<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 33-77728
PENDA CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 65-0463658
- ------------------------------------ ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2344 W. WISCONSIN STREET
PORTAGE, WISCONSIN
53901-0449
-----------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(608) 742-5301
-----------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
---- ----
Indicate 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 the 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[ ].
At March 15, 1998, the registrant had 1,016,624.2679 shares of $0.01 par value
common stock outstanding.
<PAGE> 2
<TABLE>
<CAPTION>
INDEX TO ITEMS
PAGE
----
<S> <C> <C>
ITEM 1. BUSINESS.................................................................................................1
ITEM 2. PROPERTIES...............................................................................................7
ITEM 3. LEGAL PROCEEDINGS........................................................................................7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................................8
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....................................9
ITEM 6. SELECTED FINANCIAL DATA..................................................................................9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................10
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................................14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE....................34
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....................................................35
ITEM 11. EXECUTIVE COMPENSATION.................................................................................37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................................40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................................41
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K........................................43
SIGNATURES.......................................................................................................46
</TABLE>
ii
<PAGE> 3
PART I
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of that term in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Additional written or oral
forward-looking statements may be made by the Company from time to time, in
filings with the Securities Exchange Commission or otherwise. Statements
contained herein that are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions referenced above.
Forward-looking statements may include, but are not limited to, projections
of revenues, income or losses, capital expenditures, plans for future
operations, financing needs or plans, compliance with financial covenants in
loan agreements, plans for liquidation or sale of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events, the ability to obtain additional financing, the
Company's ability to meet obligations as they become due, the impact of pending
and possible litigation, as well as assumptions relating to the foregoing. In
addition, when used in this discussion, the words "anticipates," "believes,"
"estimates," "expects," "intends," "plans" and similar expressions are intended
to identify forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, including, but not limited to,
the impact of leverage, dependence on major customers, reliance on sales of new
trucks, fluctuating demand for passenger cars and light trucks, ability to
develop complementary products, risks in product and technology development,
fluctuating resin prices, competition, litigation, labor disputes, capital
requirements, and other risk factors detailed in the Company's Securities and
Exchange Commission filings, some of which cannot be predicted or quantified
based on current expectations.
Consequently, future events and actual results could differ materially from
those set forth in, contemplated by, or underlying the forward-looking
statements. Statements in this Annual Report, particularly in "Item 1.
Business," "Item 3. Legal Proceedings" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," describe factors,
among others, that could contribute to or cause such differences.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ITEM 1. BUSINESS
GENERAL
Penda Corporation (the "Company" or "Penda") is one of the world's largest
manufacturers and suppliers of pickup truck accessories serving original
equipment manufacturers ("OEMs") and the automotive aftermarket (the
"aftermarket"). The Company manufacturers thermoformed high-density polyethylene
plastic pickup truck bedliners that are designed to both enhance the vehicle's
appearance and help protect truck beds from damage, thereby extending the useful
life and increasing the resale value of the pickup truck. The Company also
manufactures fiberglass accessory products for pickup trucks, vans, and Class 8
trucks that are sold by truck dealers, specialty automotive stores, other
retailers, and OEMs. Other truck accessories including bed mats, tailgate
liners, hood protectors, side window air deflectors, cargo tie-downs, toolboxes,
and cargo liners designed for sport utility vehicles and other light trucks are
also distributed through the Company's OEM and aftermarket distribution systems.
The Company was formed by the acquisition of substantially all of the
assets of the Proprietary Products Division of TriEnda Corporation on March 18,
1994. Effective July 14, 1995, the Company's
1
<PAGE> 4
wholly owned subsidiary, Tri-Glas Corporation ("Tri-Glas") acquired certain of
the assets and assumed certain liabilities of VMC Fiberglass Products, Inc.
("VMC").
The light truck accessory industry, like the North American automotive
parts industry, generally is composed of two distinct sectors - the original
equipment market and the automotive aftermarket. Management believes that the
OEM segment of the industry is benefited by consumers' general preference to
purchase significant add-ons at the time they purchase their vehicle. Such
purchases allow installation of accessories prior to delivery and before damage
to the vehicle occurs. It also permits the buyer to finance accessories with the
purchase of the vehicle. Aftermarket sales are generally directed to consumers
who purchase in the aftermarket because of the perceived higher cost of OEM
accessories, or their desire to engage in "do-it-yourself" installation, or they
realize the protective value of bedliners when they see pickup truck bed damage,
or they decide to "customize" the appearance of their vehicle after original
purchase, or they purchase accessories prior to a planned sale of a used
vehicle.
The Company also distributes pickup truck bedliners in Latin America and
Australia through its subsidiaries Penda SA de C.V. and Penda Australia,
Limited. These sales represented 3.0% of the Company's net sales in 1997.
PRODUCTS AND MARKETS
The Company's major product lines are:
Pickup Truck Bedliners
Pickup truck bedliners are manufactured for OEMs and the aftermarket.
Aftermarket liners carry the "PENDALINER(R) SR(TM) and PENDALINER(R)" brand
name, while OEM liners are stamped with the truck manufacturer's name, such as
GM, Toyota, or Dodge, in the headwall of the bedliner. The Company manufactures
approximately 94 different bedliner models, custom engineered and molded to fit
the exact specifications of the truck bed of most models of domestic and
foreign pickup trucks. The Company's bedliner sales represented 79% and 78% of
the Company's net sales for 1997 and 1996, respectively.
Pickup Truck Caps
Pickup truck caps are manufactured primarily for aftermarket customers.
Pickup truck caps are fiberglass shells affixed to the truck's bed rail and are
designed to enhance the appearance and aerodynamics of the truck, and provide
for a secure storage area that protects the truck bed's contents from damage
caused by precipitation, sun, and wind. The Company's caps are manufactured from
100% pure polyester reinforced resin and chopped fiberglass, and include a
one-piece reinforced fiberglass base rail.
Pickup Truck Tonneau Covers
Pickup truck tonneau covers are manufactured for both OEM and aftermarket
customers and are a flat, rigid cover that protects the bed of the pickup truck.
The tonneau cover, like a cap, enhances the appearance and aerodynamics of the
truck and provides for a secure, protected storage area. Unlike a cap, which
extends up to or above the pickup truck's cab, tonneau covers extend only a few
inches above the truck bed. The Company's tonneau covers are also manufactured
from 100% pure reinforced resin and chopped fiberglass for superior structural
strength, and are custom-finished with automotive paint.
Running Boards
Running boards are manufactured primarily for aftermarket customers.
Running boards are manufactured from 100% pure polyester reinforced resin and
chopped fiberglass and provide pickup trucks, vans, and sport utility vehicles
with an original equipment look and ground effect styling. The
2
<PAGE> 5
boards are typically sold unpainted to a retailer or vehicle converter who
paints and installs the boards for the end user. In December, Tri-Glas
introduced a new product, Penda(R) Tri-Step(TM) pony boards (a small
running board), available for nationwide distribution, which should further
strengthen market penetration in this accessory class.
Other Light Truck Accessory Products
Light truck accessories currently being distributed by the Company include
the following:
- Pickup truck bedmats, which are rubber mats designed to protect the
floor of pickup truck beds.
- Hide-A-Hook(R) tie-downs, which utilize a patented design that allows
a hook or loop to rotate out of sight when not in use. The
Hide-A-Hook(R) tie-down reduces the likelihood of pickup truck cargo
movement in the bed of the pickup.
- Hood protectors, which deflect insects, gravel and other debris away
from the vehicle and protect the hood and windshield of pickup trucks
and sport utility vehicles from nicks and chips.
- Side Window Air Deflectors, which reduce wind noise and permit a
supply of fresh air in all kinds of weather.
- Penda(R) Elite(TM) Tool Boxes, which can hold tools and other items,
fit in the bed of a pickup truck, have metal framing for strength and
durability, and are available with accessories to increase utility.
Van Tops
The Company manufactures fiberglass van top shells which are sold to custom
van converters. These van tops are made from 100% pure polyester reinforced
resin and chopped fiberglass and are designed to exceed all National Highway
Safety Traffic Administration roll-over requirements and Federal Motor Vehicle
Industry Standards for school bus roll-over testing.
Class 8 Trucks
The Company manufactures fiberglass sleeper shells and other truck parts
for certain OEMs of heavy duty trucks.
SIGNIFICANT CUSTOMERS
Sales to Chrysler Motor Corporation and Toyota Motor Corporation were
approximately 21% and 11% of consolidated net sales in 1997, respectively. No
other customer accounted for more than 10% of consolidated net sales and the
Company is not otherwise dependent upon a single or a few customers, the loss
of which would have a materially adverse effect on the Company. In February
1997, the Company's contract to supply bedliners and other accessory products
to Ford Motor Company was terminated. The Company's sales to Ford Motor Company
represented 21%, 17% and 19% of net sales for the years ended December 31, 1996
and 1995, and the period from March 18, 1994 to December 31, 1994,
respectively.
COMPETITION
While the light truck accessories industry is highly fragmented, competition
within specific product categories, such as bedliners, is frequently
concentrated among a small number of suppliers. For example,
3
<PAGE> 6
management believes that the Company and its principal competitor share
approximately 72% of the total bedliner market, with other known competitors
accounting for the balance. Competition in the industry is based primarily on
brand name recognition, delivery, price, quality, and service.
PRODUCT DESIGN AND DEVELOPMENT
Development of product enhancements and new products is managed by design
engineering teams who generally begin the product development process by
identifying marketing needs and conceptualizing product ideas through regular
meetings among members of the Company's design engineering and senior management
teams. The Company's engineering staff assesses feasibility, manufacturing cost
parameters, and lead times and uses a computer assisted design system to preview
aspects of design and performance prior to production. The Company has recently
introduced a new and improved Pendaliner SR(TM) bedliner that protects the cargo
and the truck bed, a shippable running board product, the Tri-Step(TM) Series,
and Hide-A-Hook(R) tie-downs in black as well as the previously available
stainless steel.
BACKLOG ORDERS
A sales backlog is maintained, however, sales orders are generally filled
in less than one month.
MANUFACTURING
The Company's bedliner manufacturing operations include the in-house
extrusion of plastic resins into high-density polyethylene heavy gauge sheets.
The Company then molds the polyethylene sheets into the shape of a pickup truck
bed through the use of a vacuum-forming process. High quality material is
required to assure the fit and durability of the Company's bedliners. The
Company uses virgin resin pellets mixed with regrind materials. Pellets and
regrind materials are heated and, after melting, are squeezed between a series
of rolls. The resulting sheets of plastic are cooled before thermoforming and a
computer scans the materials for gauge uniformity.
The Company's fiberglass manufacturing operations are done by using
production molds to laminate fiberglass into the various product shells. Only
100% pure polyester reinforced resin and fiberglass materials are used to
provide superior structural strength versus competitive products that use less
resin and add a filler material. After initial lamination, cardboard honeycomb
material, wood or steel reinforcements are added for structural strength. The
product is then laminated a second time to stiffen and strengthen the
reinforcement material. The edges are trimmed and the product is hand sanded to
a smooth finish. Finally, if applicable, the product is given an automotive
paint finish.
In addition to manufactured items, the Company also purchases certain
accessory products from independent manufacturers. The Company works closely
with each supplier to ensure that product quality meets the Company's and its
customers' requirements.
MARKETING
As part of the Company's marketing program to assist OEM truck dealers and
aftermarket distributors, the Company (i) provides dealers and distributors with
product pamphlets, sample materials, sales and installation training videos,
point-of-sale displays, and special promotional brochures; (ii) attends trade
shows and places advertisements in key trade journals; (iii) conducts
advertising campaigns in light truck enthusiast magazines and general consumer
interest magazines; (iv) advertises on national network
4
<PAGE> 7
radio; (v) sponsors a NASCAR Craftsman Series Truck racing team; (vi) conducts
periodic promotional campaigns to provide additional incentives to dealer and
distributor sales personnel as well as end consumers; (vii) maintains a customer
service/telemarketing department to promptly respond to customer needs and
orders; (viii) holds periodic training sessions and sales meetings, attended by
senior management and manufacturing personnel, in order to better educate its
distributors and dealers with respect to the design, manufacture, and quality of
the Company's products; and (ix) conducts ongoing surveys to determine customer
satisfaction. The Company's sales representatives are also extensively trained
on quality issues and the manufacture, distribution, features, benefits, and
installation of the Company's products.
On December 8, 1997, the Company launched its Penda Protection Pro - a new
dealer and warehouse distributor marketing program. The Program is designed to
build customer loyalty and to add value to the aftermarket customers who handle
the Company's product. The Program provides customer training, point-of-sale
materials, locator `1-800-22-PENDA' services, a premium point program, and other
advertising support. The Company has been encouraged by the favorable trade
response.
DISTRIBUTION
Bedliners and Light Truck Accessory Products
The Company's OEM distribution systems provide direct access to over 10,000
light truck dealers located throughout the United States and Canada. The
Company's OEM sales representatives and dedicated telemarketing personnel
maintain regular contact with the Company's dealer customer base and use
computerized on-line inventory management systems to ensure quick, accurate
price quotes, and on-time shipments. Once a sale has been completed, the
Company's management information systems are used to provide billing information
to the OEM, which is in turn responsible for actual dealer billing and
collection. This direct OEM billing reduces the credit risks to the Company that
would result from having numerous dealer accounts receivable. The Company uses a
network of 37 distribution locations located throughout the United States and
Canada to receive, store, and deliver products to OEM dealers. The Company's
bedliners and other automobile accessory products are distributed to the
aftermarket through approximately 80 distributors in the United States and
Canada. These distributors are called upon by the Company's regional sales
representatives, each of whom is responsible for assisting the Company's
distributors in increasing sales. Aftermarket bedliners and other products are
stored in the Company's manufacturing and warehouse facilities pending shipment
to the distributor, which is made by common carrier generally within 48 hours of
order receipt. International shipments are made from the Company's Portage,
Wisconsin and Toluca, Mexico facilities as well as from a contractor's Victoria,
Australia facilities to distributors in South America, Mexico and Australia.
Pickup Truck Caps, Tonneau Covers and Running Boards
These products are sold through the Company's sales representatives and
telemarketing staff. These sales representatives and telemarketers call upon
current and potential customers and are responsible for assisting the Company's
customers in increasing their sales. These products are manufactured at
Tri-Glas's manufacturing facility in Daleville, Alabama. Truck caps and running
boards are distributed predominately to aftermarket customers in the south
central and southeastern regions of the United States. Tonneau covers are also
manufactured for OEM customers.
Van Tops and Class 8 Truck Parts
After being manufactured at Tri-Glas, van tops are distributed to custom
van converters located throughout the United States. The Class 8 truck parts are
delivered to OEM's freight carrier who ships them to the OEM's manufacturing
locations. Tri-Glas' staff works closely with these customers to ensure on-time
delivery of these products, which is critical to the customer's success.
5
<PAGE> 8
QUALITY CONTROL
As a result of the Company's commitment to quality, both Penda and Tri-Glas
have received a number of OEM supplier awards. The criteria for these awards
generally include quality, cost control, reliability of delivery, new technology
implementation, and overall management excellence. Management attributes the
quality of the Company's products to its strict adherence to comprehensive
statistical process control systems that streamline the Company's ability to
regularly inspect product runs for manufacturing defects, as well as its
implementation of a Total Quality Management ("TQM") philosophy that emphasizes
the prevention, rather than detection, of non-conforming materials. The Company
offers a limited lifetime warranty on all products. Warranty claims to date have
been minimal.
On August 23, 1996, the Company's bedliner manufacturing operation received
"QS 9000" certification. This certification is the automotive industry's quality
standard. This standard is identical to ISO 9000 except that it requires that
approximately 100 additional quality standards be met. All of the OEMs have
required QS 9000 certification as a condition to being an OEM supplier after
1997.
TRADEMARKS AND PATENTS
The Company has registered its Penda(R), PENDALINER(R), Tri-Glas(R), and
other trademarks with the United States Patent and Trademark Office. In
addition, the Company holds several patents covering truck bedliners, pickup
truck caps, pickup truck sleepers, running boards, van tops, and other
accessories, none of which expire earlier than 2003. Since the Company believes
that it is an innovator of designs, it is the Company's policy to apply for
design and utility patents on those product designs which management believes
may be of significance to the Company. Management believes that the Company's
success also depends on its skills in marketing, distribution, and manufacturing
in addition to the patented features of its bedliners and other light truck
accessory products.
RAW MATERIALS
The primary raw materials used in the manufacture of the Company's products
are polyethylene and polyester plastic resins and chopped fiberglass. The raw
materials required by the Company are obtained from regular commercial sources
of supply and, in most cases, multiple sources. The capacity, supply, and demand
for plastic resins and fiberglass are subject to cyclical and other market
factors. Under normal conditions, there is no difficulty in obtaining
requirements at competitive prices. In addition, no shortages have been
experienced by the Company in obtaining its required raw materials. However, the
Company has no contractual assurances with respect to the availability or
pricing of its required raw materials and future shortages of raw materials
could, therefore, have a material adverse effect on the Company's business.
EMPLOYEES
At December 31, 1997, the Company had approximately 460 full-time
personnel. None of the Company's employees are subject to collective bargaining
agreements. The Company has not experienced any work stoppages and management
considers its employee relations to be good.
ENVIRONMENTAL REGULATION
The Company's operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the environment and establish standards for the handling,
generation, emission, release, discharge, treatment, storage, and disposal of
certain materials, substances, and wastes. To the Company's knowledge, the
Company's operations are in substantial compliance with the terms of all
applicable environmental laws and regulations as currently interpreted. In
addition, to the Company's knowledge, there are no existing or potential
environmental
6
<PAGE> 9
claims against the Company, nor has the Company received any notification or
knowledge of any allegation of any actual, or potential responsibility for, or
any inquiry or investigation regarding, any disposal, release, or threatened
release at any location of any hazardous substance generated or transported by
the Company.
ITEM 2. PROPERTIES
Penda owns a 240,000 square-foot manufacturing, warehouse, and corporate
administrative office facility located on 19 acres in Portage, Wisconsin. Penda
leases a warehouse in Toluca, Mexico and an unused 52,320 square foot building
on 8.9 acres in Platteville, Wisconsin. Tri-Glas owns a 14 acre manufacturing
facility in Daleville, Alabama. Tri-Glas leases its administrative offices and
maintenance facilities which are located across the street from the
manufacturing facility. Management believes that these facilities are sufficient
to support future expansion that may be required to meet increases in sales
volume for the near term.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and other
claims arising in the ordinary course of its business. The Company maintains
insurance coverage against claims in an amount which it believes to be adequate.
The Company believes that it is not presently a party to any such ordinary
course litigation the outcome of which would have a material adverse effect on
its financial condition or results of operations. Set forth below is an update
of material developments in certain non-ordinary course litigation more fully
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997 and Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1997.
PATENT INFRINGEMENT LAWSUITS
On January 2, 1997, The Colonel's, Inc. filed a lawsuit against the Company
in the United States District Court for the Eastern District of Michigan. See
Part I, Item 3 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, incorporated herein by reference. In November 1997, the
Company reached a settlement with The Colonel's, Inc. Under the settlement, the
Company and The Colonel's, Inc. entered into a cross-license agreement whereby
the Company granted The Colonel's, Inc. a license to practice certain of the
portions of one of the Company's patents and the Company received a license to
practice one of The Colonel's, Inc.'s patents. Pursuant to the cross-license
agreement, The Colonel's, Inc. agreed to pay the Company royalties and made a
one-time payment of $150,000 to the Company, of which $50,000 was applied
against the first year's royalties.
LITIGATION WITH FORMER EXECUTIVE OFFICER
In 1997, the Company was sued by a former executive officer in a lawsuit
styled Daniel E. Braun v. Penda Corporation, filed in the Circuit Court for
Columbia County, Wisconsin. See Part II, Item 1 of the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1997, and Part II,
Item 1 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997 incorporated herein by reference. This case was settled on
December 23, 1997. Under the terms of the settlement, the Company purchased
16,007.5 shares of the Company's common stock from the former officer, all stock
options held by the former officer were canceled, and the lawsuit dismissed in
exchange for aggregate consideration of $850,000.
CLASS ACTION LAWSUITS
The Company, along with various other manufacturers of pickup truck
bedliners, is a defendant in certain class action lawsuits. See Part I, Item 3
of the Company's Annual Report on Form 10-K for the year
7
<PAGE> 10
ended December 31, 1996, incorporated herein by reference. The plaintiffs in
these lawsuits allege that the bedliners manufactured by the defendants are
defective and unreasonably dangerous because they allegedly prevent the
discharge of static electricity which can accumulate on or in portable fuel
containers, thereby creating the potential for fire or explosion. Settlement
discussions are continuing in connection with this lawsuit. In the event that
settlement discussions terminate, the Company intends to vigorously defend these
lawsuits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
8
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established trading market for the Company's common stock. As
of March 18, 1998, 34 persons held the Company's 1,016,624.2679 outstanding
shares of common stock. The Company has not paid dividends since its inception
and has no intention to pay dividends for the foreseeable future.
On October 31, 1997, the Company sold an aggregate of 30,813 shares of
common stock to Mr. Jack L. Thompson, President, Chief Executive Officer, and
Director, and to Mr. Leo E. Waner, Vice President and Chief Financial Officer
for $ $374,994.21 in connection with their initial employment by the Company. On
December 31, 1997, the Company sold 8216.9269 shares of common stock to Mr.
Jeffery G. Rastocan, Vice President - Sales & Marketing, for $ 100,000.00. These
stock sales were exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
The selected income statement data for the years ended December 31, 1997,
1996, and 1995 and for the period from March 18, 1994 through December 31, 1994,
and the selected balance sheet data as of December 31, 1997, 1996, and 1995 were
derived from the audited consolidated financial statements of the Company. The
selected historical income statement data for the period from January 1, 1994
through March 17, 1994 and for the year ended December 31, 1993, and the
selected historical balance sheet data as of March 17, 1994 and December 31,
1993, were derived from the audited financial statements of the Company's
predecessor - the Proprietary Products Division of TriEnda Corporation
("Predecessor"). The following data should be read in conjunction with the
audited financial statements and related notes thereto of the Company and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA
(IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA)
- -------------------------------------------------------------------------------------------------------------------------
COMPANY PREDECESSOR
--------------------------------------------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED 3/18/94- 1/1/94- YEAR ENDED
12/31/97 12/31/96 12/31/95 12/31/94 3/17/94 12/31/93
--------------- ---------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales ................. $ 73,860 $ 89,353 $ 74,822 $ 56,160 $ 12,434 $ 52,438
Income/(Loss) Before
Income Taxes (1) .......... $ (6,218) 11,969 6,923 9,585 2,857 13,169
Net Income/(Loss) (1) ..... $ (4,888) 7,214 3,848 5,858 N/A N/A
Net Income/(Loss) Per
Common Share
Basic $ (4.89) $ 7.22 $ 3.85 $ 5.86 N/A N/A
Diluted $ (4.89) $ 7.20 $ 3.85 N/A N/A N/A
Ratio of Earnings to Fixed
Charges (2) ............... 0.3 2.3 1.7 2.4 21.6 11.0
<CAPTION>
BALANCE SHEET DATA
- -------------------------------------------------------------------------------------------------------------------------
COMPANY PREDECESSOR
--------------------------------------------------------------- -----------------------------
DECEMBER 31, MARCH 17, DECEMBER 31,
--------------------------------------------------------------- -----------------------------
1997 1996 1995 1994 1994 1993
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Assets............. $ 136,382 $ 142,029 $ 139,137 $ 122,431 $ 18,881 $ 17,649
Long-Term Debt........... $ 83,129 $ 83,743 $ 92,140 $ 80,000 -- --
</TABLE>
9
<PAGE> 12
(1) The Company's predecessor was a division of an S corporation for federal
and state income tax purposes. As a result, historical earnings prior to March
18, 1994 were taxed directly to the shareholders of the S corporation rather
than to the predecessor division.
(2) The ratio of earnings to fixed charges is computed as income before taxes
and interest expense, divided by interest expense.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion, which relates to the three years ended December
31, 1997, should be read in conjunction with the selected financial data, the
Company's consolidated financial statements, and related notes:
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1997
OVERVIEW: During 1997, the Company, experienced significant changes in
sales, personnel and direction precipitated by the February 1997 loss of the
Ford OEM contract. The Company incurred $4.7 million of one-time expenses
including legal/litigation expenses of $1.7 million, Mexican/Australian write
downs of $1.1 million, settlement with a former chief executive of $655,000, and
consulting and executive search fees of $755,000. Management believes that these
one time expenses, in conjunction with aggressive cost reduction actions and
market programs, position the Company to achieve improved operating results in
1998.
NET SALES: Net sales decreased $15.5 million, or 17.3%, from $89.4
million in 1996 to $73.9 million in 1997. The decrease resulted from lower OEM
bedliner unit sales (down 28.6%), lower fiberglass accessory and
aftermarket sales (down 21.3%), and continued erosion in overall OEM and
aftermarket bedliner pricing (down 2.6%). Fiberglass running board production
was curtailed due to the 1996 fire at the Tri-Glas manufacturing facility and
was not fully restored until late in the third quarter of 1997. New
management has pursued marketing strategies to recover the lost Ford volume
through dealer-direct programs and new aftermarket customer conquests. In
addition, in December 1997, the Company secured a General Motors supply
agreement.
COST OF GOODS SOLD AND GROSS PROFIT: Cost of sales decreased $1.8 million,
or 3.2% from $56.5 million in 1996 to $54.7 million in 1997. Gross profit
decreased $13.6 million, or 41.7% from $32.8 million in 1996 to $19.2 million in
1997. Gross profit margins declined from 36.8% in 1996 to 25.9% for 1997 These
declines were primarily due to the decrease in the Company's sales. The decline
in gross profit margin can be partially attributed to higher fixed costs as a
percent of sales due to lower production and shipping volumes and asset write
downs in Mexico and Australia. Partially offsetting the decline in gross profit
margin was lower resin prices and reduced head count. In an effort to improve
gross profit margin, prior management's capital, operational, and business
commitments were significantly curtailed and in the fourth Quarter 1997
management instituted comprehensive cost improvement programs in its offices
and manufacturing plants.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling costs increased
$900,000, or 21.1% from $4.1 million in 1996 to $5.0 million in 1997, primarily
due to increased advertising and hiring of additional sales associates
in the fourth quarter 1997 in preparation for a new aftermarket program launch
in December. As a percentage of sales, selling expenses increased from 4.6% in
1996 to 6.8% in 1997 due both to the increase in selling expenses and the
decrease in sales volume. General and administrative expenses increased $3.3
million, or 77.8% from $4.1 million in 1996 to $7.4 million in 1997. This
increase reflected $1.7 million of legal expenses associated with the Company's
class
10
<PAGE> 13
action litigation, a successful patent infringement suit with a competitor, and
litigation with the Company's former chief executive officer. The Company also
changed its independent auditors, conducted a strategic marketing study,
conducted two executive searches and retained business process consultants to
improve operational efficiencies ($755,000).
LEGAL SETTLEMENT: The Company's 1997 results also reflect a one-time charge
of $655,000 associated with its legal settlement with its former chief executive
officer.
OPERATING INCOME: As a result of the foregoing items, operating income
decreased $18.6 million or 86.1% from $21.6 million in 1996 to $3.0 million in
1997.
INTEREST EXPENSE: Interest expense decreased from $9.5 million in 1996 to
$9.1 million in 1997, or 4.5% due primarily to lower average outstanding
borrowings.
OTHER (INCOME) EXPENSE, NET: Other expense, net was $133,823 in 1997
compared to $83,504 in 1996 due primarily to the receipt of the final Tri-Glas
fire insurance reimbursement of $292,000.
INCOME TAX EXPENSE: The effective income tax rates for 1997 and 1996 were
(21.4%) and 39.7%, respectively. The reduction in tax rates for 1997 resulted
from an increase in the valuation allowance of $1.2 million due to uncertainties
related to the realization of foreign and certain state operating loss
carry-forwards. Management will file for income tax refunds in excess of $3.1
million in 1998.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1996
Net sales increased $14.5 million or 19.4%. Contributing to the increase in
sales was a full year of Tri-Glas results (acquired July 14, 1995) which
represented $8.0 million of the increase. Bedliner sales increased 9.6% due to a
3% increase in market penetration, higher OEM bedliner sales relating to new
pickup truck introductions, and a 0.3% increase in average selling prices.
Cost of sales increased $8.8 million or 18.5% and gross profit increased
$5.7 million or 21.0%. Gross profit margin was 36.8% in 1996 versus 36.3% in
1995. Raw material costs in bedliner manufacturing were lower due to favorable
resin prices in the first two quarters of 1996 and the Company's continuous
effort to achieve manufacturing efficiencies. Offsetting these gains in gross
profit margin is the impact of a full year of Tri-Glas sales. Tri-Glas' gross
profit is significantly less than Penda's since the fiberglass truck accessories
market is very price sensitive.
Selling, general and administrative expenses were 9.2% of sales in 1996
versus 10.4% of sales in 1995. This decrease was due to general and
administrative costs being flat despite the 19.4% increase in sales. Selling
costs increased due to additional sales associates being added in 1996, although
as a percentage of sales, selling expenses declined from 4.8 to 4.6%.
Interest expense was lower in 1996 as average debt outstanding was slightly
lower.
On June 3, 1996, Tri-Glas suffered a fire in one of its two main production
buildings. The building, along with equipment and inventory inside the building,
was completely destroyed. During 1996, the Company received insurance proceeds
in excess of the net book value of the assets lost in the fire of approximately
$464,000. These insurance proceeds were used by the Company to replace the
building and equipment lost in the fire.
11
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements for its operations are working
capital (principally inventory and accounts receivable) and capital
expenditures. In addition, the Company has annual note payments of $400,000 and
semi-annual interest (only) payments due on its unsecured 10.75% Senior Notes
due in 2004 ("Notes") and, if used, quarterly payments due on its revolving
Credit Facility. The Company's working capital at December 31, 1997 was $13.8
million compared to $11.0 million at December 31, 1996.
The Company's revolving credit facility ("Credit Facility") with Banque
Nationale de Paris provides for borrowings of up to $18.0 million, consisting of
(i) a $13.0 million revolving credit facility with available borrowings based on
the Company's eligible accounts receivable and inventory, and (ii) an
over-advance facility of $5 million, which will decrease by $1.5 million on July
14, 1998. Borrowings under the Credit Facility (i) bear interest at either 2.5%
above the lender's eurodollar rate or 1.0% above the lender's base rate, (ii)
are secured by a first priority lien on all inventory, accounts receivable and
other current assets of the Company, and (iii) mature on March 31, 1999. As of
February 28, 1998, the Company had outstanding borrowings of $1,000,000 and
$14.8 million borrowing ability available under the Credit Facility.
Pursuant to the Credit Facility, the Company will pay an unused facility
fee equal to 0.5% per annum on the average daily amount of the unused portion of
the facility, payable quarterly, during the revolving period. The Credit
Facility also contains (i) customary financial covenants, (ii) limitations on
indebtedness, liabilities and liens, (iii) limitations on distributions,
dividends, redemptions, prepayments of other indebtedness and other restricted
payments, (iv) limitations on mergers and purchases and sales of assets, (v)
limitations on payments to and transactions with affiliates, (vi) limitations on
loans, investments and guarantees, (vii) prohibitions of any "Change of Control"
or change in the Company's business, and (viii) limitations on amendments to the
Company's articles of incorporation, bylaws and Notes. During 1997 the Company
sought and obtained an Amendment to and a Waiver of the terms and conditions of
the Credit Facility for 1997.
Net cash provided by operating activities for the year ended December 31,
1997 was approximately $5.1 million compared to $12.3 million for the year ended
December 31, 1996. The difference between the Company's 1997 operating cash flow
and its net loss of $4.9 million was primarily attributable to $6.7 million of
depreciation and amortization, a $3.3 million reduction in account receivables
and a $1.3 million reduction in inventories, partially offset by $3.2 million of
refundable income taxes and a $1.3 million decrease in accounts payable.
Net cash used in investing activities was $2.1 million in 1997, compared to
$2.3 million in 1996. The Company's 1997 investing cash flow reflected $2.0
million of earn out payments related to the Company's March 1994 purchase of the
Predecessor and $500,000 of capital expenditures (principally associated with
internal and external tooling costs for molds development, plastics and
fiberglass production equipment, and capitalized leases for material handling
equipment).
Net cash used in financing activities was $500,000 in 1997 compared to
$8.5 million in 1996 reflecting $600,000 of indebtedness payments and $300,000
of stock repurchases, partially offset by $500,000 of proceeds of stock sales.
Although the Company has no capital commitments for 1998, the Company is
currently budgeting. approximately $2.5 million primarily for production
machinery, equipment and tooling. Management believes that funds generated from
operations and funds available under the Credit Facility will be sufficient to
satisfy the Company's debt service obligations, working capital requirements and
commitments for capital expenditures through at least 1998, but that any
significant acquisitions by the Company would generally require additional
financing. There can be no assurance that such acquisition financing will be
available to the Company on satisfactory terms.
12
<PAGE> 15
YEAR 2000 COMPLIANCE
During 1997, management undertook significant efforts to make the Company's
information systems "Year 2000 Compliant". While the Company's critical systems
are now substantially compliant with the requirements of the Year 2000,
continued efforts are underway to bring user-based, ad hoc personal computing
tools, certain CNC (Computer Numerical Control) equipment, and other data
capture/retrieval systems into compliance. The Company plans to make all of its
computer systems "Year 2000 Compliant" during 1998. The additional expense is
expected to be less than $100,000. Efforts are also in process to confirm that
principal vendors, customers, and business affiliates are also prepared and can
confirm their situation to the Company in an appropriate fashion.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
13
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
PAGE
----
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PENDA CORPORATION
Report of Ernst & Young, LLP, independent auditors 15
Reports of Coopers & Lybrand, LLP, independent accountants 16
Consolidated Balance Sheets as of December 31, 1997 and 1996 18
Consolidated Statements of Operations for the years ended December 31,
1997, 1996, and 1995 20
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1997, 1996, and 1995 21
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996, and 1995 22
Notes to Consolidated Financial Statements 23
FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts 33
14
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Penda Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of Penda Corporation
and Subsidiaries (the Company) as of December 31, 1997, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the year then ended. Our audit also included the financial statement
schedule for the year ended December 31, 1997, listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of the Company for the years ended December 31, 1996 and 1995, were audited by
other auditors, whose report dated February 24, 1997, expressed an unqualified
opinion on those financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1997, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule for the year ended December 31, 1997, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young, LLP
Milwaukee, Wisconsin
March 12, 1998
15
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Penda Corporation and Subsidiaries
Portage, Wisconsin
We have audited the accompanying consolidated balance sheet of Penda Corporation
and Subsidiaries as of December 31, 1996, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the two years in the period ended December 31, 1996. These financial statements
are the responsibility of Penda Corporation's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Penda
Corporation and Subsidiaries as of December 31, 1996, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Coopers & Lybrand, LLP
Milwaukee, Wisconsin
February 27, 1997
16
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of Penda Corporation and Subsidiaries
Our report on the consolidated financial statements of Penda Corporation and
Subsidiaries for the years ended December 31, 1996 and 1995 is included in the
Form 10-K. In connection with our audits of such financial statements, we have
also audited the related consolidated financial statement schedule for the
years ended December 31, 1996 and 1995, listed in the index of this Form 10-K.
In our opinion, the consolidated financial statements schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand, LLP
Milwaukee, Wisconsin
February 27, 1997
17
<PAGE> 20
Penda Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,459,578 $ 1,969,818
Accounts receivable, less allowance for doubtful accounts of
$470,134 in 1997 and $75,000 in 1996 9,536,514 13,276,729
Inventories (Note 2) 4,941,257 6,230,215
Refundable income taxes 3,173,000 11,000
Deferred income taxes 539,000 328,000
Other 145,092 387,144
------------------------------------
Total current assets 22,794,441 22,202,906
Property, plant and equipment:
Land and improvements 734,872 731,782
Buildings and improvements 7,078,930 6,958,971
Machinery and equipment 18,597,878 17,920,550
Furniture and Fixtures 1,242,134 1,337,695
Construction in progress 537,904 924,404
------------------------------------
28,191,718 27,873,402
Less accumulated depreciation 8,959,614 5,541,305
------------------------------------
Net property, plant and equipment 19,232,104 22,332,097
Goodwill and other intangible assets, net 93,834,032 96,888,690
Other assets 521,577 605,763
------------------------------------
Total assets $ 136,382,154 $ 142,029,456
====================================
</TABLE>
18
<PAGE> 21
Penda Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,890,610 $ 4,183,314
Accrued interest 2,926,667 2,951,937
Acquisition earnout payable - 2,000,000
Employee compensation 880,862 1,316,542
Current maturities of long-term debt 631,327 613,600
Other accrued liabilities 1,635,974 109,582
------------------------------------
Total current liabilities 8,965,440 11,174,975
Long-term debt 82,497,852 83,129,176
Deferred income taxes 7,639,000 5,776,000
------------------------------------
Total liabilities 99,102,292 100,080,151
Commitments and contingencies (Notes 6 and 14)
Shareholders' equity:
Common stock, $.01 par value, 5,000,000 shares authorized,
1,016,624 and 998,042 shares issued and outstanding, respectively 10,166 9,980
Additional paid-in capital 24,989,952 24,851,294
Retained earnings 12,031,890 16,920,212
Cumulative foreign currency translation adjustments 247,854 167,819
------------------------------------
Total shareholders' equity 37,279,862 41,949,305
------------------------------------
Total liabilities and shareholders' equity $ 136,382,154 $ 142,029,456
====================================
</TABLE>
See accompanying notes.
19
<PAGE> 22
Penda Corporation and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
----------------------------------------------------
<S> <C> <C> <C>
Net sales $73,860,089 $89,353,487 $74,821,818
Cost of sales 54,699,227 56,515,239 47,675,318
----------------------------------------------------
Gross profit 19,160,862 32,838,248 27,146,500
Selling expenses 4,986,343 4,117,664 3,536,641
General and administrative expenses 7,359,640 4,139,091 4,203,890
Legal settlement with former executive officer 655,195 - -
Amortization 3,152,840 3,011,948 2,803,061
----------------------------------------------------
Operating income 3,006,844 21,569,545 16,602,908
Interest expense 9,091,343 9,516,862 9,606,971
Other expense, net 133,823 83,504 72,997
----------------------------------------------------
Income (loss) before income taxes (6,218,322) 11,969,179 6,922,940
Provision (benefit) for income taxes (1,330,000) 4,755,000 3,075,000
----------------------------------------------------
Net income (loss) $(4,888,322) $ 7,214,179 $ 3,847,940
====================================================
Earnings (loss) per share of common stock:
Basic $(4.89) $7.22 $3.85
Diluted $(4.89) $7.20 $3.85
</TABLE>
See accompanying notes.
20
<PAGE> 23
Penda Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Stock Additional Currency
--------------------------- Paid-in Retained Translation
Shares Amount Capital Earnings Adjustment Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 1,000,000 $10,000 $24,990,000 $ 5,858,093 $ - $30,858,093
Purchase and retirement of common stock (292) (3) (20,444) - - (20,447)
Foreign currency translation adjustment - - - - 53,283 53,283
Net income - - - 3,847,940 - 3,847,940
----------------------------------------------------------------------------------------
Balances at December 31, 1995 999,708 9,997 24,969,556 9,706,033 53,283 34,738,869
Purchase and retirement of common stock (1,666) (17) (118,262) - - (118,279)
Foreign currency translation adjustment - - - - 114,536 114,536
Net income - - - 7,214,179 - 7,214,179
----------------------------------------------------------------------------------------
Balances at December 31, 1996 998,042 9,980 24,851,294 16,920,212 167,819 41,949,305
Purchase and retirement of common stock (20,448) (204) (335,946) - - (336,150)
Issuance of common stock 39,030 390 474,604 - - 474,994
Foreign currency translation adjustment - - - - 80,035 80,035
Net loss - - - (4,888,322) - (4,888,322)
----------------------------------------------------------------------------------------
Balances at December 31, 1997 1,016,624 $10,166 $24,989,952 $12,031,890 $247,854 $37,279,862
========================================================================================
</TABLE>
See accompanying notes.
21
<PAGE> 24
Penda Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ (4,888,322) $ 7,214,179 $ 3,847,940
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 3,494,807 3,059,949 1,880,900
Amortization 3,152,840 3,011,948 2,803,061
(Gain) loss on sale of assets 40,991 80,599 (204,485)
Gain on insurance claims received (298,440) (485,853) -
Assets written off - - 200,538
Deferred income taxes 1,652,000 2,216,000 2,048,000
Provision for doubtful accounts 395,134 (46,421) (13,238)
Changes in assets and liabilities, net of effects from
purchase of business assets:
Accounts receivable 3,345,081 (4,716,079) (686,097)
Inventories 1,288,958 (55,266) (1,268,290)
Refundable income taxes (3,162,000) 832,000 (843,000)
Accounts payable (1,292,704) 743,076 (1,912,507)
Accrued interest (25,270) (85,403) 166,866
Other 1,398,803 548,844 (213,876)
--------------------------------------------------
Net cash provided by operating activities 5,101,878 12,317,573 5,805,812
INVESTING ACTIVITIES
Purchase of business assets (2,000,000) (1,000,000) (8,353,261)
Capital expenditures (501,192) (2,056,300) (7,753,808)
Proceeds from sale of property, plant and equipment 65,387 200,892 946,350
Proceeds from insurance claims 298,440 556,353 -
Purchase of patent - - (178,089)
--------------------------------------------------
Net cash used in investing activities (2,137,365) (2,299,055) (15,338,808)
FINANCING ACTIVITIES
Net proceeds (payments), revolving credit borrowings - (9,900,000) 9,900,000
Payments on note payable (400,000) (240,000) -
Proceeds from sale/leaseback - 1,940,000 -
Payments on capital leases (213,597) (197,224) -
Purchase of common stock (336,150) (118,279) (20,447)
Issuance of common stock 474,994 - -
--------------------------------------------------
Net cash (used in) provided by financing activities (474,753) (8,515,503) 9,879,553
--------------------------------------------------
Net increase in cash and cash equivalents 2,489,760 1,503,015 346,557
Cash and cash equivalents at beginning of year 1,969,818 466,803 120,246
==================================================
Cash and cash equivalents at end of year $ 4,459,578 $ 1,969,818 $ 466,803
==================================================
</TABLE>
See accompanying notes.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Penda Corporation (the Company) is one of the world's largest manufacturers and
suppliers of pickup truck accessories serving original equipment manufacturers
(OEMs) and the automotive aftermarket, principally in the United States and
Canada. The Company manufactures thermoformed high-density polyethylene plastic
pickup truck bedliners that are designed to both enhance the vehicle's
appearance and help protect truck beds from damage, thereby extending the useful
life and increasing the resale value of the pickup truck. The Company also
manufactures fiberglass accessory products for pickup trucks, vans, and Class 8
trucks that are sold by truck dealers, specialty automotive stores, other
retailers and OEMs. Other truck accessories designed for sport utility vehicles
and other light trucks are also distributed through the Company's OEM and
aftermarket distribution systems. The Company has manufacturing facilities in
Portage, Wisconsin and Daleville, Alabama, a sales office in Mexico, and a
manufacturing agreement with a contractor in Australia.
CONSOLIDATION AND BASIS OF PRESENTATION
The Company's consolidated financial statements include the accounts of its
wholly owned subsidiaries. All significant intercompany transactions have been
eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Significant estimates have been made by management with respect to the possible
outcome of outstanding litigation and inventory obsolescence. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments, generally with a maturity of three months or less
when purchased, are considered to be cash equivalents. Cash equivalents,
consisting principally of money market funds, are considered to be
"available-for-sale" for financial reporting purposes.
INVENTORY VALUATION
Inventories are valued at the lower of cost or market with cost determined using
the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets which
range from 3 to 10 years for machinery and equipment and furniture and fixtures,
and 8 to 40 years for buildings and improvements.
GOODWILL AND OTHER INTANGIBLE ASSETS
The cost of goodwill and other intangible assets is amortized on a straight-line
basis over the estimated periods ranging from 5 to 40 years. The realizability
of goodwill and other intangible assets is evaluated periodically as events or
circumstances indicate a possible impairment. Such evaluations are based on
various analyses, including cash flow and profitability projections, to
determine the ability of the Company to recover its carrying amounts. The
analyses necessarily involve significant judgment to evaluate the capacity of
acquired businesses to perform within projections.
23
<PAGE> 26
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of product to the customer.
ADVERTISING COSTS
Advertising costs are expensed when the initial advertisement occurs. Total
advertising expense was approximately $2,066,000, $1,102,000, and $871,000 in
1997, 1996, and 1995, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred and were
$591,000, $728,000, and $439,000 in 1997, 1996, and 1995, respectively.
FOREIGN CURRENCY TRANSLATION
Prior to January 1, 1997, the functional currency of the Company's Mexican
subsidiary was the Mexican peso; accordingly, assets and liabilities were
translated using the current exchange rate and the income statement was
translated using the weighted average exchange rate for the year. Resulting
translation adjustments were recorded directly to a separate component of
shareholders' equity.
As a result of changes in its operations, the Company has determined that the
U.S. dollar is the functional currency of its Mexican subsidiary. The change in
functional currency required the application of the current rate translation
method, wherein all assets and liabilities are translated using the quoted
period-end exchange rate and all revenues are translated at the average rate of
exchange in effect during the period.
The functional currency of the Company's Australian subsidiary is the Australian
dollar; accordingly, assets and liabilities are translated using the current
exchange rate and the income statement is translated using the weighted average
exchange rate for the year. Resulting translation adjustments are recorded
directly to a separate component of shareholders' equity.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share," which replaced the calculation of primary and fully
diluted earnings (loss) per share with basic and diluted earnings (loss) per
share. All earnings (loss) per share amounts for all periods have been restated
to conform to SFAS No. 128 requirements. The numerator for the calculation of
basic and diluted earnings (loss) per share is net income (loss). The
denominator is computed as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Denominator for basic earnings (loss) per share - weighted
average shares 1,000,436 998,614 999,875
Employee stock options (treasury stock method) - 3,402 652
--------------------------------------------
Denominator for diluted earnings (loss) per share 1,000,436 1,002,016 1,000,527
</TABLE>
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which establishes the standards for reporting
and displaying comprehensive income and its components (revenues, expenses,
gains and losses) as part of a full set of financial statements. This Statement
requires that all elements of comprehensive income be reported in a financial
statement that is displayed with the same prominence
24
<PAGE> 27
as other financial statements. The Statement is effective for fiscal years
beginning after December 15, 1997. Since this Statement applies only to the
presentation of comprehensive income, it will not have any impact on the
Company's results of operations, financial position or cash flows.
In June 1997, the Financial Accounting Standards Board also issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes the standards for the manner in which public enterprises are
required to report financial and descriptive information about their operating
segments. The Statement defines operating segments as components of an
enterprise for which separate financial information is available and evaluated
regularly as a means for assessing segment performance and allocating resources
to segments. A measure of profit or loss, total assets and other related
information are required to be disclosed for each operating segment. In
addition, this Statement requires the annual disclosure of information
concerning revenues derived from the enterprise's products or services,
countries in which it earns revenue or holds assets, and major customers. The
Statement is also effective for fiscal years beginning after December 15, 1997.
The adoption of SFAS No. 131 will not affect the Company's results of operations
or financial position, but may affect the disclosure of segment information.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
<S> <C> <C>
Finished goods $2,921,836 $3,634,787
Work-in-process 534,594 353,829
Raw materials and supplies 2,013,193 2,421,839
Less allowance for inventory obsolescence (528,366) (180,240)
------------------------------------
$4,941,257 $6,230,215
====================================
</TABLE>
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
<S> <C> <C>
Goodwill $ 94,374,078 $ 94,374,078
Trademarks 5,408,982 5,408,982
Deferred financing costs 3,378,146 3,378,146
Other 1,364,036 1,364,036
------------------------------------
104,525,242 104,525,242
Less accumulated amortization 10,691,210 7,636,552
------------------------------------
$ 93,834,032 $ 96,888,690
====================================
</TABLE>
25
<PAGE> 28
4. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
--------------------------------
<S> <C> <C>
10 3/4% Series B Senior Notes, due 2004 $80,000,000 $80,000,000
Promissory note payable 1,600,000 2,000,000
Capital lease obligation 1,529,179 1,742,776
--------------------------------
83,129,179 83,742,776
Less amount due within one year 631,327 613,600
--------------------------------
$82,497,852 $83,129,176
================================
</TABLE>
The 10 3/4% Series B Senior Notes (Senior Notes) are unsecured with interest due
semiannually. The Senior Notes have certain early redemption provisions whereby
the Company, at its option, can retire up to $25,000,000 in aggregate principal
amount, at a redemption price equal to 110% of par, from the proceeds of an
initial public offering and any subsequent public offering of common stock. In
addition, the Company can redeem all or any portion of the Senior Notes on March
1, 1999 at a redemption price of 105.375% of par. Subsequent to March 1, 1999,
the redemption price will decline to par at maturity based upon a predetermined
schedule.
The Company also has a revolving credit agreement with a bank which provides for
maximum borrowings of $18,000,000 at either 1.0% above the lender's base rate,
or 2.5% above the lender's eurodollar rate. The maximum borrowings amount will
be reduced by $1,500,000 on July 14 in each of the years 1998 and 1999. The
revolving credit agreement is collateralized by substantially all of the
Company's accounts receivable and inventories. Borrowings under this agreement
are due March 1999. Annual commitment fees under the revolving credit agreement
are 1/2% of the unused portion of the available credit. At December 31, 1997 and
1996, there were no amounts outstanding on the revolving credit agreement.
The Company's Senior Notes and revolving credit agreement contain covenants that
restrict the payment of cash dividends, the issuance of new debt and require the
Company to maintain minimum amounts of net worth and certain financial ratios.
Under the most restrictive covenant, cash dividends paid may not exceed
$1,000,000 plus the sum of 50% of consolidated net income of the Company. The
Company's management believes it is in compliance with all covenants of these
agreements as of December 31, 1997 and 1996, except that it has received an
irrevocable waiver for covenant violations related to the interest coverage
ratio in 1997 and the fixed charge coverage ratio in 1995.
Interest on the promissory note payable is due semiannually. Annual principal
payments of $400,000 are due August 15th through 2001. Payment of this
promissory note is subordinated to the borrowings under the revolving credit
agreement.
The Company has obligations on manufacturing equipment under a capital lease
which expires December 2000. The Company has an option to purchase the equipment
at the end of the lease term for $776,000. Lease payments are due in monthly
installments including interest at 8%.
The fair value of the long-term debt, other than the capital lease obligation,
approximates $82,900,000 at December 31, 1997 based upon quoted market prices
for the senior notes and the present value of future cash flows for the note
payable using the interest rate of 9.75% on the Company's revolving credit
facility.
5. INCOME TAXES
Income (loss) before income taxes for U.S. and foreign operations was as
follows:
26
<PAGE> 29
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
U.S. $(4,492,191) $12,295,264 $7,645,316
Foreign (1,726,131) (326,085) (722,376)
------------------------------------------------------
Income (loss) before income taxes $(6,218,322) $11,969,179 $6,922,940
======================================================
</TABLE>
The components of the provision (benefit) for income taxes consist of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $(3,001,000) $2,081,000 $ 825,000
State 18,000 458,000 202,000
------------------------------------------------------
(2,983,000) 2,539,000 1,027,000
Deferred:
Federal 1,405,000 1,977,000 1,853,000
State 248,000 239,000 195,000
------------------------------------------------------
1,653,000 2,216,000 2,048,000
------------------------------------------------------
Provision (benefit) for income taxes $(1,330,000) $4,755,000 $3,075,000
======================================================
</TABLE>
The reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
Federal statutory income taxes (34.0)% 34.0% 34.0%
Foreign losses for which no tax benefit was recorded 9.4 1.0 4.7
State income taxes, net of federal income tax benefit 2.8 3.8 3.8
Other 0.4 0.9 1.9
--------------------------------------
(21.4)% 39.7% 44.4%
======================================
</TABLE>
27
<PAGE> 30
The components of the net deferred income tax liability as of December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
<S> <C> <C>
Deferred income tax assets:
Accounts receivable $ 87,000 $ 29,000
Inventories 209,000 221,000
Accrued liabilities 258,000 183,000
Intangible assets 80,000 98,000
Foreign net operating losses 1,089,000 116,000
Federal AMT credit carryforward 383,000 -
State NOL carryforwards 656,000 -
------------------------------------
2,762,000 647,000
Valuation allowance (1,368,000) (116,000)
------------------------------------
1,394,000 531,000
------------------------------------
Deferred income tax liabilities:
Intangible assets 6,483,000 4,745,000
Property, plant and equipment 2,011,000 1,234,000
------------------------------------
8,494,000 5,979,000
------------------------------------
Net deferred income tax liability $ 7,100,000 $5,448,000
====================================
</TABLE>
Deferred taxes are classified in the accompanying balance sheets as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Current asset $ 539,000 $ 328,000
Noncurrent liability (7,639,000) (5,776,000)
------------------------------------
$(7,100,000) $(5,448,000)
====================================
</TABLE>
The Company recorded a valuation allowance of $1,368,000 and $116,000 in 1997
and 1996, respectively, to provide for uncertainties relating to the realization
of foreign and certain state net operating loss carryforwards. Certain foreign
net operating losses expire beginning in 2005, and the state net operating loss
carryforwards expire in 2011.
6. LEASE COMMITMENTS
The Company has entered into operating lease agreements for equipment,
computers, vehicles and warehouses used in its operations. Rent expense under
such leases approximated $2,154,000, $2,380,000, and $1,163,000 in 1997, 1996,
and 1995, respectively. Future minimum lease payments under noncancelable
operating leases at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 449,057
1999 346,008
2000 239,982
2001 65,392
------------------
$1,100,439
==================
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution employee benefit plan in which
substantially all employees are participants. The plan requires the Company to
make matching contributions equal to 25% on the first 6% of each plan
participant's contribution. The plan also allows for the Company to make
discretionary contributions. Contributions expense approximated $115,000,
$217,000, and $103,000 in 1997, 1996, and 1995, respectively.
28
<PAGE> 31
8. MAJOR CUSTOMERS AND FOREIGN SALES
Net sales to the Company's two largest automotive industry customers
approximated 21% and 11% in 1997, 21% and 20% in 1996, and 17% and 16% in 1995.
Net sales to customers in foreign countries, principally Canada, approximated
$7,086,000, $8,920,000, and $7,112,000 in 1997, 1996, and 1995, respectively.
9. CONCENTRATIONS OF CREDIT AND OTHER RISKS
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables with a variety of automotive
industry original equipment manufacturers and automobile after-market dealers
and retailers. The Company generally does not require collateral from its
customers. Credit risk with such customers is considered by management to be
limited due to the general creditworthiness of its customers and its broad
customer base, procedures to monitor customers' payment history, and adequate
provision for uncollectable accounts.
The Company is directly affected by the well-being of the automotive industry
and a total or partial loss of the Company's business relationship with its
major customers could result in a possible loss of sales, which could have an
adverse effect on the Company's operating results. Effective in February 1997,
the Company's contract to supply bedliners to one of its major customers was
terminated.
The Company currently purchases the majority of its virgin plastic from two
suppliers. Management believes that numerous alternative sources of supply are
readily available on comparable terms. The supply and demand for plastic resins
and fiberglass are subject to cyclical and other factors. Under normal
conditions, there is no difficulty in obtaining these raw material requirements
at competitive prices. Management exercises available market and business
opportunities to moderate price and delivery risk and does not foresee
conditions which would lead to a shortage of supply or a drastic price increase
in the near term.
10. STOCK OPTIONS
The Company has entered into Management Stock Option Plans And Agreements (1997
Plan) which provide incentives to certain employees through encouragement of
stock ownership in the Company. In addition, the Company has a Management Stock
Option Plan, as amended (1994 Plan), which was suspended in 1997 except as to
outstanding options. Options under the 1997 Plan are granted provided that the
executive is employed by the Company on the last day of the fiscal year. Twenty
percent of the options become exercisable on each anniversary date of the option
grant. At December 31, 1997, there were 8,000 options granted under the 1997
Plan. In addition, the Company granted 30,813 Signing Stock Options to two
executive officers which were exercised in 1997. Options under the 1994 Plan
have a term of ten years and are contingent upon the attainment of certain
annual financial results. The options become exercisable as to 25% of the shares
on each anniversary date of the option grant on a per share exercise price equal
to the book value per share on the first day of the year that required financial
results were attained. Through December 31, 1997, 26,326 options have been
granted under the 1994 Plan, and 17,921 have been canceled due to termination of
employment.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock Based Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has elected to continue applying Accounting Principles Board (APB) No.
25, "Accounting for Stock Issued to Employees," and related interpretations in
accounting for stock options granted to employees. Accordingly, because the
exercise price of the stock options equals the market price of the stock at the
date of grant, no compensation expense has been recognized under the 1997 Plan.
Had compensation cost been determined under the method set forth in SFAS No.
123, the effect on 1997, 1996 and 1995 net income (loss) and earnings per share
would not have been significant. Total compensation expense recorded
approximated $163,000, $114,000 and $0 in 1997, 1996 and 1995, respectively.
Stock option transactions are summarized as follows:
29
<PAGE> 32
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Options Price Options Price Options Price
- ---------------------- ---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 24,684 $30.92 10,526 $25.00 10,526 $25.00
Granted 38,813 14.81 15,800 34.74 - -
Exercised (30,813) 12.17 - - - -
Canceled (16,279) 31.08 (1,642) 29.87 - -
---------- ----------- ----------
Outstanding at end
of year 16,405 $27.87 24,684 $30.92 10,526 $25.00
========== =========== =========== =========== ========== ===========
</TABLE>
The outstanding stock options at December 31, 1997 have a range of exercise
prices between $25.00 and $34.74 per option. Options under the 1994 Plan have a
weighted average contractual life of approximately 8.2 years. At December 31,
1997, 3,886 options are currently exercisable. The fair value at date of grant
for options granted during 1997 was $12.17 per option using the minimum value
method. The fair value of options at date of grant was estimated by subtracting
the present value of the exercise price from the fair value of the stock. In
order to perform this calculation, an estimated option life of seven years and
an estimated risk-free interest rate of 6.00% were assumed.
11. SUPPLEMENTAL CASH FLOW
Cash paid for interest and income taxes for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------
<S> <C> <C> <C>
Interest $9,106,363 $9,602,265 $9,440,105
==============================================
Income taxes $60,440 $2,125,000 $1,762,000
==============================================
</TABLE>
12. RELATED-PARTY TRANSACTIONS
Effective March 18, 1994, the Company has entered into a 10-year consulting
agreement (the Agreement) with Trivest Inc. (Trivest), an affiliate of its major
shareholders. Pursuant to the Agreement, Trivest provides corporate finance,
strategic and capital planning and other management advice to the Company for an
annual fee (subject to cost of living adjustments). Additionally, Trivest's
annual fee will be increased for each additional business operation acquired or
sold by the Company, based upon a percentage of the purchase or sales price and
the financial results of the operation acquired.
Management and other fees charged by Trivest totaled $481,000, $434,000 and
$397,000 in 1997, 1996 and 1995, respectively. Additionally, during 1995,
Trivest charged the Company $142,500 in connection with an acquisition.
13. TRI-GLAS FIRE LOSS
On June 3, 1996, the Company's wholly owned subsidiary, Tri-Glas Corporation,
suffered a fire in one of its two main production buildings. The building, along
with equipment inside the building at the time of the fire, was completely
destroyed. During 1996, the Company received insurance proceeds and recorded a
gain of
30
<PAGE> 33
approximately $486,000 equal to the excess of the insurance proceeds
over the net book value of the assets lost in the fire. The gain is recorded as
other income in the consolidated statements of operations. The insurance
proceeds were used by the Company to replace the building and equipment lost in
the fire. In 1997, the Company received insurance proceeds related to business
interruption insurance and recorded a gain as other income of $298,000.
14. LEGAL SETTLEMENT AND CONTINGENCIES
From time to time, the Company is subject to legal proceedings and other claims
arising in the ordinary course of its business. The Company maintains insurance
coverage against claims in an amount which it believes to be adequate. Other
than as discussed below, the Company believes that it is not presently a party
to any litigation the outcome of which would have a material adverse effect on
its financial condition or on the results of operations.
On December 23, 1997, the Company settled certain litigation with the Company's
former executive officer (officer). Under the terms of the settlement, the
Company agreed to purchase 16,007.5 shares of Penda Corporation's common stock
from the officer, the Company and the officer agreed that options held by the
officer, if any, were canceled and various other aspects of the employment
agreement between the Company and the officer were modified. The officer
received, in consideration for this settlement, $850,000. The estimated value of
the shares purchased was $195,000. The difference between the settlement and the
estimated value of shares purchased of $655,000 was expensed.
The Company, along with various other manufacturers of pickup truck bedliners,
has been identified and served as a defendant in four pending class action
lawsuits. The complaints allege that the bedliners manufactured by the
defendants are defective and unreasonably dangerous because the bedliners
supposedly prevent the discharge of static electricity which can accumulate on
or in portable fuel containers and thereby create the potential for an
explosion. The plaintiffs seek damages in unspecified amounts and equitable
relief, including a recall and replacement of all bedliners, or a refund, and
notification to all bedliner owners of the purported danger. The complaints
either request punitive damages or reserve the right to seek punitive damages at
a later date. Management believes that the claims in these lawsuits are without
merit and has specifically denied any fault or omission or any liability or
violation of law in connection with these claims. The Company is in the
preliminary stages of settlement discussions and has accrued for its portion of
the estimated settlement amount. In the event that settlement discussions
terminate, the Company intends to vigorously defend these lawsuits.
31
<PAGE> 34
15. ACQUISITION:
On July 14, 1995, the Company's wholly-owned subsidiary, Tri-Glas
Corporation ("Tri-Glas"), acquired certain assets and assumed certain
liabilities of VMC Fiberglas Products, Inc. (D.b.a. Tri-Glas Industries)
("VMC"). Tri-Glas, with manufacturing facilities in Daleville, Alabama,
manufactures pickup truck, van and sport utility vehicle accessories, including
pickup truck caps, running boards, visors and van conversion tops, and also
manufactures sleeper cabs for heavy duty trucks. These products are sold
primarily to automobile after-market dealers and retailers in the United States.
The acquired assets consisted of substantially all of the assets of VMC except
for certain real property. The aggregate consideration paid for the VMC assets
was $10,903,000, which included cash payments to seller totaling $7,562,000, a
$2,000,000 note due to the former owner of VMC, direct acquisition costs of
$791,000 and assumption of liabilities in the amount of $550,000. The
transaction was financed through proceeds from the Company's revolving credit
facility.
The acquisition has been accounted for using the purchase method of
accounting. The cost of the acquisition has been allocated to the assets
acquired and the liabilities assumed on the basis of their underlying fair
value. The excess of the cost over the fair value of the net assets acquired is
$7,821,000, and is being amortized over 40 years. The operating results
subsequent to the acquisition of Tri-Glas have been included in the Company's
consolidated operating results.
The following unaudited information presents, on a pro forma basis, the
Company's results for the year ended December 31, 1995, giving effect to the
acquisition, as if it had occurred at the beginning of the period presented:
<TABLE>
<CAPTION>
1995
--------------
<S> <C>
Net sales $ 81,521,000
==============
Net income $ 3,837,000
==============
Net income per common share
Basic $ 3.84
Diluted $ 3.84
==============
</TABLE>
32
<PAGE> 35
PENDA CORPORATION
SCHEDULE II
VALUATION AND QUALIFICATION ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged Balance
Beginning Cost and To Other at End of
Period Description of Period Expenses Accounts Deductions Period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1997 Allowance for Doubtful Accounts $ 75,000 $465,745 $ - $ 70,611(1) $470,134
Inventory Obsolescence Reserve $180,240 $348,126 $ - $ - $528,366
Year ended
December 31, 1996 Allowance for Doubtful Accounts $121,421 $(18,753) $ - $ 27,668(1) $ 75,000
Inventory Obsolescence Reserve $ 55,000 $125,240 $ - $ - $180,240
Year ended
December 31, 1995 Allowance for Doubtful Accounts $134,250 $ 92,225 $ - $105,054(1) $121,421
Inventory Obsolescence Reserve $ - $ 55,000 $ - $ - $ 55,000
</TABLE>
(1) Bad debts written off, net of recoveries.
33
<PAGE> 36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The accounting firm of Coopers & Lybrand LLP ("Coopers & Lybrand")
represented the Company as its independent accountants during calendar years
1995 and 1996 and the interim periods in 1997, and was dismissed by the Audit
Committee of the Company's Board of Directors on December 16, 1997. During the
Company's two most recent calendar years and all subsequent interim periods,
there were no (i) disagreements between the Company and Coopers & Lybrand on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Coopers & Lybrand, would have caused it to make reference to the
subject matter of the disagreement in connection with its reports, or (ii)
reportable events as defined in paragraph (a)(1)(v) of Item 304 of Regulation
S-K. Coopers & Lybrand's reports on the financial statements of the Company for
calendar years 1995 and 1996 did not contain an adverse opinion or disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope, or
accounting principles. The Company's Audit Committee of the Board of Directors
appointed Ernst & Young LLP ("Ernst & Young") on December 16, 1997 as the
Company's independent auditors for calendar year 1997. During the Company's two
most recent years and all subsequent periods, Ernst & Young was not consulted
regarding any matters set forth in paragraphs (a)(2)(i) or (ii) of Item 304 of
Regulation S-K.
34
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -----------------------------------------------
<S> <C> <C>
Earl W. Powell 59 Chairman of the Board
Jack L. Thompson 59 President, Chief Executive Officer and Director
Leo E. Waner 42 Vice President -- Chief Financial Officer
Jeffrey G. Rastocan 36 Vice President -- Sales & Marketing
Scot D. Harvey 41 Vice President -- Operations
Gary L. Witt 36 Vice President -- Quality Services
Peter C. Brockway 41 Director
Phillip T. George, M.D. 58 Director
Robert D. Blank 39 Director
Thomas J. Smith 45 Director
L.J. (Jim) Schoenwetter 59 Director
</TABLE>
Mr. Powell, a director of the Company since its 1994 organization, has
served as Chairman of the Board since January 1, 1998. Mr. Powell also served as
Chairman of the Board from the date of the Company's organization until March
27, 1997. Mr. Powell serves as President and Chief Executive Officer of Trivest,
Inc. ("Trivest"), a private investment firm formed by Messrs. Powell and George
in 1981 that specializes in management services and acquisitions, dispositions,
and leveraged buyouts. Since May 1984, Mr. Powell has served as Chairman of the
Board of Atlantis Plastics, Inc., an American Stock Exchange company whose
subsidiaries are engaged in the plastics industry ("Atlantis") and as Chief
Executive Officer from May 1984 to February 1995. Mr. Powell also served as
President of Atlantis from November 1993 to February 1995. Mr. Powell also
serves as Chairman of the Board and Chief Executive Officer of Biscayne Apparel,
Inc., an American Stock Exchange company whose principal subsidiaries are
engaged in the apparel industry ("Biscayne"). Mr. Powell also serves as Chairman
of the Board of Directors of WinsLoew Furniture Inc., a NASDAQ National Market
company engaged in the manufacture of contract seating and casual furniture
("WinsLoew"). From 1971 until 1985, Mr. Powell was a partner with KPMG/Peat
Marwick, Certified Public Accountants, where his positions included serving as
managing partner of Peat Marwick's Miami office.
Mr. Thompson has served as President, Chief Executive Officer, and as a
Director since joining the Company on July 7, 1997. From October 1993 to
February 1997, Mr. Thompson was Senior Vice President of Tenneco Automotive and
President of Monroe Auto Equipment Company, a $1.3 billion division of Tenneco
Automotive that manufactures the Monroe Brand of motor vehicle ride control
products. From April 1990 to October 1993, Mr. Thompson was Vice President
Operations and Engineering for Walker Manufacturing Company a division of
Tenneco Automotive that manufactures motor vehicle exhaust systems. From October
1987 to April 1990, Mr. Thompson was Managing Director of Walker Australia. From
January 1975 to October 1987, Mr. Thompson was Executive Director of Production
and Process Engineering for Monroe. Prior to joining Monroe Auto Equipment
Company, Mr. Thompson worked for Chrysler Corporation, General Motors
Corporation, and Ford Motor Company.
Mr. Waner has served as Vice President and Chief Financial Officer of the
Company since joining the Company on July 7, 1997. From June 1995 to March 1997,
Mr. Waner was Vice President of Acquisition and Integration for Monroe Auto
Equipment Company. From January 1993 to May 1995, Mr. Waner was Vice President
of Finance for Monroe. From 1989 to 1993, Mr. Waner was Executive Director -
Internal Audit for Tenneco Inc. From 1983 to 1989 Mr. Waner held a series of
positions of increasing responsibility with Tenneco Gas including Manager - EDP
Audit, Manager Strategy, Assistant Controller and Controller.
35
<PAGE> 38
Mr. Rastocan has served as Vice President Sales and Marketing for the
Company since joining the Company on October 20, 1997. From 1993 to 1997, Mr.
Rastocan was Retail Market Manager for Monroe Auto Equipment Company. From 1984
to 1993, Mr. Rastocan held various sales positions with Monroe. Mr. Rastocan's
background includes managing various sales and key accounts as well as designing
consumer promotions and sales incentive programs.
Mr. Harvey served as the Division's Director of Operations from March 1990
through March 18, 1994 at which time he became Vice President -- Operations. Mr.
Harvey is primarily responsible for the development and implementation of the
Company's operations and distribution. From June 1987 until March 1990, Mr.
Harvey served as Distribution Manager for Tombstone Pizza, Inc., where his
responsibilities included purchasing, scheduling, warehousing, and fleet
management.
Mr. Witt served as the Division's Director of New Business Development from
January 1993 through March 18, 1994 at which time he became Vice President --
Quality Services. Mr. Witt is responsible for the Company's Quality Services,
Human Resources, Purchasing, and Marketing and Advertising groups. From May 1987
until January 1993, Mr. Witt served as the Division's OEM Sales Manager, where
he managed and developed OEM/dealer programs.
Mr. Brockway, a director of the Company since its organization, is the
Managing Partner of Brockway Moran & Partners Inc., a private equity firm. From
March 27, 1997 until December 31, 1997, Mr. Brockway served as Chairman of the
Board of the Company, and from March 27, 1997 until July 7, 1997 served as
acting Chief Executive Officer. From September 1986 until December 1997, Mr.
Brockway was an executive with Trivest, most recently serving as Executive Vice
President and Managing Director.
Dr. George, a director of the Company since its organization, is the
Chairman of the Board of Trivest, Inc. He has served as the Vice-Chairman of the
Board of Atlantis since that company's organization and as Chairman of the
Executive Committee of the Atlantis Board of Directors since February 1990. Dr.
George also serves as a director of WinsLoew.
Mr. Blank, a director of the Company since its organization, has served as
a Partner of Brinson Partners, Inc. ("Brinson"), a global investment management
firm, since January 1992. From 1987 until January 1992, Mr. Blank served as a
Senior Investment Manager with Wind Point Partners, a venture capital
partnership. Mr. Blank also serves as director of Six Flags Entertainment
Corporation, Creo Products, Inc., AuditForce, Inc., Long Term Care Physicians
Corporation.
Mr. Smith, a director of the Company since its organization, has been
employed by Norwesco, Inc. ("Norwesco"), a manufacturer of rotationally molded
polyethylene tanks, since 1979. Mr. Smith has served as President of Norwesco
since February 1992 and was appointed Chief Executive Officer in January 1993.
Prior to his appointment as President, Mr. Smith held several positions with
Norwesco, including Vice President and General Manager. Norwesco was acquired by
certain affiliates of Trivest and certain members of Norwesco management in
1992.
Mr. Schoenwetter, a director of the Company since March 1995, has been
employed since 1960 by 3M, a diversified manufacturer with operations in 34
states and more than 60 foreign countries. Mr. Schoenwetter has had a number of
positions in the financial area of 3M, including Vice President & Controller,
and was appointed to his current position, Vice President, Logistics, in July
1993.
INVESTORS' AGREEMENT
Each of the Company's shareholders entered into a Subscription and
Shareholders' Agreement in connection with the Company's commencement of
operations in March 1994, (as amended, the "Investors' Agreement"). The
Investors' Agreement requires each shareholder to vote in favor of electing, as
directors, two designees of Trivest Institutional Fund, Ltd., two designees of
Trivest Investors Fund, Ltd., one designee of Blue Sky Partners (which Blue Sky
Partners has agreed will be the Company's President) and one designee of certain
entities advised by or affiliated with Brinson.
36
<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company, to the Company's Chief Executive
Officer and to three other executive officers whose total annual salary and
bonus, determined as of December 31, 1997, exceeded $100,000 ("Named Executive
Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION STOCK
---------------------------------------------- OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OTHER AWARDS(#)
- ---------------------------------------- --------- ------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
Jack L. Thompson (2)(3) 1997 $125,000 $100,300 $19,836 22,542.00
President and Chief Executive Officer
Daniel E. Braun (4) 1997 $ 48,725 $ 0 $ 0
Former President and Chief Executive 1996 $164,160 $240,160 5,730.87
Officer
1995 $160,000 $ 6,400
Peter C. Brockway 1997 $ 0 $ 0 $ 0
Former Acting Chief Executive Officer
Leo E. Waner (3)(5)(6) 1997 $ 60,096 $ 60,300 $41,794 11,021.00
Vice President and Chief Financial
Officer
Scot D. Harvey (7)(8) 1997 $100,616 $ 28,546 $ 0 1,500.00
Vice President-Operations 1996 $ 93,591 $ 19,200 1,988.27
1995 $ 86,900 $ 6,476 --
Gary L. Witt (8) 1997 $102,781 $ 18,300 $ 0 1,500.00
Vice President-Quality Services 1996 $ 92,733 $ 29,239 1,810.49
1995 $ 82,880 $ 8,815 --
</TABLE>
(1) Except as set forth in footnotes (6), (7), and (8), represents bonus earned
in the respective year that is paid by the Company in the subsequent year.
(2) Mr. Thompson joined the Company on July 7, 1997.
(3) Other annual compensation shown for Mr. Thompson includes payments for
housing in Portage, Wisconsin of $8,202 and travel between Portage,
Wisconsin and Monroe, Michigan for Mr. Thompson and his spouse of $6,268
and tax gross up of $5,366. Other annual compensation for Mr. Waner
includes relocation costs of $36,648.
(4) Mr. Braun resigned as an employee of the Company by letter dated March 26,
1997.
(5) Mr. Waner joined the Company on July 7, 1997.
(6) Bonus shown for 1997 for Mr. Waner includes a $25,000 signing bonus.
(7) Bonus shown for 1997 for Mr. Harvey includes an adjustment to the 1996
bonus paid after March 27, 1997 of $10,246.
37
<PAGE> 40
(8) Bonus shown for 1997 for Mr. Harvey and Mr. Witt includes a special
payment of $18,000 to each for acting as General Managers of the Company
from April through June 1997.
STOCK OPTION GRANTS
The following table sets forth information concerning the grant of stock
options to the Named Executive Officers in 1997 (all options were granted under
Management Stock Option Plans and Agreements entered into between the Company
and the Named Executive Officers). The Company did not grant any stock
appreciation rights in 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
------------------------------------------------ ---------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES BASE PRICE
GRANTED IN FISCAL ($/SH) EXPIRATION
NAME (#)(1) YEAR(2) DATE 5%($) 10%($)
- ---------------------- ---------- ----------- ----------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Jack L. Thompson (4) 20,542 52.93% $12.17 12/31/1997 $0 $ 0
2,000 5.15% $25.00 (1) $0 $13,132
Daniel E. Braun (5) 0
Peter C. Brockway 0
Leo E. Waner (4) 10,271 26.46% $12.17 12/31/1997 $0 $ 0
750 1.93% $25.00 (1) $0 $ 4,924
Gary L. Witt 1,500 3.86% $25.00 (1) $0 $ 9,849
Scot D. Harvey 1,500 3.86% $25.00 (1) $0 $ 9,849
- ---------------------
</TABLE>
(1) As of October 20, 1997, the First Amended and Restated Management Stock
Option Plan, as amended, was suspended. All unvested options outstanding
thereunder other than options granted prior to January 1, 1997 were
terminated and cancelled. New Management Stock Option Plans and Agreements
were entered into (See Exhibit 10.13). A total of 30,813 in signing options
and 5,750 in time vested options were granted to the named Executive
Officers in 1997. The time vested options become exercisable as to 20% of
the shares on each anniversary of the date of grant (beginning December 31,
1998) over a five year period, so long as employment with the
Company continues without any expiration date. The Board of Directors may,
in its discretion, accelerate the date on which any option may be
exercised, and may accelerate the vesting of any shares subject to any
option.
(2) Options to purchase a total of 38,813 shares were granted in 1997.
The percentage shown in this column represents the percentage arrived at by
dividing the number of options granted to the named Executive Officer by
the total number of options granted in 1997.
(3) Based on assumed annual rates of stock price appreciation from the fair
value of the Company's common stock as of the grant date in accordance with
Statement of Financial Accounting Standard No. 123 "Accounting for Stock
Based Compensation". These amounts represent assumed rates of appreciation
only. Actual gains, if any, on stock options exercises and common stock
holdings are dependent on the future performance of the Company and the
market available for the sale of the Company's common stock. The Company's
common stock is not registered under Section 12 of the Securities Exchange
Act of 1934 (the "Exchange Act"). Since
38
<PAGE> 41
the 1997 time vested options do not have a termination date, 10 years was
used for these calculations. Since the signing options expired on December
31, 1997, no appreciation occurred.
(4) These options were both granted and exercised in 1997. See "Stock
Option Exercises and Fiscal Year-end Holdings"
(5) Mr. Braun resigned as an employee of the Company by letter dated March
26, 1997.
STOCK OPTIONS EXERCISES AND FISCAL YEAR-END HOLDINGS
The following table sets forth information, with respect to the Named
Executive Officers, concerning exercised and unexercised options held by them as
of the end of such fiscal year:
OPTIONS EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END
OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS EXERCISED DURING OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1997 1997(#) DECEMBER 31, 1997($)(1)
---------------------------- ---------------------------- ---------------------------
VALUE
REALIZED($)
NAME SHARES(#) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack L. Thompson 20,542 0 0 2,000.000 $0
Daniel E. Braun (2) 0 0
Peter C. Brockway 0 0
Leo E. Waner 10,271 0 0 750.000 $0
Gary L. Witt 1,357.865 3,320.580 $0 $0
Scot D. Harvey 1,491.200 3,159.615 $0 $0
</TABLE>
(1) Calculated by multiplying (a) the difference between the present value of
the option exercise price per share and the estimated per share fair value
calculated in accordance with Statement of Financial Accounting Standard
No. 123 "Accounting for Stock Based Compensation" by (b) the number of
shares of common stock underlying the option. The Company's Board
determined that the fair market value of the Company's common stock on the
date of exercise and through December 31, 1997 was $12.17. Options with an
exercise price higher than fair value were considered to have a value of
zero for purposes of this calculation. The Company is not registered under
Section 12 of the Exchange Act.
(2) Mr. Braun resigned as an employee of the Company by letter dated March 26,
1997.
EMPLOYMENT AGREEMENTS
Effective on June 23, 1997, the Company entered into a four year employment
agreement with Mr. Thompson providing for his employment as President and Chief
Executive Officer for an annual base salary of $250,000 (at June 23, 1997),
subject to cost-of-living adjustments, as well as an incentive bonus based on
the Company's operating profit. In addition, the Company pays for Mr. Thompson's
living accommodations in Portage Wisconsin and for certain travel expenses for
Mr. Thompson and his spouse. The employment agreement also provides that Mr.
Thompson will receive an amount equal to the sum of his current annual base
salary plus his last incentive bonus if his employment is terminated without
"cause" (as defined), payable in 12 equal monthly installments (the "Severance
Payment"). The employment agreement also prohibits Mr. Thompson from directly or
indirectly competing with the Company for one year after termination of his
employment (or, if terminated without "cause," on the date Mr. Thompson receives
his last Severance Payment installment).
39
<PAGE> 42
Effective on July 1, 1997, the Company entered into a four year employment
agreement with Mr. Waner providing for his employment as Vice President and
Chief Financial Officer for an annual base salary of $125,000, subject to
cost-of-living adjustments, as well as $25,000 signing bonus and an incentive
bonus based on the Company's operating profit. The employment agreement also
provides that Mr. Waner will receive an amount equal to the sum of his current
annual base salary plus his last incentive bonus if his employment is terminated
without "cause" (as defined), payable in 12 equal monthly installments (the
"Severance Payment"). The employment agreement also prohibits Mr. Waner from
directly or indirectly competing with the Company for one year after termination
of his employment (or, if terminated without "cause," on the date Mr. Waner
receives his last Severance Payment installment).
COMPENSATION OF DIRECTORS
The Company reimburses directors for all travel-related expenses incurred
in connection with their activities as directors. Mr. Schoenwetter receives
quarterly director's fees totaling $12,000 annually.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company had 1,016,624.2679 shares of Common Stock issued and
outstanding at March 15, 1998. The following table sets forth information with
respect to the beneficial ownership of the Common Stock as of such date by (i)
each person known to the Company to own beneficially more than five percent of
the Company's outstanding Common Stock, (ii) each director and Named
Executive Officer who owns any shares, and (iii) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(2)
-------------------------
NAME(1) SHARES PERCENT
- ------- -------- --------
<S> <C> <C>
Brinson Partners, Inc. (3)......................................... 500,000 49.1824%
Trivest Group, Inc. (4)(5)......................................... 412,871 40.6120%
Blue Sky Partners (5)(6)........................................... 32,000 3.1477%
Earl W. Powell (5)(7).............................................. 444,871 43.7596%
Phillip T. George, M.D. (5)(7)..................................... 444,871 43.7596%
Thomas J. Smith (5)................................................ 4,000 *
Peter C. Brockway (11)............................................. 2000 *
Jack L. Thompson................................................... 20,542 2.0206%
Leo E. Waner....................................................... 10,271 1.0103%
Scot D. Harvey (8)................................................. 5,643.9110 *
Gary L. Witt (8)................................................... 4,656.6820 *
All directors and executive officers as a group (persons) (9)(10)... 491,984.5930 48.1839%
</TABLE>
* Less than 1%
(1) Unless otherwise indicated, the address of each of the identified
beneficial owners is 2344 W. Wisconsin Street, Portage, Wisconsin
53901-0449.
(2) Unless otherwise indicated, each person has sole voting and investment
power with respect to all such shares.
40
<PAGE> 43
(3) Consists of 400,000 shares held of record by Virginia Retirement System
("VRS"), 85,978 shares held of record by Brinson Venture Capital Fund III,
L.P. ("BCFIII") and 14,022 shares held of record by Brinson MAP Venture
Capital Fund III Trust ("Brinson MAP Fund"). Brinson has voting and
dispositive power over the shares held of record by VRS pursuant to
agreements between Brinson and VRS. Brinson is the general partner of BCF
III and as a result has voting and dispositive power over the shares held
by BCF III. Brinson MAP Fund is a collective investment trust the trustee
of which (Brinson Trust Company) is a subsidiary of Brinson. Robert D.
Blank, a director of the Company, is a Partner of Brinson and an officer of
Brinson Trust Company. Both Brinson and Mr. Blank disclaim beneficial
ownership of the shares of Common Stock held by VRS, BCF III and Brinson
MAP Fund. Brinson's address is 209 South LaSalle, Chicago, Illinois 60604.
(4) Trivest Group, Inc. serves as the sole general partner of Trivest 1988
Fund Manager, Ltd., which in turn is the sole general partner of Trivest
Fund I, Ltd. ("Fund I"), a privately held investment partnership that holds
a record 316,469 shares of Common Stock, and Trivest Equity Partners I,
Ltd. ("Equity Partners I"), a privately held investment partnership that
holds of record 96,402 shares of Common Stock. Messrs. Powell and George
are executive officers and directors of Trivest Group, Inc. and own a
controlling interest of its outstanding capital stock.
(5) The beneficial owner's address is 2665 South Bayshore Drive, Suite
800, Miami, Florida 33313-5401.
(6) Blue Sky Partners is a Florida general partnership ("Blue Sky"), whose
partners are Earl W. Powell and Phillip T. George, M.D., both directors
of the Company.
(7) Reflects shares held of record by Fund I, Equity Partners I and Blue Sky.
See footnotes (4) and (6).
(8) Includes 2,319.645 and 2,112.235 shares for Mr. Harvey and Mr. Witt,
respectively, of common stock issuable upon exercise of the options
presently exercisable as of March 15, 1998.
(9) Does not reflect shares held of record by any of VRS, BCF III or Brinson
MAP Fund. Reflects shares held of record by Fund I, Equity Partners I and
Blue Sky. See footnotes (3), (4) and (6).
(10) Includes 4431.880 shares of common stock issuable upon exercise of the
exercisable executive officer's options as of March 15, 1998.
(11) The beneficial owner's address is 2655 LeJeune Road, Suite 415, Coral
Gables, Florida 33134
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING AGREEMENT
Effective March 18, 1994, the Company entered into a ten-year agreement
(the "Consulting Agreement") with Trivest, a corporation owned by Messrs. Powell
and George. Pursuant to the Consulting Agreement, Trivest provides corporate
finance, strategic and capital planning and other management advice to the
Company for an annual fee, payable quarterly in advance. During 1997, the
Company paid management fees to Trivest of approximately $352,548, and
reimbursed Trivest for certain out-of-pocket expenses incurred on behalf of the
Company.
Pursuant to the Consulting Agreement, for each additional business
operation acquired by the Company, Trivest's annual base compensation will
generally be increased by the sum of 5% of the annual earnings before income
taxes, interest expense and amortization of goodwill ("EBITA") of the acquired
business for the fiscal year in which it is acquired up to $1.0 million of
EBITA, plus 2.5% of EBITA between $1.0 million and $3.0 million and 1.75% of
EBITA in excess of $3.0 million. In addition, for each acquisition of any
business operation introduced or negotiated by Trivest, Trivest will generally
receive a fee of equal to the sum of 1.5% of the purchase price up to $100.0
million and 1.25% of purchase price in excess of $100.0 million. Similarly, for
each disposition of any business operation of the Company negotiated by Trivest,
Trivest will generally receive a fee equal to the sum of 0.25% of the sales
price up to $150.0 million and 0.5% of the sales price in excess of $150.0
million.
41
<PAGE> 44
TRIVEST LEGAL DEPARTMENT
Trivest maintains an internal legal department. The Trivest legal
department accounts for its time on an hourly basis and bills Trivest and its
affiliates, including the Company, for services rendered at prevailing rates. In
1997, the Company paid Trivest $79,881.25 for services rendered by the
Trivest legal department. The Company believes that the fees charged by the
Trivest legal department in 1997 were no less favorable to the Company than fees
charged to unaffiliated third parties for similar services.
SETTLEMENT AGREEMENT
On December 23, 1997, the Company and Mr. Braun entered in a Settlement
Agreement and Stock Transfer and Option Termination Agreement under which the
Company paid $850,000 to Mr. Braun for all of Mr. Braun's rights under the
Subscription and Shareholders' Agreement and the Management Stock Option Plan
and for dismissal of the lawsuit discussed earlier. Mr. Braun does not have any
ownership rights or interests in and to any capital stock or other securities of
the Company.
42
<PAGE> 45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K
(a) The following documents are filed as part of this report:
1. Financial Statements - included in Item 8. An index to financial
statements appears on Page 14.
2. Financial Statement Schedule - Schedule II - valuation and qualifying
accounts is the only schedule provided because all other schedules for
which provision is made in the applicable accounting regulations of
the Commission are not required under the related instructions or are
not applicable, and therefore have been omitted. Schedule II appears
on Page 33.
3. Exhibits
(b) Form 8-K dated December 16, 1997 relating to the Company's change in its
independent accountants.
(c) Exhibits not incorporated by reference follow the "Signatures" section and
are incorporated herein by reference.
(d) Financial Statement Schedules required by Regulation S-X are included in
item (a)(2) above and are incorporated herein by reference.
Exhibit Description
2.1 Asset Purchase Agreement, dated as of July 14, 1995, between Tri-Glas
Corporation and VMC Fiberglass Products, Inc. (2.1)(2)
2.2 Supplemental Agreement, dated as of July 14, 1995, among Tri-Glas
Corporation, VMC Fiberglass Products, Inc., John H. Watson, Robert E.
Ostendorf, Bob Heinsen, Karl Sheffield and Alfred Saliba (2.2)(2)
2.3 Promissory Note dated as of July 14, 1995, issued by Tri-Glas Corporation
and Payable to the Order of VMC Fiberglass Products, Inc. (2.3)(2)
2.4 Guaranty, dated as of July 14, 1995, issued by the registrant in favor of
VMC Fiberglass Products, Inc. (2.4)(2)
2.5 Lease Agreement dated as of July 14, 1995, between Tri-Glas Corporation
and VMC Fiberglass Products, Inc. (2.5)(2)
3.1 Registrant's Articles of Incorporation (3.1)(1)
3.2 Registrant's Bylaws (3.2)(1)
4.1 Specimen Note Certificate for Notes (4.2)(1)
4.2 Registration Rights Agreement, dated as of March 18, 1994, between the
Registrant and Bear, Stearns & Co. Inc. (4.3)(1)
4.3 Indenture, dated as of March 18, 1994, between the Registrant and
American Stock Transfer & Trust Company (4.4)(1)
43
<PAGE> 46
4.4 Supplemental Indenture, dated as of July 14, 1995, between Tri-Glas
Corporation and American Stock Transfer & Trust Company, as Trustee
(99.1)(2)
10.1* Registrant's First Amended and Restated Management Stock Option Plan
adopted March 14, 1994(10.1)(3)
10.2 Form of Indemnification Agreement between the Registrant and each of its
directors and certain executive officers (10.2)(1)
10.3 Subscription and Shareholders' Agreement, dated March 15, 1994, among the
Registrant and its Shareholders (10.3)(1)
10.4 First Amendment to Subscription and Shareholders' Agreement, dated March
31, 1995, among the Registrant and its Shareholders (10.4)(8)
10.5 Amended and Restated Credit Agreement, dated as of July 14, 1995, between
the Registrant and Banque Nationale de Paris, as Lender and as Agent for
the Loan Parties Thereunder (10.5)(2)
10.6* Consulting Agreement, dated as of March 18, 1994, between the Registrant
and Trivest, Inc. (10.6)(1)
10.7* First Amendment to Registrant's First Amended and Restated Management
Stock Option Plan adopted August 2, 1996(10.7)(4)
10.8* Employment Agreement between the Registrant and Jack L. Thompson dated
June 23, 1997. (10.9)(5)
10.9* Employment Agreement between the Registrant and Leo E. Waner dated July
1, 1997. (10.8)(5)
10.10 Settlement Agreement, dated December 23, 1997, between the Registrant and
Daniel E. Braun (10.10)(5)
10.11 Stock Transfer and Option Termination Agreement dated December 23, 1997
between the Registrant and Daniel E Braun (10.11)(5)
10.12 Form of Shareholder's Agreement between Registrant and certain executive
officers and certain employees. (10.12)(5)
10.13* Form of Management Stock Option Plan and Agreement between Registrant and
certain executive officers (10.13)(5)
10.14 Amendment No. 1 to the Amended and Restated Credit Agreement dated as of
October 16, 1997, between the Registrant and Banque Nationale de Paris.
(10.14)(6)
10.15 Letter Waiver dated as of February 24, 1998 to the Amended and Restated
Credit Agreement between the Registrant and Banque Nationale de Paris.
(10.15)(5)
10.16* Form of Stock Option Substitution Agreement entered into between the
Registrant and certain executives (10.16)(5)
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges (5)
16.1 Letter re Change in Certifying Accountant dated December 16,
1997(16.1)(7)
21.1 Subsidiaries of the Registrant (5)
27.1 Financial Data Schedule - For SEC use only (5)
44
<PAGE> 47
(1) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Registration Statement on Form
S-4 (No. 33-77728).
(2) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Current on Form 8-K, dated July
25, 1995, as amended.
(3) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q, dated May
3, 1996.
(4) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on for 10-K, dated March
31, 1997.
(5) Filed herewith
(6) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q, dated
November 13, 1997.
(7) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 8-K, dated
December 17, 1997.
(8) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q, dated May
8, 1996.
* Indicates a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Annual Report on Form 10-K.
45
<PAGE> 48
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.
PENDA CORPORATION
Date: March 24, 1998 By: /s/ JACK L. THOMPSON
---------------------------------
Jack L. Thompson
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JACK L. THOMPSON President, Chief Executive Officer March 24, 1998
- ------------------------------------ and Director
Jack L. Thompson
/s/ EARL W. POWELL Chairman of the Board March 30, 1998
- ------------------------------------
Earl W. Powell
/s/ LEO E. WANER Vice President - Chief Financial March 24, 1998
- ------------------------------------ Officer (Principal Financial and
Leo E. Waner Accounting Officer)
/s/ PHILLIP T. GEORGE, M.D. Director March 30, 1998
- ------------------------------------
Phillip T. George, M.D.
/s/ ROBERT D. BLANK Director March 30, 1998
- ------------------------------------
Robert D. Blank
/s/ THOMAS J. SMITH Director March 27, 1998
- ------------------------------------
Thomas J. Smith
/s/ PETER C. BROCKWAY Director March 27, 1998
- ------------------------------------
Peter C. Brockway
/s/ L.J. SCHOENWETTER Director March 27, 1998
- ------------------------------------
L.J. Schoenwetter
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
The Company has not and does not intend to provide to its security
holders an annual report covering the Company's last fiscal year or proxy
materials with respect to any annual or other meeting of security holders to be
held during the current fiscal year.
46
<PAGE> 49
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Index Description Page Number
<S> <C> <C>
10.8 Employment Agreement between the Registrant and Jack L. Thompson dated June 48
23, 1997.
10.9 Employment Agreement between the Registrant and Leo E. Waner dated July 1, 56
1997.
10.10 Settlement Agreement, dated December 23, 1997, between the Registrant and 65
Daniel E. Braun
10.11 Stock Transfer and Option Termination Agreement dated December 23, 1997 68
between the Registrant and Daniel E Braun
10.12 Form of Shareholder's Agreement between Registrant and certain executive 71
officers and certain employees.
10.13 Form of Management Stock Option Plan and Agreement between Registrant and 78
certain executive officers.
10.15 Letter Waiver dated as of February 24, 1998 to the Amended and Restated 88
Credit Agreement between the Registrant and Banque Nationale de Paris.
10.16 Form of Stock Option Substitution Agreement entered into between the Registrant 91
and certain Executives
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges 95
21.1 Subsidiaries of the Registrant 96
27.1 Financial Data Schedule (for SEC purposes only) 97
</TABLE>
47
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT BETWEEN THE REGISTRANT AND JACK L. THOMPSON DATED JUNE 23,
1997.
EMPLOYMENT AGREEMENT
This Agreement is made as of June 23, 1997, between PENDA CORPORATION,
a Florida corporation (the "Company"), and JACK L. THOMPSON (the "Executive").
NOW THEREFORE, in consideration of (a) the Executive's employment and
continued employment with the Company, (b) the compensation paid to the
Executive for his services hereunder and the benefits provided to the Executive
in connection therewith, (c) the use by the Executive of the facilities and
other resources of the Company, (d) the opportunity provided by the Company to
the Executive to acquire or use information relating to or based on the business
of the Company, and (e) the opportunity provided by the Company to the Executive
to acquire shares of capital stock of the Company, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Interpretation of this Agreement.
(a) Terms Defined. As used herein, the following
terms when used in this Agreement have the meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Base Salary" shall have the meaning given to it under
Section 2(b) of this Agreement.
"Board" means the Board of Directors of the Company.
"Bonus Year" shall have the meaning given to it in section
2(e) of this Agreement.
"Cause" means (i) the commission of any act by the Executive
constituting financial dishonesty against Company or its Affiliates, (ii) the
conviction by the Executive of a felony or other crime involving moral
turpitude, (iii) gross dereliction of duty to the Company or its Subsidiaries,
(iv) the Executive's breach of the fiduciary duty of loyalty to the Company or
its Subsidiaries, (v) any breach by the Executive of any of the material terms
of this Agreement (including without limitation Sections 3, 4, 5, 6, 7 or 8
hereof), or (vi) conduct by the Executive which could reasonably be expected to
have a material adverse effect on the business, properties, results of
operations, financial condition or prospects of the Company or its Subsidiaries.
"Company" has the meaning given to it in the first sentence
of this Agreement.
"Company Information" means Confidential Information and
Trade Secrets.
"Confidential Information" means confidential data and
confidential information relating to the business of the Company (which does not
rise to the status of a Trade Secret under applicable law) which is or has been
disclosed to the Executive or of which the Executive became aware as a
consequence of or through his employment with the Company and which has material
value to the Company and its Affiliates and is not generally known to the
competitors of the Company and its Affiliates. Confidential Information shall
not include any data or information that (i) has been voluntarily disclosed to
the general public by the Company or its Affiliates, (ii) has been independently
developed and disclosed to the general public by others, or (iii) otherwise
enters the public domain through lawful means.
"Continuation Period" shall have the meaning given to it in
Section 2(d) hereof.
"Disability" means the Executive's inability to perform his
normal duties for any 180 consecutive calendar day period or any 180 business
days (whether or not consecutive) during any 365 calendar day period.
48
<PAGE> 2
"Employment Period" shall have the meaning given to it in
Section 2(a) hereof.
"Executive" shall have the meaning given to it in the first
sentence of this Agreement.
"Incentive Compensation" shall have the meaning given to it
in Section 2(e) of this Agreement.
"Independent Third Party" shall have the meaning given to it
in Section 2(a) hereof.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Stock Option Plan" means the Company's Management Stock
Option Plan and Agreement for Jack L. Thompson, as the same may be amended from
time to time.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns, directly or indirectly, a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Trade Secrets" means information of the Company and its
Subsidiaries including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, financial data, financial plans,
product or service plans or lists of actual or potential customers or suppliers
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.
(b) Interpretation. The words "herein," "hereof," "hereunder"
and other words of similar import refer to this Agreement as a whole, as the
same from time to time may be amended or supplemented and not any particular
section, paragraph, subparagraph or clause contained in this Agreement. Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
2. Employment.
(a) Duration. The Company agrees to employ the Executive and
the Executive accepts such employment for the period (the "Employment Period")
beginning on the date hereof and ending upon the first to occur of (i) December
31, 2001, (ii) the Executive's voluntary resignation, (iii) the date on which
the Executive is terminated for Cause, (iv) the date on which the Board
determines in its discretion that the Executive's employment with the Company is
no longer in the best interest of the Company (in which latter event, the
Executive will be entitled to severance pay as described in Section 2(d) below)
(termination pursuant to this clause (iv) is sometimes referred to in this
Agreement as "termination without Cause"), (v) the Executive's death, (vi) the
Executive's Disability, or (vii) the sale of the Company to an Independent Third
Party (including without limitation, by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the outstanding Common Stock or
otherwise). For purposes hereof, the term "Independent Third Party" means any
person who, prior to any sale of the company referred to in clause (vii), does
not own in excess of 5% of the Company's common stock on a fully-diluted basis,
who is not controlling, controlled by or under common control with any such 5%
owner of the Company's common stock and who is not the spouse, ancestor or
descendant (by birth or adoption) of any such 5% owner of the Company's common
stock. The Executive agrees to give the Board at least 90 days prior written
notice of his resignation. In the event the Executive's Employment shall be
terminated without Cause, the Company and the Executive shall in good faith
agree on a form of public announcement to be made by the Company in connection
with such termination of employment.
(b) Salary and Benefits. During the Employment Period, the
Company will pay the Executive a base salary at the rate of $250,000 per annum
(the "Base Salary"), payable in installments consistent with the
49
<PAGE> 3
Company's normal payroll schedule, subject to applicable withholding and other
taxes. The Executive's Base Salary shall be reviewed at least annually for merit
increases and may, by action and in the sole discretion of the Board, be
increased at any time or from time to time. The Executive's Base Salary
(including any increase thereto made pursuant to the preceding two sentences)
for any partial year during the Employment Period will be prorated based upon
the number of days elapsed in such year. In addition to the salary payable to
Executive pursuant to this Section 2(b), the Executive will be entitled to the
following benefits during the Employment Period, unless otherwise altered by the
Board:
(i) The Executive will be entitled to participate in
all medical and hospitalization, dental, group life insurance, and any
and all other fringe benefit plans as are presently and hereinafter
provided by the Company to its executives.
(ii) The Executive will be entitled to reimbursement
for reasonable business expenses incurred by the Executive, upon
submission of appropriate substantiation by the Executive.
(iii) The Company shall provide the Executive with
the use of a leased automobile (either a Lincoln Town Car or a vehicle
of similar cost).
(v) The Company shall provide the Executive with
furnished rental living accommodations in the Madison/Portage Wisconsin
geographic area. Such accommodations shall be selected by the
Executive; however, the rental terms (including, without limitation,
the amount of the periodic lease payments) shall be reasonably
acceptable to the Company. The Company shall be responsible for any
security deposit (and shall be entitled to any refund thereof), as well
as all utility and incidental expenses in connection therewith.
(vi) The Company shall, upon the receipt of proper
substantiation, reimburse the Executive for amounts actually paid by
him for air travel for him and his spouse between Detroit, Michigan and
Madison, Wisconsin.
(c) Services. During the Employment Period, the Executive will
serve as the President and Chief Executive Officer of the Company and will
render such services of an executive and administrative character to the Company
as the Board or the Chairman of the Board may from time to time direct. The
Executive will devote his best efforts and his business time and attention
(except for vacation periods and reasonable periods of illness or other
incapacity) to the business of the Company and its Affiliates. During the
Employment Period, the Executive will serve as a member of the Board.
(d) Severance Pay; Continuation of Certain Benefits. In the
event that the Executive's employment is terminated by the Board without Cause
pursuant to Section 2(a)(iv) above, the Company will pay to the Executive all
amounts due to the Executive as Base Salary pursuant to Section 2(b) above for
a period of twelve months after the date on which the Executive's
employment is terminated pursuant to Section 2(a)(iv) hereof. Any such
severance pay shall be payable in installments on the payment dates on which
such Base Salary would have been paid if the Employment Period had continued
for such twelve month period and, except as otherwise provided in the next
sentence and in Section 2(e) hereof, the Company will have no further
obligation to the Executive. During twelve month period commencing on the date
the Executive's employment is terminated without Cause pursuant to Section
2(a)(iv) above (the "Continuation Period"), the Company will use its best
efforts to cause the Executive, his spouse and dependents to be provided with
medical, dental and any other health benefits and coverage in amounts and on
terms no less favorable than provided immediately prior to the expiration of
the Employment Period, and in all other respects shall use all reasonable
efforts to cause the Executive to be treated in a manner that will cause him to
remain eligible for said coverage through and until the expiration of the
Continuation Period, at no cost to him (subject, however, to (x) any applicable
deductibles, (y) applicable co-payment charges, and (z) the employee portion of
premium charges, if applicable).
(e) Incentive Compensation. The Executive shall be entitled to
receive incentive compensation with respect to the period beginning on the date
hereof and ending December 31, 1997 by action and in an amount determined in the
discretion of the Board. The Company and the Executive acknowledge that the
target amount of such incentive compensation for the Company's 1997 fiscal year
shall be $150,000 (which shall be
50
<PAGE> 4
prorated for the period from the date hereof through December 31, 1997), based
on the Board's assessment of the Executive's performance. The Executive shall
also be entitled to receive incentive compensation (the "Incentive
Compensation") with respect to each of the Company's fiscal years ending
December 31, 1998, 1999, 2000 and 2001 (a "Bonus Year"), in an amount
determined pursuant to a performance-based plan to be agreed to, in good faith,
by the Company and Executive on or before December 31, 1997. Exhibit A hereto
sets forth certain preliminary understandings of the Company and the Executive
with respect to such performance-based plan. Except as otherwise provided in
the penultimate sentence of this Section 2(e), the Executive shall not be
entitled to any Incentive Compensation with respect to any such fiscal year if
he is not an employee of the Company through the end of such fiscal year. For
purposes of this Agreement, the amount of Incentive Compensation payable with
respect to any fiscal year of the Company (net of any tax or other amount
properly withheld therefrom) shall be paid by the Company to the Executive
within 75 days after the end of such fiscal year; provided, however, that in
the event any Incentive Compensation is paid prior to the issuance of the
Company's audited financial statements with respect to such fiscal year, any
amount paid shall be subject to increase or decrease based upon the results of
such audited financial statements. Notwithstanding the foregoing, if the
Executive's employment hereunder is terminated without Cause during any of the
fiscal years ending December 31, 1998, 1999, 2000 or 2001, then notwithstanding
the fact that the Executive is not employed by the Company through the end of
the fiscal year in which such termination occurs, the Executive shall be
entitled to receive the Incentive Compensation that would have otherwise been
payable to him had he been employed by the Company through the end of such
fiscal year, prorated based upon the number of days elapsed in such year
through the effective date of such termination without Cause. Any such prorated
Incentive Compensation shall be paid to the Executive within 75 days after the
end of such fiscal year; provided, however, that in the event any Incentive
Compensation is paid prior to the issuance of the Company's audited financial
statements with respect to such fiscal year, any amount paid shall be subject
to increase or decrease based upon the results of such audited financial
statements.
3. Nondisclosure. While employed by the Company and during the periods
described in the last sentence of this Section 3 the Executive (a) will receive
and hold all Company Information in trust and in strictest confidence, (b) will
take reasonable steps to protect the Company Information from disclosure and
will in no event take any action causing, or fail to take any action reasonably
necessary to prevent, any Company Information to lose its character as Company
Information, and (c) except as required by the Executive's duties in the course
of his employment by the Company, will not, directly or indirectly, use,
disseminate or otherwise disclose any Company Information to any third party
without the prior written consent of the Company, which may be withheld in the
Company's absolute discretion. The provisions of this Section 3 shall survive
the termination of the Executive's employment (i) for a period of three years
with respect to Confidential Information, and (ii) with respect to Trade
Secrets, for so long as any such information qualifies as a Trade Secret under
applicable law.
4. Books and Records. All books, records, reports, writings, notes,
notebooks, computer programs, sketches, drawings, blueprints, prototypes,
formulas, photographs, negatives, models, equipment, chemicals, reproductions,
proposals, flow sheets, supply contracts, customer lists and other documents
and/or things relating in any manner to the business of the Company and its
Affiliates (including but not limited to any of the same embodying or relating
to any Confidential Information or Trade Secrets), whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall not be copied, duplicated,
replicated, transformed, modified or removed from the premises of the Company
except pursuant to the business of the Company and its Affiliates and shall be
returned immediately to the Company on termination of the Executive's employment
hereunder or on the Company's request at any time.
5. Inventions and Patents. The Executive agrees that all inventions,
innovations or improvements in the Company's method of conducting its business
(including new contributions, improvements, ideas and discoveries, whether
patentable or not) conceived or made by him during his employment with the
Company belong to the Company. The Executive will promptly disclose such
inventions, innovations or improvements to the Board and perform all actions
reasonably requested by the Board to establish and confirm such ownership.
6. Other Businesses. During the Employment Period, the Executive agrees
that he will not, except with the express written consent of the Board, become
engaged in, render services for, or permit his name to be used in connection
with, any business other than the business of the Company and its Subsidiaries
and Affiliates.
51
<PAGE> 5
7. Noncompetition. During the one year period following the expiration
of the Employment Period, the Executive will not, directly or indirectly,
engage in or have any interest in any sole proprietorship, partnership,
corporation, limited liability company or business or any other Person (other
than the Company or any of its Subsidiaries), whether as an employee, officer,
director, partner, agent, security holder, creditor, consultant or otherwise,
that directly or indirectly is engaged in the design, manufacture or sale of
(a) pickup truck bedliners or (b) any other light truck accessory that is sold
by the Company or any of its Subsidiaries as of the date hereof, in the United
States of America, Australia, Brazil or Mexico; provided, however, that nothing
herein shall be deemed to prevent the Executive from acquiring through market
purchases and owning, solely as an investment, less than one percent in the
aggregate of the equity or debt securities of any class of any issuer whose
shares are registered under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and are listed or admitted for trading on any United
States national securities exchange or are quoted on the National Association
of Securities Dealers Automated Quotations System, or any similar system of
automated dissemination of quotations of securities prices in common use, so
long as he is not a member of any "control group" (within the meaning of the
rules and regulations of the United States Securities and Exchange Commission)
of any such issuer. The Executive agrees that the covenant provided for in this
Section 7 is reasonable and necessary in terms of time, activity and territory
to protect the Company's interests and in protecting (i) the Trade Secrets,
(ii) substantial relationships of the Company and its Subsidiaries with
customers throughout the United States of America, Australia, Brazil and
Mexico, and (iii) customer goodwill associated with the business of the Company
and its Subsidiaries. The Executive acknowledges that this Section 7 may be
enforced by the Company and any other permitted assignees of the Company. To
the extent that the covenant provided for in this Section 7 may later be deemed
by a court to be too broad to be enforced with respect to its duration or with
respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope of the
provision, and to add or delete specific words or phrases to or from the
provision.
8. Non-Solicitation. The Executive agrees that during the Employment
period and during the two year period following the expiration of the Employment
Period, he will not, directly or indirectly, solicit for employment or employ
(or attempt to solicit for employment or employ), for himself or on behalf of
any sole proprietorship, partnership, corporation, limited liability company or
business or any other Person (other than the Company or any of its Subsidiaries)
any of the employees of the Company or any of its Subsidiaries or encourage any
such employee to leave his or her employment with the Company or any of its
Subsidiaries.
9. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, or mailed by certified or
registered mail, return receipt requested, postage prepaid to the recipient at
the address below indicated:
To the Company:
c/o Trivest II, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: General Counsel
To Executive:
c/o Penda Corporation
2344 W. Wisconsin Street
P.O. Box 449
Portage, Wisconsin 53901-0449
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
52
<PAGE> 6
10. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
11. Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
12. Counterparts. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
13. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Executive and the Company and
their respective successors and assigns (and, in case of the Executive, heirs
and personal representatives), except that Executive may not assign any of his
rights or delegate any of his obligations hereunder.
14. Remedies. The Company will be entitled to enforce its rights under
this Agreement specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that the
Company may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
15. Damages. Nothing contained herein shall be construed to prevent any
party hereto from seeking and recovering from the other damages sustained by
either or both of them as a result of its or his breach of any term or provision
of this Agreement. In the event that either party hereto brings suit for the
collection of any damages resulting from, or for the injunction of any action
constituting, a breach of any of the terms or provisions of this Agreement, then
the party found to be at fault shall pay all reasonable costs, fees (including
reasonable attorneys' fees) and expenses of the other party.
16. Choice of Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. Each party hereby irrevocably submits to the exclusive jurisdiction of
any state or federal court sitting in the County of Dade, State of Florida in
any action or proceeding arising out of or relating to this Agreement and hereby
irrevocably agrees, on behalf of himself or itself and on behalf of such party's
successor's and assigns, that all claims in respect of such action or proceeding
may be heard and determined in any such court and irrevocably waives any
objection such person may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The parties further agree that the mailing by certified or
registered mail, return receipt requested, to the addresses specified for notice
in this Agreement, of any process or summons required by any such court shall
constitute valid and lawful service of process against them, without the
necessity for service by any other means provided by statute or rule of court.
In the event that an action or proceeding arising out of or relating to this
Agreement shall be commenced in a court described in the second sentence of this
Section 16 and such court, by a final and nonappealable order, shall refuse to
exercise in personam jurisdiction over the Company or the Executive, as the case
may be, then the parties hereto shall not be precluded from litigating such
action or proceeding in any other court of competent jurisdiction.
17. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED
53
<PAGE> 7
WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.
18. Amendments and Waivers. No provision of this Agreement may be
amended or waived without the prior written consent of the parties hereto.
19. Business Days. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
20. No Third Party Beneficiary. Except for the parties to this
Agreement and their respective successors and assigns, nothing expressed or
implied in this Agreement is intended, or will be construed, to confer upon or
give any person other than the parties hereto and their respective successors
and assigns any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
PENDA CORPORATION
By: __________________________________
Peter C. Brockway
Chairman of the Board
______________________________________
JACK L. THOMPSON
54
<PAGE> 8
EXHIBIT A
PRELIMINARY INCENTIVE COMPENSATION TERMS
1. The target amount for annual Incentive Compensation shall be $150,000.
2. The target amount will be earned if performance objectives in a
mutually agreed upon plan for the business are met.
3. The actual Incentive Compensation for any Bonus Year can be lower or
higher than the target amount, depending on the Company's performance
relative to the agreed upon performance objectives.
55
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT BETWEEN THE REGISTRANT AND LEO E. WANER DATED JULY 1, 1997.
EMPLOYMENT AGREEMENT
This Agreement is made as of July 1, 1997, between PENDA CORPORATION, a
Florida corporation (the "Company"), and LEO E. WANER (the "Executive").
NOW THEREFORE, in consideration of (a) the Executive's employment and
continued employment with the Company, (b) the compensation paid to the
Executive for his services hereunder and the benefits provided to the Executive
in connection therewith, (c) the use by the Executive of the facilities and
other resources of the Company, (d) the opportunity provided by the Company to
the Executive to acquire or use information relating to or based on the business
of the Company, and (e) the opportunity provided by the Company to the Executive
to acquire shares of capital stock of the Company, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Interpretation of this Agreement.
(a) Terms Defined. As used herein, the following
terms when used in this Agreement have the meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Base Salary" shall have the meaning given to it under
Section 2(b) of this Agreement.
"Board" means the Board of Directors of the Company.
"Bonus Year" shall have the meaning given to it in Section
2(e) of this Agreement.
"Cause" means (i) the commission of any act by the Executive
constituting financial dishonesty against Company or its Affiliates, (ii) the
conviction by the Executive of a felony or other crime involving moral
turpitude, (iii) gross dereliction of duty to the Company or its Subsidiaries,
(iv) the Executive's breach of the fiduciary duty of loyalty to the Company or
its Subsidiaries, (v) any breach by the Executive of any of the material terms
of this Agreement (including without limitation Sections 3, 4, 5, 6, 7 or 8
hereof), or (vi) conduct by the Executive which could reasonably be expected to
have a material adverse effect on the business, properties, results of
operations, financial condition or prospects of the Company or its Subsidiaries.
"Company" has the meaning given to it in the first sentence
of this Agreement.
"Company Information" means Confidential Information and
Trade Secrets.
"Confidential Information" means confidential data and
confidential information relating to the business of the Company (which does not
rise to the status of a Trade Secret under applicable law) which is or has been
disclosed to the Executive or of which the Executive became aware as a
consequence of or through his employment with the Company and which has material
value to the Company and its Affiliates and is not generally known to the
competitors of the Company and its Affiliates. Confidential Information shall
not include any data or information that (i) has been voluntarily disclosed to
the general public by the Company or its Affiliates, (ii) has been independently
developed and disclosed to the general public by others, or (iii) otherwise
enters the public domain through lawful means.
"Continuation Period" shall have the meaning given to it in
Section 2(d) hereof.
56
<PAGE> 2
"Disability" means the Executive's inability to perform his
normal duties for any 180 consecutive calendar day period or any 180 business
days (whether or not consecutive) during any 365 calendar day period.
"Employment Period" shall have the meaning given to it in
Section 2(a) hereof.
"Executive" shall have the meaning given to it in the first
sentence of this Agreement.
"Incentive Compensation" shall have the meaning given to it in
Section 2(e) of this Agreement.
"Michigan Residence" shall have the meaning given to it in
Section 2(b)(iii)(A) hereof.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Stock Option Plan" means the Company's Management Stock
Option Plan and Agreement for Leo E. Waner, as the same may be amended from time
to time.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns, directly or indirectly, a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Trade Secrets" means information of the Company and its
Subsidiaries including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, financial data, financial plans,
product or service plans or lists of actual or potential customers or suppliers
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.
"Transition Period" shall have the meaning given to it in
Section 2(b)(iii)(B) hereof.
(b) Interpretation. The words "herein," "hereof," "hereunder"
and other words of similar import refer to this Agreement as a whole, as the
same from time to time may be amended or supplemented and not any particular
section, paragraph, subparagraph or clause contained in this Agreement. Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
2. Employment.
(a) Duration. The Company agrees to employ the Executive and
the Executive accepts such employment for the period (the "Employment Period")
beginning on the date hereof and ending upon the first to occur of (i) December
31, 2001, (ii) the Executive's voluntary resignation, (iii) the date on which
the Executive is terminated for Cause, (iv) the date on which the Board
determines in its discretion that the Executive's employment with the Company is
no longer in the best interest of the Company (in which latter event, the
Executive will be entitled to severance pay as described in Section 2(d) below)
(termination pursuant to this clause (iv) is sometimes referred to in this
Agreement as "termination without Cause"), (v) the Executive's death or (vi) the
Executive's Disability. The Executive agrees to give the Board at least 90 days
prior written notice of his resignation. In the event the Executive's Employment
shall be terminated without Cause, the Company and the Executive shall in good
faith agree on a form of public announcement to be made by the Company in
connection with such termination of employment.
(b) Signing Bonus, Salary and Benefits. The Executive
acknowledges that the Company has paid him a signing bonus in the amount of
$25,000 (the "Signing Bonus") in connection with his employment by the Company
hereunder. During the Employment Period, the Company will pay the Executive a
base salary at the rate of $125,000 per annum (the "Base Salary"), payable in
installments consistent with the Company's normal payroll
57
<PAGE> 3
schedule, subject to applicable withholding and other taxes. The Executive's
Base Salary shall be reviewed at least annually for merit increases and may, by
action and in the sole discretion of the Board, be increased at any time or
from time to time. The Executive and the Company acknowledge that solely for
the purpose of determining the amount of the Executive's Base Salary effective
upon the first such annual review, the Executive's initial Base Salary
hereunder shall be deemed to be $150,000. The Executive's Base Salary
(including any increase thereto made pursuant to the preceding two sentences)
for any partial year during the Employment Period will be prorated based upon
the number of days elapsed in such year. In addition to the salary payable to
Executive pursuant to this Section 2(b), the Executive will be entitled to the
following benefits during the Employment Period, unless otherwise altered by
the Board:
(i) The Executive will be entitled to participate in
all medical and hospitalization, dental, group life insurance, and any
and all other fringe benefit plans as are presently and hereinafter
provided by the Company to its executives.
(ii) The Executive will be entitled to reimbursement
for reasonable business expenses incurred by the Executive, upon
submission of appropriate substantiation by the Executive.
(iii) The Executive shall be entitled to
reimbursement and/or direct payment of expenses in connection with the
relocation of his personal residence from Monroe, Michigan to the
Madison/Portage, Wisconsin geographic area as set forth in this
subparagraph (iii); provided, however, that (x) the aggregate
obligation of the Company under this subparagraph (iii) shall not
exceed $40,000, and (y) the Executive shall not be entitled to
reimbursement for the amount of any "points" payable with respect to a
new residential mortgage or for the difference between the interest
rate payable with respect to any such mortgage and the interest rate
payable by the Executive with respect to the mortgage on his personal
residence in Michigan.
(A) Upon the receipt of proper substantiation, the
Company shall reimburse the Executive for (1) the amount of
any sales commissions actually paid by him with respect to the
sale of his personal residence located in Monroe, Michigan
(the "Michigan Residence"), and (2) amounts actually paid by
the Executive in connection with the relocation of the
personal belongings of the Executive and his immediate family
from the Michigan Residence to the Madison/Portage, Wisconsin
geographic area (including reasonable costs incurred by the
Executive and the members of his immediate family to visit the
Madison/Portage, Wisconsin geographic area for the purpose of
locating a permanent residence there).
(B) The Company shall provide the Executive with
rental living accommodations in the Madison/Portage, Wisconsin
geographic area, for a period of up to six months from the
date hereof (the "Transition Period"). Such accommodations
shall be selected by the Executive; however, the rental terms
(including, without limitation, the amount of the periodic
lease payments) shall be reasonably acceptable to the Company.
The Company shall be responsible for any security deposit (and
shall be entitled to any refund thereof), as well as all
utility and incidental expenses in connection therewith.
(C) During the Transition Period, the Company shall,
upon the receipt of proper substantiation and subject to the
Company's travel policy applicable to its executive employees,
reimburse the Executive for amounts actually paid by him for
up to airline tickets between Madison, Wisconsin and Detroit,
Michigan purchased by him or his family members for personal
purposes.
(iv) The Company shall provide the Executive with the use of
an automobile consistent with the Company's automobile policy
applicable to Company personnel holding the title of Vice President.
(c) Services. During the Employment Period, the Executive will
serve as the Vice President and Chief Financial Officer of the Company and will
render such services of an executive and administrative character to the Company
as the Board or the Company's Chief Executive Officer may from time to time
direct. The
58
<PAGE> 4
Executive will devote his best efforts and his full business time and attention
(except for vacation periods and reasonable periods of illness or other
incapacity) to the business of the Company and its Affiliates.
(d) Severance Pay; Continuation of Certain Benefits. In the
event that the Executive's employment is terminated by the Board without Cause
pursuant to Section 2(a)(iv) above, the Company will pay to the Executive all
amounts due to the Executive as Base Salary pursuant to Section 2(b) above for
a period of twelve months after the date on which the Executive's employment is
terminated pursuant to Section 2(a)(iv) hereof. Any such severance pay shall be
payable in installments on the payment dates on which such Base Salary would
have been paid if the Employment Period had continued for such twelve month
period and, except as otherwise provided in the next sentence and in Section
2(e) hereof, the Company will have no further obligation to the Executive.
During twelve month period commencing on the date the Executive's employment is
terminated without Cause pursuant to Section 2(a)(iv) above (the "Continuation
Period"), the Company will use its best efforts to cause the Executive, his
spouse and dependents to be provided with medical, dental and any other health
benefits and coverage in amounts and on terms no less favorable than provided
immediately prior to the expiration of the Employment Period, and in all other
respects shall use all reasonable efforts to cause the Executive to be treated
in a manner that will cause him to remain eligible for said coverage through
and until the expiration of the Continuation Period, at no cost to him
(subject, however, to (x) any applicable deductibles, (y) applicable co-payment
charges, and (z) the employee portion of premium charges, if applicable).
(e) Incentive Compensation. The Executive shall be entitled to
receive incentive compensation with respect to the period beginning on the date
hereof and ending December 31, 1997 by action and in an amount determined in
the discretion of the Board. The Company and the Executive acknowledge that
the target amount of such incentive compensation for the Company's 1997 fiscal
year shall be $50,000 (which shall be prorated for the period from the date
hereof through December 31, 1997), based on the Board's assessment of the
Executive's performance. The Executive shall also be entitled to receive
incentive compensation (the "Incentive Compensation") with respect to each of
the Company's fiscal years ending December 31, 1998, 1999, 2000 and 2001 (a
"Bonus Year"), in an amount determined pursuant to a performance-based plan to
be agreed to, in good faith, by the Company and Executive on or before December
31, 1997. Exhibit A hereto sets forth certain preliminary understandings of the
Company and the Executive with respect to such performance-based plan. Except
as otherwise provided in the penultimate sentence of this Section 2(e), the
Executive shall not be entitled to any Incentive Compensation with respect to
any such fiscal year if he is not an employee of the Company through the end of
such fiscal year. For purposes of this Agreement, the amount of Incentive
Compensation payable with respect to any fiscal year of the Company (net of any
tax or other amount properly withheld therefrom) shall be paid by the Company
to the Executive within 75 days after the end of such fiscal year; provided,
however, that in the event any Incentive Compensation is paid prior to the
issuance of the Company's audited financial statements with respect to such
fiscal year, any amount paid shall be subject to increase or decrease based
upon the results of such audited financial statements. Notwithstanding the
foregoing, if the Executive's employment hereunder is terminated without Cause
during any of the fiscal years ending December 31, 1998, 1999, 2000 or 2001,
then notwithstanding the fact that the Executive is not employed by the Company
through the end of the fiscal year in which such termination occurs, the
Executive shall be entitled to receive the Incentive Compensation that would
have otherwise been payable to him had he been employed by the Company through
the end of such fiscal year, prorated based upon the number of days elapsed in
such year through the effective date of such termination without Cause. Any
such prorated Incentive Compensation shall be paid to the Executive within 75
days after the end of such fiscal year; provided, however, that in the event
any Incentive Compensation is paid prior to the issuance of the Company's
audited financial statements with respect to such fiscal year, any amount paid
shall be subject to increase or decrease based upon the results of such audited
financial statements.
3. Nondisclosure. While employed by the Company and during the periods
described in the last sentence of this Section 3 the Executive (a) will receive
and hold all Company Information in trust and in strictest confidence, (b) will
take reasonable steps to protect the Company Information from disclosure and
will in no event take any action causing, or fail to take any action reasonably
necessary to prevent, any Company Information to lose its character as Company
Information, and (c) except as required by the Executive's duties in the course
of his employment by the Company, will not, directly or indirectly, use,
disseminate or otherwise disclose any Company Information to any third party
without the prior written consent of the Company, which may be withheld in the
Company's absolute discretion. The provisions of this ss.3 shall survive the
termination of the Executive's employment
59
<PAGE> 5
(i) for a period of three years with respect to Confidential Information, and
(ii) with respect to Trade Secrets, for so long as any such information
qualifies as a Trade Secret under applicable law.
4. Books and Records. All books, records, reports, writings, notes,
notebooks, computer programs, sketches, drawings, blueprints, prototypes,
formulas, photographs, negatives, models, equipment, chemicals, reproductions,
proposals, flow sheets, supply contracts, customer lists and other documents
and/or things relating in any manner to the business of the Company and its
Affiliates (including but not limited to any of the same embodying or relating
to any Confidential Information or Trade Secrets), whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall not be copied, duplicated,
replicated, transformed, modified or removed from the premises of the Company
except pursuant to the business of the Company and its Affiliates and shall be
returned immediately to the Company on termination of the Executive's employment
hereunder or on the Company's request at any time.
5. Inventions and Patents. The Executive agrees that all inventions,
innovations or improvements in the Company's method of conducting its business
(including new contributions, improvements, ideas and discoveries, whether
patentable or not) conceived or made by him during his employment with the
Company belong to the Company. The Executive will promptly disclose such
inventions, innovations or improvements to the Board and perform all actions
reasonably requested by the Board to establish and confirm such ownership.
6. Other Businesses. During the Employment Period, the Executive agrees
that he will not, except with the express written consent of the Board, become
engaged in, render services for, or permit his name to be used in connection
with, any business other than the business of the Company and its Subsidiaries
and Affiliates.
7. Noncompetition. During the one year period following the expiration
of the Employment Period, the Executive will not, directly or indirectly,
engage in or have any interest in any sole proprietorship, partnership,
corporation, limited liability company or business or any other Person
(other than the Company or any of its Subsidiaries), whether as an employee,
officer, director, partner, agent, security holder, creditor, consultant or
otherwise, that directly or indirectly is engaged in the design, manufacture or
sale of (a) pickup truck bedliners or (b) any other light truck accessory that
is sold by the Company or any of its Subsidiaries as of the date hereof, in the
United States of America, Australia, Brazil or Mexico; provided, however, that
nothing herein shall be deemed to prevent the Executive from acquiring through
market purchases and owning, solely as an investment, less than one percent in
the aggregate of the equity or debt securities of any class of any issuer whose
shares are registered under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and are listed or admitted for trading on any United
States national securities exchange or are quoted on the National Association
of Securities Dealers Automated Quotations System, or any similar system of
automated dissemination of quotations of securities prices in common use, so
long as he is not a member of any "control group" (within the meaning of the
rules and regulations of the United States Securities and Exchange Commission)
of any such issuer. The Executive agrees that the covenant provided for in this
Section 7 is reasonable and necessary in terms of time, activity and territory
to protect the Company's interests and in protecting (i) the Trade Secrets,
(ii) substantial relationships of the Company and its Subsidiaries with
customers throughout the United States of America, Australia, Brazil and
Mexico, and (iii) customer goodwill associated with the business of the Company
and its Subsidiaries. The Executive acknowledges that this Section 7 may be
enforced by the Company and any other permitted assignees of the Company. To
the extent that the covenant provided for in this Section 7 may later be deemed
by a court to be too broad to be enforced with respect to its duration or with
respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope of the
provision, and to add or delete specific words or phrases to or from the
provision.
8. Non-Solicitation. The Executive agrees that during the Employment
period and during the two year period following the expiration of the Employment
Period, he will not, directly or indirectly, solicit for employment or employ
(or attempt to solicit for employment or employ), for himself or on behalf of
any sole proprietorship, partnership, corporation, limited liability company or
business or any other Person (other than the Company or any of its Subsidiaries)
any of the employees of the Company or any of its Subsidiaries or encourage any
such employee to leave his or her employment with the Company or any of its
Subsidiaries.
60
<PAGE> 6
9. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, or mailed by certified or
registered mail, return receipt requested, postage prepaid to the recipient at
the address below indicated:
To the Company:
c/o Trivest II, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: General Counsel
To Executive:
c/o Penda Corporation
2344 W. Wisconsin Street
P.O. Box 449
Portage, Wisconsin 53901-0449
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
10. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
11. Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
12. Counterparts. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
13. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Executive and the Company and
their respective successors and assigns (and, in case of the Executive, heirs
and personal representatives), except that Executive may not assign any of his
rights or delegate any of his obligations hereunder.
14. Remedies. The Company will be entitled to enforce its rights under
this Agreement specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that the
Company may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
15. Damages. Nothing contained herein shall be construed to prevent any
party hereto from seeking and recovering from the other damages sustained by
either or both of them as a result of its or his breach of any term or provision
of this Agreement. In the event that either party hereto brings suit for the
collection of any damages resulting from, or for the injunction of any action
constituting, a breach of any of the terms or provisions of this
61
<PAGE> 7
Agreement, then the party found to be at fault shall pay all reasonable costs,
fees (including reasonable attorneys' fees) and expenses of the other party.
16. Choice of Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. Each party hereby irrevocably submits to the exclusive jurisdiction of
any state or federal court sitting in the County of Dade, State of Florida in
any action or proceeding arising out of or relating to this Agreement and hereby
irrevocably agrees, on behalf of himself or itself and on behalf of such party's
successor's and assigns, that all claims in respect of such action or proceeding
may be heard and determined in any such court and irrevocably waives any
objection such person may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The parties further agree that the mailing by certified or
registered mail, return receipt requested, to the addresses specified for notice
in this Agreement, of any process or summons required by any such court shall
constitute valid and lawful service of process against them, without the
necessity for service by any other means provided by statute or rule of court.
In the event that an action or proceeding arising out of or relating to this
Agreement shall be commenced in a court described in the second sentence of this
Section 17 and such court, by a final and nonappealable order, shall refuse to
exercise in personam jurisdiction over the Company or the Executive, as the case
may be, then the parties hereto shall not be precluded from litigating such
action or proceeding in any other court of competent jurisdiction.
18. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
19. Amendments and Waivers. No provision of this Agreement may be
amended or waived without the prior written consent of the parties hereto.
20. Business Days. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
21. No Third Party Beneficiary. Except for the parties to this
Agreement and their respective successors and assigns, nothing expressed or
implied in this Agreement is intended, or will be construed, to confer upon or
give any person other than the parties hereto and their respective successors
and assigns any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
PENDA CORPORATION
By:
----------------------------------
Jack L. Thompson
President and Chief Executive Officer
-------------------------------------
LEO E. WANER
62
<PAGE> 8
EXHIBIT A
Preliminary Incentive Compensation Terms
1. The target amount for annual Incentive Compensation shall be $50,000.
2. The target amount will be earned if performance objectives in a
mutually agreed upon plan for the business are met.
3. The actual Incentive Compensation for any Bonus Year can be lower or
higher than the target amount, depending on the Company's performance
relative to the agreed upon performance objectives.
63
<PAGE> 1
EXHIBIT 10.10
Settlement Agreement, dated December 23, 1997, between the Registrant and
Daniel E. Braun
SETTLEMENT AGREEMENTError! Reference source not found.
This Agreement, made and entered into as of the 23rd day of December,
1997, is between Penda Corporation (hereinafter, "Penda") and Daniel E. Braun
(hereinafter, "Braun").
RECITALS
A. Penda and Braun are parties to litigation pending in the
Columbia County, Wisconsin Circuit Court entitled Daniel Braun v. Penda
Corporation, Case No. 97 CV 126 (hereinafter, "The Litigation").
B. Penda and Braun desire to settle all issues pending in The
Litigation and reach further agreements on other issues.
C. Braun is the record and beneficial holder of (a) options to purchase
3,820.58 shares of Stock, for a per share purchase price of $25.00, granted
pursuant to that certain Management Stock Option Agreement, dated as of January
1, 1994, between Braun and Penda (the "1994 Management Options"), (b) options to
purchase 5,730.87 shares of Stock, for a per share purchase price of $34.75,
granted pursuant to that certain Management Stock Option Agreement dated as of
January 1, 1996, between Braun and Penda (the "1996 Management Options"), and
(c) options to purchase 3,820.58 shares of Stock, for a per share purchase price
of $42.03, granted pursuant to that certain Management Stock Option Agreement
dated as of January 1, 1997, between Braun and Penda (the "1997 Management
Options" and, collectively with the 1994 Management Options and the 1996
Management Options, the "Management Options").
D. Braun and Penda desire to evidence their agreement that, in
connection with the transactions contemplated hereby, Braun's Management Options
were not exercised and shall be canceled.
E. Penda and Braun are parties to an Employment Agreement dated March
17, 1994 (hereinafter, "the Employment Agreement") (attached as Exhibit A), a
Subscription and Shareholders' Agreement dated March 15, 1994 (as amended)
(hereinafter, "the Subscription and Shareholders' Agreement"), and the First
Amended and Restated Management Stock Option Plan (as amended) (hereinafter,
"the Management Stock Option Plan"). Penda and Braun desire to have portions of
the Employment Agreement survive as is stated below in this Agreement and have
other portions of the Employment Agreement no longer survive after the date of
this Agreement. Penda and Braun further desire to have the provisions of the
Management Stock Option Plan, the Management Options, and the Subscription and
Shareholders' Agreement not survive as to Braun after the consummation of the
transactions contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth in this Agreement (and in other agreements referred to herein), and
such other and valuable consideration, the receipt of which is hereby
acknowledged, Penda and Braun agree as follows:
1. Recitals. The recitals set forth above are incorporated in and made
part of this Agreement.
2. Shares and Options. Penda and Braun shall execute and deliver the
following agreements concerning Braun's rights and responsibilities as a
shareholder of Penda: a Stock Transfer and Option Termination Agreement, and an
Irrevocable Stock Power (both to be signed on the same date as this Agreement).
The day Braun executes and delivers to Penda the agreements mentioned in the
immediately preceding sentence and Braun tenders his shares as required by the
Subscription and Shareholders' Agreement, Penda shall pay to Braun $850,000 for
all of Braun's shares of Penda and Braun shall have no further rights under the
Subscription and Shareholders' Agreement and the Management Stock Option Plan.
65
<PAGE> 2
3. Cancellation of Management Options. Penda and Braun hereby agree
that the 1994 Management Options, the 1996 Management Options, the 1997
Management Options, and any and all other options, warrants, shares, or other
ownership rights, which Braun may have in and to any of the capital stock or
other securities of Penda were not exercised and shall be deemed canceled and of
no further force and effect.
4. Employment Agreement.
4.1. Upon execution of this Agreement, Sections 1, 2, 3, 4,
and 5 of the Employment Agreement shall not survive and shall no longer have any
force and effect.
4.2. Sections 6 (as amended below), 7, 8, 9, 10, 11, 12, 13,
14, 15, 16, and 17 of the Employment Agreement shall survive and shall continue
in full force and effect after the date of this Agreement.
4.3. Section 6.1 of the Employment Agreement, by its terms,
shall expire on March 26, 1998. Until its expiration on March 26, 1998, Section
6.1 of the Employment Agreement shall be construed to mean that Braun may not,
among other things, own more than five percent (5%) of the stock in any
publicly-traded company described in Section 6.1 of the Employment Agreement.
4.4. The period of the nondisclosure provisions of Section 6.2
of the Employment Agreement shall be for a period of two years from March 26,
1998 to March 26, 2000. Penda and Braun agree that the nondisclosure provisions
of Section 6.2 of the Employment Agreement are based upon sufficient
consideration of promises, covenants, and agreements to settle The Litigation
stated elsewhere in this Agreement. Penda and Braun further agree that the trade
secret provisions of Section 134.90, Wisconsin Statutes, apply to Braun prior to
March 26, 1998.
5. No Admission. By entering into this Agreement and taking any actions
required by this Agreement, neither Penda nor Braun admits to any liability or
wrongdoing, and neither party admits that there is any validity to the claims of
the other party in The Litigation.
6. Dismissal of Litigation. Penda and Braun agree to enter forthwith
into a Stipulation to have The Litigation dismissed with prejudice and without
the imposition of costs or attorney fees against either party.
7. Mutual Release of Claims. Penda and Braun irrevocably and
unconditionally release and acquit each other (including Penda's officers,
directors, employees, representatives, agents, and assigns) and any and all
persons acting by, through, under, or in concert with either of them, from any
and all charges, complaints, claims, liabilities, actions, causes of action,
suits, rights, demands, costs, losses, debts, and expenses of any nature
whatsoever which Penda or Braun now have, own, or hold, or which they claim to
have, own, or hold, or which they at any time prior had, owned, or held against
each other. However, neither Penda nor Braun waive the right to enforce any of
the terms of this Agreement or the terms of other agreements mentioned herein
which survive the date of the execution of this Agreement.
8. Indemnification Agreement. Penda and Braun entered into an
Indemnification Agreement dated March 18, 1994. On December 1, 1997, Braun
requested indemnification from Penda for prior and pending litigation between
Braun and Penda. Braun hereby waives his right to request or receive
indemnification from Penda for any and all claims, damages, expenses (including
attorney fees), judgments, and other liabilities which have been, or may be,
incurred or paid by him in connection with prior and pending litigation between
Penda and Braun.
9. Authorization. Penda warrants that it has followed its regular
internal operating procedures and the person signing this Agreement on behalf of
Penda is authorized to bind Penda to the terms of this Agreement.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall serve as an original for all purposes but all
copies of which shall constitute one and the same agreement.
11. Drafting. Penda and Braun agree that each is equally responsible
for the wording and drafting of this Agreement. Neither party shall, in the
future, claim that any provision of this Agreement shall be construed against
the other because that party suggested or requested language contained in this
Agreement.
66
<PAGE> 3
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin.
13. Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the transactions contemplated hereby.
------------------------------
Daniel E. Braun
PENDA CORPORATION:
By:
---------------------------
Leo Waner, Vice President and
Chief Financial Officer
67
<PAGE> 1
EXHIBIT 10.11
Stock Transfer and Option Termination Agreement dated December 23, 1997 between
the Registrant and Daniel E Braun
STOCK TRANSFER AND OPTION TERMINATION AGREEMENT
THIS AGREEMENT is entered into this 23rd day of December, 1997, by and
between Daniel E. Braun, individually ("Braun") and Penda Corporation, a Florida
corporation ("Penda").
WITNESSETH:
STOCK
WHEREAS, Braun is the record holder of 16,007.529 shares of common
stock, $.01 par value (the "Stock"), of Penda (the "Braun Shares").
WHEREAS, Braun desires to sell the Braun Shares to Penda, and Penda
desires to purchase the Braun Shares, under the terms set forth herein;
IRR OPTIONS
WHEREAS, Braun and Penda, among others, are parties to a Subscription
and Shareholders' Agreement, dated as of March 15, 1994, as amended (the
"Shareholders' Agreement");
WHEREAS, pursuant to Section 12.1 of the Shareholders' Agreement, Braun
granted options to certain employees (and former employees) of the Company to
purchase an aggregate of 421.054 shares of Common Stock, upon the sale or other
disposition for value of Stock by Braun (the "IRR Options Granted by Braun");
WHEREAS, (i) of the IRR Options Granted by Braun, Braun granted options
to purchase 92.632 shares of Stock to himself, and (ii) Braun was granted
options to purchase Stock by certain other shareholders of Penda pursuant to
Section 12.1 of the Shareholders' Agreement (the options referred to in clauses
(i) and (ii) are referred to collectively herein as the "IRR Options Held by
Braun");
WHEREAS, Braun and Penda desire to evidence their agreement that, in
connection with the transactions contemplated hereby, the IRR Options Held by
Braun, if any exist, shall be canceled; and
WHEREAS, Braun desires to assign to Penda and Penda desires to accept
and assume the obligations of Braun (if any) under the Shareholders' Agreement
with respect to the IRR Options Granted by Braun;
NOW, THEREFORE, in consideration of the premises and the consideration
hereinafter set forth, the receipt, adequacy, and sufficiency of which
consideration is hereby acknowledged, Braun and Penda hereby agree as follows:
1. Incorporation. The preamble and recitals set forth above are
incorporated in and made a part of this Agreement.
2. Agreement Controlling. In the event of any conflict between the
provisions of this Agreement, the Shareholders' Agreement, the Management
Options or the Penda Corporation First Amended and Restated Management Stock
Option Plan, as amended (the "Plan"), this Agreement shall be controlling.
3. Sale of Braun Shares. Braun hereby conveys to Penda the Braun
Shares, free and clear of any liens or encumbrances of any kind whatsoever.
Braun holds of record and owns beneficially the Braun Shares and has good title
68
<PAGE> 2
to the Braun Shares, free and clear of any restrictions on transfer, pledges,
liens, encumbrances, charges or other security interests (whether or not related
to the extension of credit or the borrowing of money), claims, and demands,
other than restrictions under applicable securities laws and any of the
foregoing which arise under any of the documents referred to in this Agreement.
Except to the extent arising under any of the documents referred to in this
Agreement, Braun is not a party to any option, warrant, purchase right, or other
contract or commitment that could require him to sell, transfer, or otherwise
dispose of any Stock. Braun is not a party to any voting trusts, proxies, or
other agreements or understandings with respect to the voting of any capital
stock of Penda.
4. Cancellation of IRR Options Held by Braun. Penda and Braun agree
that the IRR Options Held by Braun, if any exist, shall be deemed canceled and
of no further force and effect.
5. Assignment and Assumption of IRR Options Granted by Braun. Braun
hereby assigns to Penda all of Braun's rights and obligations under the IRR
Options Granted by Braun (if any) in accordance with the Article 12 of the
Shareholders' Agreement (the "Assumed Obligations"), and Penda hereby assumes
and agrees to satisfy and discharge all of the Assumed Obligations.
6. Consideration. For valid consideration, including but not limited to
the sale, assignment, and cancellations set forth above, Penda agrees to pay to
Braun the sum of Eight Hundred Fifty Thousand Dollars ($850,000).
7. Miscellaneous.
(a) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) Choice of Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida without regard to
conflicts of laws principles thereof and all questions concerning the validity
and construction hereof shall be determined in accordance with the laws of said
state. The Company and Braun hereby irrevocably submit to the exclusive
jurisdiction of any state or federal court sitting in the County of Dade, State
of Florida, in any action or proceeding arising out of or relating to this
Agreement and each such person hereby irrevocably agrees, on behalf of himself
or itself and on behalf of such person's heirs, executors, administrators,
successors and assigns, that all claims in respect of such action or proceeding
may be heard and determined in any such court and irrevocably waives any
objection such person may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The Company and Braun further agree that the mailing by
certified or registered mail, return receipt requested, to the addresses
specified for notice in this Agreement, of any process or summons required by
any such court shall constitute valid and lawful service of process against
them, without the necessity for service by any other means provided by statute
or rule of court. In the event that an action or proceeding arising out of or
relating to this Agreement shall be commenced in a court described in the second
sentence of this Section and such court, by a final and nonappealable order,
shall refuse to exercise in personam jurisdiction over the Company or Braun, as
the case may be, then the parties hereto shall not be precluded from litigating
such action or proceeding in any other court of competent jurisdiction.
(c) Successors and Assigns. This Agreement shall be binding
upon the Parties, their heirs, executors, administrators, successors and
assigns, and the Parties covenant and agree that they and their respective
heirs, executors, administrators, successors and assigns will execute any and
all instruments, releases, assignments and consents that may be reasonably
required of them to more fully execute the provisions of this Agreement.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall serve as an original for all purposes, but all
copies of which shall constitute one and the same Agreement.
69
<PAGE> 3
(e) Headings. All headings set forth in this Agreement are
intended for convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or of any of the provisions thereof.
(f) Amendments and Waivers. No provision of this Agreement may
be amended or waived without the prior written consent of the Parties.
(g) Entire Agreement. This Agreement constitutes the entire
Agreement of the parties hereto with respect to the transactions contemplated
hereby.
(h) No Third Party Beneficiary. Except for the Company and
Braun and their respective heirs, executors, administrators, successors and
assigns, nothing expressed or implied in this Agreement is intended, or will be
construed, to confer upon or give any person other than the parties hereto and
their respective heirs, personal representatives, successors and assigns any
rights or remedies under or by reason of this Agreement.
(i) Further Assurances. Each party agrees to execute such
further and other assurances and to do such other acts as each party may
reasonably require to implement the intentions of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written:
DANIEL E. BRAUN
________________________________(SEAL)
PENDA CORPORATION
By:___________________________________
Leo Waner, Vice President &
Chief Financial Officer
70
<PAGE> 1
EXHIBIT 10.12
Form of Shareholder's Agreement between Registrant and certain executive
officers and between Registrant and certain employees.
The Following Form Agreement was entered into between the Registrant and
Messrs. Thompson, Waner, Rastocan, Harvey, and Witt. Mr. Rastocan also
subscribed to 8,126.9269 shares at $12.17 per share.(See Item 5 above).
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT is made as of October 20, 1997, among
PENDA CORPORATION, a Florida corporation (the "Company"), the Investors (as
hereinafter defined) and XXXX (the "Executive").
Preliminary Statements:
A. The Investors are the holders of 412,871 issued and outstanding
shares of the Common Stock of the Company.
B. This Agreement is being entered into in connection with (i) the
Stock Option Substitution Agreement, dated as of October 20, 1997, between the
Executive and the Company (the "Stock Option Substitution Agreement"), and (ii)
the Penda Corporation Management Stock Option Plan and Agreement for XXXX (the
"Stock Option Plan").
C. The Investors and the Executive believe that it would be in the best
interest of the Company to place certain restrictions upon the right of transfer
of the Executive Stock.
D. The directors of the Company, having considered the provisions of
this Agreement, have resolved that in their opinion the restrictions upon the
transfer of the Executive Stock and the establishment of rights and obligations
upon the occurrence of certain events, all as hereinafter set forth, are in the
best interest of the Company and its shareholders.
Agreement:
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Interpretation of this Agreement.
(a) Terms Defined. As used herein, the following
terms when used in this Agreement have the meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Agreement" means this Shareholders' Agreement and all
exhibits and schedules hereto.
"Approved Sale" shall have the meaning given to it in ss.4(a)
hereof.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Company" shall have the meaning given to it in the first
sentence of this Agreement.
71
<PAGE> 2
"Company Sale" means (i) the sale of all, or substantially
all, of the Company's consolidated assets in any single transaction or series of
related transactions; (ii) the sale or issuance, or series of related sales or
issuances, of Common Stock in any single transaction or series of related
transactions which results in any Person or group of affiliated Persons (other
than the holders of Common Stock as of the date of this Agreement and affiliates
of such holders) owning more than 66% of the Common Stock outstanding
immediately prior to such sale or issuance or such series of sales and/or
issuances; (iii) the consummation of a public sale of Common Stock pursuant to a
registration statement which has become effective under the Securities Act, the
net proceeds of which sale to the Company are at least $20 million; or (iv) any
merger or consolidation of the Company with or into another corporation
(regardless of which entity is the surviving corporation) if, after giving
effect to such merger or consolidation the holders of the Company's voting
securities (on a fully-diluted basis) immediately prior to the merger or
consolidation own voting securities of the surviving or resulting corporation
representing less than a majority of the ordinary voting power to elect
directors of the surviving or resulting corporation (on a fully-diluted basis).
"Executive" shall have the meaning given to it in the first
sentence of this Agreement.
"Executive Stock" means (i) all Common Stock now owned
beneficially or of record by the Executive (including, without limitation, all
Common Stock held of record by Robert W. Baird & Co. Incorporated, Trustee for
the benefit of the Executive's Individual Retirement Account), (ii) all Common
Stock hereafter acquired by the Executive (including any shares acquired by the
Executive upon the exercise of options granted to the Executive under the Stock
Option Plan or upon the exercise of "Surviving Options", as such term is defined
in the Stock Option Substitution Agreement), and (iii) all Common Stock issued
with respect to the Common Stock referred to in clause (i) or clause (ii) above
by way of stock dividend or stock split or in connection with any combination of
shares, merger, consolidation, recapitalization or other reorganization. All
shares of Executive Stock will continue to be Executive Stock in the hands of
any transferee, other than (x) the Company, (y) the Investors and (z) purchasers
pursuant to an offering registered with the Securities and Exchange Commission
pursuant to the Securities Act or purchasers pursuant to a public sale through a
market-maker, broker or dealer under Rule 144 (or any successor rule)
promulgated under the Securities Act.
"Exempt Transfers" shall have the meaning given to it in ss.2
(a) hereof.
"Family Group" means the Executive's spouse and descendants
(whether natural or adopted) and any trust formed and maintained solely for the
benefit of the Executive and/or the Executive's spouse and/or descendants.
"Investors" means Trivest Fund I, Ltd. and Trivest Equity
Partners I, Ltd.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Option Plan" shall have the meaning given to it in the
Preliminary Statements to this Agreement.
"Stock Option Substitution Agreement" shall have the meaning
given to it in the Preliminary Statements to this Agreement.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns, directly or indirectly, a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
(b) Interpretation. The words "herein," "hereof," "hereunder"
and other words of similar import refer to this Agreement as a whole, as the
same from time to time may be amended or supplemented and not
72
<PAGE> 3
any particular section, paragraph, subparagraph or clause contained in this
Agreement. Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in masculine, feminine or neuter gender shall include the
masculine, feminine and the neuter.
2. Restrictions on Transfer.
(a) Transfer of Executive Stock. The Executive will not sell,
pledge or otherwise directly or indirectly transfer (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any interest in or any beneficial interest in any shares of Executive Stock
except pursuant to the provisions of Section 4 hereof ("Exempt Transfers") and
except pursuant to the provisions of this Section 2. At least 60 days prior to
making any transfer other than an Exempt Transfer, the Executive will deliver a
written notice (the "Sale Notice") to the Company and the Investors. The Sale
Notice will disclose in reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the proposed transfer.
(b) First Refusal Rights. The Company may elect to purchase
all (but not less than all) of the shares of Executive Stock to be transferred
upon the same terms and conditions as those set forth in the Sale Notice by
delivering a written notice of such election to the Executive within 30 days
after the receipt of the Sale Notice by the Company. The Company shall
thereafter have up to 60 days to consummate the purchase and sale of Executive
Stock (the "Authorization Period"). If the Company does not elect to purchase
all of the shares of Executive Stock specified in the Sale Notice, the
Executive may transfer the shares of Executive Stock specified in the Sale
Notice at a price and on terms no more favorable to the transferee(s) thereof
than specified in the Sale Notice during the 60-day period immediately
following the Authorization Period. Any shares of Executive Stock not
transferred within such 60-day period will be subject to the provisions of this
Section 2(b) upon subsequent transfer.
(c) Certain Permitted Transfers. The restrictions contained in
this Section 2 will not apply with respect to transfers of Executive Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among the
Executive's Family Group; provided that the restrictions contained in this
Section 2 will continue to be applicable to Executive Stock after any such
transfer; and provided further that the transferees of such Executive Stock
have agreed in writing to be bound by the provisions of this Agreement relating
to Executive Stock.
(d) Termination of Restrictions. The restrictions on the
transfer of Executive Stock set forth in this Section 2 will continue with
respect to each share of Executive Stock until the date on which such
Executive Stock has been transferred in a transaction permitted by this Section
2 (except in a transaction contemplated by Section 2(c)); provided, however,
that in any event the restrictions on transfers set forth in this Section 2
will terminate upon a Company Sale.
3. Additional Restrictions on Transfer.
(a) The certificates representing Executive Stock will bear
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A SHAREHOLDERS'
AGREEMENT AMONG THE COMPANY AND CERTAIN OF ITS SHAREHOLDERS,
DATED AS OF OCTOBER 20, 1997, A COPY OF WHICH MAY BE OBTAINED
BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE.
(b) Opinion of Counsel. No holder of Executive Stock may sell,
pledge or otherwise directly or indirectly transfer (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any Executive Stock (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company an opinion of
counsel (reasonably acceptable in form and substance to the Company) that
neither registration nor qualification under the Securities Act and applicable
state securities laws is required in connection therewith.
73
<PAGE> 4
(c) Lock-Up. Each holder of Executive Stock agrees not to
effect any public sale or other distribution of any Executive Stock or other
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for any of the Company's equity securities, during
the seven days prior to and the 120 days after the effectiveness of any
underwritten public offering, except as part of such underwritten public
offering or if otherwise permitted by the Company.
4. Take-Along/Tag-Along.
(a) Take-Along. If the Investors propose to sell or convey, in
a single transaction or a series of transactions, any of the shares of Common
Stock owned by them, or any interest therein, to an independent third party
(including, without limitation, a sale of the Company by merger, consolidation,
sale of all or substantially all of its assets, sale of all of the outstanding
Common Stock or otherwise) (the"Approved Sale"), the Investors shall give prompt
written notice (the "Sale Notice") to the holders of Executive Stock setting
forth the terms and conditions of the proposed transfer, including the identity
of the independent third party, the number of shares of Common Stock to be
transferred, the per share price to be paid for the shares of Common Stock to be
transferred and the type and nature of the consideration to be received
therefor. By so indicating in the Sale Notice, the Investors shall be entitled
to require the holders of Executive Stock to sell to the independent third party
in the same transaction all of their shares of Common Stock and rights to
acquire shares of Common Stock (or, if the Investors are selling less than all
of their Common Stock, a percentage of each such holder's shares of Common Stock
and rights to acquire shares of Common Stock equivalent to the percentage of
Common Stock and rights to acquire shares of Common Stock to be sold by the
Investor), on the same terms and conditions set forth in the Sale Notice.
Without limitation as to the foregoing, the holders of Executive Stock will
consent to and raise no objections against the Approved Sale. If the Approved
Sale is structured as a merger or consolidation, each holder of Executive Stock
shall waive any dissenters' rights, appraisal rights or similar rights in
connection with such merger or consolidation. The holders of Executive Stock
will take all necessary and desirable actions in connection with the
consummation of any Approved Sale. For purposes of this ss.4, an "independent
third party" is any person who, on the date hereof, does not own in excess of 5%
of the Company's Common Stock on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 5% owner of the Company's
Common Stock and who is not the spouse, ancestor or descendant (by birth or
adoption) of any such 5% owner of the Company's Common Stock.
(b) Tag-Along. If the Investors shall issue a Sale Notice with
respect to an Approved Sale, the holders of Executive Stock, by written notice
to the Investors delivered within 10 days after the date of such Sale Notice,
shall be entitled to require that the Investors include in the proposed sale to
the independent third party in the same transaction all of their shares of
Common Stock and rights to acquire shares of Common Stock (or, if the Investors
are selling less than all of their Common Stock, a percentage of each such
holder's shares of Common Stock and rights to acquire shares of Common Stock
equivalent to the percentage of Common Stock and rights to acquire shares of
Common Stock to be sold by the Investors), on the same terms and conditions set
forth in the Sale Notice.
(c) Expenses of Sale. The Executive and the other holders of
Executive Stock (if any) will bear their pro rata share (based upon the number
of shares sold) of the costs of any sale of Executive Stock pursuant to an
Approved Sale to the extent that such costs are incurred for the benefit of all
holders of Common Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by the Executive and the other holders of
Executive Stock (if any) on their own behalf will not be considered costs of the
transaction hereunder.
(d) Termination The provisions of this ss.4 will terminate
upon the completion of a Qualified Public Offering.
5. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, or mailed by certified or
registered mail, return receipt requested, postage prepaid to the recipient at
the address below indicated:
To the Company:
c/o Trivest II, Inc.
74
<PAGE> 5
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: General Counsel
To the Executive or any holder(s) of Executive Stock:
at the address set forth on the signature page hereto
To the Investors:
c/o Trivest II, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: General Counsel
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
6. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
7. Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
8. Counterparts. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
9. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by the Executive, the Company and the
Investors, and their respective successors and assigns (including subsequent
holders of Executive Stock) and, where applicable, heirs and personal
representatives.
10. Choice of Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. Each party hereby irrevocably submits to the exclusive jurisdiction of
any state or federal court sitting in the County of Dade, State of Florida in
any action or proceeding arising out of or relating to this Agreement and hereby
irrevocably agrees, on behalf of itself or himself and on behalf of such party's
successor's and assigns, that all claims in respect of such action or proceeding
may be heard and determined in any such court and irrevocably waives any
objection such person may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. In the event that an action or proceeding arising out of or
relating to this Agreement shall be commenced in a court described in the second
sentence of this ss.10 and such court, by a final and nonappealable order, shall
refuse to exercise in personam jurisdiction over the Company, the Executive or
any Investor, as the case may be, then the parties hereto shall not be precluded
from litigating such action or proceeding in any other court of competent
jurisdiction.
75
<PAGE> 6
11. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
12. Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
13. Amendments and Waivers. No provision of this Agreement may be
amended or waived without the prior written consent of the Company, the
Investors and the Executive.
14. Business Days. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
15. Failure to Deliver Stock. If the Executive (or the Executive's
estate or any other representative of the Executive or holder of Executive
Stock) who has become obligated to sell shares of Executive Stock to the Company
hereunder shall fail to deliver such shares on the terms and in accordance with
this Agreement, the Company, in addition to all other remedies it may have, may
send to the such obligated party by registered mail, return receipt requested,
the purchase price for such shares on the terms provided for in this Agreement.
Thereupon, the Company, upon written notice to such holder, shall cancel on its
books the certificates representing the Executive Stock to be sold; and
thereupon, all of such obligated holder's rights in and to such Executive Stock
shall terminate.
16. No Third Party Beneficiary. Except for the parties to this
Agreement and their respective successors and assigns, nothing expressed or
implied in this Agreement is intended, or will be construed, to confer upon or
give any person other than the parties hereto and their respective successors
and assigns any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
PENDA CORPORATION
By:
--------------------------------
Jack L. Thompson, President
and Chief Executive Officer
------------------------------------
XXXXX
Address:
c/o Penda Corporation
2344 W. Wisconsin Street
P.O. Box 449
76
<PAGE> 7
Portage, Wisconsin 53901-0449
TRIVEST FUND I, LTD.
By: Trivest Fund Managers, Ltd.,
General Partner
Trivest Group, Inc., General Partner
By:
--------------------------------
Peter C. Brockway
Executive Vice President
TRIVEST EQUITY PARTNERS I, LTD.
By: Trivest Fund Managers, Ltd., General
Partner
Trivest Group, Inc., General Partner
By:
--------------------------------
Peter C. Brockway
Executive Vice President
77
<PAGE> 1
EXHIBIT 10.13
Form of Management Stock Option Plan and Agreement between Registrant and
certain executive officers.
The Following Form Agreement was entered into between the Registrant and the
listed executives except that certain executives were also granted a
Signing Option (See Item 5 above), as noted below. The variable data is listed
in the tables below.
<TABLE>
<CAPTION>
Sign Up Options
- --------------------------------------- -------------------------------------- --------------------------------------
Name Number of Shares Exercise Price
- --------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C> <C>
Mr. .Jack L. Thompson 20,542.0000 $12.17
- --------------------------------------- -------------------------------------- --------------------------------------
Mr. Leo E. Waner 10,271.0000 $12.17
- --------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Time Vested Options and Exit Participation Options (EPO)
- ----------------------------- ------------------------- ------------ ----------- ----------- ----------- ------------
Name Number of Time Vested EPO IRR EPO IRR EPO IRR EPO IRR EPO IRR
Option Shares Hurdle of Hurdle of Hurdle of Hurdle of Hurdle of
20% or 25% or 30% or 35% or 40% or
Multiple Multiple Multiple Multiple Multiple
of 4.0 of 5.0 of 6.0 of 7.0 of 8.0
- ----------------------------- ------------------------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Jack L. Thompson 4,000(1) 5,000 15,000 25,000 35,000 45,000
- ----------------------------- ------------------------- ------------ ----------- ----------- ----------- ------------
Mr. Leo E. Waner 1,500 (2) 1,500 3,000 5,000 7,000 9,000
- ----------------------------- ------------------------- ------------ ----------- ----------- ----------- ------------
Mr. Jeffery G. Rastocan 1,500 (2) 1,500 3,000 5,000 7,000 9,000
- ----------------------------- ------------------------- ------------ ----------- ----------- ----------- ------------
Mr. Scot D. Harvey 1,500 1,500 3,000 5,000 7,000 9,000
- ----------------------------- ------------------------- ------------ ----------- ----------- ----------- ------------
Mr. Gary L. Witt 1,500 1,500 3,000 5,000 7,000 9,000
- ----------------------------- ------------------------- ------------ ----------- ----------- ----------- ------------
(1) Except that in the year ending December 31, 1997 the number of shares is 2000.
(2) Except that in the year ending December 31, 1997 the number of shares is 750.
</TABLE>
---------------------------------------
PENDA CORPORATION
MANAGEMENT STOCK OPTION PLAN AND AGREEMENT
FOR XXXX
---------------------------------------
1. Purpose. The purpose of this Management Stock Option Plan is to
advance the interests of Penda Corporation, a Florida corporation (the
"Company"), by providing an additional incentive to XXXX as the Company's XXXX,
through the encouragement of stock ownership in the Company by XXXX
2. Definitions. As used herein, the following terms shall have the
meaning indicated:
"Approved Sale" shall have the meaning set forth in Section
5(a) hereof.
"Board" means the Board of Directors of the Company.
"Cause" means (i) the commission of any act by the Executive
constituting financial dishonesty against Company or its affiliates, (ii) the
conviction by the Executive of a felony or other crime involving moral
turpitude, (iii) gross dereliction of duty to the Company or its Subsidiaries,
(iv) the Executive's breach of the fiduciary duty of loyalty to the Company or
its Subsidiaries or (v) conduct by the Executive which could reasonably be
expected to have a material adverse effect on the business, properties, results
of operations, financial condition or prospects of the Company or its
Subsidiaries..
"Common Stock" means the Company's common stock, par value
$.01 per share.
"Company" shall have the meaning set forth in ss.1 hereof.
78
<PAGE> 2
"Executive" means XXXX or any person who succeeds to the
rights of XXXX under this Plan or any Option by reason of his death.
"Exercise Price Per Share" means Original Cost Per Share.
"Exit Participation Options" shall have the meaning set
forth in ss.5(a) hereof.
"Independent Third Party" means any person who, prior to any
Approved Sale, does not own in excess of 5% of the Company's Common Stock on a
fully-diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Company's Common Stock and who is not the
spouse, ancestor or descendant (by birth or adoption) of any such 5% owner of
the Company's Common Stock.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
"Lead Investors" means, collectively, Trivest Fund I,
Ltd. and Trivest Equity Partners I, Ltd.
"Option" (when capitalized) shall mean any option granted
under this Plan.
"Original Cost Per Share" means $25.00 per share plus the
per Share amount of any contribution to the capital of the Company made by
either Lead Investor after the effective date of this Plan.
"Plan" means this Management Stock Option Plan and
Agreement for XXXX.
"Pro Forma IRR" means , with respect to an Approved Sale,
the compounded annual return (expressed as a percentage) on the shares of Common
Stock being sold by the Lead Investors in such Approved Sale, computed from
March 18, 1994 through the date such Approved Sale is consummated. Pro Forma IRR
shall be determined in good faith by the Board, based upon generally accepted
financial valuation methodologies.
"Realized Exit Multiple" means the number obtained by
dividing the net proceeds per Share realized by the Lead Investors with respect
to an Approved Sale by the Original Cost Per Share.
"Sale of the Company" means a sale of the Company by merger,
consolidation, sale of all or substantially all of its assets, sale of all of
the outstanding Common Stock or otherwise
"Share" means a share of Common Stock.
"Shareholders' Agreement" means the Shareholders' Agreement,
of even date herewith, among the Executive, the Company and the Lead Investors,
as the same may be amended from time to time.
"Subsidiary" means any corporation (other than the Company)
in any unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Time Vested Options" shall have the meaning set forth in
ss.4 hereof.
3. Shares Available for Option Grants. On the terms and subject to the
provisions hereof, Options to purchase an aggregate of up to XXXX Shares from
the Company's authorized and unissued Shares shall be available for grant to the
Executive under this Plan.
4. Grant of Time Vested Options. Subject to the provisions hereof,
Options relating to XXXX Shares shall be granted to the Executive with respect
to each of the Company's fiscal years ending December 31, 1997, December 31,
1998, 1999, 2000 and 2001 (the "Time Vested Options"); provided that the
Executive is
79
<PAGE> 3
employed by the Company on the last day of such fiscal year. The Time Vested
Options shall be exercisable at a purchase price per Share equal to the Exercise
Price Per Share.
5. Exit Participation Options.
(a) Upon the sale of any of the shares of Common Stock owned
by the Lead Investors to an Independent Third Party (including, without
limitation, a Sale of the Company) (an "Approved Sale"), then, in addition to
any other Options granted to the Executive pursuant to this Plan, Options (the
"Exit Participation Options") shall be granted to the Executive, in accordance
with the formula set forth on Exhibit A hereto, if and only if the Executive is
employed by the Company immediately prior to the consummation of such Approved
Sale. Any such Exit Participation Options granted in connection with an Approved
Sale shall be granted immediately prior to the consummation of such Approved
Sale. The Exit Participation Options shall be exercisable at a purchase price
per Share equal to the Exercise Price Per Share. The Company shall provide the
Executive with written notice at least 30 days prior to the consummation of an
Approved Sale, which notice shall set forth in reasonable detail the terms of
such Approved Sale.
(b) Notwithstanding any provision hereof which may be to the
contrary, any such Exit Participation Options granted in connection with an
Approved Sale pursuant to Section 5(a) shall terminate and be deemed canceled
in the event that such Approved Sale shall not be consummated (in which case
new Exit Participation Options relating to the Shares subject to such Exit
Participation Options shall thereafter be available for grant in connection
with any subsequent Approved Sale in accordance with the provisions of this
Section 5).
(c) Notwithstanding the foregoing, if an Approved Sale shall
be approved within 180 days after the effective date of the termination of the
Executive's employment with the Company without Cause and shall be consummated,
then solely for purposes of Section 5(a), the Executive shall, be deemed to be
employed by the Company immediately prior to the consummation of such Approved
Sale.
6. Grant of Options.
(a) Time Vested Options described in Section 4 hereof with
respect to any fiscal year of the Company shall be deemed granted as of the
last day of such fiscal year upon the determination of the Exercise Price
Per Share of such Time Vested Options. Exit Participation Options described in
Section 5 hereof shall be deemed granted upon the satisfaction of the
conditions to grant as described Section 5.
(b) The Options granted to the Executive under this
Plan shall be in addition to regular salary, pension, life insurance or other
benefits related to his employment with the Company or any of its Subsidiaries.
Neither this Plan nor any Option granted under this Plan shall confer upon the
Executive any right to employment or continuance of employment by the Company or
any of its Subsidiaries.
(c) All Options granted hereunder shall be subject to the
terms and provisions of the Shareholders' Agreement.
7. Exercise of Options.
(a) Written notice of an election to exercise any portion of
an Option, specifying the portion thereof being exercised, shall be delivered by
the Executive, or his personal representative in the event of the Executive's
death (i) in the case of Exit Participation Options granted in connection with
an Approved Sale, by delivering such notice in accordance with written
instructions provided to the Executive by the Company, which instructions shall
be provided to the Executive no later than three business days prior to the
consummation of such Approved Sale (or, if the Executive does not exercise such
Exit Participation Options in connection with such Approved Sale, then either in
accordance with the provisions of clause (ii) hereof or by delivering such
notice in accordance with written instructions provided to the Executive by the
Company no later than three business days prior to the consummation of a Sale of
the Company), and (ii) in the case of all other Options, (A) by delivering such
notice to the principal executive offices of the Company or (B) by mailing such
notice, postage prepaid, addressed to the Secretary of the Company at the
principal executive offices of the Company.
80
<PAGE> 4
(b) An Option shall be deemed exercised when (i) the Company
has received written notice of such exercise pursuant to Section 6(a) above,
(ii) full payment of the aggregate option price of the Shares as to which
the Option is exercised has been made, and (iii) arrangements that are
satisfactory to the Board in its sole discretion have been made for the
Executive's payment to the Company of the amount that is necessary for the
Company to withhold in accordance with applicable Federal or state tax
withholding requirements. The Company shall promptly advise the Executive, upon
the Executive's request, made no earlier than five days prior to the proposed
date of exercise, of the amount of such withholding Taxes which the Company
will require to be paid pursuant to clause (iii) of the immediately preceding
sentence. The option price of any Shares purchased shall be paid in cash, by
certified or official bank check, by money order, or by a combination of the
above; provided, however, that the Board in its sole discretion may accept a
personal check in full or partial payment of any Shares; and provided, further,
that in the case of any exercise of Options in connection with an Approved
Sale, the Company shall, at the Executive's request, pay or cause to be paid to
the Executive, in cancellation of all such Options and in lieu of any such
exercise, an amount equal to (x) the net amount of proceeds that the Executive
would had have received had he exercised such Options and sold the underlying
Shares concurrently with the closing of such Approved Sale, minus (y) the
Aggregate Exercise Price Per Share of such Options, minus (z) the aggregate
amount that is necessary for the Company to withhold in accordance with
applicable Federal or state tax withholding requirements. The Executive shall
not be deemed to be a holder of any Shares subject to an Option unless and
until a stock certificate or certificates for such Shares are issued to him
under the terms of this Plan. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as expressly provided in Section 10
hereof.
8. Exercisability of Options. Options shall become exercisable as
follows:
(a) Each Time Vested Option shall be exercisable in whole or
in part and cumulatively according to the following schedule; provided in each
case that the Executive is employed by the Company or its Subsidiaries on the
date of reference:
20% after the first anniversary date of the date of
grant thereof 40% after the second anniversary date
of the date of grant thereof 60% after the third
anniversary date of the date of grant thereof 80%
after the fourth anniversary date of the date of
grant thereof 100% after the fifth anniversary date
of the date of grant thereof
Notwithstanding the foregoing, in the event a Sale of the Company shall occur,
any unvested portion of the Time Vested Options shall become immediately fully
exercisable immediately prior to the consummation of the Sale of the Company.
(b) Each Exit Participation Option granted hereunder shall be
immediately fully exercisable upon the grant thereof; provided, however, that it
shall be a condition to the exercise of any Exit Participation Option that the
Executive shall consent to any Approved Sale in respect of which such Options
are granted and shall waive, in writing, any dissenter or appraisal rights
applicable thereto pursuant to the provisions of the Florida Business
Corporation Act.
(c) No Option granted hereunder shall be exercisable after the
consummation of a Sale of the Company.
(d) The Board may in its sole discretion accelerate the date
on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option.
9. Termination of Option Period. Unless otherwise provided in any
Option, the unexercised portion of any Option shall automatically and without
notice terminate and become null and void at the time of the earliest to occur
of the following:
81
<PAGE> 5
(a) in the case of the Time Vested Options, upon the
termination of the Executive's employment with the Company for Cause or upon the
Executive's voluntary resignation as an employee of the Company; or
(c) immediately following the consummation of a Sale of the
Company.
10. Adjustments.
(a) If at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under this Plan, so that
the same percentage of the Company's issued and outstanding Shares
shall continue to be subject to being so optioned and appropriate
adjustment shall be made in the Exercise Price Per Share; and
(ii) appropriate adjustment shall be made in the
number of Shares and the Exercise Price Per Share thereof then subject
to any outstanding Options, so that the same percentage of the
Company's issued and outstanding Shares shall remain subject to
purchase at the same aggregate exercise price.
(b) If, prior to the consummation of an Approved Sale, the
Board shall declare any dividend or other distribution on the Common Stock
(except by way of a stock dividend payable in Common Stock on the Common Stock),
then appropriate adjustment shall be made in the Exercise Price Per Share of all
unexercised Options issued or issuable hereunder so as to reflect the effect of
such dividend on the shareholders equity of the Company.
(c) The Board may change the terms of Options outstanding
under this Plan, with respect to the Exercise Price Per Share or the number of
Shares subject to the Options, or both, when, in the Board's discretion, such
adjustments become appropriate by reason of a significant corporate transaction
so as to preserve but not increase or decrease benefits under this Plan.
(d) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made to, the number of or exercise price
for Shares then subject to outstanding Options granted under this Plan.
(e) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
11. Transferability of Options and Shares. Unless the Board's prior
written consent is obtained, no Option shall be subject to alienation,
assignment, pledge, hypothecation, charge or other transfer other than by the
Executive by will or the laws of descent and distribution, and any attempt to
make any such prohibited transfer shall be void. Options shall not be subject,
in whole or in part, to execution, attachment, or similar process. Each Option
shall be exercisable during the Executive's lifetime only by the Executive.
12. Issuance of Shares.
82
<PAGE> 6
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
federal and state laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition to any sale or issuance of Shares upon
exercise of any Option, the Board may require such agreements or undertakings as
the Board may deem necessary or advisable to facilitate compliance with any
applicable law or regulation including, but not limited to, the following:
(i) a representation and warranty by the Executive to
the Company, at the time any Option is exercised, that he is acquiring
the Shares to be issued to him for investment and not with a view to,
or for sale in connection with, the distribution of any such Shares;
and
(ii) a representation, warranty and/or agreement to
be bound by any legends endorsed upon the certificate(s) for such
Shares that are, in the opinion of the Board, necessary or appropriate
to facilitate compliance with the provisions of any securities laws
deemed by the Board to be applicable to the issuance and transfer of
such Shares.
13. Administration of Plan. This Plan shall be administered by the
Board. The Board's determinations and its good faith interpretation and
construction of any provision of this Plan or any Option shall be final and
conclusive.
14. Withholding or Deduction for Taxes. If at any time specified herein
for the making of any issuance or delivery of any Option or Common Stock to the
Executive, any law or regulation of any governmental authority having
jurisdiction in the premises shall require the Company or any of its
Subsidiaries to withhold, or to make any deduction for, any taxes or take any
other action in connection with the issuance or delivery then to be made, such
issuance or delivery shall be deferred until such withholding or deduction shall
have been provided for by the Executive, or other appropriate action shall have
been taken.
15. Interpretation.
(a) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan.
(b) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(c) Notwithstanding any provision hereof which may be to the
contrary, Options granted hereunder are not intended to qualify as incentive
stock options within the meaning of ss.422 of the Internal Revenue Code.
16. Effective Date. The effective date of this Plan is October 20,
1997.
17. Notices. Any notice provided for in this Plan must be in writing
and must be either personally delivered, or mailed by certified or registered
mail, return receipt requested, postage prepaid to the recipient at the address
below indicated:
To the Company:
c/o Trivest II, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
83
<PAGE> 7
Attention: General Counsel
To Executive:
c/o Penda Corporation
2344 W. Wisconsin Street
P.O. Box 449
Portage, Wisconsin 53901-0449
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Plan will be deemed to have been given when so delivered or
mailed.
18. Severability. Whenever possible, each provision of this Plan will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Plan is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Plan will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
19. Choice of Law. This Plan shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. The Company and the Executive hereby irrevocably submit to the exclusive
jurisdiction of any state or federal court sitting in the County of Dade, State
of Florida in any action or proceeding arising out of or relating to this Plan
and each such person hereby irrevocably agrees, on behalf of himself or itself
and on behalf of such person's heirs, personal representatives, successor's and
assigns, that all claims in respect of such action or proceeding may be heard
and determined in any such court and irrevocably waives any objection such
person may now or hereafter have as to the venue of any such suit, action or
proceeding brought in such a court or that such court is an inconvenient forum.
The Company and the Executive further agree that the mailing by certified or
registered mail, return receipt requested, to the addresses specified for notice
in this Plan, of any process or summons required by any such court shall
constitute valid and lawful service of process against them, without the
necessity for service by any other means provided by statute or rule of court.
In the event that an action or proceeding arising out of or relating to this
Plan shall be commenced in a court described in the second sentence of this
ss.19 and such court, by a final and nonappealable order, shall refuse to
exercise in personam jurisdiction over the Company or the Executive, as the case
may be, then the parties hereto shall not be precluded from litigating such
action or proceeding in any other court of competent jurisdiction.
20. Waiver of Jury Trial. THE COMPANY AND THE EXECUTIVE HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS PLAN OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.
21. Amendments and Waivers. No provision of this Plan may be amended or
waived without the prior written consent of the Company and the Executive. In
the event an Option shall be exercised in part, or a change in the number or
designation of the Common Stock shall be made, this Plan shall be amended for
the purpose of reflecting such change, or of otherwise reflecting, in such
manner as the Company shall determine, the partial exercise or the change in the
number or designation of the Common Stock.
22. Business Days. Whenever the terms of this Plan call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
23. No Third Party Beneficiary. Except for the Company and the
Executive and their respective successors and assigns, nothing expressed or
implied in this Plan is intended, or will be construed, to confer upon or
84
<PAGE> 8
give any person other than the parties hereto and their respective heirs,
personal representatives, successors and assigns any rights or remedies under or
by reason of this Plan.
IN WITNESS WHEREOF, the parties have executed this Plan and hereby
indicate their acceptance of the foregoing terms and conditions as of October
20, 1997.
PENDA CORPORATION
By:
--------------------------
Jack L. Thompson
President and Chief Executive Officer
-----------------------------
XXXX
85
<PAGE> 9
EXHIBIT A
TO
PENDA CORPORATION
MANAGEMENT STOCK OPTION PLAN FOR XXXX
Exit Participation Option Formula
A. If, with respect to an Approved Sale, both (i) the Pro Forma IRR is
less than 20%, and (ii) the Realized Exit Multiple is 4.0 or less, then
(subject to the provisions of P. D, below)Exit Participation Options
shall be granted with respect to a number of shares equal to the
greater number of Shares resulting from the following calculations:
(Pro Forma IRR ) 20%) x XXXX or (Realized Exit Multiple ) 4.0) x XXXX
B. If, with respect to an Approved Sale, either (i) the Pro Forma IRR is
20% or more but less than 40%, or (ii) the Realized Exit Multiple is
greater than 4.0 but less than 8.0, then (subject to the provisions of
P. D, below) Exit Participation Options shall be granted with respect
to a number of shares equal to the greater number of Shares resulting
from the following calculations:
Applicable Share Amount opposite next lowest IRR Hurdle below
Pro Forma IRR amount (see Table)
+
((Pro Forma IRR - such next lowest IRR Hurdle) ) 5%) x XXXX
or
Applicable Share Amount opposite next lowest Exit Multiple
Hurdle below Realized Exit Multiple (see Table)
+
((Realized Exit Multiple - such next lowest Exit Multiple
Hurdle) ) 1.0) x XXXX
<TABLE>
IRR Hurdle Exit Multiple Hurdle Applicable Share Amount
- ------------------------------ ---------------------------- --------------------------------------------------------
<S> <C> <C> <C>
20% 4.0 XXXX
- ------------------------------ ---------------------------- --------------------------------------------------------
25% 5.0 XXXX
- ------------------------------ ---------------------------- --------------------------------------------------------
30% 6.0 XXXX
- ------------------------------ ---------------------------- --------------------------------------------------------
35% 7.0 XXXX
- ------------------------------ ---------------------------- --------------------------------------------------------
40% 8.0 XXXX
- ------------------------------ ---------------------------- --------------------------------------------------------
</TABLE>
C. If, with respect to an Approved Sale, either (i) the Pro Forma IRR is
40% or more, or (ii) the Realized Exit Multiple greater than 8.0, then
(subject to the provisions of P. D, below) Exit Participation Options
shall be granted with respect to XXXX Shares.
D. For purposes of P. A, P. B and P. C above, if the Approved Sale is not
a Sale of the Company, then the Exit Participation Options shall be
granted proportionately (i.e., the number of shares subject to Exit
Participation Options calculated before application of this P. D shall
be multiplied by a fraction: (i) the numerator of which shall be number
of Shares sold by the Lead Investors in such Approved Sale, and (ii)
the denominator of which shall be the total number of Shares held by
the Lead Investors immediately prior to such Approved Sale).
86
<PAGE> 10
EXAMPLE:
Assume that the Lead Investors hold, in the aggregate, 30,000 Shares
and that they sell 15,000 Shares in an Approved Sale. Assume further
that the Pro Forma IRR achieved with respect to such Approved Sale is
38% and that the Realized Exit Multiple is 6.0. Based on the table, a
larger Applicable Share Amount corresponds to Pro Forma IRR than to the
Realized Exit Multiple. Accordingly, the Executive will be granted
4,100 Exit Participation Options in connection with such Approved Sale,
calculated as follows:
Next Lowest IRR Hurdle: 35%
Applicable Share Amount
Opposite Next Lowest IRR Hurdle: 7,000
Calculation: ((38% - 35%) ) 5%) x 2,000 = 1,200
Exit Participation Options: 7,000 + 1,200 = 8,200
Proportionate Reduction: 2 of Lead Investors= Shares sold;
therefore 4,100 Exit
Participation Options granted
87
<PAGE> 1
EXHIBIT 10.15
Letter Waiver dated as of February 24, 1998 to the Amended and Restated Credit
Agreement between the Registrant and Banque Nationale de Paris.
LETTER WAIVER
Dated as of February 28, 1998
To the parties to the Credit Agreement
referred to below
Ladies and Gentlemen:
We refer to the Amended and Restated Credit Agreement dated
as of July 14, 1995 (as amended, supplemented or otherwise modified through the
date hereof, the "Credit Agreement") among Penda Corporation (the "Borrower"),
the lenders parties thereto (the "Lenders") and Banque National De Paris, New
York Branch, as agent (the "Agent"). Capitalized terms used but not defined in
this letter waiver have the same meanings as specified in the Credit Agreement.
We hereby request that, with respect to Sections 5.04(b) and
(c) of the Credit Agreement, you waive (a) the requirements thereof solely for
the Four Fiscal Quarter Period ending on or about December 31, 1997, and (b) for
purposes of calculating compliance therewith, for each of the Four Fiscal
Quarter Periods ending on or about March 31, 1998, June 30, 1998 and September
30, 1998, the requirement that such calculation be based on the prior four
Fiscal Quarters, but in lieu thereof permit such calculations to be made based
on the actual number of days elapsed from January 1, 1998 to the end of each
such Period.
This letter waiver shall become effective as of the date
first above written when, and only when the Agent shall have received
counterparts of this letter waiver executed by us and the Required Lenders or,
as to any of the Lenders, advice satisfactory to the Agent that such Lender has
executed this letter waiver. This letter waiver is subject to the provisions of
Section 8.01 of the Credit Agreement.
The Credit Agreement, the Notes and each of the other Loan
Documents, except to the extent of the letter waiver specifically provided
above, are and shall continue to be in full force and effect and are hereby in
all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Collateral Documents and all of the Collateral described therein
do and shall continue to secure the payment of all Obligations of the Loan
Parties under the Loan Documents. The execution, delivery and effectiveness of
this letter waiver shall not, except as expressly provided herein, operate as a
letter waiver of any right, power or remedy of any Lender party or the Agent
under any of the Loan Documents, nor constitute a letter waiver of any provision
of any of the Loan Documents.
If you agree to the terms and provisions of this letter
waiver, please evidence such agreement by executing and returning at least one
counterpart of this letter waiver to Liam Toohey at Shearman & Sterling, 599
Lexington Avenue, New York, New York 10022 by March ,1998.
This letter waiver may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same letter waiver. Delivery of an
executed counterpart of a signature page to this letter waiver by telecopier
shall be effective as delivery of a manually executed counterpart of this letter
waiver.
88
<PAGE> 2
This letter waiver shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
PENDA CORPORATION
By______________________________
Title:
Agreed as of the date first above written:
BANQUE NATIONAL DE PARIS, as Agent and Lender
By_______________________________________
Title:
By_______________________________________
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By_______________________________________
Title:
CONSENT
Dated as of February __, 1998
The undersigned, Tri-Glas Corporation, an Alabama corporation,
as Guarantor under the Subsidiaries Guaranty dated July 15, 1995 (the
"Guaranty") in favor of the Agent, for its benefit and the benefit of the
Lenders parties to the Credit Agreement referred to in the foregoing Letter
Waiver, hereby consents to such Letter Waiver and hereby confirms and agrees
that (a) notwithstanding the effectiveness of such Letter Waiver, the Guaranty
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects, except that, on and after the effectiveness of
such Letter Waiver, each reference in the Guaranty to the "Credit Agreement",
"thereunder", "thereof" or words of like import shall mean and be a reference to
the Credit Agreement, as amended by such Letter Waiver, and (b) the Collateral
Documents to which such Grantor is a party and all of the
89
<PAGE> 3
Collateral described therein do, and shall continue to, secure the payment of al
of the Secured Obligations (in each case, as defined therein).
TRI-GLAS CORPORATION
By__________________________________
Title:
90
<PAGE> 1
EXHIBIT 10.16
FORM OF STOCK OPTION SUBSTITUTION AGREEMENT ENTERED INTO BETWEEN THE REGISTRANT
AND CERTAIN EXECUTIVES
The Following Form Agreement was entered into between the Registrant and
Messrs. Harvey, and Witt.
STOCK OPTION SUBSTITUTION AGREEMENT
THIS STOCK OPTION SUBSTITUTION AGREEMENT ("Agreement") is made and
entered into as of the 20th day of October, 1997, by and between XXXX (the
"Shareholder") and PENDA CORPORATION, a Florida corporation (the "Company").
Preliminary Statements:
A. The Shareholder, the Company and certain other shareholders and
former shareholders of the Company are parties to that certain Subscription and
Shareholders' Agreement, dated as of March 15, 1994, as amended (the "Original
Shareholders' Agreement").
B. The Company has heretofore adopted the Penda Corporation First
Amended and Restated Management Stock Option Plan, as amended (the "Original
Plan").
C. The Shareholder is a holder of "Options" (as such term is defined in
the Original Shareholders' Agreement) granted to him pursuant to Section 12.1 of
the Original Shareholders' Agreement (referred to herein as the "Original IRR
Options").
D. The Shareholder is a holder of "Options" (as such term is defined in
the Original Plan) granted to him pursuant to the Original Plan (referred to
herein as the "Original Plan Options"), none of which have been exercised.
E. The Company and the Shareholder desire to (i) terminate and cancel
the Original IRR Options and all Original Plan Options granted to the
Shareholder under the Original Plan other than stock options granted under the
Original Plan prior to January 1, 1997 as to which performance targets have been
satisfied (the "Surviving Options"), (ii) to suspend the grant of any further
stock options to the Shareholder under the Original Plan, (iii) to enter into a
Management Stock Option Plan and Agreement in the form of Exhibit A hereto (the
"New Plan"), and (iv) to terminate the Original Shareholders' Agreement and to
enter into a Shareholders' Agreement in the form of Exhibit B hereto (the "New
Shareholders' Agreement"), on the terms and subject to the conditions contained
in this Agreement.
Agreement:
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth in this Agreement, and such other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Shareholder and the
Company agree as follows:
1. Incorporation of Preamble and Preliminary Statements. The preamble
and Preliminary Statements set forth above are incorporated herein and made a
part hereof. For purposes of this Agreement, the term "Party" shall mean each of
the Company and the Shareholder and the term "Parties" shall mean, collectively,
the Company and the Shareholder.
2. New Plan and New Shareholders' Agreement. Concurrently with the
execution and delivery of this Agreement by the Parties, the Parties shall
execute and deliver the New Plan and the New Shareholders' Agreement. Upon the
execution and delivery of the New Plan and the New Shareholders Agreement, (i)
the Original Shareholders' Agreement (including, without limitation, the
Original IRR Options) shall be deemed terminated, void and of no further force
or effect as between the Company and the Shareholder, (ii) all Original Plan
Options (other than the Surviving Options, which shall remain in full force and
effect, subject to the terms and provisions of the
91
<PAGE> 2
Original Plan) issued to the Shareholder under the Original Plan shall be deemed
terminated, void and of no further force or effect, and (iii) no further stock
options shall be granted to the Shareholder under the Original Plan. In
furtherance of the foregoing, concurrently with the execution and delivery of
this Agreement by the Parties, the Shareholder shall deliver to the Company
share certificates (the "Share Certificates") for all of the shares of the
Common Stock, par value $.01 per share, of the Company (the "Company Stock")
held of record by the Shareholder and by Robert W. Baird & Co. Incorporated,
Trustee for the benefit of the Shareholder's Individual Retirement Account.
Thereupon, the Company shall cause all legends appearing on the reverse side of
the Share Certificates by virtue of the provisions of Article Eight of the
Original Shareholders' Agreement to be deleted and shall cause a sticker bearing
any legend required pursuant to the provisions of the New Shareholders'
Agreement to be affixed in replacement thereof. Immediately after such stickers
have been affixed to the Share Certificates, the Company shall redeliver the
Share Certificates to the Shareholder.
3. Mutual Limited Releases.
(a) Release by Shareholder. The Shareholder, for and on behalf
of his predecessors, successors, heirs, executors, administrators and assigns,
in acknowledgment of the consideration and other benefits provided herein, and
for other valuable consideration (receipt and sufficiency of which is hereby
acknowledged), hereby releases, acquits and forever discharges, the Company and
its predecessors and successors and its present and former subsidiaries, and
each and all of their respective shareholders, directors, officers, employees,
attorneys and agents, of and from any and all existing claims, causes of action
or liability of any kind whatsoever, whether known or unknown, contingent,
unmatured or unsuspected as of the date hereof, arising from or in any way
related to rights based upon, created by or derived from the Original
Shareholders' Agreement (including, without limitation, the Original IRR
Options), the Original Plan (other than with respect to any Surviving Options)
and the Original Options.
(b) Release by Company. The Company, for and on behalf of its
predecessors, successors and assigns, and its present and former subsidiaries,
and each and all of their respective shareholders, directors, officers and
employees, in acknowledgment of the consideration and other benefits provided
herein, and for other valuable consideration (receipt and sufficiency of which
is hereby acknowledged), hereby releases, acquits and forever discharges, the
Shareholder and his predecessors, successors, heirs, executors, administrators
and assigns, of and from any and all existing claims, causes of action or
liability of any kind whatsoever, whether known or unknown, contingent,
unmatured or unsuspected as of the date hereof, arising from or in any way
related to rights based upon, created by or derived from the Original
Shareholders' Agreement (including, without limitation, the Original IRR
Options), the Original Plan (other than with respect to any Surviving Options)
and the Original Options.
4. Covenant Not to Sue.
(a) Covenant of Shareholder. The Shareholder agrees and
covenants not to sue or assert any cause of action, either directly or
indirectly (without regard to when the action arose or arises) against the
Company, its predecessors, successors and assigns, and its present and former
subsidiaries, and each and all of their respective shareholders, directors,
officers, employees, attorneys and agents, arising from or in any way related to
rights based upon, created by or derived from the Original Shareholders'
Agreement (including, without limitation, the Original IRR Options), the
Original Plan (other than with respect to any Surviving Options) or the Original
Options on or after the date hereof.
(b) Covenant of Company. The Company agrees and covenants not
to sue or assert any cause of action, either directly or indirectly (without
regard to when the action arose or arises) against the Shareholder, his
predecessors, successors, heirs, executors, administrators and assigns, arising
from or in any way related to rights based upon, created by or derived from the
Original Shareholders' Agreement (including, without limitation, the Original
IRR Options), the Original Plan (other than with respect to any Surviving
Options) or the Original Options on or after the date hereof.
92
<PAGE> 3
5. Miscellaneous.
(a) Notices. Any notices, requests, demands and other
communications required or permitted to be given hereunder must be in writing
and, except as otherwise specified in writing, will be deemed to have been duly
given when personally delivered, telexed or facsimile transmitted, or three days
after deposit in the United States mail, by certified mail, postage prepaid,
return receipt requested, as follows. The addresses of the Corporation and the
Shareholder, which shall be considered to be their last known addresses unless
subsequently changed in accordance with the provisions of this Agreement, are as
follows:
To the Corporation:
Penda Corporation
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
Telecopier: (305) 285-0102
Attention: General Counsel
To the Shareholder: c/o Penda Corporation
2344 W. Wisconsin Street
P.O. Box 449
Portage, Wisconsin 53901-0449
(b) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Choice of Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida without regard to
conflicts of laws principles thereof and all questions concerning the validity
and construction hereof shall be determined in accordance with the laws of said
state. The Company and the Shareholder hereby irrevocably submit to the
exclusive jurisdiction of any state or federal court sitting in the County of
Dade, State of Florida in any action or proceeding arising out of or relating to
this Agreement and each such person hereby irrevocably agrees, on behalf of
himself or itself and on behalf of such person's heirs, executors,
administrators, successors and assigns, that all claims in respect of such
action or proceeding may be heard and determined in any such court and
irrevocably waives any objection such person may now or hereafter have as to the
venue of any such suit, action or proceeding brought in such a court or that
such court is an inconvenient forum. The Company and the Shareholder further
agree that the mailing by certified or registered mail, return receipt
requested, to the addresses specified for notice in this Agreement, of any
process or summons required by any such court shall constitute valid and lawful
service of process against them, without the necessity for service by any other
means provided by statute or rule of court. In the event that an action or
proceeding arising out of or relating to this Agreement shall be commenced in a
court described in the second sentence of this Section 5(c) and such court, by a
final and nonappealable order, shall refuse to exercise in personam jurisdiction
over the Company or the Shareholder, as the case may be, then the parties hereto
shall not be precluded from litigating such action or proceeding in any other
court of competent jurisdiction.
(d) Waiver of Jury Trial. THE COMPANY AND THE SHAREHOLDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
(e) Successors. This Agreement shall be binding upon the
Parties, their heirs, executors, administrators, successors and assigns, and the
Parties do covenant and agree that they themselves and their respective heirs,
executors, administrators, successors and assigns will execute any and all
instruments, releases, assignments and consents that may be reasonably required
of them to more fully execute the provisions of this Agreement.
93
<PAGE> 4
(f) Counterparts. This Agreement may be executed in several
counterparts, each of which shall serve as an original for all purposes, but all
copies of which shall constitute but one and the same Agreement.
(g) Headings. All headings set forth in this Agreement are intended for
convenience only and shall not control or affect the meaning, construction or
effect of this Agreement or of any of the provisions thereof.
(h) Amendments and Waivers. No provision of this Agreement may be
amended or waived without the prior written consent of the Parties.
(i) Entire Agreement. This Agreement (together with the New Plan and
the New Shareholders' Agreement) constitutes the entire Agreement of the parties
hereto with respect to the transactions contemplated hereby, and it is hereby
agreed that any prior oral or written agreements concerning the sale or
disposition of Company Stock shall be null and void.
(j) No Third Party Beneficiary. Except for the Company and the
Shareholder and their respective heirs, executors, administrators, successors
and assigns, nothing expressed or implied in this Agreement is intended, or will
be construed, to confer upon or give any person other than the parties hereto
and their respective heirs, personal representatives, successors and assigns any
rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement and hereby
indicate their acceptance of the foregoing terms and conditions as of the date
first written above.
PENDA CORPORATION
By:
--------------------------
Jack L. Thompson
President and Chief Executive Officer
-----------------------------
XXXX
94
<PAGE> 1
EXHIBIT 12.1
Statement Regarding Computation of Ratio of Earnings to Fixed Charges
(1)
<TABLE>
<CAPTION>
Year Year Year Mar. 18, Jan. 1, Year Year
Ended Ended Ended 1994 - 1994 - Ended Ended
Dec. 31 , Dec. 31, Dec. 31, Dec. 31, Mar. 17, Dec. 31, Dec. 31,
1997 1996 1995 1994 1994 1993 1992
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes $ (6,218) $ 11,969 $ 6,923 $ 9,585 $ 2,857 $ 13,169 $ 12,409
Interest
9,091 9,517 9,607 6,867 115 924 794
Interest portion of rental expense
646 714 645 237 24 398 296
Amortization of debt expenses
456 376 376 264 - - -
----------------------------------------------------------------------------------------
Earnings $ 3,975 $ 22,576 $ 17,551 $ 16,953 $ 2,996 $ 14,491 $ 13,499
----------------------------------------------------------------------------------------
Fixed charges $ 10,193 $ 10,607 $ 10,628 $ 7,368 $ 139 $ 1,322 $ 1,090
----------------------------------------------------------------------------------------
Ratio 0.4 2.1 1.7 2.3 21.6 11.0 12.4
----------------------------------------------------------------------------------------
</TABLE>
(1) All dollars in thousands.
95
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
Penda Foreign Sales Corporation
Penda International Holding Corporation
Penda Latinoamericana Holding SA de CV (Mexico)
Penda SA de CV (Mexico)
Procesos Especiales de Mexico, SA de C (Mexico
Penda Roo Holding Corporation (Florida)
Penda Australia Pty. Ltd. (Australia)
Penda-Mexico Employment Corporation (Florida)
Tri-Glass Corporation (Alabama)
96
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,460
<SECURITIES> 10,007
<RECEIVABLES> 10,007
<ALLOWANCES> (470)
<INVENTORY> 4,941
<CURRENT-ASSETS> 22,794
<PP&E> 28,192
<DEPRECIATION> 8,960
<TOTAL-ASSETS> 136,382
<CURRENT-LIABILITIES> 8,965
<BONDS> 83,129
0
0
<COMMON> 10
<OTHER-SE> 37,280
<TOTAL-LIABILITY-AND-EQUITY> 136,382
<SALES> 73,860
<TOTAL-REVENUES> 73,860
<CGS> 54,699
<TOTAL-COSTS> 54,699
<OTHER-EXPENSES> 16,288
<LOSS-PROVISION> 395
<INTEREST-EXPENSE> 9,091
<INCOME-PRETAX> (6,218)
<INCOME-TAX> (1,330)
<INCOME-CONTINUING> (4,888)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,888)
<EPS-PRIMARY> (4.89)
<EPS-DILUTED> (4.89)
</TABLE>
