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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, 1999
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
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2344 W. WISCONSIN STREET
PORTAGE, WISCONSIN
53901-0449
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(Address of principal executive offices)
(Zip Code)
(608) 742-5301
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(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 1, 2000, the registrant had 1,019,974.7661 shares of $0.01 par value
common stock outstanding.
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INDEX TO ITEMS
PAGE
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ITEM 1. BUSINESS.................................................................................1
ITEM 2. PROPERTIES...............................................................................7
ITEM 3. LEGAL PROCEEDINGS........................................................................7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................7
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS..................................................................................8
ITEM 6. SELECTED FINANCIAL DATA..................................................................8
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................................................9
.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............................12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE....................................................................30
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......................................31
ITEM 11. EXECUTIVE COMPENSATION..................................................................33
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................36
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................38
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K.........................39
SIGNATURES.......................................................................................43
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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 commodity 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, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations, and Item 7A Quantitative and
Qualitative Disclosures About Market Risk 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 the world's largest
manufacturer 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, and vans, and
Class 8 trucks that are sold by truck dealers, van converters, specialty
automotive stores, other retailers, and OEMs. Other truck accessories including
bed mats, tailgate liners, hard tonneau covers, soft tonneau covers, cargo
tie-downs, truck bed trays, cargo organizers and liners for passenger cars and
sport-utility vehicles are also distributed through the Company's OEM and
aftermarket distribution systems.
The Company was formed in connection with 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 wholly
owned subsidiary, Tri-Glas Corporation ("Tri-Glas"), acquired certain of the
assets and
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assumed certain liabilities of VMC Fiberglass Products, Inc. ("VMC"). On October
23, 1998, the Company acquired certain assets of Custom Form Manufacturing, Inc.
Effective October 29, 1999, the Company's wholly owned subsidiary, Penda
Glasstite, Inc., acquired certain assets and assumed certain liabilities, of
Raven Industries Inc.
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 market 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 purchased by consumers as an
alternative to the perceived higher cost of OEM accessories, to engage in
"do-it-yourself" installation, to protect their vehicles after they see pickup
truck bed damage, to "customize" the appearance of their vehicle, or prior to a
planned sale of a used vehicle.
Various OEM's have been working on plastic composite substitutes for
steel pickup truck boxes for more than 10 years. There are plans to put
composite pickup truck boxes into limited production in the next few years.
Composite pickup truck boxes are expected to be less than 10% of pickup truck
production through 2003. Composite pickup truck bed boxes may or may not be
painted. The Company believes that composite pickup truck boxes will continue to
require protection in order to retain the resale value of the vehicle.
The Company also distributes pickup truck bedliners outside of North
America. These sales represented 6.4%, 3.2% and 3.0% of the Company's net sales
in 1999, 1998, and 1997, respectively.
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) PRO, PENDALINER(R) SR(TM) and
PENDALINER(R)" brand names, while OEM liners are stamped with the truck
manufacturer's names, such as GM, Toyota, or Dodge or the manufacturer's logo,
such as the Chevrolet bowtie or the Dodge ramshead, in the headwall of the
bedliner. The Company manufactures approximately 500 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. For marketing reasons, the
Company may make more than one bedliner model for each individual pickup truck.
The Company's bedliner sales represented 78% and 80% of the Company's net sales
for 1999 and 1998, respectively.
Pickup Truck Caps
Pickup truck caps are manufactured primarily for aftermarket customers
and sold under the Glasstite(R), Raven(R) and Tri-Glas(R) brand names. 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
reinforced resin and chopped fiberglass, and include a one-piece reinforced
fiberglass base rail.
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Pickup Truck Hard 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. Aftermarket tonneau covers are sold under the Tri-Glas(R),
Rally(TM), Illusion(TM) and Pendacover(TM) brand names. 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 sides of
the truck bed. The Company's tonneau covers are also manufactured from
reinforced resin and chopped fiberglass and are custom-finished with automotive
paint.
Pickup Truck Soft Tonneau Covers
Pickup truck soft tonneau covers are manufactured for both OEM and
aftermarket customers and are flat, vinyl covers supported by an aluminum frame
that protects the bed of the pickup truck. Aftermarket soft tonneau covers are
sold under the Pendacover(TM) PRO(TM) and Custom Cover(TM) brand names. The soft
tonneau cover, like a hard tonneau, enhances the appearance and aerodynamics of
the truck.
Running Boards
Running boards are manufactured primarily for aftermarket customers and
are sold under the Tri-Glas(R) brand name. 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 boards are typically sold unpainted to a retailer or
vehicle converter who paints and installs the boards for the end user.
Other Light Truck Accessory Products
Light truck accessories currently being distributed by the Company
include the following:
- 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.
- Penda(R) Tri-Step(TM) boards which are a small running board and
make it easier to get into and out of a sport utility vehicle or
pickup truck.
- Pendatray(TM)SR(TM) truck bed trays which are thermoformed
high-density polyethylene plastic trays designed to fit the bottom
of a pickup truck bed and protect the bed of the truck, with a
rolled raised lip that provides spill containment.
- Cargo organizers and liners which are designed for passenger cars
and sport-utility vehicles (SUV's), maximize useful vehicle
storage space, and help secure and organize loose items in the
vehicle, as well as protect interior vehicle trucks and storage
areas.
- Pickup truck bedmats that are rubber mats designed to protect the
floor of pickup truck beds.
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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 meet Federal Motor
Vehicle Safety Standards for either Roof Crush Resistance (FMVSS 216) or School
Bus Rollover Protection (FMVSS 220).
SIGNIFICANT CUSTOMERS
Sales to DaimlerChrysler and General Motors Corporation were
approximately 21% and 12% of consolidated net sales in 1999, respectively. No
other customer accounted for more than 10% of consolidated net sales in 1999 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.
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, management believes
that the Company and its principal competitor share approximately 75% 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 develops product concepts and prototypes
assessed feasibility, manufacturing cost parameters, and lead times and use a
computer assisted design system to preview aspects of design and performance
prior to production.
BACKLOG ORDERS
A sales backlog is maintained, however, sales orders are generally
filled in less than one week.
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 and extrusion, 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 use production molds
to laminate fiberglass into the various product shells. 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.
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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
During 1999 the Company entered into a license with NASCAR for the use
of their NASCAR(R) Truck(TM) brand name and logo on the new PENDALINER(R)SR
PRO(TM) bedliner line and the new Pendacover(TM)PRO(TM) soft tonneau cover
product line. The Company presently supports new aftermarket premium product
lines with an aggressive marketing and advertising campaign to capitalize on
consumer and trade recognition of the NASCAR(R) brand name.
As part of the Company's marketing program to assist OEM truck dealers
and aftermarket distributors, the Company (i) advertises on national cable
television; (ii) advertises on national network radio; (iii) advertises in light
truck enthusiast magazines and general consumer interest magazines; (iv)
provides dealers and distributors with product pamphlets, sample materials,
sales and installation training videos, point-of-sale-displays, and special
promotional brochures; (v) attends trade shows and places advertisements in key
trade journals; (vi) sponsors a NASCAR Craftsman Series Truck racing team; (vii)
conducts periodic promotional campaigns to provide additional incentives to
dealer and distributor sales personnel as well as end consumers; (viii)
maintains a customer service/telemarketing department to promptly respond to
customer needs and orders; (ix) 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 (x) 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.
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 30 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 100 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 Elkhart, Indiana facilities.
Pickup Truck Caps, Tonneau Covers and Running Boards
These fiberglass 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
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manufactured at the Company's facilities in Daleville, Alabama, Dunnell,
Minnesota and Eloy, Arizona. Truck caps and running boards are distributed
predominately to aftermarket customers in the south central and southeastern
regions of the United States. Hard tonneau covers are also manufactured for OEM
and aftermarket customers.
Van Tops
Van tops are distributed to custom van converters located throughout
the United States. The Company's staff works closely with these customers to
ensure on-time delivery of these products, which is critical to the customer's
success.
QUALITY CONTROL
As a result of it's commitment to quality, the Company has 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.
TRADEMARKS AND PATENTS
The Company has registered its Penda(R), PENDALINER(R), Tri-Glas(R),
Glasstite(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, soft
tonneaus 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.
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 polyethylene, 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, future shortages of raw materials could have a material
adverse effect on the Company's business.
EMPLOYEES
At December 31, 1999, the Company had approximately 884 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
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interpreted. In addition, to the Company's knowledge, there are no existing or
potential environmental 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
The Company owns a 240,000 square-foot manufacturing, warehouse, and
corporate administrative office facility located on 19 acres in Portage,
Wisconsin, an 8 acre manufacturing facility in Eloy, Arizona and a 11-acre
manufacturing facility in Daleville, Alabama. The Company leases 4.4 acres for
administrative offices and maintenance facilities in Daleville, Alabama, a
30,000 square-foot warehouse and manufacturing facility in Elkhart, Indiana, a
14.2 acre manufacturing facility in Dunnell, Minnesota, a portion of a building
in Sherburn, Minnesota, and an unused 52,000 square-foot building on 8.9 acres
in Platteville, Wisconsin. The Company stores certain equipment at a facility
owned by the City of Daleville, Alabama. 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 and Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997.
CLASS ACTION LAWSUITS
The Company, along with various other manufacturers of pickup truck
bedliners, was 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 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. The Order settling this litigation became final
on November 15, 1999. For fiscal year 1999 the settlement had no impact on the
Company's earnings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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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 1, 2000, 36 persons held the Company's 1,019,974 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.
ITEM 6. SELECTED FINANCIAL DATA
The selected income statement data for the years ended December 31,
1999, 1998, 1997, 1996 and 1995, and the selected balance sheet data for the
same periods were derived from the audited consolidated financial statements of
the Company. 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.
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INCOME STATEMENT DATA
(IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA)
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COMPANY
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YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
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Net Sales.................... $95,550 $77,962 $69,961 $89,353 $74,822
Income/(Loss) Before
Income Taxes (1)............. 11,877 5,279 (6,218) 11,969 6,923
Net Income/(Loss) (1) 7,314 3,215 (4,888) 7,214 3,848
Net Income/(Loss) Per
Common Share
Basic $ 7.18 $ 3.16 $ (4.89) $ 7.22 $ 3.85
Diluted $ 7.02 $ 3.16 $ (4.89) $ 7.22 $ 3.85
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BALANCE SHEET DATA
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COMPANY
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DECEMBER 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ---------------- --------------- ------------- ---------------
Total Assets............. $147,592(1) $139,160 $136,382 $142,029 $139,137
Long-Term Debt........... $ 79,163 $ 79,350 $ 83,129 $ 83,743 $92,140
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(1) On October 29, 1999, the Company acquired certain assets and assumed
certain liabilities of Glasstite, Inc. a Division of Raven Industries, Inc.
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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, 1999, 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, 1999 AND 1998
OVERVIEW: In 1999, the Company set new records in both operational and
financial measures. The Company set new benchmarks in volume, efficiency, and
profitability growth. The strong growth in aftermarket and OEM sales continues
through the implementation of several marketing initiatives such as a national
advertising campaign which incorporates television, magazine, radio and Internet
advertising. In addition, the Company acquired certain assets and assumed
liabilities of Glasstite, Inc. from Raven Industries Inc (NASDAQ: RVN) in late
October, 1999, which provides the Company the ability to capture more of the
double-digit truck accessories growth in the fiberglass covering market.
NET SALES: Net sales increased $17.6 million, or 22.6%, from $78.0
million in 1998 to $95.6 million in 1999. This increase is due to improved
aftermarket sales and increased market penetration with General Motors,
DaimlerChrysler and Toyota. In the fourth quarter, sales were augmented by the
acquisition of Glasstite in late October 1999.
COST OF GOODS SOLD AND GROSS PROFIT: Cost of sales increased $7.8
million, or 16.1%, from $48.5, million in 1998 to $56.3 million in 1999. This
increase is due to a 23% increase in the Company's sales from 1998 and higher
resin prices in the fourth quarter of 1999. As a percentage of sales, cost of
sales went down 3.3% compared to 1998. The Company's favorable cost reduction
program and continued improvement in distribution efficiency with full truckload
shipments with multiple stops continue to contribute to keeping these costs
down. Gross profit increased $9.8 million, or 33.3%, from $29.4 million in 1998
to $39.2 million in 1999. Gross profit margins increased from 37.7% in 1998 to
41.0% for 1999. This improvement is due to the Company's continued cost
reduction efforts and improved plant utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling costs increased
$3.2 million, or 45.8% from $6.9 million in 1998 to $10.1 million in 1999. As a
percentage of sales, selling expenses increased from 8.8% in 1998 to 10.5% in
1999. This increased expense is due to a new co-branding advertising campaign
with the NASCAR(R) trademark through print, radio, and television; and
implementation of several aggressive marketing initiatives such as consumer
cross-promotion with Sears Craftsman Tool, national television and trade
advertising campaigns, and website enhancement. General and administrative
expenses decreased $0.1 million, or 1.2%, from $5.5 million in 1998 to $5.4
million in 1999. This decrease is due to reduced litigation costs in 1999.
OPERATING INCOME: As a result of the items noted above, operating
income increased $6.5 million, or 47.5%, from $13.8 million in 1998 to $20.3
million in 1999.
INTEREST EXPENSE: Interest expense decreased from $8.9 million in 1999
to $8.1 million in 1999, or 9.0%, due primarily to senior note repurchases with
the Company's available cash resources.
OTHER (INCOME) EXPENSE, NET: Other net was expense of $0.3 million in
1999 compared to a income of $0.4 million in 1998. The difference is primarily
due to an insurance recovery received in 1998.
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INCOME TAX EXPENSE: The effective income tax rates for 1999 and 1998
were 38.4% and 39.1%, respectively.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
OVERVIEW: In 1998, the Company experienced a significant turnaround in
both its financial and operational positions. It was a year in which all
operating measurables exceeded prior years for productivity, efficiency, and
profitability. Superior quarter over quarter volume and profitability growth was
achieved in the past four quarters. In 1998, the sales force was fully staffed
and trained, while a world class promotional and marketing program was rolled
out to the aftermarket customers. The growth in aftermarket sales and the
addition of General Motors as an OEM customer more than offset the loss of the
Ford business in 1997. The company acquired certain assets of Custom Form
Manufacturing, Inc. (Custom Form) late in 1998, which provides the Company
access to foreign markets and new product classes.
NET SALES: Net sales increased $8.0 million, or 11.4%, from $70.0
million in 1997 to $78.0 million in 1998. The increase resulted from the start
up of General Motors sales activities in 1998 and improved aftermarket sales
generated by aggressive advertising and promotional campaigns. In the fourth
quarter, sales were augmented by the acquisition of Custom Form in late October.
COST OF GOODS SOLD AND GROSS PROFIT: Cost of sales decreased $2.2
million, or 4.4%, from $50.8 million in 1997 to $48.6 million in 1998. Gross
profit increased $10.2 million, or 53.5%, from $19.2 million in 1997 to $29.4
million in 1998. Gross profit margins increased from 27.4% in 1997 to 37.7% for
1998. This improvement resulted from the Company's continued cost reduction
efforts, lower resin pricing, and the stabilization of pricing due to expanded
sales and marketing efforts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling costs increased
$1.9 million, or 38.2% from $5.0 million in 1997 to $6.9 million in 1998. As a
percentage of sales, selling expenses increased from 7.1% in 1997 to 8.8% in
1998. This increase was attributable to a larger sales force and expanded
promotional and advertising campaigns. General and administrative expenses
decreased $1.9 million, or 25.6%, from $7.4 million in 1997 to $5.5 million in
1998. This decrease was primarily due to reduced litigation costs in 1998.
OPERATING INCOME: As a result of the items noted above, operating
income increased $10.7 million, or 357.4%, from $3.0 million in 1997 to $13.7
million in 1998.
INTEREST EXPENSE: Interest expense decreased from $9.1 million in 1997
to $8.9 million in 1998, or 2.2%, due primarily to reduced short-term borrowings
and Senior Note repurchases in October 1998.
OTHER (INCOME) EXPENSE, NET: Other net was income of $0.4 million in
1998 compared to a net expense of $0.1 million in 1997. Key reasons for the
increase in income had to do with insurance recovery and year-end translation
adjustments.
INCOME TAX EXPENSE: The effective income tax rates for 1998 and 1997
were 39.1% and (21.4%), respectively.
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
10
<PAGE> 13
working capital availability per the borrowing base report at December 31, 1999
was $ 14.7 million compared to $14.3 million at December 31, 1998.
The Company's revolving credit facility ("Credit Facility") with Banque
Nationale de Paris provides for borrowings of up to $12.5 million, consisting of
(i) a $9 million revolving credit facility with available borrowings based on
the Company's eligible accounts receivable and inventory, and (ii) an
over-advance facility of $3.5 million. 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, 2002. As of February 29, 2000, the Company had no
outstanding borrowings and $12.5 million borrowing ability available under the
Credit Facility.
Pursuant to the Credit Facility, the Company pays 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 1999, the Company
sought and obtained an Amendment to and a Waiver of the terms and conditions of
the Credit Facility for 1999.
Net cash provided by operating activities in 1999 was approximately
$14.1 million compared to $13.5 million in 1998. The difference between the
Company's 1999 operating cash flow and its net income of $7.3 million was
primarily attributable to $7.3 million of depreciation and amortization, $.6
million of collected income tax refunds, and a $2.6 million provision for
deferred income taxes, partially offset by $1.1 million increase in inventory.
Net cash used in investing activities was $12.7 million in 1999,
compared to $7.8 million in 1998. The Company's 1999 investing cash flow
reflected $8.7 million for the Glasstite acquisition and $3.4 million of capital
expenditures (principally associated with internal and external tooling costs
for molds development, and plastics and fiberglass production equipment.
Net cash used in financing activities was $1.2 million in 1999 compared
to $3.8 million in 1998, primarily reflecting $0.6 million of indebtedness
payments and $1.6 million of bond repurchase of Senior Notes partially offset by
$1.0 million of note payable issuance.
Although the Company has no capital commitments for 2000, the Company
is currently budgeting approximately $3.5 million primarily for production
machinery, equipment and tooling. Management believes that funds generated from
operations and funds which management expects will be available when it's
short-term facility agreement is reached will be sufficient to satisfy the
Company's debt service obligations, working capital requirements and capital
expenditures through at least 2000, 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.
YEAR 2000 COMPLIANCE
In the previous year, we discussed the progress and nature of our plans
to become Year 2000 compliant. By third quarter of 1999, the Company completed
testing of it's systems and made modification as deemed necessary. As a result
of these implementation and planning efforts, the Company experienced no
disruptions in business critical information technology and non-information
technology systems and believes these systems successfully responded to the Year
2000 date change. The costs incurred during 1999 in connection with necessary
modification of the Company's systems were not material to its financial
position. The Company is not aware of any material problems resulting from Year
2000 issues regarding its
11
<PAGE> 14
internal systems or the products and services of third parties. The Company will
continue to monitor its business critical computer applications and those of its
suppliers throughout the year 2000 to ensure that any Year 2000 matters that may
arise are addressed promptly.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks, which include changes in U.S.
interest rates and commodity prices and, to a lesser extent, foreign exchange
rates. The Company does not engage in financial transactions for trading or
speculative purposes.
INTEREST RATE RISK. The interest payable on the Company's Credit
Facility is affected by changes in market interest rates. As of December 31,
1999, the Company had no outstanding debt under the Credit Facility. Based on
borrowings during 1996 through 1999, a 10% increase or decrease in the average
cost of the Company's Credit Facility debt would not be material. In addition,
the Company has fixed income investments consisting of cash equivalents and
short-term investments in marketable debt securities, which are also, affected
by changes in market interest rates. The Company does not use derivative
financial instruments in its investment portfolio.
COMMODITY PRICES. The Company is exposed to fluctuation in market
prices for plastic and electricity related to its manufacturing operations. The
Company manages its exposure to changes in those prices primarily through the
terms of its supply and procurement contracts. This exposure is material to the
Company.
FOREIGN CURRENCY RISKS. The Company has minimal sales outside of the
United States and, therefore, has only minimal exposure to foreign currency
exchange risks. The Company does not hedge against foreign currency risks and
believes that foreign currency exchange risk is immaterial.
12
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PENDA CORPORATION
Report of Ernst & Young, LLP, independent auditors 14
Consolidated Balance Sheets as of December 31, 1999 and 1998 15-16
Consolidated Statements of Operations for the years ended December 31, 1999, 1998, and 1997 17
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 18
1998, and 1997
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998, and 1997 19
Notes to Consolidated Financial Statements 20-28
FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts 29
</TABLE>
13
<PAGE> 16
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Penda Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Penda
Corporation and Subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement and schedule 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 and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 the
Company as of December 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth
herein.
Ernst & Young LLP
Milwaukee, Wisconsin
February 11, 2000, except for
Note 14, as to which the date
is March 28, 2000
14
<PAGE> 17
Penda Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,627,686 $ 6,336,206
Accounts receivable, less allowance for doubtful accounts of 12,775,677 10,667,192
$413,000 in 1999 and $380,000 in 1998
Inventories 8,332,455 5,701,194
Refundable income taxes 636,646 -
Deferred income taxes 418,000 833,000
Other 792,167 844,202
------------------------------------
Total current assets 29,582,631 24,381,794
Property, plant and equipment:
Land and improvements 870,224 743,872
Buildings and improvements 10,316,062 7,387,815
Machinery and equipment 27,779,307 21,278,237
Furniture and Fixtures 683,672 600,273
Construction in progress 1,117,034 1,816,898
------------------------------------
40,766,299 31,827,095
Less accumulated depreciation 15,711,536 11,884,805
------------------------------------
Net property, plant and equipment 25,054,763 19,942,290
Goodwill and other intangible assets, net 92,902,175 94,835,684
Other assets 52,146 -
------------------------------------
Total assets $147,591,715 $ 139,159,768
====================================
</TABLE>
15
<PAGE> 18
Penda Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,347,112 $ 3,611,565
Accrued interest 2,754,865 2,841,318
Employee compensation 774,513 1,174,382
Current maturities of long-term debt 400,000 400,000
Current maturities of capital lease obligations 413,469 250,529
Other accrued liabilities 1,056,305 2,388,318
------------------------------
Total current liabilities 9,746,264 10,666,113
Long-term debt 75,602,000 77,652,000
Capital lease obligations 2,747,192 1,047,323
Deferred income taxes 11,785,000 9,547,000
Commitments and contingencies (Notes 6 and 13)
Shareholders' equity:
Common stock, $.01 par value, 5,000,000 shares authorized, 10,200 10,166
1,019,975 and 1,016,624, shares issued and outstanding,
respectively.
Additional paid-in capital 25,139,919 24,989,952
Retained earnings 22,561,140 15,247,214
------------------------------
Total shareholders' equity 47,711,259 40,247,332
------------------------------
Total liabilities and shareholders' equity $147,591,715 $139,159,768
==============================
</TABLE>
See accompanying notes.
16
<PAGE> 19
Penda Corporation and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Net sales $95,549,751 $77,962,168 $69,961,096
Cost of sales 56,346,415 48,551,794 50,800,234
----------------------------------------------------
Gross profit 39,203,336 29,410,374 19,160,862
Selling expenses 10,045,354 6,890,761 4,986,343
General and administrative expenses 5,409,362 5,474,469 7,359,640
Legal settlement with former executive officer - - 655,195
Amortization of intangible assets 3,459,239 3,291,606 3,152,840
----------------------------------------------------
Operating income 20,289,381 13,753,538 3,006,844
Interest expense 8,096,904 8,895,584 9,091,343
Other (income) expense, net 315,551 (421,370) 133,823
----------------------------------------------------
Income (loss) before income taxes 11,876,926 5,279,324 (6,218,322)
Provision (benefit) for income taxes 4,563,000 2,064,000 (1,330,000)
====================================================
Net income (loss) $ 7,313,926 $ 3,215,324 $ (4,888,322)
====================================================
Earnings (loss) per share of common stock:
Basic $ 7.18 $ 3.16 $ (4.89)
Diluted $ 7.02 $ 3.16 $ (4.89)
</TABLE>
See accompanying notes.
17
<PAGE> 20
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 Adjustments Total
---------- ---------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 998,042 $ 9,980 $24,851,294 $16,920,212 $ 167,819 $41,949,305
Net loss - - - (4,888,322) - (4,888,322)
Foreign currency translation adjustments - - - - 80,035 80,035
------------
Comprehensive Loss (4,808,287)
Purchase and retirement of common stock (20,448) (204) (335,946) - - (336,150)
Issuance of common stock 39,030 390 474,604 - - 474,994
---------- ---------- ------------ ------------ ------------ ------------
Balances at December 31, 1997 1,016,624 10,166 24,989,952 12,031,890 247,854 37,279,862
Net income - - - 3,215,324 - 3,215,324
Foreign currency translation adjustments - - - - (247,854) (247,854)
------------
Comprehensive Income 2,967,470
---------- ---------- ------------ ------------ ------------ ------------
Balances at December 31, 1998 1,016,624 10,166 24,989,952 15,247,214 - 40,247,332
Net income - - - 7,313,926 - 7,313,926
Issuance of common stock 3,351 34 149,967 - - 150,001
---------- ---------- ------------ ------------ ------------ ------------
Balance at December 31, 1999 1,019,975 $ 10,200 $25,139,919 $22,561,140 $ - $47,711,259
========== ========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
18
<PAGE> 21
Penda Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 7,313,926 $ 3,215,324 $ (4,888,322)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 3,826,731 3,261,761 3,494,807
Amortization of intangible assets 3,455,068 3,291,606 3,152,840
Loss on sale of property, plant and equipment 30,212 313,279 40,991
Gain on insurance claims received - - (298,440)
Deferred income taxes 2,554,000 1,614,000 1,652,000
Provision (reversal of provision) for doubtful accounts 33,000 (90,000) 395,000
Changes in operating assets and liabilities, net of
effects from purchase of business assets:
Accounts receivable (114,868) (1,040,678) 3,345,215
Inventories (1,051,841) (759,937) 1,288,958
Refundable income taxes (636,646) 3,173,000 (3,162,000)
Accounts payable 414,140 720,955 (1,292,704)
Accrued interest (86,453) (85,349) (25,270)
Other (1,608,889) (108,894) 1,398,803
--------------------------------------------------
Net cash provided by operating activities 14,128,380 13,505,068 5,101,878
INVESTING ACTIVITIES
Payments for acquisition, net of cash acquired (8,691,990) - -
Acquisition of intangible assets (656,651) (4,112,065) (2,000,000)
Capital expenditures (3,360,447) (3,753,539) (501,192)
Proceeds from sale of property, plant and equipment 36,018 16,490 65,387
Proceeds from insurance claims - - 298,440
--------------------------------------------------
Net cash used in investing activities (12,673,070) (7,849,114) (2,137,365)
FINANCING ACTIVITIES
Repurchase of bonds (1,650,000) (3,148,000) -
Issuance of note payable 995,000 - -
Payments on note payable (400,000) (400,000) (400,000)
Proceeds from sale/leaseback - - -
Payments on capital leases (218,831) (231,326) (213,597)
Purchase of common stock - - (336,150)
Issuance of common stock 150,001 - 474,994
--------------------------------------------------
Net cash used in financing activities (1,163,830) (3,779,326) (474,753)
--------------------------------------------------
Net increase in cash and cash equivalents 291,480 1,876,628 2,489,760
Cash and cash equivalents at beginning of year $ 6,336,206 $ 4,459,578 $ 1,969,818
==================================================
Cash and cash equivalents at end of year $ 6,627,686 $ 6,336,206 $ 4,459,578
==================================================
</TABLE>
See accompanying notes.
19
<PAGE> 22
Penda Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
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, van converters, 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, which operates
as one segment, has manufacturing facilities in Portage, Wisconsin and
Daleville, Alabama; Dunnell, Minnesota; and Eloy, Arizona. In 1998, the Company
ceased its operations in Australia and Mexico.
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.
REVENUE RECOGNITION
Revenues are recognized upon shipment of product. The company estimates and
records provisions for warranties and other after-sale costs in the period the
sale is reported. Such provisions are included in other accrued liabilities.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 collectability of accounts receivable, inventory obsolescence,
product warranty, medical cases incurred but not reported, and 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.
20
<PAGE> 23
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.
IMPAIRMENT OF LONG-LIVED ASSETS
Goodwill, other intangible assets, and property, plant and equipment are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the sum of the expected
undiscounted cash flows is less than the carrying value of the related asset or
group of assets, a loss will be recognized for the difference between the fair
value and carrying value of the asset or group of assets. Such analyses
necessarily involve judgement.
ADVERTISING COSTS
Advertising costs are expensed when the initial advertisement occurs. Total
advertising expense was $3,566,000, $2,949,000, and $2,066,000, in
1999, 1998, and 1997, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred and were
$664,000, $707,000, and $591,000 in 1999, 1998, and 1997, respectively.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's Australian subsidiary was the
Australian dollar; accordingly, assets and liabilities were translated using the
current exchange rate 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. In 1998, the
Company ceased operating in Australia and reversed into income the accumulated
translation adjustment.
In 1998 and 1997, the functional currency of the company's Mexican subsidiary
was the U.S. dollar.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
The numerator for the calculation of basic and diluted earnings (loss) per share
of common stock is net income (loss). The denominator is computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1999 1998 1997
------------------------------------------
<S> <C> <C> <C>
Denominator for basic earnings (loss) per share - weighted average
shares 1,018,882 1,016,624 1,000,436
Employee stock options (treasury stock method) 22,432 - -
------------------------------------------
Denominator for diluted earnings (loss) per share 1,041,314 1,016,624 1,000,436
==========================================
</TABLE>
RECLASSIFICATIONS
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities (the Statement),
which is required to be adopted for fiscal years beginning after
21
<PAGE> 24
June 15, 2000. The Statement will require the Company to recognize all
derivatives in the balance sheet at fair value. As of December 31, 1999, the
Company has no derivative instruments. The Company will adopt the Statement no
later than January 1, 2001, and estimates that its effect will not be material
to its results of operations, financial position, or cash flows.
2. ACQUISITION
On October 29, 1999, the Company acquired certain assets and assumed certain
liabilities of Glasstite, Inc. ("Glasstite"), a division of Raven Industries,
Inc. Glasstite, with manufacturing facilities in Dunnell, Minnesota and Eloy,
Arizona, manufactures fiberglass pickup truck caps and tonneau covers. 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 and accounts payable of Glasstite except for certain accounts receivable
over 90 days past due. The aggregate consideration paid for the assets was
$9,148,000 which included cash payments to the seller totaling $8,412,000,
direct acquisition costs of $415,000 and assumption of liabilities in the amount
of $321,000. The transaction was financed using the Company's available cash
resources. The acquisition has been accounted for using he 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 estimated fair value.
The excess of the cost over the fair value of the net assets acquired of
$859,000 is being amortized over 20 years. The operating results of Glasstite
have been included in the Company's consolidated operating results from the date
of acquisition.
The following unaudited information presents, on a pro forma basis, the
Company's results for the year ended December 21, 1999 and 1998, giving effect
to the acquisition, as if it had occurred at the beginning of the years
presented.
The pro forma results have been prepared for informational purposes only and
include adjustments to depreciation expense of acquired plant and equipment and
amortization of goodwill, together with related income tax effects of all such
adjustments. Anticipated efficiencies from the consolidation of certain
manufacturing activities have been excluded from the pro forma operating
results. These pro forma results do not purport to be indicative of the results
of the operations that would have occurred had the purchases been made as of the
beginning of the periods presented or of the results of operations that may
occur in the future.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
1999 1998
------------------ ------------------
<S> <C> <C>
Sales $114,831,000 $98,001,000
Net income $ 8,013,000 $ 3,542,000
Net income per share of common stock:
Basic $ 7.86 $ 3.48
Diluted $ 7.70 $ 3.48
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------ -----------------
<S> <C> <C>
Finished goods $3,487,584 $3,030,878
Work-in-process 856,552 680,310
Raw materials and supplies 4,439,194 2,245,006
Less allowance for inventory obsolescence (450,875) (255,000)
================== =================
$8,332,455 $5,701,194
================== =================
</TABLE>
22
<PAGE> 25
4. INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------ -----------------
<S> <C> <C>
Goodwill $ 97,032,796 $ 95,871,423
Trademarks 6,186,277 6,178,982
Deferred financing costs 3,325,075 3,265,932
Other 3,853,535 3,614,399
------------------ -----------------
110,397,683 108,930,736
Less accumulated amortization 17,495,508 14,095,052
------------------ -----------------
$ 92,902,175 $ 94,835,684
================== =================
</TABLE>
5. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------ -----------------
<S> <C> <C>
10 3/4% Series B Senior Notes, due 2004 $75,202,000 $76,852,000
Promissory note payable 800,000 1,200,000
------------------ -----------------
$76,002,000 78,052,000
Less amount due within one year 400,000 400,000
================== =================
$75,602,000 $77,652,000
================== =================
</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.
Prior to March 1, 1999, the Company could redeem the Senior Notes at a
redemption price of 105.375% of par. Subsequent to March 1, 1999, the redemption
price declines to par at maturity based upon a predetermined schedule. In 1999
and 1998, the Company repurchased $1,650,000 and $3,148,000, respectively, of
the outstanding Senior Notes on the open market, recognizing a net gain of
$28,500 and $66,000, respectively. Due to the immaterial nature of the gains,
these transactions are not presented in the consolidated statements of
operations as an extraordinary item.
The Company also has a revolving credit agreement with a bank which provides for
maximum borrowings of $12,500,000 at either 1.0% above the lender's base rate,
or 2.5% above the lender's eurodollar rate. The revolving credit agreement is
collateralized by substantially all of the Company's accounts receivable and
inventories. Annual commitment fees under the revolving credit agreement are
1/2% of the unused portion of the available credit. At December 31, 1999 and
1998, there were no amounts outstanding on the revolving credit agreement. The
current credit facility matures and all borrowings are due March 31, 2002.
The Company's Senior Notes and revolving credit agreement contain covenants that
restrict the payment of cash dividends and 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, 1999 and 1998.
23
<PAGE> 26
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.
Scheduled of aggregate maturities on long-term debt are as follows: 2000 -
$400,000, 2001-$400,000, 2002-$0, 2003-$0, and 2004 - $75,202,000.
The fair value of the long-term debt, approximates $72,700,000 at December 31,
1999, 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 9.5% on the
Company's revolving credit facility.
6. LEASE OBLIGATIONS
The Company leases various equipment under capital lease obligations. Equipment
includes $4,096,000 and $2,338,000 of capitalized lease assets at December 31,
1999 and 1998. Lease amortization is included in depreciation expense.
Certain manufacturing equipment, computers, vehicles and warehouse space is
leased under noncancelable operating leases. Rent expense under such leases was
$1,083,000, $683,000 and $446,000 in 1999, 1998 and 1997, respectively.
Future minimum payments, by year and in the aggregate, under the capital lease
and noncancelable operating leases with initial or remaining terms of one year
or more consists of the following at December 31, 1999:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------------------- -----------------------
<S> <C> <C>
2000 $ 627,355 $1,176,633
2001 627,355 852,465
2002 627,355 354,369
2003 1,209,355 149,041
2004 716,196 51,622
-------------------------- -----------------------
Total $3,807,616 $2,584,130
=======================
Less amount representing interest 646,955
--------------------------
Present value of net minimum lease payments 3,160,661
Less current portion of capital lease obligations 413,469
==========================
Long-term capital lease obligations $2,747,192
==========================
</TABLE>
7. INCOME TAXES
Income (loss) before the provision (benefit) for income taxes for domestic and
foreign operations was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------ ------------------ ----------------
<S> <C> <C> <C>
Domestic $11,878,926 $5,113,944 $(4,492,191)
Foreign - 165,380 (1,726,131)
------------------ ------------------ ----------------
Income (loss) before income taxes $11,876,926 $5,279,324 $(6,218,322)
================== ================== ================
</TABLE>
24
<PAGE> 27
The components of the provision (benefit) for income taxes consist of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------ ------------------ ----------------
<S> <C> <C> <C>
Current:
Federal $1,637,000 $ 429,000 $(3,000,000)
State 372,000 21,000 18,000
------------------ ------------------ ----------------
2,009,000 450,000 (2,982,000)
Deferred:
Federal 2,276,000 1,221,000 1,404,000
State 278,000 393,000 248,000
------------------ ------------------ ----------------
2,554,000 1,614,000 1,652,000
------------------ ------------------ ----------------
Provision (benefit) for income taxes $4,563,000 $2,064,000 $(1,330,000)
================== ================== ================
</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
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Federal statutory income taxes 34.0% 34.0% (34.0)%
Foreign (income) loss for which no tax benefit (expense) recorded - (1.1) 9.4
State income taxes, net of federal income tax benefit 2.9 5.2 2.8
Other 1.5 1.1 0.4
============ ============ ===========
38.4% 39.2% (21.4)%
============ ============ ===========
</TABLE>
The components of the net deferred income tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Deferred income tax assets:
Accounts receivable $ 111,000 $ 118,000
Inventories 189,000 143,000
Accrued liabilities 118,000 596,000
Intangible assets 210,000 104,000
Foreign net operating losses 1,028,000 1,028,000
Federal AMT credit carryforwards - 315,000
State net operating loss carryforwards 4,000 487,000
------------------ -----------------
1,660,000 2,791,000
Valuation allowance (1,028,000) (1,313,000)
------------------ -----------------
632,000 1,478,000
------------------ -----------------
Deferred income tax liabilities:
Intangible assets (9,889,000) (8,214,000)
Property, plant and equipment (2,110,000) (1,978,000)
------------------ -----------------
(11,999,000) (10,192,000)
================== =================
Net deferred income tax liability $ (11,367,000) $ (8,714,000)
================== =================
</TABLE>
25
<PAGE> 28
Deferred taxes are classified in the accompanying balance sheets as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Current asset $ 418,000 $ 833,000
Noncurrent liability (11,785,000) (9,547,000)
================== =================
$ (11,367,000) $ (8,714,000)
================== =================
</TABLE>
The Company recorded a valuation to provide for uncertainties relating to the
realization of foreign and certain state net operating loss carryforwards.
Realization of foreign net operating losses is remote since the Company's
foreign subsidiaries have ceased operations.
8. 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 was $158,000, $124,000, and
$115,000 in 1999, 1998 and 1997, 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.
Net sales to the Company's two largest automotive industry customers were 21%
and 12% in 1999, 25% and 10% in 1998 and 25% and 12% in 1997, respectively, of
consolidated net sales.
Net sales to customers in foreign countries, principally Canada, were
$11,425,000, $7,955,000 and $7,086,000 in 1999, 1998 and 1997, respectively.
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. Options under the 1994 Plan have a term of ten years and are contingent
upon the attainment
26
<PAGE> 29
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.
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. Total compensation expense
recorded approximated $61,000, $28,000, and $114,000 in 1999, 1998 and 1997,
respectively. Had compensation cost been determined under the method set forth
in SFAS No. 123, the effect on 1999, 1998, and 1997 net income (loss) and
earnings per share would not have been significant.. Stock option transactions
are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- -----------------------
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 27,905 $26.89 16,405 $27.87 24,684 $30.92
Granted 11,500 25.00 11,500 25.00 38,813 14.81
Exercised - - - - (30,813) 12.17
Canceled - - - - (16,279) 31.08
---------- ----------- ----------
Outstanding at end of
year 39,405 $26.20 27,905 $26.89 16,405 $27.87
========== ============ =========== ============== ========== ============
</TABLE>
The outstanding stock options at December 31, 1999 have a range of exercise
prices between $25.00 and $31.08 per option and a weighted average contractual
life of approximately 6.2 years. At December 31, 1999, 12,696 options are
currently exercisable. The fair value at date of grant for options granted
during 1999 was $63.64 per option using the minimum value method. The fair value
of options at date of grant was estimated by subtracting the exercise price from
the fair value of the stock. In performing 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 INFORMATION
Cash paid for interest and income taxes for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Interest $ 8,630,800 $ 8,973,333 $ 9,106,363
================ ================ ================
Income taxes $ 2,844,100 $ 401,500 $ 60,440
================ ================ ================
</TABLE>
In 1999, the Company entered into capital lease obligations for $2,082,000.
12. RELATED-PARTY TRANSACTIONS
The Company has a ten-year consulting agreement (the Agreement), which expires
in 2004, with Trivest Inc. (Trivest), an affiliate of its major shareholders.
Pursuant to the Agreement, Trivest provides corporate finance,
27
<PAGE> 30
strategic and capital planning and other management advice to the Company for an
annual fee (subject to cost of living adjustments), payable quarterly in
advance. 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 $478,000, $417,000, and
$481,000, in 1999, 1998, and 1997, respectively.
13. 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 October 15, 1999, the Circuit Court for Champaign County, Illinois, granted
final approval of a settlement in a class action suit in which the Company and
various other manufactures of pickup truck bedliners were defendants. The
defendants agreed to fund a public education campaign, use uniform warning
labels, and pay the plaintiffs' attorneys' fees. The Company's portion of the
settlement was $600,000.
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 $850,000 in consideration for this settlement. 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.
14. SUBSEQUENT EVENT
On March 28, 2000 the Company announced a definitive agreement for the sale of
the Company to a group led by William Blair Capital Partners. The transaction
is expected to close by no later than April 30, 2000.
28
<PAGE> 31
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, 1999 Allowance for Doubtful Accounts $380,000 $200,368 $ - $167,368 (1) $413,000
Inventory Obsolescence Reserve $255,000 $196,000 $ - $ - $451,000
Year ended
December 31, 1998 Allowance for Doubtful Accounts $470,000 $289,294 $ - $379,294 (1) $380,000
Inventory Obsolescence Reserve $528,000 $ - $ - $273,000 $255,000
Year ended
December 31, 1997 Allowance for Doubtful Accounts $ 75,000 $465,611 $ - $ 70,611 (1) $470,000
Inventory Obsolescence Reserve $180,000 $348,000 $ - $ - $528,000
</TABLE>
(1) Bad debts written off, net of recoveries.
29
<PAGE> 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NOT APPLICABLE
30
<PAGE> 33
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 61 Chairman of the Board
Jack L. Thompson 61 President, Chief Executive Officer and Director
Leo E. Waner 44 Vice President -- Chief Financial Officer
Jeffrey G. Rastocan 38 Vice President -- Sales & Marketing
Scot D. Harvey 43 Vice President -- Operations
Gary L. Witt 38 Vice President -- Administration
Troy D. Templeton 39 Director
Phillip T. George, M.D. 60 Director
David S. Timson 47 Director
L. J. (Jim) Schoenwetter 61 Director
Thomas J. Smith 47 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 Chairman of the Board 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
has served as Chairman of the Board of Biscayne Apparel, Inc., a company whose
principal subsidiaries are engaged in the apparel industry ("Biscayne"), since
October 1985 and presently serves as Chief Executive Officer of Biscayne. The
common stock of Biscayne is quoted on the NASD OTC Bulletin Board. Biscayne
filed a voluntary Chapter 11 bankruptcy petition in February 1999. 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 in July 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 in July 1997. From June 1995 to March
1997, Mr. Waner was Vice President of Acquisition and Integration for Monroe
Auto Equipment Company, a subsidiary of Tenneco Automotive. 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.
31
<PAGE> 34
Mr. Rastocan has served as Vice President Sales and Marketing for the
Company since joining the Company in October 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 1994 at which time he became Vice President -- Operations.
Mr. Harvey is primarily responsible for the Company's operations and
distribution systems. 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 1994 at which time he became Vice President --
Administration. Mr. Witt is responsible for the Company's Quality, Human
Resources, and Purchasing functions, as well as the Company's Cost Reduction
Program. 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. Templeton joined the Board as a director in November 1998. Mr.
Templeton joined Trivest in 1989 and has led the origination, structuring,
financing and ultimate disposition of numerous stand-alone and add on
acquisitions. He has also been extensively involved in the management oversight
of portfolio companies. Mr. Templeton is currently a Senior Managing Director at
Trivest. Prior to joining Trivest, Mr. Templeton spend six years serving in
various capacities with Southeast Bank, NA in Miami.
Dr. George, a Director of the Company since its organization, is the
Vice-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. Dr. George also serves as a
Director of Biscayne. Biscayne filed a voluntary Chapter 11 bankruptcy petition
in February 1999. Dr. George's executive position with Trivest has been his
principal occupation since retiring from the private practice of plastic and
reconstructive surgery in February 1986.
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, Corporate Vice President, Logistics,
in July 1993.
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.
Mr. Timson joined the Board as a director in August 1998. Mr. Timson is
an Executive Director/Partner in the Private Markets Group of Brinson Partners,
Inc. and joined the firm in 1985. Mr. Timson focuses primarily on private equity
investments in general manufacturing, financial services, and other
service-based businesses. During his tenure at Brinson, Mr. Timson has invested
in 26 different companies.
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.
32
<PAGE> 35
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 four other executive officers whose total annual salary and
bonus, determined as of December 31, 1999, exceeded $100,000 ("Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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) 1999 $285,000 $230,000 $23,000 4,000.00
President and Chief Executive Officer 1998 $259,615 $150,000 $28,961 4,000.00
1997 $125,000 $100,300 $22,157 22,542.00
Leo E. Waner (4)(5) 1999 $165,612 $ 70,000 $ 5,304 1,500.00
Vice President and Chief Financial 1998 $144,808 $ 58,000 $ 5,419 1,500.00
Officer 1997 $ 60,096 $ 60,300 $43,587 11,021.00
Jeffrey G. Rastocan (6)(7) 1999 $143,907 $ 30,000 $ 6,243 1,500.00
Vice President-Sales & Marketing 1998 $116,274 $ 31,226 $24,148 1,500.00
1997 $ 19,846 $ 10,800 $ 3,810 750.00
Scot D. Harvey (8)(9) 1999 $122,659 $ 40,000 $ 5,099 1,500.00
Vice President-Operations 1998 $114,262 $ 35,000 $ 3,611 1,500.00
1997 $100,616 $ 28,546 $ 2,960 1,500.00
Gary L. Witt (9) 1999 $122,878 $ 42,000 $ 4,120 1,500.00
Vice President-Administration 1998 $114,467 $ 35,000 $ 4,309 1,500.00
1997 $102,781 $ 18,300 $ 3,768 1,500.00
</TABLE>
(1) Except as set forth in footnotes (5), (8), and (9), represents bonus earned
in the respective year regardless of when paid by the Company.
(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 $13, 096.78 in 1999, $16,489 in 1998 and
$8,202 in 1997 and travel between Portage, Wisconsin and Monroe, Michigan
for Mr. Thompson and his spouse $5,411.71 in 1999, $8,517 in 1998 and
$6,268 in 1997, and tax gross up of $5,366 in 1997.
(4) Mr. Waner joined the Company on July 7, 1997.
(5) Bonus shown for 1997 for Mr. Waner includes a $25,000 signing bonus. In
1997, other annual compensation for Mr. Waner includes relocation costs of
$36,648.
(6) Mr. Rastocan joined the Company on October 20, 1997.
(7) Other annual compensation for Mr. Rastocan in 1998 includes relocation
costs of $21,291.
33
<PAGE> 36
(8) Bonus shown for 1997 for Mr. Harvey includes an adjustment to the 1996
bonus paid after March 1997 of $10,246.
(9) Bonus shown for 1997 for Mr. Harvey and Mr. Witt includes a special payment
of $18,000 to each for acting as General Managers of the Company from April
through June 1997.
STOCK OPTION GRANTS
The following table sets forth information concerning the grant of
stock options to the Named Executive Officers in 1999 (all options were granted
under Management Stock Option Plans and Agreements entered into between the
Company and the Named Executive Officers). The Company did not grant any stock
appreciation rights in 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERM(3)
INDIVIDUAL GRANTS --------------------------
-------------------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR
GRANTED FISCAL BASE PRICE EXPIRATION
NAME (#)(1) YEAR(2) ($/SH) DATE 5%($) 10%($)
- --------------------- ------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jack L. Thompson 4,000 34.78% $25.00 (1) $314,651.42 $560,263.08
Leo E. Waner 1,500 13.04% $25.00 (1) $117,994.28 $210,098.66
Jeffrey G. Rastocan 1,500 13.04% $25.00 (1) $117,994.28 $210,098.66
Gary L. Witt 1,500 13.04% $25.00 (1) $117,994.28 $210,098.66
Scot D. Harvey 1,500 13.04% $25.00 (1) $117,994.28 $210,098.66
</TABLE>
- -------------
(1) (1) A total of 10,000 in time vested options were granted to the named
Executive Officers in 1999. The time vested options become exercisable as
to 20% of the shares on each anniversary of the date of grant (beginning
December 31, 1999) over a five year period, so long as employment with the
Company continued 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 11,500 shares were granted in 1999. 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 1999.
(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
34
<PAGE> 37
registered under Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act"). Since the 1998 time vested options do not have a
termination date, 10 years was used for these calculations.
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>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
OPTIONS EXERCISED AT DECEMBER 31, DECEMBER
DURING 1999 1999(#) 31, 1999($)(1)
----------------------------- ----------------------------- -----------------------------
($)VALUE
NAME SHARES(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------------------------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jack L. Thompson 0 $0 1,600.000 8,400.000 $ 61,824 $324,576
Leo E. Waner 0 $0 600.000 3,150.000 $ 23,184 $121,716
Jeffrey G. Rastocan 0 $0 600.000 3,150.000 $ 23,184 $121,716
Gary L. Witt 0 $0 3,464.858 4,052.622 $133,882 $156,893
Scot D. Harvey 0 $0 3,716.713 4,097.067 $143,614 $158,311
</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 calculated the
fair market value of the Company's common stock on December 31, 1999 was
$63.64. 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.
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).
35
<PAGE> 38
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 1,019,974.7661 shares of Common Stock issued and
outstanding at March 1, 2000. 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 (11)..................................................... 4,000 *
Troy D. Templeton (5).................................................... 1,000 *
</TABLE>
36
<PAGE> 39
<TABLE>
<S> <C> <C>
Jack L. Thompson (8)..................................................... 1,600 0.15687%
Leo E. Waner (8)......................................................... 10,871 1.06581%
Jeffrey G. Rastocan (8).................................................. 8,816.9269 *
Scot D. Harvey (8)....................................................... 7,041.1600 *
Gary L. Witt (8)......................................................... 6,009.3050 *
All directors and executive officers as a group (persons) (9)(10)... 484,209.3919 47.14077%
</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.
(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. David S.
Timson, a director of the Company, is a Partner of Brinson and an officer
of Brinson Trust Company. Both Brinson and Mr. Timson 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 1,600.00, 600.00, 600.00, 4,213.780 and 3,917.480 shares for
Messrs. Thompson, Waner, Rastocan, Harvey and Witt, respectively, of common
stock issuable upon exercise of the options presently exercisable as of
March 1, 2000.
(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).
37
<PAGE> 40
(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 4365 Steiner Street, St. Bonafius,
Minnesota 55375.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective March 18, 1994, the Company entered into a ten-year agreement
(the "Consulting Agreement") with Trivest, Inc., 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 1998, the
Company paid management fees to Trivest of approximately $429,000 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.
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
1999, the Company paid Trivest $49,000 for services rendered by the Trivest
legal department. The Company believes that the fees charged by the Trivest
legal department in 1999 were no less favorable to the Company than fees charged
to unaffiliated third parties for similar services.
38
<PAGE> 41
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 13.
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 29.
3. Exhibits
(b) Form 8-K dated November 4, 1999 related to the Glasstite acquisition.
(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 (4.1)(1)
39
<PAGE> 42
4.2 Registration Rights Agreement dated as of March 18, 1994, between the
Registrant and Bear, Stearns & Co. Inc. (4.2)(1)
4.3 Indenture, dated as of March 18, 1994, between the Registrant and
American Stock Transfer & Trust Company (4.3)(1)
4.4 Supplemental Indenture, dated as of July 14, 1995, between Tri-Glas
Corporation and American Stock Transfer & Trust Company, as Trustee.
(4.4)(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. (10.8)(8)
10.9* Employment Agreement between the Registrant and Leo E. Waner dated July
1, 1997. (10.9)(8)
10.10 Settlement Agreement, dated December 23, 1997, between the Registrant
and Daniel E. Braun. (10.10)(8)
10.11 Stock Transfer and Option Termination Agreement dated December 23, 1997
between the Registrant and Daniel E Braun. (10.11)(8)
10.12 Form of Shareholder's Agreement between Registrant and certain
executive officers and certain employees. (10.12)(8)
10.13* Form of Management Stock Option Plan and Agreement between Registrant
and certain executive officers. (10.13)(8)
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)
40
<PAGE> 43
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)(8)
10.16* Form of Stock Option Substitution Agreement entered into between the
Registrant and certain executives'. (10.16)(8)
10.17 Master Lease between Penda Corporation and Firstar Equipment Finance
Corporation dated December 26, 1995. (10.17)(9)
10.19 Amendment to Lease Schedule #9001 between Firstar Leasing Services
Corporation and Penda Corporation dated March 26, 1999 (10.19)(11)
10.20 Lease Schedule #48500-02 between Firstar Leasing Services Corporation
and Penda Corporation date April 5, 1999 (10.20)(11)
10.21 Amendment No. 2 to the Amended and Restated Credit Agreement between
Banque Nationale de Paris and Penda Corporation dated March 31, 1999
(10.21)(11)
10.22 Amendment to Lease Schedule #48500-032 between Firstar Leasing Services
Corporation dates July 6, 1999 (10.22)(12)
10.23 Amendment to Lease Schedule #48500-03 between Firstar Leasing Services
Corporation, Amendment 3 dated (10.23)(5)
10.25 Shared Savings Plan between Wisconsin, Power & Light Company and The
Company dated December 20, 1999 (10.25)(5)
10.26 Lease Agreement between Glasstite, Inc. and Penda Glasstite dated
October 29, 1999 (10.26)(5)
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges
(5)
21.1 Subsidiaries of the Registrant (5)
27.1 Financial Data Schedule - For SEC use only (5)
(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.
41
<PAGE> 44
(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 10-Q, dated May
8, 1996.
(8) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-K, dated
March 24, 1998.
(9) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q, dated
July 23, 1998.
(10) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-K dated
March 9, 1999.
(11) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q, dated
April 19, 1999.
(12) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on 10-Q, dated July 29,
1999.
* Indicates a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Annual Report on Form 10-K.
42
<PAGE> 45
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 27, 2000 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 27, 2000
- ------------------------------------ and Director
Jack L. Thompson
/s/ EARL W. POWELL Chairman of the Board March 27, 2000
- ------------------------------------
Earl W. Powell
/s/ LEO E. WANER Vice President - Chief Financial March 27, 2000
- ------------------------------------ Officer (Principal Financial and
Leo E. Waner Accounting Officer)
/s/ PHILLIP T. GEORGE, M.D. Director March 27, 2000
- ------------------------------------
Phillip T. George, M.D.
/s/ DAVID S.TIMSON Director March 27, 2000
- ------------------------------------
David S. Timson
/s/ TROY D.TEMPLETON Director March 27, 2000
- ------------------------------------
Troy D. Templeton
/s/ L.J. SCHOENWETTER Director March 27, 2000
- ------------------------------------
L.J. Schoenwetter
/s/ THOMAS J. SMITH Director March 27, 2000
- ------------------------------------
Thomas J. Smith
</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.
43
<PAGE> 46
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.
44
<PAGE> 47
EXHIBIT INDEX
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 (4.1)(1)
<PAGE> 48
4.2 Registration Rights Agreement dated as of March 18, 1994, between the
Registrant and Bear, Stearns & Co. Inc. (4.2)(1)
4.3 Indenture, dated as of March 18, 1994, between the Registrant and
American Stock Transfer & Trust Company (4.3)(1)
4.4 Supplemental Indenture, dated as of July 14, 1995, between Tri-Glas
Corporation and American Stock Transfer & Trust Company, as Trustee.
(4.4)(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. (10.8)(8)
10.9* Employment Agreement between the Registrant and Leo E. Waner dated July
1, 1997. (10.9)(8)
10.10 Settlement Agreement, dated December 23, 1997, between the Registrant
and Daniel E. Braun. (10.10)(8)
10.11 Stock Transfer and Option Termination Agreement dated December 23, 1997
between the Registrant and Daniel E Braun. (10.11)(8)
10.12 Form of Shareholder's Agreement between Registrant and certain
executive officers and certain employees. (10.12)(8)
10.13* Form of Management Stock Option Plan and Agreement between Registrant
and certain executive officers. (10.13)(8)
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)
<PAGE> 49
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)(8)
10.16* Form of Stock Option Substitution Agreement entered into between the
Registrant and certain executives'. (10.16)(8)
10.17 Master Lease between Penda Corporation and Firstar Equipment Finance
Corporation dated December 26, 1995. (10.17)(9)
10.19 Amendment to Lease Schedule #9001 between Firstar Leasing Services
Corporation and Penda Corporation dated March 26, 1999 (10.19)(11)
10.20 Lease Schedule #48500-02 between Firstar Leasing Services Corporation
and Penda Corporation date April 5, 1999 (10.20)(11)
10.21 Amendment No. 2 to the Amended and Restated Credit Agreement between
Banque Nationale de Paris and Penda Corporation dated March 31, 1999
(10.21)(11)
10.22 Amendment to Lease Schedule #48500-032 between Firstar Leasing Services
Corporation dates July 6, 1999 (10.22)(12)
10.23 Amendment to Lease Schedule #48500-03 between Firstar Leasing Services
Corporation, Amendment 3 dated (10.23)(5)
10.25 Shared Savings Plan between Wisconsin, Power & Light Company and The
Company dated December 20, 1999 (10.25)(5)
10.26 Lease Agreement between Glasstite, Inc. and Penda Glasstite dated
October 29, 1999 (10.26)(5)
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges
(5)
21.1 Subsidiaries of the Registrant (5)
27.1 Financial Data Schedule - For SEC use only (5)
(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.
<PAGE> 50
(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 10-Q, dated May
8, 1996.
(8) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-K, dated
March 24, 1998.
(9) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q, dated
July 23, 1998.
(10) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-K dated
March 9, 1999.
(11) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on Form 10-Q, dated
April 19, 1999.
(12) Incorporated by reference to an exhibit shown in the preceding
parentheses and filed with the Company's Report on 10-Q, dated July 29,
1999.
* Indicates a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Annual Report on Form 10-K.
<PAGE> 1
EXHIBIT 10.23
AMENDMENT NO. 3 TO THE
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 27, 1999
AMENDMENT NO. 3 TO THE AMENDED AND RESTATED CREDIT AGREEMENT
among Penda Corporation, a Florida corporation (the "Borrower"), the Lenders and
Banque Nationale de Paris, as Agent (the "Agent") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Agent have entered into
an Amended and Restated Credit Agreement dated as of July 14, 1995 (as amended,
supplemented or otherwise modified through the date hereof, the "Credit
Agreement"). Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified in the Credit Agreement.
(2) The Borrower and the Required Lenders have agreed to
amend the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 2, hereby amended by inserting a
new subsection 5.02(b)(i)(E) to read as follows:
"(E) other unsecured Debt in an aggregate amount not to exceed
$1,200,000 at any time outstanding;".
SECTION 2. Conditions of Effectiveness. This Amendment shall
become effective on and as of the first date (the "Effective Date") on which the
Agent shall have received, in form and substance satisfactory to the Agent and
in sufficient copies for each Lender Party, counterparts of this Amendment
executed by the Borrower and all the Lenders or, as to any of the Lenders,
advice satisfactory to the Agent that such Lender has executed this Amendment
and the consent attached hereto executed by Tri-Glas.
SECTION 3. Representations and Warranties of the Borrower.
(a) The Borrower represents and warrants as follows:
(i) Each of the Borrower and Tri-Glas is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.
(ii) The execution, delivery and performance by the Borrower
of this Amendment and by Tri-Glas of the consent attached hereto and
the consummation of the transactions contemplated hereby, is within its
corporate powers, has been duly authorized by all necessary corporate
action and does not contravene (1) its charter or by-laws; or (2) any
law or any contractual restriction binding on or affecting it.
45
<PAGE> 2
(iii) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery,
recordation, filing or performance by the Borrower of this Amendment
and by Tri-Glas of the consent attached hereto.
(iv) This Amendment has been duly executed and delivered by
the Borrower. This Amendment is the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with its terms.
(v) The consent attached hereto has been duly executed and
delivered by Tri-Glas. The consent attached hereto is the legal, valid
and binding obligations of Tri-Glas, enforceable against Tri-Glas in
accordance with its terms.
(b) The Borrower hereby repeats the representations and
warranties contained in each Loan Document as if made on the date of
this Amendment, other than any such representations or warranties that,
by their terms, refer to a specific date other than the date of this
Amendment, in which case as of such specific date.
SECTION 4. Reference to and Effect on the Loan Documents. (a)
On and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in each of the other Loan
Documents to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement, as amended by this Amendment.
(b) The Credit Agreement and each of the other Loan Documents, as
specifically amended by this Amendment, 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, in each case as
amended by this Amendment.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Lender or the Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
SECTION 5. Costs, Expenses. The Borrower agrees to pay on
demand all costs and expenses of the Agent in connection with the preparation,
execution, delivery and administration, modification and amendment of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and expenses of counsel for
the Agent) in accordance with the terms of Section 8.04 of the Credit Agreement.
SECTION 6. Execution in Counterparts. This Amendment 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 but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
46
<PAGE> 3
SECTION 7. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
47
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
PENDA CORPORATION
By
----------------------------
Title:
BANQUE NATIONAL DE PARIS,
as Agent and as Lender
By
----------------------------
Title:
By
----------------------------
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By
----------------------------
Title:
CONSENT
Dated as of December 27, 1999
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
party to the Credit Agreement referred to in the foregoing Amendment, hereby
consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, 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 Amendment,
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 Amendment, and (b) the Collateral Documents to
which such Grantor is a party and all of the Collateral described therein do,
and shall continue to, secure the payment of all of the Secured Obligations (in
each case, as defined therein).
TRI-GLAS CORPORATION
By
----------------------------
Title:
48
<PAGE> 1
EXHIBIT 10.25
SHARED SAVINGS
THIS ENERGY SERVICE AGREEMENT (hereinafter, "Agreement") is made and entered
into as of The 20 day of December, 1999, by and between, WISCONSIN POWER & LIGHT
COMPANY, having its principal offices at P.O. Box 8880, Madison, Wisconsin
53704-8880 (hereinafter, "Utility"), and PENDA CORPORATION, a FLORIDA
corporation having its principal offices at Portage, Wisconsin (hereinafter,
"Client"), relating to property owned by Client at 2400 WISCONSIN AVE., PORTAGE,
Wisconsin, 53901 (hereinafter, "Premises", which are more particularly described
in Part I of Schedule A attached hereto).
IT IS AGREED AS FOLLOWS:
SECTION 1. PURPOSES OF AGREEMENT
The purposes of this Agreement and the actions of the parties in pursuit thereof
are:
a. To accurately identify and agree upon certain baseline
information concerning the energy consumption characteristics
of the Premises (hereinafter, "Baseline Energy Consumption");
b. To designate certain equipment (hereinafter, "Equipment")
which, installed on the Premises in lieu of Equipment
formerly used by Client, is estimated by Utility to reduce
Client's annual energy consumption below Baseline Energy
Consumption ("Energy Savings") thereby providing an estimated
level of savings to Client; and
C. To set forth the obligation of the Utility to fund the
acquisition and installation of the Equipment in exchange for
the promise by client to share a portion of the value of the
Energy Savings ("Shared Savings") with Utility by paying such
amount to Utility along with payment of Client's regular bill
for utility service.
SECTION 2. BASELINE ENERGY CONSUMPTION
Client and Utility have to their mutual satisfaction analyzed the historic and
present operating practices of Client (hereinafter, "Baseline Operating
Practices") and the corresponding energy consumption characteristics of the
Premises and agree that the Baseline Energy Consumption on all (or a specified
portion, as the case may be) of the Premises for the purposes of this Agreement
shall be as set forth in Part 11 of Schedule A. The parties intend that such
Baseline Energy Consumption shall be conclusive and, except for material error
or misrepresentation with respect to the Baseline Operating Practices, each
hereby waives any objections to same, whether now existing or hereafter arising.
SECTION 3. EQUIPMENT PURCHASE, INSTALLATION, OPERATION AND MAINTENANCE
Within a reasonable period of time after the execution of this Agreement:
a. Client has purchased the Equipment specified in Part I of
Schedule B hereof and arranged for installation of the
Equipment at the Premises.
b. Client shall be responsible for obtaining all governmental
permits, consents and authorizations necessary for
installation of the Equipment, and Utility shall use its best
efforts to assist Client in obtaining such permits, consents
and authorizations.
49
<PAGE> 2
As part of the initial installation and continuing thereafter, Client shall
provide Utility with mutually satisfactory access to the Premises for the
inspection of the Equipment, and with free and reasonable access to lights,
heat, power, water, and the like necessary for such inspection and any
associated submetering.
Client shall have exclusive responsibility for the operation and maintenance of
the Equipment in accordance with all manufacturer specifications and
recommendations and with such additional standards and procedures as may be set
forth in Part 11 of Schedule B. All costs and expenses incurred in connection
with the operation and maintenance of the Equipment shall be the sole
responsibility of Client. Client shall be solely responsible for enforcing any
manufacturer's warranties which accompany the Equipment and shall enforce such
warranties on its own or upon Utility's request.
SECTION 4. RISK OF LOSS
Client hereby assumes all risks of loss or damage to the Equipment while such
Equipment is in their care, custody or control. Client shall notify Utility
within 10 days of any loss or damage to the Equipment and shall keep Utility
informed of all developments regarding insurance rights and recoveries. Should
the Equipment be deemed a total loss or Client decides not to complete repairs,
Client shall to pay to Utility the Termination Value specified in Schedule C
hereto.
SECTION 5. INSURANCE
The Client shall provide, maintain, and pay for commercial general liability
insurance with limits of at least $1,000,000 per occurrence so as to comply with
Section 14. Indemnification. Client shall also provide, maintain, and pay for
all risk property insurance with a minimum limit of the Termination Value of
this Agreement as specified in Schedule C hereto. In the event of any loss or
damage to the Equipment, the proceeds of insurance covering the Equipment shall
be applied toward the replacement, restoration, or repair of the Equipment in
accordance with Section 4. Risk of Loss. This insurance must be in effect from
the time that the first item of Equipment is delivered to the Client until the
end of the term. Each policy must contain the insurer's agreement to give thirty
(30) days written notice to Utility before cancellation or non-renewal of the
required insurance.
The Client agrees to provide certificates of insurance as evidence of the
required coverage to Utility. Failure of Utility to enforce the minimum
insurance requirements listed above shall not relieve Client of responsibility
for maintaining these coverages.
SECTION 6. DISCLAIMER OF WARRANTIES
UTILITY MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, CONCERNING
THE CONDITION OR PERFORMANCE OF THE EQUIPMENT, AND SPECIFICALLY DISCLAIMS ANY
AND ALL SUCH REPRESENTATIONS AND WARRANTIES, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
SECTION 7. COMMENCEMENT DATE AND TERM
The "Commencement Date" shall be the first day of the first Billing Period
beginning after the date of this Agreement. The "Term" of this Agreement shall
begin on the date set forth on page one hereof and shall run continuously from
such date (unless this Agreement shall have been terminated by the parties at an
earlier date pursuant to the terms hereof) until the fifth (5th) anniversary of
the Commencement Date.
50
<PAGE> 3
"Billing Period" shall mean any period of approximately one month's duration
coincident with the normal billing cycle between Utility and Client, and "Annual
Billing Period" shall mean a series of twelve (12) consecutive Billing Periods,
the first of which shall begin with the Billing Period which first begins on or
after the Commencement Date.
SECTION 8. COMPENSATION AND BILLING
Client agrees to pay Utility an amount equal to seventeen thousand one hundred
sixty dollars ( $17,160) in each Billing Period during the Term of this
Agreement following the Commencement Date, for a total of sixty (60) billing
periods. The foregoing amount (the "Shared Savings") reflects a sharing by
Client of the value of the Energy Savings estimated to be realized from the
operation and use of the Equipment at the Premises as outlined in Schedule D
with the present energy charge in effect under Utility's applicable Rate
Schedule. The foregoing amount (the "Bright Ideas" labeled on bill) shall appear
as a separate line item on Client's bill from Utility during each Billing
Period, and shall be payable by Client upon the same terms and conditions as are
applicable to the normal utility bill. The foregoing amount shall not vary due
to change in Utility's rates, returns, or charges authorized by the Public
Service Commission of Wisconsin. The foregoing amount is based upon an estimated
cost for purchase and installation of the Equipment and will be modified by
amendment to this Agreement to reflect the actual cost of such purchase and
installation upon completion thereof.
The above monthly amount of seventeen thousand one hundred
sixty dollars ($17,160) represents the principal amount of the
Shared Savings plus simple interest at 3.0% per annum in
arrears. The principal amount of the Shared Savings may be
prepaid in whole or in part at any time without penalty. If the
principal amount of the Shared Savings is prepaid in part, then
the monthly amount to be paid will be recalculated over the
balance of the Term of this Agreement.
SECTION 9. CONDITIONS BEYOND CONTROL OF UTILITY
If Utility shall be unable to carry out any of its obligations under this
Agreement due to events beyond its control, including, without limitation, acts
of God, governmental or judicial authority, insurrections, riots, labor
disputes, labor or material shortages, fires, explosions, or floods, this
Agreement shall remain in effect but Utility's obligations shall be suspended
until the uncontrollable event terminates.
SECTION 10. REMEDIES UPON DEFAULT BY CLIENT
a. Utility's Remedies. In the event Client fails to pay Utility
its compensation when due, or any other Event of Default by
Client occurs, (defined as a failure by Client to timely
perform any of its obligations under this Agreement), Utility
may, without an election of remedies:
1) disconnect all electric service to the Premises in
accordance with the rules and regulations of the
Utility as approved by the Public Service Commission
of Wisconsin and in effect at the time of breach;
and
2) declare the Termination Value specified in Schedule
C immediately due and payable from Client and
exercise all remedies available at law or at equity
or
51
<PAGE> 4
other appropriate proceedings including bringing an
action or actions from time to time for recovery of
amounts due and unpaid by Client, and/or for damages
which shall include all costs and expenses
reasonably incurred in exercise of its remedy
(including reasonable attorney's fees), and/or for
specific performance; or
3) without recourse to legal process, terminate this
Agreement by delivery of a notice declaring
termination, whereupon Utility may enter the
Premises and dismantle and/or remove the Equipment
from the Premises, without liability in any suit,
action or other proceeding to Client or Lessor of
Premises, if any, on account of such actions.
b. Liquidated Damages. In the event Utility terminates this
Agreement due to an Event of Default, at Utility's request
Client shall pay to Utility, as liquidated damages, the
Termination Value set forth in Schedule C, plus all costs and
expenses reasonably incurred in exercise of its remedy,
including reasonable attorney's fees.
C. Termination. Utility may terminate this Agreement and declare
the Termination Value specified in Schedule C immediately due
and payable should:
1) Client cease use of the Equipment or the conduct of
commercial operations at the premises, or
2) any creditor of Client commence legal proceedings
against Client involving any debt or obligation of
Client for which the Equipment is pledged as
collateral, or
3) Client commence or have commenced against it any
proceedings in bankruptcy, receivership or
insolvency or make any assignment for the benefit of
its creditors, or
4) Client cease to take or receive electric and/or
natural gas service from Utility.
SECTION 11. REMEDIES UPON DEFAULT BY UTILITY
In the event of material default by Utility, Client shall have the following
remedy:
a. Terminate this Agreement by delivery of a Notice declaring
termination, and paying the Termination Value indicated in
Schedule C (less the cost of any future maintenance and
energy related services included therein, as agreed to by
the parties), whereupon Utility shall have no further
rights, obligations or claims under this Agreement.
52
<PAGE> 5
Client may terminate this agreement by paying the Termination Value indicated
in Schedule C.
SECTION 12. ARBITRATION
Except as otherwise provided herein, any dispute, controversy or claim arising
out of or in connection with or relating to this Agreement, upon the request of
either Client or Utility, shall be submitted to and settled by arbitration at
the locality where the Premises are situated in conformance with rules of the
American Arbitration Association then in effect. Any award rendered shall be
final and conclusive upon the parties and a judgment thereon may be entered in a
court of any forum, state or federal, having jurisdiction. The expenses of the
arbitration shall be borne equally by the parties to the arbitration, provided
that each party shall pay for and bear the cost of its own experts, evidence and
counsel. This Section 12 does not apply and shall not limit Utility's rights to
seek redress in any forum in the event Utility seeks to invoke any of the
provisions of Section 10 herein.
SECTION 13. ASSIGNMENT
Utility may (a) transfer or assign all or any part of its rights and obligations
herein to any party, (b) pledge its rights hereunder to its creditors, or (c)
utilize contractors and subcontractors, provided that any assignee or transferee
agrees to honor the terms of this Agreement. Unless otherwise approved in
writing, Client may not transfer or assign this Agreement and its rights and
obligations herein. If such assignment is permitted, Client shall condition
assignment on assignee assuming in writing all of Client's rights and
obligations under this Agreement.
SECTION 14. INDEMNIFICATION
Client agrees to indemnify, defend and hold Utility harmless from any and all
claims, actions, costs, expenses, damages and liabilities, including reasonable
attorney's fees, and claims of third parties arising out of, connected with or
resulting from Client's operation, installation, use, maintenance or repair of
the Equipment, or from the negligence or misconduct of its employees or other
agents in connection with their activities within the scope of this Agreement.
However, Client shall not be obligated to indemnify Utility against claims,
damages, expenses or liabilities solely to the extent such claims, damages,
expenses or liabilities directly result from the negligence or willful
misconduct of Utility or its employees or agents. The duty to indemnify will
continue in full force and effect notwithstanding the expiration or early
termination of this Agreement with respect to any claims based on facts or
conditions which occurred prior to termination.
SECTION 15. MISCELLANEOUS
a. This Agreement shall be governed by and
interpreted pursuant to the laws of the state of
Wisconsin without regard to its conflict of law's
provisions.
b. This Agreement constitutes the entire
understanding and agreement between the parties, and
supersedes any and all prior representations and
agreements, whether written or oral between the
parties as to the subject matter hereof. No wavier,
alteration, consent or modification of any of the
provisions of this Agreement shall be binding unless
in writing and signed by a duly authorized
representative of all parties hereto bound.
53
<PAGE> 6
IN WITNESS WHEREOF and intending to be legally bound, the parties hereto
subscribe their names to this instrument on the date first above written.
ATTEST: WISCONSIN POWER & LIGHT COMPANY
/s/ Mark Mierdirk By /s/ Chuck Ashe
------------------------- ------------------------------
Title Account Manager
ATTEST: PENDA CORPORATION
/s/ Samuel Mostkoff By /s/ Leo E. Waner
------------------------- ------------------------------
Title VP & CFO
---------------------------
54
<PAGE> 7
SCHEDULE A
PENDA CORPORATION
DESCRIPTION OF PREMISES
PART I
DESCRIPTION
CITY OF PORTAGE PARCELS 2521 & 2536; COUNTY TAX ID #11271 CP02521.8 LOT 2 OF CS
V.5P. 15331161 R331-303 R471-440; COUNTY TAX ID # 11271 CP02536 PRT OL 153 &
144, LOT 1 CS V.5P. 115 & 1123 EASE EXC R67-322 R 262 - 702
PART II
ENERGY CONSUMPTION CHARACTERISTICS
Historical Energy Consumption and Facility Operation
Floor area of facility: 300,000 s.f.
<TABLE>
<CAPTION>
PERIOD #1 PERIOD #2
01/01/98 - 12/31/98
<S> <C> <C>
ELECTRIC
AVERAGE DEMAND (KW) 6,746 0
INTERRUPT DEMAND (KW) 4,500 0
ON-PEAK ENERGY (kWh) 16,956,578 0
OFF-PEAK ENERGY (kWh) 23,574,622 0
NATURAL GAS
ENERGY (THERMS) 28,000 0
OTHER FUELS
OTHER FUEL 1 0 0
OTHER FUEL 2 0 0
FACILITY OPERATION
HOURS OF OPERATION 8,500 0
HEATING DEGREE DAYS 0 0
% OCCUPANCY 0 0
PRODUCTION (UNITS/YEAR) 0 0
PRODUCTION (UNITS/YEAR) 0 0
PRODUCTION (UNITS/YEAR) 0 0
</TABLE>
COMMENTS:
55
<PAGE> 8
SCHEDULE B
PENDA CORPORATION
PART I
EQUIPMENT
<TABLE>
<CAPTION>
Item Description Manufacturer Model Number Quantity
<S> <C> <C> <C> <C>
1. #12 THERMOFORMER BROWM S/N 13757. R-244 1
2. #13 THERMOFORMER BROWN S/N 13878 R-244-E 1
3. #4 THERMOFORMER BROWN S/N 11164 R-244 1
</TABLE>
PART 11
ADDITIONAL STANDARDS AND PROCEDURES
56
<PAGE> 9
SCHEDULE C
PENDA CORPORATION
TERMINATION VALUES
<TABLE>
<CAPTION>
Billing Billing Billing
Period Value Period Value Period Value
<S> <C> <C> <C> <C> <C>
1 955,000.00 21 652,426.68 41 334,359.94
2 940,227.50 22 636,897.75 42 318,035.84
3 925,418.07 23 621,329.99 43 301,670.93
4 910,571.62 24 605,723.31 44 285,265.11
5 895,688.05 25 590,077.62 45 268,818.27
6 880,767.27 26 574,392.81 46 252,330.32
7 865,809.19 27 558,668.79 47 235,801.15
8 850,813.71 28 542,905.46 48 219,230.65
9 835,780.74 29 527,102.72 49 202,618.73
10 820,710.19 30 511,260.48 50 185,965.28
11 805,601.97 31 495,378.63 51 169,270.19
12 790,455.97 32 479,457.08 52 152,533.37
13 775,272.11 33 463,495.72 53 135,754.70
14 760,050.29 34 447,494.46 54 118,934.09
15 744,790.42 35 431,453.20 55 102,071.43
16 729,492.40 36 415,371.83 56 85,166.61
17 714,156.13 37 399,250.26 57 68,219.53
18 698,781.52 38 383,088.39 58 51,230.08
19 683,368.47 39 366,886.11 59 34,198.16
20 667,916.89 40 350,643.33 60 17,160.00
</TABLE>
57
<PAGE> 10
SCHEDULE D
PENDA CORPORATION
CONTRACT: THERMOFORMER 12, 13, 4
This contract includes the following projects:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CUSTOMER's GROSS ANNUAL Project
SAVINGS Cost ($)
- -------------------------------------------------------------------------------------------
PROJECT Bill KW kWh Therms $
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EFFICIENT THERMOFORMER 12 178.00 1,260,193 28,578 73,399 911,000
- ----------------------------------------------------------------------------------------------------------
EFFICIENT THERMOFORMER 13 178.00 1,260,193 28,578 73,399 911,000
- ----------------------------------------------------------------------------------------------------------
THERMOFORMER 4 ELE. UPGRAD 80.00 120,000 0 12,435 12,000
- ----------------------------------------------------------------------------------------------------------
TOTAL 436.00 2,640,386 57,156 159,233 1,834,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 11
CONSENT
Dated as of December 27, 1999
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
party to the Credit Agreement referred to in the foregoing Amendment, hereby
consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, 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 Amendment,
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 Amendment, and (b) the Collateral Documents to
which such Grantor is a party and all of the Collateral described therein do,
and shall continue to, secure the payment of all of the Secured Obligations
(in each case, as defined therein).
TRI-GLAS CORPORATION
By /s/ Samuel Mostkoff
-------------------
Title: Vice President
--------------
<PAGE> 1
EXHIBIT 10.26
REAL ESTATE LEASE AND PURCHASE AGREEMENT
THIS AGREEMENT, is made this 29th day of October, 1999 by and between
GLASSTITE INC., a Minnesota corporation ("Landlord"), RAVEN INDUSTRIES, INC., a
South Dakota corporation (the "Shareholder"), as Landlord's guarantor, PENDA
GLASSTITE, INC., a Florida Corporation ("Tenant") and guaranteed by PENDA
CORPORATION, a Florida corporation (the "Parent").
PRELIMINARY STATEMENT:
The Tenant and the Landlord are parties to an Asset Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), pursuant to
which the Tenant is purchasing from the Landlord substantially all of the assets
(and assuming certain of the liabilities) of the Landlord in exchange for cash.
This Agreement is executed and delivered by the Tenant and the Landlord pursuant
to the Purchase Agreement. Certain capitalized terms used in this Agreement are
defined in Section 1 hereof. Capitalized terms used but not otherwise defined
herein shall have the respective meanings given such terms in the Purchase
Agreement.
AGREEMENT:
In consideration of the premises and the respective mutual
agreements, covenants, representations and warranties herein contained, the
parties hereto agree as follows:
1. Certain Defined Terms. As used in this Agreement
the following terms shall have the following meanings:
"Closing " shall have the meaning set forth in Section 20(a).
"Environmental Remediation Release Date" means three years
from the date hereof provided however that the Environmental Remediation Release
Date shall be extended if any remedial measure or enforcement action relating to
conditions that existed as of the Closing Date, including the MPCA NOV, is on
going. If the Environmental Remediation Release Date extends beyond 3 years from
the date hereof, then the Environmental Remediation Release Date shall not occur
until the MPCA issues a No Action Letter or Certificate of Completion or accepts
Landlord's clean closure certification (without any post-closure obligations) or
other applicable regulatory mechanism documenting that no additional
environmental investigation, remediation, closure, post-closure, or clean-up is
required at the Dunnell Minnesota facilities related to activities and releases
including the MPCA NOV at the Dunnell, Minnesota facilities prior to the Closing
Date; provided however, if EPA has exercised its oversight authority over the
Premises, then the Environmental Remediation Release Date shall not occur until
the EPA has issued a No Action Letter or Certificate of Completion or accepts
Landlord clean closure certification (without any post-closure obligations) or
other applicable regulatory mechanism documenting that no additional
environmental investigation, remediation, closure, post-closure, or clean-up is
required at the Dunnell Minnesota facilities related to activities and releases
including the MPCA NOV at the Dunnell Minnesota facilities prior to the date
hereof. The Environmental Remediation Release Date shall occur prior to three
years after the date hereof if the MPCA issues a No Action Letter or Certificate
of Completion or accepts Landlord's clean closure certification (without any
post-closure obligations) or other applicable regulatory mechanism documenting
that no additional environmental investigation, remediation, closure,
post-closure, or clean-up is required at the Dunnell Minnesota facilities
related to activities and releases including the MPCA NOV at the Dunnell
Minnesota facilities prior to the date hereof and EPA has not exercised its
oversight authority over the Premises.
"Premises" shall have the meaning set forth in Section 2.
"Real Estate Closing Date" shall have the meaning set forth in
Section 19(a).
60
<PAGE> 2
2. Lease of Premises. Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord in its "As-Is" condition the real estate
legally described on Exhibit A attached hereto, and commonly known as 600
Highway 4, Dunnell, Minnesota 56127 and the Truck Repair Facility, situated in
the County of Martin and State of Minnesota and commonly known as 130 East
Wenberg, Dunnell, Minnesota.
Together with any and all improvements presently located on said real estate,
all of which real estate and other property are hereinafter called the
"Premises".
3. Term. The term of this Lease shall begin on the date
of this Agreement and shall end on the Real Estate Closing Date.
4. Payment of Rent. Tenant agrees to pay Landlord annual rent
of one ($1.00) dollar. The first such installment shall be due and payable on
the date of this Agreement and a like sum shall be due and payable on the 1st
day of each succeeding calendar year during the term of this Agreement.
5. Net Lease. This is an absolutely net lease to Landlord. It
is the intent of the parties hereto that Tenant shall pay all costs and expenses
relating to the Premises and the business carried on therein. Any amount or
obligations herein relating to the Premises which is not expressly declared to
be that of Landlord shall be deemed to be an obligation of Tenant to be
performed by Tenant at Tenant's expense. All sums payable hereunder by Tenant
shall be paid without notice, demand, set-off, counterclaim, abatement,
suspension, deduction or defense.
6. Taxes, Assessments and Utilities. Tenant agrees to pay all
taxes and assessments that may be levied against the Premises during the term of
this Agreement and to deliver proof of payment to the Landlord, upon written
request. Tenant agrees to pay all charges for public utilities services
(electricity, gas, telephone, water, and sewer) to the Premises during the term
of this Agreement.
7. Insurance. Tenant shall maintain, at its sole expense,
insurance on the Premises, which policy or policies shall include the following
coverages under the following terms and conditions:
(a) Property. All-risk policy extending coverage against loss,
damage or destruction by fire or other casualty, including theft, vandalism and
and malicious mischief, boiler explosion (if there is a boiler on the Premises),
sprinkler damage, all matters covered by a standard extended coverage
endorsement and such other risks as Landlord may reasonably require, insuring
the Premises for not less than its full insurable value on a replacement cost
basis. Landlord shall be named as an additional insured.
(b) Liability. Comprehensive general liability insurance,
insuring against, without limitation, any liability arising out of the
ownership, maintenance, repair, condition or operation of the Premises or
adjoining ways, parking areas, sidewalks or other portions of the Premises. The
establishment of insurance requirements shall not limit the liability of Tenant
under this Agreement.
(c) Conditions. The insurance policies shall: (i) be obtained
by Tenant under valid and enforceable standard form policies issued by
responsible insurance companies with a current A.M. Best rating of at least
A+VII licensed to do business in the State of Minnesota; (ii) provide that such
insurance cannot be unreasonably canceled, invalidated or suspended on account
of the conduct of Tenant, its officers, directors, employees or agents; (iii)
provide that any "no other insurance" clause in the insurance policy shall
exclude any policies of insurance maintained by Landlord and that the insurance
policy shall not be brought into contribution with the insurance maintained by
Landlord; (iv) provide that the policy of insurance shall not be terminated,
canceled or substantially modified without at least 30 days prior written notice
to Landlord; (v) as to the liability insurance, name Landlord as additional
insured; (vi) as to the property policy, Landlord shall be named as additional
insured; and (vii) as to the casualty policy, provide for a waiver of
subrogation by the insurer as to claims against Landlord, its officers,
directors, employees and agents.
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<PAGE> 3
(d) Certificates. Tenant shall deliver to Landlord
certificates of insurance, making specific reference to the Premises, evidencing
the existence and amounts of the policies of insurance required pursuant to this
section. Any failure of Tenant to obtain, maintain, or provide copies of
certificates of any insurance required hereunder shall constitute a material and
continuing breach of this Agreement. Tenant shall give notice to its insurance
carrier that a waiver of liability and subrogation is contained in this
Agreement.
8. Landlord's Access to Premises. Tenant agrees that Landlord
or its agents shall have the right to enter the Premises at any reasonable time
in order to satisfy Landlord's obligations under the MPCA NOV.
9. Use of Premises by Tenant. Tenant agrees that it shall not
use or occupy nor permit the Premises or any part thereof to be used or occupied
in any unlawful manner or for any unlawful purpose.
10. Encumbrances. Landlord represents and warrants that as of
the date hereof, the Premises is free and clear of any encumbrances, except for
those set forth on Exhibit B, attached hereto. Landlord covenants and agrees not
to cause or create any lien, mortgage or other encumbrance on the Premises, by
act or omission, during the term of this Agreement
11. Quiet Enjoyment of Premises by Tenant. Subject to all laws
and ordinances now or hereafter in force regarding zoning and condemnation,
Landlord represents that it has the full right, power, and authority to enter
into this Agreement for the term herein granted and that the Premises may be
used by Tenant during the entire duration of said term for the purposes herein
set forth. Tenant, upon the full and faithful performance of all the conditions,
covenants, and agreements herein contained, shall at all times during the term
hereof peaceably and quietly enjoy the use of the Premises without any
disturbance from Landlord, subject, however to any rights which may be reserved
to Landlord herein and to all encumbrances to which this Agreement may be
subordinate, if any.
12. Maintenance and Repair of Premises. Subject to Landlord's
obligations under the MPCA NOV, Tenant agrees to maintain and keep all portions
of the Premises in good order and repair. Such maintenance and repairs shall be
made at Tenant's sole expense.
13. Alteration or Improvement of Premises. Landlord agrees
that alterations, additions, or improvements, to the Premises may be made by
Tenant without the prior consent of Landlord. Tenant shall pay for such
alterations, additions, or improvements to the Premises and ensure that no
liens, claims, or demands of any nature attach to Landlord , Landlord's interest
in the Premises and/or the Premises. Any alteration, addition, or improvement
made by Tenant shall be the property of the Tenant.
14. Environmental Matters. "Environmental Laws" means any or
all of the laws and regulations now in effect or hereafter enacted by any
governmental authority or other regulatory body having jurisdiction over the
Premises that deal with the regulation or protection of the environment,
including ambient air, ground water, surface water and land use, including
sub-strata land. Tenant shall comply with all Environmental Laws affecting the
Premises during the Term. Provided however, that any liability of the Tenant to
Landlord related to Environmental Laws shall be subject to the limits set forth
in the Purchase Agreement.
15. Default. It is expressly agreed that if Tenant shall not
fully and faithfully perform all of its material obligations hereunder, or if
the Tenant shall be adjudicated a bankrupt or insolvent according to law or if a
receiver is appointed for Tenant or if Tenant shall make an assignment for the
benefit of creditors, then Tenant shall be deemed to be in default hereunder. In
such event, Landlord may pay such amounts Tenant is obligated to pay and invoice
Tenant for such amounts plus interest at the rate of 10% per annum. Tenant
hereby pledges and assigns to Landlord all improvements, fixtures, furnishings,
equipment, and other property of Tenant which may be placed on or become a part
of the Premises as security for the payment of all obligations of Tenant under
this Agreement, and the lien created by such pledge and assignment shall be in
addition to all other rights and remedies to which Landlord may otherwise be
entitled.
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<PAGE> 4
16. Conveyance, Assignment, or Subletting. Tenant may not
sublease the Premises or any part thereof or assign this Agreement or any part
hereof unless Tenant has obtained the prior consent of Landlord, which consent
shall not be unreasonably withheld provided, that any such assignee assumes all
of Tenant's obligations under this Agreement, and provided that this Agreement
shall be assignable by any party to a successor who acquires substantially all
of the assets of that party. Landlord shall not convey or transfer ownership of
the Premises or assign or transfer this Agreement or any part hereof.
17. Conveyance of Premises at End of Term. Upon the
termination or expiration of this Agreement, and upon satisfaction of the
conditions to the obligation to close set forth below, Landlord agrees to convey
the Premises to Tenant and Tenant agrees to accept such conveyance from Landlord
as set forth below.
18. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Tenant. The obligation of
the Tenant to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the Environmental Remediation Release Date has occurred;
(ii) there shall not be an injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement, and no action, suit, claim or
proceeding by a third party unaffiliated with Tenant shall be pending before any
Authority which seeks to prohibit or enjoin the consummation of the transactions
contemplated by this Agreement;
(iii) the Premises shall be free and clear of any and all
liens and encumbrances of Landlord, except as set forth on Exhibit B, attached
hereto.
The Tenant may waive any condition specified in this Section if it executes and
delivers a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Landlord. The obligation
of the Landlord to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the Tenant shall have delivered to the Landlord a
certificate to the effect that all currently due and payable real estate taxes
and levied special assessments related to the Premises have been paid;
(ii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement, and no action, suit, claim or
proceeding by a third party unaffiliated with Landlord shall be pending before
any Authority which seeks to prohibit or enjoin the consummation of the
transactions contemplated by this Agreement; and
(iii) the Environmental Remediation Release Date has occurred.
The Landlord may waive any condition specified in this Section if it executes
and delivers a writing so stating at or prior to the Closing.
19. Sale and Purchase of Premises.
(a) Basic Transaction. On the terms and subject to the
conditions set forth in this Agreement, on a date 15 days after the termination
of the Environmental Remediation Release Date or such other
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<PAGE> 5
date as shall be agreed to in writing by the Tenant and the Landlord (the "Real
Estate Closing Date") the Landlord will convey, assign and transfer to the
Tenant, and the Tenant will acquire and accept conveyance of the Premises.
(b) Purchase Price. The aggregate purchase price to be paid by
the Tenant to the Landlord for the conveyance, assignment and transfer to the
Tenant of the Premises shall be One Dollar ($1.00).
20. Closing.
(a) Date and Place of Real Estate Closing. The closing of the
transactions contemplated hereby (the "Closing") will take place at the offices
of Maslon Edelman Borman & Brand, LLP, 3300 Norwest Center, 90 South Seventh
Street, Minneapolis, Minnesota, at 10:00 a.m. (local time) or at such other
place as mutually agreed to by the parties on the Real Estate Closing Date.
Except as otherwise provided herein, all proceedings to be taken and all
documents to be executed at the Closing will be deemed to have been taken,
delivered and executed simultaneously, and no proceeding will be deemed taken
nor documents deemed executed or delivered until all have been taken, delivered
and executed.
(b) Deliveries by Landlord at the Closing. At the Closing, the
Landlord will deliver to the Tenant:
(i) the Warranty Deed for the Premises, duly executed by the
Landlord in the form attached hereto as Exhibit C;
(ii) a copy of the resolution or resolutions duly adopted by
the board of directors of the Landlord authorizing the execution and delivery of
the Warranty Deed;
(iii) a certificate of the Secretary or an Assistant Secretary
of the Landlord as to the incumbency and signatures of the officers of the
Landlord executing the Warranty Deed on behalf of the Landlord;
(iv) a certificate issued by the Secretary of State of the
State of Minnesota as to the change of Landlord's corporate name to "GTH, Inc. "
(v) such other instruments of sale, transfer, and conveyance
as shall be reasonably required by the Tenant.
(c) Deliveries by the Tenant at the Closing. At the Closing,
the Tenant will deliver to the Landlord:
(i) a certificate issued by the Secretary of State of the
Tenant's state of incorporation, as of a recent date, as to the good standing of
the Tenant in such state;
(ii) such other instruments of assumption, assignment and
transfer as shall be reasonably required by the Landlord.
21. Waiver; Entire Agreement; Binding Effect. It is expressly
agreed that no waiver or apparent waiver of failure of Landlord or Tenant to
require strict performance of any condition, covenant, or agreement herein
contained shall constitute a waiver or shall estop Landlord from enforcing such
condition, covenant, or agreement at a later time; it is further expressly
agreed that, other than the Purchase Agreement, this instrument contains the
entire agreement of Landlord and Tenant relating to the Premises, and no other
condition, covenant, or agreement shall be implied at any time; and it is
further expressly agreed by Landlord and Tenant that the conditions, covenants
and agreements herein contained shall apply and inure to and be binding upon
their
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<PAGE> 6
respective heirs, executors, administrators, successors, and assigns and
that the terms "Landlord" and "Tenant" shall embrace all of the parties hereto
irrespective of number or gender.
22. Applicable Law. This Agreement shall be governed by the
laws of the State of Minnesota.
23. Guaranty of Parent. Parent hereby absolutely and
unconditionally guarantees the complete performance of each and every
obligation, covenant, representation and warranty of the Tenant contained in
this Agreement as if such obligations, covenants, representations and warranties
were those of the Parent.
24. Guaranty of Shareholder. Shareholder hereby absolutely and
unconditionally guarantees the complete performance of each and every
obligation, covenant, representation and warranty of the Landlord contained in
this Agreement as if such obligations, covenants, representations and warranties
were those of the Shareholder.
25. Memorandum of Lease. Landlord and Tenant acknowledge and
agree that, simultaneously with the execution of this Lease, they shall execute
and record in the public records a memorandum of this Lease which shall include
reference, among other things, to the term hereof and Tenant's right and
obligation to purchase the Premises.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
LANDLORD TENANT
GLASSTITE INC., PENDA GLASSTITE, INC.,
A Florida corporation
a Minnesota corporation
By: /s/ Ronald M. Moquist By: /s/ Leo E. Waner
Ronald M. Moquist Leo E. Waner
President Vice President and Chief Financial Officer
SHAREHOLDER PARENT
RAVEN INDUSTRIES, INC., PENDA CORPORATION,
a Florida corporation
a South Dakota corporation
By: /s/ Ronald M. Moquist By:/s/ Leo E. Waner
Ronald M. Moquist Leo E. Waner
Executive Vice President Vice President and Chief Financial Officer
65
<PAGE> 1
EXHIBIT 12.1
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
<TABLE>
<CAPTION>
Year Year Year Year Year Mar. 18, Jan. 1,
Ended Ended Ended Ended Ended 1994 - 1994 -
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Mar. 17,
1999 1998 1997 1996 1995 1994 1994
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes $11,877 $ 5,279 $ (6,218) $ 11,969 $ 6,923 $ 9,585 $ 2,857
Interest 8,097
8,896 9,091 9,517 9,607 6,867 115
Interest portion of rental expense
2,353 673 646 714 645 237 24
Amortization of debt expenses
347 473 456 376 376 264 -
---------------------------------------------------------------------------------
Earnings $22,870 $ 15,321 $ 3,975 $ 22,576 $ 17,551 $ 16,953 $ 2,996
---------------------------------------------------------------------------------
Fixed charges $10,797 $ 10,042 $ 10,193 $ 10,607 $ 10,628 $ 7,368 $ 139
---------------------------------------------------------------------------------
Ratio
2.1 1.5 0.4 2.1 1.7 2.3 21.6
---------------------------------------------------------------------------------
</TABLE>
(1) All dollars in thousands.
66
<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-Glas Corporation (Alabama)
67
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 6628
<SECURITIES> 0
<RECEIVABLES> 12,776
<ALLOWANCES> 413
<INVENTORY> 8,332
<CURRENT-ASSETS> 29,583
<PP&E> 40,766
<DEPRECIATION> 15,712
<TOTAL-ASSETS> 147,592
<CURRENT-LIABILITIES> 9,746
<BONDS> 79,162
0
0
<COMMON> 10
<OTHER-SE> 47,701
<TOTAL-LIABILITY-AND-EQUITY> 147,592
<SALES> 95,550
<TOTAL-REVENUES> 95,550
<CGS> 56,346
<TOTAL-COSTS> 56,346
<OTHER-EXPENSES> 20,289
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,097
<INCOME-PRETAX> 11,877
<INCOME-TAX> 4,563
<INCOME-CONTINUING> 7,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,314
<EPS-BASIC> 7.18
<EPS-DILUTED> 7.02
</TABLE>
