-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CLrcUrGzKvGKNvRisvVEzdAx8F7lhrarklgBX94W6h3rSh8bPJ0uv8sbH+3CaDpZ 9zUZH6A0oMY49MmksFmXHg== 0000897069-98-000191.txt : 19980402 0000897069-98-000191.hdr.sgml : 19980402 ACCESSION NUMBER: 0000897069-98-000191 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEIN WERNER CORP CENTRAL INDEX KEY: 0000046613 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 390340430 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-02725 FILM NUMBER: 98584395 BUSINESS ADDRESS: STREET 1: 2120 N PEWAUKEE RD STREET 2: PO BOX 1606 CITY: WAUKESHA STATE: WI ZIP: 53188-2404 BUSINESS PHONE: 4145426611 MAIL ADDRESS: STREET 1: 2120 N PEWWAUKEE ROAD STREET 2: PO BOX 1606 CITY: WAUKESHA STATE: WI ZIP: 53188-2404 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________ Commission File Number 1-2725 HEIN-WERNER CORPORATION (Exact name of registrant as specified in its charter) Wisconsin 39-0340430 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2120 Pewaukee Road 53188 Waukesha, Wisconsin (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (414) 542-6611 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $1 par value American Stock Exchange Common Stock Purchase Rights American Stock Exchange 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 at least 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 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 [ ] Aggregate market value of the voting stock held by non-affiliates of the registrant as of March 27, 1998: $21,816,743 The number of shares outstanding of each registrant's classes of common stock as of March 27, 1998: Common Stock, $1 par value -- 2,908,899 shares DOCUMENTS INCORPORATED BY REFERENCE: Definitive Proxy Statement relating to the 1998 annual meeting of shareholders (Part III of Form 10-K). PART I ITEM 1. BUSINESS GENERAL. Hein-Werner Corporation was incorporated under the laws of the State of Wisconsin on April 16, 1921 and is headquartered in Waukesha, Wisconsin. Throughout the remainder of this Form 10-K, Hein- Werner Corporation and its subsidiaries will be referred to as the "Company" or the "Registrant" except where the context otherwise requires. THE DISPOSITIONS. In order to reposition the Company around its core business, Hein-Werner sold two of its three operating divisions in fiscal 1997: (i) the Great Bend Industries Division ("Great Bend"), located in Great Bend, Kansas, and (ii) the Winona Van Norman Division ("Winona"), located in Winona, Minnesota (together, the sale of Great Bend and Winona are referred to as the "Dispositions"). Great Bend, which was sold for approximately $22.8 million in cash on May 29, 1997, designed, manufactured, and supplied high performance hydraulic cylinders and related hydraulic components to original equipment manufacturers in the construction, transportation, solid waste, utility, and energy industries. Great Bend employed approximately 230 people and accounted for net sales of approximately $7.4 million, $20.2 million, and $20.9 million in fiscal 1997, 1996, and 1995, respectively. Winona, which was sold for cash on August 28, 1997, designed, manufactured and supplied engineering machinery for the automotive aftermarket (primarily for automotive, truck, diesel, and high- performance engine rebuilding) and also manufactured brake lathes and related equipment. Winona employed approximately 59 people and accounted for net sales of $5.6 million, $6.7 million, and $11.0 million in fiscal 1997, 1996, and 1995, respectively. The proceeds from the Dispositions were used to reduce domestic debt levels. Income statement data included herein have been restated to reflect continuing and discontinued operations as a result of the Dispositions. For additional information concerning the Dispositions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Notes to the Consolidated Financial Statements," contained herein. THE BUSINESS. The Company designs, manufactures, markets and sells proprietary collision repair equipment worldwide, with operations centered in North America and in Europe. Collision repair equipment is comprised of vehicle correction equipment for straightening collision damaged cars, vehicle alignment equipment for measuring cars as they are straightened, and heavy duty collision repair equipment for the truck market. The collision repair market is made up of autobody shops and other collision repair facilities owned by automotive dealers, franchisees, and independents. The Company's collision repair equipment is designed to straighten collision-damaged cars and trucks to original manufacturers' specifications. Using computer aided design and patented measuring systems, the Company measures each new model of automobile soon after its introduction and provides to its customers books or magnetic media that detail measurement data covering every model of car over the preceding three model years. When a damaged automobile is to undergo collision repair, an autobody repair technician applies controlled pressure to designated points on the body using chains and hydraulic pumps to restore the body to its designated size and shape utilizing the measurement equipment and specification data published by the Company. The majority of cars are now made with a unibody shell compared to older vehicles built with frames. Unibody vehicles are designed to better absorb the impact of a collision which necessitates more vehicle straightening and a higher degree of accuracy in measuring vehicles as they are straightened. The closer tolerances needed in repairing unibody vehicles requires the use of sophisticated straightening and measurement systems such as those designed, manufactured, and marketed by the Company. The insurance industry and automobile manufacturers encourage the use of such systems. In North America, the Company services the market with its Kansas Jack,/R/ Blackhawk,/R/ Hein-Werner Heavy Duty,/R/ and Hein-Werner SHARK/R/ brands. The Company's strategy is to offer the most complete line of collision repair equipment available in the marketplace at a range of price levels. The product offering is a full range of frame straightening and vehicle alignment equipment for both trucks and automobiles including floor-pull correction systems, rack and bench repair systems, and universal and dedicated vehicle alignment systems employing state of the art technology for laser, mechanical, and ultrasonic measurement of collision damaged vehicles. From North America, the Company services the markets in North and South America, the Caribbean, and certain Pacific Rim countries. The Company serves the rest of the international market through wholly-owned subsidiaries in Europe. European operating units accounted for approximately 53% of the Company's 1997 collision repair sales. International operations are headquartered in Strasbourg, France. The Company maintains manufacturing and sales facilities in the United Kingdom and Italy; distribution and training facilities in France; and sales offices in France and Germany. In the international market served from Europe, the Company principally sells collision repair equipment under the Blackhawk and Hein- Werner trade names. All collision repair manufacturing facilities provide product to markets worldwide. U.S. manufactured products are modified for international markets at the Company's plant in Italy. European manufactured products are modified for the North American market at the Company's facilities in the United States. The Company markets its collision repair products through sales representatives, equipment distributors, automotive jobbers, and a direct sales force, depending upon the country and local market. The Company also participates in the equipment programs of all major U.S. and foreign automotive manufacturers including Ford, General Motors, Chrysler, Nissan, Toyota, Hyundai, Peugeot, and Volvo, and national tool marketing programs of the companies. The Company's products have been approved by all major European automobile manufacturers. Such approvals provide the Company with a significant competitive advantage. Sales of the Company's SHARK/R/ product represented approximately 28.7%, 26.2% and 25.4% of the Company's net sales for the years ended December 31, 1997, 1996, and 1995, respectively. RAW MATERIALS. The Company's principal raw materials are steel products, castings, and forgings. The Company customarily procures its castings and forgings from unaffiliated foundries. Steel products are purchased by the Company from a number of steel mills and steel service centers. The principal materials and supplies used by the Company can ordinarily be procured in the general market. Raw materials, parts, and components are purchased from many different sources, generally on a purchase order basis. MANUFACTURING/PRODUCT SOURCING. The Company has supply arrangements with manufacturers in Taiwan and the People's Republic of China for equipment manufactured exclusively to the Company's standards and specifications. Such equipment is shipped to the Company's facilities in Wisconsin and France for packaging and shipment to the Company's customers. The Company has the ability to switch sources of manufacturing to take advantage of wage rates, foreign exchange rates, foreign trade developments, and other factors. The Company can manufacture products domestically as well. PATENTS AND TRADEMARKS. The Company owns certain patents and trademarks which are considered to be important to the success of the Company. The remaining term on the Company's patents is one to seventeen years. SEASONALITY. The Company experiences a significant decline in order demand during July and August. CUSTOMERS. The Company is not dependent upon a single customer or on a few customers, the loss of which would have a material adverse effect on the Company. BACKLOG. The estimated amount of backlog at December 31, 1997 was approximately $1.2 million; the comparable figure for December 31, 1996 was approximately $2.4 million. The Company anticipates that all orders on hand as of December 31, 1997 will be filled during 1998. Most orders are filled within three months. COMPETITION. The Company experiences intense competition with numerous domestic and foreign producers. Some of the Company's competitors are significantly larger than the Company and have substantially greater resources. The Company expects that it will continue to encounter highly competitive conditions. The Company believes that it competes favorably primarily on the basis of the Company's recognized brand names, reputation for product innovation and engineering of high quality products, and the Company's distribution channels. RESEARCH AND DEVELOPMENT. The Company has 15 engineering employees who devote all or a portion of their time to the development and improvement of its products, and many of the features of the Company's products are the result of its own development work. The Company spent approximately $1.0 million, $1.2 million, and $1.2 million in the years ended December 31, 1997, 1996, and 1995, respectively, on engineering and research activities for continuing operations relating to product development and improvement, all of which were Company sponsored. IMPACT OF ENVIRONMENTAL LEGISLATION. The Company did not during 1997, nor does it expect to during 1998, experience any material capital expenditures as a result of federal, state, or local environmental legislation. FOREIGN AND EXPORT SALES. Information concerning foreign and export sales is part of the "Notes to Consolidated Financial Statements" and "Geographic Data," which can be found in "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA," Item 8 of this report. EMPLOYEES. The Company's continuing operations had about 250 and 253 employees at the end of 1997 and 1996, respectively, none of whom were represented by labor unions. The Company considers its employee relations to be satisfactory. MISCELLANEOUS. On January 23, 1998, the Company paid a 5% stock dividend to shareholders of record on January 2, 1998. ITEM 2. PROPERTIES The following table sets forth certain information with respect to the principal manufacturing facilities (20,000 square feet or more) which the Company uses in its operations: Owned Expiration Square Location or Leased Date of Lease Footage Baraboo, WI Leased December 2005 73,000 Ashford, Kent, England Leased September 2002 20,000 Verona, Italy Leased August 1999 43,000 Sales, marketing, administrative, and distribution and training facilities are leased in Wisconsin, France, and Germany. The properties above are considered to be adequate for present and planned future business. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal proceedings, claims, and administrative actions arising in the normal course of business. For additional information, see the footnote "Commitments and Contingencies" in "Notes to Consolidated Audited Financial Statements" (Item 8 of this report). ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company did not submit any matters to a vote of its security holders during the fourth quarter of 1997. EXECUTIVE OFFICERS OF REGISTRANT Set forth below is certain information concerning the executive officers of the Registrant as of March 27, 1998: Name, Age and Position Business Experience During Past 5 Years Joseph L. Dindorf, 57 President and Chief Executive Officer, President and Chief Hein-Werner Corporation (elected in Executive Officer 1976). Reinald D. Liegel, 55 Senior Vice President-Technology, Hein- Senior Vice President- Werner Corporation (elected June, 1988). Technology Jean-Paul Barthelme, 60 Vice President, and President of European Vice President, and Operations, Hein-Werner Corporation President-European (elected September, 1988). Operations Michael J. Koons, 58 Vice President-Industrial Relations and Vice President-Industrial Personnel, Hein-Werner Corporation Relations and Personnel (elected in 1979). Maurice J. McSweeney, 59 Elected March, 1983; partner, Foley & Secretary Lardner, attorneys, Milwaukee, Wisconsin. The officers of Registrant are elected annually by the Board of Directors following the Annual Meeting of Shareholders and each officer holds office until his successor has been duly elected and qualified or until his prior death, resignation, or removal. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's Common Stock is listed on the American Stock Exchange under the symbol "HNW." The following table sets forth the range of high and low closing sales prices per share as reported on the American Stock Exchange for the Company's Common Stock and the cash dividends declared per share of Common Stock thereon during the periods indicated. The Company paid a 5% stock dividend on (i) January 24, 1997 to shareholders of record on January 3, 1997 and (ii) January 23, 1998 to shareholders of record on January 2, 1998. Closing sale price Cash dividends High Low declared 1996 4th quarter . . . . . . $7.250 $6.250 -- 3rd quarter . . . . . . 8.000 5.750 -- 2nd quarter . . . . . . 8.750 5.813 -- 1st quarter . . . . . . 6.375 4.250 -- 1997 4th quarter . . . . . . $8.375 $6.875 -- 3rd quarter . . . . . . 8.375 7.250 -- 2nd quarter . . . . . . 8.250 6.375 -- 1st quarter . . . . . . 7.500 6.375 -- As of March 27, 1998, the closing sales price of the Company's Common Stock, as reported on the American Stock Exchange, was $7.50 per share. As of that date there were approximately 568 holders of record of the Company's Common Stock. Holders of Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. The Company's credit agreement with domestic banks, which is not currently being utilized, contains a restriction against the payment of cash dividends which could be enforced should the Company begin to utilize this credit facility. ITEM 6. SELECTED FINANCIAL DATA (Amounts in thousands, except per share data) 1997 1996 1995 1994 1993 Net sales from continuing operations $39,037 $41,696 $41,819 $36,615 $33,515 Net income (loss) from continuing operations 1,337 1,908 892 281 (1,622) Net income (loss) . . . 6,299 2,176 1,013 827 (1,576) Earnings per share from continuing operations - basic . . . . . . . . . 0.46 0.66 0.31 0.10 (0.56) Earnings per share - basic . . . . . . . . 2.17 0.75 0.35 0.29 (0.55) Earnings per share from continuing operations - diluted . . . . . . . 0.42 0.57 0.26 0.08 (0.56)1 Earnings per share - diluted . . . . . . . 1.96 0.69 0.32 0.24 (0.55)1 Total assets . . . . . 37,348 45,598 49,657 46,101 45,345 Long-term debt, excluding current installments . . . . . 310 10,161 10,902 13,256 14,071 Cash dividends declared per common share . . . $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Per share data has been restated to give effect to stock dividends paid through January 23, 1998. 1 Diluted earnings per share was anti-dilutive for this period. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion includes forward-looking statements that reflect management's current assumptions and estimates concerning the Company's performance and financial results. Each forward-looking statement contained herein is either preceded by or contained in a paragraph beginning with the phrase, "management expects" or words of similar import. A variety of factors could cause the Company's actual results to differ materially from the anticipated results. These factors include, but are not limited to, increased competition; unfavorable fluctuation of currency exchange rates; rising interest rates; instability of foreign governments; and the escalation of raw material prices, primarily steel. During 1997, the Company sold its Engine Rebuilding and Fluid Power industry segments for cash. The remaining segment is Collision Repair with operations in North America and Europe. Operations are categorized by where sales originate from, North America or Europe. North American operations mainly serve markets in the United States, Central America, South America, the Caribbean, Canada, and Mexico while operations in Europe mainly serve markets in Europe, Russia, Japan, the Pacific Rim, the People's Republic of China, South Korea, New Zealand, Africa, India, the Middle East, Indochina, and Australia. The income statement data herein have been restated to reflect continuing and discontinued operations. Balance sheet information for prior years has not been restated. Additional information concerning the discontinued operations is included in the Notes to the Consolidated Financial Statements. Results of Operations Net sales Consolidated net sales for 1997 decreased 6.4% from 1996 following virtually no change between 1996 and 1995. (Amounts in thousands) 1997 1996 1995 North America $18,220 $18,510 $15,777 Europe 20,817 23,186 26,042 ------ ------ ------ Total net sales $39,037 $41,696 $41,819 ====== ====== ====== Sales by the Company's North American operations remained steady between 1997 and 1996, following an increase between 1995 and 1996 of 17.3%. European operations experienced a 10.2% decline in sales following an 11.0% decrease between 1996 and 1995. The decrease between 1996 and 1997 resulted from unfavorable foreign exchange translation reflecting weak business conditions in certain European countries as well as the downturn in the Asian markets during 1997. The decrease between 1995 and 1996 resulted from a weakening in both the French and German markets. Management expects sales levels to improve in 1998. During 1997, we restructured our business units on a country-by-country basis in an effort to meet current and future economic demands. Our North American operation is expected to remain strong with potential for future growth in the Latin American region. International sales made through European operations should improve with strong growth potential in the East European countries as well as Turkey, China, Russia, and the Ukraine. Weakness in the Southeast Asia economy may adversely impact European sales; however, management expects such impact to be less than in 1997. Costs and profit margins Gross profit as a percent of net sales decreased 1.5% between 1997 and 1996 mainly due to reduced sales volume, pricing pressure and unfavorable exchange rates in the European markets. Gross profit percentages in North American markets remained stable between 1997 and 1996. The 1996 gross profit as a percent of sales decreased 1.0% from 1995. Gross margins in the markets served by North American operations rose 10.0% between 1995 and 1996 while margins for European markets for the same time period declined 6.9%. The North American operations were able to maintain gross profit percentages despite pricing pressures for certain products due to several reasons. The manufacturing facility implemented procedures to improve productivity while maintaining its fixed costs. This work process improvement led to their receipt of ISO 9002 certification during 1997. Strong sales of more advanced equipment during 1997 resulted in higher margins for the Company because these sales were typically direct to the end-user. This benefit was partially offset by commissions paid to distributors. In addition, the North American operation continues to benefit from the value engineering program. This program involves reengineering products to reduce their material cost content and to better utilize raw material in the production process. The gains maintained in the North American operation were offset, however, by lower margins in the markets served by the European operations. Margins in certain countries were lower due to overall economic conditions fostering pricing pressures and unfavorable exchange rates. Operating expenses and profit (Amounts in 1997 1996 1995 thousands) Operating expenses $16,518 $16,865 $18,168 Operating profit $ 1,809 $ 2,970 $ 1,937 Operating expenses for 1997 were 2.1% below the 1996 level. This reduction in operating expenses was achieved even with the inclusion of restructuring charges incurred for the elimination of the sales office in Geneva, Switzerland. Operating expenses in 1996 were down 7.2% from 1995. The decreases in these two years can be attributed to the Company's continued emphasis on cost control. Over the past several years, insurance premiums have been reduced due to favorable workers' compensation experience, a favorable settlement of a patent infringement lawsuit during 1996 allowed the Company to recover fees incurred in prior years, and the 1995 restructuring of the German sales office reduced both marketing and administrative expenses during 1996 and 1997. Operating profits decreased 39.1% between 1997 and 1996 mainly due to reduced sales and margins from the European operations. Operating profit rose 53.3% from 1995 to 1996 mainly due to above-mentioned cost reduction programs and the restructuring of the German sales office. Operating expenses as a percent of net sales for 1997 increased 4.7% over 1996 due to reduced sales volume. Operating expenses as a percent of net sales decreased 6.9% between 1996 and 1995 due to the restructuring of the German sales office during 1995 and continued emphasis on cost control. Nonoperating income and expense Historically, interest expense has been the largest component of nonoperating expense, consisting of interest paid to banks, leasing companies, and other lenders for borrowed money or for capitalized leases. Interest expense was reduced during 1997 as the result of the Company applying the proceeds from the sale of discontinued businesses to reduce domestic debt levels by 97.5%. European debt levels were also reduced due to improved cash flow in 1997. Improved cash flow during 1996 allowed the Company to lower overall borrowing levels. The reduction in 1996 was combined with a negotiated reduction in interest rates during the last half of the year. Both of these factors provided for a 21.7% reduction in interest expense between 1996 and 1995. (Amounts in thousands) 1997 1996 1995 Interest expense $ 95 $ 775 $ 990 Loss on foreign exchange 161 207 135 Miscellaneous, net (81) (42) (44) ----- ----- ----- Total nonoperating expense, net $ 175 $ 940 $1,081 ===== ===== ===== The foreign exchange gains and losses are primarily attributable to European operations where a considerable amount of buying and selling is done in nonlocal currencies. Receivables and payables denominated in nonlocal currencies give rise to foreign exchange gains and losses on a regular basis. Normally, foreign exchange risk in this category is managed by a review of the balance of receivables and payables and, where warranted, the purchase of foreign exchange contracts to hedge risk. Income tax expense Income tax expense from continuing operations in 1997 was entirely from European operations. No income tax was allocated to continuing North American operations since all of such current tax expense would have been completely offset by the reduction of the previously established valuation reserve for deferred tax assets. Thus, all North American income tax was allocated to the discontinued North American operations. Income tax expense in 1996 was primarily from European operations, as North American operations were able to make use of net operating loss carryforwards. The income tax benefit recorded in 1995 was the result of recoverable income taxes from net operating loss carrybacks and the favorable resolution of audits of prior year tax returns. Discontinued operations Effective May 29, 1997, the Company sold for cash substantially all of the business and assets, and transferred certain of the liabilities, of its Great Bend Industries fluid power division. The fluid power division designed, manufactured, and supplied high performance single-acting, double-acting, and telescopic hydraulic cylinders and related hydraulic components to original equipment manufacturers in the construction, transportation, solid waste, utility, and energy industries. Effective August 28, 1997, the Company sold for cash substantially all of the business, including certain assets and liabilities, of its Winona Van Norman engine rebuilding division. The engine rebuilding division designed, manufactured, and supplied advanced machinery for the automotive aftermarket, primarily for automotive, truck, diesel, and high- performance engine rebuilding. The division also manufactured brake lathes and related equipment, as well as provided contract machining services. Financial Condition Liquidity Net income adjusted for noncash items for 1997 decreased $3.7 million from 1996 mainly due to expenses associated with the sale of the discontinued operations combined with the satisfaction of associated lease and accounts payable commitments. In 1996, net income adjusted for noncash items increased $484,000 over the previous year's level. (Amounts in thousands) 1997 1996 1995 Net income (loss) $ 6,299 $ 2,176 $ 1,013 Adjustments for noncash items (6,342) 1,523 2,202 ------ ------ ------ (43) 3,699 3,215 Changes in cash from certain assets and liabilities (177) (724) (2,676) ------ ------ ------ Cash provided by operating activities $ (220) $ 2,975 $ 539 ====== ====== ====== Management expects cash provided by operating activities to supply the Company with sufficient cash to satisfy debt service requirements and investments in capital assets in 1998. (Amounts in thousands) 1997 1996 1995 Current assets $33,386 $37,090 $41,525 Current liabilities 12,885 16,197 20,749 -------- -------- -------- Working capital $20,501 $20,893 $20,776 ======== ======== ======== Current ratio 2.6 to 1 2.3 to 1 2.0 to 1 ======== ======== ======== During 1997, the Company completed the sale of both the Great Bend Industries fluid power division and the Winona Van Norman engine rebuilding division. Both sales were cash transactions. Current assets and liabilities from the discontinued operations were $10.8 and $1.1 million in 1996 and $13.8 and $4.6 million in 1995, respectively. The proceeds from these transactions were used to reduce domestic debt levels. The Company's current ratio continued to improve in 1997 and working capital remained strong. In 1996, the Company maintained inventory levels while increasing accounts receivable collections allowing a significant reduction in accounts payable and notes payable. The Company repaid $1.3 million of subordinated debt on schedule during the last half of 1996 while reducing overall debt levels by 2.8%. Financing Activities Credit arrangements in Europe are short-term in nature and designed to satisfy seasonal fluctuations in liquidity requirements. Those arrangements are renewed annually and management expects they will be sufficient to support the needs of the Company's European operations in 1998. The Company currently is not utilizing its credit agreements with domestic banks. Cash remaining from the sale of the two divisions after reducing domestic debt levels is invested in short-term instruments. At the end of the year, the Company entered into an agreement with Massachusetts Mutual Life Insurance Company to repurchase certain warrants to purchase Company common stock that arose from convertible subordinated debt which was repaid during 1996 and 1997. This transaction will have a positive impact on future earnings per share by reducing common stock dilution. During 1996, the Company had a maximum $12.0 million credit line dependent on the balances of underlying collateral. At December 31, 1996, based on the balances of underlying collateral, the Company could borrow $8.4 million of the line of credit of which $6.1 million was utilized. Management intends to expand into one or more complementary and counter- cyclical businesses during 1998. Management believes that the current cash position, along with cash provided by operating activities, will be sufficient to satisfy the cash needs of the Company's North American operations and that adequate financing will be obtained, if required, for any future acquisition activity. Year 2000 Compliance Many software programs will experience malfunctions associated with the turning of the year 2000. The Company has undertaken a review of potential year 2000 concerns, and management expects that the Company will be year 2000 compliant by the end of 1998. The Company's North American operation currently is compliant and management expects the European operations to be compliant prior to the end of 1998. Management does not expect the cost of the year 2000 compliance to have a material adverse effect on its financial results. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index Report of Management Independent Auditors' Report Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements REPORT OF MANAGEMENT The management of Hein-Werner Corporation is responsible for the preparation and presentation of financial statements. Management believes the established policies, internal accounting controls and review procedures provide reasonable assurance that the consolidated financial statements included herein are prepared in accordance with generally accepted accounting principles. This preparation has been based upon the best estimates and judgments and giving due consideration to materiality. The Company maintains internal accounting control systems and related policies and procedures. These systems are designed to provide reasonable assurance that assets are safeguarded, transactions are executed in accordance with management's authorization and properly recorded, and accounting records may be relied upon for the preparation of financial statements and other financial information. The design, monitoring and revision of internal accounting control systems involve, among other things, management's judgment with respect to the relative cost and expected benefits of specific control measures. The independent auditors are responsible for expressing their opinion as to whether the financial statements present fairly the financial position, operating results and cash flows of the Company. In this process, they obtain a sufficient understanding of the internal accounting systems to establish the audit scope, review selected transactions and carry out other audit procedures. The Audit Committee of the Board of Directors is composed of three nonemployee directors who meet periodically with the independent auditors and the Company's management. This Committee considers the audit scope, discusses financial and reporting subjects and reviews management actions on these matters. The independent auditors have full and free access to the Audit Committee. /s/ Mary L. Kielich /s/ Joseph L. Dindorf Mary L. Kielich Joseph L. Dindorf Corporate Controller President and Chief Executive Officer Waukesha, Wisconsin February 13, 1998 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders of Hein-Werner Corporation: We have audited the accompanying consolidated balance sheets of Hein- Werner Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hein-Werner Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Milwaukee, Wisconsin February 13, 1998 CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31: (Amounts in thousands, except per share data) 1997 1996 1995 Net sales $39,037 $41,696 $41,819 Cost of sales 20,710 21,861 21,714 ------ ------ ------ Gross profit 18,327 19,835 20,105 Selling, engineering, and administrative expenses 16,518 16,865 18,168 ------ ------ ------ Operating profit 1,809 2,970 1,937 Interest expense, net 95 775 990 Other expense, net 80 165 91 ------ ------ ------ Income from continuing operations, before income tax 1,634 2,030 856 Income tax expense (benefit) 297 122 (36) ------ ------ ------ Net income from continuing operations 1,337 1,908 892 Discontinued businesses: Income (loss) from operations of discontinued businesses, net of related income tax (79) 268 121 Gain on the disposal of discontinued businesses, net of related income tax 5,041 --- --- ------ ------ ------ Net income $ 6,299 $ 2,176 $ 1,013 ====== ====== ====== Earnings per share from continuing operations - basic $ 0.46 $ 0.66 $ 0.31 Earnings per share from discontinued operations - basic 1.71 0.09 0.04 ------ ------ ------ Earnings per share - basic $ 2.17 $ 0.75 $ 0.35 ====== ====== ====== Earnings per share from continuing operations - diluted $ 0.42 $ 0.57 $ 0.26 Earnings per share from discontinued operations - diluted 1.54 0.12 0.06 ----- ------ ----- Earnings per share - diluted $ 1.96 $ 0.69 $ 0.32 ===== ====== ====== See accompanying notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS As of December 31: 1997 1996 (Amounts in thousands, except share data) Assets Current Assets: Cash and cash equivalents $ 9,696 $ --- Accounts receivable, net 12,180 18,794 Inventories 9,876 17,415 Prepaid expenses and other 1,634 881 ------ ------ Total current assets 33,386 37,090 ------ ------ Property, plant, and equipment, net 2,800 5,451 Other assets 1,162 3,057 ------ ------ $37,348 $45,598 ====== ====== Liabilities and Stockholders' Equity Current Liabilities: Notes payable $ 2,674 $ 3,281 Current installments of long-term debt 91 1,856 Accounts payable 4,530 4,873 Other current liabilities 5,590 6,187 ------ ------ Total current liabilities 12,885 16,197 ------ ------ Long-term debt, excluding current installments 310 10,161 Other long-term liabilities 2,051 1,304 ------ ------ Commitments and contingencies Total liabilities 15,246 27,662 ------ ------ Stockholders' Equity: Common stock of $1 par value per share Authorized: 20,000,000 shares; Issued: 2,770,630 and 2,629,320 shares at December 31, 1997 and 1996, respectively 2,771 2,629 Capital in excess of par value 11,769 11,995 Retained earnings 8,312 2,921 Cumulative translation adjustments (750) 443 ------ ------ 22,102 17,988 Less cost of common shares in treasury - 3,104 at December 31, 1996 --- 52 ------ ------ Total stockholders' equity 22,102 17,936 ------ ------ $37,348 $45,598 ====== ====== See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31: (Amounts in thousands) 1997 1996 1995 Cash From Operating Activities: Net income $ 6,299 $ 2,176 $ 1,013 Adjustments to reconcile net income to cash provided by operating activities: Adjustments to net income for items not using or providing cash: Depreciation and amortization 837 1,103 1,234 Bad debt expense 265 420 970 Gain on sale of property, plant and equipment (23) --- (2) Gain on sale of discontinued business (7,421) --- --- Increase (decrease) in cash due to changes in: Accounts receivable 3,492 4,063 (4,372) Inventories 1,157 (144) (1,117) Prepaid expenses and other assets (327) (75) 806 Accounts payable (1,343) (4,358) 1,929 Other liabilities (3,156) (210) 78 ------ ------ ------ Cash provided by (used in) operating activities (220) 2,975 539 ------- ------ ------ Cash From Investing Activities: Capital expenditures (859) (1,139) (1,174) Proceeds from sale of property, plant, and equipment --- 14 28 ------- ------ ------ Cash used in investing activities (859) (1,125) (1,146) ------- ------ ------ Cash From Financing Activities: Increase (decrease) in notes payable (607) (928) 1,020 Proceeds from long-term debt --- 551 163 Proceeds from sale of discontinued businesses 23,861 --- --- Proceeds from exercise of stock options 60 --- --- Repayment of long-term debt (11,346) (1,485) (1,363) ------- ------- ------- Cash provided by (used in) financing activities 11,968 (1,862) (180) ------- ------- ------- Cumulative translation adjustments (1,193) (384) 717 ------ ------- ------- Total cash provided (used) 9,696 (396) (70) Cash and cash equivalents - beginning of year --- 396 466 ------- ------- ------- Cash and cash equivalents - end of year $ 9,696 $ --- $ 396 ======== ======= ======= See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summary of Significant Accounting Policies (A) NATURE OF OPERATIONS The Company is a worldwide manufacturer and marketer of collision repair equipment. The Company has manufacturing operations and offices in the United States and Europe, with distribution channels throughout the rest of the world. During 1997, the Company sold its Engine Rebuilding and Fluid Power industry segments. (B) FINANCIAL STATEMENT PRESENTATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (C) CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. (D) INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out ("FIFO") basis. Inventory which is repossessed is recorded at the lesser of its original FIFO cost, the amount receivable from the customer, or its fair market value. (E) PROPERTY, PLANT, AND EQUIPMENT The cost of plant and equipment is depreciated over the estimated useful lives of the respective assets using the straight-line method. Major replacements and betterments are capitalized, while maintenance and repairs are expensed as incurred. (F) INTANGIBLES Patents and trademarks are amortized over their estimated useful lives but not exceeding seventeen years. The excess cost over net assets of acquired companies is amortized on the straight-line basis over a forty-year period. Deferred debt issuance costs are amortized over the term of the underlying debt agreements. The Company periodically evaluates the carrying value and remaining amortization periods of intangible assets for impairment. (G) LONG-LIVED ASSETS Long-lived assets and certain identifiable intangibles, including goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. (H) NONCURRENT RECEIVABLES Certain accounts receivable from distributors in the Collision Repair segment were renegotiated during 1993 to notes with payment schedules which extend beyond one year. These notes, which bear an interest rate of 8%, have been collateralized with personal guarantees of the owners, partners, and principals of the distributors and are presented as noncurrent assets. The allowance for uncollectible notes is management's estimate of uncollectible amounts based upon a review of the outstanding balances. (I) REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK Sales are recognized upon shipment of products to equipment distributors, automotive jobbers, warehouse distributors, and retail dealers for resale, and on shipments directly to end-users. Estimated losses on accounts receivable and guaranteed notes are provided for in allowance for losses. The Company extends customary industry credit terms to customers in North America and in Europe. Sales outside these regions are generally supported by letters of credit. Accounts receivable from resellers of equipment are generally collateralized by the products sold and the Company also obtains guarantees from some owners, partners, or principals. When product is repossessed for which the Company has obtained a guarantee, the guarantor takes possession of the product and the Company records a receivable from the guarantor. If there is no third party guarantor, the Company takes possession of the equipment and charges any recognizable loss to an allowance account established for that purpose. (J) INCOME TAXES The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (K) TRANSLATION OF FOREIGN FINANCIAL STATEMENTS Assets and liabilities of foreign subsidiaries are translated at year-end exchange rates and the statements of operations are translated at the average exchange rates for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated as a separate component of stockholders' equity until the entity is sold or liquidated, at which time any gain or loss is included in net earnings. The Company enters into forward foreign exchange contracts relating to the anticipated settlement in local currencies of intercompany purchases. These contracts generally require the Company to exchange U.S. dollars for foreign currencies. The contracts are marked to market, and the related adjustment is recognized in other expense, net. Intercompany purchases and sales are eliminated at the consolidated level. At December 31, 1997, the Company had outstanding forward exchange contracts to buy approximately $487,000 in foreign currencies of countries in which it operates. Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity's functional currency) are included in net earnings. (L) ADVERTISING EXPENSES The Company incurred advertising costs for continuing operations of approximately $845,000 in 1997, $938,000 in 1996, and $1,184,000 in 1995. Advertising costs are expensed as incurred. (M) RESEARCH & DEVELOPMENT EXPENSES The Company incurred research and development costs for continuing operations of approximately $1,019,000 in 1997, $1,151,000 in 1996, and $1,166,000 in 1995. Research and development costs are expensed as incurred. (N) EARNINGS PER SHARE Earnings per share ("EPS") data and weighted average shares outstanding have been restated for all years presented to give effect to the 5% stock dividend paid January 23, 1998 and all previous stock dividends. The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, on December 15, 1997. This Statement replaces the presentation of primary EPS and fully diluted EPS with basic EPS and diluted EPS. Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Basic EPS does not consider common stock equivalents as did primary EPS. Diluted EPS reflects the dilution that would occur if convertible debt securities and employee stock options were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The computation of diluted EPS uses "if converted" and "treasury stock" methods to reflect dilution in a manner similar to fully diluted EPS under Accounting Principles Board ("APB") Opinion No. 15. The statement requires that at adoption, all prior period EPS data presented be restated (including interim financial statements, summaries of earnings, and selected financial data). As adjusted for stock dividends, the number of shares used in calculating basic earnings per share was 2,896,000 in 1997, 2,895,000 in 1996, and 2,888,000 in 1995. The number of shares used in calculating diluted earnings per share was 3,258,000 in 1997, 3,631,000 in 1996, and 3,659,000 in 1995. The difference between the number of shares used in the two calculations is due to the convertible debt securities and employee stock options. (O) STOCK OPTION PLAN Prior to January 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the "fair-value-based method" defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure when required by SFAS No. 123. (P) RECLASSIFICATIONS Certain amounts in 1996 and 1995 have been reclassified to conform to the 1997 presentation. (Q) PENDING ACCOUNTING CHANGES In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, Reporting Comprehensive Income. As a result , the Company will be required to separately report comprehensive income components previously excluded from net income. Comprehensive income includes all changes to equity during a period except those resulting from investments by or distributions to shareholders. Because comprehensive income is subject to external factors beyond the Company's control, including, but not limited to, foreign currency fluctuations and economic factors, the impact from SFAS No. 130 cannot be estimated at this time. Accounts Receivable (Amounts in thousands) 1997 1996 Accounts receivable $13,750 $20,445 Less allowance for losses 1,570 1,651 ------ ------ $12,180 $18,794 ====== ====== Inventories (Amounts in thousands) 1997 1996 Raw material $ 2,065 $ 5,574 Work-in-process 958 1,172 Finished goods 6,853 10,669 ------ ------ $ 9,876 $17,415 ====== ====== Property, Plant, and Equipment, Net (Amounts in thousands) 1997 1996 Land $ --- $ 90 Buildings 1,191 3,125 Machinery and equipment 6,338 14,361 ------ ------ 7,529 17,576 Less accumulated depreciation 4,729 12,125 ------ ------ $ 2,800 $ 5,451 ====== ====== Other Assets (Amounts in thousands) 1997 1996 Patents and trademarks $1,033 $1,359 Goodwill 141 2,282 ------ ------ 1,174 3,641 Less accumulated amortization 720 1,467 ------ ------ Net intangibles 454 2,174 Noncurrent notes receivable 850 1,159 Less allowance for uncollectible notes 473 500 ------ ------ Net notes receivable 377 659 Other 331 224 ------ ------ $1,162 $3,057 ====== ====== The fair value of noncurrent notes receivable is estimated using discounted cash flows on expected payments to be received based on the terms of the notes and current interest rates. The fair value of the noncurrent notes receivable is estimated to be approximately $340,000 and $532,000 at December 31, 1997 and 1996, respectively. Short-term Borrowings and Lines of Credit The Company has various unsecured lines of credit with foreign banks aggregating $6,168,000. The amount of unused available borrowings under these various lines of credit was $3,494,000 at December 31, 1997. The weighted average interest rate on outstanding amounts was 5.85% and 7.5% at December 31, 1997 and 1996, respectively. In addition, the Company has the ability to borrow funds outside of these lines of credit at foreign banks by using local currency receivables as collateral. The Company was not utilizing this facility as of December 31, 1997. Other Current Liabilities (Amounts in thousands) 1997 1996 Accrued payroll and related $ 1,684 $ 2,199 expenses Accrued commissions 876 1,055 Other accrued expenses 2,031 2,667 Accrued income taxes 999 266 ------ ------ $ 5,590 $ 6,187 ====== ====== Long-term Debt (Amounts in thousands) 1997 1996 Revolving credit agreement $ --- $ 6,070 8% Convertible subordinated notes due 1996 to 1999 --- 3,375 11.5% Financing due to 2000 --- 791 8.75% Financing due to 2004 --- 272 5.0% Financing due to 2002 --- 188 Capitalized leases due to 2005 112 670 Other 289 651 ------- ------- 401 12,017 Less current installments of long-term debt 91 1,856 ------- ------- Total long-term debt, excluding current installments $310 $10,161 ======= ====== Aggregate required annual principal payments, including capital leases, for the next five years are: (Amounts in thousands) 1998 $ 91 1999 104 2000 130 2001 76 2002 --- The Company is not currently using its credit arrangements with domestic banks, however a line of $6.0 million is available. Were this facility to be utilized, borrowings would be based on the availability of collateral assets, primarily inventory and accounts receivable, and would be at an interest rate of prime plus .65%. The prime rate at December 31, 1997, was 8.5%. The 8% convertible subordinated notes were convertible into common stock at a price of approximately $5.98 per share after giving effect to the 5% stock dividend paid January 24, 1997. The note agreement, as modified in 1994, also called for the issuance of nondetachable warrants, fixed in price and quantity, to purchase common stock when scheduled principal repayments were made. Under the agreement, 179,000 of exercisable warrants were issued in 1996 at an exercise price of $5.98. A similar number of warrants was to be issued when scheduled principal repayments were made in 1997 and 1998. All of the warrants issued under the agreement were to expire when the final scheduled principal repayment was to be made in 1999. The notes were repaid on May 29, 1997 and warrants were issued concurrently to the holder of the notes. On December 30, 1997 the Company entered into an agreement to repurchase all of the approximately 750,000 outstanding warrants for $1.0 million. The 11.5% financing was collateralized by machinery and equipment with a net book value at December 31, 1996 of $1.1 million. The 8.75% financing was collateralized by buildings and fixtures with a net book value at December 31, 1996 of $565,000. In 1995, the Company entered into a 5% financing arrangement with a county in the state of Kansas allowing borrowings up to $195,000. The borrowings were collateralized by a second mortgage on buildings and fixtures with a net book value at December 31, 1996 of $933,000. Each of these obligations was repaid in conjunction with the sale of the discontinued operations. Included in other long-term debt is a liability for the present value, discounted at the Company's current borrowing rate, of future payments expected to be made in connection with the acquisition of distribution and trademark rights to Blackhawk collision repair equipment for Central and South America and selected Asian markets. The fair value of the Company's long-term debt was estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of long-term debt approximated fair value at December 31, 1997 and 1996. Interest paid during 1997, 1996, and 1995 was $145,000, $1,524,000, and $1,842,000, respectively. Commitments and Contingencies (A) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK To meet the financing needs of consumers of its collision repair and engine rebuilding products, the Company is, in the normal course of business, a party to financial instruments with off-balance-sheet risk. The instruments are guarantees of notes payable to financing institutions arranged by the Company. The Company performs credit reviews on all such guarantees. These guarantees extend for periods up to five years and expire in decreasing amounts through 2001. The amount guaranteed to each institution is contractually limited to a portion of the amount financed in a given year. The notes are collateralized by the equipment financed. Proceeds from the resale of recovered equipment have generally approximated 90% of repurchased notes. The maximum credit risk to the Company at December 31, 1997 and 1996 was approximately $1,538,000 and $2,199,000, respectively. Proceeds from guaranteed notes totaled approximately $241,000, and $728,000 in 1997 and 1996, respectively. In 1997, the Company adopted SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on consistent application of a financial-components approach that focuses on control. It distinguishes transfers of financial assets that are sales from transfers that are secured borrowings. Adoption of this pronouncement did not have a material impact on the Company's financial position, results of operations, or liquidity. (B) LITIGATION The Company is involved in legal proceedings, claims, and administrative actions arising in the normal course of business. In the opinion of management, the Company's liability, if any, under any pending litigation or administrative proceeding would not materially affect its financial condition or operations. (C) ENVIRONMENTAL CLAIMS From time to time, the Company is identified as a potentially responsible party in environmental matters primarily related to waste disposal sites which contain residuals from the manufacturing process which were previously disposed of by the Company in accordance with applicable regulations in effect at the time of disposal. Materials generated by the Company in these sites have been small and claims against the Company have been handled on a de minimis basis. In addition, the Company has indemnified purchasers of property previously sold by the Company against any environmental damage which may have existed at the time of the sale. In the opinion of management, the Company's liability, if any, under any pending administrative proceeding or claim would not materially affect its financial condition or operations. (D) LEASES At December 31, 1997, future minimum lease payments under capital leases and under noncancelable operating leases with initial terms greater than one year are as follows: Capitalized Operating (Amounts in thousands) leases leases 1998 $ 50 $1,201 1999 35 1,096 2000 44 1,114 2001 --- 913 2002-2005 --- 312 ------- ------- Total minimum lease payments 129 $4,636 Less amount representing interest 17 -------- Present value of minimum lease payments $ 112 ======== Current portion of capitalized lease obligations $ 39 ======== Property, plant, and equipment includes the following amount relating to leases which have been capitalized: (Amounts in thousands) 1997 1996 Machinery and equipment $ 130 $ 1,041 Less accumulated depreciation 18 513 ----- ------ $ 112 $ 528 ===== ====== Operating leases are for buildings, warehouses, and equipment. Included in the above operating leases is $199,000 each year for the next four years for an obligation related to one of the discontinued operations. The present value of these lease payments is included in current and noncurrent liabilities of discontinued operations. Rental expense for operating leases was $1,565,000 in 1997, $1,857,000 in 1996, and $1,955,000 in 1995.
Changes in Stockholders' Equity Capital in Cumulative Total (Amounts in thousands, except Common excess of Retained translation Treasury stockholders' share data) stock par value earnings adjustments stock equity Balance at December 31, 1994 $ 2,386 $11,377 $ 827 $ 110 $ (378) $14,322 Net income --- --- 1,013 --- --- 1,013 Translation adjustments --- --- --- 717 --- 717 5% Stock dividend paid January 27, 1995, 117,944 shares issued 118 413 (531) --- --- --- 5% Stock dividend, fractional shares --- --- (1) --- --- (1) Shares contributed to employee benefit plan --- (232) --- --- 326 94 ------ ------ ------ ------ ------ ------ Balance at December 31, 1995 2,504 11,558 1,308 827 (52) 16,145 Net income --- --- 2,176 --- --- 2,176 Translation adjustments --- --- --- (384) --- (384) 5% Stock dividend paid January 26, 1996, 124,899 shares issued 125 437 (562) --- --- --- 5% Stock dividend, fractional shares --- --- (1) --- --- (1) ------ ------ ------ ------ ------- ------- Balance at December 31, 1996 2,629 11,995 2,921 443 (52) 17,936 Net income --- --- 6,299 --- --- 6,299 Translation adjustments --- --- --- (1,193) --- (1,193) 5% Stock dividend paid January 24, 1997, 131,169 shares issued 131 738 (869) --- --- --- 5% Stock dividend, fractional shares --- --- (2) --- --- (2) Issue treasury shares - exercise of employee stock options - 3,190 shares --- --- (36) --- 51 15 Exercise of employee stock options, 10,210 shares issued 11 36 --- --- --- 47 Return 69 treasury shares to authorized but unissued --- --- (1) --- 1 --- Repurchase outstanding warrants --- (1,000) --- --- --- (1,000) ------ ------ ------ ------ ------- ------ Balance at December 31, 1997 $ 2,771 $11,769 $ 8,312 $ (750) $ --- $22,102 ====== ====== ====== ====== ======= ======
Stock Plans Under the 1987 Stock Option and Incentive Plan (the "Plan"), the Company is authorized to grant 141,381 stock options. No option may be exercised until three years after the date of grant when 50% of the options granted become exercisable. Five years after the date of grant 100% of the options granted are exercisable. Options expire ten years after the date of grant. Under provisions defined in the Plan, all options become exercisable in the event of a public tender offer or if an exchange offer is made for the Company's stock. Stock options arising from stock dividends are exercisable upon issuance of the dividend. Stock option activity for each of the three years in the period ended December 31, 1997 follows: Option Price shares per share* December 31, 1994 112,455 $ 4.61 Cancelled (5,788) Granted via stock dividend 5,623 ------- --------- December 31, 1995 112,290 $ 4.61 Cancelled (3,473) Granted via stock dividend 5,441 ------- --------- December 31, 1996 114,258 $ 4.61 Exercised (13,400) Cancelled (9,573) Granted via stock dividend 5,713 ------- December 31, 1997 96,998 ======= Exercisable at December 31, 1997: 96,998 $ 4.61 ======= ========= Available for future grants 44,383 ======= *Option shares and price are adjusted to give effect to the stock dividend paid January 24, 1997. Each outstanding share of common stock is entitled to one common share purchase right. Pursuant to the Rights Agreement and under certain circumstances, each right entitles the holder to purchase one share of common stock at $65, subject to adjustment. The rights are not exercisable until ten days after a public announcement that a person or group has acquired at least 20% of the outstanding common stock or ten business days (or later date determined by the Board of Directors) after a person or group announces an intention to make, or commences, a tender or exchange offer that would result in ownership of 20% or more of the Company's common stock. Subject to certain limitations, the Company's Board of Directors may reduce the thresholds applicable to the rights to not less than 10%. If a person or group acquires 20% or more of the outstanding common stock, or certain other events occur, each right not owned by a 20% or greater stockholder will become exercisable for that number of shares of common stock having a market value of twice the exercise price of the right. If the Company is acquired in a merger or other business combination, or 50% or more of its consolidated assets or earning power is sold at any time after the rights become exercisable, the rights will entitle the holder thereof to purchase common stock of the acquiring company having a market value equal to two times the exercise price of the rights. The rights, which do not have voting privileges, may be redeemed by the Company at a price of $.03 per right at any time prior to public announcement that a person or group has acquired 20% or more of the Company's common stock. In addition, under certain circumstances the rights may be redeemed by stockholder action in connection with an acquisition proposal. Further, at any time after a person or group acquires 20% or more of the Company's common stock and prior to that person or group acquiring 50% or more of the common stock, the Company may exchange the rights (other than rights owned by such 20% or greater stockholder) in whole or in part for one share of common stock per right. The rights expire on May 23, 1999. Employee Benefit Plans A profit sharing and retirement plan is in effect for all domestic employees of the Company. The Company can contribute between 5% and 16% of its earnings before income taxes in excess of varying levels, ranging from $250,000 to $4,500,000. The Company's expense under the terms of the plan was $179,000, $314,000, and $96,600 in 1997, 1996, and 1995, respectively. In addition, the Board of Directors authorized a special 1997 contribution of $73,215 in the form of 10,000 shares of the Company's common stock to be made in 1998. The shares were valued at the year end closing price of $7.3215 per share. The Company does not provide post- retirement benefits under current benefit programs. Obligations under previous programs are not material. A foreign subsidiary maintains a defined benefit plan which is not material to the financial position of the Company. The Company's expense under this benefit plan was $54,000, $58,000, and $54,000 in 1997, 1996, and 1995, respectively. Income Taxes Income from continuing operations before income tax consists of the following: (Amounts in thousands) 1997 1996 1995 Domestic $ 1,279 $ 1,574 $ (672) Foreign 355 456 1,528 ------ ------ ------ $ 1,634 $ 2,030 $ 856 ====== ====== ====== Income tax expense (benefit) from continuing operations consists of the following: (Amounts in thousands) 1997 1996 1995 Current: U.S. Federal $ 369 $ 143 $ (306) Foreign 291 109 270 ------ ------ ------ 660 252 (36) Deferred: U.S. Federal (369) (130) --- Foreign 6 --- --- ------ ------ ------ (363) (130) --- ------ ------ ------ $ 297 $ 122 $ (36) ====== ====== ====== Income tax expense (benefit) related to the operation of the discontinued businesses was ($38,000) in 1997, $2,000 in 1996, and zero in 1995. Amounts for 1996 and 1995 reflect the utilization of net operating loss carryforwards and the reduction in the valuation allowance for deferred tax assets. Income tax expense related to the sale of the discontinued businesses was $2.4 million. The significant components of deferred income tax expense (benefit) attributable to income from continuing operations before income tax are as follows: (Amounts in thousands) 1997 1996 1995 Deferred income tax expense (benefit) (exclusive of the effects of other components listed below) $ (79) $ 1,040 $ 32 Increase (decrease) in the valuation allowance for deferred tax assets (284) (1,170) (32) ------ ------ ----- $ (363) $ (130) $ --- ====== ====== ===== The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: (Amounts in thousands) 1997 1996 Inventory valuation $ 79 $ 150 Accounts receivable valuation 304 140 Vacation accrual 93 166 Self-insurance accrual 146 244 Accrual related to discontinued operations 719 --- Net operating loss carryforwards 349 792 Foreign tax credit carryforwards 401 --- Other 363 899 ------ ------ Gross deferred tax assets 2,454 2,391 Less valuation allowance 913 1,387 ------ ------ Deferred tax assets 1,541 1,004 ------ ------ Depreciation (356) (874) Other (81) --- ------ ------ Deferred tax liabilities (437) (874) ------ ----- Net deferred tax asset $ 1,104 $ 130 ====== ====== The net deferred tax asset is included in prepaid expenses and other. The Company made net income tax payments of $3,309,000 during 1997 and received net income tax refunds of $171,000 and $306,000 during 1996 and 1995, respectively. Deferred income taxes have been provided on that portion of the undistributed earnings of foreign subsidiaries which the Company expects to recover in a taxable manner, such as through the receipt of dividends. A provision has not been made for U.S. or additional foreign taxes on foreign earnings which have been and will continue to be reinvested. It is not practicable to estimate the amount of additional tax that might be payable on these foreign earnings. At December 31, 1997, the undistributed earnings of these foreign subsidiaries on which taxes have not been provided were approximately $4,200,000. A reconciliation of actual income tax expense (benefit) attributable to income from continuing operations before income tax to the "expected" income tax expense (benefit) computed by applying the U.S. Federal corporate tax rate to income before income tax follows: (Percent of pretax earnings) 1997 1996 1995 Statutory rate 34.0% 34.0% 34.0% Amortization of excess cost over net assets of acquired companies 0.8 2.0 2.0 Effect of foreign operations 14.8 (2.0) 20.9 Net operating losses utilized (4.9) (29.7) --- Foreign tax credit carryforwards utilized (11.6) --- --- Resolution of income tax examinations --- --- (31.8) Change in the valuation allowance for deferred tax assets allocatedto income tax expense (17.4) 5.6 (30.7) Other items, net 2.5 (3.9) 1.4 ----- ----- ---- 18.2% 6.0% (4.2)% ===== ===== ==== Approximate net operating loss carryforwards available at December 31, 1997, to offset future taxable earnings of the Company are as follows: (Amounts in thousands) Amount Year of expiration State $4,000 1998 through 2010 Foreign 45 1999 through 2000 A valuation allowance has been provided for the future benefit of the above net operating loss carryforwards. Discontinued Operations Effective May 29, 1997, the Company sold for cash substantially all of the business and assets, and transferred certain of the liabilities, of its Great Bend Industries fluid power division. The fluid power division designed, manufactured, and supplied high performance single-acting, double-acting, and telescopic hydraulic cylinders and related hydraulic components to original equipment manufacturers in the construction, transportation, solid waste, utility, and energy industries. Effective August 28, 1997, the Company sold for cash substantially all of the business, including certain assets and liabilities, of its Winona Van Norman engine rebuilding division. The engine rebuilding division designed, manufactured, and supplied advanced machinery for the automotive aftermarket, primarily for automotive, truck, diesel, and high- performance engine rebuilding. The division also manufactured brake lathes and related equipment, as well as provided contract machining services. At December 31, 1996, assets and liabilities of the discontinued operations consisted of the following: (Amounts in thousands) Accounts receivable, net $ 4,224 Inventories, net 6,567 Property, plant, and equipment, net 2,557 Other assets 1,367 ------- Total assets $ 14,715 ------- Less: Current portion of long-term debt 464 Current liabilities 605 Long-term debt 1,457 ------- Net assets of discontinued operations $ 12,189 ======= Assets and liabilities relating to the discontinued operations on the balance sheet as of December 31, 1997 were $505,000 and $1,844,000, respectively. The assets consist mainly of receivables retained in the sale of the engine rebuilding segment and the balance in an escrow account relating to the sale of the fluid power segment. The liabilities consist mainly of reserves for estimated costs associated with the sale of the businesses, including lease commitments. Current liabilities of $669,000 are included in other accrued expenses with the balance in other long-term liabilities. Net sales of the fluid power division for the period January 1, 1997 through May 29, 1997 were $7.4 million, and $20.2 million and $20.9 million for the years ended December 31, 1996 and 1995, respectively. Net sales of the engine rebuilding division for the period January 1, 1997 through August 28, 1997 were $5.6 million, and $6.7 million and $11.0 million for the years ended December 31, 1996 and 1995, respectively. Interest has been allocated to the discontinued operations based on the ratio of the net assets to be sold to the sum of total assets of the net consolidated entity plus consolidated debt other than (a) debt of the discontinued operations that was assumed by the buyer and (b) debt that can be directly attributable to other operations of the enterprise. Segment Information During 1997, the Company sold its Engine Rebuilding and Fluid Power industry segments. The remaining segment is Collision Repair, with operations in North America and Europe. The Collision Repair segment includes frame straightening and vehicle measurement equipment, as well as various tools and accessories. Supplemental Information Quarterly Data The following table contains selected unaudited quarterly consolidated financial data for the last two years including all adjustments which the Company considers necessary to a fair presentation thereof: (Amounts in thousands, except per share amounts) 1997: Quarter: 1st 2nd 3rd 4th Net sales from continuing operations $ 9,599 $10,040 $ 7,482 $11,916 Gross profit from continuing operations 4,434 4,635 3,529 5,729 Net income (loss) from continuing operations 351 339 (125) 772 Earnings (loss) from discontinued operations (81) 5,690 (374) (273) Net income (loss) 270 6,029 (499) 499 ----- ----- ------ ----- Earnings (loss) per share from continuing operations - basic 0.12 0.12 (0.04) 0.27 Earnings (loss) per share from discontinued operations - basic (0.03) 1.96 (0.13) (0.10) Earnings (loss) per share - basic 0.09 2.08 (0.17) 0.17 ----- ------ ----- ----- Earnings (loss) per share from continuing operations - diluted 0.11 0.10 (0.04) 0.25 Earnings (loss) per share from discontinued operations - diluted (0.02) 1.69 (0.12) (0.09) Earnings (loss) per share - diluted 0.09 1.79 (0.16) 0.16 ------ ------ ----- ----- Stock price high 7.500 8.250 8.375 8.375 Stock price low 6.375 6.375 7.250 6.875 ------ ------ ----- ----- (Amounts in thousands, except per share amounts) 1996: Quarter: 1st 2nd 3rd 4th Net sales from continuing operations$10,580 $10,005 $ 8,827 $12,284 Gross profit from continuing operations 5,021 4,706 4,151 5,957 Net income from continuing operations 704 462 206 536 Earnings (loss) from discontinued operations 76 20 (4) 176 Net income 780 482 202 712 ------ ------ ------ ------ Earnings per share from continuing operations - basic 0.24 0.16 0.07 0.19 Earnings per share from discontinued operations - basic 0.03 0.01 0.00 0.06 Earnings per share - basic 0.27 0.17 0.07 0.25 ----- ----- ----- ----- Earnings per share from continuing operations - diluted 0.21 0.14 0.07 0.16 Earnings per share from discontinued operations - diluted 0.03 0.01 0.01 0.06 Earnings per share - diluted 0.24 0.15 0.08 0.22 ----- ------ ------ ------ Stock price high 6.375 8.750 8.000 7.250 Stock price low 4.250 5.813 5.750 6.250 Earnings per share data have been adjusted to give effect to the 5% stock dividend paid January 23, 1998. Geographic Data Data for geographic regions, excluding corporate expenses and eliminations, is presented below: (Amounts in thousands) Net sales Earnings before 1997: unaffiliated income taxes Assets North America $18,220 $ 1,827 $11,956 Europe 20,817 355 19,406 ------ ------ ------ $39,037 $ 2,182 $31,362 ====== ====== ====== 1996: North America $18,510 $ 2,233 $11,548 Europe 23,186 456 24,011 ------ ------ ------ $41,696 $ 2,689 $35,559 ====== ====== ====== 1995: North America $15,777 $ 992 $11,389 Europe 26,042 1,528 25,935 ------ ------ ------ $41,819 $ 2,520 $37,324 ====== ====== ====== Export sales of United States operations made to unaffiliated customers located in foreign countries aggregated $1,875,000, $1,992,000, and $1,461,000, in 1997, 1996, and 1995, respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES The Company did not file a Form 8-K within the 24 months prior to the date of its most recent financial statements that reports a change of accountants and a disagreement on any matter of accounting principles or practices or financial statement disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item with respect to directors and Section 16 compliance is included under the headings "ELECTION OF DIRECTORS" and "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" in the definitive Proxy Statement, relating to the 1998 annual meeting of shareholders (the "Proxy Statement"), and is incorporated herein by reference. Information about executive officers appears at the end of Part I of this Form 10-K under the caption "EXECUTIVE OFFICERS OF REGISTRANT." ITEM 11. EXECUTIVE COMPENSATION Information concerning executive compensation is included under the heading "EXECUTIVE COMPENSATION" in the Proxy Statement and is incorporated herein by reference; provided, however, that the subsection entitled "Report on Executive Compensation" shall not be deemed to be incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning security ownership is included under the heading "STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning relationships and related transactions is included under the headings "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider Participation" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in the Proxy Statement and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. and 2. Financial Statements and Financial Statement Schedules. Reference is made to the separate index to consolidated financial statements and schedules contained hereinafter. 3. Exhibits. Reference is made to the Exhibit Index contained hereinafter. (b) Form 8-K There were no reports on Form 8-K filed during the fiscal quarter ended December 31, 1997. 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. Dated March 31, 1998 HEIN-WERNER CORPORATION By: /s/ J. L. Dindorf J. L. Dindorf President and 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 and in the capacities and on the dates indicated. Dated March 31, 1998 By:/s/ J. L. Dindorf J. L. Dindorf President and Chief Executive Officer; Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) Dated March 31, 1998 By: O. A. Friend Director Dated March 31, 1998 By:/s/ J. S. Jones J. S. Jones Director Dated March 31, 1998 By:/s/ M. J. McSweeney M. J. McSweeney Director Dated March 31, 1998 By:/s/ D. J. Schuetz D. J. Schuetz Director By:/s/ D. L. Krause Dated March 31, 1998 D. L. Krause Director Index to Consolidated Financial Statements and Schedules for Form 10-K The consolidated financial statements of Hein-Werner Corporation and Subsidiaries, together with the opinion thereon of KPMG Peat Marwick LLP dated February 13, 1998, appear in Item 8 of this report. The following additional financial data should be read in conjunction with the financial statements in such 1997 Annual Report to Shareholders. Additional Financial Data Independent Auditors' Report on Financial Statement Schedules Schedule Submitted: II- Valuation and qualifying accounts All other schedules are omitted because they are either not applicable or the required information is shown in the financial statements or the notes thereto. INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Hein-Werner Corporation: Under date of February 13, 1998, we reported on the consolidated balance sheets of Hein-Werner Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income and cash flows for each of the years in the three-year period ended December 31, 1997, as contained in the Annual Report on Form 10-K for the year 1997. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Milwaukee, Wisconsin February 13, 1998 Schedule II VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 1997, 1996 and 1995 (Dollars in thousands) Allowances for Losses(1) Balance at Charged to Balance beginning cost and Other(2) at end of period expenses Additions Deduction(3) of period 1997 $2,151 $ 265 $ 230 $ 603 $2,O43 1996 $2,469 $ 420 $ -- $ 738 $2,151 1995 $2,625 $ 970 $ -- $1,126 $2,469 Inventory Valuation Reserve Balance at Charged to Balance beginning cost and Other at end of period expenses Additions Deduction(4) of period 1997 $ 455 $ 314 $ -- $ 437 $ 332 1996 $ 690 $ 91 $ -- $ 326 $ 455 1995 $ 588 $ 576 $ -- $ 474 $ 690 _____________ (1) Includes allowances for losses on accounts receivable and non- current notes receivable. (2) Increase in allowance for losses on accounts receivable for discontinued operations. (3) Bad debts written off, net of any recoveries. (4) Inventory written off, net of any recoveries. Exhibits (2) Plan of acquistion, reorganization, arrangement, liquidation, or succession: (2.1) Asset Purchase Agreement, dated as of April 9, 1997, by and among the Company, Kaydon Corporation and Kaydon Acquisition VIII, Inc. (incorporated by reference to Exhibit 2 to the Company's Form 8-K, dated April 9, 1997) (2.2) Escrow Agreement, dated as of May 29, 1997, by and among the Company, Kaydon Acquisition VIII, Inc. and Firstar Trust Company (incorporated by reference to Exhibit 2.2 to the Company's Form 8-K, dated May 29, 1997) (2.3) Asset Purchase Agreement, dated as of August 18, 1997, by the Company and Van Norman Equipment Co., Inc. (incorporated by reference to Exhibit 2.1 to the Company's Form 8-K, dated August 28, 1997) (3) Articles of Incorporation and By-Laws: (3.1) Amendments to the By-Laws of the Company (3.2) By-Laws of the Company, as amended through March 12, 1998 (3.3) Restated Articles of Incorporation, as amended through February 21, 1991 (incorporated by reference to Exhibit 3.2 to the Company's Form 10-K for the year ended December 31, 1993) (4) Instruments defining the rights of security holders, including indentures: (4.1) Revolving Loan and Security Agreement dated October 13, 1993 by and between the Company and Firstar Bank Milwaukee, N.A. and Continental Bank N.A. (incorporated by reference to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended October 2, 1993) (4.2) Letter dated October 27, 1994 by Firstar Bank Milwaukee, N.A., as administrator of the Revolving Loan and Security Agreement dated October 13, 1993 by and between the Registrant and Firstar Bank Milwaukee, N.A. and BankAmerica N.A.'s Pacific Business Credit Inc. (formerly Continental Bank, N.A.), extending the Revolving Loan and Security Agreement to May 31, 1996 (incorporated by reference to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended October 1, 1994) (4.3) Letter dated June 25, 1996 by Firstar Bank Milwaukee, N.A., as administrator of the Revolving Loan and Security Agreement dated October 13, 1993 by and between the Company and Firstar Bank Milwaukee, N.A., amending and extending the agreement through June 30, 1999 (incorporated by reference to Exhibit 4 to the Company's Form 10-Q for the quarter ended June 29, 1996) (4.4) Letter dated November 27, 1996 by Firstar Bank Milwaukee, N.A., as administrator of the Revolving Loan and Security Agreement dated October 13, 1993 by and between the Company and Firstar Bank Milwaukee, N.A., amending the agreement (incorporated by reference to Exhibit 4.4 to the Company's Form 10-K for the year ended December 31, 1996) (4.5) Rights Agreement by and between the Company and Firstar Trust Company (formerly First Wisconsin Trust Company) (incorporated by reference to Exhibit 4.8 to the Company's Form 10-K for the year ended December 31, 1993) (10) Material contracts: (10.1) *Change of Control Agreement between the Company and Joseph L. Dindorf dated January 27, 1984 (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K for the year ended December 31, 1993) (10.2) Lease dated January 25, 1983 between the Company and Winvan, Inc. (incorporated by reference to Exhibit 10.3 to the Company's Form 10-K for the year ended December 31, 1993) (10.3) *1987 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Form 10-K for the year ended December 31, 1993) (10.4) *1988 Corporate Officer Incentive Bonus Schedule (incorporated by reference to Exhibit 10.5 to the Company's Form 10-K for the year ended December 31, 1993) (10.5) Option Purchase Agreement, dated as of December 30, 1997, by and between the Company and Massachusetts Mutual Life Insurance Company. (21) Subsidiaries (incorporated by reference to Exhibit 21 to the Company's Form 10-K for the year ended December 31, 1996) (23) Consent of KPMG Peat Marwick LLP (27.1) 1997 Financial Data Schedule (27.2) Restated 1996 Financial Data Schedule (27.3) Restated 1995 Financial Data Schedule (99) Definitive Proxy Statement relating to the 1998 Annual Meeting of Shareholders (to be filed within 120 days of the Company's fiscal 1997 year end) [Except to the extent specifically incorporated by reference, the Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders is not deemed to be filed with the Commission as part of this Annual Report on Form 10-K] ________________ * A management contract or compensatory plan or arrangement EX-3.1 2 Exhibit 3.1 Amendments to the By-Laws of the Company 1.) Pursuant to a resolution of the Board of Directors, the By-Laws of the Company were amended by changing the third sentence of Section 2.05 to read as follows: "In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken." 2.) Pursuant to a resolution of the Board of Directors, the By-Laws of the Company were amended by changing the second sentence of the first paragraph of Section 3.01 to read as follows: "The number of directors of the corporation shall be six." EX-3.2 3 Exhibit 3.2 BY-LAWS OF HEIN-WERNER CORPORATION (a Wisconsin corporation) ARTICLE I. OFFICES 1.01. Principal and Business Offices. The principal office of the corporation shall be located in Waukesha, Wisconsin. The corporation may have such other business offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the corporation may require from time to time. 1.02. Registered Office. The registered office of the corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin may be, but need not be, identical with the principal office in the State of Wisconsin, and the address of the registered office may be changed from time to time by the Board of Directors or by the registered agent. The business office of the registered agent of the corporation shall be identical to such registered office. ARTICLE II. SHAREHOLDERS 2.01. Annual Meeting. The annual meeting of the shareholders shall be held on the second Thursday in April in each year at 2:00 o'clock P.M., or at such other time and date within thirty days before or after said date as may be fixed by or under the authority of the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Wisconsin, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein, or fixed as herein provided, for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as conveniently may be. 2.02. Special Meeting. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or the Board of Directors or by the person designated in the written request of the holders of not less than one- tenth of all shares of the corporation entitled to vote at the meeting. 2.03. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Wisconsin, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Wisconsin, as the place for the holding of such meeting. If no designation is made, or if a special meeting may otherwise be called, the place of meeting shall be the principal business office of the corporation in the State of Wisconsin or such other suitable place in the county of such principal office as may be designated by the person calling such meeting, but any meeting may be adjourned to reconvene at any place designated by vote of a majority of the shares represented thereat. 2.04. Notice of Meeting. Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten days (unless a longer period is required by law or the Restated Articles of Incorporation) nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or other officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock record books of the corporation, with postage thereon prepaid. 2.05. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the close of business on the date on which notice of the meeting is mailed or on the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall be applied to any adjournment thereof except where the determination has been made through the closing of the stock transfer books and the stated period of closing has expired. 2.06. Voting Records. The officer or agent having charge of the stock transfer books for shares of the corporation shall, before each meeting of shareholders, make a complete record of the shareholders entitled to vote at such meeting, or any adjournment thereof, with the address of and the number of shares held by each. Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such record or transfer books or to vote at any meeting of shareholders. Failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting. 2.07. Quorum. Except as otherwise provided in the Restated Articles of Incorporation, a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders unless the vote of a greater number or voting by classes is required by law or the Restated Articles of Incorporation. Though less than a quorum of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. 2.08. Conduct of Meeting. The President, and in his absence, a Vice President in the order provided under Section 4.06, and in their absence, any person chosen by the shareholders present shall call the meeting of the shareholders to order and shall act as chairman of the meeting, and the Secretary of the corporation shall act as secretary of all meetings of the shareholders, but, in the absence of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting. 2.09. Proxies. At all meetings of shareholders, a shareholder entitled to vote may vote in person or by proxy appointed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. Unless otherwise provided in the proxy, a proxy may be revoked at any time before it is voted, either by written notice filed with the Secretary or the acting secretary of the meeting or by oral notice given by the shareholder to the presiding officer during the meeting. The presence of a shareholder who has filed his proxy shall not of itself constitute a revocation. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. The Board of Directors shall have the power and authority to make rules establishing presumptions as to the validity and sufficiency of proxies. 2.10. Voting of Shares. Each outstanding share shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or classes are enlarged, limited or denied by the Restated Articles of Incorporation. 2.11. Voting of Shares by Certain Holders. (a) Other Corporations. Shares standing in the name of another corporation may be voted either in person or by proxy, by the president of such corporation or any other officer appointed by such president. A proxy executed by any principal officer of such other corporation or assistant thereto shall be conclusive evidence of the signer's authority to act, in the absence of express notice to this corporation, given in.writing to the Secretary of this corporation, of the designation of some other person by the board of directors or the by-laws of such other corporation. (b) Legal Representatives and Fiduciaries. Shares held by any administrator, executor, guardian, conservator, trustee in bankruptcy, receiver, or assignee for creditors may be voted by him, either in person or by proxy, without a transfer of such shares into his name provided that there is filed with the Secretary before or at the time of meeting proper evidence of his incumbency and the number of shares held. Shares standing in the name of a fiduciary may be voted by him, either in person or by proxy. A proxy executed by a fiduciary, shall be conclusive evidence of the signer's authority to act, in the absence of express notice to this corporation, given in writing to the Secretary of this corporation, that such manner of voting is expressly prohibited or otherwise directed by the document creating the fiduciary relationship. (c) Pledgees. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. (d) Treasury Stock and Subsidiaries. Neither treasury shares, nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation is held by this corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares entitled to vote, but shares of its own issue held by this corporation in a fiduciary capacity, or held by such other corporation in a fiduciary capacity, may be voted and shall be counted in determining the total number of outstanding shares entitled to vote. (e) Minors. Shares held by a minor may be voted by such minor in person or by proxy and no such vote shall be subject to disaffirmance or avoidance, unless prior to such vote the Secretary of the Corporation has received written notice or has actual knowledge that such shareholder is a minor. (f) Incompetents and Spendthrifts. Shares held by an incompetent or spendthrift may be voted by such incompetent or spendthrift in person or by proxy and no such vote shall be subject to disaffirmance or avoidance, unless prior to such vote the Secretary of the corporation has been adjudicated an incompetent or spendthrift or actual knowledge of filing of judicial proceedings for appointment of a guardian. (g) Joint Tenants. Shares registered in the names of two or more individuals who are named in the registration as joint tenants may be voted in person or by proxy signed by any one or more such individuals if either (i) no other such individual or his legal representative is present and claims the right to participate in the voting of such shares or prior to the vote filed with the Secretary of the corporation a contrary written voting authorization or direction or written denial of authority of the individual present or signing the proxy proposed to be voted or (ii) all such other individuals are deceased and the Secretary of the corporation has no actual knowledge that the survivor has been adjudicated not to be the successor to the interests of those deceased. 2.12. Waiver of Notice by Shareholders. Whenever any notice whatever is required to be given to any shareholder of the corporation under the Restated Articles of Incorporation or By-laws or any provision of law, a waiver thereof in writing, signed at any time, whether before or after the time of meeting, by the shareholder entitled to such notice, shall be deemed equivalent to the giving of such notice; provided that such waiver in respect to any matter of which notice is required under any provision of the Wisconsin Business Corporation Law, shall contain the same information as would have been required to be included in such notice, excePt the time and place of meeting. 2.13. Unanimous Consent without Meeting. Any action required or permitted by the Restated Articles of Incorporation or By-laws or any provision of law to be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE III. BOARD OF DIRECTORS 3.01. General Powers, Classification and Number. The business and affairs of the corporation shall be managed by its Board of Directors. The number of directors of the corporation shall be six. At the 1978 annual meeting of shareholders, the directors of the first class shall be elected for a term to expire at the first annual meeting of shareholders after their election, the directors of the second class shall be elected for a term to expire at the second annual meeting of shareholders after their election, and the directors of the third class shall be elected for a term to expire at the third annual meeting of shareholders after their election. At each annual meeting of shareholders the successors to the class of directors whose terms shall expire at the time of such annual meeting shall be elected to hold office until the third succeeding annual meeting of shareholders. Each director shall hold office for the term for which he is elected and until his successor is elected and qualified or until his prior death, resignation or removal. A director may resign at any time by filing his written resignation with the Secretary of the corporation. 3.02. Tenure and Qualifications. Directors shall be shareholders of the corporation. No director will stand for re-election as a director who has attained age 72 on or before the annual meeting of shareholders. A director who is an officer of the corporation and who shall retire or otherwise terminate employment as such officer shall automatically be retired as a director of the corporation and thereafter shall not be eligible for reelection as a director, unless his continued service as a director is approved by the number of directors specified in Article IX of the Restated Articles of Incorporation. 3.03. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this By-Law immediately after the annual meeting of share-holders, and each adjourned session thereof. The place of such regular meeting shall be the same as the place of the meeting of shareholders which precedes it, or such other suitable place as may be announced at such meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings without other notice than such resolution. 3.04. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the President, Secretary or any two directors. The person or persons calling any special meeting of the Board of Directors may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting of the Board of Directors called by them, and if no other place is fixed the place of meeting shall be the principal business office of the corporation in the State of Wisconsin. 3.05. Notice: Waiver. Notice of each meeting of the Board of Directors (unless otherwise provided in or pursuant to Section 3.03) shall be given to each director not less than 48 hours prior to the meeting by giving oral, telephone or written notice to a director in person, or by telegram of not not less than four days prior to a meeting by delivering or mailing written notice to the business address or such other address as a director shall have designated in writing filed with the Secretary. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Whenever any notice whatever is required to be given to any director of the corporation under the Restated Articles of Incorporation or By-laws or any provision of law, a waiver thereof in writing, signed at any time, whether before or after the time of meeting, by the director entitled to such notice, shall be deemed equivalent to the giving of such notice. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting and objects thereat to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of waiver of notice of such meeting. 3.06. Quorum. Except as otherwise provided by law or by the Restated Articles of Incorporation or these By-laws, a majority of the number of directors as provided in Section 3.01 shall constitute a quorum for the transaction of business at any Meeting of the Board of Directors, but a majority of the directors present (though less than such quorum) may adjourn the meeting from time to time without further notice. 3.07. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by law or by the Restated Articles of Incorporation or these By- laws. 3.08. Conduct of Meetings. The President, and in his absence, a Vice-President in the order provided under Section 4.06, and in their absence, any director chosen by the directors present, shall call meetings of the Board of Directors to order and shall act as chairman of the meeting. The Secretary of the Board of Directors, but in the absence of the Secretary, the presiding officer may appoint any Assistant Secretary or any director or other person present to act as secretary of the meeting. 3.09. Vacancies. If the office of any director or directors becomes vacant for any reason, the vacancy shall be filled as provided for in the Restated Articles of Incorporation. 3.10. Compensation. The Board of Directors, by affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, may establish reasonable compensation of all directors for services to the corporation as directors, or may delegate such authority to an appropriate committee. The Board of Directors shall establish the compensation of the President, who shall have the authority under Section 4.05 to establish the compensation, exclusive of the benefits hereinafter referred to in this Section 3.10, of the other officers, employees and agents of the corporation. The Board of Directors also shall have authority to provide for or to delegate authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, and other benefits or payments, to directors, officers and employees and.to their estates, families, dependents or beneficiaries on account of prior services rendered by such directors, officers and employees to the corporation. 3.11. Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors or committee thereof of which he is a member at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 3.12. Committees. The Board of Directors by resolution adopted by the affirmative vote of a majority of the number of directors as provided in Section 3.01 may designate one or more committees, each committee to consist of three or more directors elected by the Board of Directors, which to the extent provided in said resolution as initially adopted, and as thereafter supplemented or amended by further resolution adopted by a like vote, shall have and may exercise, when the Board of Directors is not in session, the powers of the Board of Directors in the management of the business and affairs of the corporation, except action in respect to dividends to shareholders, election of the principal officers or the filing of vacancies in the Board of Directors or committees created pursuant to this section. The Board of Directors may elect one or more of its members as alternate members of any such committee who may take the place of any absent member or members at any meeting of such committee, upon request by the President or upon request by the chairman of such meeting. Each such committee shall fix its own rules governing the conduct of its activities and shall make such reports to the Board of Directors of its activities as the Board of Directors may request. 3.13. Unanimous Consent Without Meeting. Any action required or permitted by the Restated Articles of Incorporation or By-laws or any provision of law to be taken by the Board of Directors at a meeting or by resolution may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors then in office. ARTICLE IV. OFFICERS 4.01. Number. The principal officers of the corporation shall be a President, Vice-Presidents, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person, except the offices of President and Secretary and the offices of President and Vice President. 4.02. Election and Term of Office. The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected or until his prior death, resignation or removal. 4.03. Removal. Any officer or agent may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment shall not of itself create contract rights. 4.04. Vacancies. A vacancy in any principal office because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term. 4.05. President. The President shall be the principal executive offIcer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. He shall, when present, preside at all meetings of the shareholders and of the Board of Directors. He shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such employees and agents of the corporation as he shall deem necessary, to prescribe their powers, and duties and to delegate authority to them. The President shall establish the compensation, exclusive of certain benefits provided by the Board of Directors under Section 3.10, of the other officers, employees and agents of the corporation. Such employees and agents shall hold office at the discretion of the President. He shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, he may authorize any Vice President or other officer or agent of the corporation to assign, execute and acknowledge such documents or instruments in his place and stead. In general he shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. 4.06. The Vice Presidents. In the absence of the President or in the event of his death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Vice-President (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice-President may sign, with the Secretary or Assistant Secretary, certificates for shares of the corporation; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him by the President or by the Board of Directors. The execution of any instrument of the corporation by any Vice-President shall be conclusive evidence, as to third parties, of his authority to act in the stead of the President. 4.07. The Secretary. The Secretary shall: (a) keep the minutes of the meetings of the shareholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corportion and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep or arrange for the keeping of a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the President, or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned to him by the President or by the Board of Directors. 4.08. The Treasurer. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 5.04; and (c) in general perform all of the duties incident to the office of Treasurer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him by the President or by the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. 4.09. Assistant Secretaries and Assistant Treasurers. There shall be such number of Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time authorize. The Assistant Secretaries may sign with the President or a Vice-President certificates for shares of the corporation the issuance of which shall have been authorized by-a resolution of the Board of Directors. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties and have such authority as shall from time to time be delegated or assigned to them by the Secretary or the Treasurer, respectively, or by the President or the Board of Directors. 4.10. Other Assistants and Acting Officers. The Board of Directors shall have the power to appoint any person to act as assistant to any officer, or as agent for the corporation in his stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors shall have the power to Perform all the duties of the office to which he is so appointed to be assistant, or as to which he is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors. ARTICLE V. CONTRACTS, LOANS, CHECKS AID DEPOSITS; SPECIAL CORPORATE ACTS 5.01. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute or deliver any instrument in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages and instruments of assignment or pledge made by the corporation shall be executed in the name of the corporation by the President or one of the Vice-Presidents and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or required, shall affix the corporate seal thereto; and when so executed no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers. 5.02. Loans. No indebtedness for borrowed money shall be contracted on behalf of the corporation and no evidences of such indebtedness shall. be issued in its name unless authorized by or under the authority or a resolution of the Board of Directors. Such authorization may be general or confined to specific instances. 5.03. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by or under the authority of a resolution of the Board of Directors. 5.04. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as may be selected by or under the authority of a resolution of the Board of Directors. 5.05. Voting of Securities Owned by this Corporation. Subject always to the specific directions of the Board Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this corporation may be voted at any meeting of security holders of such other corporation by the President of this corporation if he be present, or in his absence by any Vice President of this corporation who may be present, and (b) whenever, in the judgment of the President, or on his absence by any Vice President, it is desirable for this corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other corporation and owned by this corporation, such proxy or consent shall be executed in the name of this corporation by the President or one of the Vice Presidents of this corporation without necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this corporation the same as such shares or other securities might be voted by this corporation. ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER 6.01. Certificates for Shares. Certificates representing shares of the corporation shall be in such form, consistent with law, as shall be determined by the Board of Directors. Such certificates shall be signed by the President or a Vice-President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except as provided in Section 6.06. 6.02. Facsimile Signatures and Seal. The seal of the corporation on any certificate for snares may be a facsimile. The signatures of the President or Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or a registrar, other than the corporation itself or an employee of the corporation. 6.03. Signature by Former Officers. In case any officer, who has signed or whose facsimile signature has been placed upon any certificate for shares, shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. 6.04. Transfer of Shares. Prior to due presentment of a certificate for shares for registration of transfer the corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to have and exercise all the rights and power of an owner. Where a certificate for shares is presented to the corporation with a request to register for transfer, the corporation shall not be liable to the owner or any other person suffering loss as a result of such registration of transfer if (a) there were on or with the certificate the necessary endorsements, and (b) the corporation had no duty to inquire into adverse claims or has discharged any such duty. The corporation may require reasonable assurance that said endorsements are genuine and effective and compliance with such other regulations as may be prescribed by or under the authority of the Board of Directors. 6.05. Restrictions on Transfer. The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction imposed by the corporation upon the transfer of such shares. 6.06. Lost, Destroyed or Stolen Certificates. Where the owner claims that his certificate for shares has been lost, destroyed or wrongfully taken, a new certificate shall be issued in place thereof if the owner (a) so requests before the corporation has notice that such shares have been acquired by a bona fide purchaser, and (b) files with the corporation a sufficient indemnity bond, and (c) satisfies such other reasonable requirements as may be prescribed by or under the authority of the Board of Directors. 6.07. Consideration for Shares. The shares of the corporation may be issued for such consideration as shall be fixed from time to time by the Board of Directors, provided that any shares having a par value shall not be issued for a consideration less than the par value thereof. The consideration to be paid for shares may be paid in whole or in part, in money, in other property, tangible or intangible, or in labor or services actually performed for the corporation. When payment of the consideration for which shares are to be issued shall have been received by the corporation, such shares shall be deemed to be fully paid and nonassessable by the corporation. No certificate shall be issued for any share until such share is fully paid. 6.08. Stock Regulations. The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with the statutes of the State of Wisconsin as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the corporation. ARTICLE VII. SEAL 7.01. The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words, "Corporate Seal". ARTICLE VIII. INDEMNIFICATION 8.01. Certain Definitions. All capitalized terms used in this Article VIII and not otherwise hereinafter defined in this Section 8.01 shall have the meaning set forth in Section 180.042 of the Statute. The following capitalized terms (including any plural forms thereof) used in this Article VIII shall be defined as follows: (a) "Affiliate" shall include, without limitation, any corporation, partnership, joint venture, employee benefit plan, trust or other enterprise that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the corporation. (b) "Authority" shall mean the entity selected by the Director or Officer to determine his or her right to indemnification pursuant to Section 8.04. (c) "Board" shall mean the entire then elected and serving board of directors of the corporation, including all members thereof who are parties to the subject proceeding or any related proceeding. (d) "Breach of Duty" shall mean the Director or Officer breached or failed to perform his or her duties to the corporation and his or her breach of or failure to perform those duties is determined, in accordance with Section 8.04, to constitute misconduct under Section 180.044(2) (a) l, 2, 3 or 4 of this Statute. (e) "Corporation," as used herein and as defined in the Statute and incorporated by reference into the definitions of certain other capitalized terms used herein, shall mean this corporation, including, without limitation, any successor corporation or entity to this corporation by way of merger, consolidation or acquisition of all or substantially all of the capital stock or assets of this corporation. (f) "Director or Officer" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article VIII, it shall be conclusively presumed that any Director or Officer serving as a director, officer, partner, trustee, member of any governing or decision-making committee, employee or agent of an Affiliate shall be so serving to the request of the corporation. (g) "Disinterested Quorum" shall mean a quorum of the Board who are not parties to the subject proceeding or any related proceeding. (h) "Party" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article VIII the term "Party" shall also include any Director or Officer who is or was witness in a preceeding at a time when he or she has not otherwise been formally named a party thereto. (i) "Proceeding" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article VIII, the term "Proceeding" shall also include all Proceedings (i) brought under (in whole or in part) the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, their respective state counterparts, and/or any rule or regulation promulgated under any of the foregoing; (ii) brought before an Authority or otherwise to enforce rights hereunder; (iii) any appeal from a Proceeding; and (iv) any Proceeding in which the Director or Officer is a plaintiff or petitioner because he or she is a Director or Officer; provided, however, that such Proceeding is authorized by a majority vote of a Disinterested Quorum. (j) "Statute" shall mean Sections 180.042 through 180.059, inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes, as the same shall then be in effect, including any amendments thereto, but, in the case of any such amendment, only to the extent such amendment permits or requires the corporation to provide broader indemnification rights than the Statute permitted or required the corporation to provide prior to such amendment. 8.02. Mandatory Indemnification. To the fullest extent permitted or required by the Statute, the corporation shall indemnify a Director or Officer against all liabilities incurred by or on behalf of such Director or Officer in connection with a proceeding in which the Director or Officer is a party because he or she is a Director or Officer. 8.03. Procedure Requirements. (a) A Director or Officer who seeks indemnification under Section 8.02 shall make a written request therefor to the corporation. Subject to Section 8.03(b), within sixty days of the corporation's receipt of such request, the corporation shall pay or reimburse the Director or Officer for the entire amount of liabilities incurred by the Director or Officer in connection with the subject proceeding (net of any expenses previously advanced pursuant to Section 8.05). (b) No indemnification shall be required to be paid by the corporation pursuant to Section 8.02 if, within such sixty-day period: (i) a Disinterested Quorum, by a majority vote thereof, determines that the Director or Officer requesting indemnification engaged in misconduct constituting a Breach of Duty; or (ii) a Disinterested Quorum cannot be obtained. (c) In either case of nonpayment pursuant to Section 8.03(b), the Board shall immediately authorize by resolution that an Authority, as provided in Section 8.04, determine whether the Director's or Officer's conduct constituted a Breach of Duty and, therefore, whether indemnification should be denied hereunder. (d) If the Board does not authorize an Authority to determine the Director's or Officer's right to indemnification hereunder within such sixty-day period and/or if indemnification of the requested amount of Liabilities is paid by the Corporation, then it shall be conclusively presumed for all purposes that a Disinterested Quorum has determined that the Director or Officer did not engage in misconduct constituting a Breach of Duty. 8.04. Determination of Indemnification. (a) If the Board authorizes an Authority to determine a Director's or Officer's right to indemnification pursuant to Section 8.03, then the Director or Officer requesting indemnification shall have the absolute discretionary authority to select one of the following as such Authority. (i) An independent legal counsel; provided, that such counsel shall be mutually selected by such Director or Officer and by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board. (ii) A panel of three arbitrators selected from the panels of arbitrators of the American Arbitration Association in Milwaukee Wisconsin; provided, that (A) one arbitrator shall be selected by such Director or Officer, the second arbitrator shall be selected by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, than by a majority vote of the Board, and the third arbitrator shall be selected by the two previously selected arbitrators; and (B) in all other respects, such panel shall be governed by the American Arbitration Association's then existing. Commercial Arbitration Rules; or (iii) A court pursuant to and in accordance with Section 180.051 of the Statute. (b) In any such determination by the selected Authority there shall exist a rebuttable presumption that the Director's or Officer's conduct did not constitute a Breach of Duty and that indemnification against the requested amount of Liabilities is required. The burden of rebutting such a presumption by clear and convincing evidence shall be on the Corporation or such other party asserting that such indemnification should not be allowed. (c) The Authority shall make its determination within sixty days of being selected and shall submit a written opinion of its conclusion simultaneously to both the corporation and the Director or Officer. (d) If the Authority determines that indemnification is required hereunder, the corporation shall pay the entire requested amount of Liabilities (net of any Expenses previously advanced pursuant to Section 8.05), including interest thereon at a reasonable rate, as determined by the Authority, within ten days of receipt of the Authority's opinion; provided, that, if it is determined by the Authority that a Director or Officer is entitled to indemnification as to some claims, issues or matters, but not as to other claims, issues or matters, involved in the subject Proceeding, the corporation shall be required to pay (as set forth above) only the amount of such requested Liabilities ask the authority shall deem appropriate in light of all of the circumstances of such Proceeding. (e) The determination by the Authority that indemnification is required hereunder shall be binding upon the corporation regardless of any prior determination that the Director or Officer engaged in a Breach of Duty. (f) All Expenses incurred in the determination process under this Section 8.04 by either the corporation or the Director or Officer, including, without limitation, all Expenses of the selected Authority, shall be paid by the corporation. 8.05. Mandatory Allowance of Expense. (a) The corporation shall pay or reimburse, within ten days after the receipt of the Director's or Officer's written request therefor, the reasonable Expenses of the Director or Officer as such Expenses are incurred, provided the following conditions are satisfied: (i) The Director or Officer furnishes to the corporation an executed written certificate affirming his or her good faith belief that he or she has not engaged in misconduct which constitutes a Breach of Duty; and (ii) The Director or Officer furnishes to the corporation an unsecured executed written agreement to repay any advances made under this Section 8.05 if it is ultimately determined by an Authority that he or she is not entitled to be indemnified by the corporation for such Expenses pursuant to this Section 8.04. (b) If the Director or Officer must repay any previously advanced Expenses pursuant to this Section 8.05, such Director or Officer shall not be required to pay interest on such amounts. 8.06. Indemnification and Allowance of Expenses of Certain Others. (a) The corporation shall indemnify a director or officer of an Affiliate (who is not otherwise serving as a Director or Officer) against all Liabilities, and shall advance the reasonable Expenses, incurred by such director or officer in a Proceeding to the same extent hereunder as if such director or officer incurred such Liabilities because he or she was a Director or Officer, if such director or officer is a Party thereto because he or she is or was a director or officer of the Affiliate. (b) The Board may, in its sole and absolute discretion as it deems appropriate, pursuant to a majority vote thereof, indemnify against Liabilities incurred by, and/or provide for the allowance of reasonable Expenses of, an authorized employee or agent of the corporation acting within the scope of his or her duties as such and who is not otherwise a Director or Officer. 8.07. Insurance. The corporation may purchase and maintain insurance on behalf of a Director or Officer or any individual who is or was an authorized employee or agent of the corporation against any Liability asserted against or incurred by such individual in his or her capacity as such or arising from his or her status as such, regardless of whether the corporation is required or permitted to indemnify against any such Liability under this Article VIII. 8.08. Notice to the Corporation. A Director or Officer shall promptly notify the corporation in writing when he or she has actual knowledge of a Proceeding which may result in a claim of indemnification against Liabilities or allowance of Expenses hereunder, but the failure to do so shall not relieve the corporation of any liability to the Director or Officer hereunder unless the corporation shall have been irreparably prejudiced by such failure (as determined by an Authority). 8.09. Severability. If any provision of this Article VIII shall be deemed invalid or inoperative, or if a court of competent jurisdiction determines that any of the provisions of this Article VIII contravene public policy, this Article VIII shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect and any such provisions which are invalid or inoperative or which contravene public policy shall be deemed, without further action or deed by or on behalf of the corporation, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable. 8.10. Nonexclusivity, of Article VIII. The rights of a Director or Officer (or any other person) granted under this Article VIII shall not be deemed exclusive of any other rights to indemnification against Liabilities or advancement of Expenses which the Director or Officer (or such other person) may be entitled to under any written agreement, Board resoLution, vote of shareholders of the corporation or otherwise, including, without limitation, under the Statute. Nothing contained in this Article VIII shall be deemed to limit the corporation's obligations to indemnify a Director or Officer under the Statute. 8.11. ContractuaL Nature of Article VIII: Repeal or Limitation of Rights. This Article VIII shall be deemed to be a contract between the corporation and each Director and Officer and any repeal or other limitation of this Article VIII or any repeal or limitation of the Statute or any other applicable law shall not limit any rights of indemnification against Liabilities or allowance of Expenses then existing or arising out of events, acts or omissions occurring prior to such repeal or limitation, including, without limitation, the right to indemnification against Liabilities or allowance of Expenses for Proceedings commenced after such repeal or limitation to enforce this Article VIII with regard to acts, omissions or events arising prior to such repeal or limitation. ARTICLE IX. AMENDMENTS 9.01. Except as otherwise provided in the Restated Articles of Incorporation, these By-laws may be altered, amended or repealed and new By-laws may be adopted by the shareholders by the affirmative vote of a majority of the shares present or represented at any annual or special meeting of the shareholders or by the affirmative vote of a majority of the entire number of directors authorized, at any general or special meeting of such Board of Directors. EX-10.5 4 Exhibit 10.5 OPTION PURCHASE AGREEMENT This OPTION PURCHASE AGREEMENT dated effective as of December 30, 1997 by and between Hein-Werner Corporation, a Wisconsin corporation (the "Company") and Massachusetts Mutual Life Insurance Company, a Massachusetts corporation, MassMutual Participation Investors and MassMutual Corporate Investors (collectively the "Seller"), WITNESSETH WHEREAS, the Seller is the holder of certain options entitling the holder thereof to purchase a total of 752,478 duly authorized, validly issued and fully paid shares of the Company's common stock, at a purchase price of $5.98 per share and represented by certain Hein-Werner Corporation Certificates dated as of September 3, 1996 and May 30, 1997 (the "Options"), and WHEREAS, the Company desires to acquire the Options and the Seller desires to sell the Options in accordance with the terms, conditions and provisions set forth herein. NOW THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth herein, and other fair and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Purchase and Sale of the Options. Terms. Subject to the terms and conditions of this Agreement, the Seller hereby sells the Options to the Company, and the Company hereby purchases the Options from the Seller, for an aggregate purchase price of $1,000,000 (One Million Dollars). Payment of the aggregate purchase price shall be made by the Company in immediately available funds and the Seller will thereafter promptly deliver the Options to the Company duly endorsed in form to be transferred to the Company. Such payment and delivery shall occur as soon as possible, but in no event later than January 30, 1998. 2. Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Company as follows: (a) Corporate Organization and Authority. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, with corporate power to own its properties and to conduct its business as now conducted. The Seller has full legal right, power and authority to enter into and perform this Agreement. (b) Authorization. The execution and delivery of this Agreement by the Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Seller. (c) Title. The Seller has good and marketable title to the Options, with full power to deliver the Options hereunder. Upon payment for the Options pursuant to this Agreement, the Company will receive good and marketable title to the Options, free and clear of all liens, encumbrances, claims, security interests and defects. 3. Representations and Warranties of the Company. The Company hereby represents and warrants to the Seller as follows: (a) Corporate Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Wisconsin, with corporate power to own its properties and to conduct its business as now conducted. The Company has full legal right, power and authority to enter into and perform this Agreement. (b) Authorization. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement constitutes a legal, valid and binding agreement of the Company. (c) No Conflicts. Neither the execution and delivery of this Agreement by the Company, nor the consummation of the transactions contemplated hereby, will violate or conflict with (i) any provisions of the Certificate of Incorporation or Bylaws of the Company, (ii) any agreement or instrument to which the Company is a party or by which the Company or any of its assets or properties are subject or (iii) any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any court, government, government agency or instrumentality, domestic or foreign, binding upon the Company. 4. Price Adjustment Event. If at any time prior to January 20, 1999, any Price Adjustment Event (as hereinafter defined) occurs or an agreement in principle concerning the material terms of a Price Adjustment Event is reached, then the Company shall immediately notify the Seller. Contemporaneously with the consummation of the Price Adjustment Event, the Company shall pay to the Seller an amount equal to 752,478 times the excess, if any, of (i) the per share purchase price determined as of the date upon which such Price Adjustment Event is consummated and paid in connection with the Price Adjustment Event, over (ii) $7.31 per share. All computations made pursuant to this section and paid to Seller shall be made in writing and shall be satisfactory to Seller. For purposes herein, Price Adjustment Event shall mean any Change of Control of the Company. "Change of Control" shall mean and shall be deemed to have occurred if at any time for whatever reason any Person together with "affiliates" and "associates" of such Person, within the meaning of Rule 12b-2 of the Commission under the Exchange Act, shall acquire control or beneficial ownership (including beneficial ownership resulting from the formation of a "group" within the meaning of Rule 13d-5 of the Commission under the Exchange Act) of more than 51% of the shares of any class of voting stock of the Company. 5. Miscellaneous. (a) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. (b) Expenses. Each party shall bear its own expenses and costs for any and all transactions contemplated by this Agreement. (c) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by and against the successors and assigns of the parties hereto. (d) Amendments. This Agreement embodies all representations, warranties and agreements of the parties hereto, supersedes any prior agreement and the understanding between the parties with respect to the subject matter of this Agreement. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by both the parties hereto. However, either party may waive any condition to the obligation of the other party hereunder. (e) Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given, if given) by delivery, by facsimile transmission or by mail (registered or certified mail, postage prepaid, return receipt requested) to the respective parties as follows: If to the Company: Hein-Werner Corporation 2120 Pewaukee Road Waukesha, Wisconsin 53188 Attention: J.L. Dindorf, President and C.E.O. If to the Seller: Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA 01111-0001 Attention: Roger W. Crandall or at such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the substantive law of the Commonwealth of Massachusetts without giving effect to the principles of conflict of laws thereof. (g) Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement. IN WITNESS WHEREOF, HEIN-WERNER CORPORATION and MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY have caused this Agreement to be duly executed as of the day and year first above written. HEIN-WERNER CORPORATION By:/s/ Joseph L. Dindorf Name: Joseph L. Dindorf Title: President and Chief Executive Officer Seller: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, MassMutual Participation Investors and MassMutual Corporate Investors By:/s/ Charles C. McCobb Name: Charles C. McCobb Title: Managing Director EX-23 5 Exhibit 23 Consent of KPMG Peat Marwick LLP The Board of Directors Hein-Werner Corporation: We consent to incorporation by reference in the registration statement (Registration No. 333-48633) on Form S-8 of Hein-Werner Corporation of our report dated February 13, 1998, relating to the consolidated balance sheets of Hein-Werner Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1997, and our report dated February 13, 1998, relating to the financial statement schedule for each of the years in the three-year period ended December 31, 1997 which reports appear in the December 31, 1997 Annual Report on Form 10-K of Hein-Werner Corporation. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Milwaukee, Wisconsin March 31, 1998 EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997, THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997; AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1997 DEC-31-1997 9,696 0 13,750 1,570 9,876 33,386 7,529 4,729 37,348 12,885 0 2,771 0 0 19,331 37,348 39,037 39,037 20,710 37,228 80 265 95 1,634 297 1,337 4,962 0 0 6,299 2.17 1.96
EX-27 7
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996, AND THE COMPUTATION OF EARNINGS PER SHARE (EXHIBIT 11) FOR THE YEAR ENDED DECEMBER 31, 1996; AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS. 1,000 YEAR DEC-31-1996 DEC-31-1996 0 0 20,445 1,651 17,415 37,090 17,576 12,125 45,598 16,197 0 2,629 0 0 15,307 45,598 41,696 41,696 21,861 38,726 165 420 775 2,030 122 1,908 268 0 0 2,176 0.75 0.69
EX-27 8
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995, AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995, AND THE COMPUTATION OF EARNINGS PER SHARE (EXHIBIT 11) FOR THE YEAR ENDED DECEMBER 31, 1995; AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS. 1,000 YEAR DEC-31-1995 DEC-31-1995 396 0 25,019 1,742 17,271 41,525 16,517 11,163 49,657 20,749 0 2,504 0 0 13,641 49,657 41,819 41,819 21,714 39,882 91 970 990 856 (36) 892 121 0 0 1,013 0.35 0.32
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