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LADISH CO., INC.
(Name of Registrant as Specified in its Charter)
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LADISH CO., INC.
5481 South Packard Avenue
Cudahy, Wisconsin 53110
To Stockholders:
An Annual Meeting of Stockholders of Ladish Co., Inc., a Wisconsin corporation (the “Company”), will be held in the Creole Meeting Room of the Four Points Hotel Sheraton Milwaukee Airport located at 4747 South Howell Avenue, Milwaukee, Wisconsin on Tuesday, April 6, 2004 at 10:00 a.m. Central Daylight Time, for the following purposes:
| (1) To elect six (6) Directors, to serve for the term of one year or until their successors have been elected and have duly qualified. |
| (2) To approve, pursuant to Section 180.1150(5)(c) of the Wisconsin Business Corporation Law, all shares of common stock of the Company owned beneficially by Grace Brothers Ltd. having "regular voting power" of one vote per share on all matters brought to a vote of stockholders, and waiving the restrictions contained in section 180.1150(2) of the Wisconsin Business Corporation Law as to such shares. |
| (3) To transact such other business as may properly come before the meeting or any adjournment thereof. |
Only Stockholders of record at the close of business on March 1, 2004 will be entitled to notice of and to vote at the 2004 Annual Meeting or any adjournment thereof, notwithstanding the transfer of any stock on the books of the Company after such record date.
A Proxy Statement and proxy card accompany this Notice of Annual Meeting of Stockholders.
| /s/ Wayne E. Larsen | |
| Wayne E. Larsen | |
| Secretary |
Cudahy, Wisconsin
February 24, 2004
LADISH CO., INC.
5481 South Packard Avenue
Cudahy, Wisconsin 53110
This Proxy Statement is furnished to the stockholders of Ladish Co., Inc. (the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the Annual Meeting of Stockholders of the Company to be held at the Four Points Hotel Sheraton Milwaukee Airport, Creole Meeting Room, 4747 South Howell Avenue, Milwaukee, Wisconsin on Tuesday, April 6, 2004 at 10:00 a.m., Central Daylight Time (the “2004 Annual Meeting”), or at any adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement and the enclosed form of proxy are being mailed to stockholders on or about March 15, 2004.
Any stockholder giving the proxy enclosed with this Proxy Statement has the power to revoke such proxy at any time prior to the exercise thereof by filing with the Company a written revocation at or prior to the 2004 Annual Meeting, by executing a proxy bearing a later date or by attending the 2004 Annual Meeting and voting in person the shares of stock that such stockholder is entitled to vote. Unless the persons named in the proxy are prevented from acting by circumstances beyond their control, the proxy will be voted at the 2004 Annual Meeting and at any adjournment thereof in the manner specified therein, or if not specified, the proxy will be voted:
(1) FOR the election of the six (6) nominees listed under “Election of Directors” as nominees of the Company for election as directors to hold office until the next Annual Meeting of Stockholders or until their successors are elected and qualified;
(2) To approve, pursuant to Section 180.1150(5)(c) of the Wisconsin Business Corporation Law, all shares of common stock of the Company owned beneficially by Grace Brothers Ltd. having "regular voting power" of one vote per share on all matters brought to a vote of stockholders, and waiving the restrictions contained in Section 180.1150(2) of the Wisconsin Business Corporation Law as to such shares.
(3) At the discretion of the persons named in the enclosed form of proxy, on any other matter that may properly come before the 2004 Annual Meeting or any adjournment thereof.
The enclosed proxy is solicited by and on behalf of the Board of Directors of the Company. The expense of the solicitation of proxies for the 2004 Annual Meeting, including the cost of mailing, will be borne by the Company. To the extent necessary to assure sufficient representation at the 2004 Annual Meeting, officers and regular employees of the Company, at no additional compensation, may request the return of proxies personally, by telephone, facsimile, mail, or other method. The extent to which this will be necessary depends entirely upon how promptly proxies are received. Stockholders are urged to send in their proxies without delay. The Company will supply brokers, nominees, fiduciaries and other custodians with proxy materials to forward to beneficial owners of shares in connection with the request from the beneficial owners of authority to execute such proxies, and the Company will reimburse such brokers, nominees, fiduciaries and other custodians for their expenses in making such distribution. Management has no knowledge or information that any other person will specifically engage any persons to solicit proxies.
1
The outstanding voting securities of the Company consist entirely of shares of Common Stock, $0.01 par value per share, each share of which entitles the holder thereof to one vote. The record date for the determination of the stockholders entitled to notice of and to vote at the 2004 Annual Meeting, or any adjournment thereof, has been established by the Board of Directors as the close of business on March 1, 2004. At that date, there were outstanding and entitled to vote 13,023,393 shares of Common Stock.
The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares of Common Stock entitled to vote is necessary to constitute a quorum for the transaction of business at the 2004 Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors.
The proxy card provides space for a stockholder to withhold voting for any nominee for the Board of Directors or to abstain from voting for any other proposal if the stockholder chooses to do so. Under Wisconsin law, directors are elected by a plurality of the votes cast at the meeting. Each other matter to be submitted to the stockholders requires the affirmative vote of a majority of the votes cast at the meeting. For purposes of determining the number of votes cast with respect to any voting matter, only those cast “for” or “against” are included. Abstentions and broker non-votes are counted only for purposes of determining whether a quorum is present at the meeting.
As of February 20, 2004, no person was known by the Company to own beneficially more than five percent (5%) of the outstanding shares of Common Stock of the Company, except as shown in the following table:
| Name and Address Of Beneficial Owner | Number of Shares Beneficially Owned | Percent Of Class |
|---|---|---|
Grace Brothers Ltd.1 | 3,858,973 | 29.6% |
| 1650 Sherman Avenue, Suite 900 | ||
| Evanston, Illinois 60201 | ||
State Street Research & Management Company1 | 1,384,417 | 10.6% |
| 1 Financial Center, 30th Floor | ||
| Boston, Massachusetts 02111 | ||
Wellington Management Company, LLP1, 2 | 1,246,600 | 9.6% |
| 75 State Street, 19th Floor | ||
| Boston, Massachusetts 02109 | ||
Dimensional Fund Advisors Inc.1 | 991,110 | 7.6% |
| 1299 Ocean Avenue, 11th Floor | ||
| Santa Monica, California 90401 | ||
FleetBoston Financial Corporation1, 3 | 783,588 | 6.0% |
| 111 Westminster Street | ||
| Providence, Rhode Island 02903 |
1 Information regarding the above stockholders and their beneficial ownership of the Company’s shares was obtained from the Schedule 13D/A of Grace Brothers Ltd. dated August 15, 2003, the Schedule 13G of Dimensional Fund Advisors Inc. dated December 31, 2003, the Schedule 13G of State Street Research & Management Company dated December 31, 2003, the Schedule 13G of Wellington Management Company, LLP dated December 31, 2003 and the Schedule 13G of FleetBoston Financial Corporation dated December 31, 2003.
2 The Wellington Management Company, LLP ownership position is comprised of 1,246,600 shares with shared dispositive power and 410,600 shares with shared voting power.
3 The FleetBoston Financial Corporation ownership position is comprised of 779,688 shares with sole dispositive power, 3,900 shares with shared dispositive power and 663,688 shares with shared voting power.
2
The following table shows the number of shares of Common Stock beneficially owned by each director or nominee, by the executive officers named below in the Summary Compensation Table and by all directors, nominees and executive officers as a group, based upon information supplied by them:
| Name | Number of Shares Beneficially Owned At February 20, 20041 | Percent Of Class | ||||||
|---|---|---|---|---|---|---|---|---|
| Lawrence W. Bianchi | 5,000 | * | ||||||
| James C. Hill | 1,500 | * | ||||||
| Leon A. Kranz | 0 | * | ||||||
| Wayne E. Larsen | 97,800 | * | ||||||
| J. Robert Peart | 0 | * | ||||||
| Bradford T. Whitmore | 3,858,973 | 29.6% | ||||||
| Lawrence C. Hammond | 61,667 | * | ||||||
| Randy B. Turner | 16,500 | * | ||||||
| Gary J. Vroman | 70,000 | * | ||||||
| Kerry L. Woody | 178,467 | 1.4% | ||||||
| Directors and Executive Officers | ||||||||
| as a Group (13 persons) | 4,411,324 | 33.9% | ||||||
* Less than one percent (1%)
1Unless otherwise noted, all shares are owned directly and the owner has the right to vote the shares, except for shares that officers and directors have the right to acquire under the Company’s stock option plans as of the record date or within sixty (60) days thereafter, which for Messrs. Woody, Larsen, Hammond, Vroman and Turner are 178,167; 95,500; 60,000; 70,000 and 16,500 shares, respectively.
At the 2004 Annual Meeting, six (6) directors are to be elected who shall hold office until the next Annual Meeting of Stockholders or until their respective successors are duly elected and qualified. It is the intention of the persons named in the Company’s proxy to vote for the election of each of the nominees listed below, unless authority is withheld. All nominees have indicated a willingness to serve as directors, but if any of them should decline or be unable to serve as a director, the persons named in the proxy will vote for the election of another person recommended by the Board of Directors.
The Board of Directors recommends you vote FOR the election of each of the six (6) nominees to the Board of Directors set forth below.
3
The directors hold regular quarterly meetings, in addition to the meeting immediately following the Annual Meeting of Stockholders, attend special meetings, as required, and spend such time on the affairs of the Company as their duties require. During the fiscal year ended December 31, 2003, the Board of Directors held sixteen (16) meetings. All directors of the Company attended at least seventy-five percent (75%) of the meetings of the Board of Directors and the committees on which they served during the fiscal year ended December 31, 2003. All Board members, except Mr. Peart, attended the 2003 Annual Meeting of Stockholders. All Directors, except for Mr. Woody, are considered independent by NASDAQ listing standards. During the fiscal year ended December 31, 2003, there were two committees, those being an Audit Committee and a Compensation and Stock Option Committee. Prior to the issuance of this proxy statement, the Board of Directors also established the Nominating Committee.
For the year ending December 31, 2003, the members of the Audit Committee were Chairman Lawrence W. Bianchi, Leon A. Kranz and J. Robert Peart. Each member of the Audit Committee is “independent” according to the definition of independence contained in Rule 4200(a)(15) of the Nasdaq listing standards. Mr. Bianchi, an independent director, has been designated as the Audit Committee “financial expert,” as defined in Item 401(h) of Regulation S-K, by the Board of Directors. The Audit Committee is responsible for annually selecting a firm of independent certified public accountants to serve as the Company’s auditors, to meet with and review reports of the Company’s auditors and approve the fees payable to them. The independence of the public accountants auditing the Company’s financial statements is one of the factors evaluated by the Audit Committee when recommending auditors. During fiscal years 2003 and 2002, the Company’s auditors were KPMG LLP. All services provided by KPMG LLP in 2003 and 2002 were authorized by the Audit Committee. Services provided in 2003 and 2002 by KPMG LLP resulted in fees of:
| Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees | |
| 2002 | $331,000 | $0 | $0 | $0 |
| 2003 | $102,000 | $20,000 | $0 | $36,000 |
The KPMG LLP services provided in 2003 under “All Other Fees” were for merger and acquisition advisory services. The Audit Committee assessed the level of non-audit services in determining the Company’s auditors, KPMG LLP, to be independent. Following conclusion of the 2003 audit by KPMG LLP, the Audit Committee confirms that:
| • | the Audit Committee has reviewed and discussed the audited financial statements with management; |
| • | the Audit Committee has discussed with KPMG LLP the matters required to be discussed by SAS 61 as amended by SAS 90; |
| • | the Audit Committee has received the written disclosures and the letter from KPMG LLP required by Independence Standards Board Statement No. 1; and |
| • | the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K. |
The Audit Committee Charter was reviewed by the Audit Committee in 2003 and no changes were made. The Charter was filed as an Exhibit to the Company’s Proxy Statement for the 2003 Annual Meeting of Stockholders.
In addition, the Audit Committee provides oversight to the total financial status of the Company as well as assisting the Company with assessments of pension-asset performance and investment criteria. The Audit Committee met five (5) times in 2003 for these purposes.
By the Audit Committee
Lawrence W. Bianchi, Leon A. Kranz and J. Robert Peart
4
The members of the Compensation and Stock Option Committee for the year ending December 31, 2003 were Leon A. Kranz, J. Robert Peart and Chairman Bradford T. Whitmore. The Compensation and Stock Option Committee is responsible for (i) setting the overall policy of the Company’s executive compensation program; (ii) establishing the base salary level for the executive officers; (iii) reviewing and approving the annual incentive program for the Company executives; and (iv) acting as the administrator of the Company’s 1996 Long Term Incentive Plan (the “Incentive Plan”). The Compensation and Stock Option Committee met twice in 2003. The Company’s executive compensation program is designed to be closely linked to corporate performance and returns to stockholders. To this end, the Company has developed an overall compensation strategy and specific compensation plan that tie a very significant portion of executive compensation to the Company’s success in meeting specified performance goals. The primary criteria used by the Compensation and Stock Option Committee in assessing the performance of the Company’s Chief Executive Officer are the results of the Company as measured by its earnings before interest, taxes, depreciation and amortization (“EBITDA”), the Company’s success in generating cash and the strategic direction of the Company. By monitoring these areas at the Company the Compensation and Stock Option Committee determines whether the Chief Executive Officer is achieving their expectations. In addition, the Compensation and Stock Option Committee also assesses the accomplishments of the Chief Executive Officer and the other executive officers with respect to activities such as acquisitions, divestitures and the raising of capital for the business. In 2003, the Company was able to exceed its business plan with respect to EBITDA and cash generation. The Chief Executive Officer received incentive compensation for 2003 of $79,000 due to the Company’s performance.
In addition, through the use of stock options, the Company ensures that a part of the executives’ compensation is closely tied to appreciation in the Company’s stock price. The overall objectives of this strategy are to attract and retain the best possible executive talent, to motivate these executives to achieve the goals inherent in the Company’s business strategy, to link executive and stockholder interests through equity based plans and, finally, to provide a compensation package that recognizes individual contributions as well as overall business results. In 2003, executives at the Company did not receive any stock options.
The Compensation and Stock Option Committee regularly reports its actions and recommendations to the full Board of Directors. In 2003, none of the actions or recommendations of the Compensation and Stock Option Committee were modified or rejected by the Board of Directors.
By the Compensation and Stock Option Committee
Leon A. Kranz, J. Robert Peart and Bradford T. Whitmore
The Company’s Nominating Committee was established in 2004. The Nominating Committee is made up of all directors who are not a member of the Company’s management. For 2004, the Nominating Committee consists of Lawrence W. Bianchi, James C. Hill, Leon A. Kranz, J. Robert Peart and Bradford T. Whitmore, all of whom are considered to be independent by NASDAQ listing standards. Among other duties, the Nominating Committee is responsible for nominating the slate of directors to be considered for election at the Company’s annual meeting of stockholders. Due to the timing of its organization, the Nominating Committee met only once in 2004 prior to the issuance of this proxy statement. The Nominating Committee has adopted a Charter which is attached hereto as Appendix A. The Company has also made the Charter available on the Company’s website, www.ladishco.com.
The Nominating Committee is in the process of further refining its duties and expects to develop the following policies and processes during fiscal 2004:
| • | establish a policy for evaluating director candidates recommended by Company stockholders; |
| • | identify minimum qualifications for consideration of director nominees; and |
| • | create a process for identifying prospective director nominees. |
By the Nominating Committee
Lawrence W. Bianchi, James C. Hill, Leon A. Kranz, J. Robert Peart and Bradford T. Whitmore
5
Non-employee directors receive an annual fee of twenty thousand dollars ($20,000.00) which is payable quarterly. Directors who are not officers or employees of the Company also receive a fee of one thousand dollars ($1,000.00) for each Board meeting personally attended. In addition, the Company reimburses all directors for expenses associated with attending Board meetings and Board Committee meetings.
The following table sets forth information for the Company’s fiscal years ended December 31, 2003, 2002 and 2001, with regard to the compensation for their services to the Company of the Chief Executive Officer and each of the other four (4) most highly compensated executive officers serving the Company at the close of the Company’s most recently completed fiscal year.
| SUMMARY COMPENSATION TABLE | |||||||
| Annual Compensation1 | Long Term Compensation | ||||||
| Name and Principal Position | Year | Salary | Bonus2 | Other Annual Compensation3 | Restricted Stock Awards (Shares) | Stock Option Awards (Shares) | All Other Compensation6 |
| Kerry L. Woody | 2003 | $299,140 | $79,000 | $1,296 | -- | -- | $5,398 |
| President & Chief Executive Officer | 2002 | $274,601 | -- | $1,296 | -- | -- | $4,996 |
| 2001 | $286,102 | $156,465 | $774 | -- | -- | $5,216 | |
| Wayne E. Larsen | 2003 | $188,310 | $49,000 | $774 | -- | -- | $4,587 |
| Vice President Law/Finance & Secretary | 2002 | $173,312 | -- | $774 | -- | -- | $3,475 |
| 2001 | $180,967 | $88,020 | $774 | -- | -- | $3,695 | |
| Randy B. Turner | 2003 | $169,073 | $9,550 | $786 | -- | -- | -- |
| President - Pacific Cast Technologies, Inc. | 2002 | $168,807 | -- | $786 | -- | -- | -- |
| 2001 | $154,500 | $82,810 | -- | -- | 10,000 | -- | |
| Gary J. Vroman | 2003 | $145,159 | $15,000 | $468 | -- | -- | $5,247 |
| Vice President - Sales & Marketing | 2002 | $134,004 | -- | $468 | -- | -- | $5,247 |
| 2001 | $140,004 | $25,200 | $468 | -- | -- | $5,029 | |
| Lawrence C. Hammond | 2003 | $134,365 | $18,000 | $2,304 | -- | -- | $5,337 |
| Vice President - Human Resources | 2002 | $124,846 | -- | $2,304 | -- | -- | $5,100 |
| 2001 | $130,500 | $23,400 | $1,296 | -- | -- | $5,483 | |
1Annual Compensation includes those amounts the executive officers may defer under the 401(k) Plans of the Company and its subsidiaries as well as amounts the executive officers may defer under the Company’s Elective Deferred Compensation Plan (the “EDC Plan”). Participants in the EDC Plan may elect to defer salary and/or bonus on an unsecured basis and may select any of eight investment options.
2An incentive bonus is paid only upon the achievement of a predetermined financial objective set each year by the Board of Directors’ Compensation and Stock Option Committee at the beginning of the fiscal year.
3Other annual compensation includes supplemental life insurance provided to the above listed executives.
4All other compensation consists principally of automobile allowances.
Defined Benefit Plan. The Ladish Co., Inc. Salaried Pension Plan (the “Pension Plan”) is a “defined benefit” pension plan generally covering salaried, non-union employees at the Wisconsin facility of the Company who are not covered by any other defined benefit plan to which the Company makes contributions pursuant to a collective bargaining agreement.
Upon reaching normal retirement at or after age 65, a participant is generally entitled to receive an annual retirement benefit for life. The Pension Plan provides alternative actuarially equivalent forms of benefit payment. Vesting under the Pension Plan occurs after five years of continued service.
The monthly retirement benefit at the normal retirement age of at least 65 is determined pursuant to a formula as follows: 1.25% of the average base salary (exclusive of bonuses or other incentive or special compensation) of the individual during the consecutive five year period of service within the ten years preceding termination of employment (or after age 45, if longer) that his/her earnings were highest is multiplied by the number of years of Benefit Service (as defined). Monthly normal retirement benefits are payable on a straight life annuity basis and such amounts are not subject to any deduction for Social Security or other offset amounts.
6
The following table sets forth the annual benefits payable to a participant who qualified for normal retirement in 2003, with the specified highest average earnings during the consecutive five year period of service within the ten years prior to retirement and the specified years of Benefit Service:
| Years of Benefit Service | ||||||
|---|---|---|---|---|---|---|
| Average Annual Earnings for Highest 5-Year Period Within the 10-Years Preceding Retirement | 10 | 15 | 20 | 25 | 30 | 40 |
| $50,000 | $6,250 | $9,375 | $12,500 | $15,625 | $18,750 | $25,000 |
| $95,000 | $11,875 | $17,813 | $23,750 | $29,688 | $35,625 | $47,500 |
| $100,000 | $12,500 | $18,750 | $25,000 | $31,250 | $37,500 | $50,000 |
| $150,000 | $18,750 | $28,125 | $37,500 | $46,875 | $56,250 | $75,000 |
| $200,000 | $25,000 | $37,500 | $50,000 | $62,500 | $75,000 | $100,000 |
| $250,000 | $31,250 | $46,875 | $62,500 | $78,125 | $93,750 | $125,000 |
The years of Benefit Service for Messrs. Woody, Larsen, Vroman and Hammond as of January 1, 2004 were 29, 23, 22 and 24, respectively.
Deferred Compensation Agreements. The Company has entered into deferred compensation agreements (the “Agreements”) with seven current officers of the Company, including Messrs. Woody, Larsen, Hammond and Vroman. Each employee covered by the Agreements (an “Employee”), upon full vesting, is entitled to receive supplemental disability or retirement benefits; provided that in no event may a person’s total retirement benefits under the Agreements exceed 60% of the monthly average base salary (inclusive of bonuses or other compensation) during the five calendar years immediately preceding retirement.
The retirement benefit at the normal retirement age of at least 62 is determined pursuant to a formula as follows: 60% of the monthly average of the Employee’s base salary plus any incentive compensation which does not exceed twenty percent of the base salary during the five calendar years of highest compensation over ten years immediately preceding retirement multiplied by years of service, up to 15, and divided by 15. If an Employee suffers a disability (as defined), he is entitled to benefits paid under the same formula as in the preceding sentence (with his years of service calculated as if he had retired at age 62), reduced by other disability benefits paid by the Company or through workers’ compensation (unless he is receiving fixed statutory payments for certain bodily injuries).
Any amount to be paid under the Agreements shall be reduced by any benefit paid to an Employee or his beneficiary pursuant to the Pension Plan.
Defined Contribution Plan. The Ladish Co., Inc. Savings and Deferral Investment Plan (“SDIP”), which has been qualified under section 401(k) of the Internal Revenue Code, provides that salaried, non-union employees with six months’ service may contribute 1% to 20% of their annual base salary to SDIP and the Company will provide a matching contribution in an amount to be determined by the Board of Directors of the Company. Employees’ contributions of 1% to 20% can be “before tax” contributions, “after tax” contributions or a combination of both. The employees’ contributions and the matching Company contribution may be placed by the employee in a fixed income fund, an equity investment fund or various combinations of each.
Elective Deferred Compensation Plan. The EDC Plan was approved by the Board of Directors during 2000 and became effective during the Fourth Quarter of 2000. Participants in the EDC Plan may elect to defer salary and/or bonus on an unsecured basis and may select any of eight investment options. There is no Company matching contribution to the EDC Plan and the Company does not guaranty any return on any of the investment options available to the participants in the EDC Plan.
7
The following graph compares the period percentage change in Ladish’s cumulative total shareholder return on its common stock, assuming dividend reinvestment, with the cumulative total return of (i) the Russell 2000 Small Cap Index, and (ii) a peer group from the Company’s industry, for the period of December 31, 1998 to December 31, 2003. The Company’s peer group is comprised of Precision Castparts Corporation, Allegheny Technologies Inc., Titanium Metals Corporation and SIFCO Industries, Inc.
| Dec-31-98 | Dec-31-99 | Dec-31-00 | Dec-31-01 | Dec-31-02 | Dec-31-03 | |
|---|---|---|---|---|---|---|
| Ladish | 8.38 | 6.38 | 10.75 | 10.92 | 8.06 | 8.12 |
| Russell 2000 | 421.96 | 504.75 | 483.53 | 488.50 | 383.09 | 556.91 |
| Industry Peers | 21.81 | 14.99 | 17.36 | 13.64 | 8.7 | 16.99 |
The Company has entered into employment agreements with Messrs. Woody, Larsen, Hammond and Vroman which are substantially similar in all respects. The basic employment agreement provides for a number of benefits, all of which vest after ten years of employment, including group term life insurance, health and dental coverage and long-term disability coverage.
The agreements provide that, upon the involuntary termination of the employee other than for cause, the Company is required to pay the employee 24 months of severance pay, determined by the employee’s base monthly salary at the time of termination. In the case of Messrs. Woody and Larsen they are entitled to 30 months of severance pay. Upon retirement at age 62, the employee will receive his normal retirement benefits. Such benefits include a monthly payment equal to 60% of the employee’s average compensation (i.e., monthly average of compensation for the five years of highest compensation over the ten years prior to retirement) multiplied by a fraction, the numerator of which is the length of service of the employee up to 15 and the denominator of which is 15. There are also provisions adjusting this calculation in the event of early retirement. Disabled employees can also be eligible for certain retirement benefits. All retirement benefits are tolled during any period of re-employment by the Company. Each agreement further provides that any compensation paid by the Company shall be reduced by any benefit paid under the Company’s salaried employees’ retirement plan. In addition to the foregoing, grants of stock options and SARs under the Incentive Plan become immediately exercisable upon a change in control of the Company. Mr. Turner has a separate agreement with the Company which provides for six months of severance pay in the event of involuntary separation other than for cause.
8
During the year ending December 31, 2003, Kerry L. Woody, President and Chief Executive Officer of the Company, did not serve on the Compensation and Stock Option Committee of the Company. No insider at the Company participated on the Compensation and Stock Option Committee in 2003.
The Company participates in a joint venture with Weber Metals, Inc., of which Leon A. Kranz, a director of the Company, is chief executive officer. The Company incurred costs of approximately $1,250,000 to Weber Metals, Inc. under the joint venture in 2003.
The Plan has been established by the Company to promote the long-term financial interest of the Company by providing for the award of equity-based incentives to key employees and other persons providing material services to the Company, approximately 35 persons as of February 28, 2003. The Plan provides a means whereby such individuals may acquire shares of Common Stock through the grant of stock options and stock appreciation rights.
| Option Grants In 2003 | |||||
|---|---|---|---|---|---|
| Name | Shares Underlying Options Granted | Percentage of Total Options Granted to All Employees in 2003 | Exercise Price (per share) | Expiration Date | Grant Date Present Value |
| Kerry L. Woody | 0 | 0% | -- | -- | -- |
| Wayne E. Larsen | 0 | 0% | -- | -- | -- |
| Gary J. Vroman | 0 | 0% | -- | -- | -- |
| Lawrence C. Hammond | 0 | 0% | -- | -- | -- |
| Randy B. Turner | 0 | 0% | -- | -- | -- |
| Aggregated Option Exercises in 2003 and Fiscal Year-End Option Values | ||||||
|---|---|---|---|---|---|---|
| Name | Number of Shares Acquired on Exercise | Value Realized | Number of Shares Underlying Unexercised Options at Fiscal Year-End | Value of Unexercised In-the-Money Options at Fiscal Year-End | ||
| Exercisable | Unexercisable | Exercisable | Unexercisable | |||
| Kerry L. Woody | -- | -- | $178,167 | 0 | $165,714 | $0 |
| Wayne E. Larsen | -- | -- | 95,500 | 0 | $75,260 | $0 |
| Gary J. Vroman | -- | -- | 70,000 | 0 | $63,600 | $0 |
| Lawrence C. Hammond | -- | -- | 15,000 | 0 | $53,000 | $0 |
| Randy B. Turner | -- | -- | 16,500 | $0 | $0 | |
9
| Equity Compensation Plan Information | |||
|---|---|---|---|
| (a) | (b) | (c) | |
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| Equity compensation plans | |||
| approved by security holders | 729,910 | $7.64 | 28,004 |
| Equity compensation plans | |||
| not approved by security holders | -- | -- | -- |
| Total | 729,910 | $7.64 | 28,004 |
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers, directors and persons who own more than ten percent (10%) of the Company’s Common Stock to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC��). These reports are also filed with Nasdaq and a copy of each report is furnished to the Company.
Additionally, SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely basis during the most recent fiscal year. To the Company’s knowledge, based on review of reports furnished to it, each individual who was required to file such a report for the calendar year ending December 31, 2003 did so in a timely manner.
On June 13, 2002 the Company appointed Deloitte & Touche LLP (“D&T”) as its independent auditors due to the demise of the Company’s former independent auditors, Arthur Andersen, LLP. On August 19, 2002 D&T resigned as the independent auditors of the Company. D&T attributed the resignation to a disagreement with the Company over the Company’s prior accounting for net operating losses and a valuation reserve. The Company’s Audit Committee did not discuss this disagreement with D&T. D&T did not issue a report on the Company’s financial statements. The Company authorized D&T to respond fully to the inquiries of any successor auditor concerning the subject matter of the disagreement. On September 9, 2002 the Company appointed KPMG LLP as its independent auditors.
KPMG LLP have been the auditors of the accounts of the Company for the fiscal years ended December 31, 2002 and 2003. It is anticipated that representatives of KPMG LLP will be present at the 2004 Annual Meeting, will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions raised at the 2004 Annual Meeting or submitted to them in writing before the 2004 Annual Meeting.
KPMG LLP has informed the Company that it does not have any direct financial interest in the Company and that it has not had any direct connection with the Company in the capacity of promoter, underwriter, director, officer or employee.
As is customary, auditors for the current fiscal year will be appointed by the Audit Committee and ratified by the Board of Directors at their meeting immediately following the 2004 Annual Meeting.
10
Grace Brothers Ltd., the owner of 3,858,973 shares of Common Stock of the Company or 29.6% of the outstanding shares, has proposed pursuant to SEC Rule 14a-8 a resolution under Section 180.1150(5) of the Wisconsin Business Corporation Law (“WBCL”).
Section 180.1150 of the WBCL provides that with limited exceptions, or unless its provisions are waived in any particular instance by a vote of shareholders, the voting power of shares of a Wisconsin “resident domestic corporation,” such as the Company, held by any person in excess of 20% of the voting power in the election of directors shall be limited to 10% of the full voting power of those excess shares. The effect on Grace Brothers Ltd. has been to limit its total voting power to approximately 21% of the voting power of all outstanding shares. The effect of the shareholder proposal, if adopted, would be to restore the full voting power of all the shares owned by Grace Brothers Ltd.
This resolution will be adopted if a majority of the shares represented at the Annual Meeting (including shares held by Grace Brothers, subject to the voting power limitation currently in place as described above) are voted in favor.
The notice provided by Grace Brothers Ltd. pursuant to Section 180.1150 of the WBCL is attached to this Proxy Statement as Appendix B.
The Board of Directors recommends that you vote IN FAVOR of Proposal 2.
Management of the Company is not aware of other matters to be presented for action at the 2004 Annual Meeting; however, if other matters are presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters.
Stockholders who wish to include a proposal in the proxy statement for the Company’s Annual Meeting of Stockholders for 2005 pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, must forward the proposal to the Secretary of the Company no later than November 15, 2004. Stockholder proposals other than pursuant to Rule 14a-8 will be considered untimely under the Company’s By-laws if received less than 45 days in advance of the Annual Meeting of Stockholders in 2005 and the Company will not be required to present such proposals at the meeting. If the Board of Directors of the Company chooses to present such a proposal despite its untimeliness, the people named in the proxies solicited by the Board of Directors for the 2005 Annual Meeting of Stockholders will have the right to exercise discretionary voting power with respect to such proposal.
Any stockholder who wishes to communicate to the entire Board of Directors of the Company, or to any individual director, may send that communication in writing to the Secretary of the Company and it will be forwarded to the appropriate member(s) of the Board of Directors. All written stockholder communications to the Board of Directors will be forwarded to the designated recipient(s).
Upon the written request of any stockholder, addressed to the Secretary of the Company, the Company will provide to such stockholder, without charge, a copy of the Company’s 2003 Annual Report on Form 10-K (without exhibits), as filed with the Securities and Exchange Commission.
It is important that proxies be returned promptly to avoid unnecessary expense. Therefore, stockholders are urged, regardless of the number of shares owned, to date, sign and return the enclosed proxy.
| By Order of the Board of Directors | |
| /s/ WAYNE E. LARSEN | |
| Wayne E. Larsen | |
| February 24, 2004 | Secretary |
11
Appendix A
This Nominating Committee Charter (the “Charter”) is intended to assist the Nominating Committee (the “Committee”) of the Board of Directors (the “Board”) of Ladish Co., Inc., a Wisconsin corporation, (the “Company”) in carrying out its duties and responsibilities. This Charter is in addition to, and is not intended to change or interpret, any federal or state law or regulation, the rules of the Securities and Exchange Commission (“SEC”), Nasdaq’s listing standards, the Wisconsin Business Corporation Law, or the Company’s Articles of Incorporation or By-Laws. This Charter is not intended to, and does not, create any legal or fiduciary duties or responsibilities or form the basis for a breach of fiduciary duty or potential liability if not complied with. There are no third party beneficiaries to the Charter. This Charter is subject to modification and interpretation by the Board.
| A. | General Role |
| The Committee is responsible for identifying and recommending for approval by the Board a slate of director nominees for election at each of the Company’s annual meetings of shareholders, and otherwise for determining the Board’s other committee members and chairmen, subject to Board ratification, as well as recommending to the Board director nominees to fill vacancies or new positions on the Board or its committees that may occur or be created from time to time except for the vacancy to be filled pursuant to the June 10, 2003 Agreement between the Company and Grace Brothers, Ltd., all in accordance with the Company’s By-Laws and applicable law. |
| B. | Members |
| The Committee shall consist of at least three directors, one of whom shall be the Chairman, all of whom shall meet the independence and other requirements of the SEC, Nasdaq’s listing standards, other applicable laws and the Company’s By-Laws. Committee members may be removed in accordance with the Company’s By-Laws. |
| C. | Meetings |
| Absent unusual circumstances, the Committee shall meet at least annually. In addition, special meetings shall be held as circumstances require as determined by the Committee’s Chairman or by any two other members of the Committee in accordance with the Company’s By-Laws. The Committee may invite to its meetings such other directors, members of Company management and such other persons or advisors as the Committee or its Chairman deems necessary or appropriate in order to carry out the Committee’s duties and responsibilities. The Committee, through its Chairman, shall report its activities to the Board at the Board meeting next following each Committee meeting so that the Board is kept fully informed of the Committee’s activities on a current basis. Minutes of each Committee meeting shall also be distributed to the Board as and when appropriate. |
| D. | Responsibilities |
| The Committee's Responsibilities shall include the following: |
| 1. | To establish criteria for prospective director nominees. |
| 2. | To establish and effectively communicate to shareholders a method for shareholders to recommend director nominees in accordance with the Company’s By-Laws for the Committee’s consideration. |
| 3. | To evaluate all prospective director nominees, including those nominated by shareholders, in accordance with the Company’s By-Laws. |
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| 4. | To conduct appropriate inquiries into the backgrounds and qualifications of prospective director nominees. |
| 5. | To annually select and recommend for approval by the Board and the election by the Company’s shareholders a slate of director nominees, and to otherwise recommend for approval by the Board director nominees to fill vacancies or new positions on the Board as they may occur or be created from time to time, all in accordance with the Company’s By-Laws. |
| 6. | To review and recommend to the Board an appropriate course of action with respect to or upon the resignation, retirement or removal of any then currently serving director, including whether a new director should be appointed by the Board prior to the Company’s next shareholder meeting, all in accordance with the Company’s By-Laws. |
| 7. | To, on an annual basis, determine and propose to the Board which directors shall serve as members and chairmen of the Board’s other committees. In making its determinations, the Committee shall take into consideration (a) balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors which may result from the rotation of committee members and chairmen; (b) subject matter expertise; (c) applicable SEC, IRS or Nasdaq requirements; (d) tenure; and (e) the desires of individual Board members. |
| 8. | To plan in advance for continuity on the Board as current directors are expected to retire from the Board. |
| 9. | If a then serving director shall retire or otherwise undergo a change in the employment position that he or she held when he or she first became a member of the Board, the Committee shall review the continued appropriateness or such director’s Board membership and shall take such action as the Committee deems necessary or appropriate, subject to ratification by the Board and compliance with the Company’s By-Laws. |
| 10. | To, from time to time, if the Committee determines it to be necessary or appropriate, select and retain independent consultants, search firms and experts to provide independent advice to the Committee with respect to the Company’s director nominees and nominating policies, practices and procedures and to help identify, screen and check potential director candidates, and to otherwise assist the Committee in carrying out its duties and responsibilities. The cost of such consultants, search firms and experts shall be paid for by the Company. |
| 11. | To, from time to time, if the Committee determines it to be necessary or appropriate, conduct such reviews, investigations and surveys as the Committee may consider necessary or appropriate in the exercise of its duties and responsibilities. |
| E. | Unrestricted Committee Communications |
| The Committee shall have unrestricted lines of communication with the Company’s chief executive officer, chief financial officer, chief legal officer, principal accounting officer, independent auditors and outside legal counsel at all times. The Committee may also, as it deems necessary or appropriate, obtain advice and assistance from independent legal, accounting or other advisors, which advisors shall be paid for by the Company. |
| F. | Annual Review of Charter |
| The Committee shall, at least annually, review and reassess the adequacy of this Charter and, if determined necessary or appropriate, make recommendations to the Board. During this review process, the Committee may seek the input of the Company’s chief executive officer, chief legal counsel and/or other experts or advisors with regard to the adequacy of this Charter and the necessity or desirability of any amendments. |
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Appendix B
Notice Pursuant to Section 180.1150, Wis. Stats.
a. This notice is being provided to Ladish Co., Inc., a Wisconsin corporation (“Ladish”), by Grace Brothers Ltd., an Illinois limited partnership (“Grace Brothers”). |
b. This notice, and the attached resolution, are submitted pursuant to subsection 180.1150(4) of the Wisconsin Business Corporation Law. |
c. Grace Brothers is the beneficial owner of 3,858,973 shares of common stock of Ladish. |
d. Grace Brothers, by the attached resolution, seeks shareholder approval that it has full voting power for all shares of common stock of Ladish beneficially owned by Grace Brothers, without application of the restrictions that might otherwise apply by virtue of subsection 180.1150(2) of the Wisconsin Business Corporation Law. |
e. The circumstances under which Grace Brothers has acquired the shares of Ladish common stock which it beneficially owns are as reported by Grace Brothers in its filings with the Securities and Exchange Commission from time to time pursuant to Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. The shares of Ladish common stock beneficially owned by Grace Brothers were purchased with working capital and partnership funds. |
f. As of the date of this notice, Grace Brothers has no present plan or intention of the type described in subsection 180.1150(4)(f) of the Wisconsin Business Corporation Law. |
| Dated June 10, 2003. |
GRACE BROTHERS LTD.
This Proxy is being solicited by the Board of Directors of Ladish Co., Inc. (the “Company”). The undersigned hereby appoints Wayne F. Larsen and Kerry L. Woody with full power to act alone and with full power of substitution, as proxy of the undersigned, to attend the Annual Meeting of the Company, to be held on Tuesday, April 6, 2004, in the Creole Meeting Room of the Four Points Hotel Sheraton Milwaukee Airport, 4747 South Howell Avenue, Milwaukee, Wisconsin, at 10:00 a.m., Central Daylight Time, and any adjournment or postponement thereof (the “Annual Meeting”), and to vote all shares of Common Stock of the Company held of record by the undersigned on March 1, 2004, upon any and all matters that may properly come before the Annual Meeting. This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS LISTED BELOW. This Proxy, when properly executed, may be voted in the discretion of the proxy upon any and all other matters that may properly come before the Annual Meeting and the proxy is hereby authorized to vote the shares of Common Stuck represented by the proxy on matters incident to the conduct of the Annual Meeting, including any motion to adjourn or postpone the Annual Meeting (although the proxy does not intend, and is not aware at this time of any intention of any other person, to make such a motion)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS IN PROPOSAL 1 AND “FOR” PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
| PROPOSAL (1) To elect Six (6) Directors, to serve for the term of one year or until | This Proxy may be revoked at any time before the authority |
| their successors have been elected and have duly qualified | hereby granted is exercised by (i) delivering a written statement |
| of revocation to the Secretary of the Company, (ii) submitting a | |
| later dated Proxy or (iii) attending the Annual Meeting and voting | |
| in person. | |
| PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY |
| NOMINEES: | |
|---|---|
|_| FOR ALL NOMINEES | ( ) Lawrence W. Bianchi |
| |_| WITHHOLD AUTHORITY | ( ) James C. Hill |
| FOR ALL NOMINEES | ( ) Leon A. Kranz |
| |_| FOR ALL EXCEPT | ( ) J. Robert Peart |
| (See instructions below) | ( ) Bradford T. Whitmore |
| ( ) Kerry L. Woody | |
| INSTRUCTION: | To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold as shown here: ( ) |
| PROPOSAL (2) To approve, pursuant to Section 180.1150(5)(c) of the Wisconsin Business Corporation Law, all shares of common stock of the Company beneficially owned by Grace Brothers Ltd. having "regular voting power" of one vote per share on all matters brought to a vote of stockholders, and waiving the restrictions contained in Section 180.1150(2) of the Wisconsin Business Corporation Law as to such shares. |
| |_| FOR | |_| AGAINST | |_| ABSTAIN |
| Signature of Stockholder______________________________ | Date:_________________ | Signature of Stockholder______________________________ | Date:_________________ |
Note: Please sign exactly as your name or names appear on the Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
