<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED . . . . . . . . . . . . . .DECEMBER 31, 1996
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 001-12505
CORE MATERIALS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-1481870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Manor Park Drive,
P.O. Box 28183
Columbus, Ohio 43228 - 0183
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 870-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.01 American Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-- --
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. [X]
As of March 27, 1997, 9,514,800 shares of Core Materials Corporation
common stock were outstanding, and the aggregate market value of the shares held
by non-affiliates (based upon the closing price of the common stock on that date
as reported on the American Stock Exchange Composite Tape) was approximately
$34,491,150.
DOCUMENTS INCORPORATED BY REFERENCE
1. Registrant's 1997 definitive Proxy Statement to be filed with the
Securities and Exchange Commission no later than 120 days after the end
of the registrant's fiscal year is incorporated herein by reference in
PART III of this Form 10-K.
2
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PART I
ITEM 1. BUSINESS.
BACKGROUND
On October 8, 1996, RYMAC Mortgage Investment Corporation ("RYMAC")
formed Core Materials Corporation ("Core Materials" or the "Company") as a
wholly owned subsidiary under the laws of the State of Delaware. RYMAC
incorporated Core Materials in order to acquire substantially all of the assets
of the Columbus Plastics operating unit of Navistar International Transportation
Corp. ("Navistar"). The discussion in Part I of this Form 10-K provides an
overview of the historical business of RYMAC, its decision to incorporate Core
Materials, and the current business of Core Materials.
HISTORICAL BUSINESS OF RYMAC AND INCORPORATION OF CORE MATERIALS
Historical Business of RYMAC
RYMAC was incorporated in the State of Maryland on July 1, 1988. RYMAC
elected to be a real estate investment trust ("REIT") under the Internal Revenue
Code of 1986, as amended (the "Code").(1)
Prior to 1994, RYMAC was primarily engaged in making investments in
mortgage derivative securities and, to a lesser extent, mortgage related
investments, all of which were secured by single-family residential mortgage
loans. RYMAC also generated revenues from other sources, such as interest
earnings on certain investments and sales of certain investments. In 1995, RYMAC
purchased one 7% Federal National Mortgage Association ("FNMA") guaranteed
pass-through certificate backed by 30 year single-family mortgage loans. The
principal balance at December 31, 1996 was approximately $3.3 million.
During the period from RYMAC's inception in 1988 through early 1992,
mortgage interest rate levels and prepayment speeds remained within ranges
existent from 1970 to early 1992. From early 1992 to early 1994, mortgage rates
declined to levels lower than those existent for the prior 20 year period and,
in fact, in the fall of 1993, declined to the lowest level in 25 years. The
decline in mortgage rates and the availability of mortgage monies from a wide
variety of lenders produced an unprecedented level and sustained duration of
mortgage refinancings which directly resulted in unparalleled early mortgage
prepayments.
Initially, the result of such prepayment levels sharply reduced
interest and dividend earnings on RYMAC's assets. As the duration of these rapid
prepayments extended, RYMAC's cash flows from interest and dividends and returns
on invested principal were severely impaired, eventually being reduced to levels
sufficient only to repay RYMAC's borrowings, pay operating
- ----------
(1) With the acquisition of Navistar's Columbus Plastics operation, Core
Materials did not qualify as a REIT and became subject to income and franchise
taxes on its income to the extent that it could not offset such income with net
operating loss or capital loss carryforwards.
<PAGE> 4
expenses and fund minimal dividend distributions. This deterioration of asset
performance began in the second quarter of 1992 and continued throughout 1993
and 1994, causing permanent impairment to a number of RYMAC's assets. For a
substantial portion of RYMAC's assets, especially those with substantial cost
basis premiums, the rapid prepayment scenario produced cash flows that did not
recover the investment basis.
Simultaneously, generally accepted accounting principles required
quarterly asset valuations that produced write-downs in the value of a majority
of RYMAC's assets. Such write-downs were reflected as reductions to the interest
revenues on RYMAC's Statements of Revenues and Expenses.
The result of these earnings difficulties and the altered mortgage
securities market that emerged after the prepayment cycle of 1992-1994 caused
RYMAC's Board of Directors in mid-1994 to determine that it would not pursue its
historical line of business and would investigate alternative opportunities to
maximize stockholder value.(2) In this regard, RYMAC's Board of Directors
focused its efforts on finding and evaluating acquisition candidates. This
process led to negotiations with Navistar for the acquisition of Columbus
Plastics.
Incorporation of Core Materials and the Acquisition of Columbus Plastics
RYMAC entered into an Asset Purchase Agreement with Navistar, dated
September 12, 1996, as amended on October 31, 1996, December 16, 1996 and
January 31, 1997, this third amendment providing for the post-closing adjustment
for the Secured Note due Navistar discussed below, (as amended, the "Asset
Purchase Agreement"). Navistar is the wholly owned operating subsidiary of the
holding company, Navistar International Corporation. The manufacturing
operations of Navistar are responsible for the manufacture and marketing of
medium and heavy-duty trucks, including school buses, mid-range diesel engines
and service parts, primarily in the United States and Canada, as well as in
selected export markets.
Columbus Plastics historically constituted a part of Navistar's
manufacturing business and was not a separate entity apart from Navistar.
Navistar had used its Columbus Plastics operations to manufacture fiberglass and
plastic component parts for use by Navistar in Navistar's business of
manufacturing and marketing medium- and heavy-duty trucks and for sales to third
party customers, primarily Yamaha Motor Manufacturing Corporation ("Yamaha"),
for use in its personal watercraft business. Prior to the acquisition, in excess
of 60% of all component parts produced by Columbus Plastics were sold to
Navistar at the standard cost basis of Columbus Plastics which was substantially
below the market value of such component parts.
The Asset Purchase Agreement between Navistar and RYMAC provided for
the acquisition by RYMAC of substantially all of the assets of Columbus
Plastics. Navistar's obligation to consummate the acquisition, however, was
conditioned (among other things) on the reincorporation of RYMAC in the State of
Delaware. In order to effect the reincorporation,
- ----------
(2) The Company had maintained a portfolio of assets from its historical
business, selectively selling assets to generate liquidity as market conditions
were appropriate. At the acquisition, Core Materials maintained ownership of
the FNMA certificate described above.
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RYMAC formed Core Materials as a wholly owned subsidiary, incorporated under
the laws of the State of Delaware.
RYMAC subsequently merged with and into Core Materials. The merger took
place pursuant to the terms of the Asset Purchase Agreement and Agreement and
Plan of Merger, dated November 1, 1996, by and between RYMAC and Core Materials
(the "Agreement and Plan of Merger"). Core Materials was the surviving
corporation in the merger with each outstanding share of RYMAC common stock
being converted into the right to receive one share of Core Materials common
stock.
Pursuant to the terms of the Asset Purchase Agreement, RYMAC acquired
substantially all of the assets and liabilities of Columbus Plastics on December
31, 1996. As consideration, Navistar received a secured note (the "Secured
Note") in the principal amount of $25,504,000. Navistar also received 4,264,000
shares of newly issued common stock of Core Materials. The principal amount of
the Secured Note and the number of shares of common stock received by Navistar
were subject to adjustment pursuant to the terms of the Asset Purchase
Agreement. Effective December 31, 1996, the amount of the Secured Note was
increased to $29,514,000 in order to reflect an increase in the "net tangible
assets" of Columbus Plastics as of the December 31, 1996 acquisition date. In
addition, Navistar will receive future consideration in the form of an increase
in the principal amount on the Secured Note if Core Materials achieves
earnings results above specified levels during the period 1997 through 1999.
Should there be additional future consideration, it will be accounted for by
increasing the amount of the Secured Note, and by reducing the amount of Core
Materials' retained earnings.
Accounting Treatment
Based upon the terms of the acquisition, the transaction for financial
reporting and accounting purposes has been accounted for as a reverse
acquisition whereby Columbus Plastics is deemed to have acquired Core Materials.
Core Materials, however, is the continuing legal entity and registrant for both
Securities and Exchange Commission filing purposes and income tax reporting
purposes. Consistent with reverse acquisition accounting treatment Core
Materials has carried forward the historical basis of the acquired assets and
assumed liabilities of Columbus Plastics and has revalued the basis of its net
assets to fair value at December 31, 1996.
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CURRENT BUSINESS OF CORE MATERIALS
Certain statements under this caption constitute "forward-looking
statements" which involve certain risks and uncertainties. Core Materials'
actual results may differ significantly from those discussed in the
forward-looking statements. Factors that may cause such a difference include,
but are not limited to, those discussed in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" as
well as those discussed elsewhere in this Form 10-K.
Description of Business of Core Materials
Core Materials operates principally in one business segment, the
production of high quality compression Sheet Molding Composite ("SMC")
fiberglass reinforced plastic parts. SMC plastics are part of a larger family of
materials collectively known as "reinforced plastics." Reinforced plastics are
combinations of resins and reinforcing fibers formed through high or low
pressure fabrication techniques.
Reinforced plastics compete largely against metals and have the
strength to function well during prolonged use. Management believes that
reinforced plastic components offer many advantages over metals, including:
- heat resistance
- corrosion resistance
- lighter weight
- lower cost
- greater flexibility in product design
- part consolidation for multiple piece assemblies
- lower initial tooling costs for lower volume applications
- high strength-to-weight ratio
- dent-resistance in comparison to steel or aluminum.
The largest markets for reinforced plastics, by volume of production,
are automotive and land transportation, construction, corrosion-resistance
products, marine, and electrical and electronic applications.
Selection of an SMC supplier and distribution of SMC usually involves a
competitive selection process in which an original equipment manufacturer
("OEM") solicits bids for the production of a component. After assessing each
supplier's ability to manufacture the component, the OEM selects one supplier to
work with the OEM's design team. The plastic supplier is generally selected to
supply a component a year or two in advance of production. Once selected, the
plastic supplier generally supplies the component for the life of the product
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<PAGE> 7
model. The Company's products have model lives that range from approximately two
to eight years.
Major Competitors
The Company's industry is highly competitive. Core Materials faces
competition from a number of companies, some of whom are larger and have greater
financial resources, research and development facilities, and manufacturing and
marketing capabilities than Core Materials. In addition, many OEM customers
manufacture, engineer and design some of their own components, rather than
relying on suppliers of SMC.
Core Materials' major competitors include Budd Plastics, Cambridge
Industries, Eagle-Picher, Goodyear Plastics and Molded Fiberglass Corporation.
Core Materials believes that it is one of the largest producers of SMC in the
United States and Canada. Core Materials competes primarily on material design
and manufacturing capability, product quality, cost, delivery and customer
service.
Major Customers
Core Materials currently has two major customers, Navistar and Yamaha.
The loss of a significant portion of sales to Navistar or Yamaha would have a
material adverse effect on the business of Core Materials.
RELATIONSHIP WITH NAVISTAR
Core Materials has assumed the long-standing relationship between
Columbus Plastics and Navistar's truck manufacturing division. As a condition to
the acquisition, Navistar and Core Materials entered into a Comprehensive Supply
Agreement. Pursuant to the terms of that agreement, Core Materials currently is
the sole supplier of Navistar's original equipment and service requirements for
fiberglass reinforced parts, using the SMC process, as those requirements
existed on the date of the agreement and were specified in the agreement, or as
those requirements may be modified or improved subject to the written approval
of Core Materials.
Navistar manufactures and markets medium- and heavy-duty trucks,
including school buses, mid-range diesel engines and service parts in North
America and in certain export markets. Navistar delivered 95,200 class 5 through
8 trucks, including school buses, in the United States and Canada during its
fiscal 1996, a 15% decrease from the 112,200 units delivered in 1995.
Navistar's combined share of the class 5 through 8 truck market was 27.5% in
1996 and 26.7% in 1995. Navistar has been the leader in combined market share
for class 5 through 8 trucks, including school buses, in the United States
and Canada in each of the last 16 years based on data obtained from the
American Automobile Manufacturer's Association, the United States Motor
Vehicle Manufacturer's Association and R.L. Polk & Company.
Core Materials makes products for Navistar's Chatham (Canada) assembly
plant and its Springfield, Ohio assembly and body plants. Core Materials
currently works closely on new
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<PAGE> 8
product development with Navistar's engineering and research personnel at
Navistar's Fort Wayne, Indiana, Technical Center. Core Materials currently also
receives support from Navistar in the form of accounting, payroll, and human
resources management functions under a Transitional Services Agreement with
Navistar dated December 31, 1996.
Core Materials occupies the facility previously used by Columbus
Plastics. Navistar opened the facility in 1980 to fulfill Navistar's need for
higher quality fiberglass hoods. Until the addition of Yamaha personal
watercraft products in 1990, production sales growth at Columbus Plastics was
largely driven by Navistar's increased use of SMC material in its trucks. The
facility began production in late 1980, producing hoods for Navistar medium-duty
trucks. Beginning in 1986, air deflectors, air farings, fenders, splash panels,
engine covers and other components for Navistar trucks were added to the product
line.
The North American truck market in which Navistar competes is highly
competitive and the demand for trucks is subject to considerable volatility as
it moves in response to cycles in the overall business environment and is
particularly sensitive to the industrial sector, which generates a significant
portion of the freight tonnage hauled. Truck demand also depends on general
economic conditions, among other factors. Sales to Navistar amounted to
approximately 60%, 63%, and 74% of total revenues for the twelve month periods
ended December 31, 1996, October 31, 1995, and October 31, 1994, respectively.
RELATIONSHIP WITH YAMAHA
Core Materials also has assumed the long-standing relationship between
Columbus Plastics and Yamaha. Core Materials currently supplies a significant
amount of the SMC products for Yamaha's personal watercraft.
The addition of Yamaha's personal watercraft component business in 1990
represented Columbus Plastics' first major outside business undertaking.
Products produced for Yamaha included decks, hulls, engine hatches, bulk heads,
and reinforcements. Columbus Plastics had worked closely with Yamaha over the
six years prior to the asset purchase, to improve the surface quality of Yamaha
products and to identify new process control techniques and improved materials.
The diversification into a new market area that was not correlated to
truck demand allowed Columbus Plastics to fill in production gaps that would
have occurred during periods of lower demand for medium- and heavy-duty trucks.
Demand for products from Yamaha is related to the level of general economic
activity and specifically to the cyclical and seasonal nature of the personal
watercraft industry among other factors.
Sales to Yamaha amounted to approximately 38%, 34%, and 23% of total
revenues for the twelve month periods ended December 31, 1996, October 31, 1995,
and October 31, 1994, respectively.
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OTHER CUSTOMERS
Core Materials also provides limited secondary operations, such as
assembly of components and prime painting for customers other than Navistar and
Yamaha. In addition, Core Materials sells SMC material directly to third
parties, primarily other SMC molders.
Products
Core Materials incorporates a sophisticated computer program that
assists in the compounding of various complex SMC formulations tailored to
customer needs. The system provides for the following:
- Control information during various production processes; and
- Data for statistical batch controls
Core Materials has the capacity to manufacture approximately 45 million
pounds of SMC sheet material annually. Core Materials reached this production
capacity, in part, through the installation of an additional SMC compounding
machine in January 1997, which is expected to be brought on line in early April
1997. Production of SMC by Columbus Plastics for the twelve month periods ended
December 31, 1996, October 31, 1995, and October 31, 1994 was as follows:
<TABLE>
<CAPTION>
SMC Pounds
Produced
Year (Millions)
---- ----------
<S> <C>
1996 (December 31)................... 27
1995 (October 31).................... 31
1994 (October 31).................... 22
</TABLE>
Backlog
Core Materials relies on production schedules provided by Navistar and
Yamaha to plan and implement production. These schedules are provided on a
monthly basis and are considered firm for the current period. Navistar and
Yamaha can update these schedules daily for changes in demand that allows them
to run their inventories on a "just-in-time" basis. Accordingly, the ordered
backlog at Columbus Plastics was de minimis as of December 31, 1996 and 1995 and
as of October 31, 1995. In addition, sales to Navistar in 1997 will be highly
dependent on the rate at which new truck orders are received by Navistar.
Raw Materials
The principal raw materials used in the SMC compounding include:
polyester resin, fiberglass rovings and adhesives. Currently, there are at least
two suppliers for each of the raw
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<PAGE> 10
materials used by Core Materials. The Company believes it currently has access
to an ample supply of these raw materials.
Capacity Constraints
Core Materials believes improvements in uptime performance offer the
best, and usually the most cost effective means of increasing existing
capacities and providing opportunities to pursue new business growth. Columbus
Plastics, on occasion in the past, was required to work a seven day/three shift
schedule to meet Navistar and Yamaha production requirements.
Working Capital Requirements
Core Materials, during its first three months of operation from January
1, 1997 to March 31, 1997, borrowed against its 7% FNMA guaranteed pass-through
certificate to meet short-term working capital requirements for production to
Navistar and Yamaha. The need for such borrowing arose from an initial waiting
period, contained in the Comprehensive Supply Agreement with Navistar, for
receipt of payment for shipments to Navistar. Core Materials anticipates, but
has not yet finalized negotiations for, a permanent revolving credit facility,
secured by accounts receivable and inventory to meet any working capital
requirements in the future.
Molding
Core Materials currently owns or leases 17 presses, ranging in size
from 500 to 4500 tons. Large presses provide the ability to manufacture very
large molded plastic parts. Core Materials believes that no other molder has
this number of large capacity presses.
Core Materials has both vacuum molding and in-mold coating capabilities
and currently operates eleven robots and two automatic guided vehicles that
assist in material handling, machining, and adhesive application.
Assembly and Paint
Core Materials has the ability to assemble and/or prime paint a wide
variety and volume of products. To enhance the surface quality and paint finish,
Columbus Plastics developed an in-mold coating capability. In-mold coating is a
manufacturing process performed by injecting a liquid over the molded part
surface and then applying pressure at elevated temperatures during an extended
molding cycle. The liquid coating serves to fill and/or bridge surface porosity
as well as provide a barrier against solvent penetration during subsequent
top-coating operations. Core Materials believes that it is among the industry
leaders in in-mold coating applications, based on the size and complexity of
parts coated and the number of presses, 13 of 17, that are in-mold coating
capable.
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Capital Expenditures and Research and Development
Capital expenditures totaled approximately $5.1 million, $7.3 million,
and $2.0 million for the twelve month periods ended December 31, 1996, October
31, 1995, and October 31, 1994, respectively. The increase in 1996 and 1995
from 1994 primarily relates to three large presses which were brought on line
in 1996 and a 24" SMC line in early 1997. Capital expenditures consist of
presses and other equipment to manufacture Navistar truck components and Yamaha
personal watercraft parts as well as laboratory equipment, storage equipment,
computers and office furniture and fixtures.
Product development is a continuous process at Core Materials. Research
and development activities focus on developing new SMC formulations and
improving existing products and manufacturing processes.
Core Materials does not maintain a separate research and development
facility but uses its production equipment (compounding machines, molding
presses, and primer system), as necessary, to support these efforts and
cooperates with Navistar and its resin supplier in its research and development
efforts. Likewise, manpower to direct and advance research and development is
integrated with the existing manufacturing, engineering, production, and quality
organizations. Management of Core Materials has estimated that internal costs
related to research and development activities approximate $200,000 per year.
Major research and development projects of current focus at Core
Materials include the following:
- Develop low pressure SMC applications to achieve lower initial
tooling costs and shorter lead times;
- Reduce the densities of SMC formulations to mold lighter
components without sacrificing physical or cosmetic properties;
- Use recycled SMC parts as filler to be environmentally proactive
and reduce waste cost;
- Complement current liquid in-mold-coating applications with
powder in-mold-coating development to expand the number of sealed
substrate surfaces on large-sized components; and
- Develop alternate primers for environmental, quality and cost
advantages.
Environmental Compliance
Core Materials' manufacturing operations are subject to federal, state
and local environmental laws and regulations which impose limitations on the
discharge of pollutants into the air and water and establish standards for the
treatment, storage and disposal of hazardous
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waste. The Company's policy is to conduct its business with due regard for the
preservation and protection of the environment. Core Materials' environmental
waste management involves the daily auditing of all satellite hazardous waste
accumulation points, weekly audits of all hazardous waste activities and
biennial audits of every authorized treatment, storage and disposal facility.
The Company's environmental staff also trains each new employee on waste
management and other environmental issues as part of an initial orientation
process, and annually thereafter.
Core Materials has submitted the information necessary for the granting
of a Title V permit, as required under the Clean Air Act. In 1989, Columbus
Plastics installed a Regenerative Thermal Oxidizer ("REECO"). The purpose of the
REECO system is to destroy volatile organic compounds from the coating
operation. The Company's current emission permits allow for 15 lbs./day of
volatile organic compound emission. The REECO system allows Core Materials to
meet these limitations by consistently achieving about 95% destruction
efficiency. Core Materials and Columbus Plastics have spent over $100,000 in the
past year to maintain the system, thus extending the reliability of the system
another 5 to 7 years. Core Materials believes that it is in compliance with the
Resource Conservation and Recovery Act of 1976 ("RCRA") and the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA").
Compliance with these environmental laws and regulations has not had, nor is it
currently expected to have, a material effect on the Company's operations,
competitive position or capital expenditures through fiscal year 1997. The
amount of capital expenditures currently expected to be spent on environmental
compliance over the next two years is not significant.
Employees
As of December 31, 1996, Core Materials employed a total of 419
employees, 340 of whom are covered by a collective bargaining agreement with the
International Association of Machinists and Aerospace Workers ("IAM"). After a
15 day strike in August 1995, Columbus Plastics concluded a collective
bargaining agreement with the IAM covering the hourly employees ("Labor
Contract"). The Labor Contract expires in August of 1998 and provides for 3%
annual wage increases in August 1995, 1996 and 1997 with a reduction in benefit
costs, with this net increase being offset in part by a new two-tier wage system
for new hires. Core Materials assumed the Labor Contract, pursuant to an
Amendment, effective January 1, 1997.
Patents, Tradenames and Trademarks
Core Materials applies for and maintains patents, tradenames and
trademarks where it believes that such patents, tradenames and trademarks are
reasonably required to protect its rights in its products. Core Materials does
not believe that any single patent, tradename or trademark or related group of
such rights is materially important to its business or its ability to compete.
ITEM 2. PROPERTIES.
The materially important physical property of Core Materials consists
of a single plant that is situated approximately nine miles west of the center
of Columbus, Ohio, at 800 Manor Park
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Drive. The approximate 306,656 square-foot facility currently consists of
manufacturing, office and warehouse buildings on 28.2 acres of land.
The approximate 306,656 square feet of available floor space at Core
Materials is comprised of the following:
<TABLE>
<CAPTION>
Approximate
Square Feet
-----------
<S> <C>
Manufacturing.......................... 258,850
Office .............................. 23,223
Warehouse.............................. 24,583
-------------
306,656
</TABLE>
Core Materials produces SMC sheet material and molds fiberglass,
reinforced parts. Currently, Core Materials has SMC sheet production capacity
adequate for its production volume and there exist third parties from whom Core
Materials could purchase SMC sheet material. Core Materials has used and
maintained, in good operating condition, its plant and all of its equipment.
These facilities, through productive use, have adequate production capacity to
meet current production volume. The approximate capacity utilization for the
molding of production products was 84%, 122%, and 102% for the twelve month
periods ended December 31, 1996, October 31, 1995, and October 31, 1994. During
1996, the three new presses put into operation at Columbus Plastics have
increased the available capacity for the molding of production products.
Capacity utilization is measured on the basis of a six day, three-shifts per day
operation.
Core Materials acquired the property at 800 Manor Park Drive as a
result of the Asset Purchase Agreement between RYMAC and Navistar. The property
is subject to a first priority lien and security interest of Navistar under the
terms of the Secured Note.
ITEM 3. LEGAL PROCEEDINGS.
Core Materials is not currently a party to any material pending legal
proceedings, other than ordinary, routine litigation incidental to the business,
nor are any such proceedings known by management to be contemplated by
government authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 19, 1996, the stockholders of RYMAC held a special meeting
to consider and vote upon the Asset Purchase Agreement between RYMAC and
Navistar ("Proposal No. 1") and the Agreement and Plan of Merger between RYMAC
and Core Materials ("Proposal No. 2"). The shareholders voted to approve both
the Asset Purchase Agreement and the Agreement and Plan of Merger. The following
table shows the votes for and against, as well as the number of abstentions, on
each proposal:
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<PAGE> 14
<TABLE>
<CAPTION>
Proposal No. 1
--------------
<S> <C>
Votes For.....................................3,986,673
Votes Against...................................338,754
Abstentions......................................51,816
Proposal No. 2
--------------
Votes For.....................................3,991,992
Votes Against...................................336,460
Abstentions......................................48,791
</TABLE>
The Asset Purchase Agreement provided for the acquisition by RYMAC of
substantially all of the assets of the Columbus Plastics operating unit of
Navistar. As consideration, Navistar received the Secured Note in the principal
amount of $25,504,000. Navistar also received 4,264,000 shares of newly issued
common stock of Core Materials. The principal amount of the Secured Note and the
number of shares of common stock received by Navistar were subject to adjustment
pursuant to the terms of the Asset Purchase Agreement. Effective December 31,
1996, the amount of the Secured Note was increased to $29,514,000 in order to
reflect an increase in the "net tangible assets" of Columbus Plastics as of the
December 31, 1996 acquisition date. In addition, Navistar will receive future
consideration in the form of an increase in the principal amount of the Secured
Note if Core Materials achieves earnings results above specified levels during
1997 through 1999.
The Agreement and Plan of Merger provided for the merger of RYMAC with
and into its wholly owned subsidiary, Core Materials. Core Materials continued
as the surviving corporation of the merger under the laws of the State of
Delaware. RYMAC, by contrast, ceased to exist as a separate corporate entity.
The merger was accomplished by a conversion of each issued and outstanding share
of common stock in RYMAC into the right to receive one fully paid share of
common stock in Core Materials.
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<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the American Stock Exchange
under the symbol "CME" and began trading on January 2, 1997. The common stock of
the Company's former parent, RYMAC, was traded on the American Stock Exchange
under the symbol "RM" until December 31, 1996.
The table below sets forth the high and low sale prices of RYMAC common
stock for each full quarterly period within the two most recent fiscal years for
which such stock was traded, as reported on the American Stock Exchange
Composite Tape, and certain dividend information with respect to such shares and
the same information for Core Materials common stock for the January 2, 1997 to
March 27, 1997 period. RYMAC share price information is presented on a
calendar quarter basis. Following the acquisition and merger, Core Materials
assumed the business previously conducted by Columbus Plastics, rather than the
business previously conducted by RYMAC. The historical prices for RYMAC common
stock, therefore, are not indicative of Core Materials' potential future
performance.
<TABLE>
<CAPTION>
Per Share
Dividends
Paid or
High Low Declared
---- --- --------
CORE MATERIALS CORPORATION
--------------------------
<S> <C> <C> <C> <C>
Period 1/2/97 to 3/27/97 3 5/8 2 5/16 $0.00
RYMAC MORTGAGE INVESTMENT CORPORATION
-------------------------------------
First Quarter 1996 1 7/16 1 $0.00
Second Quarter 1996 2 7/8 1 1/8 0.00
Third Quarter 1996 2 5/8 1 1/2 0.00
Fourth Quarter 1996 2 1/2 1 7/8 0.00
First Quarter 1995 1 5/16 15/16 $0.00
Second Quarter 1995 1 3/4 1 0.00
Third Quarter 1995 1 3/4 1 1/16 0.003(1)
Fourth Quarter 1995 1 7/16 1 0.00
(1)Three tenths of one cent.
</TABLE>
The Company's common stock was held by 666 holders of record on March
26, 1997.
-13-
<PAGE> 16
Core Materials is a new entity and has never paid any cash dividends on
its common stock. Core Materials currently expects that its earnings will be
retained to finance the growth and development of its business and does not
anticipate paying dividends on its common stock in the foreseeable future.
Moreover, Core Materials is restricted by covenants contained in the
Secured Note due Navistar. Pursuant to the terms of the Secured Note, Core
Materials has agreed that, so long as any amount is owing to Navistar, it will
not, and will not permit any of its subsidiaries to, directly or indirectly,
declare or pay any dividend (other than dividends payable solely in common
stock or preferred stock of Core Materials and dividends payable by any
subsidiary of Core Materials to Core Materials, or any other subsidiary of Core
Materials) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of capital stock of
Core Materials or any warrants or options to purchase any such capital stock,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Core Materials or any subsidiary.
Unregistered Securities
On February 19, 1997, Core Materials issued, in total, 40,200 shares of
common stock, par value $.01 per share, to approximately 402 employees (which
constituted all of its employees with the exception of certain executive
employees.(3)) The Company received no consideration for the shares. The shares
were issued as an incentive for its employees to remain with the Company and are
subject to forfeiture to the Company if an employee leaves prior to December 31,
1998. During this period, the shares may not be transferred.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data as of December 31, 1996 and 1995
and as of October 31, 1995 and for the year ended December 31, 1996, the
two-month period ended December 31, 1995 and for each of the three years in the
period ended October 31, 1995 are derived from the audited financial statements
of Core Materials and Columbus Plastics. The capital structure of Core Materials
differs significantly from the capital structure of Columbus Plastics prior to
its acquisition by RYMAC. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the financial statements and related notes included
elsewhere herein including, the unaudited combined pro forma financial
information.
- ----------
(3) Specifically, Richard R. Conte (Acting Chief Financial Officer), Kenneth M.
Schmell (Acting Chief Executive Officer), and Gerald L. Voirol (Controller and
Assistant Secretary) did not receive any of the common shares issued on February
19. In addition, at least one employee decided not to accept the shares.
-14-
<PAGE> 17
<TABLE>
<CAPTION>
Year Ended Two Months For the Year Ended October 31,
December 31, Ended Decem- ------------------------------
1996 ber 31, 1995 1995 1994 1993
-------------------- -------------------- -------- -------- -------
(In thousands)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenues(1) $52,467 $ 8,855 $59,505 $44,191 $39,767
Direct costs and expenses:
Cost of sales 50,734 8,082 53,319 40,487 38,393
Postretirement benefits expense 1,043 151 857 833 934
Marketing and administrative expense 493 81 484 390 369
Other-net (350) (3) 55 15 4
------- ------- ------- ------- -------
Income before interest and taxes(2) $ 547 $ 544 $ 4,790 $ 2,466 $ 67
------- ------- ------- ------- -------
BALANCE SHEET DATA (AT END OF PERIOD)
Accounts receivable $ 2,008 $ 7,298 $ 7,233 $ 1,238
Inventory 3,343 3,512 3,362 3,019
Net property, plant and equipment 25,068 21,939 21,652 15,734
Deferred tax asset-net 12,455 -- -- --
Total assets 47,104 33,305 32,591 20,281
Accounts payable and accrued expenses 1,795 9,099 12,451 5,791
Secured note payable 29,514 -- -- --
Navistar's equity investment -- 24,206 20,140 14,489
Stockholders' equity 15,551 -- -- --
<FN>
(1) Core Materials provided Navistar's truck assembly operations with all
of its sheet molding composite plastic component requirements, which
represented greater than 60% of its output in all periods presented, at
standard cost, with the remainder sold to unrelated third party
customers at negotiated prices.
(2) Interest, income taxes and earnings per share have been omitted because
Core Materials was not a separate stand alone division or subsidiary of
Navistar and generally was not accounted for separately prior to the
Acquisition. In addition, Navistar's systems and procedures do not
provide sufficient information to develop a reasonable cost allocation
of income taxes, corporate debt and interest expense.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF CORE MATERIALS
Certain statements under this caption constitute "forward-looking
statements" which involve certain risks and uncertainties. Core Materials'
actual results may differ significantly from those discussed in the
forward-looking statements. Factors that may cause such a difference include,
but are not limited to, those discussed in this section under the captions
"Liquidity and Capital Resources" and "Business Outlook".
OVERVIEW
On December 31, 1996, Core Materials acquired all of the assets and
assumed certain liabilities of Columbus Plastics, a wholly owned operating unit
of Navistar's truck manufacturing division since its formation in late 1980.
Based on the terms of the acquisition, the transaction for financial reporting
and accounting purposes has been accounted for as a reverse acquisition whereby
Columbus Plastics is deemed to have acquired Core Materials. However, Core
Materials
-15-
<PAGE> 18
is the continuing legal entity. Accordingly, references to the
operating results of Core Materials refer to the historical operations of
Columbus Plastics.
Core Materials manufactures high quality compression SMC fiberglass
reinforced parts. Core Materials has two major customers, Navistar and Yamaha.
The demand for Core materials products is affected by the volume of purchases
from these two customers, whose orders are primarily affected by economic
conditions in the United States and Canada. Core Materials' manufacturing
operations have a significant fixed cost component. Accordingly, during
periods of changing demands, the profitability of Core Materials' operations
will change proportionately more than revenues from operations.
Pursuant to the Asset Purchase Agreement, Navistar and Core Materials
entered into a Comprehensive Supply Agreement with an initial term of five
years. Under the terms of the Comprehensive Supply Agreement, Navistar agreed
to purchase from Core Materials, and Core Materials agreed to sell to Navistar
at negotiated prices, which approximate fair value, all of Navistar's original
equipment and service requirements for fiberglass reinforced parts using the SMC
process for components currently being manufactured by Core Materials and
detailed in the Comprehensive Supply Agreement. The historical sales and
gross margin amounts have been adjusted to reflect the Comprehensive Supply
Agreement.
Prior to January 1, 1997, Core Materials had not been a stand alone
operating entity. As such, Navistar had provided substantial management
support in the form of treasury, legal, tax, information systems and other
similar corporate support functions. Corporate general and administrative
expenses have not been previously allocated to Core Materials. For purposes of
preparing the financial statements of Core Materials included in this Form
10-K, these corporate costs have been allocated using a method management
believes to be reasonable and reflective of those costs had they been incurred
as a stand alone entity. However, Navistar's systems and procedures did not
provide the ability to reasonably allocate costs for income taxes, debt and
interest expense. Additionally, sales to Navistar were recorded as revenues at
Core Materials' standard cost. Accordingly, the results of operations
reflected in the financial statements and as discussed below may not be
indicative of the results of operations of Core Materials had it been a stand
alone company during the periods presented.
Results of Operations
The pro forma amounts are shown in parentheses next to the historical
amounts.
CALENDAR YEAR 1996 COMPARED WITH FISCAL YEAR 1995
Net sales for 1996 totaled $52.5 million ($56.8 million) down 12%
(13%) from the $59.5 million ($65.6 million) in 1995. Shipments to Navistar
decreased 16% (18%) to $31.5 million ($35.7 million) from $37.8 million ($43.6
million) in 1995. The decrease in shipments to Navistar was the direct result
of a decrease in sales of Navistar trucks resulting from a decline in demand
for trucks in the United States and Canada. Sales to Yamaha decreased in 1996
by 2% to $19.8 million compared with the $20.2 million in 1995. This decrease
was the result of a slight decrease in demand for Yamaha's watercraft products.
-16-
<PAGE> 19
Gross margin was 3% (11%) of sales in 1996 compared with 10% (19%) in
1995. The decrease in gross margin was primarily the result of the decrease in
sales volume which resulted in lower capacity utilization and overhead
absorption. Manufacturing costs in 1996 were higher than in 1995 due to
increased depreciation expense resulting from the installation of three large
SMC presses that became operational in 1996. In addition, the 1996 gross
margin was adversely impacted by start up costs related to the tooling for a
new Yamaha model, increased labor costs resulting from the three year labor
agreement with hourly employees signed in August, 1995 and increased repair and
maintenance costs relating to projects that had been deferred during 1995 due
to the record production volumes experienced in that year.
Marketing and administrative expenses at $493,000 in 1996 were
essentially the same as in 1995. Allocated postretirement benefits expense
increased from 1995 due to higher service costs resulting from increased
employment levels and increased multi-employer plan contributions. Other
income in 1996 resulted from the close-out of a special tooling project for one
customer.
FISCAL YEAR 1995 COMPARED WITH FISCAL YEAR 1994
Net sales for 1995 totaled $59.5 million ($65.6 million) up 35% (33%)
over the $44.2 million ($49.2 million) in 1994. Shipments to Navistar
increased 16% (16%) to $37.8 million ($43.6 million) from the $32.5 million
($37.6 million) in 1994. The increase in shipments to Navistar was the result
of an increase in sales of Navistar trucks due to an increase in truck industry
demand in the United States and Canada. Sales to Yamaha in 1995 increased by
95% to $20.2 million compared with the $10.4 million in 1994. This increase
resulted from an increase in demand for Yamaha's watercraft products and
improved pricing.
Gross margin was 10% (19%) of sales in 1995 compared with 8% (18%) in
1994. The increase in gross margin was primarily the result of the increase in
sales volumes, improved pricing, capacity utilization and operating efficiency.
These improvements were partially offset by higher labor and overtime costs to
meet the demand for both Navistar and Yamaha products. Gross margin in 1995
was also adversely impacted by a 15 day strike by Columbus Plastics' hourly
workers during the fiscal fourth quarter.
Marketing and administrative expenses were $484,000 in 1995 compared
with $390,000 in 1994. The increase was primarily the result of the hiring of
new employees and increased support costs to meet the increased production
demand in 1995. Allocated postretirement benefits expense was essentially the
same as the prior year.
-17-
<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
Historically, Core Materials' working capital and investment needs have
been financed by Navistar through the intercompany equity investment account and
through the sale of products to Yamaha. Subsequent to the Closing, Core
Materials has independently funded all of its working capital and investment
capital requirements. Funds necessary to meet its working capital and
investment needs are currently being financed through the following sources: 1)
the Comprehensive Supply Agreement between Navistar and Core Materials, while in
effect, requires that Navistar obtain all of its SMC plastic requirements for
components currently being manufactured by Core Materials, as detailed in the
Comprehensive Supply Agreement, from Core Materials at negotiated prices which
approximate fair value; 2) the Company has substantial net operating losses
("NOLs") that will be available to offset future taxable income of Core
Materials (the utilization of these NOLs will substantially reduce any federal
income tax liability payments); and 3) Core Materials is currently negotiating
to obtain a permanent working capital line of credit from a commercial bank
which will be available to fund Core Materials' working capital requirements.
In January 1997, management concluded a $3 million temporary working capital
facility with a commercial bank utilizing the mortgage-backed security as
collateral for borrowings under the facility. Internally generated funds
together with proceeds from the use of this temporary working capital facility
have provided sufficient operating liquidity for Core Materials. The
Comprehensive Supply Agreement with Navistar provides for payment terms for
shipments to Navistar which are customary in the SMC manufacturing industry.
Core Materials has been receiving regular payments on its receivables from
Navistar after an initial period prescribed by the Comprehensive Supply
Agreement.
Based upon 1) the terms of its sales arrangements with its customers,
particularly Navistar and Yamaha, 2) forecasted cash flows from operations and
3) utilization of NOLs, management believes that internally generated funds
from operations will be sufficient to fund working capital and investment
capital requirements. The securing of the temporary, and subsequently, a
permanent working capital facility will provide liquidity in periods of
fluctuating sales activity and in instances of production slowdowns.
Management is also negotiating a term loan facility(ies) which will be
supported by Core Materials' machinery, equipment and real estate. Funding
from such term loan(s) will be utilized to reduce the Navistar Secured Note
Payable (Navistar's remaining note balance will likely become subordinate in
regard to both collateral and repayment to any term financing concluded).
INCOME TAXES
The balance sheet at December 31, 1996 includes a deferred tax asset
of $12,455,000, net of a valuation allowance of $6,838,000. The deferred tax
assets are net of a valuation allowance since it is more likely than not that
a portion of the deferred tax asset may not be realized in the future.
The deferred tax asset includes the tax benefits associated with
cumulative net operating and capital tax losses of approximately $41.9 million
and temporary differences between the book and tax basis of Core Materials'
property and equipment. The valuation allowance at December
-18-
<PAGE> 21
31, 1996 assumes that it is more likely than not that approximately $10.3
million of the cumulative net operating losses and all (approximately $9.8
million) of the cumulative capital tax losses will not be realized before their
expiration date. Realization of the net deferred tax asset is dependent on the
generation of approximately $27.0 million of future taxable income, of which an
average of approximately $1.8 million would need to be generated annually for
the next 15 year period 1997 through 2011.
Extensive analysis is performed to determine the amount of the
deferred tax asset. Such analysis is based upon the premise that Core
Materials is and will continue to be a going concern and that it is more likely
than not that deferred tax benefits will be realized through the generation of
future taxable income. Management reviews all available evidence, both
positive and negative, to assess the long-term earnings potential of Core
Materials using a number of alternatives to evaluate financial results in
economic cycles at various industry volume conditions. Other factors considered
are the company's long standing relationship with its two largest customers -
Navistar and Yamaha, the Comprehensive Supply Agreement between Core Materials
and Navistar, and Navistar's 16-consecutive-year leadership in the combined
market share of Class 5 through 8 trucks. The projected availability of
taxable income to realize the tax benefits from net operating loss
carryforwards and the reversal of temporary differences before expiration of
these benefits are also considered. Management believes that, with the
combination of available tax planning strategies, the maintenance of its
relationships with Yamaha and Navistar and Navistar's maintenance of
significant market share, earnings are achievable in order to realize the net
deferred tax asset of $12,455,000.
BUSINESS OUTLOOK
After experiencing significant order declines during 1996 from both
its major customers, Navistar and Yamaha, order rates for both these customers
have increased in early 1997 to levels above the low points of 1996 order
rates. However, Navistar's management forecasts that industry demand for the
medium- and heavy-duty trucks that contain Core Materials' products will be
lower in 1997 compared to 1996. Additionally, since the Acquisition, Core
Materials has responded to and initiated discussions on a number of new sales
opportunities with customers representing product diversification opportunities
and with trucking industry related entities. Although there can be no
assurance that these opportunities will result in incremental sales volumes,
Management is encouraged by both the number and diversity of the opportunities
it is currently discussing since Core Materials became a stand alone, publicly
owned company.
-19-
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
Core Materials Corporation
Columbus, Ohio
We have audited the accompanying balance sheets of Core Materials Corporation
(the "Company") as of December 31, 1996 and 1995 and as of October 31, 1995 and
the related statements of revenues, direct expenses and identified corporate
expenses before interest and taxes for the year ended December 31, 1996, the
two month period ended December 31, 1995 and each of the two years in the period
ended October 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As explained in Note 2, the Company's historical operating results are not
necessarily indicative of those which may have resulted had it been a stand
alone company.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Core Materials Corporation as of December
31, 1996 and 1995 and as of October 31, 1995 and the results of its direct
operations and identified corporate expenses before interest and taxes for the
year ended December 31, 1996, the two month period ended December 31, 1995 and
each of the two years in the period ended October 31, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 21, 1997
-20-
<PAGE> 23
CORE MATERIALS CORPORATION
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, OCTOBER 31,
1996 1995 1995
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 590,212 $ 33,064 $ 11,929
Mortgage-backed security investment 3,295,049
Accounts receivable 2,007,963 7,297,866 7,232,646
Inventories:
Work in process 1,585,644 2,245,017 1,912,227
Stores 1,757,055 1,266,809 1,450,123
------------ ----------- -----------
3,342,699 3,511,826 3,362,350
Other current assets 344,440 523,146 332,079
------------ ----------- -----------
Total current assets 9,580,363 11,365,902 10,939,004
PROPERTY, PLANT AND
EQUIPMENT - Net 25,068,481 21,939,271 21,652,220
DEFERRED TAX ASSET - Net 12,455,000
------------ ----------- -----------
TOTAL $ 47,103,844 $33,305,173 $32,591,224
============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
CURRENT LIABILITIES:
Accounts payable $ 372,869 $ 7,665,258 $11,235,036
Accrued liabilities 1,422,103 1,433,507 1,215,742
------------ ----------- -----------
Total current liabilities 1,794,972 9,098,765 12,450,778
SECURED NOTE PAYABLE 29,514,000
POSTRETIREMENT BENEFITS LIABILITY 244,000
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, authorized
20,000,000 shares; issued and outstanding
9,474,600 shares 94,746
Paid-in-capital 15,918,193
Retained deficit (462,067)
NAVISTAR'S EQUITY INVESTMENT ACCOUNT
------------ ----------- -----------
Total stockholders' equity 15,550,872 24,206,408 20,140,446
------------ ----------- -----------
TOTAL $ 47,103,844 $33,305,173 $32,591,224
============ =========== ===========
</TABLE>
See notes to the financial statements
-21-
<PAGE> 24
CORE MATERIALS CORPORATION
STATEMENTS OF REVENUES, DIRECT EXPENSES AND IDENTIFIED
CORPORATE EXPENSES BEFORE INTEREST AND TAXES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWO
YEAR ENDED MONTHS ENDED YEARS ENDED OCTOBER 31,
DECEMBER 31, DECEMBER 31, ------------------------------
1996 1995 1995 1994
<S> <C> <C> <C> <C>
NET SALES:
Navistar $ 31,546,315 $ 5,334,994 $37,777,164 $32,541,121
Yamaha 19,759,033 3,216,025 20,221,722 10,381,686
Other 1,161,461 303,633 1,506,243 1,268,645
------------ ------------ ----------- -----------
52,466,809 8,854,652 59,505,129 44,191,452
COSTS AND EXPENSES:
Cost of sales 50,733,573 8,082,169 53,319,218 40,487,461
Postretirement
benefits expense 1,042,794 151,108 857,098 832,590
Marketing and administrative 493,000 81,000 484,000 390,000
Other (income) expense (349,604) (3,250) 55,241 15,278
------------ ------------ ----------- -----------
INCOME BEFORE
INTEREST AND TAXES $ 547,046 $ 543,625 $ 4,789,572 $ 2,466,123
============ ============ =========== ===========
</TABLE>
See notes to financial statements.
-22-
<PAGE> 25
CORE MATERIALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS FORMATION AND NATURE OF OPERATIONS
Core Materials Corporation ("Core Materials"), a Delaware corporation, was
formed on October 8, 1996 by RYMAC Mortgage Investment Company ("RYMAC"),
a Maryland corporation, as a wholly owned subsidiary, for the purpose of
acquiring substantially all of the assets and liabilities of Columbus
Plastics Operation ("Columbus Plastics"), an operating unit of Navistar
International Transportation Corp. ("Navistar"). Throughout these Notes to
Financial Statements, references to Columbus Plastics refers to the
operations of Core Materials prior to the acquisition.
Prior to 1994, RYMAC was primarily engaged in making investments in
mortgage derivative securities and, to a lesser extent, mortgage related
investments. In mid-1994, RYMAC's Board of Directors decided not to pursue
its historical line of business and would investigate alternative
opportunities to maximize stockholder value, which led to the acquisition
of Columbus Plastics.
On December 31, 1996, RYMAC merged into its wholly owned subsidiary, Core
Materials, by converting each outstanding common share of RYMAC into the
right to receive one common share of Core Materials, with Core Materials
as the surviving corporation and continuing registrant. Simultaneously, on
December 31, 1996, Core Materials purchased substantially all of the
assets and assumed certain liabilities of Columbus Plastics for (1)
$29,514,000, in the form of a secured promissory note due to Navistar
("Secured Note") and (2) 4,264,000 shares of Core Materials common stock,
representing approximately 45% of the total number of shares of Core
Materials common stock then issued and outstanding (see Note 4) (the
"Acquisition").
Based upon the terms of the Acquisition, the transaction for financial
reporting and accounting purposes has been accounted for as a reverse
acquisition whereby Columbus Plastics is deemed to have acquired Core
Materials. However, Core Materials is the continuing legal entity and
registrant for both Securities and Exchange Commission filing purposes and
income tax reporting purposes. Consistent with reverse acquisition
accounting treatment Core Materials has carried forward the historical
basis of the acquired assets and assumed liabilities of Columbus Plastics
and has revalued the basis of its net assets to fair value at December 31,
1996.
Core Materials produces compression Sheet Molding Composite ("SMC")
fiberglass reinforced parts. Core Materials has two principal customers,
Navistar and Yamaha, and provides Navistar's truck assembly operations
with generally all of its SMC requirements, primarily hoods and air
deflector shields.
-23-
<PAGE> 26
2. BASIS OF PRESENTATION
The fiscal year end of Core Materials Corporation is December 31. Columbus
Plastics' historical year end was October 31. In the accompanying
financial statements, the historical fiscal year of Columbus Plastics has
been maintained through October 31, 1995, its previous most recently
audited financial statements. Effective December 31, 1995, the fiscal year
end was changed to conform to the year end of Core Materials, the
continuing legal entity and registrant.
The accompanying balance sheet as of December 31, 1996 reflects the
Acquisition accounted for as a reverse acquisition. All other accompanying
financial statements reflect the historical assets, liabilities and
operations of Columbus Plastics. Note 5 contains the unaudited pro forma
combined statements of income of Core Materials for the twelve months
ended December 31, 1996 and the twelve months ended October 31, 1995, as
if the Acquisition had been consummated as of November 1, 1994.
Prior to the Acquisition, Columbus Plastics was not a "stand alone"
division or subsidiary of Navistar and was not generally accounted for
separately. As a result, the distinct and separate accounts necessary to
present individual Core Materials balance sheets as of December 31, 1995
and October 31, 1995 and income statements for the year ended December
31, 1996, the two month period ended December 31, 1995 and each of the
two years in the period ended October 31, 1995 have not been maintained.
Columbus Plastics did not maintain corporate treasury, legal, tax,
purchasing and other similar corporate support functions. Corporate
general and administrative expenses have not been previously allocated to
Columbus Plastics. For purposes of preparing the Core Materials financial
statements, certain of these corporate costs, along with other Navistar
Truck Group expenses, were allocated using an allocation method (see Note
14). However, Navistar's systems and procedures do not provide sufficient
information to develop a reasonable cost allocation for income taxes,
corporate debt and interest expense.
With respect to cash flows; purchases of inventory, payroll, capital and
other expenditures were funded through the Equity Investment account with
Navistar. Accounts payable to third party vendors and certain expense
accruals were processed and recorded at other Navistar locations.
Remittances from sales to third parties were collected by Navistar and
were accounted for through the Equity Investment account as were sales to
Navistar's truck assembly operations. Accordingly, Columbus Plastics has
no operating cash flows.
FINANCIAL STATEMENT PRESENTATION - Based upon the above information, the
following financial information is presented:
- Balance Sheets - The assets and liabilities of Columbus Plastics
are included herein at Navistar's historical cost. The net assets
of Core Materials have been revalued to their fair value at
December 31, 1996.
-24-
<PAGE> 27
- Statements of Revenues, Direct Expenses and Identified Corporate
Expenses before Interest and Taxes-Includes all Navistar corporate
cost allocations for which a reasonable method of allocating the
costs to the operations of Columbus Plastics can be developed.
- Statements of Cash Flows are not presented as Columbus Plastics has
essentially no cash flow. Note 8 to the financial statements
presents a reconciliation of the Navistar Equity Investment account
for all periods presented.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities and reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION - During the periods presented, Core Materials
recorded sales to Navistar's manufacturing plants at its standard cost
at date of shipment. Effective December 31, 1996, sales to Navistar will
be recorded at the prices stipulated in the Comprehensive Supply
Agreement between Core Materials and Navistar (the "Supply Agreement")
(see Note 15), which approximate fair value. Sales to third party
customers, other than Navistar, are recorded at negotiated prices at
date of shipment.
MORTGAGE-BACKED SECURITY - Pursuant to reverse acquisition accounting, the
mortgage-backed security is recorded at its fair value at December 31,
1996, which is also the cost basis to Core Materials. The security, which
matures in November 2025, is considered held to maturity, and is carried
at the lower of its cost or market value. Core Materials has the intent
and ability to hold this security to maturity.
INVENTORIES - Inventories are stated at the lower of cost (standard cost)
or market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are recorded
at cost. Depreciation is provided on a straight line method over the
estimated useful lives of the assets. The carrying amount of long-lived
assets is evaluated annually to determine if adjustment to the
depreciation period or to the unamortized balance is warranted. Such
evaluation is based principally on the expected utilization of the
long-lived assets.
Ranges of estimated useful lives for computing depreciation are as
follows:
Land improvements 20 years
Building and improvements 20-50 years
Machinery and equipment 3-25 years
Tools, dies and patterns 3-5 years
-25-
<PAGE> 28
FAIR VALUE OF FINANCIAL INSTRUMENTS - Core Materials' financial
instruments consist of a mortgage-backed security investment, accounts
receivable, accounts payable and a secured note payable. The carrying
amounts of the financial instruments approximate their fair value.
EARNINGS PER SHARE - Earnings per share is not presented as Columbus
Plastics was not a stand alone division or subsidiary of Navistar and was
generally not accounted for separately during the periods presented.
4. ACQUISITION
On December 31, 1996 Core Materials acquired substantially all of the
assets and assumed certain liabilities of Columbus Plastics for (1) a
$25,504,000 Secured Note due Navistar, subject to adjustment, and (2)
4,264,000 shares of Core Materials common stock, representing
approximately 45% of the total number of shares of Core Materials common
stock then issued and outstanding.
Effective December 31, 1996, the Secured Note was increased to
$29,514,000 in order to reflect an increase in the "net tangible assets"
(as defined in the Asset Purchase Agreement between RYMAC and Navistar
(the "Agreement")) of Columbus Plastics as of December 31, 1996.
In connection with the Acquisition, Core Materials is required to pay
Navistar future consideration in the form of an increase in the Secured
Note based upon a multiple of the amount by which Core Materials' earnings
before interest and taxes (EBIT) exceeds established thresholds over the
three year period 1997 to 1999. The future consideration received will be
based upon a multiple of EBIT as follows:
- 1997: If EBIT exceeds $6,512,000, then the future
consideration will be the excess multiplied by 5.55.
- 1998: If EBIT exceeds $6,512,000, then the future
consideration will be the product of the 1998 excess EBIT less
the 1997 excess EBIT multiplied by 4.50.
- 1999: If EBIT exceeds $6,512,000, then the future
consideration will be the product of the 1999 excess EBIT less
the 1998 excess EBIT multiplied by 2.75.
The maximum increase in the Secured Note as a result of future
consideration is limited to $24,496,000. Such increases will be accounted
for by reducing Core Materials' retained earnings and will increase the
amount of the balloon payment due in November 2006.
Based upon the terms of the Acquisition, the transaction for financial
reporting and accounting purposes has been accounted for as a reverse
acquisition whereby Columbus Plastics is deemed to have acquired Core
Materials. However, Core Materials is the continuing legal entity and
registrant for both Securities and Exchange Commission filing purposes and
income tax reporting purposes. Consistent with reverse acquisition
accounting
-26-
<PAGE> 29
treatment Core Materials has carried forward the historical basis of the
acquired assets and assumed liabilities of Columbus Plastics and has
revalued the basis of its net assets to fair value at December 31, 1996.
Consistent with reverse acquisition accounting treatment, the purchase
price should be determined as the fair value of the consideration paid or
received whichever is more clearly evident. Because RYMAC's stock was
thinly traded and supported a company with no operations (prior to the
Acquisition), the fair value of RYMAC's then outstanding common stock was
not appropriate to determine the Acquisition purchase price. Instead the
purchase price was determined based upon the fair value of the
consideration received (Core Materials' assets and liabilities) by
Columbus Plastics. The purchase price was approximately $16.0 million,
calculated as follows, and excludes any future consideration which would
be paid if certain earnings thresholds are met:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 584,351
Mortgage-backed security 3,295,049
Other assets 122,935
Deferred tax asset, net 12,455,000
Accrued expenses (492,649)
-----------
$15,964,686
</TABLE>
Transaction costs incurred by the acquiror in connection with the
acquisition of a company without operating substance should be treated
similar to that of an offering of equity securities as a reduction of
paid-in capital. Since the recording of Navistar's transaction costs at
Core Materials would result in no net impact to Core Materials' balance
sheet, Navistar's transaction costs are excluded from the purchase price.
The Agreement identified the specific assets to be acquired and the
specific liabilities to be assumed. The decrease in accounts payable at
December 31, 1996 versus the prior periods as shown in the accompanying
balance sheets reflects the retention by Navistar of certain accounts
payable at closing in accordance with the Agreement.
5. PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma combined statements of income for the
twelve month periods ended December 31, 1996 and October 31, 1995 are
presented as if the Acquisition had occurred as of November 1, 1994. This
pro forma information is not necessarily indicative of the actual results
of operations which would have occurred had the transactions occurred on
such dates or which may occur in the future.
-27-
<PAGE> 30
CORE MATERIALS CORPORATION
UNAUDITED PROFORMA COMBINED STATEMENT OF INCOME
Twelve months ended December 31, 1996
<TABLE>
<CAPTION>
Proforma Adjustments
-------------------------------------------
Historical Supply & Proforma
Columbus Services Adjusted
Plastics Acquisition Note Agreements Note Balance Note
---------- ----------- ---- ---------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues:
Navistar $31,548,315 $ 4,123,000 (b) $ 35,669,315
Yamaha 19,759,033 19,759,033
Other-manufacturing 1,161,461 1,161,461
Investment income $ 230,650 (a) 230,650
----------- ----------- ------------ ------------
52,466,809 230,650 4,123,000 56,820,459
Cost of sales 50,733,573 50,733,573
----------- ----------- ------------ ------------
Gross Margin 1,733,236 230,650 4,123,000 6,086,886
Postretirement benefits expense 1,042,794 1,042,794
Marketing and administrative 493,000 864,000 (d) - (d) 1,357,000
Interest expense - net 1,841,120 (c) 1,841,120
Other (income) (349,604) (349,604)
----------- ----------- ------------ ------------
Income Before Income Taxes $ 547,046 $(2,474,470) $ 4,123,000 $ 2,195,576
Income Tax Provision 905,895 (f)
------------
Net income $ 1,289,681
============
Net Income Per Common Share $ 0.13
============
Weighted Average Number of
Common Shares and Common
Stock Equivalents 9,654,400 (e)
============
</TABLE>
-28-
<PAGE> 31
CORE MATERIALS CORPORATION
UNAUDITIED PROFORMA COMBINED STATEMENT OF INCOME
Twelve months Ended October 31, 1995
<TABLE>
<CAPTION>
Proforma Adjustments
--------------------------------------------------
Historical Supply & Proforma
Columbus Services Adjusted
Plastics Acquisition Note Agreements Note Balance Note
-------- ----------- ---- ---------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues:
Navistar $ 37,777,164 $ 5,866,200 (b) $ 43,643,364
Yamaha 20,221,722 20,221,722
Other-manufacturing 1,506,243 1,506,243
Investment income $ 230,650 (a) 230,650
------------- ------------- ------------ -------------
59,505,129 230,650 5,866,200 65,601,979
Cost of sales 53,319,218 53,319,218
------------- ------------- ------------ -------------
Gross Margin 6,185,911 230,650 5,866,200 12,282,761
Postretirement benefits expense 857,098 857,098
Marketing and administrative 484,000 864,000 (d) - (d) 1,348,000
Interest expense - net 2,211,120 (c) 2,211,120
Other expense 55,241 55,241
------------- ------------- ------------ -------------
Income Before Income Taxes $ 4,789,572 $ (2,844,470) $ 5,866,200 $ 7,811,302
Income Tax Provision 3,222,943 (f)
-------------
Net income $ 4,588,359
-------------
Net Income Per Common Share $ 0.48
=============
Weighted Average Number of
Common Shares and Common
Stock Equivalents 9,654,400 (e)
=============
</TABLE>
The Unaudited Proforma Combined Statements of Income for the twelve months ended
December 31, 1996 and October 31, 1995 have been prepared assuming the proposed
acquisition had occurred on November 1, 1994 and reflect the effects of certain
adjustments to the historical financial statements that result from the
acquisition of Columbus Plastics by Core Materials. Columbus Plastics was not a
stand alone division or subsidiary of Navistar and was not generally accounted
for separately. Navistar's systems and procedures do not provide sufficient
information to develop a reasonable cost allocation for income taxes and
interest expense. Accordingly, historical net income per common share amounts
have not been included for the
-29-
<PAGE> 32
financial information for Columbus Plastics. A historical statement of income
for Core Materials is not included in the unaudited proforma combined financial
information as the Acquisition was accounted for using reverse acquisition
accounting treatment.
(a) Represents the estimated interest income to be earned on the
mortgage-backed security at the security's effective interest rate of
7%.
(b) Represents the additional revenues resulting from pricing sales by Core
Materials to Navistar reflecting the prices specified in the
Comprehensive Supply Agreement, rather than at Core Materials
historical standard cost.
(c) Represents the estimated interest expense on the Secured Note due to
Navistar at 8% per annum less the interest credit of $520,000 and
$150,000 for the twelve months ended December 31, 1996 and October 31,
1995, respectively, which represents the capitalization of interest on
the Secured Note relating to property, plant and equipment under
construction.
(d) Represents an estimate of the additional administrative expenses to be
incurred by Core Materials as a result of its status as a stand-alone,
publicly owned company rather than an operating unit of a much larger
corporation. Additional costs consist primarily of executive salary
costs and legal and directors fees. The historical marketing and
administrative expense of Columbus Plastics includes allocated
corporate costs which are reflective of the costs that will be charged
to Columbus Plastics pursuant to the Transitional Services Agreement
between Core Materials and Navistar. Accordingly, no adjustments have
been recorded to reflect the impact of the Transitional Services
Agreement on the unaudited proforma combined financial statements.
(e) The weighted average number of common shares and common stock
equivalents outstanding used to calculate net income per common share
include the number of shares of Core Materials common stock outstanding
prior to the acquisition; the number of shares issued to Navistar as
consideration for the Acquisition; and the effect of the exercise of
260,000 dilutive Core Materials stock options, using the treasury stock
method.
(f) Represents the estimated income tax expense for Core Materials based
upon a statutory Federal tax rate of 34% and an estimated Ohio state
and local tax rate of 11%. The income tax expense recorded in the
unaudited proforma combined financial statements is not necessarily
indicative of the cash payments for income taxes that Core Materials
would be required to pay due to Core Materials' substantial net
operating loss carryforwards. Core Materials expects to only be
required to make minimal Federal income tax payments as mandated,
primarily, by the Alternative Minimum Tax regulations until such time
that the loss carryforwards are fully utilized or expired.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
-30-
<PAGE> 33
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, OCTOBER 31,
1996 1995 1995
<S> <C> <C> <C>
Land and land improvements $ 1,607,066 $ 1,480,782 $ 1,480,782
Building and equipment 38,933,211 28,473,930 28,473,930
Tools, dies and patterns 299,135 295,110 295,110
Construction in progress 1,498,558 7,170,187 6,608,206
----------- ----------- -----------
42,337,970 37,420,009 36,858,028
Less accumulated depreciation 17,269,489 15,480,738 15,205,808
----------- ----------- -----------
Property, plant and equipment - net $25,068,481 $21,939,271 $21,652,220
=========== =========== ===========
</TABLE>
Construction in progress primarily relates to the purchase and
installation of SMC presses and certain other SMC capital projects.
Substantially all amounts included in construction in progress at December
31, 1996, December 31, 1995 and October 31, 1995 are expected to be placed
in service within six months from each respective period end. At December
31, 1995 and October 31, 1995 commitments for capital expenditures in
progress, relating to SMC presses, were approximately $2,600,000 and
$1,800,000, respectively. There were no commitments for capital
expenditures in progress at December 31, 1996. Prior to December 31,
1996, Core Materials did not record capitalized interest on construction
in progress as interest expense was not allocated by Navistar to Columbus
Plastics.
7. DEBT
Secured Note
The Secured Note due to Navistar of $29,514,000 at December 31, 1996 bears
interest at the rate of 8% per annum, payable semi-annually, and is
secured by a first priority lien upon and security interest in all of Core
Materials' assets. The Secured Note is due in November 2006. In connection
with the acquisition, Core Materials is also required to pay Navistar
future consideration in the form of an increase in the principal amount of
the Secured Note if Core Materials achieves earnings before interest and
taxes in excess of established thresholds during the period 1997 through
1999. (See Note 4).
Principal payments under the Secured Note are due as follows:
(a.) Within ninety (90) days after the end of each fiscal year of Core
Materials during the term of the Secured Note, Core Materials shall pay
principal in an amount equal to the amount, if any, by which the total
cash and cash equivalents of Core Materials, as shown on Core Materials'
audited balance sheet as of the end of such fiscal year, exceeds
$3,000,000; and
-31-
<PAGE> 34
(b.) In the event Core Materials obtains, from time to time, any
refinancing loan (as defined by the terms of the Secured Note), Core
Materials shall promptly upon obtaining such loan pay principal in an
amount equal to the proceeds of such loan.
Based upon the financial position of Core Materials at December 31, 1996,
the Secured Note is classified as long-term on the balance sheet.
The provisions of the Secured Note prohibit the declaration or payment of
cash dividends, the repurchase or retirement of capital stock, as well as
the pledge of any of Core Materials' assets or revenue as a security
lien to a third party as long as the Secured Note is outstanding.
Line of Credit
Subsequent to December 31, 1996, Core Materials entered into a line of
credit facility with a Bank ($3,000,000 maximum availability) for working
capital purposes. The line of credit is repayable on demand, bears
interest at the prime rate (8.25% at December 31, 1996) and is secured
by the mortgage-backed security.
8. EQUITY INVESTMENT ACCOUNT
Cash flows for purchases and sales of inventory, payroll, capital
expenditures, and other expenditures were funded through the intercompany
equity investment account with Navistar. The following summarizes the
changes in the Equity Investment account for the periods presented:
<TABLE>
<CAPTION>
TWO
YEAR ENDED MONTHS ENDED YEARS ENDED OCTOBER 31,
DECEMBER 31, DECEMBER 31, -----------------------
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Balance - beginning of
period $24,206,408 $20,140,446 $14,489,444 $ 13,350,804
Funding of purchases 45,922,756 9,870,093 37,766,508 24,636,830
Net charges from Navistar 19,695,932 3,032,887 19,991,165 16,631,167
Navistar funding of plant
expenses and other 2,777,608 300,196 2,076,547 1,700,381
Net charges to Navistar (36,030,151) (6,344,451) (37,368,465) (32,431,104)
Collections from third
parties (27,781,025) (3,336,388) (21,604,325) (11,864,757)
Income before
interest and taxes 547,046 543,625 4,789,572 2,466,123
Push down of
pension liability from Navistar (244,000)
Issuance of Core Materials
common stock (29,094,574)
----------- ----------- ----------- ------------
Balance - end of period $ $24,206,408 $20,140,446 $ 14,489,444
=========== =========== =========== ============
</TABLE>
-32-
<PAGE> 35
FUNDING OF PURCHASES - represents amounts funded by Navistar primarily for
purchases of materials and capital expenditures.
NET CHARGES FROM NAVISTAR - represents amounts charged for payroll and
related expenses, charges for employee health and welfare plans, payments
to union sponsored pension plans and all corporate support services.
NAVISTAR FUNDING OF PLANT EXPENSES - represents amounts transferred to
Columbus Plastics from Navistar as reimbursement for expenses paid by
Columbus Plastics.
NET CHARGES TO NAVISTAR - represents the intercompany sales and charges by
Columbus Plastics to other Navistar manufacturing plants for the sale of
SMC products.
COLLECTIONS FROM THIRD PARTIES - represents amounts collected by Columbus
Plastics on sales to third parties, primarily Yamaha, and collections on
billings for tooling projects.
PUSH DOWN OF PENSION LIABILITY FROM NAVISTAR - represents the push down
from Navistar to Core Materials of the projected benefit obligation for
non-represented employees' pension benefits which was assumed by Core
Materials. See Note 13 for further discussion of the pension obligation.
ISSUANCE OF CORE MATERIALS COMMON STOCK - reverse acquisition accounting
treatment requires that the retained earnings carried forward to Core
Materials as of December 31, should consist of Columbus Plastics'
Equity Investment account, less an amount equivalent to the par value of
Core Materials common stock owned by Navistar. This item represents the
transfer of the Equity Investment account to common stock and retained
earnings.
9. EQUITY
Anti-takeover Measures
Core Materials' Certificate of Incorporation and By-laws contain certain
provisions designed to discourage specific types of transactions involving
an actual or threatened change of control of Core Materials. These
provisions, which are designed to make it more difficult to change
majority control of the Board of Directors without its consent, include
the following:
Removal of Directors - This provision provides that a director of
Core Materials may be removed with or without cause only upon the
vote of the holders of at least 80% of the voting power of the
outstanding shares of capital stock entitled to vote generally in
the election of directors.
Supermajority Approval - This provision requires that a merger
and certain other transactions (as outlined in the Certificate of
Incorporation) be approved by the affirmative vote of the holders
of at least 66 2/3% of the then outstanding shares of Core
Materials' common stock. Such affirmative vote is required
notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified by law.
-33-
<PAGE> 36
Amendments - This provision requires that any amendment to the
provisions relating to the removal of directors be approved by
the holders of at least 80% of the then outstanding shares of
voting stock, and any amendment to provisions requiring the
approval of the holders of at least 66 2/3% of the then
outstanding shares of voting stock be approved by the holders of
at least 66 2/3% of the then outstanding shares of voting stock.
Restrictions on Transfer
Core Materials' Certificate of Incorporation also contains a provision
(the "Prohibited Transfer Provision") designed to help assure the
continued availability of Core Materials' substantial net operating loss
and capital loss carryforwards by seeking to prevent an "ownership
change" as defined under current Treasury Department income tax
regulations. Under the Prohibited Transfer Provision, if a stockholder
transfers or agrees to transfer stock, the transfer will be prohibited
and void to the extent that it would cause the transferee to hold a
"Prohibited Ownership Percentage" (as defined in Core Materials'
Certificate of Incorporation, but generally, means direct and indirect
ownership of 4.5% or more of the Company's common stock) or if the
transfer would result in the transferee's ownership increasing if the
transferee had held a Prohibited Ownership Percentage within the three
prior years or if the transferee's ownership percentage already exceeds
the Prohibited Ownership Percentage under applicable Federal income tax
rules. The Prohibited Transfer Provision does not prevent transfers of
stock between persons who do not hold a Prohibited Ownership Percentage.
Restricted Common Stock
On February 19, 1997, Core Materials issued, in total, 40,200 shares of
common stock, par value $0.01 per share, to approximately 402 employees
(which constituted all of its employees with the exception of certain
executive employees). The Company received no consideration for the
shares. The shares were issued as an incentive for its employees to remain
with the Company and are subject to forfeiture to the Company if an
employee leaves prior to December 31, 1998. During this period, the shares
may not be transferred.
Preferred Stock
The Company has authorized 10,000,000 shares of preferred stock (par
value: $0.01) of which none is issued.
-34-
<PAGE> 37
10. STOCK OPTIONS AND EQUITY INCENTIVE PLAN
At the time of the merger of RYMAC into Core Materials, each outstanding
option to purchase shares of RYMAC's common stock granted under any of
RYMAC's previous stock option plans was deemed amended to constitute an
option to acquire, at the same price per share, the same number of shares
of Core Materials' common stock.
At December 31, 1996, there were 260,000 outstanding options each to
purchase one share of Core Materials' common stock at prices ranging from
$0.75 to $1.50, all of which were exercisable. All of the options are held
by executive officers and a former director of RYMAC. There have been no
options granted during the year ended December 31, 1996, the two month
period ended December 31, 1995 or the year ended October 31, 1995;
accordingly, pro forma disclosures as required by Statement of Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" are not
applicable.
Subsequent to year-end, the Board of Directors of Core Materials
authorized the adoption of the Core Materials Corporation -- Long Term
Equity Incentive Plan, subject to the approval of holders of a majority
of the Core Materials' common shares outstanding. The plan allows for
grant of non-qualified stock options, incentive stock options, director
options, stock appreciation rights, restricted stock, performance shares,
performance units and other incentive awards up to an aggregate 1.5
million awards, each award representing a right to buy a share of Core
Materials' common stock. The plan expires on the earlier of December 31,
2006, or the date that the maximum number of available awards under the
plan have been granted.
11. LEASES AND ACCRUED EXPENSES
Core Materials has long-term noncancellable leases for use of equipment
under operating lease agreements. Total rental expense under such
agreements amounted to approximately $563,000 for the year ended December
31, 1996, $83,000 for the two month period ended December 31, 1995 and
$560,000 and $540,000 for the years ended October 31, 1995 and 1994,
respectively.
At December 31, 1996, the aggregate minimum future rental commitments
under noncancellable leases with terms in excess of one year were
approximately $569,000 in 1997; $569,000 in 1998; $273,000 in 1999;
$174,000 in 2000 and $15,000 in 2001.
Accrued expenses at December 31, 1996, December 31, 1995 and October 31,
1995 include $1,174,770, $1,101,456, and $819,522, respectively, for
certain accrued employee benefits.
12. INCOME TAXES
As Navistar's systems and procedures do not provide sufficient information
to develop a reasonable cost allocation for income taxes, income taxes
were not allocated to Columbus Plastics prior to the Acquisition.
Accordingly, there is no income tax expense recorded in the accompanying
financial statements.
The accompanying financial statements include a deferred tax asset for
Core Materials' net operating loss (NOL) and capital loss carryforwards
and the temporary difference between the book and tax basis of Core
Materials' property, plant and equipment. The components of the deferred
tax asset at December 31, 1996 are as follows:
-35-
<PAGE> 38
<TABLE>
<CAPTION>
<S> <C>
Property, plant and equipment $ 5,036,000
Net operating loss carryforwards 10,925,000
Capital loss carryforwards 3,332,000
------------
$ 19,293,000
Valuation allowance (6,838,000)
------------
Deferred Tax Asset-Net $ 12,455,000
------------
</TABLE>
A valuation allowance has been provided for those NOL carryforwards and
temporary differences which are estimated to expire before they are
utilized. A full allowance has been provided against the approximately
$9.8 million of capital loss carryforwards, because the capital loss
carryforwards are estimated to expire before they are utilized
($4,800,000 expire in 1999 and $5,000,000 expire in 2001). At December 31,
1996, Core Materials had approximately $32.1 million of NOL carryforwards
available to offset future taxable income. Such carryforwards reflect
income tax losses incurred which will expire as follows:
<TABLE>
<CAPTION>
<S> <C>
2007: $16,656,000
2008: 10,823,000
2009: 3,614,000
2010: 638,000
2011: 400,000
</TABLE>
13. POSTRETIREMENT BENEFITS
Core Materials provides postretirement benefits to substantially all of
its employees. Total postretirement benefits expense includes the pension
expense for salaried employees, retirees and surviving spouses, and
postretirement health care and life insurance expense for all employees,
retirees and surviving spouses and dependents. Core Materials also
participates in a multi-employer defined benefit pension plan for its
union represented employees, and allows all employees to participate in
one of two 401(k) plans, to which Core Materials does not make
contributions. Prior to the Acquisition Core Materials' employees were
participants in the Navistar sponsored pension and postretirement plans.
Navistar allocated postretirement benefit costs to Columbus Plastics
based upon the number of Columbus Plastics participants and their
respective demographic data.
The pension plan for non-represented employees is non-contributory with
benefits related to an employee's length of service and compensation rate.
In connection with the acquisition, Navistar retained responsibility for
vested benefits as of December 31, 1996. Under the principles of reverse
acquisition accounting, the retention of the earned pension liability by
Navistar has been treated as a settlement for that portion of the total
pension obligation. As Navistar did not push down Columbus Plastics'
portion of the total pension liability to their financial statements prior
to the Acquisition, the pension liability as of December 31, 1996 has been
reclassified from the Navistar Equity Investment account. The plan
provisions at December 31, 1996 are substantially the same as the prior
Navistar sponsored defined benefit pension plan for non-represented
employees. The funded status of the non-represented employees' pension
plan as of December 31, 1996 and a reconciliation with the amount
-36-
<PAGE> 39
recognized in the Balance Sheet is as follows:
<TABLE>
<CAPTION>
<S> <C>
Accumulated benefit obligation $ 0
========
Projected benefit obligation $400,000
Plan assets at fair value 0
--------
Funded status at December 31, 1996 ( 400,000)
Unrecognized pension costs:
Transition obligation 47,000
Prior service costs 10,000
Net pension losses 99,000
--------
Net liability ($244,000)
</TABLE> ========
All Core Materials' union employees are covered under a multi-employer
defined benefit pension plan administered under a collective bargaining
agreement. This plan is not administered by Core Materials and
contributions are determined in accordance with provisions in the
negotiated labor contract. Pursuant to the terms of the Asset Purchase
Agreement (see Note 4) Navistar withdrew from the multi-employer plan,
and, simultaneously, Core Materials took over Navistar's former
responsibilities in regards to the multi-employer plan. Management has
been advised by the multi-employer plan's actuary that Navistar's
withdrawal from the plan will not result in a withdrawal liability.
The postretirement plan provides healthcare and life insurance for retired
employees; spouses and certain dependents and calls for cost sharing
between Core Materials, Navistar and the participants in the form of
premiums, co-payments and deductibles. The plan is substantially the same
as the plans provided by Navistar prior to the Acquisition. Core Materials
and Navistar share the cost of such benefits based upon the hire date and
retirement status of the employee participant using a formula that
allocates the cost based upon the respective portion of time that the
employee was an active service participant after the Acquisition to the
period of active service prior to the Acquisition. Core Materials will be
fully responsible for the postretirement healthcare and life insurance
benefits for all employees hired after January 1, 1997. Since Columbus
Plastics' accumulated postretirement benefit obligation for healthcare and
life insurance benefits as of December 31, 1996 was fully retained by
Navistar no liability for such benefits is recorded as of December 31,
1996 in the accompanying financial statements.
The costs of postretirement benefits including the effect of the corporate
allocation adjustments (see Note 14) are segregated as a separate
component in the accompanying Statements of Revenues, Direct Expenses and
Identified Corporate Expenses Before Interest and Taxes and approximate
the following:
-37-
<PAGE> 40
<TABLE>
<CAPTION>
TWO MONTHS
YEAR ENDED ENDED YEARS ENDED OCTOBER 31,
DECEMBER 31, DECEMBER 31, -------------------------
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Pension expense $ 229,000 $ 31,000 $229,000 $243,000
Multi-employer plan
contrbutions 275,794 45,108 235,098 241,590
Health and life insurance 538,000 75,000 393,000 348,000
---------- -------- -------- --------
Total postretirement
benefits expense $1,042,794 $151,108 $857,098 $832,590
---------- -------- ======== ========
</TABLE>
14. CORPORATE ALLOCATIONS
Prior to its acquisition by Core Materials, Columbus Plastics did not
maintain corporate treasury, legal, tax, purchasing and other similar
corporate support functions. Columbus Plastics did record certain budgeted
corporate expenses related primarily to employee benefits, real estate
taxes and insurance. Adjustments to these amounts to reflect actual
expenditures were not recorded by Columbus Plastics but are included in
the corporate allocation amounts noted below. For purposes of preparing
the financial information for Columbus Plastics certain corporate costs
and credits along with other Navistar Truck Group expenses which were not
budgeted to Columbus Plastics were allocated based upon a variety of
factors which include the size of the Columbus Plastics operation, the
number of Columbus Plastics employees, and the identification of costs
specifically attributable to Columbus Plastics. Management believes that
the allocation method used is reasonable and reflective of Columbus
Plastics' proportionate share of such expenses and is comparable to those
that would have been incurred on a stand-alone basis.
The following summarizes the corporate costs (credits) allocated to
Columbus Plastics which were not budgeted and recorded by Columbus
Plastics. The amounts represent adjustments to the budgeted expenses or
allocations of Navistar Corporate and Truck Group Marketing and
Administrative expenses.
<TABLE>
<CAPTION>
TWO MONTHS
YEAR ENDED ENDED YEARS ENDED OCTOBER 31,
DECEMBER 31, DECEMBER 31, -------------------------
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Cost of sales $(545,000) $(115,000) $(317,000) $(270,000)
Postretirement benefits
expense $ 21,000 $ (12,000) $ 57,000 $(196,000)
Marketing and administrative $ 493,000 $ 81,000 $ 484,000 $ 390,000
</TABLE>
-38-
<PAGE> 41
15. RELATED PARTIES
In connection with the acquisition, Core Materials and Navistar entered
into a Supply Agreement and a Transitional Services Agreement (the
"Services Agreement"). Under the terms of the Supply Agreement, for a
period of five years commencing December 31, 1996, Navistar agreed to
purchase from Core Materials, and Core Materials agreed to sell to
Navistar at negotiated prices, which approximate fair value, all of
Navistar's original equipment and service requirements for Fiberglass
Reinforced Parts using the Sheet Molding Composite process as they
currently exist or as they may be improved or modified. On a pro forma
basis, pursuant to the terms of the Supply Agreement, Core Materials would
have charged Navistar for sales of its products approximately $35,670,000,
$6,210,000, $43,640,000 and $37,600,000 for the year ended December 31,
1996, the two month period ended December 31, 1995, and for the years
ended October 31, 1995 and 1994, respectively. However, no minimum
quantities of annual production of products or minimum purchase quantities
are set forth or implied in the Supply Agreement, and no penalties will be
imposed on Navistar for volumes of products actually ordered by Navistar
below those quantities forecasted. Under the terms of the Services
Agreement, Navistar will provide financial reporting, accounting, computer
services, and office support services to Core Materials and procure
insurance on Core Materials' behalf for up to three years at fees based
upon actual hours incurred, the cost of Navistar personnel and related
expenses, and any costs incurred by Navistar in providing such services
and purchases. Management believes that the costs that will be incurred
pursuant to the Services Agreement will approximate the amounts
historically allocated to Columbus Plastics (see Note 14).
16. LABOR CONCENTRATION
At December 31, 1996, Core Materials had 340 manufacturing employees all
of which were represented by the International Association of Machinists
and Aerospace Workers ("IAM"). The collective bargaining agreement with
the IAM expires on August 1, 1998.
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the years ended December 31, 1996 and October 31, 1995. The
results for the two month period ended December 31, 1995 are not presented
herein as audited results are provided in the accompanying financial
statements.
-39-
<PAGE> 42
<TABLE>
<CAPTION>
QUARTER
------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Net sales $ 14,601,363 $ 13,470,421 $ 10,846,590 $ 13,548,435
Gross profit 493,968 13,682 419,360 806,226
Income (loss) before interest and taxes 66,731 (420,563) 50,082 850,796
OCTOBER 31, 1995
Net sales $ 12,472,584 $ 16,444,155 $ 15,002,464 $ 15,585,926
Gross profit 598,622 2,437,777 2,009,334 1,140,178
Income before interest and taxes 272,645 2,077,263 1,654,462 785,202
</TABLE>
******
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Core Materials previously reported the information required by this
Item 9 in a Form 8-K, as amended by a Form 8-K/A (filed with the Securities
Exchange Commission on January 14, 1997 and January 27, 1997, respectively.)
-40-
<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required to be set forth hereunder has been
incorporated by reference herein from the Company's Proxy Statement for its 1997
Annual Meeting of Stockholders to be held on or about May 29, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be set forth hereunder has been
incorporated by reference herein from the Company's Proxy Statement for its 1997
Annual Meeting of Stockholders to be held on or about May 29, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required to be set forth hereunder has been
incorporated by reference herein from the Company's Proxy Statement for its 1997
Annual Meeting of Stockholders to be held on or about May 29, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required to be set forth hereunder has been
incorporated by reference herein from the Company's Proxy Statement for its 1997
Annual Meeting of Stockholders to be held on or about May 29, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a)(1) Financial Statements
---------------------
The following financial statements are included in Part II, Item 8 of
this Form 10-K:
Independent Auditors' Report
Balance Sheets
Statements of Revenues, Direct Expenses and Identified Corporate Expenses Before
Interest and Taxes
Notes to Financial Statements
(a)(2) Financial Statement Schedules
-----------------------------
-41-
<PAGE> 44
All schedules are omitted because of the absence of the conditions
under which they are required.
(a)(3) Exhibits
--------
The following "Index to Exhibits" lists the exhibits that are included
as a part of this Form 10-K:
INDEX TO EXHIBITS
Exhibit No. Description Location
- ----------- ----------- ---------
2.1 Asset Purchase Agreement Incorporated by
dated as of September 12, 1996, reference to Exhibit
as amended October 31, 1996, 2-A to Form S-4
between Navistar and RYMAC** (filed November 8,
1996, SEC File
No. 333-15809)
2.1.1 Second Amendment to Asset Purchase
Agreement dated December 16, 1996 Page No. 1
2.2 Agreement and Plan of Merger Incorporated by
dated as of November 1, 1996, reference to Exhibit
between Core Materials and 2-B to Form S-4
RYMAC (filed November 8,
1996, SEC File
No. 333-15809)
3.1 Certificate of Incorporation of Incorporated by
Core Materials Corporation reference to Exhibit
3-A to Form S-4,
(filed November 8,
1996, SEC File
No. 333-15809)
3.1.1 Certificate of Amendment of Incorporated by
Certificate of Incorporation reference to Exhibit
of Core Materials Corporation 3-B to Form S-4,
(filed November 8,
1996, SEC File
No. 333-15809)
3.2 By-Laws of Core Materials Incorporated by
Corporation reference to Exhibit
-42-
<PAGE> 45
3-C to Form S-4
(filed November 8,
1996, SEC File No.
333-15809)
4.1 Certificate of Incorporation of Incorporated by
Core Materials Corporation reference to Exhibit
3-A to Form S-4
(filed November 8,
1996, SEC File No.
333-15809)
4.1.1 Certificate of Amendment of Incorporated by
Certificate of Incorporation reference to Exhibit
of Core Materials Corporation 3-B to Form S-4,
(filed November 8,
1996, SEC File
No. 333-15809)
10.1 Core Materials Corporation Page No. 4
Secured Promissory Note
10.1.1 Amendment No. 1 to Secured
Promissory Note Page No. 25
10.2 Comprehensive Supply Agreement Page No. 27
10.3 Transitional Services Agreement Page No. 42
10.4 Registration Rights Agreement Page No. 54
10.5 Long Term Equity Incentive Plan* Page No. 69
10.6 1995 Stock Option Plan* Page No. 88
10.7 Letter Agreement Regarding
Severance Pay to Richard R. Conte* Page No. 95
10.8 Letter Agreement with Hellmold
Associates, Inc. dated November 1, 1995,
as amended April 10, 1996
and July 18, 1996* Page No. 97
10.9 Oral Compensation Agreement with Page No. 107
Malcolm M. Prine*
11.1 Computation of Earnings per share The Exhibit is
ommited because of
the absence of the
conditions under
which it would be
required
-43-
<PAGE> 46
24.1 Power of Attorney for
Kenneth M. Schmell Page No. 108
24.2 Power of Attorney for
Richard R. Conte Page No. 109
24.3 Power of Attorney for
Gerald L. Voirol Page No. 110
24.4 Power of Attorney for
Ralph O. Hellmold Page No. 111
24.5 Power of Attorney for
Thomas M. Hough Page No. 112
24.6 Power of Attorney for
Malcolm M. Prine Page No. 113
24.7 Power of Attorney for
Thomas E. Rigsby Page No. 114
27.1 Financial Data Schedule Page No. 115
*Indicates management contracts or compensatory plans that are required to be
filed as an exhibit to this Form 10-K.
**The following schedules and exhibits are omitted from Exhibit 2-A of
Core Materials' Form S-4, as filed on November 8, 1996, and as incorporated
herein by reference. Core Materials will provide any omitted schedule or
exhibit to the Commission upon request:
Exhibit A (Buyer Note)
Exhibit B (Specialty Warranty Deed)
Exhibit C (Supply Agreement)
Exhibit D (Registration Rights Agreement)
Exhibit E (Transition Services Agreement)
Schedule 1(b)(ii) (Equipment)
Schedule 1(b)(iii) (Computer Software)
Schedule 1(b)(iv) (Contracts)
Schedule 1(b)(vii) (Real Property)
Schedule 1(g)(vi) (Categories and Methodology)
Schedule 1(h) (Allocation of Purchase Price)
Schedule 3(a)(iv) (Company and Third Party Approvals)
Schedule 3(a) (v) (Governmental Approvals)
Schedule 3(b)(xv) (Disclosed Liabilities)
Schedule 4(c) (Liens)
Schedule 4(d) (Existing Leases, Liens, and Possession or Occupancy Agreements)
Schedule 4(e) (Intellectual Property)
Schedule 4(f) (Disclosure with respect to non-binding Contracts)
Schedule 4(g) (Litigation)
Schedule 4(h) (Financial Statements)
Schedule 4(i) (Compliance with Laws)
Schedule 4(j) (Asset Sufficiency)
Schedule 4(k) (Seller Plans)
Schedule 4(m) (Undisclosed Liabilities)
Schedule 5(b) (Non-Ordinary Conduct)
Schedule 6(b)(i) (Certain Stock)
Schedule 6(b)(ii) (Articles and By-Laws)
Schedule 6(b) (iii) (Recourse Against Buyer)
Schedule 6(b)(iv) (Stockholder Agreements)
Schedule 6(c) (Subsidiaries; Investments)
Schedule 6(d) (Buyer Financial Schedules)
Schedule 6(h)(i) (Buyer Contracts)
Schedule 6(h)(ii) (Non-terminable Contracts without penalty or premium)
Schedule 6(h)(iii) (Contracts in Breach or default)
Schedule 6(k)(i) (Tax Matters)
Schedule 6(k)(ii) (NOLs)
Schedule 6(k)(iii) (Territories Buyer Required to File Tax Returns)
Schedule 6(m) (Buyer Litigation)
Schedule 6(n) (Compliance with Laws)
Schedule 6(o) (Guidelines or Policies)
Schedule 8(k) (Hired Employees of Seller)
Schedule 30 (Representatives of Buyer).
(b) Reports on Form 8-K
-------------------
In a Form 8-K as amended by a Form 8-K/A (filed with the
Securities and Exchange Commission on January 14, 1997 and January 27, 1997,
respectively), the Company reported the purchase of substantially all of the
assets and liabilities of Navistar's Columbus Plastics operating unit, discussed
in Item 1. The Form 8-K, as amended by the Form 8-K/A also discussed the
appointment of Deloitte & Touche LLP as independent auditors for Core Materials.
The Form 8-K incorporated by reference the following financial
statements and pro forma financial information: (1) the information set forth
under the caption "Columbus Plastics Operation (An Operating Unit of Navistar
International Transportation Corp.)" on pages F-1 to F-9 of the Company's Form
S-4 Registration Statement dated November 8, 1996 (SEC Registration No.
333-15809); and (2) the information set forth under the caption "Unaudited Pro
Forma Combined Financial Information of Core Materials" on pages 47-54 of the
Company's Form S-4 Registration Statement dated November 8, 1996 (SEC
Registration No. 333-15809).
-44-
<PAGE> 47
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.
Core Materials Corporation
By /s/ KENNETH M. SCHMELL
-------------------------------
Kenneth M. Schmell
General Manager and Acting Chief Executive Officer
Date 3/31/97
------------
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:
/s/ RICHARD R. CONTE
-------------------------------
Richard R. Conte
Acting Chief Financial Officer and Director
(Chief Accounting Officer)
Date 3/31/97
------------
*
-------------------------------
Gerald L. Voirol
Controller and Assistant Secretary
Date
------------
*
-------------------------------
Ralph O. Hellmold
Director
Date
------------
*
-------------------------------
Thomas M. Hough
Director
Date
------------
*
-------------------------------
Malcolm M. Prine
Director
-45-
<PAGE> 48
Date
------------
*
-------------------------------
Thomas E. Rigsby
Director
Date
------------
/s/ RICHARD R. CONTE
*By: -----------------------------
Richard R. Conte
Attorney-In-Fact
Date: 3/31/97
-----------
-46-
<PAGE> 1
SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
This Second Amendment to the Asset Purchase Agreement (the "Second
Amendment") dated as of the 16th day of December, 1996, by and between RYMAC
Mortgage Investment Corporation, a Maryland corporation ("BUYER") and Navistar
International Transportation Corp., a Delaware corporation ("SELLER");
W I T N E S S E T H
WHEREAS, Buyer and Seller entered into a certain Asset Purchase
Agreement dated as of September 12, 1996, and entered into a First Amendment
thereto dated as of October 31, 1996, (as so amended, the "AGREEMENT"),
regarding the sale by Seller to Buyer of certain assets of Seller's Columbus
Plastics Operation located at 800 Manor Park Drive, Columbus, Ohio;
WHEREAS, Buyer and Seller desire to amend the Agreement as hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Agreement as follows, said provisions to control whenever inconsistent with
the original provisions of the Agreement, and the capitalized terms herein shall
have the same meaning as set forth in the Agreement unless stated otherwise
herein:
1. Section 6(b)(i) of the Agreement is hereby amended by deleting the
reference to "50,000,000" in the first sentence and replacing it with
"20,000,000".
2. With respect to Section 3(a)(x) of the Agreement, Buyer hereby
agrees to waive the condition to Closing which would require Seller to have the
Plastics Business's pro forma balance sheet as of January 31, 1996 audited.
3. The product descriptions and prices described in Schedule A hereto
are hereby inserted at the end of Exhibit A to the Supply Agreement attached as
Exhibit C to the Agreement.
4. Except as herein expressly set forth, all other provisions of the
Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the date first written above.
NAVISTAR INTERNATIONAL
TRANSPORTATION CORP.
By: /s/ Thomas M. Hough
--------------------------
Name: Thomas M. Hough
-3-
<PAGE> 2
Title: Vice President and Treasurer
RYMAC MORTGAGE INVESTMENT
CORPORATION
By: /s/ Richard R. Conte
----------------------------------------
Name: Richard R. Conte
Title: Chief Executive Officer
-4-
<PAGE> 3
COLUMBUS PLASTICS OPERATION
CURRENT CONTRACT PRICES
Schedule A
<TABLE>
<CAPTION>
PACKAGING
--------------------------------
1996* 1996*
SALES SALES
LINE 1995* 1996* PRICE PRICE
NO. CUSTOMER DESCRIPTION PART NUMBER QUANTITY QUANTITY PER UNIT PART NUMBER PER UNIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
159 ADDITIONAL ITEMS
182 Navistar Thom Bus Hood Shuttr,Ltch 1688895C93
Logo holes
183 Navistar Thom Bus Hood W/O 2034089C92
Shuttr,Ltch Logo holes
</TABLE>
*Confidential Treatment Has Been Granted
5
<PAGE> 1
CORE MATERIALS CORPORATION
SECURED PROMISSORY NOTE
-----------------------
December 31, 1996 $25,504,000.00
FOR VALUE RECEIVED, Core Materials Corporation, a Delaware
corporation (the "Company"), hereby promises to pay to the order of Navistar
International Transportation Corp., a Delaware corporation ("NAVISTAR"), the
principal amount of Twenty-Five Million Five Hundred Four Thousand and 00/100
Dollars ($25,504,000.00) (or the unpaid principal amount from time to time
outstanding hereunder) together with interest thereon calculated from the date
hereof in accordance with the provisions of this Note.
This Note was issued pursuant to that certain Asset Purchase
Agreement, dated as of September 12, 1996 (as amended and modified from time to
time, the "PURCHASE AGREEMENT"), between the RYMAC Mortgage Investment
Corporation (predecessor in interest to the Company) and Navistar. The Purchase
Agreement contains certain terms governing the rights of the holder of this Note
which are incorporated herein by reference. Except as defined in paragraph 10
hereof and unless otherwise indicated herein, capitalized terms used in this
Note have the same meanings set forth in the Purchase Agreement. Notwithstanding
anything to the contrary herein, it is expressly agreed that the outstanding
principal amount of this Note may, from time to time, be increased pursuant to
certain purchase price adjustments set forth in Section 1(g) of the Purchase
Agreement (the "Purchase Price Adjustments").
1. PAYMENTS OF PRINCIPAL AND INTEREST.
(a) PRINCIPAL PAYMENT. The Company shall pay principal installments
under this Note to the Noteholder as follows:
(i) Within ninety (90) days after the end of each fiscal year
of the Company during the term hereof, the Company shall pay principal in an
amount equal to the amount, if any, by which the total cash and Cash Equivalents
of the Company, as shown on the Company's audited balance sheet and statement of
financial condition as of the end of such fiscal year, prepared in accordance
with GAAP, exceeds Three Million Dollars ($3,000,000.00); and
(ii) In the event the Company obtains, from time to time, any
Refinancing Loan, the Company shall promptly upon obtaining such loan pay
principal in an amount equal to the proceeds of such loan.
If not sooner paid, the Company shall pay the entire principal amount of this
Note then outstanding to the Noteholder in full on December 31, 2006 (the
"Maturity Date"), together with any and all accrued and unpaid interest and any
other amounts due hereunder.
(b) INTEREST. Except as otherwise expressly provided herein, interest
shall accrue at the rate of eight percent (8.0%) per annum, (computed on the
basis of a 360-day year and the actual
-6-
<PAGE> 2
number of days elapsed in any year) on the unpaid principal amount of this Note
outstanding from time to time from and including the date hereof until the date
paid, or (if less) at the highest rate then permitted under applicable law. The
Company shall pay to the Noteholder all accrued interest on the last business
day of each June and December, beginning after the date hereof. Notwithstanding
anything to the contrary contained herein, on the date any such scheduled
interest payment becomes due the Company may elect to add such interest payment
to the outstanding principal balance of the Note to be repaid with interest in
accordance with the provisions of this Note; provided, that (i) the board of
directors of the Company by resolution declares that the payment of such
scheduled interest payment would be reasonably expected to significantly effect
the Company's and any of its Subsidiaries' ability to fund current operations
and (ii) the Noteholder shall have received written notice of such election at
least thirty (30) days before the date of such scheduled interest payment, which
notice shall be accompanied by a certified copy of the resolution of the board
of directors of the Company referred to in clause (i) above and an amendment to
this Note, in form and substance satisfactory to the Noteholder, duly executed
by the Company and dated as of the date such scheduled interest payment becomes
due, which amendment shall increase the principal amount of this Note by the
amount of such scheduled interest payment. Payments received by the Noteholder
from the Company on this Note shall be applied first to the payment of interest
which is due and payable and only thereafter to the outstanding principal
balance hereof. Unless prohibited under applicable law, any accrued interest
which is not paid on the date on which it is due and payable shall bear interest
at the same rate at which interest is then accruing on the principal amount of
this Note until such interest is paid. Any accrued interest which for any reason
has not theretofore been paid shall be paid in full on the date on which the
final principal payment on this Note is made.
2. PREPAYMENTS; SETOFF.
(a) OPTIONAL PREPAYMENTS. The Company may, without premium or penalty,
at any time and from time to time, prepay all or any portion (in whole number
multiples of $50,000) of the outstanding principal amount of this Note, provided
that the Company has paid all interest on this Note accrued through the
immediately preceding scheduled interest payment date. In connection with any
prepayment of principal pursuant to this paragraph 2(a), the Company shall also
pay all accrued and unpaid interest on the principal amount of this Note being
prepaid.
(b) RIGHT OF SETOFF. In addition to all other rights and remedies
available to Navistar hereunder or otherwise, Navistar shall have the right,
after the occurrence and during the continuance of any Default or Event of
Default, to setoff against and to apply to the accrued and unpaid interest and
outstanding principal balance of the Note (in each case, to the extent then due
and payable), any obligation owing by Navistar to the Company. Any such setoff
shall be applied first to the payment of interest which is due and payable and
only thereafter to the outstanding principal balance hereof.
3. COLLATERAL SECURITY. This Note is secured by a first priority lien upon and
security interest in all of the Company's assets, whether now owned or hereafter
acquired, and is entitled to the
-7-
<PAGE> 3
benefits of the Security Documents. Notwithstanding the foregoing, Noteholder
agrees that it will (if requested to do so by the holder of the Senior
Obligations), upon terms reasonably acceptable to Noteholder, subordinate its
security interest and lien in the Collateral (as defined in the Security
Documents) in connection with and to the extent reasonably required to
facilitate a Refinancing Loan, and promptly upon the request of the holder of
the Senior Obligations, it will execute and deliver such documents, instruments
and agreements as are necessary to evidence such subordination.
4. COVENANTS.
(a) AFFIRMATIVE COVENANTS; OTHER INFORMATION. The Company hereby agrees
that, so long as any amount is owing to the Noteholder hereunder, the Company
shall and (except in the case of delivery of financial information, reports and
notices) shall cause each of its Subsidiaries to:
(i) PERFORMANCE OF OBLIGATIONS. (A) Pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company or its Subsidiaries, as the case may be or
the failure to pay, discharge or otherwise satisfy such obligations would not be
reasonably expected to have a Material Adverse Effect; and (B) comply with all
material applicable laws, rules and regulations of all governmental authorities,
except to the extent that the failure to comply therewith would not be
reasonably expected to cause a Material Adverse Effect.
(ii) CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Continue to engage in business of the same general type as conducted by it on
the Closing Date (after giving effect to the transactions contemplated by the
Purchase Agreement) and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business except as otherwise permitted pursuant to subparagraph 4(b)(iv), and
except to the extent that the failure to do so would not be reasonably expected
to have a Material Adverse Effect.
(iii) MAINTENANCE OF PROPERTY; INSURANCE. Keep all property
useful and necessary in its business in good working order and condition;
maintain with financially sound and reputable insurance companies insurance on
all its property in at least such amounts and against at least such risks (but
including in any event public liability) as are usually insured against in the
same general area by companies engaged in the same or a similar business; and
furnish to the Noteholder, upon written request, full information as to the
insurance carried.
(iv) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and applicable law shall be made of all dealings and
transactions in relation to its business and activities; and permit
representatives of the Noteholder to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and upon reasonable notice and as often as may reasonably be desired and to
discuss the business,
-8-
<PAGE> 4
operations, properties and financial and other condition of the Company and
its Subsidiaries with officers and employees of the Company and its
Subsidiaries and with its independent certified public accountants;
provided that the Noteholder shall bear its own expenses if any such
inspection, examination or discussion occurs at a time when no Default or
Event of Default shall have occurred and be continuing.
(v)INFORMATION. Provide to Navistar:
(A) within five days after the same are sent, copies
of all financial statements and reports which the Company sends to its
stockholders, and within five days after the same are filed, copies of all
financial statements and reports which the Company may make to, or file with,
the Securities and Exchange Commission or any successor or analogous
governmental authority;
(B) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the Company by
its independent accountants (and not otherwise contained in other materials
provided hereunder); and
(C) promptly, such additional financial and other
information as the Noteholder may from time to time reasonably request.
(vi) NOTICES. Reasonably promptly after obtaining knowledge of
any of the following (or within such other time period designated in clause (E)
below) give notice to the Noteholder thereof:
(A) the occurrence of any Default or Event of
Default;
(B) any (1) default or event of default under any
contractual obligation of the Company or any of its Subsidiaries or (2)
litigation, investigation or proceeding which may exist at any time between the
Company or any of its Subsidiaries and any governmental authority, which in
either case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(C) any litigation or proceeding affecting the
Company or any of its Subsidiaries in which the amount involved is $250,000 or
more and not covered by insurance or in which injunctive or similar relief is
sought;
(D) the occurrence of or existence of any event or
condition that, in the judgment of Company, could be reasonably expected to give
rise to a claim for indemnification by the Noteholder under Section 10 of the
Purchase Agreement;
(E) as soon as possible and in any event within 30
days after the Company or any Commonly Controlled Entity knows or has reason to
know of (1) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, and (2) within 15 days after the Company or any Commonly
Controlled Entity knows or has reason to know of the occurrence or expected
occurrence of any of the following events: (i) a failure to make any
-9-
<PAGE> 5
required contribution to a Plan, (ii) the filing of a request for a minimum
funding waiver under Section 412 of the Code with respect to a Plan, (iii) the
creation of any Lien in favor of the PBGC or a Plan, (iv) any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan, (v)
the institution of proceedings or the taking of any other action by the PBGC or
the Company or any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the termination, Reorganization or Insolvency
of, any Plan, (vi) the disqualification of any Plan that is intended to be
qualified under Section 401(a) of the Code, (vii) the filing of a notice of
intent to terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA, or (viii) any other event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or the
imposition of any liability under Title IV of ERISA;
(F) any Lien (other than security interests created
by the Security Agreement or Liens permitted hereunder) on any of the Collateral
(as defined in the Security Agreement) which is not permitted under subparagraph
4(b)(ii) and which, in the judgment of the Company, would be reasonably expected
to materially and adversely affect the ability of the Noteholder to exercise any
of its remedies under the Security Agreement;
(G) the occurrence of any event that, in the judgment
of the Company, would reasonably be expected to have a material adverse effect
on the aggregate value of the Collateral or on the security interests created by
the Security Agreement; and
(H) any material adverse change in the business,
operations, property or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
Each notice pursuant to this paragraph shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action (if any) the Company proposes to take with respect
thereto.
(vii) ADDITIONAL COLLATERAL; SUBSIDIARIES.
(A) With respect to any assets of the type covered by
the Security Agreement acquired after the Closing Date by the Company or any of
its Subsidiaries, and, upon the occurrence and during the continuance of an
Event of Default and at the request of the Noteholder, with respect to any other
assets or property of the Company or any of its Subsidiaries, as to which the
Noteholder does not have a perfected Lien, (1) execute and deliver to the
Noteholder such amendments to the Security Agreement or such other documents as
the Noteholder reasonably requests in order to grant to the Noteholder a
security interest in such assets, (2) take all actions reasonably requested by
the Noteholder to grant to the Noteholder a perfected security interest in such
assets, including, without limitation, the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Security
Agreement or by law or as may be reasonably requested by the Noteholder and (3)
if reasonably requested by the Noteholder deliver to the Noteholder legal
opinions relating to the matters described in the preceding clauses (1) and (2),
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Noteholder.
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<PAGE> 6
(B) With respect to any Subsidiary of the Company
created or acquired after the Closing Date by the Company, prior to or
concurrently with becoming such Subsidiary (1) have the Company amend the
Security Agreement so as to grant to the Noteholder a perfected security
interest in the Capital Stock and assets of such Subsidiary, (2) deliver to the
Noteholder or its agent the certificates representing such Capital Stock, if
any, together with undated stock powers, executed in blank, in form and
substance reasonably satisfactory to the Noteholder, in respect of such stock,
(3) cause such Subsidiary to enter into a guarantee in form and substance
reasonably satisfactory to the Noteholder guarantying the prompt payment and
performance by the Company of all of its obligations hereunder, and (4) if
requested by the Noteholder, deliver to the Noteholder legal opinions relating
to the matters described in the preceding clauses (1), (2) and (3) which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Noteholder.
(viii) OBTAIN REFINANCING LOAN. To use reasonable commercial
efforts to obtain a Refinancing Loan within six (6) months from the date hereof
in amounts and with terms reasonably satisfactory to the Company and the
Noteholder.
(b) NEGATIVE COVENANTS. The Company hereby agrees that, so long as any
amount is owing to the Noteholder, the Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly:
(i) LIMITATION ON INDEBTEDNESS. Create, incur, assume or
suffer to exist any Indebtedness, except:
(A) the Senior Obligations;
(B) Indebtedness of the Company to any Subsidiary and
of any Subsidiary to the Company or any other Subsidiary;
(C) Indebtedness of the Company or any of its
Subsidiaries incurred to finance the acquisition of fixed or capital assets
(whether pursuant to a loan, a Financing Lease or otherwise) after the date
hereof;
(D) Indebtedness assumed by the Company pursuant to
the Purchase Agreement, and any refinancings, refundings, renewals or extensions
thereof; PROVIDED, that the principal amount of any such Indebtedness shall not
be increased to more than the principal amount outstanding on the Closing Date
(after giving effect to the transactions contemplated by the Purchase
Agreement);
(E) Indebtedness of a corporation which becomes a
Subsidiary after the date hereof, PROVIDED that (i) such Indebtedness existed at
the time such corporation became a Subsidiary and was not created in
anticipation thereof and (ii) immediately after giving effect to the acquisition
of such corporation by the Company no Default or Event of Default shall have
occurred and be continuing;
(F) Indebtedness of the Company on an unsecured basis
in an aggregate principal amount not to exceed $3,000,000 at any one time
outstanding under the lines of credit
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<PAGE> 7
offered by commercial banks to the Company or its Subsidiaries to finance the
working capital needs of the Company and its Subsidiaries; and
(G) Indebtedness of the Company in respect of this
Note, as may be amended from time to time (including without limitation any
increase in the principal amount of this Note pursuant hereto or the Purchase
Agreement).
(ii) LIMITATION ON LIENS. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(A) Liens and encumbrances of the type described in
Sections 4(c), (d) and (e) of the Purchase Agreement;
(B) Liens securing Indebtedness of the Company and
its Subsidiaries permitted by clause (C) of subparagraph 4(b)(i) hereof incurred
to finance the acquisition of fixed or capital assets, PROVIDED that (i) such
Liens shall be created substantially simultaneously with the acquisition of such
fixed or capital assets, (ii) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness, (iii) the amount
of Indebtedness secured thereby is not increased to more than the principal
amount originally incurred and (iv) the principal amount of Indebtedness secured
by any such Lien shall at no time exceed 100% of the fair value (as determined
in good faith by the board of directors of the Company) of such property at the
time it was acquired;
(C) Liens on the property or assets of a corporation
which becomes a Subsidiary after the date hereof securing Indebtedness permitted
by clause (E) of subparagraph 4(b)(i) hereof, PROVIDED that (i) such Liens
existed at the time such corporation became a Subsidiary and were not created in
anticipation thereof, (ii) any such Lien is not spread to cover any property or
assets of such corporation after the time such corporation becomes a Subsidiary,
and (iii) the amount of Indebtedness secured thereby is not increased to more
than the principal amount originally incurred;
(D) Liens created to secure the Senior Obligations;
(E) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the Company or its
Subsidiaries, as the case may be, in conformity with GAAP;
(F) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or which are
being contested in good faith by appropriate proceedings;
(G) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
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<PAGE> 8
(H) deposits to secure the performance of bids, trade
contracts (other than borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(I) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the Company or such Subsidiary; and
(J) Liens created by the Security Documents.
(iii) LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur,
assume or suffer to exist any Guarantee Obligation except:
(A) Guarantee Obligations assumed by the Company
pursuant to the Purchase Agreement and any refinancings, refundings, renewals or
extensions thereof, PROVIDED, that the principal amount of any such Guarantee
Obligations shall not be increased to more than the principal amount outstanding
on the Closing Date (after giving effect to the transactions contemplated by the
Purchase Agreement);
(B) guarantees made in the ordinary course of
business, not to exceed $250,000 in the aggregate, by the Company of obligations
of any of its Subsidiaries or by any Subsidiary of obligations of the Company,
in each case to the extent such guaranty obligations are otherwise permitted
under this Agreement;
(C) guarantees made in respect of the Senior
Obligations;
(D) guarantees by the Company or any of its
Subsidiaries of indebtedness permitted by subparagraph 4(b)(i);
(E) Guarantee Obligations in respect of the undrawn
portion of the face amount of letters of credit issued for the account of the
Company or any Subsidiary in an aggregate amount not to exceed $250,000 at any
one time outstanding for the Company and its Subsidiaries; and
(F) guarantees made in favor of the Noteholder as
contemplated by this Note.
(iv) LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(A) any Subsidiary of the Company may be merged or
consolidated with or into the Company (PROVIDED that the Company shall be the
continuing or surviving
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<PAGE> 9
corporation) or with or into any one or more wholly owned Subsidiaries of the
Company (PROVIDED that the wholly owned Subsidiary or Subsidiaries shall be the
continuing or surviving corporation);
(B) any wholly owned Subsidiary may sell, lease,
transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Company or any other wholly owned Subsidiary of
the Company; and
(C) any Person may be merged with or into the
Company, (PROVIDED that the continuing or surviving corporation assumes all of
the obligations and liabilities of the Company in respect of this Note, the
Purchase Agreement, the Ancillary Agreements, and Related Documents) with the
prior written consent of the Noteholder.
(v) LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests) or any
product line, whether now owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any
Person other than the Company or any wholly owned Subsidiary, except:
(A) the sale or other disposition of any property in
the ordinary course of business;
(B) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection with the
compromise or collection thereof;
(C) as permitted by subparagraph 4(b)(iv);
(D) the sale or other disposition of any property,
provided the aggregate book value of all property sold or disposed of by the
Company pursuant to this clause (D) does not exceed $1,000,000 in any fiscal
year of the Company; and
(E) the sale or other disposition of any assets, the
net proceeds of which are used to prepay this Note or are otherwise distributed
in accordance with the Intercreditor Agreement.
(vi) LIMITATION ON DIVIDENDS. Declare or pay any dividend
(other than dividends payable solely in common stock or preferred stock of the
Company and dividends payable by any Subsidiary of the Company to the Company,
or any other Subsidiary of the Company) on, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of the Company or any warrants or options to purchase any
such Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Company or any Subsidiary.
(vii) LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase
any stock, bonds, notes, debentures or
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<PAGE> 10
other securities of or any assets constituting a business unit of, or
make any other investment (collectively, "Investments") in, any Person, except:
(A) extensions of trade credit in the ordinary course
of business;
(B) investments in Cash Equivalents;
(C) investments by the Company in its Subsidiaries
and investments by such Subsidiaries in the Company and in other Subsidiaries;
(D) Investments in existence on the date hereof and
disclosed in the Purchase Agreement;
(E) additional Investments or acquisitions made after
the date hereof and approved by the board of directors of the Company; and
(F) loans and advances to employees of the Company or
its Subsidiaries for travel and entertainment expenses in the ordinary course of
business.
(viii) LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF
DEBT INSTRUMENTS. (A) Make any optional payment or prepayment on or redemption
or purchase of any Indebtedness for borrowed money other than any prepayment of
this Note or any prepayment of any revolving loans or term loans made under the
Credit Agreement; (B) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of any such Indebtedness
other than any such amendment, modification or change which would extend the
maturity or reduce the amount of any payment of principal thereof or which would
reduce the rate or extend the date for payment of interest thereon) or (C)
amend, modify or change, or consent or agree to any amendment, modification or
change to the Credit Agreement to increase the interest rate on the Senior
Obligations (including any default rate).
(ix) LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal
year of the Company to end on a day other than December 31.
(x) LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement, other than (A) this Note, (B) the Credit Agreement and (C)
purchase money mortgages or Financing Leases permitted by this Note (provided in
the case of this clause (C), any prohibition or limitation shall only be
effective against the assets financed thereby), which prohibits or limits the
ability of the Company or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
(xi) LIMITATION ON AMENDMENTS OF CERTIFICATES OF INCORPORATION
AND BY-LAWS. Permit any material modification, amendment or supplement to the
certificate of incorporation or by-laws of the Company or any of its
Subsidiaries.
(xii) LIMITATION ON CERTAIN RESTRICTIONS. Become subject to,
or permit any of its Subsidiaries to become subject to, (including, without
limitation, by way of amendment to or
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<PAGE> 11
modification of) any agreement (other than the Credit Agreement) which by its
terms would (under any circumstances) restrict (A) the right of any Subsidiary
to make loans or advances or any dividends to, transfer property to, or repay
any Indebtedness owed to, the Company or another Subsidiary or (B) the Company's
right to perform the provisions of this Note (including, without limitation,
provisions relating to the payment or prepayment of principal and interest on
this Note).
5. INTERCREDITOR AGREEMENT.
The Noteholder hereby acknowledges and agrees that the exercise of
remedies pursuant to paragraph 6 is, and shall at all times be, subject to the
limitations on the Noteholder's remedies set forth in the Intercreditor
Agreement.
6. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an Event of Default shall be
deemed to have occurred if
(i) The Company shall fail to pay any principal when due in
accordance with the terms hereof; or the Company shall fail to pay any interest
when due in accordance with the terms hereof, or any other amount payable
hereunder, within five days after any such interest or other amount becomes due
in accordance with the terms hereof; or
(ii) Any representation or warranty made or deemed made by the
Company in the Purchase Agreement or any Related Document or which is contained
in any certificate, document or financial or other statement furnished by it at
any time under or in connection with this Note, the Purchase Agreement or any
Related Document shall prove to have been incorrect in any material respect on
or as of the date made or deemed made; or
(iii) The Company shall default in the observance or
performance of any agreement contained in subparagraph 4(a) (vii) of this Note
or contained in the Purchase Agreement or any Related Document, subject to
applicable cure periods, if any; or
(iv) The Company shall default in the observance or
performance of any other agreement contained in this Note subject to 30 day cure
(other than as provided in subparagraphs (i) through (iii) of this paragraph);
or
(v) The Company or any of its Subsidiaries shall (A) default
in any payment of principal of any Indebtedness for borrowed money in excess of
$50,000 at the final maturity thereof; or (B) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or any Guarantee Obligation in respect of any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to become payable
(whether by the terms of any document evidencing such Indebtedness or Guarantee
Obligation, upon the election of any holder of Indebtedness or beneficiary of
any Guarantee Obligation or otherwise); or
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<PAGE> 12
(vi) (A) The Company or any of its Subsidiaries shall commence
any case, proceeding or other action (1) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (2)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or the
Company or any of its Subsidiaries shall make a general assignment for the
benefit of its creditors; or (B) there shall be commenced against the Company or
any of its Subsidiaries any case, proceeding or other action of a nature
referred to in clause (A) above which (1) results in the entry of an order for
relief or any such adjudication or appointment or (2) remains undismissed,
undischarged or unbonded for a period of 60 days; or (C) there shall be
commenced against the Company or any of its Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (D) the Company or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (A), (B), or (C) above; or
(E) the Company or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(vii) (A) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (B) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Company or any Commonly Controlled Entity, (C) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Plan that is a
Single-Employer Plan, (D) any Plan that is a Single-Employer Plan shall
terminate for purposes of Title IV of ERISA, (E) the Company or any Commonly
Controlled Entity shall, or in the reasonable opinion of Noteholder is likely
to, incur any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (F) any other event or condition
shall occur or exist with respect to a Plan; and in each case in clauses (A)
through (F) above, such event or condition, together with all other such events
or conditions, if any, could reasonably be expected to have a Material Adverse
Effect; or
(viii) One or more judgments or decrees shall be entered
against the Company or any of its Subsidiaries involving in the aggregate a
liability (not fully covered by insurance) of $1,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof; or
(ix) (A) Any of the Security Documents shall cease, for any
reason, to be in full force and effect, or the Company or any Subsidiary which
is a party to any of the Security Documents shall so assert or (B) the Lien
created by any of the Security Documents shall cease to be enforceable and of
the same effect and priority purported to be created thereby, except to the
extent, if any, otherwise provided in the Intercreditor Agreement.
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<PAGE> 13
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If any Event of Default has occurred, the interest rate on
this Note shall increase immediately by an increment of 1 percentage point(s) to
the extent permitted by law. Any increase of the interest rate resulting from
the operation of this subparagraph shall terminate as of the close of business
on the date on which no Events of Default exist.
(ii) If an Event of Default of the type described in
subparagraph 6(a) (vi) has occurred with respect to the Company, the aggregate
principal amount of this Note (together with all accrued interest thereon and
all other amounts due and payable with respect thereto) shall become immediately
due and payable without any action on the part of the Noteholder, and the
Company shall immediately pay to the Noteholder all amounts due and payable with
respect to this Note.
(iii) If any Event of Default has occurred (other than under
subparagraph 6(a) (vi)), the Noteholder may declare all or any portion of the
outstanding principal amount of this Note (together with all accrued interest
thereon and all other amounts due and payable with respect thereto) to be
immediately due and payable and may demand immediate payment of all or any
portion of the outstanding principal amount of this Note (together with all such
other amounts then due and payable).
(iv) The Noteholder shall also have any other rights which
such holder may have been afforded under any contract or agreement (including,
without limitation, the Security Documents) at any time and any other rights
which such holder may have pursuant to applicable law.
7. WAIVER OF CERTAIN RIGHTS. The Company hereby waives diligence, presentment,
protest and demand and notice of protest and demand, dishonor and nonpayment of
this Note, and expressly agrees that this Note, or any payment hereunder, may be
extended from time to time and that the holder hereof may accept security for
this Note or release security for this Note, all without in any way affecting
the liability of the Company hereunder.
8. ASSIGNMENT. The rights and obligations of the Company and the Noteholder
shall be binding upon and benefit the permitted successors, assigns and
transferee of the parties; provided that in no event shall the Company assign
its rights hereunder without the prior written consent of the Noteholder. The
Noteholder shall provide the Company with notice of any assignment or transfer
of Noteholder's rights hereunder.
9. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein, the
provisions of this Note may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Noteholder.
10. DEFINITIONS. For purposes of this Note, the following capitalized terms have
the following meaning:
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<PAGE> 14
"CAPITAL STOCK" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all warrants or options to purchase any of the
foregoing.
"CASH EQUIVALENTS" shall mean (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit and eurodollar time deposits with maturities of one year or less from
the date of acquisition and overnight bank deposits of any commercial bank
having capital and surplus in excess of $250,000,000, or party to the Credit
Agreement (c) repurchase obligations of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days with respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer rated at
least A-2 by Standard and Poor's Ratings Group ("S&P") or P-2 by Moody's
Investors Service, Inc. ("Moody's"), (e) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States or by any political subdivision
or taxing authority of any such state, commonwealth or territory or by any
foreign government, the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government (as the case may
be) are rated at least A by S&P or A by Moody's, (f) securities with maturities
of one year or less from the date of acquisition backed by standby letters of
credit issued by any commercial bank satisfying the requirements of clause (b)
of this definition or (g) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses (b) through
(f) of this definition;
"COMMONLY CONTROLLED ENTITY" shall mean an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"CONSOLIDATED LEASE EXPENSE" shall mean for any period, the aggregate
amount of fixed and contingent rentals payable by the Company and its
Subsidiaries for such period with respect to leases of real and personal
property, determined in accordance with GAAP on a consolidated basis.
"DEFAULT" shall mean any of the events specified in paragraph 6,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"EMPLOYEE BENEFIT PLAN" shall have the meaning set forth in Section
3(3) of ERISA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EVENT OF DEFAULT" shall mean each of the events described in paragraph
6; PROVIDED, HOWEVER, that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
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<PAGE> 15
"FINANCING LEASE" shall mean any lease of property, real or personal,
the obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"GUARANTEE OBLIGATION" shall mean as to any Person (the "GUARANTEEING
PERSON"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"PRIMARY OBLIGATIONS") of any other third Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Company in good
faith.
"INDEBTEDNESS" shall mean of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under Financing Leases, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
obligations in respect of deferred compensation and (f) all liabilities secured
by any Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
"INSOLVENCY" shall mean with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"INTERCREDITOR AGREEMENT" shall mean the intercreditor agreement
entered into between the holders of Senior Obligations and Navistar, as amended
or otherwise modified from time to time.
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<PAGE> 16
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of the
foregoing).
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the business, operations, property or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Note or any of the other Related Documents (other than
the Intercreditor Agreement) or the rights or remedies of Noteholder hereunder
or thereunder.
"MULTIEMPLOYER PLAN" shall mean a Plan which is a multiemployer plan as
defined in Section 400l(a)(3) of ERISA.
"NOTEHOLDER" shall mean Navistar and its permitted successors,
transferees and assigns.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERSON" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN" shall mean any Employee Benefit Plan in respect of which the
Company or a Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"REFINANCING LOAN" shall mean any loan, extension of credit or other
financial accommodation (other than a revolving line of credit for working
capital purposes or loans for project finance use) made as of or after the
Closing to the Company by a Person other than the Noteholder, to refinance and
pay indefeasibly in full or in part the outstanding principal amount now or at
any time or times hereafter owing by the Company to Noteholder under this Note,
and which is secured by Company's equipment or other assets in which Noteholder
holds security interests on the date hereof, provided that (i) the proceeds of
such loan are disbursed directly to Noteholder pursuant to written authorization
given by Company to the Person making the loan; and (ii) to the extent such
Person intends to take a security interest in any of Company's equipment or
other assets, such person has entered into an intercreditor agreement with the
Noteholder in form and substance acceptable to Noteholder.
"RELATED DOCUMENTS" shall mean this Note, the Security Documents and
the Intercreditor Agreement.
"REORGANIZATION" shall mean with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
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<PAGE> 17
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day notice
period is waived by regulation.
"RESPONSIBLE OFFICER" shall mean the chief executive officer and the
president of the Company or, with respect to financial matters, the chief
financial officer of the Company.
"SENIOR OBLIGATIONS" shall mean all obligations and liabilities of the
Company in respect of the loan agreement entered into by the Company in
connection with the Refinancing Loan (the "CREDIT AGREEMENT") and all loan and
security documents executed and delivered in connection therewith, and any
refinancing, refunding, renewals or extensions thereof (PROVIDED, that the
principal amount of such Indebtedness shall not be increased to more than the
principal amount outstanding as of the date of such loan agreement), including,
without limitation, any interest accruing subsequent to the commencement of any
bankruptcy, insolvency or similar proceedings with respect to the Company,
whether or not such interest constitutes an allowed claim in such proceeding.
"SECURITY AGREEMENT" shall mean (i) the Open-End Mortgage Deed and
Security Agreement dated as of December 31, 1996 given by the Company in favor
of the Navistar and filed for record with the Franklin County, Ohio, Recorder,
and (ii) the Security Agreement dated as of December 31, 1996 given by the
Company in favor of Navistar.
"SECURITY DOCUMENTS" shall mean the Security Agreement, and the
subsidiary guarantees contemplated hereby.
"SINGLE-EMPLOYER PLAN" shall have the meaning set forth in Section
4001(a)(15) of ERISA.
"SUBSIDIARY" shall mean as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Note shall refer to a Subsidiary or Subsidiaries of
the Company.
11. CANCELLATION. After all principal, accrued interest and all other amounts
hereunder at any time owed on this Note, including all Purchase Price
Adjustments, have been paid in full, this Note shall be surrendered to the
Company for cancellation, and the Noteholder shall take such action as the
Company may reasonably request to evidence such discharge and the release of the
Liens created by the Security Documents. Notwithstanding anything herein to the
contrary, it is expressly agreed that the outstanding principal balance under
this Note may be reduced to a zero balance without such repayment operating to
cancel this Note or extinguish or release the Liens, security title and security
interest created by the Security Documents. This Note and the Security Documents
shall remain in full force and effect as to any subsequent Purchase Price
Adjustments made after the zero balance without loss or priority until all
Indebtedness of the Company to the
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<PAGE> 18
Noteholder arising under or in connection with this Note, the Purchase
Agreement, or any other instrument or document now or at any time evidencing,
securing or guaranteeing the same is paid in full and satisfied. The Company
waives the operation of any applicable statute, law or regulation having a
contrary effect.
12. PAYMENT OF EXPENSES AND TAXES. The Company hereby agrees (a) to pay or
reimburse the Noteholder for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Note and the other
Related Documents after the occurrence of any Event of Default, including,
without limitation, the reasonable fees and disbursements of counsel to the
Noteholder, (b) to pay, indemnify, and hold the Noteholder harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Note and the other Related
Documents and (c) to pay, indemnify, and hold the Noteholder harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Note and the other Related Documents,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Company, any of its Subsidiaries or any of their
properties (all the foregoing in this clause (c), collectively, the "indemnified
liabilities"), PROVIDED that the Company shall have no obligation hereunder to
the Noteholder with respect to indemnified liabilities arising from (i) the
gross negligence or willful misconduct of the Noteholder, (ii) legal proceedings
commenced against the Noteholder by any security holder or creditor thereof
arising out of and based upon rights afforded any such security holder or
creditor solely in its capacity as such or (iii) any matter relating to the
Intercreditor Agreement. The agreements in this paragraph shall survive
repayment of this Note and all other amounts payable hereunder.
13. PAYMENTS. All payments to be made to the Noteholder shall be made in the
lawful money of the United States of America in immediately available funds and,
except as otherwise expressly provided herein or as may be required by law,
without any setoff, counterclaim, withholding or deduction whatsoever.
14. PLACE OF PAYMENT. Payments of principal and interest shall be delivered to
Navistar by wire transfer of immediately available funds to the following
account:
Bank of America, Illinois
231 South LaSalle Street
Chicago, Illinois 60697
ABA Routing Number: 071000039
For the account of
Navistar International Transportation Corp.
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<PAGE> 19
or to such other Noteholder at such other address or to the attention of such
other person or to such other account as specified by prior written notice to
the Company.
15. SEVERABILITY. Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Note.
16. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings of this Note
are inserted for convenience only and do not constitute a substantive part of
this Note. The use of the word "including" in this Note shall be by way of
example rather than by limitation.
17. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS.
18. WAIVERS. TO THE EXTENT PERMITTED BY LAW, THE COMPANY HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY CERTIFIED REGISTERED MAIL DIRECTED TO IT AT ITS ADDRESS SET
FORTH IN PARAGRAPH 19 HEREOF. IN ADDITION, THE COMPANY HEREBY WAIVES TRIAL BY
JURY, ANY OBJECTIONS BASED ON FORUM NON CONVENIENS AND ANY OBJECTIONS TO VENUE
OF ANY ACTION ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
TRANSACTIONS CONTEMPLATED BY OR THE RELATIONSHIPS ESTABLISHED IN CONNECTION WITH
THIS NOTE.
19. NOTICES. All notices, requests, demands, waivers and other communication
required or permitted to be given under this Note shall be in writing and shall
be deemed to have been duly given if (i) delivered personally, (ii) mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or (iii) sent by next-day or overnight mail or delivery or (iv) sent by
telecopy (with verbal confirmation of receipt) or telegram.
IF TO NAVISTAR:
---------------
455 North City Front Plaza Drive
Chicago, IL 60611
Attn: Treasurer
Fax Number: (312) 836-2573
WITH A COPY, WHICH WILL
NOT CONSTITUTE NOTICE TO
NAVISTAR, TO:
455 North City Front Plaza Drive
Chicago, IL 60611
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<PAGE> 20
Attn: General Counsel
Fax Number: (312) 836-3982
and:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Michael Kerr
Fax Number: (312) 861-2200
Confirm Number: (312) 861-2356
IF TO THE COMPANY:
Core Materials Corporation
800 Manor Park Drive
Columbus, Ohio 43228
Attn: President
Fax Number: (614) 870-5051
WITH A COPY, WHICH WILL
NOT CONSTITUTE NOTICE TO
THE COMPANY, TO:
Brown & Wood LLP
One World Trade Center
New York, New York, 10048
Attn: Edward J. Fine, Esquire
Fax Number: (212) 839-5599
or, in each case, to such other Noteholder at such other address as may be
specified in writing to the other Parties.
All such notices, requests, demands, waivers and other communications shall be
deemed to have been received (i) if by personal delivery on the date after such
delivery, (ii) if by certified or registered mail, on the seventh business day
after the mailing thereof, (iii) if by next-day or overnight mail or delivery,
on the day delivered, or (iv) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a
copy is also sent by certified or registered mail.
20. BUSINESS DAYS. If any payment is due, or any time period for giving notice
or taking action expires, on a day which is a Saturday, Sunday or legal holiday
in the State of Illinois, the payment shall be due and payable on, and the time
period shall automatically be extended to, the next business day immediately
following such Saturday, Sunday or legal holiday, and interest shall continue to
accrue at the required rate hereunder until any such payment is made.
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<PAGE> 21
21. USURY LAWS. It is the intention of the Company and the Noteholder to conform
strictly to all applicable usury laws now or hereafter in force, and any
interest payable under this Note shall be subject to reduction to the amount not
in excess of the maximum legal amount allowed under the applicable usury laws as
now or hereafter construed by the courts having jurisdiction over such matters.
If the maturity of this Note is accelerated by reason of an election by the
holder hereof resulting from an Event of Default, voluntary prepayment by the
Company or otherwise, then earned interest may never include more than the
maximum amount permitted by law, computed from the date hereof until payment,
and any interest in excess of the maximum amount permitted by law shall be
canceled automatically and, if theretofore paid, shall at the option of the
holder hereof either be rebated to the Company or credited on the principal
amount of this Note, or if this Note has been paid, then the excess shall be
rebated to the Company. The aggregate of all interest (whether designated as
interest, service charges, points or otherwise) contracted for, chargeable, or
receivable under this Note shall under no circumstances exceed the maximum legal
rate upon the unpaid principal balance of this Note remaining unpaid from time
to time. If such interest does exceed the maximum legal rate, it shall be deemed
a mistake and such excess shall be canceled automatically and, if theretofore
paid, rebated to the Company or credited on the principal amount of this Note,
or if this Note has been repaid, then such excess shall be rebated to the
Company.
IN WITNESS WHEREOF, the Company has executed and delivered this Note as
of December 31, 1996.
CORE MATERIALS CORPORATION
By: /s/ Richard R. Conte
----------------------------
Its: President
----------------------------
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<PAGE> 1
AMENDMENT NO. 1 TO
SECURED PROMISSORY NOTE
THIS AMENDMENT NO. 1 TO SECURED PROMISSORY NOTE (this "AMENDMENT"
entered into as of this 31st day of December, 1996, by and between Navistar
International Transportation Corp., a Delaware corporation ("NAVISTAR"), and
Core Materials Corporation, a Delaware corporation (the "COMPANY").
WITNESSETH:
WHEREAS, Navistar and RYMAC Mortgage Investment Corporation ("RYMAC")
entered into a certain Asset Purchase Agreement dated as of September 12, 1996,
as amended (the "PURCHASE AGREEMENT"), pursuant to which the Company (as
successor to RYMAC) purchased those certain assets of Navistar's Columbus
Plastics Operation as described in the Purchase Agreement (the "ASSETS"),
subject to the terms and conditions therein;
WHEREAS, as part of the consideration for the sale of the Assets, the
Company previously executed and delivered to Navistar that certain Secured
Promissory Note dated as of December 31, 1996, in the original principal amount
of Twenty Five Million Five Hundred Four Thousand and 00/100 Dollars
($25,504,000.00), subject to adjustment as provided therein (the "NOTE");
WHEREAS, Navistar and the Company have agreed upon a final
determination of the "Closing Date Balance Sheet" (as defined in the Purchase
Agreement);
WHEREAS, the "Net Tangible Assets" (as defined in the Purchase
Agreement) reflected in the Closing Date Balance Sheet exceed the Net Tangible
Assets as of January 31, 1996 by Four Million Ten Thousand and 00/100 Dollars
($4,010,000.00) (the "EXCESS AMOUNT"); and
WHEREAS, in order to effectuate the purchase price adjustment described
in Section 1(g)(i) of the Purchase Agreement, Navistar has elected to increase
the principal amount of the Note by the Excess Amount, and Navistar and the
Company wish to amend the terms of the Note pursuant to the terms and conditions
set forth herein below.
NOW, THEREFORE, in consideration of the facts recited, the covenants
contained in this Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which consideration are hereby acknowledged, Navistar
and the Company hereby agree as follows:
1. The Note is hereby amended to be in the amount of "$29,514,000.00."
2. The first paragraph of the Note is hereby amended in its entirety to
read as follows:
FOR VALUE RECEIVED, Core Materials Corporation, a Delaware
corporation (the "COMPANY"), hereby promises to pay to the order of Navistar
International Transportation Corp., a Delaware corporation ("NAVISTAR"), the
principal amount of Twenty Nine Million Five Hundred Fourteen Thousand and
00/100 Dollars ($29,514,000.00) (or the unpaid principal
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<PAGE> 2
amount from time to time outstanding hereunder) together with interest thereon
calculated from the date hereof in accordance with the provisions of this Note.
3. The Company hereby ratifies and confirms the Note, as amended
hereby, in all respects, and, as amended hereby, the terms thereof shall remain
in full force and effect. This Amendment may be attached to and shall form a
part of the Note for all purposes.
IN WITNESS WHEREOF, this instrument is executed as of the day and year
first above written.
CORE MATERIALS CORPORATION
By: /s/ Kenneth M. Schmell
-----------------------------------
Kenneth M. Schmell
Acting Chief Executive Officer
NAVISTAR INTERNATIONAL
TRANSPORTATION CORP.
By: /s/Thomas M. Hough
-----------------------------------
Thomas M. Hough
Vice President and Treasurer
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<PAGE> 1
COMPREHENSIVE SUPPLY AGREEMENT
NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
AND
CORE MATERIALS CORPORATION
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
1. LENGTH OF AGREEMENT
This Agreement between NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
("Buyer") and CORE MATERIALS CORPORATION ("Seller") will be for an initial
term of five (5) years commencing January 1, 1997 and terminating December
31, 2001 unless otherwise terminated as provided herein. This Agreement is
intended to be a rolling five (5) year Agreement where an extension to the
fifth year is negotiated annually.
2. PRODUCTS
A. During the term of this Agreement, provided Seller meets conditions
in Article 8, Buyer shall purchase from Seller, and Seller shall sell to
Buyer, one hundred percent (100%) of Buyer's original equipment and
service requirements for Fiberglass Reinforced Parts using the Sheet
Molding Compound (SMC) process as they presently exist and are detailed
in the written specifications, drawings, design and style of Buyer,
attached hereto as Exhibit A (at their specified prices), or as they may
be hereafter improved or modified if such improvements and modifications
are approved by Buyer in writing.
B. The Buyer agrees to pay the prices as listed in Exhibit A to this
Agreement as those prices may be amended by other terms in this
Agreement.
C. During the term of this Agreement, Seller shall not manufacture or sell
the Products covered by this Agreement and developed exclusively for
Buyer to any other party other than Buyer, unless authorized in writing
by Buyer.
3. PAYMENT TERMS
Payment terms shall be [ * ] from date of invoice.
__________________________________
[ * ] = CONFIDENTIAL TREATMENT HAS BEEN GRANTED
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<PAGE> 2
4. FREIGHT
A. Seller agrees to use only freight carriers specified in writing by Buyer.
B. Terms of delivery for all Products sold herein shall be f.o.b. Seller's
plant.
5. QUALITY
A. Seller agrees to maintain an acceptable quality system as defined by
Buyer's corporate requirements published under the title "Navistar
Quality Requirements", document number GF-333 (NQR). NQR is comprised of
two parts: QS-9000, the automotive and truck manufacturers' quality
system requirements, and NSR, Navistar-specific requirements. The Seller
agrees to be QS-9000 registered by January l, 1998.
B. Part Certification: Seller further agrees to participate in Buyer's
product certification program as stated in Buyer's Product Certification
Manual, GF-604L.
C. Seller shall provide Product to Buyer which can be applied with paint
without defects or requiring further processing or repair by Buyer. The
defects may include dirt, porosity, primer finish defects, molding mars,
packaging, and other defects similar to the foregoing. In the event Buyer
must repair or further process Product for painting, Seller will reimburse
Buyer at a labor rate of [ * ] per hour.
6. PACKAGING
A. 1. Seller shall deliver all Products in packaging that
complies with Buyer's packaging specifications (D13, Rev. 7/94)
and other special packaging requirements consistent therewith, and
with previous Agreements between Buyer and Seller. Buyer is
responsible for conveying Product packaging specifications to Seller.
2. Interpretation of packaging specifications and determination of market
competitive packaging costs will be coordinated between Buyer and
Seller.
B. RETURNABLE CONTAINERS: If returnable containers are required by
Buyer, container and transportation costs therefor will be negotiated
in good faith between Buyer and Seller.
__________________________________
[ * ] = CONFIDENTIAL TREATMENT HAS BEEN GRANTED
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<PAGE> 3
7. SERVICE PARTS AVAILABILITY
A. Service parts for the Products covered within this Agreement
will be furnished and combined with production orders. If Buyer ceases
production of any product incorporating a Product covered within this
Agreement, Seller shall continue to maintain tools and supply Buyer with
the Products necessary to satisfy Buyer's past model service and
replacement requirements for Buyer's product for a period of at least
ten (10) years, and at prices to be reasonably agreed to between the
parties hereto.
B. In addition, upon termination or expiration of this Agreement,
Buyer shall have the opportunity for a one-time buy of Products by
Buyer to fulfill such service and replacement requirements. Buyer and
Seller shall negotiate in good faith with respect thereto.
8. TOOLING
A. All tooling jigs, fixtures and associated manufacturing equipment
necessary for the successful production and test of the Products for
which Buyer pays Seller in full will remain the exclusive property of
Buyer and Seller assumes all liability for any loss, damage or shortage
except as caused by Buyer and/or for Seller's failure to return such
property, including equipment, to Buyer upon request. Seller shall
promptly notify Buyer of any such loss, damage or shortage. Such tooling
items must be identified and labeled as "Owned by Navistar".
Furthermore, all tooling owned by Buyer shall be used exclusively for
the manufacture of Products for Buyer. Seller will perform normal
on-going maintenance, at Seller's expense, in said tooling, jigs,
fixtures and associated equipment for the duration of this Agreement.
Buyer further agrees that the costs of replacement of said tooling, jigs
and fixtures and associated equipment caused by normal use and age of
these items will be the responsibility of the Buyer. In addition, Buyer
agrees that all major tool refurbishment inclusive of, but not limited
to, re-shear, resurface, re-chrome and rebuild that is a result of
volume and/or part configuration related tool wear will be funded and
paid for by the Buyer.
B. Tooling developed by Seller for the production of the Products will
conform to Buyer's product development guidelines. It is expected that
Seller will exercise due care and judgment in the design, specification
and building, or supervision of building, of all tooling in such a way
to maximize production efficiency and minimize cost. Seller shall
submit all tools to Buyer for inspection and review by Buyer as defined
by AIAG Publication, Production Part Approval Process, prior to Buyer
making payment for the same. Buyer may, at its option, see detailed
tooling documents, invoices and/or tooling order prior to issuing its
approval for payment of tooling. Tooling costs may be shared with
Seller or amortized as mutually agreed upon by both parties in writing.
If Seller pays for tooling and amortizes
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<PAGE> 4
cost to Buyer, upon completion of amortization Buyer shall have
the option to purchase all such tooling from Seller for the price of
one dollar ($1.00).
9. NAFTA
Seller will provide annually to Navistar, by the requested due date, an
accurate and complete North American Free Trade Agreement (NAFTA)
Certificate of Origin. The NAFTA Certificate of Origin must be completed
in accordance with regulations published by the U.S. Department of the
Treasury in the Federal Register on December 30, 1993, pages 69460 through
69565, and any amendments thereto and in accordance with instructions
issued annually to the Supplier by Navistar.]
10. NEW BUSINESS
A. EXISTING BUSINESS: Buyer shall place additional production business of
Buyer with Seller if, in Buyer's opinion, Seller is competitive in
price, performance, delivery, reliability, technology or quality with
other manufacturers of any such products.
B. NEW PRODUCT DEVELOPMENT: Both Buyer and Seller shall work together to
develop designs and processes at target costs that establish the lowest
possible cost of any new products. Seller agrees to provide all
price/cost submissions with full cost disclosure throughout the
iterative design process. Nothing in this Article shall be construed as
an obligation on the part of Buyer to develop or purchase any products
other than those Products covered by this Agreement.
11. ENGINEERING/TECHNICAL SUPPORT
Seller will provide at no additional cost to Buyer such design and
design qualification assistance, manufacturing assistance, technical
and field support as may be reasonably required by Buyer.
12. WARRANTY
Seller agrees to warrant its Product for Buyer's heavy duty, medium
duty and school bus chassis which prove to be defective in material
and/or workmanship of Seller's Product up to twelve (12) months from new
vehicle delivery date to user, or 100,000 miles to the extent set forth
in Article 13.
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<PAGE> 5
13. REIMBURSEMENT FOR WARRANTY CLAIMS
Reimbursement for warranty claims costs pursuant to this Article shall
include one-hundred percent (100%) of the sum of: (1) material costs at
Seller's OEM selling price (Seller to Buyer); (2) Buyer's dealer cost
(Buyer to dealer) times [ * ] percent ([ * ]%); and (3) dealer's normal
labor charge at the approved rate and time standards approved by Buyer.
14. RIGHTS AND DUTIES
The rights and duties under this Agreement may be assigned by either
party, either in whole or in part, only with the prior written consent of
the other party, which will not be unreasonably withheld.
15. ELECTRONIC DATA INTERCHANGE (EDI) - SCHEDULES AND FORECASTS
A. Seller agrees to arrange to be in a position to communicate and receive
all current and future EDI transactions deemed necessary by Buyer
within twelve months of a consummated transaction.
B. The parties contemplate that Buyer will communicate production/service
schedules and releases to Seller, and Seller shall confirm the same to
Buyer as soon as practicable via electronic data interchange (EDI). EDI
is the electronic exchange of routine business transactions (purchase
orders, material releases, shipping authorizations, shipment
notifications, etc.). On not less than a monthly basis, Buyer shall
issue to Seller a set of communications via EDI. The EDI
communications, among other things, shall define Buyer's requirements
for production/service material as hereinafter provided.
C. Buyer's Scheduling and Release program will provide weekly regeneration
of production requirements netted against current available inventory.
The requirements horizon will be six (6) months, and will contain both
customer orders and production forecasts. Furthermore, the six (6)
month schedule horizon will contain current production requirements
consisting of twenty (20) daily buckets, eight (8) weekly buckets, one
(1) balance-of-the-month bucket, and three (3) monthly buckets of
production requirements. Buyer's liability for materials shall be
limited to the requirements shown in the most current six (6) week
schedule/release, which shall represent a firm commitment for Products,
except as the parties otherwise agree in writing from time to time with
regard to specific components which the parties acknowledge require
additional lead time, and for which parts Buyer shall provide Seller
with additional lead time in excess of such
__________________________________
[ * ] = CONFIDENTIAL TREATMENT HAS BEEN GRANTED
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<PAGE> 6
six (6) week firm schedule/release. The parties contemplate that the
regenerated schedules will be transmitted weekly via the EDI 830
transaction set. In addition, the parties further contemplate that the
requirements displayed in each new weekly schedule should match very
closely to the daily requirements which will be transmitted via the EDI
862 Shipment Authorization. These schedules will be transmitted weekly
unless an interim schedule change is required and agreed to in writing
by the parties. Seller shall make arrangements to check its EDI mailbox
on a daily basis.
D. Additional EDI transactions that will be transmitted weekly, or as
required, shall include the EDI 856 Shipment Notification and EDI 997
Functional Acknowledgment.
16. VOLUMES
Seller and Buyer agree that volumes are based on past usage and
projected market forecasts. No minimum quantities of annual production of
Products or minimum purchase quantities are implied herein, and no
penalties shall be imposed on Buyer for volumes of Products actually
ordered by Buyer below those quantities forecasted.
17. INDEMNIFICATION
Seller indemnifies and holds harmless Buyer and its officers, directors
and affiliates from any and all damages, costs and expenses incurred as a
result of a claim by any third party regarding any harm, damage or loss
incurred (or alleged to have incurred) as a direct result of any defect in
the materials or workmanship of Seller's Products. Buyer indemnifies and
holds harmless Seller and its officers, directors and affiliates from any
and all damages, costs and expenses incurred as a result of a claim by any
third party regarding any harm, damage, loss or expense incurred (or
alleged to have incurred) as a result of Buyer's installation of Seller's
Products other than as a direct result of any defect in the materials or
workmanship of Seller's Products. If a claim is asserted against Buyer and
Seller, Buyer and Seller shall reasonably cooperate in notifying the
indemnifying party and shall permit the indemnifying party to conduct the
defense of such claims at its option.
18. COMPETITIVE CLAUSE
In the spirit set forth in the recitals of this Agreement, the parties
recognize that continuing to be competitive in price, performance,
delivery, reliability, quality and technology is essential for this
long-term association to exist. If Buyer reasonably demonstrates to Seller
that the particular Product part number is not a competitive value in
price, performance, delivery, reliability, technology and quality with
other equivalent products of equivalent values, production, usage or
availability in the world, then Seller
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<PAGE> 7
agrees to provide an action plan and timetable within sixty (60) days
of such demonstration to cure the deficiency. If the plan fails to cure
the deficiency within the agreed upon timetable, then Buyer may at its
option withdraw the non-competitive Product(s) from this Agreement and
serve notice to terminate the obligations of the parties under this
Agreement with respect thereto, effective upon the date specified by Buyer
in such notice. Buyer agrees that prior to exercising its option, it will
consider, in good faith, any proposal by Seller to correct the deficiency.
19. REIMBURSEMENT FOR NON-PERFORMANCE BY SELLER
A. Seller acknowledges that Buyer requires on-time delivery in order to
operate its plants. The parties further acknowledge that the precise
amount of damages which Buyer would sustain in the event Seller were to
fail to make timely or conforming deliveries of Products would be
difficult to determine. Therefore, the parties agree that Seller shall
be responsible for consequential or incidental damages for the
correction of products assembled out of sequence, as a result of
delivery delays by Seller that are not due to circumstances beyond its
control, such as weather, transportation system failures or other acts
of God, or for the correction of products with quality problems by
making a payment of $66 per manhour required to correct such problems.
Any costs Buyer incurs in connection with Buyer's assembly line down
time caused by failure of Seller to deliver on schedule, for reasons not
beyond its control but only to the extent that Buyer is not covered by
business interruption insurance, will be charged at a rate of $700 per
minute. Seller will advise Buyer immediately in writing of any apparent
imminent problem and the parties will mutually use their best efforts to
avoid any actual assembly line down time. Seller shall not be
responsible for the above damages if such out-of-order (late) delivery
or non-delivery results from a cause beyond Seller's reasonable control
without fault or negligence, provided that Seller has immediately
informed Buyer in writing of the problem. It is expressly understood
that a failure by Seller to perform resulting from a strike, lockout or
labor difficulty of Seller shall not be excused, and Seller shall be
responsible for the above damages, except if Seller complies with
Article 19-B below.
B. Seller shall promptly notify Buyer in writing of any anticipated labor
dispute or labor shortage or any other labor performance interruption,
and Seller shall arrange for advance deliveries or warehousing, at
Buyer's option and at locations acceptable to Buyer, of a one month
supply of Products, which Products shall be limited to those contained
in the most current six week Scheduling Release (as described in
Paragraph 15-C herein) or other quantity mutually agreed upon.
-33-
<PAGE> 8
20. PRICING
A. Effective with shipments on January 1, 1998, all Product on contract
will reflect a minimum [ * ] [ * ] percent ([ * ]%) decrease on the
non-raw material cost components. Furthermore, an additional minimum
[ * ] percent ([ * ]%) price reduction on the non-raw material cost
components will become effective on January 1 of each succeeding year
for the duration of this Agreement.
B. Seller is required to provide to Buyer audited financial statements,
including income statements, balance sheets and cash flow, on an annual
basis.
21. MATERIAL, LABOR AND OVERHEAD
Labor and overhead costs will be firm, and only raw material
adjustments will be made for the duration of this Agreement. Price
adjustments for raw materials will be based on actual transaction prices
and must be verified by actual sub-supplier invoices.
Documentation must be furnished by Seller in writing to Buyer to
establish the starting base for future requested price adjustments. Seller
will absorb [ * ] of any raw material price adjustment (increase or
decrease). Buyer reserves the right to negotiate and/or purchase raw
material from other sources for Seller that Buyer proves to be at a lower
total cost. Material price adjustments will be subject to annual reviews.
If a price adjustment is granted by Buyer, then a new price base for raw
material will be established.
22. PRODUCT IMPROVEMENTS/COST REDUCTION
Seller and Buyer are committed to an active Product cost reduction
program. Any Buyer-initiated cost savings resulting from Product
improvements and/or design changes shall be credited [ * ] percent ([ * ]%)
to Buyer. Mutually developed cost savings resulting from Product/process
improvements and/or design changes shall be shared [ * ] with Buyer. Cost
savings developed solely by Seller shall not affect contract prices.
23. CONFIDENTIAL INFORMATION
A. During the term of this Agreement, each party may disclose to the other
certain confidential information relating to the Product(s), the
application of the Product(s) by Buyer, and business information and
marketing plans of either party. Any such information that is marked or
otherwise clearly identified at the time of disclosure as confidential"
or "proprietary" shall be considered as Confidential Information for
purposes of this Agreement, provided that, if the information is
__________________________________
[ * ] = CONFIDENTIAL TREATMENT HAS BEEN GRANTED
-34-
<PAGE> 9
disclosed orally, a writing identified as "confidential" or
"proprietary" and summarizing the Confidential Information will be
provided within thirty (30) days after disclosure. During the term of
this Agreement and for a period of five (5) years after the expiration
or termination of this Agreement, the receiving party will use its best
efforts to prevent its disclosure of such Confidential Information for
any purpose other than to effectuate the provisions of this Agreement.
"Best efforts" with respect to any Confidential Information means at
least that degree of care normally used by the receiving party to
prevent disclosure to others of its own confidential information of
similar importance, but in no case less than a reasonable degree of
care. Notwithstanding the foregoing, Seller and Buyer agree that
Confidential Information shall not include any information which: (a)
is or becomes publicly known through no wrongful act on the receiving
party's part; or (b) is, at the time of disclosure under this Agreement,
already known to the receiving party without restriction on disclosure;
or (c) is, or subsequently becomes, rightfully and without breach of
this Agreement, in the receiving party's possession without any
obligation restricting disclosure; or (d) is independently developed by
the receiving party without reference to or use of the Confidential
Information; or (e) is disclosed pursuant to an order or requirement of
any governmental or judicial authority, after prior notice to the
disclosing party respecting such order, and affording the disclosing
party reasonable cooperation respecting any objections by the disclosing
party to the request for disclosure, including a reasonable opportunity
for the disclosing party to obtain a protective order in respect of the
Confidential Information at the expense of the disclosing party.
B. Upon request of the disclosing party at any time, the recipient agrees
to return to the disclosing party or destroy all materials in its
possession or control which contain Confidential Information of the
disclosing party, including, without limitations, documents, drawings,
CAD drawings, computer media, models, prototypes, sketches, designs, and
lists furnished by the disclosing party or accessed by the recipient,
including copies thereof made by the recipient, and to delete from its
computers any software, data files, or CAD files containing Confidential
Information furnished by the disclosing party. If materials are
destroyed, an officer of the recipient shall identify such materials to
the disclosing party and certify that their destruction has been
completed. Notwithstanding the foregoing, each party shall be entitled
to maintain one archival copy of the Confidential Information within its
Law Department or at the office of its General Counsel, such archival
copy to be used solely in connection with resolving claims or disputes
between the parties relating to this Agreement.
C. This Article 23, Confidential Information, shall survive the termination
or expiration of this Agreement.
-35-
<PAGE> 10
24. PATENT, COPYRIGHT AND TRADE SECRET INDEMNITY
Seller agrees to defend, at its expense, any claim or suit against
Buyer or Buyer's customers, based on an assertion or claim that a
Product(s) furnished by Seller to Buyer hereunder or the use or sale by
Buyer or its customers in the manner contemplated by this Agreement
infringes any patent, or copyright or is a wrongful use of third-party
trade secret or proprietary information, and further agrees to indemnify
and hold Buyer harmless from any cost and expenses, including attorneys'
fees, settlements associated with said claim or suit, or any damages,
including attorneys' fees or costs, finally awarded in any such suit,
provided that Seller is notified promptly in writing of the suit or claim
and, at Seller's request and expense, is given control of the defense to
such claim or suit and all reasonable assistance for the defense of same.
If the use or sale of a Product(s) furnished hereunder is enjoined as a
result of such suit, Seller, at its option and at no expense to Buyer,
shall obtain for Buyer and its customers the right to use and sell the
Product(s) or shall substitute an equivalent Product(s) acceptable to Buyer
and extend this indemnity thereto. This indemnity does not extend to any
claim or suit based on any infringement of any patent by the combination of
Product(s) furnished by Seller with other components added thereto by
Buyer, except when the Product(s) is a material part of the invention of an
asserted patent and the components furnished by Buyer to complete the
claimed combination, such as an engine, sensor, or vehicle frame, are not
novel. This indemnity does not extend to any infringement or alleged
infringement arising solely out of Seller's compliance with Buyer-required
specifications, designs, or instructions that (i) are created solely by
Buyer and (ii) are thereafter furnished to Seller in writing.
25. TERMINATION
Any termination or expiration of all or part of this Agreement shall not
relieve either party of obligations incurred pursuant to and during the
terms of this Agreement, including but not limited to the warranty
provisions set forth in Article 12 hereof, the indemnification provisions
set forth in Article 17 hereof, and the "Confidential Information"
provisions set forth in Article 23 hereof.
A. TERMINATION FOR DEFAULT: At any time during the term of this Agreement
should either party default in performing any of its material
obligations hereunder, the other party may give written notice of
default giving the full details thereof. If the defaulting party fails
within thirty (30) days of the receipt of written notice of default to
cure the default, then the non- defaulting party shall have the right to
terminate this Agreement with regard to the particular Product
materially affected by the default, or if the default materially affects
all Products, the non-defaulting party shall have the right to terminate
this Agreement in its entirety. The non-defaulting party shall give the
other party thirty (30) days written notice from the determination of
the failure to cure the default, whereupon the termination shall be
effective.
-36-
<PAGE> 11
B. TERMINATION FOR INSOLVENCY: If either party is adjudicated as bankrupt
or files a voluntary petition in bankruptcy, then, in accordance with
applicable law, the other party shall have the right to terminate this
Agreement by giving such financially distressed party thirty (30) days
written notice from the determination of the bankruptcy to cure the
bankruptcy, whereupon this Agreement shall automatically terminate.
C. TERMINATION FOR INADEQUATE QUALITY: Buyer may terminate this Agreement
with regard to Products if adequate quality is not maintained in
accordance with the terms of Article 5 hereof.
D. TERMINATION FOR FAILURE TO REMAIN COMPETITIVE: Buyer may terminate this
Agreement with regard to non-competitive Product in accordance with the
terms of Article 18 hereof.
E. If Force Majeure delays delivery of Products past 15 days, Buyer may
terminate this Agreement in whole or in part without penalty upon
written notice to Seller.
26. OTHER CONDITIONS
This Agreement will also include the terms and conditions as outlined
on Buyer's contract boilerplate.
27. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio.
NAVISTAR INTERNATIONAL
TRANSPORTATION CORP. CORE MATERIALS CORPORATION
By: /s/ Thomas M. Hough By: /s/ Richard R. Conte
--------------------- ----------------------
Name: Thomas M. Hough Name: Richard R. Conte
Title: Vice President and Title: President
Treasurer
December 31, 1996 December 31, 1996
- ------------------------- -------------------------
Date Date
-37-
<PAGE> 12
COLUMBUS PLASTICS OPERATION
CURRENT CONTRACT PRICES
<TABLE>
<CAPTION>
PACKAGING
----------------------------
1996* 1996*
SALES SALES
LINE 1995* 1996* PRICE PRICE
NO. CUSTOMER DESCRIPTION PART NUMBER QUANTITY QUANTITY PER UNIT PART NUMBER PER UNIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Navistar AIR DEFL EXT KIT COMPLETE 1257228R93
2 Navistar AIR DEFL EXT KIT COMPLETE 1258056R91
3 Navistar BATTERY BOX COVER 1516024C1
4 Navistar A/D CAB SIDE LT W/TUNNEL COMP 1616854C1
5 Navistar A/D CAB SIDE RT W/TUNNEL COMP 1616855C1
6 Navistar 9670 AIR DEFL BULK PACK COMP 1617278C1 1100047R1
7 Navistar 9670 AIR DEFL BULK PACK COMP 1617279C2 1100047R1
8 Navistar 9370 AIR DEFL BULK PACK COMP 1617280C1 1100047R1
9 Navistar LT FENDER EXT EUR/AFR COMPLETE 1619600C3
10 Navistar RT FENDER EXT EUR/AFR COMPLETE 1619601C3
11 Navistar 9370 AIR DEFLECTOR COMPLETE 1647462C1
12 Navistar LT SPLASH PNL S-SERIES W/HOLES 1647986C2
13 Navistar RT SPLASH PNL S-SERIES W/HOLES 1647990C2
14 Navistar 80 x 100 HOOD COMPLETE 1648017C1 1100000R1
15 Navistar AIR DEFLECTOR CENTER EXT COMP 1649744C1
16 Navistar AIR DEFLECTOR LEFT EXT COMP 1651622C1
17 Navistar AIR DEFLECTOR RIGHT EXT COMP 1651623C1
18 Navistar MEDIUM AIR DEFLECTOR COMP 1652440C92
19 Navistar PANEL FILLER LEFT COMPLETE 1652441C2
20 Navistar PANEL FILLER RIGHT COMPLETE 1652442C2
21 Navistar LT SIDE PANEL COMPLETE 1652443C2
22 Navistar RT SIDE PANEL COMPLETE 1652444C2
23 Navistar LT SIDE PANEL COMPLETE 1652445C1
24 Navistar RT SIDE PANEL COMPLETE 1652446C1
25 Navistar 9670 SUNSHADE COMPLETE 1652484C1
26 Navistar 9670 AIR DEFLECTOR COMPLETE 1653218C1
27 Navistar 9670 AIR DEFLECTOR COMPLETE 1655015C1
28 Navistar 8300 FRONT ENGINE COVER MOLD 1656783C4
29 Navistar REAR ENGINE COVER MOLD 1656787C2
30 Navistar ENGINE COVER ASSEMBLY REAR 1656788C92
31 Navistar FRONT ENGINE COVER MOLD 1656789C1
32 Navistar ENGINE COVER ASSEMBLY FRONT 1656790C91
33 Navistar REAR ENGINE COVER MOLD 1656791C1
34 Navistar ENGINE COVER ASSEMBLY REAR 1656792C91
35 Navistar 46-4900 HOOD SKIN MOLDED 1657741C1
36 Navistar 46-4900 Lt Fender Ext Complete 1657747C3
37 Navistar 46-4900 Rt Fender Ext Complete 1657748C3
38 Navistar 71-8100 LT FENDER EXT COMPLETE 1657761C4
39 Navistar 71-8100 RT FENDER EXT COMPLETE 1657762C4
40 Navistar 46-4900 LT SPLASH PANEL COMP 1657763C2
41 Navistar 46-4900 RT SPLASH PANEL MOLD 1657764C2
42 Navistar 71-8100 LT SPLASH PANEL MOLD 1657765C2
43 Navistar 71-8100 RT SPLASH PANEL MOLD 1657766C2
44 Navistar AIR DEFL COVER PLATE COMPLETE 1658122C1
45 GW Fibergla 80 x 112 CENTER REAR REINF 1658666C1
46 GW Fibergla 80 x 112 CTR. RR. ASS'Y FOR GW 1658666C91
47 GW Fibergla 80 x 112 LEFT REAR REINF 1658667C2
48 GW Fibergla 80 x 112 RIGHT REAR REINF 1658668C2
49 GW Fibergla 80 x 112 CENTER REINF 1658671C2
50 Navistar 80 x 112 HOOD ASSEMBLY COMP 1658675C6
51 Navistar 80 x 90 HOOD COMPLETE 1658745C1 1100003R1
52 Navistar 80 x 100 BTFLY HOOD COMPLETE 1659041C92 1100000R1
53 Navistar 90 x 90 HOOD COMPLETE 1659885C1 1100003R1
54 Navistar 46-4900 HOOD COMPLETE 1660021C1 1100064R1
55 Navistar SCHOOL BUS ENGINE COVER COMP 1660049C2
56 Navistar 71-8100 HOOD COMPLETE 1661723C1 1100058R1
57 Navistar 46-4900 F/Grille Hood Complete 1664204C2 1100064R1
58 Navistar LOWER GRILLE PANEL COMPLETE 1664205C1
59 Navistar 46-4900 HATCH HOOD COMPLETE 1665119C1 1100064R1
60 Navistar ENGINE COVER ASSEMBLY REAR 1666026C91
61 Navistar ENGINE COVER COMPLETE 1666027C1
62 Navistar 9400 AIR DEFLECTOR COMPLETE 1666660C1
63 Navistar 9400 SUNSHADE COMPLETE 1668583C3
64 Navistar 9700 LT FRONT CAB SKIRT COMP 1668823C2
65 Navistar 9700 RT FRONT CAB SKIRT COMP 1668825C2
66 Navistar 9700 LT SHORT CAB SKIRT COMP 1668827C3
67 Navistar 9700 RT SHORT CAB SKIRT COMP 1668829C3
68 Navistar 9700 LT LONG CAB SKIRT COMP 1668831C3
</TABLE>
-38-
<PAGE> 13
<TABLE>
<CAPTION>
PACKAGING
----------------------------
1996* 1996*
SALES SALES
LINE 1995* 1996* PRICE PRICE
NO. CUSTOMER DESCRIPTION PART NUMBER QUANTITY QUANTITY PER UNIT PART NUMBER PER UNIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
69 Navistar 9700 RT LONG CAB SKIRT COMP 1668833C3
70 Navistar COVER BATTERY BOX (S.E.) 1669645C2
71 Navistar LT SPLASH PANEL COMPLETE 1671720C2
72 Navistar SERVICE GRILLE 1677510C2
73 Navistar 71-8100 LOWER GRILLE SERVICE 1677511C1
74 Navistar 9370 RH SPLASH PANEL COMPLETE 1688857C1
75 Navistar THOMAS BUS HOOD COMPLETE 1688895C92
76 Navistar UPPER GRILLE PANEL COMPLETE 1689922C1
77 Navistar 80 x 112 HOOD ASM COMP SERVICE 1696070C1 1100002R1
78 Navistar 80 x 112 BTFLY HD ASM SERVICE 1696073C91 1100002R1
79 Navistar 80 x 112 HOOD ASM COMP SERVICE 1696083C1 1100002R1
80 Navistar 80 x 112 OBF BIG HATCH SERVICE 1696085C91 1100002R1
81 Navistar 80 x 112 BTFLY HOOD ASSEMBLY 2002001C91 1100002R1
82 Navistar 80 x 112 OBF BIG HATCH COMP 2002001C93
83 Navistar ENGINE COVER, FRONT 2009847C1
84 Navistar ENGINE COVER ASSEMBLY 2009848C91
85 Navistar COVER, ENGINE - REAR 2009850C1
86 Navistar ENGINE COVER ASSEMBLY REAR 2009851C91
87 Navistar 8200 HOOD 4/RAD ASM COMPLETE 2010717C91
88 Navistar 8100 HOOD W/91L10 PACKAGE 2012728C91
89 Navistar WINDSHIELD COWL COMPLETE 2015306C1
90 Navistar 4500 LH ROUTED FENDER EXT COMP 2015474C1
91 Navistar 4700 LPX LH FENDER ROUTED 2015474C2
92 Navistar 4500 RH ROUTED FENDER EXT COMP 2015475C1
93 Navistar 4700 LPX RH FENDER ROUTED 2015475C2
94 Navistar 4500 LH SPLASH PANEL COMP 2015476C1
95 Navistar 4500 RH SPLASH PANEL COMP 2015477C1
96 Navistar 8300 SA HOOD ASS'Y COMPLETE 2017424C91
97 Navistar 8200 YF 4/RAD HOOD W/ACC DOOR 2018532C91
98 Navistar SE BATTERY BOX COVER 2021637C1
99 Navistar 46-4900 HOOD ASSEMBLY COMP 2023778C1
100 Navistar 46-4900 F/ GRILLE HOOD ASM COMP 2023784C1
101 Navistar 46-4900 HATCH HOOD ASM COMP 2023786C1
102 Navistar SE MED DUTY A/D ASSEMBLY COMP 2024955C92 1100028R1
103 Navistar SE LH FILLER PANEL COMPLETE 2024982C1
104 Navistar SE RH FILLER PANEL COMPLETE 2024983C1
105 Navistar 80 x 112 CAB AIR HOOD ASM COMP 2025663C91
106 Navistar 9370 RT SPLASH PANEL COMPLETE 2025741C2
107 Navistar FRONT ENGINE COVER ASSEMBLY 2026893C91
108 Navistar ENGINE COVER ASSEMBLY FRONT 2026894C91
109 Navistar ENGINE COVER ASSEMBLY REAR 2026895C91
110 Navistar ENGINE COVER ASSEMBLY LEVEL 3 2026896C91
111 Navistar ENGINE COVER ASSEMBLY LEVEL 1 2026897C1
112 Navistar ENGINE COVER ASSEMBLY LEVEL 3 2026912C91
113 Navistar ENGINE COVER ASSEMBLY LEVEL 3 2026913C91
114 Navistar ENGINE COVER ASSEMBLY LEVEL 3 2026914C91
115 Navistar ENGINE COVER ASSEMBLY LEVEL 3 2026915C91
116 Navistar 4500 HOOD ASSEMBLY W/LOGO COMP 2030592C91
117 Navistar LH CAB SKIRT PANEL COMPLETE 2031142C1
118 Navistar 46-4900 HD W/SHUTTER TRIM COMP 2031849C1
119 Navistar 8100 HOOD ASSEMBLY COMPLETE 2033813C91
120 Navistar 8100 HOOD ASM W/CAB AIR COMP 2033814C91
121 Navistar THOMAS BUS ASM W/O LATCH/LOGO 2034089C91
122 Navistar LPX LH SPLASH PANEL 2034763C1
123 Navistar BATTERY BOX SERVICE COMPLETE 400614C2
124 Navistar FAN SHROUD COMPLETE 415824C1
125 Navistar BATTERY BOX SERVICE MOLD 415877C2
126 Navistar BATTERY BOX SERVICE COMPLETE 424704C2
127 Navistar 4070 HEADLIGHT PNL RT COMPLETE 448689C1
128 Navistar BATTERY BOX PAYSTAR COMPLETE 461568C3
129 GW Fibergla 80 x 112 REINF LT FT VERT ZBAR 483658C2
130 GW Fibergla 80 x 112 REINF RT FT VERT ZBAR 483659C1
131 Navistar 90x90 ENG COV CHEST BOT REAR 492612C2
132 Navistar 90x90 ENG COV CHEST COMP 492621C2
133 Navistar FENDER EXTENSION COMPLETE 499488C2
134 Navistar FENDER EXTENSION COMPLETE 499489C2
135 Navistar BATTERY BOX 9670 CAB OVER COMP 503225C1
136 Navistar WINDSHIELD COWL COMPLETE 556644C2
137 Navistar 9370 LT SPLASH PANEL COMPLETE 557488C2
138 Navistar 9370 LT SPLASH PANEL COMPLETE 557489C4
139 Navistar 9370 RT SPLASH PANEL COMPLETE 557490C2
</TABLE>
-39-
<PAGE> 14
<TABLE>
<CAPTION>
PACKAGING
----------------------------
1996* 1996*
SALES SALES
LINE 1995* 1996* PRICE PRICE
NO. CUSTOMER DESCRIPTION PART NUMBER QUANTITY QUANTITY PER UNIT PART NUMBER PER UNIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
140 Navistar WINDOW TRIM RING BROWN COMP 557499C2
141 Navistar WINDOW TRIM RING MOLD 557499CA
142 Navistar WINDOW TRIM RING BEIGE COMP 557500C2
143 Navistar WINDOW TRIM RING BLUE COMP 557501C2
144 Navistar A PILLAR LEFT BROWN COMPLETE 557505C1
145 Navistar A PILLAR RIGHT BROWN COMPLETE 557511C1
146 Navistar A PILLAR RIGHT BEIGE COMPLETE 557512C1
147 92/9400 HOOD PRODUCT
148 Navistar 9200 HOOD ASS'Y COMPLETE 3501142C91
149 Navistar 9200 SPLASH PANEL LEFT HAND 3502332C1
150 Navistar 9200 SPLASH PANEL RIGHT HAND 3502336C1
151 Navistar 9400 HOOD ASS'Y COMPLETE 3501143C91
152 Navistar 92/9400 LH FENDER 3502350C1
153 Navistar 92/9400 RH FENDER 3502351C1
154 Navistar 9400 SPLASH PANEL LEFT HAND 3502324C1
155 Navistar 9400 SPLASH PANEL RIGHT HAND 3502328C1
156 HET FLAT FLOOR
157 Navistar CONSOLE BOX ASSEMBLY 2041836C91
158 Navistar CONSOLE BOX ASSEMBLY 2041838C91
</TABLE>
* Confidential Treatment Has Been Granted
-40-
<PAGE> 15
COLUMBUS PLASTICS OPERATION
CURRENT CONTRACT PRICES
Schedule A
COLUMBUS PLASTICS OPERATION
CURRENT CONTRACT PRICES PACKAGING
<TABLE>
<CAPTION>
PACKAGING
----------------------------
1996* 1996*
SALES SALES
LINE 1995* 1996* PRICE PRICE
NO. CUSTOMER DESCRIPTION PART NUMBER QUANTITY QUANTITY PER UNIT PART NUMBER PER UNIT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
159 ADDITIONAL ITEMS
160 Navistar 9800 RH Front Cab Skirt 2032937C1
161 Navistar 9800 RH Short Skirt Assy 3501623C91
162 Navistar 9800 RH Long Cab Skirt w/Access 3501624C81
163 Navistar SE Air Deflector Kit 2042399C91
164 Navistar 8200/2600 Hood Assy Cab Air 350607C91
165 Navistar 8200/2600 Hood Assy Cab 350714C81
166 Navistar 9400 Splash Panel LH 3502326C1
167 Navistar 9400 Splash Panel LH Assy 3502327C1
168 Navistar 9400 Splash Panel RH 3502330C1
169 Navistar 9400 Splash Panel RH Assy 3502331C1
170 Navistar 9200 Splash Panel LH 3502334C1
171 Navistar 9200 Splash Panel LH Assy 3502335C1
172 Navistar 9200 Splash Panel RH 3502338C1
173 Navistar 9200 Splash Panel RH Assy 3502339C1
174 Navistar 46/4900 Headlight Can LH Service 1695909C1
175 Navistar 46/4900 Headlight Can RH Service 1695910C1
176 Navsitar SE Air Deflector RH Assy 2042388C1
177 Navistar A Pillar LH 557508C1
178 Navistar A Pillar RH 557514C1
179 Navistar 8300 Service Crate 1100907R91
180 Navistar Sunshade Pack 1100081R1
181 Navistar 92/9400 Hood Crate Assembly
Line number 94 is deleted and replaced with following:
94 Navistar 4500 LH Splash Panel Comp 2015476C1
</TABLE>
*Confidential Treatment Has Been Granted
<PAGE> 1
TRANSITIONAL SERVICES AGREEMENT
-------------------------------
AGREEMENT, entered into and effective as of the 31st day of
December, 1996 (the "Effective Date"), by and between Navistar International
Transportation Corp., a Delaware corporation, with its principal place of
business at 455 North Cityfront Plaza Drive, Chicago, Illinois 60611,
("Provider"), and Core Materials Corporation, a Delaware corporation, with its
principal place of business at 800 Manor Park Drive, Columbus, Ohio 43228,
("Buyer") (Buyer and Provider are at times referred to herein individually as a
"Party" and collectively as the "Parties").
WITNESSETH
----------
WHEREAS, Provider and RYMAC Mortgage Investment Corporation ("RYMAC")
have entered into an Asset Purchase Agreement dated as of September 12, 1996, as
amended (the "Purchase Agreement") pursuant to which Buyer (as successor to
RYMAC) agreed to purchase those certain assets of Provider's Columbus Plastics
Division business as described in the Purchase Agreement (the "Plastics
Business"); and
WHEREAS, as set forth in Section 8(j) of the Purchase Agreement,
Provider agreed to make available to Buyer certain transitional administrative
and support services for the Plastics Business for a limited period after the
completion of the sale in accordance with the terms of this Agreement.
NOW, THEREFORE, subject to the terms, conditions, covenants and
provisions of this Agreement, Provider and Buyer mutually covenant and agree as
follows:
ARTICLE I.
SERVICES PROVIDED
-----------------
1.1 TRANSITIONAL SERVICES. Upon the terms and subject to the conditions
set forth in this Agreement, Provider will provide to Buyer for the Plastics
Business each of those administrative and support services listed in APPENDIX A,
which is attached to and made part of this Agreement (hereinafter referred to
individually as a "Transitional Service", and collectively as the "Transitional
Services"), during the time period for each Transitional Service set forth on
APPENDIX A, (hereinafter referred to as the "Time Periods" for all of the
Transitional Services, and the "Time Period" for each Transitional Service).
1.2 PERSONNEL. (a) In providing the Transitional Services, Provider, as
it deems necessary or appropriate in its sole discretion, may (i) use such
personnel of Provider or its affiliates, and (ii) employ the services of third
parties to the extent such third party services are routinely utilized to
provide similar services to other Provider businesses or are reasonably
necessary for the efficient performance of any of such Transitional Services.
(b) Buyer agrees that Provider shall be entitled to use a
reasonable amount of the services of those former employees of Provider, who
were employed by Buyer as a result of
-44-
<PAGE> 2
the acquisition of the Plastics Business by Buyer, in the provision of the
Transitional Services, which employees shall be made available by Buyer to
Provider for this purpose.
1.3 LEVEL OF TRANSITIONAL SERVICES. (a) Nothing in this Agreement shall
require Provider to favor the Plastics Business over its own businesses or those
of any of its affiliates, subsidiaries or divisions. Provider shall devote such
time and attention as are reasonably necessary to provide the Transitional
Services required hereunder.
(b) Unless otherwise specifically set forth in the Appendixes
attached hereto, it is the intention of the parties that Buyer's use of any
Transitional Service that Buyer elects to use shall not be higher than the level
of use required by the Plastics Business prior to the acquisition thereof by
Buyer. In no event shall Buyer be entitled to any new service or to increase its
use of any of the Transitional Services above that level of use without the
prior written consent of Provider, which consent may be withheld by Provider for
any or no reason in its sole and absolute discretion.
(c) As procedures, policies and services evolve and change
with respect to its own operations, Provider reserves the right to make
corresponding changes to the Transitional Services to be performed hereunder and
to the procedures and policies used to provide and implement the Transitional
Services. Provider shall not be required to provide Buyer extraordinary levels
of Transitional Services, special studies, training, or the like or the
advantage of systems, equipment, facilities, training, or improvements procured,
obtained or made after the Effective Date by Provider.
1.4 LIMITATION OF LIABILITY AND WARRANTY. (a) In the absence of
negligence or willful misconduct on Provider's part, Provider shall not be
liable for any claims, liabilities, damages, losses, costs, expenses (including,
but not limited to, settlements, judgments, court costs and reasonable
attorneys' fees), fines and penalties, arising out of any actual or alleged
injury, loss or damage of any nature whatsoever in providing or failing to
provide the Transitional Services to Buyer. Notwithstanding anything to the
contrary contained herein, in the event Provider commits an error with respect
to or incorrectly performs or fails to perform any Transitional Service, at
Buyer's request, Provider shall use reasonable efforts to correct such error,
re-perform or perform such Transitional Service.
(b) In no event shall Provider be liable for any damages
caused by Buyer's failure to perform Buyer's responsibilities hereunder unless
Buyer's failure to perform is caused by Provider's negligence, willful
misconduct or breach of this Agreement. Provider will not be liable to Buyer for
any act or omission of any other entity (other than due to a default by Provider
in any agreement between Provider and such other entity) furnishing any
Transitional Service. Further, Provider will have no liability for lost, altered
or destroyed data in providing any Transitional Service or for any interruption
of any Transitional Services relating to computer or telecommunications services
unless due to Provider's negligence or willful misconduct
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<PAGE> 3
(c) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN
OR AT LAW OR IN EQUITY, IN NO EVENT SHALL PROVIDER BE LIABLE FOR PUNITIVE,
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (EXCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION OR ANY
OTHER LOSS) ARISING FROM OR RELATING TO ANY CLAIM MADE UNDER THIS AGREEMENT OR
REGARDING THE PROVISION OF OR THE FAILURE TO PROVIDE THE TRANSITIONAL SERVICES,
EVEN IF PROVIDER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
1.5 NO OBLIGATION TO CONTINUE TO USE SERVICES. Buyer shall have no
obligation to continue to use any of the Transitional Services and may delete
any Transitional Service from the Transitional Services that Provider is
providing to Buyer by giving Provider advance written notice of its desire to
delete any or all Transitional Services; PROVIDED, that the deletion of any
Transitional Service can only be effective on the last day of a calendar month.
If any Transitional Service is deleted by Buyer, Provider shall have the option,
in its sole and absolute discretion, to discontinue any related Transitional
Services by providing written notice to Buyer.
1.6 TECHNOLOGY. Any processes, techniques, hardware, software,
copyrights, patents, practices or other technical or proprietary matter related
to, arising from, or used in connection with, the performance by Provider of the
Transitional Services (the "Technology"), and any improvement, modification or
new development in the Technology, shall be the sole and exclusive property of
Provider.
1.7 PROVIDER ACCESS. To the extent reasonably required for Provider
personnel to perform the Transitional Services, Buyer shall provide Provider
personnel with access to its equipment, office space, plants, telecommunications
and computer equipment and systems, and any other areas and equipment.
ARTICLE 2.
COMPENSATION
------------
2.1 CONSIDERATION. As consideration for the Transitional Services,
Buyer shall pay to Provider the amount specified for each Transitional Service
as set forth in APPENDIX A. If the amount to be paid for any Transitional
Service is described in APPENDIX A as "cost", the use of the term "cost" means
the cost to Provider to provide that Transitional Service to Buyer. If the
amount to be paid for any Service is described on APPENDIX A as "actual hours
incurred", the amount of such fee shall be determined based on (i) all
compensation costs for direct personnel of Provider who perform the Transitional
Services (including, without limitation, payroll, overhead and related amounts),
(ii) travel cost (including meals and lodging expenses) for such personnel and
their successors incurred in connection with the Transitional Services, and
(iii) other ordinary and necessary business expenses incurred by Provider in
connection with the Transitional Services.
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<PAGE> 4
(b) In addition to the payments described in subparagraph (a)
above, Buyer shall reimburse to Provider an amount equal to the sum of (i) all
of the costs, if any, required by any third party incurred by Provider to obtain
consents from such third parties to permit Provider to provide any Transitional
Service to Buyer hereunder (including, without limitation, amounts paid for the
right to continue to use third party software for the benefit of Buyer) ("Third
Party Consent Costs"), plus (ii) any reasonable and customary expenditures made
by Provider on behalf of Buyer pursuant to APPENDIX A to provide the
Transitional Services to Buyer. Such costs and expenditures will be billed to
Buyer in the monthly invoice(s) described in Paragraph 2.3 below. In the event
that Provider will be making any such disbursements of funds on behalf of Buyer,
before any disbursement will be made, Buyer shall, if requested by Provider,
deposit funds equal to an estimated amount of such costs and expenditures into a
bank account designated by Provider. Notwithstanding anything to the contrary in
this subparagraph (b), all Third Party Consent Cost shall be subject to Buyer's
prior approval; provided, however, that in the event Buyer does not approve such
Third Party Consent Cost, Provider shall not be obligated under this Agreement
to perform the Transitional Service to which such Third Party Consent Cost
relates.
2.2 TAXES. Any taxes (other than income taxes) assessed against
Provider on the provision of the Transitional Services shall be reimbursed by
Buyer.
2.3 INVOICES. At the end of each month, each of Provider and its
affiliates or subsidiaries providing the Transitional Services will submit one
invoice to Buyer for (a) all Transitional Services provided to Buyer and its
subsidiaries by such entity, and (b) those costs and expenditures described in
Paragraph 2.1 (b) above incurred by such entity during such month. Such monthly
invoices shall be issued no later than the fifteenth day of each month. Each
invoice shall include documentation supporting each of the invoiced amounts. The
total of this list and supporting detail will equal the invoice total, and will
be provided under separate cover apart from the invoice. All invoices shall be
sent to Buyer at the following address or to such other address as Buyer shall
have specified by notice in writing to Provider:
Core Materials Corporation
800 Manor Park Drive
Columbus, Ohio 43228
Attn: President
Fax No. (614) 870-5051
2.4 PAYMENT OF INVOICES. (a) Payment of all invoices shall be made by
check or by electronic funds transmission in U.S. Dollars, without any offset or
deduction of any nature whatsoever, within fifteen (15) days of the invoice date
unless otherwise specified in APPENDIX A. All payments made by electronic funds
transmission shall be made to the account set forth below with written
confirmation of payment sent by facsimile to the person set forth below.
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<PAGE> 5
ACCOUNT:
Bank of America, Illinois
231 South LaSalle Street
Chicago, Illinois 60697
ABA Routing Number: 071000039
For the account of
Navistar International Transportation Corp.
WRITTEN CONFIRMATION:
Navistar International Transportation Corp.
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attn: Vice President and Treasurer
Fax No. (312) 836-2573
All payments made by check shall be sent by U.S. Mail, postage prepaid, to the
following address:
Navistar International Transportation Corp.
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attn: Vice President and Treasurer
ARTICLE 3.
CONFIDENTIALITY
---------------
3.1 OBLIGATION. (a) In addition to any obligations of confidentiality
pursuant to other agreements between the Parties, without the prior written
consent of the other Party, each Party shall hold in confidence and not disclose
to any third party any confidential information received by it from the other
Party during the provision of the Transitional Services, including, without
limitation, information which is not related to the Transitional Services.
(b) Subject to the terms of any other written agreement
between the Parties, each Party agrees that it shall only use the information
received by it from the other Party in connection with the provision or receipt
of the Transitional Services, and for no other purpose whatsoever.
(c) For the purposes of this Agreement, confidential
information shall not include information:
(i) which is or becomes part of the public domain
other than through breach of this Agreement or through the fault of the
receiving Party;
(ii) which is or becomes available to the receiving
Party from a source other than the disclosing Party, which source has no
obligation of confidentiality to the disclosing Party in respect thereof;
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<PAGE> 6
(iii) which is required to be disclosed by law or
government order; or
(iv) the disclosure of which is mutually agreed to by
the Parties.
3.2 EFFECTIVENESS. The foregoing obligation of confidentiality shall be
in effect during the term of this Agreement and any extensions thereof and for a
period of seven (7) years after the termination or expiration of this Agreement.
3.3 CARE AND INADVERTENT DISCLOSURE. With respect to any confidential
information, each Party agrees as follows:
(a) it shall use the same degree of care in safeguarding said
information as it uses to safeguard its own information which must be held in
confidence; and
(b) upon the discovery of any inadvertent disclosure or
unauthorized use of said information, or upon obtaining notice of such a
disclosure or use from the other Party, it shall take all necessary actions to
prevent any further inadvertent disclosure or unauthorized use, and, subject to
the provisions of Paragraph 1.4 above, such other Party shall be entitled to
pursue any other remedy which may be available to it.
ARTICLE 4.
TERM AND TERMINATION
--------------------
4.1 TERM. This Agreement shall become effective on the Effective Date
and shall remain in force until the earlier of (i) three (3) years from the date
hereof or (ii) the expiration of the longest Time Period, unless all of the
Transitional Services are deleted by Buyer in accordance with Paragraph 1.5
above (in which case this Agreement shall terminate when all of the Transitional
Services are so deleted), or this Agreement is terminated under Paragraph 4.2,
6.7 or 6.11 below prior to the end of such period.
4.2 TERMINATION. (a) If either Party (hereafter called the "Defaulting
Party") shall fail to perform or default in the performance of any of its
obligations under this Agreement (other than as described in subparagraph (b)
below), the other Party (hereinafter called the "Non-Defaulting Party") may give
written notice to the Defaulting Party specifying the nature of such failure or
default and stating that the Non-Defaulting Party intends to terminate this
Agreement if such failure or default is not cured within forty five (45) days of
such written notice. If any failure or default so specified is not cured within
such forty five (45) day period, the Non-Defaulting Party may elect to
immediately terminate this Agreement; PROVIDED, HOWEVER, that if the failure or
default relates to a dispute made in good faith by the Defaulting Party, the
Non-Defaulting Party may not terminate this Agreement pending the resolution of
such dispute. Such termination shall be effective upon giving a written notice
of termination from the Non-Defaulting Party to the
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Defaulting Party and shall be without prejudice to any other remedy which may be
available to the Non-Defaulting Party against the Defaulting Party.
(b) Notwithstanding the provisions of subparagraph (a) above,
Provider may immediately terminate this Agreement upon written notice to Buyer
if Buyer fails to make any payment hereunder within fifteen (15) days of the due
date thereof.
(c) Either Party may immediately terminate this Agreement by a
written notice to the other without any prior notice upon the occurrence of any
of the following events:
(i) the other Party enters into proceedings in
bankruptcy or insolvency;
(ii) the other Party shall make an assignment for
benefit of creditors;
(iii) a petition shall be filed against the other
Party under a bankruptcy law, a corporate reorganization law, or any other law
for relief of debtors (or similar law in purpose or effect); or
(iv) the other Party enters into liquidation or
dissolution proceedings.
4.3 BUYER'S ADMINISTRATIVE AND SUPPORT SERVICES. (a) Buyer acknowledges
that Provider is providing the Transitional Services as an accommodation to
Buyer to allow Buyer a period of time to obtain its own or alternative
administrative and support services. During the term of this Agreement, Buyer
agrees that it shall take all steps necessary to obtain its own or alternative
administrative and support services prior to the expiration of the Time Period
for each Transitional Service.
(b) Buyer specifically agrees and acknowledges that all
obligations of Provider to provide each Transitional Service shall immediately
cease upon the expiration of the Time Period for such Transitional Service, and
Provider's obligations to provide all of the Transitional Services shall
immediately cease upon the termination of this Agreement. Upon the cessation of
Provider's obligation to provide any Transitional Service, Buyer shall
immediately cease using, directly or indirectly, such Transitional Service
(including, without limitation, any and all Provider software or third party
software provided through Provider telecommunications services or equipment, or
computer systems or equipment).
(c) PROVIDER SHALL HAVE NO LIABILITY OF ANY KIND OR NATURE
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, INDIRECT, CONSEQUENTIAL, SPECIAL,
INCIDENTAL OR PUNITIVE DAMAGES) TO BUYER, OR TO ANYONE CLAIMING BY OR THROUGH
BUYER, FOR PROVIDER'S CEASING TO PROVIDE ANY TRANSITIONAL SERVICE UPON THE
EXPIRATION OF THE TIME PERIOD FOR SUCH TRANSITIONAL SERVICE OR THE TERMINATION
OF THIS AGREEMENT.
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<PAGE> 8
4.4 SURVIVAL OF CERTAIN OBLIGATIONS. Without prejudice to the survival
of the other agreements of the Parties, the following obligations shall survive
the termination of this Agreement: (a) for the period set forth therein, the
obligations of each Party under Articles 3, 4 and 5, and (b) Provider's right to
receive the compensation for the Transitional Services provided, and
reimbursement of the costs and expenditures described in Paragraph 2. I above
incurred, prior to the effective date of termination.
ARTICLE 5.
INDEMNITIES
-----------
5.1 INDEMNITY BY PROVIDER. Subject to the limitations set forth in
Paragraphs 1.4 and 4.3 above, Provider shall indemnify, defend and hold Buyer
harmless against any and all claims, liabilities, damages, losses, costs,
expenses (including, but not limited to, settlements, judgments, court costs and
reasonable attorney's fees), fines and penalties arising out of any actual
injury, loss or damage of any nature whatsoever due or relating to the provision
of or failure to provide the Transitional Services, only if such amounts are a
result of the negligence or reckless or willful misconduct of the personnel of
Provider and/or any contract personnel who are managed and directed by Provider.
5.2 INDEMNITY BY BUYER. Buyer shall indemnify, defend and hold Provider
harmless against any and all claims, liabilities, damages losses, costs,
expenses (including, but not limited to, settlements, judgments, court costs and
reasonable attorneys' fees), fines and penalties arising out of any injury or
death, and any loss or damage of any nature whatsoever (including, without
limitation, loss of or damage to property, or damage to the environment) arising
out of the operations and activities of Buyer, except for losses, liabilities,
obligations, costs, expenses or damages which are the result of the negligence,
gross negligence or willful misconduct of the personnel of Provider and/or any
contract personnel who are under contract with Provider.
5.3 TERM OF INDEMNITY. The indemnities contained in this Article shall
survive for a period of three (3) year after the termination of this Agreement
for any reason.
ARTICLE 6.
MISCELLANEOUS
-------------
6.1 AMENDMENT. This Agreement shall not be amended or modified except
in writing signed by the Parties.
6.2 SUCCESSORS AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns. The Buyer shall not assign this Agreement or any rights
herein without the prior written consent of Provider, which may be withheld for
any or no reason.
6.3 MERGER. All understandings, representations, warranties and
agreements, if any, heretofore existing between the Parties regarding the
Transitional Services are merged into this Agreement, including the Appendices
attached hereto, which fully and completely express the
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<PAGE> 9
agreement of the Parties with respect to the subject matter hereof. The Parties
have entered into this Agreement after adequate investigation with neither Party
relying upon any statement or representation not contained in this Agreement or
the Appendices attached hereto.
6.4 NOTICES. All notices, consents, requests, approvals, and other
communications provided for or required herein, and all legal process in regard
thereto, must be in writing and shall be deemed validly given, made or served,
(a) when delivered personally or sent by telecopy to the facsimile number
indicated below with a required confirmation copy sent in accordance with
subparagraph (c) below; or (b) on the next business day after delivery to a
nationally-recognized express delivery service with instructions and payment for
overnight delivery; or (c) on the third day after deposited in any depository
regularly maintained by the United States postal service, postage prepaid,
certified or registered mail, return receipt requested, addressed to the
following addresses or to such other address as the Party to be notified shall
have specified to the other Party in accordance with this paragraph:
If to Provider: Navistar International Transportation Corp.
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
Attn: Vice President and Treasurer
If to Buyer: Core Materials Corporation
800 Manor Park Drive
Columbus, Ohio 43228
Attn: President
6.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America and the State of Ohio.
6.6 HEADINGS. The various headings used in this Agreement are for
convenience only and are not to be used in interpreting the text of the Articles
or Paragraphs in which they appear or to which they relate.
6.7 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law. If any portion of this Agreement is declared invalid for any
reason in any jurisdiction, such declaration shall have no effect upon the
remaining portions of this Agreement, which shall continue in full force and
effect as if this Agreement had been executed with the invalid portions thereof
deleted; PROVIDED, that the entirety of this Agreement shall continue in full
force and effect in all other jurisdictions. Notwithstanding the foregoing, if
the portion of this Agreement which is declared invalid has the effect of
reducing the compensation due hereunder or preventing the reimbursement of the
costs and expenditures described in Paragraph 2.1(b) above, Provider, at its
sole discretion, may terminate this Agreement by providing thirty (30) days
written notice to Buyer.
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<PAGE> 10
6.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
6.9 RIGHTS OF THE PARTIES. Nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give any person or
entity, other than the Parties and their respective subsidiaries and affiliates,
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
6.10 RESERVATION OF RIGHTS. Either Party's waiver of any of its
remedies afforded hereunder or at law is without prejudice and shall not operate
to waive any other remedies which that Party shall have available to it, nor
shall such waiver operate to waive the Party's rights to any remedies due to a
future breach, whether of a similar or different nature.
6.11 FORCE MAJEURE. Any failure or omission by Provider in the
performance of any obligation under this Agreement on its part to be performed
shall not be deemed a breach of this Agreement or create any liability, if the
same arises from any cause or causes beyond the control of Provider, including,
but not limited to, the following, which, for purposes of this Agreement shall
be regarded as beyond the control of Provider: acts of God, fire, storm, flood,
earthquake, governmental regulation or direction, acts of the public enemy, war,
rebellion, insurrection riot, invasion, strike or lockout; PROVIDED, HOWEVER,
that Provider shall resume the performance whenever such causes are removed.
Notwithstanding the foregoing, if Provider cannot perform under this Agreement
for a period of five (5) days due to such cause or causes, Buyer may terminate
this Agreement by providing written notice to Provider.
6.12 RELATIONSHIP OF THE PARTIES. It is expressly understood and agreed
that in rendering the Transitional Services hereunder, Provider is acting as an
independent contractor and that this Agreement does not constitute either Party
as an employee, agent or other representative of the other Party for any purpose
whatsoever. Neither Party has the right or authority, to enter into any
contract, warranty, guarantee or other undertaking in the name or for the
account of the other Party, or to assume or create any obligation or liability
of any kind, express or implied, on behalf of the other Party, or to bind the
other Party in any manner whatsoever, or to hold itself out as having any right,
power or authority to create any such obligation or liability on behalf of the
other or to bind the other Party in any manner whatsoever (except as to any
actions taken by either Party at the express written request and direction of
the other Party).
6.13 CONFLICT. In case of conflict between the terms and conditions of
this Agreement and any Appendix, the terms and conditions of such Appendix shall
control and govern as it relates to the Transitional Service to which those
terms and conditions apply.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Transitional
Services Agreement to be executed the day and year first above written.
NAVISTAR INTERNATIONAL
TRANSPORTATION CORP.
By: /s/ Thomas M. Hough
---------------------------------
Name: Thomas M. Hough
Title: Vice President and Treasurer
CORE MATERIALS CORPORATION
By: /s/ Richard R. Conte
--------------------------------
Name: Richard R. Conte
Title: President
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<PAGE> 12
APPENDIX A
TRANSITIONAL SERVICES AGREEMENT
<TABLE>
<CAPTION>
FUNCTION BASIS TIME PERIOD
FOR CHARGE
I. DIRECT SERVICES
<S> <C> <C> <C>
A. Internal financial reporting Actual hours incurred One (1) Year
B. Tax return preparation (pro forma Actual hours incurred One (1) Year
basis only) for local, state and
federal income tax, personal property
and real estate tax with respect to
Plastics Business property only, and
employee withholding tax
C. Property records (plant and Actual hours incurred One (1) Year
equipment)
D. Corporate computer systems Actual hours incurred One (1) Year
II. INDIRECT SERVICES
A. Billing invoices and accounts Cost and Actual Hours One (1) Year
receivable Incurred
B. Purchasing, accounts payable and Cost and Actual Hours One (1) Year
cash disbursements Incurred
C. Payroll Cost and Actual Hours One (1) Year
Incurred
D. Corporate transportation and freight Cost and Actual Hours One (1) Year
Incurred
E. Life insurance/survivor benefit Cost and Actual Hours Three (3) Years
objective Incurred
F. Occupational Health Safety Cost and Actual Hours Three (3) Years
Incurred
G. Car Pool Cost and Actual Hours Six (6) Months
Incurred
H. Workers Compensation Cost and Actual Hours Three (3) Years
Administration Incurred
I. Navcom phone system Cost and Actual Hours Six (6) Months
Incurred
J. Procure, on Buyer's behalf, property Cost and Actual Hours Three (3) Years
and business interruption insurance, Incurred
primary general liability, automobile
liability, D&O insurance, fidelity and
other liability and casualty insurance
relating to Buyer's business as
requested by Buyer
K. Health care - Active employees Cost One (I) Year
- Retired employees Cost Three (3) Years
L. Pension - Actuarial Cost Three (3) Years
- Benefit Payment Cost Three (3) Years
</TABLE>
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<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS AGREEMENT is made as of December 31, 1996, by and among
Core Materials Corporation, a Delaware corporation (the "COMPANY"), Navistar
International Transportation Corp., a Delaware corporation ("Navistar") and each
of the other Persons who becomes a party to this Agreement after the date hereof
pursuant to paragraphs 10(e) or 10(f) below. Certain capitalized terms used
herein are defined in paragraph 9 below.
WHEREAS, RYMAC Mortgage Investment Corporation ("RYMAC") and
Navistar are parties to an Asset Purchase Agreement dated as of September 12,
1996, as amended (the "PURCHASE AGREEMENT") pursuant to which Navistar has
agreed to sell certain assets to the Company (as successor to RYMAC) subject to
the terms and conditions therein.
WHEREAS, as part of the consideration for the sale of certain
of its assets, the Company is issuing to Navistar certain shares of the
Company's Common Stock, par value $.01 per share (the "COMMON STOCK"); and
WHEREAS, the execution and delivery of this Agreement is a
condition to Navistar's obligation to sell certain assets to the Company
pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
intending to be legally bound, hereby agree as follows:
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. The holders of at least 20% of
the Investor Registrable Securities may at any time request registration under
the Securities Act of all or any portion of their Registrable Securities on Form
S-1 or any similar long-form registration ("LONG-FORM REGISTRATIONS"), and the
holders of at least 20% of the Investor Registrable Securities may request
registration under the Securities Act of 1933, as amended (the "SECURITIES ACT")
of all or any portion of their Registrable Securities on Form S-2 or S-3
(including pursuant to Rule 415 under the Securities Act) or any similar
short-form registration ("SHORT-FORM REGISTRATIONS") if available. All
registrations requested pursuant to this paragraph 1(a) are referred to herein
as "DEMAND REGISTRATIONS". Each request for a Demand Registration shall specify
the approximate number of Investor Registrable Securities requested to be
registered and the anticipated per share price range for such offering. Within
10 days after receipt of any such request, the Company shall give written notice
of such requested registration to all other holders of Registrable Securities
and shall include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion therein within
15 days after the receipt of the Company's notice.
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<PAGE> 2
(b) LONG-FORM REGISTRATIONS. The holders of Investor
Registrable Securities shall be entitled to request 2 Long-Form Registrations.
The Company shall pay all Registration Expenses for such Long-Form
Registrations. Except as otherwise provided in this paragraph 1(b), (i) a
registration shall not count as one of the permitted Long-Form Registrations
until it has become effective and the holders of Investor Registrable Securities
are able to register and sell at least 90% of the Investor Registrable
Securities requested to be included in such registration; and (ii) the Company
shall pay all Registration Expenses in connection with any registration
initiated as a Long-Form Registration whether or not it has become effective and
whether or not such registration has counted as one of the permitted Long-Form
Registrations. The holders of Investor Registrable Securities may, before a
Long-Form Registration becomes effective, withdraw their Registrable Securities
from inclusion therein, should the terms of sale not be satisfactory to such
holders. Should all such holders so withdraw, such Long-Form Registration shall
be deemed to have been declared effective, unless such holders of Investor
Registrable Securities pay within 30 days after any such withdrawal, their
pro-rata share of all of the out-of-pocket expenses of the Company incurred in
connection with such registration.
If so requested by the holders of at least a majority of the
Investor Registrable Securities included in a Demand Registration, the public
offering or distribution of Registrable Securities under this Agreement shall be
pursuant to a firm commitment underwriting, the managing underwriter of which
shall be a nationally recognized investment banking firm selected and engaged by
the Company and approved by the holders of at least a majority of the Investor
Registrable Securities included in such Demand Registration (which approval
shall not be unreasonably withheld). The Company shall enter into the same
underwriting agreement as entered into by the holders of Investor Registrable
Securities, which shall contain representations, warranties, indemnities and
agreements not substantially different from those customarily made by an issuer
in underwriting agreements with respect to secondary distributions. The Company,
as a condition to fulfilling its obligations under this Agreement, may require
that such underwriting agreement contain customary provisions indemnifying the
Company against any losses that arise out of or are based upon an untrue
statement, an alleged untrue statement, an omission or an alleged omission in
any registration statement or prospectus made in reliance upon and in conformity
with written information furnished to the Company by the underwriters
specifically for use in the preparation of such registration statement or
prospectus.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of Investor
Registrable Securities shall be entitled to request an unlimited number of
Short-Form Registrations in which the Company shall pay all Registration
Expenses. Demand Registrations shall be Short-Form Registrations whenever the
Company is permitted to use any applicable short form. The Company shall use its
best efforts to make Short-Form Registrations on Form S-3 available for the sale
of Registrable Securities. If the Company, pursuant to the request of the
holders of at least 20% of the Investor Registrable Securities, is qualified to
and has filed with the Securities and Exchange Commission a registration
statement under the Securities Act on Form S-3 pursuant to Rule 415 under the
Securities Act (the "REQUIRED REGISTRATION"), the Company shall use its best
efforts to cause the Required Registration to be declared effective under the
Securities Act as soon as practical after
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<PAGE> 3
filing, and once effective, the Company shall cause such Required Registration
to remain effective for a period ending on the earlier of (i) the date on which
all Registrable Securities have been sold pursuant to the Required Registration
or (ii) the date as of which the holders of Investor Registrable Securities
(assuming such holders are affiliates of the Company) are able to sell all of
the Investor Registrable Securities then held by them within a ninety-day period
in compliance with Rule 144 under the Securities Act (the "EFFECTIVE PERIOD").
The Company represents, warrants and covenants that it currently is, and shall
remain at all times during the Effective Period, eligible to use Form S-2 under
the Securities Act. Each party hereto hereby acknowledges that the Company is
currently not eligible to effect a Required Registration for a primary offering,
but is eligible to effect a Required Registration for a secondary offering.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the holders of at least 50% of
the Investor Registrable Securities included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriter advises
the Company in writing that in its opinion the number of Registrable Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Registrable Securities and other securities, if
any, which can be sold without adversely affecting the marketability of the
offering, the Company shall include in such registration prior to the inclusion
of any securities which are not Registrable Securities the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold without adversely affecting the marketability of the offering, first
pro rata among the respective holders of the Investor Registrable Securities and
then to the extent that any Other Registrable Securities can still be included,
pro rata among the respective holders thereof on the basis of the amount of
Registrable Securities owned by each such holder, and then to the extent that
any securities which are not Registrable Securities can still be included, pro
rata among the respective holders thereof on the basis of the amount of such
securities owned by each such holder. Any Persons other than holders of
Registrable Securities who participate in Demand Registrations which are not at
the Company's expense must pay their share of the Registration Expenses as
provided in paragraph 5 hereof.
(e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company shall
not be obligated to effect any Demand Registration within 180 days after the
effective date of a previous Demand Registration or a previous registration in
which the holders of Registrable Securities were given piggyback rights pursuant
to Section 2 and in which there was no reduction in the number of Registrable
Securities requested to be included. The Company shall be entitled to postpone,
for a reasonable period of time not in excess of 90 days after its receipt of an
initial request for a Demand Registration pursuant to this Agreement, the filing
of any registration statement if at the time it received a request therefor, the
Company determines, in its reasonable business judgment, that such registration
and offering could interfere with or otherwise adversely affect any financing,
acquisition, corporate reorganization or other material transaction or
development involving the Company or any of its subsidiaries or affiliates;
provided that the Company shall only be entitled to one postponement in any
365-day period. The Company shall give the holders of Investor Registrable
Securities making such request written notice of such determination. In the
event of such postponement, the Company shall file such Registration
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Statement as soon as practicable after it shall determine, in its reasonable
business judgment, that such registration and offering will not interfere with
the matters described in the first sentence of this Section 2(e) or, if later,
at the end of such 90-day period. If the Company shall postpone the filing of
any registration statement, the holders of Investor Registrable Securities shall
have the right to withdraw their request for such registration by giving notice
to the Company within 15 days of the notice of postponement; provided, however,
that in the event that the holders of Investor Registrable Securities withdraw
their request in the foregoing manner, such request shall not be counted for
purposes of determining the number of registrations to which the holders of
Investor Registrable Securities are entitled pursuant to paragraph (a) above.
Notwithstanding the provisions of this paragraph 1, the
Company shall not be required to effect more than two Long-Form Registrations or
more than five Demand Registrations that have been filed pursuant to paragraph
1(a) above, were declared effective by the Commission and remained effective for
the period set forth in paragraph 4(b) hereof.
(f) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of the holders of at least 50% of the Investor Registrable
Securities; provided that the Company may grant rights to employees of the
Company and its Subsidiaries to participate in Piggyback Registrations so long
as such rights are subordinate to the rights of the holders of Registrable
Securities with respect to such Piggyback Registrations as provided in
paragraphs 2(c) and 2(d) below.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "PIGGYBACK REGISTRATION"), the Company
shall give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and shall include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt of the
Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold without adversely affecting the
marketability of the offering, the Company shall include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
Investor Registrable Securities requested to be included in such registration,
pro rata among the holders of such Investor Registrable Securities on the basis
of the number of shares owned by each such holder, (iii) third, the Other
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Registrable Securities requested to be included in such registration,
pro rata among the holders of such Registrable Securities on the basis of the
number of shares owned by each such holder, and (iv) fourth, other securities
requested to be included in such registration pro rata among the holders of
such securities on the basis of the number of shares owned by each such holder.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold without adversely
affecting the marketability of the offering, the Company shall include in such
registration (i) first, the securities requested to be included therein by the
holders requesting such registration, (ii) second, the Investor Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Investor Registrable Securities on the basis of the number of
shares owned by each such holder, (iii) third, the Other Registrable Securities
requested to be included in such registration, pro rata among the holders of
such Registrable Securities on the basis of the number of shares owned by each
such holder, and (iv) fourth, other securities requested to be included in such
registration pro rata among the holders of such securities on the basis of the
number of shares owned by each such holder.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is an underwritten offering, the selection of investment banker(s) and
manager(s) for the offering must be approved by the holders of a majority of the
Investor Registrable Securities included in such Piggyback Registration. Such
approval shall not be unreasonably withheld or delayed.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph l or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 180 days has elapsed from the effective date of such
previous registration.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the 10 days prior to and the 180-day
period beginning on the effective date of any underwritten Demand Registration
or any underwritten Piggyback Investor Registration in which Registrable
Securities are included (except as part of such underwritten registration),
unless the underwriters managing the registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or
distribution of its equity securities,
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or any securities convertible into or exchangeable or exercisable for such
securities, during the ten days prior to and during the 180-day period beginning
on the effective date of any (x) underwritten Demand Registration, (y)
underwritten Piggyback Registration (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form) or
(z) post-effective amendment of a Required Registration pursuant to which an
underwritten offering is to be effected, unless (in any such case) the
underwriter managing the registered public offering otherwise agrees.
4. REGISTRATION PROCEDURES. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant thereto
the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Investor Registrable Securities
covered by such registration statement copies of all such documents proposed to
be filed, which documents shall be subject to the reasonable review and comment
of such counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 180 days or such longer period specified in paragraph 1(c) and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
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(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities and a CUSIP number for all such Registrable Securities
not later than the effective date of such registration statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including effecting a stock split or
a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement, subject to
the execution by any such person of a confidentiality agreement in form and
substance reasonably satisfactory to the Company;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder,
in its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
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(l) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, use its best efforts promptly to obtain the withdrawal of such
order;
(m) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable Securities;
(n) obtain a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the Investor Registrable Securities being sold reasonably request
(provided that such Investor Registrable Securities constitute at least 10% of
the securities covered by such registration statement); and
(o) use reasonable efforts to cause certificates for the
Registrable Securities covered by such registration statement to be delivered by
the holders thereof to the underwriters in such denominations and registered in
such names as the underwriters may request.
5. REGISTRATION EXPENSES.
(a) Subject to paragraph (b) below, all expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, fees and disbursements of custodians, fees and disbursements
of counsel for the Company and fees and disbursements of all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company or the holders of Investor Registrable
Securities (all such expenses being herein called "REGISTRATION EXPENSES"),
shall be borne as provided in this Agreement, except that the Company shall, in
any event, pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or on the NASD automated
quotation system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the Investor
Registrable Securities included in such registration and for the reasonable fees
and disbursements of each additional counsel retained by any holder of
Registrable Securities for the purpose of rendering a legal opinion on behalf of
such holder in connection with any underwritten Demand Registration or Piggyback
Registration.
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(c) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder shall pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable shall be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities, its officers, directors and
partners, legal counsel, accountants and each Person who controls such holder
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses (including investigation costs and costs of defending
same) caused by (i) any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same or any violation of federal or state securities laws, rules or
regulations relating to actions or inactions required by such holder, its
officers, directors or partners or any Person who controls such holder (within
the meaning of the Securities Act) in connection with any such registration or
qualification or (ii) any violation by the Company of the Securities Act or any
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance. In connection with an underwritten offering, the
Company shall indemnify such underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of the Securities Act)
to the same extent as provided above with respect to the indemnification of the
holders of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
officers, directors and partners, and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses (including investigations and cost of defending same)
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
such holder and stated to be specifically for use therein; provided that the
obligation to indemnify shall be individual, not joint and several, for
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each holder and shall be limited to the net amount of proceeds received by such
holder from the sale of Registrable Securities pursuant to such registration
statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director, legal counsel,
accountant, partner or controlling Person of such indemnified party and shall
survive the transfer of securities. The Company also agrees to make such
provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Company's indemnification is
unavailable for any reason.
(e) If the indemnification provided for in this paragraph 6 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(f) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Investor Registrable Securities included in any underwritten
registration shall be required to make any representations or warranties to the
Company or the underwriters (other than representations and warranties regarding
such holder and such holder's intended method of distribution) or to undertake
any indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in paragraph 6 hereof. The Company's
obligations under this Agreement with respect to each seller of Registrable
Securities shall be conditioned upon such seller's compliance with the
following:
(a) Such seller shall cooperate with the Company in connection
with the preparation of the registration statement, and for so long as the
Company is obligated to keep the registration statement effective, shall provide
to the Company, in writing, for use in the registration statement, all
information reasonably requested by the Company regarding such seller and such
other information relating to such seller as may be necessary to enable the
Company to prepare the registration statement and prospectus covering the
Registrable Securities, to maintain the currency and effectiveness thereof, and
to otherwise comply with all applicable requirements of law in connection
therewith;
(b) during such time as such seller may be engaged in a
distribution of Registrable Securities, such seller will comply with all
applicable laws including but not limited to Rules 10b-6 and 10b-7 promulgated
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and
pursuant thereto will, among other thing: (A) not engage in any stabilization
activity in connection with the securities of the Company in contravention of
such rules; (B) distribute the Registrable Securities owned by such seller
solely in the manner described in the registration statement; (C) cause to be
furnished to each underwriter, agent or broker-dealer to and through whom the
Registrable Securities owned by such seller may be offered, or to the offeree if
an offer is made directly by such seller, such copies of the prospectus (as
amended and supplemented to such date) and documents incorporated by reference
therein as may be required by such underwriter, agent, broker-dealer or offeree;
and (D) not bid for or purchase any securities of the Company or attempt to
induce any person to purchase any securities of the Company other than as
permitted under the Exchange Act; and
(c) on notice from the Company of the happening of any of the
events specified in paragraph 4(e) above, if it requires the suspension by such
seller of the distribution of any of the Registrable Securities, then such
seller shall cease offering or distributing the Registrable Securities until
such time as the Company notifies such seller that offering and distribution of
the Registrable Securities may recommence (which in any event shall be no later
than immediately after the filing of the supplemented or amended prospectus
contemplated by Section 4(e)).
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8. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Securities and Exchange
Commission that may permit the sale of Registrable Securities to the public
without registration, the Company agrees to use its best efforts to:
(a) make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) file with the Securities and Exchange Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") at any time after it has become subject to such reporting
requirements; and
(c) so long as a holder owns any Registrable Securities,
furnish to the holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, and of
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a holder may reasonably request in availing itself of any rule or regulation
of the Securities and Exchange Commission allowing a holder to sell any such
securities without registration.
9. DEFINITIONS.
"INVESTOR REGISTRABLE SECURITIES" means any shares of Common
Stock held by Navistar and its affiliates and any other shares of Common Stock
held by a person who is a party to this Agreement and are designated as such by
Navistar.
"OTHER REGISTRABLE SECURITIES" means any shares of Common
Stock held by a person who is a party to this Agreement that do not constitute
Investor Registrable Securities.
"REGISTRABLE SECURITIES" means Investor Registrable Securities
and Other Registrable Securities. As to any particular Registrable Securities,
such securities shall cease to be Investor or Other Registrable Securities when
they have been distributed to the public pursuant to an offering registered
under the Securities Act or sold to the public through a broker, dealer or
market maker in compliance with Rule 144 under the Securities Act (or any
similar rule then in force). For purposes of this Agreement, a Person shall be
deemed to be a holder of Registrable Securities whenever such Person has the
right to acquire such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected, and such Person shall be entitled
to exercise the rights of a holder of Registrable Securities hereunder.
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in
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the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be or
control any managing director or general partner of such partnership,
association or other business entity. For purposes hereof, reference to a
"Subsidiary" of the Company shall be given effect only at such times as the
Company has one or more Subsidiaries.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
shall be effective against the Company or the holders of Registrable Securities
unless such modification, amendment or waiver is approved in writing by the
Company and the holders of at least a majority of the Registrable Securities
then in existence, which majority shall include a majority of the Investor
Registrable Securities then in existence; provided that no such amendment or
action which materially adversely affects any one holder of Registrable
Securities, as such, vis-a-vis the other holders of Registrable Securities, as
such, shall be effective against such holder without the prior written consent
of such holder. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the
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right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
(e) ADDITIONAL PARTIES. The Board of Directors of the Company
shall be entitled, but not obligated, to allow any purchaser of Common Stock (or
securities or rights convertible or exercisable into Common Stock) to execute a
counterpart to this Agreement and become a party hereto (each, an "ADDITIONAL
PARTY"), in which case the Common Stock issued or issuable to any such
Additional Party shall be deemed "Registrable Securities" for purposes of this
Agreement. Except as set forth in this paragraph 10(e) and in paragraph 1(g),
the Company will not grant to any other Persons any registration rights.
(f) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of the
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities. Notwithstanding
the foregoing, (a) in order to obtain the benefit of this Agreement, any
subsequent holder of Registrable Securities must execute a counterpart to this
Agreement, thereby agreeing to be bound the terms hereof and (b) the right to
designate "Investor Registrable Securities" is not assignable unless the person
holding such right explicitly assigns such right to the assignee or transferee
of all or a portion of its Registrable Securities.
(g) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(h) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
(i) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(j) GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of Ohio, without giving effect to any choice of law
or conflict of law rules or provisions (whether of the State of Ohio or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Ohio. In furtherance of the foregoing, the
internal law of the State of Ohio shall control the interpretation and
construction of this Agreement (and all schedules and exhibits hereto), even
though under
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that jurisdiction's choice of law or conflict of law analysis, the substantive
law of some other jurisdiction would ordinarily apply.
(k) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications shall be sent to holder of Registrable
Securities at the address indicated on the books and records of the Company and
to the Company at its principal executive office (to the attention of the
Company's president) or to such other address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CORE MATERIALS CORPORATION
By: /s/ Richard R. Conte
----------------------------------
Its: President
----------------------------------
NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
By: /s/ Thomas M. Hough
----------------------------------
Its: Vice President and Treasurer
----------------------------------
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CORE MATERIALS CORPORATION
LONG-TERM EQUITY INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Core Materials Corporation, a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "Core Materials Corporation
Long-Term Equity Incentive Plan" (hereinafter referred to as the "Plan"), as set
forth in this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Director Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares and Performance Units, and Other Incentive
Awards.
Subject to approval by the Company's stockholders within twelve (12)
months of the Effective date (as herein defined), the Plan shall become
effective as of January 1, 1997 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link and align the personal
interests of Participants and Eligible Directors to those of the Company's
stockholders; to provide Participants and Eligible Directors with an incentive
for excellence in individual performance; and to promote teamwork.
The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract, and retain the services of Participants and
Eligible Directors who make significant contributions to the Company's success
and to allow Participants and Eligible Directors to share in the success of the
Company.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective
Date, as described in Section 1.1 hereof, and shall remain in effect, subject to
the right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 16 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award or Director Option be granted under the Plan on or after December
31, 2006.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below, and when the meaning is intended, the initial letter of the
word shall be capitalized:
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2.1 "AWARD" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Performance Units, or Other
Incentive Awards, but shall not include any Director Option.
2.2 "AWARD AGREEMENT" means an agreement entered into by the Company
and each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.3 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.5 "CHANGE IN CONTROL" of the Company means the Company or its
shareholders entering into one or more agreements to dispose of all or
substantially all of the assets or fifty percent (50%) or more of the
outstanding capital stock of the Company by means of sale (whether as a result
of a tender offer or otherwise), merger, reorganization or liquidation in one or
a series of related transactions; provided, however, that a "Change in Control"
shall not occur in the event that (a) the primary purpose of the transaction is
to change the Company's domicile solely within the United States; or (b) the
transaction is approved by a majority of the members of the Board of Directors
who had either been in office for more than twelve months prior to such
transaction or had been elected, or nominated for election by the Company's
shareholders, by the vote of three-fourths of the directors then still in office
who were directors at the beginning of such twelve-month period.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
2.7 "COMMITTEE" means the Compensation Committee of the Board, as
specified in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.8 "COMPANY" means Core Materials Corporation, a Delaware corporation,
and the Company's Subsidiaries, as well as any successor to any of such entities
as provided in Article 19 herein.
2.9 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.10 "DIRECTOR OPTION" means a Nonqualified Stock Option granted to
each Eligible Director pursuant to Section 6.9 without any action by the Board
or the Committee.
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2.11 "DISABILITY" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan. To the extent that a
Participant is not covered under a long-term disability plan, the term
"Disability" shall have the meaning ascribed to the term "permanent and total
disability" under Section 22(e)(3) of the Code, or any successor provision
thereto.
2.12 "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "ELIGIBLE DIRECTOR" means, on any date, a person who is serving as
a member of the Board who is a Nonemployee Director.
2.14 "EMPLOYEE" means any employee of the Company. Nonemployee
Directors shall not be considered Employees under this Plan unless specifically
designated otherwise.
2.15 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.16 "FAIR MARKET VALUE" shall be determined on the basis of the
average of the high and low sale prices on the principal securities exchange on
which the Shares are publicly traded or, if there is no such sale on the
relevant date, then on the last previous day on which a sale was reported.
2.17 "FREESTANDING SAR" means an SAR that is granted independently of
any Options, as described in Article 7 herein.
2.18 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase
Shares granted under Article 6 herein and which is designated as an Incentive
Stock Option and which is intended to meet the requirements of Code Section 422.
2.19 "INSIDER" shall mean an individual who is, on the relevant date,
an officer, director, or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.20 "NAMED EXECUTIVE OFFICER" means a Participant who, as of the date
of vesting and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
2.21 "NONEMPLOYEE DIRECTOR" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the Company or a
Subsidiary.
2.22 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
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2.23 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein, but shall not include a Director
Option.
2.24 "OPTION PRICE" means the price at which a Share may be purchased
by a Participant pursuant to an Option.
2.25 "OTHER INCENTIVE AWARD" means an award granted pursuant to Article
10 hereof.
2.26 "PARTICIPANT" means an Employee who has outstanding an Award
granted under the Plan.
2.27 "PERFORMANCE-BASED EXCEPTION" means the performance-based
exception from the tax deductibility limitations of Code Section 162(m).
2.28 "PERFORMANCE PERIOD" means the time period during which
performance goals must be achieved with respect to an Award, as determined by
the Committee.
2.29 "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 9 herein.
2.30 "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 9 herein.
2.31 "PERIOD OF RESTRICTION" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, and/or upon the occurrence of other
events as determined by the Committee at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.32 "PERSON" shall have the meaning ascribed to such term in Section
3(a) (9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.33 "RESTRICTED STOCK" means an Award granted to a Participant
pursuant to Article 8 herein.
2.34 "RETIREMENT" means the normal retirement date on which a
Participant qualifies for full retirement benefits under the Company's qualified
retirement plan, as identified by the Committee. In the event that a Participant
is not covered under any qualified retirement plan maintained by the Company,
the term "Retirement" shall mean the date on which such Participant attains age
65.
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2.35 "SHARES" means the shares of common stock of the Company.
2.36 "SHARE POOL" means the number of shares authorized for issuance
under paragraph 4.1, as adjusted for awards and payouts under paragraph 4.2 and
as adjusted for changes in corporate capitalization under paragraph 4.3.
2.37 "STOCK APPRECIATION RIGHT" or "SARA" means an Award, granted alone
or in connection with a related Option, designated as an SAR, pursuant to the
terms of Article 7 herein.
2.38 "SUBSIDIARY" means any corporation, partnership, joint venture,
affiliate, or other entity in which the Company has a majority voting interest,
and which the Committee designates as a participating entity in the Plan.
2.39 "TANDEM SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors. Notwithstanding any
provision contained herein, to the extent that any Award is designed to comply
with the Performance-Based Exception, the Committee shall satisfy the
requirements contained in Section 1.162-27(c)(4) of the final regulations
promulgated by the Internal Revenue Service under Section 162(m) of the Code.
For purposes of granting Awards under the Plan, the Committee shall be composed
of not less than the minimum number of persons from time to time required by
Rule 16b-3 under the Exchange Act, each of whom shall be a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, or any
successor rule or regulation.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 16 herein)
amend the terms and conditions of any outstanding Award to the extent such terms
and conditions are within the discretion of the Committee as provided in the
Plan. Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law,
the Committee may delegate its authority as identified herein. Notwithstanding
anything else contained in the Plan to the contrary, neither the Committee nor
the Board shall have any discretion regarding whether an Eligible
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Director shall receive a Director Option pursuant to Section 6.9 or regarding
the terms of any Director Option, including, without limitation, the number of
Shares subject to such Director Option, the timing of the grant or the
exercisability of such Director Option or the exercise price per Share of such
Director Option.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, Participants, and their
estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 4.3 herein, the number of Shares hereby reserved for
issuance under the Plan shall be One Million Five Hundred Thousand
(1,500,000.00). The Committee shall determine the appropriate methodology for
calculating the number of Shares issued pursuant to the Plan.
Unless and until the Committee determines that an Award to a Named
Executive Officer shall not be designed to comply with the Performance-Based
Exception, the following rules shall apply to grants of such Awards under the
Plan:
(a) The maximum aggregate number of Shares (including Options,
SARs, Restricted Stock, Performance Units and Performance
Shares paid out in Shares, or Other Incentive Awards paid out
in Shares) that may be granted or that may vest, as
applicable, pursuant to any Award held by any Named Executive
Officer shall be One Hundred Twenty-five Thousand (125,000).
For this purpose, to the extent that any Option is canceled
(as described in Section 1.162-27(e)(2)(vi)(B) of the final
regulations under Section 162(m) of the Code, such canceled
Option shall continue to be counted against the maximum number
of Shares for which Options may be granted to a Named
Executive Officer under the Plan; and
(b) The maximum aggregate cash payout (including Performance Units
and Performance Shares paid out in cash, or Other Incentive
Awards paid out in cash) with respect to Awards granted in any
fiscal year which may be made to any Named Executive Officer
shall be One Hundred Twenty-five Thousand Dollars ($125,000).
4.2 LAPSED AWARDS. If any Award or Director Option granted under this
Plan is canceled, terminates, expires, or lapses for any reason (with the
exception of the termination of a Tandem SAR upon exercise of the related
Option, or the termination of a related Option upon exercise of the
corresponding Tandem SAR), any Shares subject to such Award or Director Option
again shall be available for the grant of an Award or Director Option under the
Plan.
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4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368), or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares available in the Share Pool and
in the number and class of and/or price of Shares subject to outstanding Awards
granted under the Plan, as may be determined to be appropriate and equitable by
the Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Award shall
always be a whole number. If, pursuant to the preceding sentence, an adjustment
is made to outstanding Options held by Participants, a corresponding adjustment
shall be made to outstanding Director Options and if, pursuant to the preceding
sentence, an adjustment is made to the number of Shares authorized for issuance
under the Plan, a corresponding adjustment shall be made to the number of Shares
subject to each Director Option thereafter granted pursuant to Section 6.9.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include
all officers and key employees of the Company, as determined by the Committee,
including Employees who are members of the Board and Employees who reside in
countries other than the United States of America.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award. Each Eligible Director shall receive nondiscretionary Director Options in
accordance with, and only in accordance with, Section 6.9 hereof.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted, either by the Committee or the Board, to one or more
Participants in such number, and upon such terms, and at any time and from time
to time as shall be determined by the Committee. The Committee or the Board
shall have the authority to grant Incentive Stock Options or to grant
Nonqualified Stock Options or to grant both types of Options. In the case of
Incentive Stock Options, the terms and conditions of such grants shall be
subject to, and comply with, such rules as may be prescribed by Section 422 of
the Code, as from time to time amended, and any regulations implementing such
statute, including, without limitation, the requirements of Code Section 422(d)
which limit the aggregate Fair Market Value of Shares (determined at the time
that such Option is granted) for which Incentive Stock Options are exercisable
for the first time to $100,000 per calendar year. Each provision of the Plan and
of each written Award Agreement relating to an Option designated as an Incentive
Stock Option shall be construed so
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that such Option qualifies as an Incentive Stock Option, and any provision that
cannot be so construed shall be disregarded.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO or an NQSO.
6.3 OPTION PRICE. Unless otherwise designated by the Committee at the
time of grant, the Option Price for each grant of an Option under this Plan
shall be at least equal to one hundred percent (100%) of the Fair Market Value
of a Share on the date the Option is granted. Notwithstanding any provision
contained herein, in the case of an Incentive Stock Option, the exercise price
at the time such Incentive Stock Option is granted to any Employee who, at the
time of such grant, owns (within the meaning of Section 425(d) of the Code) more
than ten percent of the voting power of all classes of stock of the Company or a
subsidiary, shall not be less than 110% of the per Share Fair Market Value on
the date of grant.
6.4 DURATION OF OPTIONS. Each Option granted to an Employee shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, that in the case of an Incentive Stock Option, an Employee
may not exercise such Incentive Stock Option after (a) the date which is ten
years (five years in the case of a Participant who owns more than ten percent of
the voting power of the Company or a subsidiary) after the date on which such
Incentive Stock Option is granted; or (b) the date which is three months (twelve
months in the case of a Participant who becomes disabled, as defined in Section
22(e)(3) of the Code, or who dies) after the date on which he ceases to be an
Employee of the Company or a subsidiary.
6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6 PAYMENT. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price), or (c) by a combination of
(a) and(b).
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
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6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8 TERMINATION OF EMPLOYMENT. Each Option Award Agreement shall set
forth the extent to which the Participant shall have the right to exercise the
Option following termination of the Participant's employment with the Company
and/or its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment.
6.9 DIRECTOR OPTIONS. Notwithstanding anything else contained herein to
the contrary, each Eligible Director shall receive, on March ____, 1997,
provided that the Eligible Director is serving as a member of the Board on such
date, a grant of a Director Option to purchase 35,000 Shares at an exercise
price per Share equal to the Fair Market Value on the date of grant. Each
Eligible Director who is first elected to the Board after March ___, 1997 shall
receive, on the day following such election, a grant of a Director Option to
purchase 35,000 Shares at an exercise price per Share equal to the Fair Market
Value on the date of grant. A Director Option shall be exercisable until the
earlier to occur of the following two dates: (a) the tenth anniversary of the
date of grant of such Director Option; or (b) twelve months after the date the
Eligible Director ceases to be a member of the Board, except that if the
Eligible Director ceases to be a member of the Board after having been convicted
of, or pled guilty or nolo contendere to, a felony, his Director Option shall be
canceled on the date he ceases to be a member of the Board. Each Director Option
shall vest twenty percent (20%) on the annual anniversary date after the date of
grant; and any unvested Director Options shall be forfeited by the Eligible
Director if he terminates his service on the Board prior to satisfaction of such
vesting requirement. An Eligible Director may pay the exercise price of a
Director Option in the manner described in Section 6.6. Each Director Option
shall be evidenced by an agreement between the Company and the Eligible
Director.
6.10 NONTRANSFERABILITY OF OPTIONS AND DIRECTOR OPTIONS.
(a) INCENTIVE STOCK OPTIONS AND DIRECTOR OPTIONS. No ISO or
Director Option granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs and Director Options granted
to a Participant or Eligible Director under the Plan shall be
exercisable during his or her lifetime only by such
Participant or Eligible Director..
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this
Article 6 may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by
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will or by the laws of descent and distribution. Further,
except as otherwise provided in a Participant's Award
Agreement, all NQSOs granted to a Participant under this
Article 6 shall be exercisable during his or her lifetime only
by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan,
SARs may be granted to Participants at any time and from time to time as shall
be determined by the Committee. The Committee may grant Freestanding SARs,
Tandem SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number
of SARs granted to each Participant (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs.
Unless otherwise designated by the Committee at the time of grant, the
grant price of a Freestanding SAR shall equal the Fair Market Value of a Share
on the date of grant of the SAR. The grant price of Tandem SARs shall equal the
Option Price of the related Option.
7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right
to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them.
7.4 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.5 TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
unless otherwise designated by the Committee, such term shall not exceed ten
(10) years.
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7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, in Restricted Shares of equivalent
value, or in some combination thereof.
7.7 TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and/or
its Subsidiaries. Such provisions shall be determined in the sole discretion of
the Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of employment.
7.8 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by an Award Agreement that shall specify the Period(s) of Restriction,
the number of Shares of Restricted Stock granted, and such other provisions as
the Committee shall determine.
8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction established by the Committee and specified in the
Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
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8.4 OTHER RESTRICTIONS. Subject to Article 11 herein, the Committee may
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (Company-wide, divisional, and/or individual),
time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable federal or state securities laws.
The Company shall retain the certificates representing Shares of
Restricted Stock in the Company's possession until such time as all conditions
and/or restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted
Stock covered by each Restricted Stock grant made under the Plan shall become
freely transferable by the Participant after the last day of the applicable
Period of Restriction.
8.5 VOTING RIGHTS. Unless otherwise designated by the Committee at the
time of grant, Participants holding Shares of Restricted Stock granted hereunder
may exercise full voting rights with respect to those Shares during the Period
of Restriction.
8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. Unless otherwise designated by
the Committee at the time of grant, Participants holding Shares of Restricted
Stock granted hereunder may be credited with regular cash dividends paid with
respect to the underlying Shares while they are so held during the Period of
Restriction. The Committee may apply any restrictions to the dividends that the
Committee deems appropriate. Without limiting the generality of the preceding
sentence, if the grant or vesting of Restricted Shares granted to a Named
Executive Officer is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Restricted
Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.
8.7 TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement
shall set forth the extent to which the Participant shall have the right to
receive unvested Restricted Shares following termination of the Participant's
employment with the Company and/or its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with each Participant, need not be uniform among
all Shares of Restricted Stock issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment; provided,
however that, except in the cases of terminations connected with a Change in
Control, terminations by reason of death or Disability, and except for
Restricted Shares paid to Participants upon SAR exercise, the vesting of Shares
of Restricted Stock which qualify for the Performance-Based Exception and which
are held by Named Executive Officers shall not occur prior to the time they
otherwise would have, but for the employment termination.
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ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the
Plan, Performance Units and/or Performance Shares may be granted to Participants
in such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Participant. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a "Performance Period."
9.3 EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved, as established by the Committee.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of
earned Performance Units/Shares shall be made in a single lump sum within
seventy-five (75) calendar days following the close of the applicable
Performance Period. Subject to the terms of this Plan, the Committee, in its
sole discretion, may pay earned Performance Units/Shares in the form of cash or
in Shares (or in a combination thereof) which have an aggregate Fair Market
Value equal to the value of the earned Performance Units/Shares at the close of
the applicable Performance Period. Such Shares may be granted subject to any
restrictions deemed appropriate by the Committee.
At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which have
been earned, but not yet distributed to Participants (such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 8.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.
9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT.
Unless otherwise designated by the Committee, and set forth in the Participant's
Award Agreement, in the event the employment of a Participant is terminated due
to death, Disability, or Retirement during a Performance Period, the Participant
shall receive a prorated payout of the Performance Units/Shares. The prorated
payout shall be determined by the Committee, shall be based upon the length of
time that the Participant held the Performance Units/Shares during the
Performance
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Period, and shall further be adjusted based on the achievement of the
preestablished performance goals.
Payment of earned Performance Units/Shares shall be made at a time
specified by the Committee in its sole discretion and set forth in the
Participant's Award Agreement. Notwithstanding the foregoing, with respect to
Named Executive Officers who retire during a Performance Period, payments shall
be made at the same time as payments are made to Participants who did not
terminate employment during the applicable Performance Period.
9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by
the Participant to the Company unless determined otherwise by the Committee, as
set forth in the Participant's Award Agreement.
9.7 NONTRANSFERABILITY. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.
ARTICLE 10. OTHER INCENTIVE AWARDS
10.1 GRANT OF OTHER INCENTIVE AWARDS. Subject to the terms and
provisions of the Plan, Other Incentive Awards may be granted to Participants in
such amount, upon such terms, and at any time and from time to time as shall be
determined by the Committee.
10.2 OTHER INCENTIVE AWARD AGREEMENT. Each Other Incentive Award grant
shall be evidenced by an Award Agreement that shall specify the amount of the
Other Incentive Award granted, the terms and conditions applicable to such
grant, the applicable Performance Period and performance goals, and such other
provisions as the Committee shall determine, subject to the terms and provisions
of the Plan.
10.3 NONTRANSFERABILITY. Except as otherwise provided in a
Participant's Award Agreement, Other Incentive Awards may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution.
10.4 FORM AND TIMING OF PAYMENT OF OTHER INCENTIVE AWARDS. Payment of
Other Incentive Awards shall be made at such times and in such form, in cash, in
Shares, or in Restricted Shares (or a combination thereof), as established by
the Committee subject to the terms of the Plan. Such Shares may be granted
subject to any restrictions deemed appropriate by the Committee. Without
limiting the generality of the foregoing, annual incentive awards may be paid
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in the form of Shares and/or Other Incentive Awards (which may or may not be
subject to restrictions, at the discretion of the Committee).
ARTICLE 11. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 11, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Named Executive Officers which are
designed to qualify for the Performance-Based Exception, the performance
measure(s) to be used for purposes of such grants shall be chosen from among the
following alternatives, as reported on the Company's annual 10-k report:
(a) Return on Assets ("ROA") which equals net income divided by
total assets.
(b) Return on Sales ("ROS") which equals net income divided by net
sales.
(c) Return on Equity ("ROE") which equals net income divided by
total equity.
(d) Cash Flow Return on Investment ("CFROI") which equals net cash
flows divided by owners equity.
(e) Operating Income.
(f) Earnings Before Income Taxes ("EBIT") which equals net income
plus taxes.
(g) Net Earnings which equals net earnings as reported.
(h) Earnings Per Share.
The Committee shall have the discretion to adjust the determinations of
the degree of attainment of the preestablished performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Named Executive Officers, may not be adjusted
upward (the Committee shall retain the discretion to adjust such Awards
downward).
In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m) and, thus, which use performance measures other than those
specified above. To the extent that the Committee determines that it is
advisable to grant Awards in compliance with the Performance-Based Exception,
the Committee must certify, in writing, prior to the payment of any compensa-
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tion under the Award, that the performance goals and any other material terms
were in fact satisfied.
ARTICLE 12. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
ARTICLE 13. DEFERRALS
The Committee may permit a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or SAR, the lapse
or waiver of restrictions with respect to Restricted Stock, or the satisfaction
of any requirements or goals with respect to Performance Units/Shares or Other
Incentive Awards. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
ARTICLE 14. RIGHTS OF EMPLOYEES
14.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ of
the Company.
14.2 PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
ARTICLE 15. CHANGE IN CONTROL
15.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change
in Control, unless otherwise specifically prohibited under applicable laws, or
by the rules and regulations of any governing governmental agencies or national
securities exchanges:
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(a) Any and all Options, Director Options and SARs granted
hereunder shall become immediately exercisable, and shall
remain exercisable throughout their entire term, and any cash
or property received upon exercise of any Option or SAR shall
be free from further restriction;
(b) Any restriction periods and restrictions imposed on Restricted
Shares shall lapse; and
(c) Unless otherwise specified in Participant's Award Agreement at
time of grant, the target payout opportunities attainable
under all outstanding Awards of Performance Units and
Performance Shares and Other Incentive Awards shall be deemed
to have been fully earned for the entire Performance Period(s)
as of the effective date of the Change in Control. The vesting
of all such Awards shall be accelerated as of the effective
date of the Change in Control, and in full settlement of such
Awards, there shall be paid out to Participants (in Shares for
Awards normally paid in Shares and in cash for Awards normally
paid in cash) within thirty (30) days following the effective
date of the Change in Control a pro rata portion of all
targeted Award opportunities associated with such outstanding
Awards, based on the number of complete and partial calendar
months within the Performance Period which had elapsed as of
such effective date.
15.2 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 15 may not be terminated,
amended, or modified to affect adversely any Award or Director Option
theretofore granted under the Plan without the prior written consent of the
Participant or Eligible Director with respect to said Participant's or Eligible
Director's outstanding Awards or Director Options.
ARTICLE 16. AMENDMENT, MODIFICATION, AND TERMINATION
16.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any
time and from time to time alter, amend, suspend or terminate the Plan in whole
or in part, provided that no amendment may be made to Section 6.9 or any other
provision of the Plan relating to Director Options within six months of the last
date on which any such provision was amended, other than to comport with changes
in the Code or the rules thereunder. The Committee shall not have the authority
to cancel outstanding Awards and issue substitute Awards in replacement thereof.
16.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
16.3 COMPLIANCE WITH CODE SECTION 162(M). At all times when Code
Section 162(m) is applicable, all Awards granted under this Plan shall comply
with the requirements of Code Section 162(m); provided, however, that in the
event the Committee determines that such
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compliance is not desired with respect to any Award or Awards available for
grant under the Plan, then compliance with Code Section 162(m) will not be
required. In addition, in the event that changes are made to Code Section 162(m)
to permit greater flexibility with respect to any Award or Awards available
under the Plan, the Committee may, subject to this Article 16, make any
adjustments it deems appropriate.
ARTICLE 17. WITHHOLDING
17.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant or Eligible Director to remit to
the Company, an amount sufficient to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with respect
to any taxable event arising as a result of this Plan.
17.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options, Director Options or SARs, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event arising as a result of Awards
granted hereunder, Participants or Eligible Directors may elect, subject to the
approval of the Committee, to satisfy the withholding requirement, in whole or
in part, by having the Company withhold Shares having a Fair Market Value on the
date the tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction. All such elections shall be irrevocable,
made in writing, signed by the Participant or Eligible Director, and shall be
subject to any restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.
ARTICLE 18. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under the Plan. Such person shall
be indemnified by the Company for all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in satisfaction of
any judgment in any such action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
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ARTICLE 19. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards or
Director Options granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
ARTICLE 20. LEGAL CONSTRUCTION
20.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include the plural.
20.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
20.3 REQUIREMENTS OF LAW. The granting of Awards or Director Options
and the issuance of Shares under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
20.4 GOVERNING LAW. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Delaware.
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RYMAC MORTGAGE INVESTMENT CORPORATION
STOCK OPTION PLAN
1. PURPOSE.
1.1 General. The purpose of the RYMAC Mortgage Investment Corporation
Stock Option Plan (the "Plan") is to secure for RYMAC Mortgage Investment
Corporation, a Maryland corporation (the "Company") and its stockholders the
benefits of the additional incentive inherent in the ownership of the Company's
common stock, par value $0.01 per share (the "Common Stock"), by selected
employees of the Company who are important to the success and growth of the
business of the Company and to help the Company secure and retain the services
of such persons.
1.2 Form of Awards. Awards under the Plan are in the form of stock
options (the "Options"), all as more fully described herein. Options granted
under the Plan are intended to be "nonqualified stock options" subject to the
provisions of Section 83 of the Internal Revenue Code of 1986, as amended (the
"Code"), and are not intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Code.
2. COMPENSATION COMMITTEE.
2.1 Administration. The Plan shall be administered by a committee (the
"Compensation Committee") of the Board of Directors of the Company (the "Board
of Directors"), consisting of three or more directors, each of whom shall be a
"disinterested person" (within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act")); however, the mere fact
that a Compensation Committee member shall fail to qualify under this
requirement shall not invalidate any award made by the Compensation Committee
which award is otherwise validly made under the Plan. The Compensation Committee
shall have the power to authorize the issuance of the Company's Common Stock
pursuant to the exercise of Options granted under the Plan. The members of the
Compensation Committee shall be appointed, and may be removed at any time either
with or without cause, by resolution adopted by the Board of Directors. Any
vacancy on the Compensation Committee, whether due to action of the Board of
Directors or due to any other cause, may be filled, and shall be filled if
required to maintain a Compensation Committee of at least three members, by
resolution adopted by the Board of Directors.
2.2 Procedures. The Compensation Committee shall select one of its
members as Chairman and shall adopt such rules and regulations as it shall deem
appropriate concerning the administration of the Plan. A majority of the whole
Compensation Committee shall constitute a quorum, and the acts of a majority of
the members of the Compensation Committee present at a meeting at which a quorum
is present, or acts approved in writing by all of the members of the
Compensation Committee, shall be the acts of the Compensation Committee.
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2.3 Interpretation. The Compensation Committee shall have full power
and authority to interpret the provisions of the Plan and agreements evidencing
awards granted under the Plan, and to determine any and all questions arising
under the Plan. The Compensation Committee's decisions shall be final and
binding on all participants in the Plan.
2.4 Non-Uniform Determinations. The Compensation Committee's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, awards under
the Plan (whether or not such persons are similarly situated). Without limiting
the generality of the foregoing, the Compensation Committee shall be entitled,
among other things, to make non-uniform and selective determinations, and to
enter into non-uniform and selective award agreements as to (i) the persons to
receive awards under the Plan, and (ii) the treatment of leaves of absence
pursuant to Paragraph 7.3.
3. SHARES SUBJECT TO AWARDS.
3.1 Number of Shares. Subject to the provisions of Paragraph 11
(relating to adjustments upon changes in capitalization), the sum of (i) the
number of shares of Common Stock subject at any one time to outstanding Options
granted under the Plan and (ii) the number of shares of Common Stock theretofore
issued or delivered pursuant to the exercise of Options granted under the Plan,
shall not exceed 260,000. If and to the extent that Options granted under the
Plan terminate, expire or are cancelled for any reason without such Options
having been exercised, new awards may be granted under the Plan with respect to
the shares of Common Stock covered by such terminated, expired or cancelled
awards; provided that the granting and terms of such new awards shall in all
respects comply with the provisions of the Plan.
3.2 Character of Shares. Shares of Common Stock deliverable upon the
exercise of options granted under the Plan will be either newly issued or
previously outstanding Common Stock held in the Company's treasury or Common
Stock purchased on the open market or from shareholders by the Company for such
purpose.
4. GRANT OF AWARDS.
The Compensation Committee shall determine, within the limitations of
the Plan, the persons to whom awards are to be granted (each, an "Optionee"),
the number of shares covered by such award and the Option exercise price,
provided that the aggregate number of shares subject to Options granted under
the Plan to any such Optionee in any calendar year shall not exceed 150,000,
subject to the provisions of Paragraph 11. Each award granted under the Plan
shall be evidenced by a written agreement between the Company and the Optionee
substantially in the form attached as Exhibit A.
5. ELIGIBLE PARTICIPANTS.
Awards may be granted under the Plan to such officers, directors and
executive, managerial or professional employees, and to any consultant of the
Company ("key personnel") as the Committee shall from time to time in its sole
discretion select; provided, however, that
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directors who are not employees of the Company shall not be eligible to receive
awards under the Plan.
For all purposes under the Plan (i) the time at which an award is
granted, in the case of the grant of an award to an Optionee, shall be deemed to
be the effective date of such grant, and (ii) a "prospective employee" shall be
a person who holds an outstanding offer of employment on specific terms from the
Company.
6. OPTION EXERCISE PRICE.
Subject to Paragraph 11 and the other provisions of this Paragraph 6,
the Option exercise price of each share of Common Stock purchasable under any
Option granted under the Plan shall be as set forth in the applicable award
agreement. With respect to each grant of an Option made to an Optionee who on
the date of such grant is a director of the Company, the Option exercise price
of each share of Common Stock purchasable under such Option shall not be less
than the fair market value of a share of Common Stock on the effective date of
such grant.
7. EXERCISABILITY AND DURATION OF AWARDS.
7.1 Determination of Compensation Committee; Acceleration. Each award
granted under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Compensation
Committee shall specify in the award agreement; provided, however, that
subsequent to the grant of an award, the Compensation Committee, at any time
before the expiration of such award, may accelerate the time or times at which
such award may be exercised in whole or in part.
7.2 Acceleration of Awards in Certain Circumstances.
(a) ACCELERATION FOR CHANGE OF CONTROL: Notwithstanding any contrary
provision of the Plan, upon the occurrence of a Change of Control prior to the
date on which an Option expires:
(i) Each Option which has not theretofore vested and become
exercisable shall immediately vest and become exercisable;
PROVIDED, HOWEVER, that no Option may be exercised until six
months after the date of grant of such Option.
(ii) In the case of any Option which has vested and become
exercisable solely as a result of a Change of Control due to
approval by the shareholders of the Company of a Business
Combination, any exercise by an Optionee shall be conditioned
upon, and deemed to occur immediately prior to, consummation
of the Business Combination; PROVIDED, HOWEVER, that,
notwithstanding the provisions of this Section 7.2(a)(ii), an
Optionee may at any time exercise any Option rights in
accordance with the other provisions of this Plan.
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(b) DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall
mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20 percent or more of
either the then-outstanding Common Stock or the combined
voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of
directors; or
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; PROVIDED, HOWEVER, that if any individual becomes a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board, then such individual
shall be considered as though such individual were a member of
the Incumbent Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, a complete
dissolution or liquidation of the Company, or the sale or
other disposition of all or substantially all of the assets of
the Company.
7.3 Automatic Termination. The unexercised portion of any award
granted under the Plan shall automatically and without notice terminate and
become null and void at the time of the earliest to occur of the following:
(a) the expiration of ten years from the date on which such
award was granted;
(b) the expiration of three months from the date of
termination of the Optionee's employment (other than a termination
described in subparagraph (c) or (d) below); provided, that if the
Optionee shall die during such three-month period, the time of
termination of the unexercised portion of any such award shall not be
determined under this subparagraph (b);
(c) the expiration of six months following the issuance of
letters testamentary or letters of administration to the executor or
administrator of a deceased Optionee, if the Optionee's death occurs
either during his employment or during the three-month period following
the date of termination of such employment (other than a termination
described in subparagraph (d) below), but in no event later than one
year after the Optionee's death;
(d) the termination of the Optionee's employment if such
termination constitutes or is attributable to a breach by the Optionee
of an employment or consulting agreement with the Company, or if the
Optionee is discharged or his or her services are terminated for cause;
or
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(e) the expiration of such period of time or the occurrence of
such event as the Compensation Committee in its discretion may provide
upon the granting of such Option.
Any employment agreement approved or ratified by the Compensation
Committee may modify the foregoing provisions of this Paragraph 7.3 (other than
subparagraph (a) above). Subject to the terms of any such employment agreement,
the Compensation Committee or the Board of Directors shall have the right to
determine what constitutes cause for discharge or termination of services,
whether the Optionee has been discharged or his or her services terminated for
cause and the date of such discharge or termination of services and such
determination of the Compensation Committee or the Board shall be final and
conclusive. An Optionee shall be deemed to have terminated employment when he no
longer is employed by the Company. The Compensation Committee may in its
discretion determine (i) whether any leave of absence constitutes a termination
of employment within the meaning of the Plan, and (ii) the impact, if any, of
any such leave of absence on awards under the Plan theretofore made to an
Optionee who takes such leave of absence. Except for purposes of Paragraph 5,
references herein to an individual's employment as an employee of the Company
shall include all periods during which such individual serves as a director of
the Company, but is not otherwise a common law employee.
8. EXERCISE OF AWARDS; CERTAIN LEGAL AND OTHER RESTRICTIONS.
8.1 Exercise. Options granted under the Plan shall be exercised by the
Optionee (or by his or her executors or administrators, as provided in Paragraph
9) as to all shares covered thereby, by the giving of written notice of exercise
to the Company as to the number of Options to be exercised (and the number of
shares of Common Stock to be thereby purchased), accompanied by payment of the
full purchase price for any shares being purchased. Payment of such purchase
price shall be made by check payable to the Company. Notice of exercise,
accompanied by payment of the purchase price, shall be delivered to the Company
at its principal business office or such other office as the Compensation
Committee may from time to time direct, and shall be in such form, and
containing such further provisions consistent with the provisions of the Plan,
as the Compensation Committee may from time to time prescribe. The date of
exercise shall be the date of the Company's receipt of such notice. The Company
shall transfer the shares so purchased to the Optionee (or such other person
exercising the Option pursuant to Paragraph 9) as soon as practicable, and
within a reasonable time thereafter such transfer shall be evidenced on the
books of the Company. No Optionee or other person exercising an Option shall
have any of the rights of a stockholder of the Company with respect to shares
subject to an Option granted under the Plan until due exercise and full payment
has been made as provided above. No adjustment shall be made for cash dividends
or other rights for which the record dates is prior to the date of such due
exercise and full payment. In no event may any Option granted hereunder be
exercised for a fraction of a share.
8.2 Withholding Tax. Whenever under the Plan shares of Common Stock are
to be delivered upon exercise of an Option, the Company shall be entitled to
require as a condition of delivery that the Optionee remit or, in appropriate
cases, agree to remit when due an amount
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sufficient to satisfy all current or estimated future federal, state and local
withholding tax requirements relating thereto.
8.3 Restrictions on Delivery and Sale of Shares. Each Option granted
under the Plan is subject to the condition that if at any time the Compensation
Committee, in its discretion, shall determine that the listing, registration or
qualification of the shares covered by such Option upon any securities exchange
or under any state or federal law is necessary, or desirable as a condition of
or in connection with, the granting of such Option or the purchase or delivery
of shares thereunder, the delivery, of any or all shares pursuant to exercise of
the Option may be withheld unless and until such listing, registration or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933 with respect to the shares of Common
Stock purchasable under Options then-outstanding, the Compensation Committee may
require, as a condition of exercise of any Option, that the Optionee represent
in writing that the shares received upon exercise of the Option are being
acquired for investment and not with a view to distribution and disposition
except pursuant to an effective registration statement, unless the Company shall
have received an opinion of counsel that such disposition is exempt from such
requirement under the Securities Act of 1933. The Company may endorse on
certificates representing shares issued upon the exercise of an Option such
legends referring to the foregoing representations or restrictions or any other
applicable restrictions on resale as the Company, in its discretion, shall deem
appropriate.
9. NON-TRANSFERABILITY OF AWARDS.
No award granted under the Plan or any right evidenced thereby shall be
transferable by the Optionee other than by will or by the laws of descent and
distribution, and an award may be exercised, during the lifetime of an Optionee,
only by such Optionee. In the event of an Optionee's death during his or her
employment by the Company, or during the three-month period following the date
of termination of such employment, his or her award shall thereafter be
exercisable by his or her executors or administrators in accordance with the
provisions of Paragraph 7.3.
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10. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan or in any award granted under the Plan shall confer
upon any Optionee the right to continue as an employee or a consultant of the
Company or affect the right of the Company to terminate the Optionee's
employment at any time, subject, however, to the provisions of any agreement of
employment or consultancy between the Optionee and the Company.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
In the event of any stock split, dividend, distribution, combination,
reclassification or recapitalization that changes the character or amount of the
Company's outstanding Common Stock while any portion of any Option theretofore
granted under the Plan is outstanding but unexercised, the Compensation
Committee shall make such adjustments in the character and number of shares
subject to such Option and in the Option exercise price as shall be equitable
and appropriate in order to make the Option, as nearly as may be practicable,
equivalent to such Option immediately prior to such change.
If any merger, consolidation or similar transaction affects the Common
Stock subject to any unexercised award theretofore granted under the Plan, the
Compensation Committee or any surviving or acquiring corporation shall take such
action as is equitable and appropriate to substitute a new Option for such award
or to assume such award in order to make such new or assumed award as nearly as
may be practicable equivalent to the old award.
If any such change or transaction shall occur, the number and kind of
shares for which awards may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
12. AMENDMENT, EXPIRATION AND TERMINATION OF THE PLAN.
12.1 General. Awards may be granted under the Plan at any time and from
time to time prior to the tenth anniversary of the effective date of the Plan as
set forth in Paragraph 13 of the Plan (the "Expiration Date"), on which date the
Plan will expire except as to awards then-outstanding under the Plan. Such
outstanding awards shall remain in effect until they have been exercised,
terminated or have expired. The Plan may be terminated, modified or amended by
the Board of Directors at any time prior to the Expiration Date, except that no
such amendment shall impair any rights or obligations under any award
theretofore made under the Plan without the consent of the person to whom such
award was made.
12.2 Modification. No modification, extension, renewal or other change
in any award granted under the Plan shall be made after the grant of such award,
unless the same is consistent with the provisions of the Plan. With the consent
of the Optionee and subject to the terms and conditions of the Plan (including
Paragraph 12.1), the Compensation Committee may amend outstanding award
agreements with any Optionee, including, without limitation, any amendment which
would (i) accelerate the time or times at which the award may be exercised
and/or (ii) extend the scheduled expiration date of the award. Without limiting
the generality of the
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foregoing, the Compensation Committee may, but solely with the Optionee's
consent, agree to cancel any award under the Plan and issue a new award in
substitution therefore provided that the award so substituted shall satisfy all
of the requirements of the Plan as of the date such new award is made.
13. GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Maryland and the Code.
14. EFFECTIVE DATE OF PLAN. The Plan shall become effective on
September 29, 1994, the date of its adoption by the Board of Directors.
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November 1, 1994
Mr. Richard R. Conte
Chairman and Chief Executive Officer
RYMAC Mortgage Investment Corporation
Re: Possible Acquisition of RYMAC Mortgage Investment
Corporation (the "Company") by third party
Dear Mr. Conte:
As you know, the Board of Directors of the Company (the "Board") has
authorized the officers of the Company to seek business alternatives to the
business currently conducted by the Company, including potential business
combinations with third parties (a "Business Combination"). The Board recognizes
that your continued employment by the Company or any successor thereto cannot be
assured in the event a Business Combination is effectuated between the Company
and a third party. The Board therefore agrees, on behalf of the Company, in
order to induce you to remain in the Company's employ, that in the event a
Business Combination is effected by the Company with any party, you shall be
entitled to continue to receive your salary at the annual rate than in effect
for a period of one year from the date of such Business Combination. Such salary
shall be paid monthly in arrears and shall be reduced by the amount of any
salary received by you as a result of subsequent employment, whether with the
Company, any successor thereto, or any third party.
To the extent that such Business Combination does not create or result
in a successor to the obligations of the Company hereunder, the Company shall
cause to be created prior to the date of such Business Combination arrangements
satisfactory to ensure the payment of the amounts referred to above.
To the extent that as of the first anniversary of such Business
Combination the sum of (i) amounts paid to you hereunder and (ii) amounts paid
to you as compensation as a result of subsequent employment exceed the amount of
your annual salary as in effect at the date of such Business Combination, you
agree that you will remit the amount of such excess (provided that no
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such repayment shall exceed the amounts paid to you pursuant to the foregoing
clause (i)) to such entity as may be specified by the Board at the date of such
Business Combination.
Yours truly,
RYMAC Mortgage Investment Corporation
By: /s/ James C. Chaplin IV
------------------------------------
James C. Chaplin IV
Director, Chairman of Compensation Committee
By: /s/ Richard R. Conte
------------------------------------
Richard R. Conte
Chairman and Chief Executive Officer
Agreed and accepted:
/s/ Richard R. Conte
- -----------------------
Richard R. Conte
Chairman and Chief Executive Officer
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July 18, 1996
Mr. Ralph O. Hellmold
President
Hellmold Associates, Inc.
640 Fifth Avenue, 13th Floor
New York, New York 10019
Dear Ralph:
Further to the Agreement between RYMAC Mortgage Investment Corporation ("RYMAC")
and Hellmold Associates, Inc. ("Hellmold") of November 1, 1995 (the "Engagement
Agreement"), and the Letter Agreement between RYMAC and Hellmold of April 10,
1996 in which RYMAC exercises its option under paragraph 5(b) of the Engagement
Agreement to make remaining fee payments to Hellmold in the form of RYMAC Common
Stock.
Hellmold and RYMAC agree, in the best interests of the acquisition transaction
of Navistar's Columbus Plastics Operation, to rescind the Letter Agreement of
April 10, 1996 and further agree that fees payable under paragraph 5(b) of the
November 1, 1995 Engagement Agreement between the parties will be payable in
cash.
If the terms of this letter are agreeable to you, please sign one of the two
originals of this letter and return it to us as soon as possible, keeping the
second original for your own file.
We continue to look forward to a successful conclusion of the Columbus Plastics
asset purchase.
Sincerely
/s/ Richard R. Conte
Richard R. Conte
Chief Executive Officer
ACCEPTED THIS 29th DAY OF JULY, 1996
/s/ Ralph O. Hellmold
- -----------------------------
Ralph O. Hellmold, President
Hellmold Associates, Inc.
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<PAGE> 2
April 10, 1996
Mr. Richard R. Conte
Chairman & Chief Executive Officer
RYMAC Mortgage Investment Corporation
P.O. Box 250
Steubenville, OH 43952
Dear Rich:
Further pursuant to our discussions on April 3, 1996 regarding
compensation payable to Hellmold Associates in the event of a successful
transaction with the Columbus Plastics Division of Navistar International, based
upon your offer of $60.60 million and the fee schedule in paragraph 5(b) of our
Agreement dated November 1, 1995, RYMAC would owe Hellmold Associates a
transaction fee of $841,950.00, against which the initial $75,000.00 retainer is
creditable. This would leave a remaining balance of $766,950.00.
Pursuant to paragraph 5(d) of our Agreement RYMAC has the right to pay
all or part of the remaining transaction fee in RYMAC stock "at a valuation to
be mutually agreed upon." Hellmold Associates is prepared to accept payment in
RYMAC common stock valued at the HIGHER OF: (i) $1.875 per share (a 50% premium
over RYMAC's closing price of $1.25 on April 3, 1996), or (ii) the average
trading price of RYMAC common stock for the 30 days prior to the announcement of
an agreement in principle to acquire Columbus Plastics.
If RYMAC wishes to exercise its right to pay Hellmold Associates in
RYMAC stock valued on the terms outlined above if the Columbus Plastics
transaction closes, please indicate by signing below.
We look forward to working with you to bring this transaction to a
successful conclusion.
Sincerely,
/s/ Ralph O. Hellmold
Ralph O. Hellmold
President
Accepted this 11th day of April, 1996
/s/ Richard R. Conte
- --------------------------
Richard R. Conte
Chief Executive Officer
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<PAGE> 3
As of
November 1, 1995
RYMAC Mortgage Investment Corporation
100 North Fourth Street
P.O. Box 250
Steubenville, OH 43952
Dear Sirs:
This will confirm the understanding and agreement (the "Agreement")
between Hellmold Associates, Inc. ("Hellmold Associates") and RYMAC Mortgage
Investment Corporation (RYMAC or the "Company") as follows:
1. The Company hereby engages Hellmold Associates as the
Company's sole and exclusive agent for the purpose of (a)
identifying opportunities for a merger transaction for the
Company, (b) actively soliciting owners of private businesses
for a prospective transaction, and (c) as requested by the
Company, participating on the Company's behalf in negotiations
concerning such transaction or assisting the Company in
structuring such transaction.
2. Hellmold Associates hereby accepts the engagement described in
paragraph 1 and, in that connection, agrees to:
(a) prepare, in consultation with the Company
and its counsel, a memorandum describing the
merits of a potential merger transaction
with RYMAC;
(b) develop a list of leveraged buyout ("LBO")
and venture capital firms which might own
businesses which could be attractive merger
partners for RYMAC;
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(c) contact such firms on behalf of RYMAC;
(d) develop, update and review with the Company
on an ongoing basis a list of potential
transaction candidates (including ones
identified by the Company);
(e) develop in consultation with the Company and
its other advisors a strategy to best
effectuate a transaction;
(f) assist in negotiations to effectuate a
transaction, and
(g) be available on request to meet with the
Company's Board of Directors to discuss
strategic alternatives and their financial
implications.
3. For the purposes of this Agreement:
(a) A "transaction" shall mean: any transaction
or series or combination of transactions,
other than in the ordinary course of trade
or business, whereby, directly or
indirectly, control of, or a material
interest in, a company or any of its
businesses, assets or properties, is
purchased, leased or otherwise acquired,
including, without limitation, a sale or
exchange of capital stock or assets, a lease
of assets with or without a purchase option,
a merger or consolidation, a tender or
exchange offer, or a leveraged buy-out; a
restructuring, a repurchase of capital
stock, a recapitalization, an extraordinary
dividend or distribution (whether cash,
property, securities or a combination
thereof), a liquidation, the formation of a
joint venture or partnership, a minority
investment or any other similar transaction.
In the case of a tender or exchange offer or
a multi-step transaction which contemplates
the acquisition of more than 50% of an
entity's outstanding voting stock, a
transaction shall be deemed to have been
consummated upon the acquisition of 50% or
more of such entity's outstanding voting
power or the ability to elect a majority of
the Board of Directors.
(b) "Consideration" shall mean the total value
of all cash, securities, other property and
any other consideration, including, without
limitation, any contingent, earned or other
consideration, paid or payable, directly or
indirectly, to a company or the holders of
its securities in connection with a
transaction. The value of any such
securities (whether debt or equity) or other
property shall be determined as follows: (1)
the value of securities that are freely
tradeable in an established public market
shall be the last closing market price of
such securities prior to the public
announcement of
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the acquisition; and (2) the value of
securities which are not freely tradeable or
which have no established public market, or
if the consideration consists of property
other than securities, the value of such
securities or other property shall be the
fair market value thereof as mutually agreed
by the Company and Hellmold Associates.
Consideration shall also be deemed to
include any indebtedness, including, without
limitation, unfunded pension liabilities,
retiree medical benefits liabilities,
guarantees and other obligations, assumed in
connection with an acquisition.
4. The term of Hellmold Associates' engagement hereunder shall
extend from the date hereof through November 1, 1996. Either
party may terminate Hellmold Associates' engagement hereunder
at any time, with or without cause, by giving the other party
at least 10 days' prior written notice, subject to the
provisions of paragraphs 4 through 8, and 10 through 13, which
shall survive any termination of this Agreement. Beginning
December 1, 1995, every 60 days thereafter during the term of
this Agreement (February 1, 1996, April 1, 1996, June 1, 1996,
August 1, 1996 and October 1, 1996) and within 30 days after
the effective date of any termination of this Agreement,
Hellmold Associates will deliver to the Company a list (the
"List") of all parties contacted by Hellmold Associates,
identified to the Company by Hellmold Associates or reviewed
by Hellmold Associates at the Company's written request prior
to such termination.
5. As compensation for the services rendered by Hellmold
Associates hereunder, the Company shall pay Hellmold
Associates as follows:
(a) A retainer of $75,000 payable upon the
signing of this Agreement, which fee shall
be credited against any compensation payable
pursuant to paragraph 5(b) below.
(b) If the Company announces a transaction
either:
(i) during the term of Hellmold
Associates' engagement hereunder or
at any time during a period of 12
months following the effective date
of termination of Hellmold
Associates hereunder, regardless of
whether the party or parties to the
transaction were identified by
Hellmold Associates or whether
Hellmold Associates rendered advice
concerning the transaction, or
(ii) at any time during a period of 24
months following the effective date
of termination of Hellmold
Associates hereunder, and the
transaction involves a party or
parties named on the List,
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<PAGE> 6
and such a transaction is thereafter
consummated, then the Company shall pay to
Hellmold Associates the following
percentages of the total consideration paid
in such transaction:
TOTAL CONSOLIDATION PERCENTAGE
------------------- ----------
On first $15 million 3.33%
Plus on amounts over $15 million 0.75%
(c) Compensation which is payable to Hellmold
Associates pursuant to subparagraph 5(b)
shall be paid by the Company to Hellmold
Associates upon the consummation of a
transaction, provided that compensation paid
or payable to Hellmold Associates in respect
of consideration which is contingent upon
the occurrence of some future event (e.g.,
the realization of earnings projections) or
pursuant to the agreement relating to the
transaction is to be paid following the
closing of such transaction shall be paid by
the Company to Hellmold Associates at the
earlier of (i) the payment of such
consideration or (ii) the time that the
amount of such consideration can be
determined.
(d) Hellmold Associates agrees, upon the request
of the Company, to accept its entire
compensation payable pursuant to
subparagraph 5(b) in RYMAC stock at a
valuation to be mutually agreed upon.
6. The Company shall reimburse Hellmold for its out-of-pocket
expenses promptly as requested, including the fees and
expenses of its legal counsel and those of any advisor
retained by Hellmold Associates with the prior approval of the
Company, incurred in connection with the engagement hereunder.
7. In connection with Hellmold Associates' engagement, the
Company will furnish Hellmold Associates with all information
concerning the Company which Hellmold Associates reasonably
deems appropriate (the "Information") and will provide
Hellmold Associates with access to the Company's officers
directors, accountants, counsel and other advisors. The
Company represents and warrants to Hellmold Associates that
all such Information concerning the Company will be true and
accurate in all material respects and will not contain any
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein not misleading in light of the circumstances under
which such statements are made. The Company acknowledges and
agrees that Hellmold Associates (a) will be using and relying
upon the information supplied by the Company and its officers,
agents and others and any other publicly available Information
concerning the Company without any independent investigation
or verification thereof; (b) will not make an independent
appraisal of the Company, or its business or assets; and (c)
does not assume responsibility for the accuracy or
completeness of the Information. All non-public Information
concerning the
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<PAGE> 7
Company which is given to Hellmold Associates will be used
solely in the course of the performance of its services
hereunder and will be treated confidentially by Hellmold
Associates for so long as it remains nonpublic. Hellmold
Associates will not disclose this Information to any third
party without the Company's consent, except as otherwise
required by law or as required by a regulatory authority and
after notification to the Company.
8. Because Hellmold Associates will be acting on behalf of the
Company in connection with this engagement, the Company agrees
to indemnify Hellmold Associates and its affiliates and their
respective directors, officers, employees, agents and
controlling persons (Hellmold Associates and each such person
being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to
which such Indemnified Party may become subject under any
applicable federal or state law, or otherwise, related to or
arising out of any transaction contemplated by this Agreement
or the engagement of Hellmold Associates pursuant to, and the
performance by Hellmold Associates of the services
contemplated by, this Agreement and will reimburse any
Indemnified Party for all expenses (including reasonable
counsel fees and expenses) as they are incurred in connection
with the investigation of, preparation for or defense of any
pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a
party and whether or not such claim, action or proceeding is
initiated or brought by or on behalf of the Company. The
Company will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage,
liability or expense is found in a final judgment by a court
to have resulted from Hellmold Associates' bad faith or
negligence. The Company also agrees that no Indemnified Party
shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to the Company or its security
holders or creditors related to or arising out of the
engagement of Hellmold Associates pursuant to, or the
performance by Hellmold Associates of the services
contemplated by, this Agreement except to the extent that
loss, claim, damage or liability is found in a final judgment
by a court to have resulted from Hellmold Associates' bad
faith or negligence.
In order to provide for just and equitable contribution, if a
claim for indemnification is made pursuant to this Agreement
but it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) that such
indemnification is not available for any reason (other than in
accordance with the terms hereof), then the Company, on the
one hand, and Hellmold Associates, on the other hand, shall
contribute to such claim, liability, loss, damage or expense
for which such indemnification or reimbursement is held
unavailable (1) in such proportion as is appropriate to
reflect the relative benefits to the Company on the one hand,
and Hellmold Associates on the other hand, of this transaction
as contemplated (whether or not the transaction is
consummated) or (ii) if (but only if) the allocation provided
for in clause (i) is for any reason held unenforceable, in
such proportion as is appropriate to reflect not only the
relative benefits referred to
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<PAGE> 8
in clause (i) but also the relative fault of the Company, on
the one hand, and Hellmold Associates, on the other hand, as
well as any other relevant equitable considerations. The
Company agrees that for the purposes of this paragraph the
relative benefits to the Company and Hellmold Associates of
the transaction as contemplated shall be deemed to be in the
same proportion that the total value received or contemplated
to be received by the Company or its security holders, as the
case may be, as a result of or in connection with the
transaction bears to the fees paid or to be paid to Hellmold
Associates under this Agreement; PROVIDED, HOWEVER, that, to
the extent permitted by applicable law, in no event shall the
Indemnified Parties be required to contribute an aggregate
amount in excess of the aggregate fees actually received or to
be received by Hellmold Associates pursuant to this Agreement.
The Company agrees that, without Hellmold Associates' prior
written consent, which shall not be unreasonably withheld, it
will not settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or
proceeding in request of which indemnification could be sought
under the indemnification provision of this Agreement (whether
or not Hellmold Associates or any other Indemnified Party is
an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party
from all liability arising out of such claim, action or
proceeding.
If multiple claims are brought against Hellmold Associates or
any Indemnified Party in an arbitration, with respect to at
least one of which indemnification is permitted under
applicable law and provided for under this Agreement, the
Company agrees that any arbitration award shall be
conclusively deemed to be based on claims as to which
indemnification is permitted and provided for, except to the
extent the arbitration award expressly states that the award,
or any portion thereof, is based solely on a claim as to which
indemnification is not available.
The Company acknowledges and agrees that Hellmold Associates
has been retained to act solely as financial advisor to the
Company. In such capacity, Hellmold Associates shall act as an
independent contractor, and any duties of Hellmold Associates
arising out of its engagement pursuant to this Agreement shall
be owed solely to the Company.
9. Hellmold Associates shall have the right to place
advertisements in financial and other newspapers and journals
at its own expense describing its services to the Company
hereunder if a transaction is completed. Hellmold Associates
will submit a copy of any such advertisements to the Company
for its approval prior to the first time such advertisement is
used, which approval shall not be unreasonably withheld or
delayed.
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10. The Company represents and warrants to Hellmold Associates
that there are no brokers, representatives or other persons
which have an interest in compensation due to Hellmold
Associates from any transaction contemplated herein.
11. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the
Indemnified Parties hereunder and their successors and assigns
and representatives, and the obligations and liabilities
assumed in this Agreement by the parties hereto shall be
binding upon their respective successors and assigns.
12. This Agreement may not be amended or modified except in
writing and shall be governed by and construed in accordance
with the laws of the State of New York, without regard to
principles of conflicts of laws.
13. If any provision of this Agreement is, or may be, determined
to be unenforceable for any reason, the remaining provisions
of this Agreement shall be unaffected and shall remain in full
force and effect.
Hellmold Associates is delighted to accept this engagement and
looks forward to working with you on this assignment. Please confirm that the
foregoing correctly sets forth our agreement by signing the enclosed duplicate
of this letter in the space provided and returning it, whereupon this letter
shall constitute a binding agreement as of the date first above written.
HELLMOLD ASSOCIATES, INC.
By: /s/ Ralph O. Hellmold
-------------------------------
Ralph O. Hellmold
President
AGREED:
RYMAC Mortgage Investment Corporation
By: /s/ Richard R. Conte
---------------------------------
Title: CEO
---------------------
Date: November 14, 1995
----------------------------
-108-
<PAGE> 10
Addendum
--------
1. Beginning December 1, 1995, every 60 days thereafter during the term of this
Agreement (February 1, 1996, April 1, 1996, June 1, 1996, August 1, 1996 and
October 1, 1996) and within 30 days after the effective date of any termination
of this Agreement, Hellmold Associates will deliver to the Company a list (the
"List") of all parties contacted by Hellmold Associates, identified to the
Company by Hellmold Associates or reviewed by Hellmold Associates at the
Company's written request prior to such termination.
2. during the term of Hellmold Associates engagement hereunder or at any time
during a period of 12 months following the effective date of termination of
Hellmold Associates hereunder regardless of whether the party or parties to the
transaction were identified by Hellmold Associates or whether Hellmold
Associates rendered advice concerning the transaction, or
3. at any time during a period of 24 months following the effective date of
termination of Hellmold Associates hereunder and the transaction involves a
party or parties named on the List.
-109-
<PAGE> 1
ORAL COMPENSATORY AGREEMENT WITH
MALCOLM M. PRINE
Pursuant to an oral agreement with Core Materials, Malcolm M. Prine,
director, receives $7,500 per month for certain services to Core Materials.
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Core Materials Corporation, a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, its Annual Report on Form 10-K for the
year ended December 31, 1996, constitutes and appoints Malcolm M. Prine, Kenneth
M. Schmell and Richard R. Conte, or any of them, his true and lawful
attorney-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th
day of March, 1997.
/s/ Kenneth M. Schmell
---------------------------
Kenneth M. Schmell,
General Manager and
Acting Chief Executive Officer
-110-
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Core Materials Corporation, a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, its Annual Report on Form 10-K for the
year ended December 31, 1996, constitutes and appoints Malcolm M. Prine, Kenneth
M. Schmell and Richard R. Conte, or any of them, his true and lawful
attorney-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th
day of March, 1997.
/s/ Richard R. Conte
---------------------------
Richard R. Conte,
Acting Chief Financial Officer
and Director
-111-
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Core Materials Corporation, a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, its Annual Report on Form 10-K for the
year ended December 31, 1996, constitutes and appoints Malcolm M. Prine, Kenneth
M. Schmell and Richard R. Conte, or any of them, his true and lawful
attorney-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th
day of March, 1997.
/s/ Gerald L. Voirol
---------------------------
Gerald L. Voirol,
Controller and
Assistant Secretary
-112-
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Core Materials Corporation, a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, its Annual Report on Form 10-K for the
year ended December 31, 1996, constitutes and appoints Malcolm M. Prine, Kenneth
M. Schmell and Richard R. Conte, or any of them, his true and lawful
attorney-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th
day of March, 1997.
/s/ Ralph O. Hellmold
---------------------------
Ralph O. Hellmold,
Director
-113-
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Core Materials Corporation, a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, its Annual Report on Form 10-K for the
year ended December 31, 1996, constitutes and appoints Malcolm M. Prine, Kenneth
M. Schmell and Richard R. Conte, or any of them, his true and lawful
attorney-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th
day of March, 1997.
/s/ Thomas M. Hough
---------------------------
Thomas M. Hough,
Director
-114-
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Core Materials Corporation, a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, its Annual Report on Form 10-K for the
year ended December 31, 1996, constitutes and appoints Malcolm M. Prine, Kenneth
M. Schmell and Richard R. Conte, or any of them, his true and lawful
attorney-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th
day of March, 1997.
/s/ Malcolm M. Prine
---------------------------
Malcolm M. Prine,
Director
-115-
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Core Materials Corporation, a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, its Annual Report on Form 10-K for the
year ended December 31, 1996, constitutes and appoints Malcolm M. Prine, Kenneth
M. Schmell and Richard R. Conte, or any of them, his true and lawful
attorney-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 25th
day of March, 1997.
/s/ Thomas E. Rigsby
---------------------------
Thomas E. Rigsby,
Director
-116-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from Core Materials'
report on Form 10-K for the year ended December 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 590
<SECURITIES> 3,295
<RECEIVABLES> 2,008
<ALLOWANCES> 0
<INVENTORY> 3,343
<CURRENT-ASSETS> 9,580
<PP&E> 42,338
<DEPRECIATION> 17,269
<TOTAL-ASSETS> 47,104
<CURRENT-LIABILITIES> 1,795
<BONDS> 29,514
<COMMON> 95
0
0
<OTHER-SE> 15,456
<TOTAL-LIABILITY-AND-EQUITY> 47,104
<SALES> 52,467
<TOTAL-REVENUES> 52,467
<CGS> 50,734
<TOTAL-COSTS> 52,270
<OTHER-EXPENSES> (350)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 547
<INCOME-TAX> 0
<INCOME-CONTINUING> 547
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
