<PAGE> 1
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 (Fee Required)
For the fiscal year ended February 28, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _______ to ________.
Commission File No. 1-5774
THE TRANZONIC COMPANIES
- ----------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
OHIO 34-0664235
- ------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
30195 Chagrin Boulevard, Pepper Pike, Ohio 44124
- ------------------------------------------------------------
(Address of Principal Executive Office) (ZIP Code)
(216) 831-5757
- ---------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH
------------------- --------------------------
REGISTERED
----------
Class A Common Shares
without par value American Stock Exchange
Class B Common Shares
without par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
------ ------
[Cover Continued on Following Page]
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates of the
Registrant on April 28, 1995: $8,920,221.
----------
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
2,185,223 Class A Common Shares without par value at April 28, 1995
- -------------------------------------------------------------------
1,306,765 Class B Common Shares without par value at April 28, 1995
- -------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Notice of Annual Meeting and Proxy Statement Dated May
12, 1995 -- Part III. Neither the Report of the Compensation Committee on
Executive Compensation nor the Performance Graph contained in the Registrant's
Notice of Annual Meeting and Proxy Statement dated May 12, 1995 shall be deemed
incorporated by reference herein.
Portions of the Registrant's 1995 Annual Report to Shareholders -- Parts I and
II.
<PAGE> 3
PART I
------
ITEM 1. BUSINESS
- -----------------
The Tranzonic Companies (the "Corporation") was incorporated under the
laws of the State of Ohio on September 26, 1946. The Corporation adopted its
current name on December 13, 1983.
The Corporation and its subsidiaries (hereinafter collectively referred
to as the "Registrant") are engaged principally in the distribution (and in the
majority of instances, designing, processing, producing and manufacturing) of
(i) personal care products, including feminine napkins, Tampax(R) tampons (and
the machines through which both are dispensed), children's disposable diapers,
adult incontinent briefs and toilet seat covers; (ii) industrial textiles;
(iii) clothing care related housewares; and (iv) spiral-wound paper tubes and
cores. The Registrant distributes its products throughout the United States
from manufacturing and distribution facilities located in Ohio, Kentucky,
Arizona, Nevada, South Carolina, Missouri, and Florida. In addition, the
Registrant sells industrial textiles in Canada; licenses the distribution of
housewares in, and distributes housewares to, foreign markets; distributes
paper tubing and cores in foreign markets; and sells a limited amount of
personal care products in foreign markets. Aggregate revenues derived from
foreign sources are not a material portion of the Registrant's gross revenues.
The Registrant operates in one industry segment which is the conversion
of paper, cloth and allied materials. The majority of the Registrant's
products are produced from large rolls of paper, cloth or allied products
purchased directly from the mills where such materials are manufactured. These
raw materials make up a significant amount of the total cost of production of
the Registrant's products. As a result, each of the Corporation's divisions
displays similar purchasing functions, such as bulk purchasing of raw materials
at discount prices from manufacturers. In addition, the end use of most of the
Registrant's products is similar, as most of the Registrant's sales are of
disposable products that are used for personal hygiene and cleaning.
The Registrant, through its Personal Care Division, markets and
distributes through independent sales representatives various products,
including feminine napkins such as Maxithins(R), Tampax(R) tampons, children's
disposable diapers, adult incontinent briefs, toilet seat covers, condoms and
related items, as well as feminine douche and enema products and restroom
deodorant systems. The Registrant manufactures all of the feminine napkins,
1
<PAGE> 4
children's diapers, adult incontinence products and toilet seat covers which it
distributes, and manufactures machines which dispense feminine napkins,
Tampax(R) tampons, condoms and other similar products. The Division is the
exclusive distributor of Tampax(R) tampons to the institutional
trade for resale by others primarily through coin-operated dispensing machines
in the United States, Canada and Mexico. The Division also wholesales, for
resale through vending machines, its proprietary feminine napkins, which have
been marketed by the Division and a predecessor since 1923 under its trademark
Gards(R) and now MaxiThins(R), and condoms manufactured by others. The
Division markets feminine napkins under its trademarks Maxithins(R),
Everyday(R), Safe & Soft(R) and Soft & Thin(R) and packages the feminine
napkins which it manufactures for private label sale to retail outlets. The
Division markets children's disposable diapers for over-the-counter sales under
its trademarks Precious(R) and Bottoms Up(R) and under private labels. The
Division also markets adult incontinence products under its trademark At
Ease(R), toilet seat covers and odor control products under its trademark
Health Gards(R), feminine douches under its trademark Fresh Gards(R), enema
products under its trademark At Ease(R) and disposable Gards obstetrical pads.
The Division also distributes stainless steel washroom accessories and supplies
under the name Hospeco(R), including such items as handrails for the
handicapped and dispensers for paper towels, tissues, soap and toilet seat
covers.
Through its wholly-owned subsidiary CCP Industries, Inc., the Registrant
processes, packages and distributes a varied range of industrial textiles and
related products. These products include industrial wiping materials, cleaning
chemicals, restroom supplies, disposable and durable work clothing, floor mats,
napery and safety products. This subsidiary employs a nationwide sales force
which markets such products to industrial, commercial and institutional users
in every state of the continental United States and in portions of Canada. In
March, 1995, a wholly-owned subsidiary of CCP Industries, Inc. acquired
substantially all of the business and assets of Plezall Wipers, Inc., a Florida
corporation, which is engaged in the business of converting, packaging and
distributing industrial textiles, wiping cloths and related products.
Through its wholly-owned subsidiary, Design Trend, Inc., the Registrant
designs, produces, manufactures and sells to retailers and others laundry
products, including clothes hampers, sweater drying racks, ironing boards,
ironing board covers and ironing accessories; closet storage and closet
organization products; cedar storage products; and personal travel organizers.
These activities formerly were conducted by the Registrant through its
wholly-owned subsidiaries American Homeware, Inc. and Pressing Supply Company,
both of which have been merged into Design Trend, Inc. In addition to
distributing such products in the United States through independent sales
representatives to retailers,
2
<PAGE> 5
including discount stores, department stores and houseware specialty stores,
the Registrant sells such products directly to independent distributors in
Canada, the United Kingdom, Japan, Germany, France, Guam, Mexico and South
America. In fiscal 1994, American Homeware, Inc. acquired all of the
outstanding shares of Ever-Ready Appliance Mfg. Co., a Missouri corporation,
which designed, produced and/or manufactured ironing boards and step stools for
sale nationally to retailers. As of January 1994, each of Pressing Supply
Company and Ever-Ready Appliance Mfg. Co. began marketing their respective
products under the trademark Design Trend(R). In the first quarter of fiscal
year 1995, Design Trend, Inc. ceased manufacturing operations in Texas and
Pennsylvania and commenced manufacturing operations in St. Louis, Missouri, the
locus of the Ever-Ready Appliance Mfg. Co. operations.
Through its wholly-owned subsidiary Baxter Tube Company, the Registrant
manufactures and distributes spiral-wound paper tubes and cores for use by a
variety of businesses, including the automotive, fiberglass and textile
industries. Baxter Tube Company also manufactures a line of paper sleeving
products. Although Baxter Tube Company distributes its products principally
throughout the United States, the bulk are distributed in the Midwest and the
Midsouth. In addition, this subsidiary distributes a limited amount of its
products to Canada, Mexico, England, Taiwan, South Africa and Venezuela. This
subsidiary sells directly and through the services of independent marketing
agents.
Competition, Business Practices and Background Information
- ----------------------------------------------------------
The Registrant's operations are highly competitive and the principal
bases of competition are (i) quality and type of goods sold and services
rendered and (ii) price. Some of the Registrant's competitors have greater
financial resources than the Registrant and include manufacturers and
distributors dealing directly with retail or industrial customers. Based upon
the limited information available, the Registrant believes that it is not a
significant factor in any market in which it operates except for the
distribution of feminine napkins and tampons for resale through coin-operated
dispensing machines.
The Registrant does not have any special or unusual working capital
requirements. The nature of the Registrant's business does not require it to
carry significant amounts of inventory to meet rapid delivery requirements of
customers or to assure itself of a continuous allotment of goods from
suppliers. The Registrant generally provides its customers with no more than
thirty (30) days to remit payment for goods and does not provide its customers
with any special rights to return goods. The Registrant believes that its
practices relating to working capital items are consistent with industry
practices.
3
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As of April 30, 1995, the Registrant had approximately 1,201 employees,
some of whom are represented by various labor unions. The Registrant considers
its employee relations satisfactory.
The Registrant uses in its business various service marks, trademarks,
trade names, and patents. The Registrant's patents relate to lock mechanisms
utilized in its coin-operated dispensing machines and to the process and
manufacture of paper tubes for the fiberglass industry. The Registrant's
service marks, trademarks, and trade names protect certain marks and names
printed on the Registrant's products. These marks and names are significant to
the extent they provide the Registrant with a certain amount of goodwill in the
industry. Although each of the foregoing contributes to the profitability of
the Registrant, the Registrant does not consider a material part of its
business to be dependent on any one or group of them.
ITEM 2. PROPERTIES
- -------------------
The following chart describes the principal properties that are owned by
the Registrant or one of its subsidiaries:
<TABLE>
<CAPTION>
Location Principal Use Approximate Acreage
- -------- ------------- -------------------
<S> <C> <C>
Cleveland, Ohio Office, warehouse and 7 acres
manufacturing facilities
Nicholasville, Office, warehouse 13.14 acres
Kentucky and manufacturing
facilities
Minerva, Ohio Office, warehouse and 3.5 acres
manufacturing facilities
</TABLE>
The following chart describes the principal properties that are leased by the
Registrant or one of its subsidiaries:
<TABLE>
<CAPTION>
Approximate
Principal Square Expiration Renewal
Location Use Footage Date Options
- -------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Highland Office, 108,750 2/28/09 Two 10-
Heights, warehouse year
Ohio and manu- renewal
facturing options
facilities
St. Louis, Office, 70,000 12/31/98 One 5-
Missouri warehouse year
and manu- renewal
facturing option
facilities
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
Approximate
Principal Square Expiration Renewal
Location Use Footage Date Options
- -------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C>
St. Louis, Office, 65,000 7/31/01 One 5-
Missouri warehouse year
and manu- renewal
facturing option
facilities
Tempe, Office, 50,580 2/28/09 Two 10-
Arizona warehouse year
and manu- renewal
facturing options
facilities
Perrysburg, Office, 43,000 8/31/97 None
Ohio warehouse
and manu-
facturing
facilities
Hialeah Office, 11,684 3/31/97 None
Gardens, warehouse
Florida and manu-
facturing
facilities
Pepper Corporate 6,100 2/28/98 Two 5-
Pike, headquarters year
Ohio renewal
options
</TABLE>
ITEM 3. PENDING LEGAL PROCEEDINGS
- ----------------------------------
The Registrant is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The age (as of April 28, 1995), business experience during the past five
years, and offices held by each of the Registrant's executive officers who is
not also a Director of the Registrant are reported below. The Registrant's
Code of Regulations provides that officers shall hold office until their
successors
5
<PAGE> 8
are chosen and qualified in their stead, and that any officer may be removed
from office at any time by the Registrant's Board of Directors.
JAMES L. GLENN: Age 45; Vice President of the Registrant since June,
1991. Executive Vice President and General Manager of American Homeware, Inc.
from November, 1990 to June, 1991. Vice President of Learsiegler Seymour
(manufacturers of housewares) from March, 1988 to November, 1990.
DENNIS H. KELLY: Age 57; Vice President of the Registrant since June 1,
1989.
RICHARD J. SIMS: Age 44; Senior Vice President of the Registrant since
1992. Previously, Senior Vice President and General Counsel of Victoria
Financial Corporation (insurance holding corporation).
ALAYNE L. REITMAN: Age 30; Treasurer, Vice President--Finance and Chief
Financial Officer of the Registrant since October 1993. Previously, Financial
Analyst for American Airlines.
RICHARD J. PENNZA: Age 40; Chief Accounting Officer of the Registrant
since October 1993. Previously, Controller of the Registrant.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
- -----------------------------------------------------------------------------
MATTERS
- -------
Information in response to this Item is set forth on page 28 of the
Registrant's 1995 Annual Report to Shareholders (Exhibit 13), which information
is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Information in response to this Item is set forth on page 17 of the
Registrant's 1995 Annual Report to Shareholders (Exhibit 13), which information
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Information in response to this Item is set forth on pages 14 through 17
of the Registrant's 1995 Annual Report to Shareholders (Exhibit 13), which
information is incorporated herein by reference.
6
<PAGE> 9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
(a) Financial Statements
--------------------
Information in response to this Item is set forth on pages 18
through 27 of the Registrant's 1995 Annual Report to Shareholders (Exhibit 13),
which information is incorporated herein by reference.
(b) Supplementary Data
------------------
Information in response to this Item is set forth in the
financial statement schedules set forth on pages 13 through 15 of this Form
10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The information required in response to this Item in respect of Directors
is set forth under the caption "Election of Directors" in the Registrant's
proxy statement dated May 12, 1995 (Exhibit 99), which information is
incorporated herein by reference. The information required by this Item in
respect of Executive Officers who are not also Directors of the Registrant is
set forth on pages 5 and 6 of this Form 10-K and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
Information in response to this Item is set forth under the caption
"Compensation of Executive Officers" in the Registrant's proxy statement dated
May 12, 1995 (Exhibit 99), which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
Information in response to this Item is set forth under the caption
"Beneficial Ownership of Class A Common Shares and Class B Common Shares" in
the Registrant's proxy statement dated May 12, 1995 (Exhibit 99), which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
7
<PAGE> 10
Information in response to this Item is set forth under the caption
"Election of Directors" in the Registrant's proxy statement dated May 12, 1995
(Exhibit 99), which information is incorporated by reference herein.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. See the Index to Financial Statements for a list of
consolidated financial statements and financial
statement schedules included or incorporated herein by
reference.
2. Exhibits:
Exhibit Number
--------------
3(a) Amended Articles of Incorporation (incorporated
by reference to Exhibit 3(a) of the Registrant's
Form 10-K for the fiscal year ended February 28,
1993)
3(b) Certificate of Amendment to Amended Articles of
Incorporation filed June 16, 1992 (incorporated
by reference to Exhibit 3(b) of the Registrant's
Form 10-K for the fiscal year ended February 28,
1993)
3(c) Code of Regulations (incorporated by reference
to Exhibit 3(c) of the Registrant's Form 10-K
for the fiscal year ended February 28, 1994)
10(a)* 1989 Incentive Stock Option Plan (incorporated
by reference to Exhibit 10(f) of the
Registrant's Form 10-K for the fiscal year ended
February 28, 1990)
10(b)* 1995 Incentive Stock Option Plan (incorporated
by reference to Exhibit 10(e) of the
Registrant's Form 10-K for the fiscal year ended
February 28, 1994)
10(c)* Salary Savings and Profit-Sharing Plan and First
and Second Amendment thereto
8
<PAGE> 11
(incorporated by reference to Exhibit 10(f) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1994)
10(d)* Third Amendment to Salary Savings and
Profit-Sharing Plan (incorporated by reference
to Exhibit 10(g) of the Registrant's Form 10-K
for the fiscal year ended February 28, 1994)
10(e)* Fourth Amendment to Salary Savings and
Profit-Sharing Plan (incorporated by reference
to Exhibit 10(h) of the Registrant's Form 10-K
for the fiscal year ended February 28, 1994)
10(f)* Salary Savings and Profit-Sharing Trust
Agreement dated September 4, 1984 between the
Registrant and Ameritrust Company National
Association (National City Bank has been
appointed successor Trustee of said
Trust)(incorporated by reference to Exhibit
10(i) of the Registrant's Form 10-K for the
fiscal year ended February 28, 1994)
10(g)* Deferred Compensation Plan for Non-Employee
Directors (incorporated by reference to Exhibit
10(k) of the Registrant's Form 10-K for the
fiscal year ended February 28, 1993)
10(h)* 1992 Supplemental Benefit Plan (incorporated by
reference to Exhibit 10(l) of the Registrant's
Form 10-K for the fiscal year ended February 28,
1993)
10(i) Credit Agreement dated as of October 7, 1993,
with Society National Bank, individually and as
Agent, and National City Bank for borrowings up
to $30,000,000.
10(j) First Amendment dated as of June 30, 1994 to
Credit Agreement with Society National Bank,
individually and as Agent, and National City
Bank.
10(k)* Employment Agreement dated June 20, 1990 between
the Registrant and Morton L. Reitman
(incorporated by reference to Exhibit 10(p) of
the Registrant's Form
9
<PAGE> 12
10-K for the fiscal year ended February 28, 1991)
10(l)* Consultant Agreement dated January 29, 1986
between the Registrant and Morton L. Reitman
(incorporated by reference to Exhibit 10(r) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1990)
10(m)* Employment Agreement dated June 18, 1990 between
the Registrant and Robert S. Reitman
(incorporated by reference to Exhibit 10(r) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1991)
10(n)* Employment Agreement dated June 18, 1990 between
the Registrant and David J. Golden (incorporated
by reference to Exhibit 10(p) of the
Registrant's Form 10-K for the fiscal year ended
February 29, 1992)
10(o)* Employment Agreement dated October 22, 1990
between the Registrant and James L. Glenn
(incorporated by reference to Exhibit 10(u) of
the Registrant's Form 10-K for the fiscal year
ended February 29, 1992)
10(p)* Employment Agreement dated March 1, 1995 between
Baxter Tube Company and Dennis Kelly
10(q)* Employment Agreement dated December 2, 1991
between the Registrant and James C. Spira
(incorporated by reference to Exhibit 10(w) of
the Registrant's Form 10-K for the fiscal year
ended February 29, 1992)
10
<PAGE> 13
10(r)* Amendment to Employment Agreement dated May 4,
1994 between the Registrant and James C. Spira
(incorporated by reference to Exhibit 10(u) of
the Registrant's Form 10-K for the fiscal year
ended February 28, 1994)
10(s)* Employment Agreement dated July 1, 1992 between
the Registrant and Richard J. Sims (incorporated
by reference to Exhibit 10(v) of the
Registrant's Form 10-K for the fiscal year ended
February 28, 1993)
10(t)* Purchase Agreement dated August 13, 1993 between
American Homeware, Inc., Tony C. Ribaudo, Jr.,
Angeline Ribaudo, Anthony M. Ribaudo, Kathleen
Ribaudo, Dominic Ribaudo, Martin Ribaudo, Carl
Ribaudo and Mary Ann Ribaudo Ferris
(incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K dated
August 26, 1993)
13 The Registrant's 1995 Annual Report to
Shareholders
21 Subsidiaries of the Registrant
24 Powers of Attorney
27** Financial Data Schedule
99 Notice of Annual Meeting and Proxy Statement
dated May 12, 1995 (filed by the Registrant with
the Securities and Exchange Commission on May
12, 1995)
*Management contract or compensatory plan or arrangement required
to be filed as an Exhibit hereto.
**Filed only in electronic format pursuant to Item 601(b)(27) of
Regulation S-K.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the last quarter of the Registrant's
fiscal year ended February 28, 1995.
11
<PAGE> 14
S I G N A T U R E S
-------------------
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.
THE TRANZONIC COMPANIES
By: /s/ Robert S. Reitman
-----------------------
Robert S. Reitman
Chairman, President and
Principal Executive Officer
Dated: May 26, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: May 26, 1995 /s/ Robert S. Reitman
---------------------
Robert S. Reitman
Director
Dated: May 26, 1995 /s/ Alayne L. Reitman
---------------------
Alayne L. Reitman
Principal Financial Officer
Dated: May 26, 1995 /s/ Richard J. Pennza
---------------------
Richard J. Pennza
Principal Accounting Officer
James H. Berick, Director
Joseph A. Campanella, Director
David J. Golden, Director
Steven W. Percy, Director
Morton L. Reitman, Director
Sylvia K. Reitman, Director
Thomas S. Robertson, Director
James C. Spira, Director
Dated: May 26, 1995 By: /s/ Robert S. Reitman
-----------------------
Robert S. Reitman
Attorney in Fact
Powers of attorney authorizing Robert S. Reitman to sign this Annual
Report on Form 10-K on behalf of Directors of the Registrant are being filed
with the Securities and Exchange Commission herewith (Exhibit 24).
12
<PAGE> 15
THE TRANZONIC COMPANIES
Index
-----
Financial Statements
--------------------
Audited:
Consolidated Balance Sheets
February 28, 1995 and 1994
Consolidated Statements of Earnings
Years ended February 28, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity
Years ended February 28, 1995, 1994, and 1993
Consolidated Statements of Cash Flows
Years ended February 28, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
February 28, 1995, 1994, and 1993
Schedule
--------
Valuation and Qualifying Accounts and Reserves Schedule II
All other schedules have been omitted because the material is not
applicable or is not required as permitted by the rules and regulations
of the Commission, or the required information is included in notes to
consolidated financial statements.
Financial statements of the parent company are omitted because it is
primarily an operating company and all subsidiaries included in the
consolidated financial statements are wholly owned.
-13-
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Shareholders
The Tranzonic Companies:
Under date of March 31, 1995, we reported on the consolidated balance
sheets of The Tranzonic Companies as of February 28, 1995 and 1994, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended February 28,
1995, as contained in the 1995 annual report to shareholders. These
consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1995. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the financial statement schedule as listed
in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our
audits. In our opinion, this financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
Cleveland, Ohio
March 31, 1995
-14-
<PAGE> 17
<TABLE>
Schedule II
-----------
THE TRANZONIC COMPANIES
Valuation and Qualifying Accounts and Reserves
Years ended February 28, 1995, 1994, and 1993
<CAPTION>
Additions
------------------------
Balance at Charged to Balance at
Beginning Costs and End of
Classification of Period Expenses Recoveries Deductions Period
-------------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended February 28, 1995
Allowance for doubtful
accounts receivable $ 337,000 229,651 90,109 248,260(A) 408,500
======= ======= ====== ========== =======
Year ended February 28, 1994
Allowance for doubtful
accounts receivable $ 296,000 336,269 20,767 316,036(A) 337,000
======= ======= ====== ========== =======
Year ended February 28, 1993
Allowance for doubtful
accounts receivable $ 547,300 902,650 64,069 1,218,019(A) 296,000
======= ======= ====== ========= =======
<FN>
- ---------------------
(A) Accounts written off.
</TABLE>
-15-
<PAGE> 1
Exhibit 10(i)
Credit Agreement dated as of October 7, 1993 with Society National Bank,
individually and as Agent, and National City Bank for borrowings up to
$30,000,000
<PAGE> 2
________________________________________________________________________________
________________________________________________________________________________
CREDIT AGREEMENT
by and among
THE TRANZONIC COMPANIES,
SOCIETY NATIONAL BANK,
Individually and as Agent
and
NATIONAL CITY BANK
Dated as of
October 7 , 1993
-----------
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
-----------------
<S> <C>
Article I. Definitions...........................................................................1
Article II. Amount and Credit....................................................................9
Section 2.1. Amount and Nature of Credit................................................9
A. Revolving Credit.............................................................9
B. Extension of Revolving Credit................................................11
Section 2.2. Conditions to Loans........................................................11
Section 2.3. Payment on Notes, Etc......................................................12
Section 2.4. Prepayment.................................................................12
Section 2.5. Commitment Fees; Termination of Reduction of Commitments...................13
Section 2.6. Agent's Fee................................................................14
Article III. Additional Provisions Relating to LIBOR Loans.......................................14
Section 3.1. Reserves or Deposit Requirements, etc......................................14
Section 3.2. Tax Law....................................................................15
Section 3.3. Eurodollar Deposits Unavailable or Interest Rate Unascertainable...........16
Section 3.4. Indemnity..................................................................16
Section 3.5. Changes in Law Rendering LIBOR Loans Unlawful..............................16
Section 3.6. Funding....................................................................17
Article IV. Additional Provisions Relating to Domestic Fixed Rate Loans..........................17
Section 4.1. Increased Cost.............................................................17
Section 4.2. Quoted Rates...............................................................17
Section 4.3. Change of Law..............................................................18
Article V. Opening Covenants.....................................................................18
Section 5.1. Resolutions................................................................18
Section 5.2. Legal Opinion..............................................................18
Section 5.3. Certificate of Incumbency..................................................19
Section 5.4. Guaranty of Payment........................................................19
Section 5.5. Resolutions of Consolidated Subsidiaries...................................19
Article VI. Covenants............................................................................19
Section 6.1. Insurance..................................................................19
Section 6.2. Money Obligations..........................................................19
Section 6.3. Financial Statements.......................................................19
Section 6.4. Financial Records..........................................................20
Section 6.5. Franchises.................................................................20
Section 6.6. ERISA Compliance...........................................................21
Section 6.7. Borrowings.................................................................21
Section 6.8. Liens......................................................................21
Section 6.9. Regulations U and X........................................................22
Section 6.10. Loans, Advances and Investments...........................................22
Section 6.11. Merger and Purchase and Sale of Assets....................................24
Section 6.12. Dividends.................................................................24
Section 6.13. Notice....................................................................24
</TABLE>
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<TABLE>
<S> <C>
Section 6.14. Acquisitions...................................................... 24
Section 6.15. Funded Debt-to-Worth Ratio ....................................... 25
Section 6.16. Consolidated Net Worth ........................................... 25
Section 6.17. Working Capital .................................................. 25
Section 6.18. Interest Coverage Ratio .......................................... 25
Section 6.19. Environmental Compliance ......................................... 25
Section 6.20. Plan ............................................................. 26
Article VII. Warranties 26
Section 7.1. Existence ......................................................... 26
Section 7.2. Right to Act ...................................................... 26
Section 7.3. Litigation and Liens .............................................. 27
Section 7.4. Guaranties of Consolidated Subsidiaries ........................... 27
Section 7.5. ERISA Compliance .................................................. 27
Section 7.6. Environmental Laws ................................................ 27
Section 7.7. Solvency .......................................................... 27
Section 7.8. Financial Statements .............................................. 28
Section 7.9. Actuarial Valuation Reports ....................................... 28
Section 7.10. Regulations ...................................................... 28
Section 7.11. Defaults ......................................................... 28
Article VIII. Events of Default ......................................................... 28
Section 8.1. Payments .......................................................... 28
Section 8.2. Covenants ......................................................... 28
Section 8.3. Warranties ........................................................ 29
Section 8.4. Cross Default ..................................................... 29
Section 8.5. Termination of Plan ............................................... 29
Section 8.6. Solvency .......................................................... 29
Article IX. Remedies upon Default ....................................................... 30
Section 9.1. Optional Defaults ................................................. 30
Section 9.2. Automatic Defaults ................................................ 30
Section 9.3. Offsets ........................................................... 30
Section 9.4. Equalization Provision ............................................ 31
Article X. The Agent .................................................................... 31
Section 10.1. Appointment and Authorization .................................... 31
Section 10.2. Note Holders ..................................................... 31
Section 10.3. Consultation with Counsel ........................................ 31
Section 10.4. Documents ........................................................ 31
Section 10.5. Agent and Affiliates ............................................. 32
Section 10.6. Knowledge of Default ............................................. 32
Section 10.7. Action by Agent .................................................. 32
Section 10.8. Notices, Default, Etc. ........................................... 32
Section 10.9. Indemnification .................................................. 32
Article XI. Miscellaneous ............................................................... 33
Section 11.1. Banks' Independent Investigation ................................. 33
Section 11.2. No Waiver, Cumulative Remedies ................................... 33
Section 11.3. Amendments, Consents ............................................. 33
Section 11.4. Notices .......................................................... 33
Section 11.5. Costs, Expenses and Taxes ........................................ 34
Section 11.6. Capital Adequacy ................................................. 34
Section 11.7. Indemnity ........................................................ 35
</TABLE>
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<TABLE>
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Section 11.8. Obligations Several, No Fiduciary Obligations .................... 35
Section 11.9. Execution in Counterparts ........................................ 35
Section 11.10. Binding Effect; Assignment....................................... 36
Section 11.11. Governing Law ................................................... 36
Section 11.12. Severability of Provisions; Captions ............................ 36
Section 11.13. Investment Purpose .............................................. 36
Section 11.14. Entire Agreement ................................................ 36
Section 11.15. Jury Trial Waiver ............................................... 36
Annex A 38
Exhibit A - Revolving Credit Note ................................................... 39
Exhibit B - Guaranty of Payment of Debt ............................................. 41
</TABLE>
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C R E D I T A G R E E M E N T
Credit agreement, effective as of the 7 day of October, 1993, between
THE TRANZONIC COMPANIES, an Ohio corporation (hereinafter sometimes called the
"Borrower"), the Banking Institutions named in Annex A attached hereto and made
a part hereof (hereinafter sometimes collectively called the "Banks" and
individually "Bank") and SOCIETY NATIONAL BANK, Cleveland, Ohio, as Agent for
the Banks under this credit agreement (hereinafter sometimes called the
"Agent"),
WITNESSETH:
WHEREAS, the Borrower and the Banks desire to contract for the
establishment of credits in the aggregate principal amounts hereinafter set
forth, to be made available to the Borrower upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
As used in this credit agreement, the following terms shall have the
following meanings:
"Adjusted LIBOR" shall mean a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the nearest 1/100th of 1%) by
dividing (i) the applicable LIBOR rate by (ii) 1.00 minus the Reserve
Percentage.
"Advantage" shall mean any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by any Bank in respect of Borrower's Debt to the Banks if such payment
results in that Bank having a lesser share of Borrower's Debt to the Banks,
than was the case immediately before such payment.
"Applicable Leverage Ratio" shall mean for any day the ratio of the
sum of Consolidated Funded Indebtedness plus all outstanding loans hereunder
plus any other indebtedness for borrowed money to Consolidated Net Worth, in
each case calculated on the basis of the information set forth in the
Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries
most recently delivered by the Borrower to the Bank pursuant to this credit
agreement; provided, that if the Borrower shall fail to timely deliver such
balance sheet, the Applicable Leverage Ratio for each day from and including
the day on which such information is required to be delivered to but excluding
the day on which such information is delivered shall be deemed to exceed .74 to
1.00.
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<PAGE> 7
"Capital Distribution" shall mean (i) a cash payment made for the
purchase, acquisition, redemption or retirement of any capital stock of any
Company or as a dividend, return of capital or other distribution in respect of
any Company's capital stock, other than any stock dividend or stock split
payable only in capital stock of the Company in question, or (ii) cash payments
made to employees of any Company in lieu of their exercise of stock options
under Borrower's 1973 Performance Share Option Plan, as amended, the 1981
Performance Share Option Plan, and any other employee stock option plan
hereafter established.
"C/D Reference Banks" shall mean Society National Bank and National
City Bank.
"Cleveland banking day" shall mean a day on which the main office of
the Agent is open for the transaction of business.
"Commitment" shall mean the obligation hereunder of each Bank to make
loans up to the amount set opposite such Bank's name under the column headed
"Maximum Amount" as set forth in Annex A hereof during the Commitment Period
(or such lesser amount as shall be determined pursuant to Section 2.5 hereof).
"Commitment Period" shall mean the period from the date hereof to June
30, 1997, as such date may be extended pursuant to Section 2.1B hereof.
"Company" shall mean Borrower or a Subsidiary.
"Consolidated" shall mean the resultant consolidation of the financial
statements of the Borrower and its Consolidated Subsidiaries in accordance with
generally accepted accounting principles, including principles of consolidation
consistent with those applied in preparation of the Consolidated financial
statements referred to in Section 7.8 herein.
"Consolidated Net Income" shall mean, for any period, the amount of
consolidated net income of Borrower and its Consolidated Subsidiaries for such
period (taken as a cumulative whole) determined in accordance with generally
accepted accounting principles not inconsistent with present accounting
procedures.
"Consolidated Net Worth" shall mean the excess of the net book value
(after deduction of all applicable reserves and excluding any re- appraisal or
write-up of assets) of the assets (other than patents, good will, treasury
stock and similar intangibles) of Borrower and its Consolidated Subsidiaries
over all of their liabilities (other than any liabilities Subordinated, by
writing in form and substance satisfactory to Banks, in favor of all of
Borrower's Debt to Banks) as determined on a consolidated basis in accordance
with generally accepted accounting principles applied on a basis not
inconsistent with their present accounting procedures.
"Consolidated Subsidiary" shall mean, at any particular time, every
Subsidiary other than those Subsidiaries which are not included as consolidated
subsidiaries of Borrower in the financial statements contained in the then most
recent annual or periodic report filed by Borrower with the Securities and
Exchange Commission (or any governmental body or agency
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<PAGE> 8
succeeding to the functions of such Commission) on Form 10-K, 10-Q or 8-K
pursuant to the Securities Exchange Act of 1934, as then in effect (or any
comparable forms or under similar Federal statutes then in force), and in
Borrower's most recent financial statements furnished to its stockholders and
certified by Borrower's independent certified public accountants; provided that
such excluded Subsidiary or Subsidiaries shall be excluded from Consolidated
Subsidiaries hereunder only for so long as it or they are so excluded from such
financial statements filed with such Commission and furnished to such
stockholders.
"Controlled Group" shall mean a controlled group of corporations as
defined in Section 1563 of the Internal Revenue Code of 1986, as may be amended
from time to time, of which Borrower or any Consolidated Subsidiary is a part.
"Corporate Acquisition" shall mean the acquisition by Borrower of
either (i) all or a substantial part of the assets of a company or (ii) all of
the outstanding shares of common stock and preferred stock, if any, of a
company, together, in the case of either (i) or (ii), with any related assets
purchased in connection therewith.
"Current Assets" and "Current Liabilities" shall mean the amounts as
determined in accordance with generally accepted accounting principles not
inconsistent with present accounting procedures, with the understanding that
the principal installments of any Note maturing within twelve (12) months of
the date in question, shall be excluded from Current Liabilities.
"Debt" shall mean, collectively, every liability now or hereafter
owing by Borrower to the Banks or any thereof, whether owing by only Borrower
or by Borrower with one or more others in a several, joint or joint and several
capacity, whether owing absolutely or contingently, whether created by loan,
overdraft, guaranty of payment or other contract or by quasi-contract, tort,
statute or other operation of law, whether incurred directly to the Banks or
any thereof or acquired by any or all thereof by purchase, pledge or otherwise,
and whether participated to or from the Banks or any thereof in whole or in
part.
"Domestic Base Rate" shall mean a rate per annum determined pursuant
to the following formula:
( Dom. CD )*
DBR = ( ------------- ) + AR
( 1.00 - RP)
DBR = Domestic Base Rate
Dom. CD = Domestic C/D Rate
RP = Domestic Reserve Percentage
AR = Assessment Rate
*The amount in brackets being rounded upwards, if necessary,
to the nearest 1/100 of 1%.
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"Domestic C/D Rate" means with respect to each Domestic
Interest Period the rate of interest determined by the Agent to be the
arithmetic average (rounded upwards, if necessary, to the nearest 1/100 of 1%)
of the prevailing rates per annum bid at 9:00 a.m. (Cleveland, Ohio time) (or
as soon thereafter as practicable) on the first day of the relevant Domestic
Interest Period by New York certificate of deposit dealers of recognized
standing to each C/D Reference Bank and reported to the Agent by two or more
such dealers for the purchase at face value from such C/D Reference Bank of its
certificates of deposit in an amount approximately equal or comparable to such
C/D Reference Bank's pro rata share of such Domestic Fixed Rate Loans and
having a maturity of 30, 60, 90 or 180 days, as selected by the Borrower.
"Domestic Reserve Percentage" shall mean for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, all basic, supplemental, marginal and other reserves and taking
into account any transitional adjustments or other scheduled changes in reserve
requirements) for a member bank of the Federal Reserve System in Cleveland,
Ohio, in respect of new nonpersonal time deposits in dollars in the United
States, having a maturity comparable to the related Domestic Interest Period
and in an amount of One Hundred Thousand Dollars ($100,000.00) or more. The
Domestic Base Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" shall mean for any Domestic Interest Period
the net annual assessment rate (rounded upwards, if necessary, to the next
higher 1/100th of 1%) actually incurred by Agent to the Federal Deposit
Insurance Corporation (or any successor) for such corporation's (or such
successor's) insuring deposits in United States dollars at the offices of Agent
in the United States during the most recent period for which such rate has been
determined prior to the commencement of such Domestic Interest Period. The
Domestic Base Rate shall be automatically adjusted on and as of the effective
date of any change in the Assessment Rate.
"Domestic Fixed Rate" shall mean a rate per annum equal to the sum of
the Domestic Margin for the first day of the applicable Domestic Interest
Period plus the Domestic Base Rate.
"Domestic Fixed Rate Loans" shall mean those loans described in
Section 2.1A hereof on which the Borrower shall pay interest at a rate based on
the applicable Domestic Fixed Rate.
"Domestic Interest Period" shall mean a period of 30, 60, 90 or 180
days (as selected by the Borrower) commencing on the applicable borrowing date
of each Domestic Fixed Rate Loan and on each Interest Adjustment Date with
respect thereto; provided, however, that if any such period would be affected
by a reduction in Commitment as provided in Section 2.5 hereof, prepayment or
conversion rights as provided in Section 4.3 hereof or maturity of
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Domestic Fixed Rate Loans as provided in Section 2.1A hereof, such period shall
be shortened to end on such date. If the Borrower fails to select a new
Domestic Interest Period with respect to an outstanding Domestic Fixed Rate
Loan at least three Cleveland banking days prior to any Interest Adjustment
Date, the Borrower shall be deemed to have selected a Prime Rate Loan.
"Domestic Margin" shall mean (i) five-eighths percent (5/8 of 1%) for
any day on which Level I Status exists; (ii) one and one-eighth percent
(1-1/8%) for any day on which Level II Status exists; (iii) one and
three-eighths percent (1-3/8%) for any day on which Level III Status exists;
and (iv) one and five-eighths percent (1-5/8%) for any day on which Level IV
Status exists.
"Environmental Laws" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the
government of the United States of America or by any state or municipality
thereof or by any court, agency, instrumentality, regulatory authority or
commission of any of the foregoing concerning health, safety and protection of,
or regulation of the discharge of substances into, the environment.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Fiscal Quarter" shall mean a fiscal quarter of the Borrower, which
shall be any quarterly period ending on the last day of February, May, August
or November of any year. "Fiscal Quarter", when used herein without reference
to any particular person, shall mean a Fiscal Quarter of the Borrower.
"Funded Indebtedness" shall mean indebtedness which (including any
renewal or extension in whole or in part) matures or remains unpaid more than
twelve (12) months after the date on which originally incurred.
"Guarantor" shall mean one who pledges his credit or property in any
manner for the payment or other performance of the indebtedness, contract or
other obligation of another and includes (without limitation) any guarantor
(whether of payment or of collection), surety, comaker, endorser or one who
agrees conditionally or otherwise to make any purchase, loan or investment in
order thereby to enable another to prevent or correct a default of any kind.
"Guarantor of Payment" shall mean one of the Consolidated Subsidiaries
(now existing or hereafter acquired) executing and delivering a Guaranty of
Payment.
"Guaranty of Payment" shall mean the guaranty of payment of debt
executed and delivered in connection herewith and any guaranty of payment of
debt in the form of Exhibit B attached hereto (with the blanks appropriately
filled) executed and delivered pursuant to Section 6.14 hereof.
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"Interest Adjustment Date" shall mean the last day of each Interest
Period or each Domestic Interest Period, as the case may be.
"Interest Period" shall mean a period of one, two, three or six months
(as selected by the Borrower) commencing on the applicable borrowing or
conversion date of each LIBOR Loan and on each Interest Adjustment Date with
respect thereto; provided, however, that if any such period would be affected
by a reduction in Commitment as provided in Section 2.5 hereof, prepayment or
conversion rights as provided in Section 3.5 hereof or maturity of LIBOR Loans
as provided in Section 2.1A hereof, such period shall be shortened to end on
such date. If the Borrower fails to select a new Interest Period with respect
to an outstanding LIBOR Loan at least three (3) London banking days prior to
any Interest Adjustment Date, the Borrower shall be deemed to have selected a
Prime Rate Loan.
"Level I Status" exists during any Fiscal Quarter if as of the end of
the immediately preceding Fiscal Quarter for which the Bank has received
Consolidated financial statements from the Borrower, the Applicable Leverage
Ratio was equal to or less than .20 to 1.00.
"Level II Status" exists during any Fiscal Quarter if as of the end of
the immediately preceding Fiscal Quarter for which the Bank has received
Consolidated financial statements from the Borrower, the Applicable Leverage
Ratio was .21 to 1.00 or greater but less than or equal to .50 to 1.00.
"Level III Status" exists during any Fiscal Quarter if as of the end
of the immediately preceding Fiscal Quarter for which the Bank has received
Consolidated financial statements from the Borrower, the Applicable Leverage
Ratio was greater than .50 to 1.00 but less than or equal to .74 to 1.00.
"Level IV Status" exists during any Fiscal Quarter if as of the end of
the immediately preceding Fiscal Quarter for which the Bank has received
Consolidated financial statements from the Borrower, the Applicable Leverage
Ratio exceeded .74 to 1.00, or exists on any other day in which Level I Status
or Level II Status or Level III Status is not applicable.
"LIBOR" shall mean the average (rounded upward to the nearest 1/16th
of 1%) of the per annum rates at which deposits in immediately available funds
in United States dollars for the relevant Interest Period and in the amount of
the LIBOR Loan to be disbursed or to remain outstanding during such Interest
Period, as the case may be, are offered to the Reference Banks by prime banks
in any Eurodollar market reasonably selected by the Reference Banks, determined
as of 11:00 a.m. London time (or as soon thereafter as practicable), two (2)
London banking days prior to the beginning of the relevant Interest Period
pertaining to a LIBOR Loan hereunder. In the event one or more of the
Reference Banks fail to furnish its quote of any rate required herein, such
rate shall be determined on the basis of the quote or quotes of the remaining
Reference Bank or Banks.
"LIBOR Loans" shall mean those loans described in Section 2.1A hereof
on which the Borrower shall pay interest at a rate based on LIBOR.
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"LIBOR Margin" shall mean (i) one-half percent (1/2 of 1%) for any day
on which Level I Status exists; (ii) one percent (1%) for any day on which
Level II Status exists; (iii) one and one-fourth percent (1-1/4%) for any day
on which Level III Status exists; and (iv) one and one-half percent (1-1/2%)
for any day on which Level IV Status exists.
"London banking day" shall mean a day on which banks are open for
business in London, England, and quoting deposit rates for dollar deposits.
"Material" shall mean the measure of a matter of significance which
shall be determined as being an amount equal to five percent (5%) of Borrower's
Consolidated Net Worth.
"Note" or "Notes " shall mean a note or notes executed and delivered
pursuant to Section 2.1A hereof.
"Plan" shall mean any employee pension benefit plan subject to Title
IV of the Employee Retirement Income Security Act of 1974, as amended,
established or maintained by Borrower, any Consolidated Subsidiary, or any
member of the Controlled Group, or any such Plan to which Borrower, any
Consolidated Subsidiary, or any member of the Controlled Group is required to
contribute on behalf of any of its employees.
"Possible Default" shall mean an event, condition or thing which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, any event of default referred to in
Article VIII hereof and which has not been appropriately waived by the Banks in
writing or fully corrected prior to becoming an actual event of default.
"Prime Rate" means that interest rate established from time to time by
Agent as Agent's Prime Rate, whether or not such rate is publicly announced;
the Prime Rate may not be the lowest interest rate charged by Agent or any Bank
for commercial or other extensions of credit.
"Prime Rate Loan" shall mean those loans described in Section 2.1A
hereof on which the Borrower shall pay interest at a rate based on the Prime
Rate.
"Receivable" shall mean a claim for moneys due or to become due,
whether classified as a contract right, account, chattel paper, instrument,
general intangible or otherwise.
"Reference Banks" shall mean the Cayman Islands branch office of
Society National Bank and the ___________ branch office of National City Bank.
"Regulatory Change" shall mean, as to any Bank, any change in United
States federal, state or foreign laws or regulations or the adoption or making
of any interpretations, directives or requests of or under any United States
federal, state or foreign laws or regulations (whether or not having the force
of law) by any court or governmental authority charged with the interpretation
or administration thereof, excluding, however, any such change which results in
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an adjustment of the Assessment Rate or the Domestic Reserve Percentage and the
effect of which is reflected in a change in the Domestic Base Rate.
"Related Writing" shall mean any Note, assignment, mortgage, security
agreement, guaranty agreement, subordination agreement, financial statement,
audit report or other writing furnished by any Company or any of its officers
to the Banks pursuant to or otherwise in connection with this credit agreement.
"Reportable Event" shall mean a reportable event as that term is
defined in Title IV of the Employee Retirement Income Security Act of 1974, as
amended, except actions of general applicability by the Secretary of Labor
under Section 110 of such Act.
"Reserve Percentage" shall mean for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, all basic,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
for a member bank of the Federal Reserve System in Cleveland, Ohio, in respect
of "Eurocurrency Liabilities". The Adjusted LIBOR shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Percentage.
"Revolving Credit Note" shall mean a note executed and delivered
pursuant to Section 2.1A hereof.
"Subordinated" as applied to indebtedness, shall mean that the
indebtedness has been subordinated (by written terms or agreement being in form
and substance satisfactory to the Banks) in favor of the prior payment in full
of Borrower's Debt to the Banks.
"Subsidiary" shall mean an existing or future corporation, the
majority of the outstanding capital stock or voting power, or both, of which is
(or upon the exercise of all outstanding warrants, options and other rights
would be) owned at the time in question by Borrower or by another such
corporation or by any combination of Borrower and such corporations.
"Target Company" shall mean any company which is the subject of a
Corporate Acquisition.
Any accounting term not specifically defined in this Article I shall
have the meaning ascribed thereto by generally accepted accounting principles
not inconsistent with Borrower's present accounting procedures.
The foregoing definitions shall be applicable to the singulars and
plurals of the foregoing defined terms.
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ARTICLE II. AMOUNT AND TERMS OF CREDIT
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and
provisions of this credit agreement each Bank will participate to the extent
hereinafter provided in making loans to the Borrower in such aggregate amount
as the Borrower shall request; provided, however, that in no event shall the
aggregate principal amount of all loans outstanding under this credit agreement
during the Commitment Period be in excess of Thirty Million Dollars
($30,000,000).
Each Bank, for itself and not one for any other, agrees to participate
in borrowings made hereunder on such basis that (a) immediately after the
completion of any borrowing by the Borrower hereunder the aggregate principal
amount then outstanding on the Note issued to such Bank shall not be in excess
of the amount shown opposite the name of such Bank under the column headed
"Maximum Amount" as set forth in Annex A hereto for the Commitment Period and
(b) such aggregate principal amount outstanding on the Note issued to such Bank
shall represent that percentage of the aggregate principal amount then
outstanding on all Notes (including the Note held by such Bank) which is shown
opposite the name of such Bank under the column headed "Percentage" in Annex A
hereto.
Each borrowing from, and reduction of Commitments of, the Banks
hereunder shall be made pro rata according to their respective Commitments. The
aforementioned loans may be made as revolving credits, as follows:
A. Revolving Credit. Subject to the terms and conditions of
this credit agreement, during the Commitment Period each Bank will make a loan
or loans to the Borrower in such amount or amounts as the Borrower may from
time to time request but not exceeding in aggregate principal amount at any
one time outstanding hereunder the Commitment of such Bank. The Borrower shall
have the option, subject to the terms and conditions set forth herein, to
borrow hereunder up to the Commitment by means of any combination of (i) Prime
Rate Loans maturing at the end of the Commitment Period drawn down in aggregate
amounts of not less than One Hundred Thousand Dollars ($100,000) or any
multiple thereof, bearing interest at a rate per annum which shall be the Prime
Rate, (ii) LIBOR Loans maturing at the end of the Commitment Period drawn down
in aggregate amounts of not less than One Million Dollars ($1,000,000) or any
multiple of One Hundred Thousand Dollars ($100,000) in excess thereof, bearing
interest at a rate per annum which shall be equal to the sum of the LIBOR
Margin for the first day of the applicable Interest Period, plus Adjusted
LIBOR, or (iii) Domestic Fixed Rate Loans maturing at the end of the Commitment
Period, drawn down in aggregate amounts of not less than One Million Dollars
($1,000,000) or any multiple of One Hundred Thousand Dollars ($100,000) in
excess thereof, bearing interest at a rate per annum equal to the applicable
Domestic Fixed Rate. The Borrower shall pay interest (based on a year having
365 days, 366 days in any leap year, and calculated for the actual number of
days elapsed) on the unpaid principal amount of Prime Rate Loans outstanding
from time to time from the date thereof until paid, payable on the last day of
each March, June, September and December of each year and at the maturity
thereof, commencing September 30, 1993, at a rate per annum which shall be the
Prime Rate from
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time to time in effect. The Borrower shall pay interest (based on a year
having 360 days and calculated for the actual number of days elapsed) at a
fixed rate for each Interest Period on the unpaid principal amount of LIBOR
Loans outstanding from time to time from the date thereof until paid, payable
on each Interest Adjustment Date with respect to an Interest Period (provided
that if an Interest Period exceeds three months, the interest must be paid
every three months from the beginning of such Interest Period), at the rate per
annum equal to the sum of the LIBOR Margin for the first day of such Interest
Period, plus Adjusted LIBOR, fixed in advance of each Interest Period as herein
provided for each such Interest Period. The Borrower shall pay interest (based
on a year having 360 days and calculated for the actual number of days elapsed)
at a fixed rate for each Domestic Interest Period on the unpaid principal
amount of Domestic Fixed Rate Loans outstanding from time to time from the date
thereof until paid, payable on each Interest Adjustment Date with respect to a
Domestic Interest Period, at a rate per annum equal to the applicable Domestic
Fixed Rate, fixed in advance of each Domestic Interest Period as herein
provided for each such Domestic Interest Period; provided that if any portion
of any Domestic Fixed Rate Loan shall have a Domestic Interest Period of less
than thirty (30) days, such portion shall bear interest during such Domestic
Interest Period at the rate per annum which would apply if such portion were a
Prime Rate Loan, and, further, provided, that if a Domestic Interest Period
exceeds ninety (90) days, the interest must be paid every ninety (90) days
commencing ninety (90) days from the beginning of such Domestic Interest
Period.
At the request of the Borrower, provided, no event of default exists
hereunder, the Banks shall convert Prime Rate Loans to LIBOR Loans or Domestic
Fixed Rate Loans at any time and shall convert LIBOR Loans or Domestic Fixed
Rate Loans to any other type of loans permitted by this Paragraph A on any
Interest Adjustment Date applicable to the LIBOR Loan or Domestic Fixed Rate
Loan, as the case may be, but each request for loans under this Paragraph A
must either be for Prime Rate Loans or Domestic Fixed Rate Loans or LIBOR
Loans. The obligation of the Borrower to repay the Prime Rate Loans, Domestic
Fixed Rate Loans and the LIBOR Loans made by each Bank and to pay interest
thereon shall be evidenced by a Revolving Credit Note of the Borrower
substantially in the form of Exhibit A hereto, with appropriate insertions,
dated the date of this credit agreement and payable to the order of such Bank
on the last day of the Commitment Period in the principal amount of its
Commitment, or if less, the aggregate unpaid principal amount of revolving
credit loans made hereunder by such Bank.
The principal amount of the Prime Rate Loans, Domestic Fixed Rate
Loans and the LIBOR Loans made by each Bank and all prepayments thereof and the
applicable dates with respect thereto shall be recorded by such Bank from time
to time on the records of the Bank by such method as such Bank may generally
employ; provided, however, that failure to make any such entry shall in no way
detract from Borrower's obligations under such Note. The aggregate unpaid
amount of Prime Rate Loans, Domestic Fixed Rate Loans and LIBOR Loans set forth
on the records of the Bank shall be rebuttably presumptive evidence of the
principal amount owing and unpaid on such Revolving Credit Note. If any
Revolving Credit Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision of
acceleration of maturity therein contained, the principal thereof
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and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be two percent (2%) in excess of the applicable rate in
effect from time to time. Subject to the provisions of this credit agreement
the Borrower shall be entitled under this Paragraph A to borrow funds, repay
the same in whole or in part and reborrow hereunder at any time and from time
to time.
B. Extension of Revolving Credit. Subject to the terms and
conditions of this credit agreement, on or before June 30, 1994 Borrower may
request an extension of the term of the Commitment Period for an additional
one-year period and may make a similar request on or before each June 30
thereafter (which request shall be evidenced by a writing duly executed and
delivered by Borrower to the Agent). If the Banks in their sole discretion
grant Borrower such extension(s), the date reflected in the definition of
"Commitment Period" shall automatically be changed to the date of such
extension. Each such extension shall not be deemed a new Commitment of the
Banks nor a new borrowing by Borrower but shall be merely an additional term
applicable to the Commitment Period and the obligations of the Borrower
hereunder and under the Notes. No such extension shall be effective unless
consented to in writing by the Banks.
SECTION 2.2. CONDITIONS TO LOANS. The obligation of each Bank to
make the loans hereunder is conditioned, in the case of each borrowing
hereunder, upon (i) receipt by the Agent of same Cleveland banking day's
notice (not later than 1:00 p.m.) from the Borrower of the proposed date and
aggregate amount of the borrowing of any Prime Rate Loans, one (1) Cleveland
banking day's notice (not later than 11:00 a.m. on the date of such notice)
from the Borrower of the proposed date, aggregate amount and initial Domestic
Interest Period for any Domestic Fixed Rate Loans, and three (3) London banking
days' notice (not later than 11:00 a.m. on the date of such notice) from the
Borrower of the proposed date, aggregate amount and initial Interest Period of
any LIBOR Loans, of which date, amount and initial Interest Period or initial
Domestic Interest Period (if applicable) the Agent shall notify each Bank
promptly upon the receipt of such notice, and on which date each Bank shall
provide the Agent not later than 2:00 p.m. Cleveland time, with the amount in
Federal or other immediately available funds, required of it; (ii) the fact
that no Possible Default shall then exist or immediately after the loan would
exist; (iii) the fact that the representations and warranties contained in
Article VII hereof shall be true and correct in all material respects with the
same force and effect as if made on and as of the date of such borrowing except
to the extent that any thereof expressly relate to an earlier date; and (iv)
with respect to any loan to be used for a Corporate Acquisition, receipt by the
Agent, not later than ten (10) days prior to the date of the proposed loan, of
the pro forma Consolidated financial statements of Borrower, including but not
limited to balance sheets, income statements and cash flow projections
(certified as to completeness and accuracy by the chief financial officer of
Borrower) reflecting that after giving effect to the proposed Corporate
Acquisition, Borrower will be in compliance with all the terms and conditions
of this credit agreement. Each borrowing by the Borrower hereunder shall be
deemed to be a representation and warranty by the Borrower as of the date of
such borrowing as to the facts specified in (ii) and (iii) above.
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SECTION 2.3. PAYMENT ON NOTES, ETC. All payments of principal,
interest and commitment fees shall be made to the Agent in immediately
available funds for the account of the Banks, and the Agent forthwith shall
distribute to each Bank its ratable share of the amount of principal, interest
and commitment fees received by it for the account of such Bank. Each Bank
shall endorse each Note held by it with appropriate notations evidencing each
payment of principal made thereon or shall record such principal payment by
such other method as such Bank may generally employ; provided, however, that
failure to make any such entry shall in no way add to or detract from
Borrower's obligations under each such Note. Whenever any payment to be made
hereunder, including without limitation any payment to be made on any Note,
shall be stated to be due on a day which is not a Cleveland banking day, such
payment shall be made on the next succeeding Cleveland banking day and such
extension of time shall in each case be included in the computation of the
interest payable on such Note; provided, however, that with respect to any
LIBOR Loan, if the next succeeding Cleveland banking day falls in the
succeeding calendar month, such payment shall be made on the preceding
Cleveland banking day and the relevant Interest Period shall be adjusted
accordingly.
SECTION 2.4. PREPAYMENT. The Borrower shall have the right at any
time or from time to time, upon one (1) Cleveland banking days' prior
written notice to the Agent in the case of Prime Rate Loans, without the
payment of any premium or penalty, or four (4) London banking days' prior
written notice in the case of LIBOR Loans (subject to the payment of a
prepayment penalty as hereinafter described in this Section 2.4), to prepay on
a pro rata basis, all or any part of the principal amount of the Notes then
outstanding as designated by the Borrower, plus interest accrued on the amount
so prepaid to the date of such prepayment.
Each prepayment of a Prime Rate Loan shall be in the aggregate
principal sum of not less than One Hundred Thousand Dollars ($100,000).
In any case of prepayment of any LIBOR Loans, the Borrower agrees that
if Adjusted LIBOR as determined as of 11:00 a.m. London time, two (2) London
banking days prior to the date of prepayment of any LIBOR Loans (hereinafter,
"Prepayment LIBOR") shall be lower than the last Adjusted LIBOR previously
determined for those LIBOR Loans with respect to which prepayment is intended
to be made (hereinafter, "Last LIBOR"), then the Borrower shall, upon written
notice by the Agent, promptly pay to the Agent, for the account of each of the
Banks, in immediately available funds, a prepayment penalty measured by a rate
(the "Prepayment Penalty Rate") which shall be equal to the difference between
the Last LIBOR and the Prepayment LIBOR. In determining the Prepayment LIBOR,
Agent shall apply a rate equal to Adjusted LIBOR for a deposit approximately
equal to the amount of such prepayment which would be applicable to an Interest
Period commencing on the date of such prepayment and having a duration as
nearly equal as practicable to the remaining duration of the actual Interest
Period during which such prepayment is to be made. The Prepayment Penalty Rate
shall be applied to all or such part of the principal amounts of the Notes as
related to the LIBOR Loans to be prepaid, and the prepayment penalty shall be
computed for the period commencing with the date on which such prepayment is to
be made to that date
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which coincides with the last day of the Interest Period previously established
when the LIBOR Loans, which are to be prepaid, were made.
Each prepayment of a LIBOR Loan shall be in the aggregate principal
sum of not less than One Million Dollars ($1,000,000). In the event the
Borrower cancels a proposed LIBOR Loan subsequent to the delivery to the Agent
of the notice of the proposed date, aggregate amount and initial Interest
Period of such loan, but prior to the draw down of funds thereunder, such
cancellation shall be treated as a prepayment subject to the aforementioned
prepayment penalty.
In the event any Domestic Fixed Rate Loan is prepaid, after having
first given Agent two (2) Cleveland banking days' prior written notice of such
prepayment, the Borrower agrees that if the Domestic Fixed Rate as determined
as of 11:00 a.m. Cleveland time, two (2) Cleveland banking days prior to the
date of prepayment of any Domestic Fixed Rate Loans (hereinafter, "Prepayment
Domestic Fixed Rate") shall be lower than the last Domestic Fixed Rate
previously determined for those Domestic Fixed Rate Loans with respect to which
prepayment is intended to be made (hereinafter, "Last Domestic Fixed Rate"),
then the Borrower shall, upon written notice by the Agent, promptly pay to the
Agent, for the account of each of the Banks, in immediately available funds, a
prepayment penalty measured by a rate (the "Prepayment Domestic Penalty Rate")
which shall be equal to the difference between the Last Domestic Fixed Rate and
the Prepayment Domestic Fixed Rate. In determining the Prepayment Domestic
Fixed Rate, Agent shall apply the Domestic Fixed Rate which would be applicable
to a Domestic Fixed Rate Loan approximately equal to the amount of such
prepayment having a Domestic Interest Period commencing on the date of such
prepayment and having a duration as nearly equal as practicable to the
remaining duration of the actual Domestic Interest Period during which such
prepayment is to be made. The Prepayment Domestic Penalty Rate shall be
applied to all or such part of the principal amounts of the Notes as related to
the Domestic Fixed Rate Loans to be prepaid, and the prepayment penalty shall
be computed for the period commencing with the date on which such prepayment is
to be made to the date which coincides with the last day of the Domestic
Interest Period previously established when the Domestic Fixed Rate Loans,
which are to be prepaid, were made.
In the event the Borrower cancels a proposed Domestic Fixed Rate Loan
subsequent to the delivery to the Agent of the notice of the proposed date,
aggregate amount and initial Domestic Interest Period of such loan, but prior
to the draw down of funds thereunder, such cancellation shall be treated as a
prepayment subject to the aforementioned prepayment penalty. Each prepayment
of a Domestic Fixed Rate Loan shall be in the aggregate principal sum of not
less than One Million Dollars ($1,000,000).
SECTION 2.5. COMMITMENT FEES; TERMINATION OR REDUCTION OF
COMMITMENTS. Borrower agrees to pay to Agent, for the ratable account of each
Bank, as a consideration for its Commitment hereunder, a commitment fee
calculated at the rate of three-tenths percent (3/10 of 1%) per annum (based on
a year having 360 days and calculated for the actual number of days elapsed)
from the date hereof to and including the last day of the Commitment Period (as
the same may be extended from time to time), on the average daily
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unborrowed amount of such Bank's Commitment hereunder, payable on September 30,
1993 and quarter-annually thereafter.
Borrower may at any time or from time to time terminate in whole or
ratably in part the Commitments of the Banks hereunder to an amount not less
than the aggregate principal amount of the loans then outstanding, by giving
Agent not less than two (2) Cleveland banking days' notice, provided that any
such partial termination shall be in an aggregate amount for all the Banks of
Five Hundred Thousand Dollars ($500,000) or any integral multiple thereof. The
Agent shall promptly notify each Bank of its proportionate amount and the date
of each such termination. After each such termination, the commitment fees
payable hereunder shall be calculated upon the Commitments of the Banks as so
reduced. If the Borrower terminates in whole the Commitments of the Banks, on
the effective date of such termination (the Borrower having prepaid in full the
unpaid principal balance, if any, of the Notes outstanding together with all
interest (if any) and commitment fees accrued and unpaid) all of the Notes
outstanding shall be delivered to the Agent marked "Cancelled" and redelivered
to the Borrower. Any partial reduction in the Commitments of the Banks shall
be effective during the remainder of the Commitment Period.
SECTION 2.6. AGENT'S FEE. Borrower agrees to pay to Agent, for its
sole benefit, an annual agent's fee in the amount of Ten Thousand Dollars
($10,000), payable to Agent on April 1 of each year, commencing April 1, 1994.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If at any time
any law, treaty or regulation (including, without limitation, Regulation D of
the Board of Governors of the Federal Reserve System) or the interpretation
thereof by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority shall impose
(whether or not having the force of law), modify or deem applicable any reserve
and/or special deposit requirement (other than reserves included in the Reserve
Percentage, the effect of which is reflected in the interest rate(s) of the
LIBOR Loan(s) in question) against assets held by, or deposits in or for the
amount of any loans by, any Bank, and the result of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to such
Bank of making or maintaining hereunder LIBOR Loans or to reduce the amount of
principal or interest received by such Bank with respect to such LIBOR Loans,
then upon demand by such Bank the Borrower shall pay to such Bank from time to
time on Interest Adjustment Dates with respect to such loans, as additional
consideration hereunder, additional amounts sufficient to fully compensate and
indemnify such Bank for such increased cost or reduced amount, assuming (which
assumption such Bank need not corroborate) such additional cost or reduced
amount was allocable to such LIBOR Loans. A certificate as to the increased
cost or reduced amount as a result of any event mentioned in this Section 3.1,
setting forth the calculations therefor, shall be promptly submitted by such
Bank to the Borrower and shall, in the absence of manifest error, be conclusive
and binding as to the amount thereof. Notwithstanding any other provision of
this credit agreement, after any such demand for compensation by any Bank,
Borrower, upon at least three (3) Cleveland banking days' prior
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written notice to such Bank through the Agent, may prepay the affected LIBOR
Loans in full or convert all LIBOR Loans to Prime Rate Loans or Domestic Fixed
Rate Loans regardless of the Interest Period of any thereof. Any such
prepayment or conversion shall be subject to the prepayment penalties set forth
in Section 2.4 hereof. Each Bank will notify Borrower as promptly as
practicable (with a copy thereof delivered to the Agent) of the existence of
any event which will likely require the payment by Borrower of any such
additional amount under this Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any law,
regulation or requirement or in the interpretation thereof by an official
authority, or the imposition of any requirement of any central bank whether or
not having the force of law, any Bank shall, with respect to this credit
agreement or any transaction under this credit agreement, be subjected to any
tax, levy, impost, charge, fee, duty, deduction or withholding of any kind
whatsoever (other than any tax imposed upon the total net income of such Bank)
and if any such measures or any other similar measure shall result in an
increase in the cost to such Bank of making or maintaining any LIBOR Loan or in
a reduction in the amount of principal, interest or commitment fee receivable
by such Bank in respect thereof, then such Bank shall promptly notify the
Borrower stating the reasons therefor. The Borrower shall thereafter pay to
such Bank upon demand from time to time on Interest Adjustment Dates with
respect to such LIBOR Loans, as additional consideration hereunder, such
additional amounts as will fully compensate such Bank for such increased cost
or reduced amount. A certificate as to any such increased cost or reduced
amount, setting forth the calculations therefor, shall be submitted by such
Bank to the Borrower and shall, in the absence of manifest error, be conclusive
and binding as to the amount thereof.
If any Bank receives such additional consideration from the
Borrower pursuant to this Section 3.2, such Bank shall use its best efforts to
obtain the benefits of any refund, deduction or credit for any taxes or other
amounts on account of which such additional consideration has been paid and
shall reimburse the Borrower to the extent, but only to the extent, that such
Bank shall receive a refund of such taxes or other amounts together with any
interest thereon or an effective net reduction in taxes or other governmental
charges (including any taxes imposed on or measured by the total net income of
such Bank) of the United States or any state or subdivision thereof by virtue
of any such deduction or credit, after first giving effect to all other
deductions and credits otherwise available to such Bank. If, at the time any
audit of such Bank's income tax return is completed, such Bank determines,
based on such audit, that it was not entitled to the full amount of any refund
reimbursed to the Borrower as aforesaid or that its net income taxes are not
reduced by a credit or deduction for the full amount of taxes reimbursed to the
Borrower as aforesaid, the Borrower, upon demand of such Bank, will promptly
pay to such Bank the amount so refunded to which such Bank was not so entitled,
or the amount by which the net income taxes of such Bank were not so reduced,
as the case may be.
Notwithstanding any other provision of this credit agreement, after
any such demand for compensation by any Bank, Borrower, upon at least three (3)
Cleveland banking days' prior written notice to such Bank through the Agent,
may prepay the affected LIBOR Loans in
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full or convert all LIBOR Loans to Prime Rate Loans or Domestic Fixed Rate
Loans regardless of the Interest Period of any thereof. Any such prepayment or
conversion shall be subject to the prepayment penalties set forth in Section
2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any LIBOR Loans, in the event that the Agent
shall have determined that dollar deposits of the relevant amount for the
relevant Interest Period for such LIBOR Loans are not available to the
Reference Banks in the applicable Eurodollar market or that, by reason of
circumstances affecting such market, adequate and reasonable means do not exist
for ascertaining the LIBOR rate applicable to such Interest Period, as the case
may be, the Agent shall promptly give notice of such determination to the
Borrower and (i) any notice of new LIBOR Loans (or conversion of existing loans
to LIBOR Loans) previously given by the Borrower and not yet borrowed (or
converted, as the case may be) shall be deemed a notice to make Prime Rate
Loans, and (ii) the Borrower shall be obligated either to prepay or to convert
any outstanding LIBOR Loans on the last day of the then current Interest Period
or Periods with respect thereto.
SECTION 3.4. INDEMNITY. Without prejudice to any other provisions of
this Article III, the Borrower hereby agrees to indemnify each Bank against any
loss or expense which such Bank may sustain or incur as a consequence of any
default by the Borrower in payment when due of any amount due hereunder in
respect of any LIBOR Loan, including, but not limited to, any loss of profit,
premium or penalty incurred by such Bank in respect of funds borrowed by it for
the purpose of making or maintaining such LIBOR Loan, as determined by such
Bank in the exercise of its sole but reasonable discretion. A certificate as
to any such loss or expense shall be promptly submitted by such Bank to the
Borrower and shall, in the absence of manifest error, be conclusive and binding
as to the amount thereof.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at
any time any new law, treaty or regulation, or any change in any existing law,
treaty or regulation, or any interpretation thereof by any governmental
or other regulatory authority charged with the administration thereof, shall
make it unlawful for any Bank to fund any LIBOR Loans which it is committed to
make hereunder with moneys obtained in the Eurodollar market, the Commitment of
such Bank to fund LIBOR Loans shall, upon the happening of such event forthwith
be suspended for the duration of such illegality, and such Bank shall by
written notice to the Borrower and the Agent declare that its Commitment with
respect to such loans has been so suspended and, if and when such illegality
ceases to exist, such suspension shall cease and such Bank shall similarly
notify the Borrower and the Agent. If any such change shall make it unlawful
for any Bank to continue in effect the funding in the applicable Eurodollar
market of any LIBOR Loan previously made by it hereunder, such Bank shall, upon
the happening of such event, notify the Borrower, the Agent and the other Banks
thereof in writing stating the reasons therefor, and the Borrower shall, on the
earlier of (i) the last day of the then current Interest Period or (ii) if
required by such law, regulation or interpretation, on such date as shall be
specified in such notice, either convert all LIBOR Loans to Prime Rate Loans or
Domestic Fixed Rate Loans or prepay all LIBOR Loans to the
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Banks in full. Any such prepayment or conversion shall be subject to the
prepayment penalties prescribed in Section 2.4 hereof.
SECTION 3.6. FUNDING. Each Bank may, but shall not be required to,
make LIBOR Loans hereunder with funds obtained outside the United States.
ARTICLE IV. ADDITIONAL PROVISIONS RELATING TO
DOMESTIC FIXED RATE LOANS
SECTION 4.1. INCREASED COST. If, as a result of any Regulatory
Change:
(a) the basis of taxation of payments to any Bank of the principal of
or interest on any Domestic Fixed Rate Loan or any other amounts payable under
this credit agreement in respect thereof (other than taxes imposed on the total
net income of such Bank ) is changed; or
(b) any reserve, special deposit or similar requirements relating to
any extensions of credit or other assets of, or any deposits with or
liabilities of, any Bank are imposed, modified or deemed applicable; or
(c) any other condition affecting this credit agreement or any of the
Domestic Fixed Rate Loans is imposed on any Bank;
and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining any of the Domestic Fixed Rate Loans is increased, or any
amount received by such Bank hereunder in respect of any such loans is reduced
(such increase in cost and reductions in amounts receivable being herein called
"Increased Costs"), then the Borrower shall pay to such Bank upon demand such
additional amount or amounts as will compensate such Bank for such Increased
Costs (such demand to be accompanied by a statement setting forth the basis for
the calculation thereof). Determinations by such Bank for purposes of this
Section of the effect of any Regulatory Change on its costs of making or
maintaining Domestic Fixed Rate Loans or on amounts receivable by it in respect
of such Domestic Fixed Rate Loans, and of the additional amounts required to
compensate such Bank in respect of any Increased Cost shall be conclusive in
the absence of manifest error. Notwithstanding any other provision of this
credit agreement, after any such demand for compensation by any Bank, Borrower,
upon at least three (3) Cleveland banking days' prior written notice to such
Bank through the Agent, may prepay the affected Domestic Fixed Rate Loans in
full or convert all Domestic Fixed Rate Loans to Prime Rate Loans or LIBOR
Loans regardless of the Domestic Interest Period of any thereof. Any such
prepayment or conversion shall be subject to the prepayment penalty set forth
in Section 2.4 hereof. Each Bank will notify Borrower as promptly as
practicable (with a copy thereof delivered to the Agent) of the existence of
any event which will likely require the payment by Borrower of any such
additional amounts under this Section.
SECTION 4.2. QUOTED RATES. Anything herein to the contrary
notwithstanding, if on or before the first day of the applicable Domestic
Interest Period for any Domestic Fixed
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Rate Loan (i) the Agent determines that for any reason whatsoever, dealers of
recognized standing are not providing quotes for certificates of deposit (in
the applicable amounts) of each C/D Reference Bank for a period of time
comparable to the applicable Domestic Interest Period or (ii) the Agent shall
determine that the rates quoted by such dealers for purposes of computing the
rate of interest on Domestic Fixed Rate Loans for the applicable Domestic
Interest Period do not accurately reflect the cost to the Banks of making or
maintaining such Domestic Fixed Rate Loans for such period, then the Agent
shall give the Borrower prompt notice thereof, and so long as such failure to
quote such rates continues and/or rates fail to accurately reflect costs to the
Banks as aforesaid, the Banks shall be under no obligation to make Domestic
Fixed Rate Loans or to convert Prime Rate Loans or LIBOR Loans into Domestic
Fixed Rate Loans under this credit agreement and the Borrower shall not be
entitled to obtain any Domestic Fixed Rate Loans hereunder until the Agent has
notified the Borrower that the conditions giving rise to the operation of this
Section no longer exist.
SECTION 4.3. CHANGE OF LAW. Notwithstanding any other provision in
this credit agreement, in the event that any Regulatory Change shall make it
unlawful for any Bank to fund any Domestic Fixed Rate Loans, the Commitment of
such Bank to fund Domestic Fixed Rate Loans shall, upon the happening of
such event forthwith be suspended for the duration of such illegality, and such
Bank shall by written notice to the Borrower and the Agent declare that its
Commitment with respect to such loans has been so suspended and, if and when
such illegality ceases to exist, such suspensions shall cease and such Bank
shall similarly notify the Borrower and the Agent. If any such change shall
make it unlawful for any Bank to continue in effect the funding of Domestic
Fixed Rate Loans, such Bank shall, upon the happening of such event, notify the
Borrower, the Agent and the other Banks thereof in writing stating the reasons
therefor, and the Borrower shall, on the earlier of (i) the last day of the
then current Domestic Interest Period or (ii) if required by such Regulatory
Change, on such date as shall be specified on such notice, either convert all
Domestic Fixed Rate Loans to Prime Rate Loans or LIBOR Loans or prepay all
Domestic Fixed Rate Loans to the Banks in full. Any such prepayment or
conversion shall be subject to the prepayment penalties prescribed in Section
2.4 hereof.
ARTICLE V. OPENING COVENANTS
Prior to or concurrently with the execution and delivery of this
credit agreement, Borrower shall furnish to each Bank the following:
SECTION 5.1. RESOLUTIONS. Certified copies of the resolutions of the
board of directors of Borrower evidencing approval of the execution of this
credit agreement and the execution and delivery of the Notes as provided for
herein.
SECTION 5.2. LEGAL OPINION. A favorable opinion of counsel for
Borrower as to the matters referred to in Sections 7.1, 7.2, 7.3 and 7.4 of
this credit agreement and such other matters as Agent and the Banks may
reasonably request.
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SECTION 5.3. CERTIFICATE OF INCUMBENCY. A certificate of the
secretary or assistant secretary of Borrower certifying the names of the
officers of Borrower authorized to sign this credit agreement, and the Notes,
together with the true signatures of such officers.
SECTION 5.4. GUARANTY OF PAYMENT. The Guaranty of Payment duly
executed by the presently existing Consolidated Subsidiaries, which Guaranty of
Payment shall be substantially in the form of Exhibit C attached hereto, with
the blanks appropriately filled.
SECTION 5.5. RESOLUTIONS OF CONSOLIDATED SUBSIDIARIES. Certified
copies of the resolutions of the Board of Directors of each Consolidated
Subsidiary evidencing approval of the execution of the Guaranty of Payment by
each such Consolidated Subsidiary, together with a certificate of the secretary
or assistant secretary of each such Consolidated Subsidiary certifying the
names of the officers of such Subsidiary authorized to sign the Guaranty of
Payment, together with the true signatures of such officers.
ARTICLE VI. COVENANTS
Borrower agrees that so long as the Commitments remain in effect and
thereafter until the principal of and interest on all Notes and all other
payments due hereunder shall have been paid in full, Borrower will perform and
observe and will cause each Consolidated Subsidiary to perform and observe, all
of the following provisions that are on their respective parts to be complied
with, namely:
SECTION 6.1. INSURANCE. Borrower and its Consolidated Subsidiaries
will (a) maintain insurance to such extent and against such hazards and
liabilities as is commonly maintained by companies similarly situated, and
(b) forthwith upon any Bank's written request, furnish to such Bank such
information about any such company's insurance as that Bank may from time to
time reasonably request, which information shall be prepared in form and detail
satisfactory to such Bank and certified by an officer of such company.
SECTION 6.2. MONEY OBLIGATIONS. Borrower and each Consolidated
Subsidiary will pay when due all taxes, and assessment for which they may
be or become liable except only those so long as and to the extent that the
same is contested in good faith by appropriate and timely proceedings.
SECTION 6.3. FINANCIAL STATEMENTS. Borrower will furnish to each Bank
(a) within sixty (60) days after the end of each of the first
three quarter-annual periods of each of its fiscal year (and, in any
event, in each case as soon as prepared), balance sheets of Borrower
and its Consolidated Subsidiaries as at the end of that period and
their profit and loss statements and reconciliations of surplus for
that period, all prepared on a Consolidated basis and in form and
detail satisfactory to the Banks and certified by a financial officer
of Borrower;
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(b) within ninety (90) days after the end of each of its fiscal
years (and, in any event, in each case and as soon as available), a
complete annual audit report of Borrower and its Consolidated
Subsidiaries for that year prepared on a Consolidated basis and in
form and detail of Borrower's February 28, 1993 annual report (or in
other form and detail satisfactory to the Banks) and certified by KPMG
Peat Marwick or another independent public accountant satisfactory to
the Banks, together with a certificate by the accountant setting forth
the Possible Defaults coming to its attention during the course of its
audit or, if none, a statement to that effect;
(c) within sixty (60) days of the closing date of a Corporate
Acquisition, Consolidated balance sheets of Borrower and the Target
Company as of the date of the Corporate Acquisition and Consolidated
profit and loss statements and reconciliations of surplus as of that
date, all prepared on a Consolidated basis and in form and detail
satisfactory to the Banks and certified by a financial officer of
Borrower;
(d) as soon as available, copies of all notices, reports,
definitive proxy statements and other similar documents sent by
Borrower to its shareholders, to the holders of any of its debentures
or bonds or the trustee of any indenture securing the same or pursuant
to which they may be issued, to any securities exchange or to the
Securities and Exchange Commission or any similar federal agency
having regulatory jurisdiction over the issuance of Borrower's
securities; and
(e) forthwith upon any Bank's written request, such other
information about the financial condition, properties and operations
of Borrower or any of its Consolidated Subsidiaries as such Bank may
from time to time reasonably request, which information shall be
submitted in form and detail satisfactory to such Bank and certified
by an officer of the company or companies in question.
SECTION 6.4. FINANCIAL RECORDS. Borrower and each Consolidated
Subsidiary will at all times maintain true and complete records and books of
account including, without limiting the generality of the foregoing,
appropriate reserves for possible losses and liabilities, all in accordance
with generally accepted accounting principles consistently applied, and at all
reasonable times permit the Banks to examine that company's books and records
and to make excerpts therefrom and transcripts thereof.
SECTION 6.5. FRANCHISES. Borrower and each Consolidated Subsidiary
will preserve and maintain at all times its existence, rights and franchises;
provided, that this Section shall not prevent (i) any Company (other than
Borrower) from failing to preserve or maintain its corporate existence or
prevent any Company (other than Borrower) from failing to preserve or maintain
its rights or franchise so long as such failure shall not result in any
Material adverse change in Borrower's financial condition, properties or
business, (ii) any Subsidiary from merging with any Company so long as such
merger shall not result in any Material adverse change in Borrower's financial
condition, properties or business, or (iii) any merger, consolidation or
transfer permitted by Section 6.11 hereof.
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SECTION 6.6. ERISA COMPLIANCE. Neither Borrower nor any Consolidated
Subsidiary will incur any Material accumulated funding deficiency within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations thereunder, or any Material liability to
the Pension Benefit Guaranty Corporation, established thereunder in connection
with any Plan. Borrower will furnish to the Banks (i) as soon as possible and
in any event within thirty (30) days after Borrower or such Consolidated
Subsidiary knows or has reason to know that any Reportable Event with respect
to any Plan has occurred, a statement of the chief financial officer of
Borrower or such Consolidated Subsidiary setting forth details as to such
Reportable Event and the action which Borrower or such Consolidated Subsidiary
proposes to take with respect thereto, together with a copy of the notice of
such Reportable Event given to the Pension Benefit Guaranty Corporation if a
copy of such notice is available to Borrower or such Consolidated Subsidiary,
(ii) promptly after the filing thereof with the Internal Revenue Service,
copies of each annual report with respect to each Plan established or
maintained by Borrower or such Consolidated Subsidiary for each plan year,
including (x) where required by law, a statement of assets and liabilities of
such Plan as of the end of such plan year and statements of changes in fund
balance and in financial position, or a statement of changes in net assets
available for plan benefits, for such plan year, certified by KPMG Peat
Marwick, or another independent public accountant satisfactory to the Banks and
(y) an actuarial statement of such Plan applicable to such plan year, certified
by William M. Mercer, Inc. or an enrolled actuary of recognized standing
acceptable to the Banks, and (iii) promptly after receipt thereof a copy of any
notice Borrower or such Consolidated Subsidiary, or any member of the
Controlled Group may receive from the Pension Benefit Guaranty Corporation or
the Internal Revenue Service with respect to any Plan administered by Borrower
or such Consolidated Subsidiary; provided, that this latter clause shall not
apply to notices of general application promulgated by the Pension Benefit
Guaranty Corporation or the Internal Revenue Service. Borrower will promptly
notify the Banks of any taxes assessed, proposed to be assessed or which
Borrower has reason to believe may be assessed against Borrower by the Internal
Revenue Service with respect to any Plan.
SECTION 6.7. BORROWINGS. Borrower will not create, incur or have
outstanding or permit any Consolidated Subsidiary to create, incur or have
outstanding any obligation for borrowed money or any Funded Indebtedness of any
kind; provided, that this Section shall not apply to (i) the loans evidenced by
the Notes issued pursuant to this credit agreement; or (ii) any loan obtained
by Borrower and Subordinated in favor of Borrower's Debt to the Banks pursuant
to a subordination agreement being in such form and substances as Banks may
require.
SECTION 6.8. LIENS. Borrower will not and will not permit any
Consolidated Subsidiary to (a) acquire any property subject to any inventory
consignment, lease, land contract or other title retention contract, (b) sell
or otherwise transfer any Receivables, whether with or without recourse, or (c)
suffer or permit any property now owned or hereafter acquired to be or become
encumbered by any mortgage, security interest, financing statement or lien of
any kind or nature; provided, that this Section shall not apply to the
following:
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(i) liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings;
(ii) other liens incidental to the conduct of its business or the
ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or
credit, and which do not in the aggregate materially detract from the
value of its property or assets or materially impair the use thereof
in the operation of its business;
(iii) liens existing on either real or personal property at the time
such property is acquired by Borrower or a Consolidated Subsidiary
through a Corporate Acquisition; provided, that any such lien (a)
secures obligations incurred pursuant to an industrial revenue bond
financing, or (b) encumbers property other than Receivables or
inventory;
(iv) any transfer of a check or other medium of payment for deposit
or collection through normal banking channels or any similar
transaction in the normal course of business;
(v) any financing statement perfecting only a security interest
permitted by clauses (iii) and (viii) of this Section;
(vi) easements, restrictions, minor title irregularities and
similar matters having no adverse effect as a practical matter on the
ownership or use of any of Borrower's or a Consolidated Subsidiary's
real property;
(vii) any acquisition of property subject to any inventory
consignment, lease, land contract or other title retention contract,
the fair market value of which is not Material when aggregated with
the fair market value of all other property subject to any inventory
consignment, lease, land contract or other title retention contract
acquired by any Company; or
(viii) any mortgage, security interest or lien securing only
indebtedness incurred to the Banks hereunder.
SECTION 6.9. REGULATIONS U AND X. Borrower will not nor will it
permit any Subsidiary to take any action that would result in any
non-compliance of the loans made hereunder with Regulations U or X of the Board
of Governors of the Federal Reserve System.
SECTION 6.10. LOANS, ADVANCES AND INVESTMENTS. Borrower will not
make or permit to remain outstanding or permit any Consolidated Subsidiary to
make or permit to remain outstanding any loan or advance to, or own,
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any person or entity, or be
or become a Guarantor of any kind except that the Borrower or any Consolidated
Subsidiary may
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(i) own, purchase or acquire all of the outstanding stock,
obligations or securities of a Consolidated Subsidiary or of a Target
Company which immediately after such purchase or acquisition will be a
Consolidated Subsidiary or will become a division of Borrower pursuant
to Section 6.14 hereof;
(ii) make any advance or loan obtained by any Subsidiary from
Borrower or from another Subsidiary;
(iii) make advances and loans to employees of the Companies so long
as the amount of such advances and loans at any one time outstanding
for all the Companies shall not exceed $500,000 in the aggregate and
$200,000 to any one officer or employee;
(iv) make advances, commissions and loans to customers and
suppliers so long as the aggregate unpaid principal balance of all
such advances, commissions and loans outstanding at any one time does
not exceed the sum of $50,000;
(v) make any investment in banker's acceptances and/or treasury
bills sold by any financial institution having a capitalization of at
least $100,000,000, accompanied by an agreement for repurchase on
behalf of such financial institution;
(vi) make any investment in commercial paper maturing within one
(1) year which at the time of such investment is assigned the highest
quality rating in accordance with the rating systems employed by
either Moody's Investors Service, Inc. or Standard & Poor's
Corporation and/or time deposits maturing within one (1) year in any
Canadian or other off-shore bank having a capitalization of at least
$100,000,000;
(vii) make any investment in short-term non-voting securities for
investment portfolio purposes ("short-term securities") and any other
stocks, bonds or securities of any kind not otherwise permitted by
this Section;provided, that the aggregate amount of all such
investments does not exceed $8,000,000, and further provided, that the
aggregate amount of investments other than investments in short-term
securities does not exceed the greater of $4,000,000 or 10% of
Consolidated Net Worth;
(viii) make any endorsement of a check or other medium of payment for
deposit or collection through normal banking channels or any similar
transaction in the normal course of business;
(ix) make any investment in direct obligations of the United States
of America or in certificates of deposit issued by a member bank of
the Federal Reserve System;
(x) guarantee the obligations of Borrower or a Consolidated
Subsidiary or an entity which immediately upon consummation of the
transaction involving the aforesaid guaranty will become a
Consolidated Subsidiary, if the obligation being guaranteed is an
obligation permitted to be incurred by Borrower under this credit
agreement and no
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Possible Default exists hereunder nor would any begin to exist
immediately after the execution and delivery of the guaranty; or
(xi) execute and deliver to Agent on behalf of the Banks a Guaranty
of Payment.
SECTION 6.11. MERGER AND PURCHASE AND SALE OF ASSETS. Neither
Borrower nor any Consolidated Subsidiary will (a) be a party to any
consolidation or merger or (b) purchase all or a substantial part of the assets
of any corporation or other business enterprise, or (c) lease, sell or
otherwise transfer any assets (other than such chattels, if any, as may have
become obsolete or no longer useful in the continuance of its present business)
except in the normal course of its present business, except that this Section
shall not apply to the following:
(i) any merger of a Consolidated Subsidiary into Borrower or to
Borrower's acquisition of any or all of the assets of a Consolidated
Subsidiary if no Possible Default shall then exist or immediately
thereafter will begin to exist;
(ii) any merger or acquisition which does not result in a violation
of the provisions of Section 6.14 hereof; or
(iii) any merger of a Target Company into a Consolidated Subsidiary
or a Consolidated Subsidiary into a Target Company (provided that the
surviving corporation is a Consolidated Subsidiary), provided that
such merger is permitted by clause (ii) of this Section.
SECTION 6.12. DIVIDENDS. Neither Borrower nor any Consolidated
Subsidiary will pay or commit itself to pay any Capital Distributions at any
time except as follows: So long as no Possible Default shall have occurred,
(i) Borrower may purchase its own stock worth up to $500,000 during each fiscal
year, and (ii) the Companies may otherwise pay Capital Distributions during
each fiscal year of Borrower in an amount not to exceed fifty percent (50%) of
an amount equal to the aggregate of Borrower's Consolidated Net Income from
Borrower's current quarter-annual period and the immediately preceding eleven
(11) quarter-annual periods of Borrower divided by three (3) (on a
non-cumulative basis).
SECTION 6.13. NOTICE. Borrower will cause its treasurer, or in his
absence another officer designated by the treasurer, to promptly notify the
Banks whenever any Possible Default may occur hereunder or any other
representation or warranty made in Article VII hereof or elsewhere in this
credit agreement or in any Related Writing may for any reason cease in any
material respect to be true and complete.
SECTION 6.14. ACQUISITIONS. Borrower may use the proceeds of any loan
obtained hereunder to make a Corporate Acquisition so long as Borrower
complies with the following conditions:
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(i) It furnishes to each of the Banks the pro forma financial
statements required by clause (iv) of Section 2.1B hereof.
(ii) The Target Company becomes a Consolidated Subsidiary or is
merged into the Borrower and becomes a division thereof.
(iii) If the Target Company becomes a Consolidated Subsidiary, such
Consolidated Subsidiary becomes a Guarantor of Payment by executing a
Guaranty of Payment substantially in the form of Exhibit B hereto,
with appropriate insertions.
(iv) No Possible Default shall then exist or immediately thereafter
will begin to exist.
SECTION 6.15. FUNDED DEBT-TO-WORTH RATIO. Borrower will not suffer
or permit the ratio of its Consolidated Funded Indebtedness to its Consolidated
Net Worth at any time to exceed 1.25 to 1.00.
SECTION 6.16. CONSOLIDATED NET WORTH. Borrower will not suffer or
permit its Consolidated Net Worth at any time to fall below an amount
equal to the aggregate of (i) Thirty-Eight Million Dollars ($38,000,000), plus
(ii) fifty percent (50%) of Borrower's cumulative Consolidated Net Income after
February 28, 1993, minus (iii) the aggregate amount of any intangibles created
as the result of a Corporate Acquisition (determined on a cumulative basis)
after the date of this credit agreement.
SECTION 6.17. WORKING CAPITAL. Borrower will maintain at all times a
ratio of Current Assets to Current Liabilities of no less than 2.00 to
1.00.
SECTION 6.18. INTEREST COVERAGE RATIO. Borrower shall maintain at
all times a ratio of (a) (i) Consolidated Net Income, plus (ii) its
Consolidated taxes including, but not limited to, Consolidated taxes on
Consolidated Net Income or based on Consolidated Net Income and the amount of
any deferred Consolidated taxes, plus (iii) all interest on all Consolidated
indebtedness of the Companies (including Subordinated indebtedness)
accrued during the period in question to (b) all interest on all Consolidated
indebtedness of the Companies (including Subordinated indebtedness) accrued
during the period in question, of no less than 3.00 to 1.00 until February 28,
1997 and 3.50 to 1.00 thereafter, based upon Borrower's Consolidated financial
statements for the most recent calendar quarter and the previous three (3)
calendar quarters.
SECTION 6.19. ENVIRONMENTAL COMPLIANCE. Borrower and each Subsidiary
will comply in all material respects with any and all Environmental Laws
including, without limitation, all Environmental Laws in jurisdictions in which
such Company owns or operates a facility or site, arranges for disposal or
treatment of hazardous substances, solid waste or other wastes, accepts for
transport any hazardous substances, solid waste or other wastes or holds any
interest in real property or otherwise. Each Company will furnish to the Banks
promptly after receipt thereof a copy of any notice such Company may receive
from any
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governmental authority, private person or entity or otherwise that any
litigation or proceeding pertaining to any environmental, health or safety
matter has been filed or is threatened against any such Company, any real
property in which any such Company holds any interest or any past or present
operation of any such Company. Neither Borrower nor any Subsidiary will allow
the release or disposal of hazardous waste, solid waste or other wastes on,
under or to any real property in which any Company holds any interest or
performs any of its operations, in violation of any Environmental Law. As used
in this subsection "litigation or proceeding" means any demand, claim, notice,
suit, suit in equity, action, administrative action, investigation or inquiry
whether brought by any governmental authority, private person or entity or
otherwise. Each Company shall defend, indemnify and hold the Banks harmless
against all costs, expenses, claims, damages, penalties and liabilities of
every kind or nature whatsoever (including attorneys fees) arising out of or
resulting from the noncompliance of any Company with any Environmental Law.
SECTION 6.20. PLAN. Neither Borrower nor any Consolidated Subsidiary
will suffer or permit any Plan to be amended if, as a result of such amendment,
the current liability under the Plan is increased to such an extent that
security is required pursuant to section 307 of the Employee Retirement Income
Security Act of 1974, as amended from time to time. As used herein, "current
liability" means current liability as defined in section 307 of such Act.
ARTICLE VII. WARRANTIES
Subject only to such exceptions, if any, as may be fully disclosed in
an officer's certificate or written opinion of counsel furnished by Borrower to
each Bank prior to the execution and delivery hereof, Borrower represents and
warrants as follows:
SECTION 7.1. EXISTENCE. Borrower is a duly organized and validly
existing Ohio corporation and is in good standing in the office of Ohio's
Secretary of State. Each Consolidated Subsidiary is a duly organized and
validly existing corporation and is in good standing in the sate in which it is
incorporated. Borrower and each Consolidated Subsidiary are duly qualified and
authorized to do business where it owns substantial property or transactions
substantial business.
SECTION 7.2. RIGHT TO ACT. No registration with or approval of any
governmental agency of any kind is required for the due execution and delivery
or for the enforceability of this credit agreement and any Note issued pursuant
to this credit agreement. Borrower has legal power and right to execute and
deliver this credit agreement and any Note issued pursuant to this credit
agreement and to perform and observe the provisions of this credit agreement
and any Note issued pursuant hereto. By executing and delivering this credit
agreement and any Note issued pursuant to this credit agreement and by
performing and observing the provisions of this credit agreement and any Note
issued pursuant hereto, Borrower will not violate any existing provision of its
articles of incorporation, code of regulations or by-laws or any applicable law
or violate or otherwise become in default under any existing contract or other
obligation binding upon Borrower. The officers executing and delivering
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this credit agreement on behalf of Borrower have been duly authorized to do so,
and this credit agreement and any Note, when executed, are legally binding upon
Borrower in every respect, enforceable in accordance with their terms.
SECTION 7.3. LITIGATION AND LIENS. No litigation or proceeding is
pending or threatened which in the opinion of Borrower's counsel might, if
successful, adversely affect any Company to a substantial extent. The Internal
Revenue Service has not alleged any material default by any Company in the
payment of any tax or threatened to make any material assessment in respect
thereof.
SECTION 7.4. GUARANTIES OF CONSOLIDATED SUBSIDIARIES. Each
Consolidated Subsidiary has the legal power and right to execute and deliver
the Guaranty of Payment executed by it pursuant to this credit agreement and to
perform and observe the provisions thereof. By executing and delivering such
Guaranty of Payment and by performing and observing the provisions thereof,
such Consolidated Subsidiary will not violate any existing provision of its
articles of incorporation, code of regulations or by-laws or any applicable law
or violate or otherwise become in default under any existing contract or other
obligation binding upon such Consolidated Subsidiary. The officers executing
and delivering such Guaranty of Payment on behalf of such Consolidated
Subsidiary have been duly authorized to do so, and such Guaranty of Payment,
when executed, shall be legally binding upon such Consolidated Subsidiary in
every respect, enforceable in accordance with its terms.
SECTION 7.5. ERISA COMPLIANCE. Neither Borrower nor any Consolidated
Subsidiary has incurred any Material accumulated funding deficiency within the
meaning of the Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations thereunder. No Reportable Event has occurred
with respect to any Plan. The Pension Benefit Guaranty Corporation,
established thereunder has not asserted that Borrower or any Consolidated
Subsidiary has incurred any Material liability in connection with any Plan. No
lien has been attached and no person has threatened to attach a lien on any
property of Borrower or any Consolidated Subsidiary as a result of Borrower's
or any Consolidated Subsidiary's failing to comply with such act or regulation.
SECTION 7.6. ENVIRONMENTAL LAWS. Borrower and each of its Subsidiaries
is, to the best of Borrower's knowledge after due diligence, in compliance in
all material respects with all applicable Environmental Laws (other than laws
and regulations the validity or applicability of which is being contested by
Borrower in good faith by appropriate proceedings diligently prosecuted) in all
jurisdictions where Borrower or any of its Subsidiaries is presently doing
business.
SECTION 7.7. SOLVENCY. Borrower has received consideration which is
the reasonable equivalent value of the obligations and liabilities that
Borrower has incurred to the Banks. Neither Borrower nor any Consolidated
Subsidiary is insolvent as defined in any applicable state or federal statute,
nor will Borrower or any Consolidated Subsidiary be rendered insolvent by the
execution and delivery of this credit agreement of any Note to the Banks.
Neither Borrower nor any Consolidated Subsidiary is engaged or is about to
engage in any business or transaction for which the assets retained by it shall
be an unreasonably small
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capital, taking into consideration the obligations to the Banks incurred
hereunder. Neither Borrower nor any Consolidated Subsidiary intends to, nor
does it believe that it will, incur debts beyond its ability to pay them as
they mature.
SECTION 7.8. FINANCIAL STATEMENTS. Borrower's and its Consolidated
Subsidiaries' Consolidated financial statements dated February 28, 1993,
heretofore furnished to each Bank, are true and complete, have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with those used by Borrower and its Consolidated Subsidiaries during
Borrower's immediately preceding full fiscal year and fairly present Borrower's
and its Consolidated Subsidiaries' financial condition as of that date and the
results of their operations for the fiscal year then ending. Since that date
there has been no Material adverse change in Borrower's and its Consolidated
Subsidiaries' financial condition, properties or business nor any change in
their accounting procedures.
SECTION 7.9. ACTUARIAL VALUATION REPORTS. To the best of Borrower's
knowledge, the actuarial valuation reports prepared and certified by the
actuaries and employee benefit consultants of Borrower and its Consolidated
Subsidiaries, with respect to each Plan as of the end of the Borrower's
preceding fiscal year, copies of which actuarial valuation reports have been
furnished to the Banks, fairly present the actuarial condition of each Plan as
of the end of Borrower's preceding fiscal year and the annual contribution
requirements for the year in which this credit agreement is executed.
SECTION 7.10. REGULATIONS. Borrower is not engaged principally or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States of America). Neither the granting of any loans hereunder (or any
conversion thereof) nor the use of the proceeds of such loans will violate, or
be inconsistent with, the provisions of Regulation U or X of said Board of
Governors.
SECTION 7.11. DEFAULTS. No Possible Default exists hereunder, nor will
any begin to exist immediately after the execution and delivery hereof.
ARTICLE VIII. EVENTS OF DEFAULT
Each of the following shall constitute an event of default hereunder:
SECTION 8.1. PAYMENTS. If the principal of or interest on any Note or
any commitment fee shall not be paid in full punctually when due and payable
and shall remain unpaid for a period of five (5) consecutive days after the
giving of written notice thereof to Borrower.
SECTION 8.2. COVENANTS. If any Company shall fail or omit to perform
and observe any agreement or other provision (other than those referred to in
Section 8.1 hereof) contained or referred to in this credit agreement or any
Related Writing that is on such
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<PAGE> 34
Company's part to be complied with, and that Possible Default shall not have
been fully corrected within thirty (30) days after the giving of written notice
thereof to Borrower by Agent or any Bank that the specified Possible Default is
to be remedied.
SECTION 8.3. WARRANTIES. If any representation, warranty or
statement made in or pursuant to this credit agreement or any Related
Writing or any other material information furnished by any Company to the Banks
or any thereof or any other holder of any Note, shall be false or erroneous in
any material respect.
SECTION 8.4. CROSS DEFAULT. If Borrower fails to notify the Agent
within ten (10) days after Borrower or any of its Consolidated Subsidiaries
default in the payment of principal or interest due and owing upon any other
obligation for borrowed money aggregating for any fiscal year in excess
of One Hundred Thousand Dollars ($100,000) beyond any period of grace provided
with respect thereto or in the performance of any other agreement, term or
condition contained in any agreement under which such obligation is created, if
the effect of such default is to accelerate the maturity of such indebtedness
or to permit the holder thereof to cause such indebtedness to become due prior
to its stated maturity.
SECTION 8.5. TERMINATION OF PLAN. If (a) any Reportable Event occurs
and the Banks, in their sole determination, deem such Reportable Event to
constitute grounds (i) for the termination of any Plan by the Pension Benefit
Guaranty Corporation or (ii) for the appointment by the appropriate United
States district court of a trustee to administer any Plan and such Reportable
Event shall not have been fully corrected or remedied to the full satisfaction
of the Banks within thirty (30) days after giving of written notice of such
determination to Borrower by the Banks or (b) any Plan shall be terminated
within the meaning of Title IV of the Employee Retirement Income Security Act
of 1974, as amended, or (c) a trustee shall be appointed by the appropriate
United States district court to administer any Plan, or (d) the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan.
SECTION 8.6. SOLVENCY. If Borrower or a Consolidated Subsidiary
representing in excess of ten percent (10%) of total consolidated assets of
Borrower and its Consolidated Subsidiaries shall (a) discontinue business,
(except as the result of a merger into, or a transfer of its assets and
business to, Borrower or another Consolidated Subsidiary or the sale of the
stock or assets of any Consolidated Subsidiary), or (b) generally not pay its
debts as such debts become due, or (c) make a general assignment for the
benefit of creditors, or (d) apply for or consent to the appointment of a
receiver, a custodian, a trustee, an interim trustee or liquidator of itself or
all or a substantial part of its assets, or (e) be adjudicated a debtor or have
entered against it an order for relief under Title 11 of the United States
Code, as the same may be amended from time to time, or (f) file a voluntary
petition in bankruptcy or file a petition or an answer seeking reorganization
or an arrangement with creditors or seeking to take advantage of any other law
(whether federal or state) relating to relief of debtors, or admit (by answer,
by default or otherwise) the material allegations of a petition filed against
it in any bankruptcy, reorganization, insolvency or other proceeding (whether
federal or state) relating to relief of debtors, or (g) suffer or permit to
continue unstayed and in effect for thirty (30)
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consecutive days any judgment, decree or order, entered by a court of competent
jurisdiction, which approves a petition seeking its reorganization or appoints
a receiver, custodian, trustee, interim trustee or liquidator of itself or of
all or a substantial part of its assets, or (h) take or omit to take any other
action in order thereby to effect any of the foregoing.
ARTICLE IX. REMEDIES UPON DEFAULT
Notwithstanding any contrary provision or inference herein or
elsewhere,
SECTION 9.1. OPTIONAL DEFAULTS. If any event of default referred to in
Section 8.1, 8.2., 8.3, 8.4 or 8.5 hereof shall occur, the holders of any of
the Commitments or, if there is any borrowing hereunder, the holders of any of
the Notes shall have the right in their discretion, by directing the Agent, on
behalf of the Banks, to give written notice to Borrower, to
(a) terminate the Commitments and the credits hereby established, if
not theretofore terminated, and forthwith upon such election the obligations of
Banks, and each thereof, to make any further loan or loans hereunder
immediately shall be terminated, and/or
(b) accelerate the maturity of all of Borrower's Debt to the Banks
(if it be not already due and payable), whereupon all of Borrower's Debt to the
Banks shall become and thereafter be immediately due and payable in full
without any presentment or demand and without any further or other notice of
any kind, all of which are hereby waived by Borrower.
SECTION 9.2. AUTOMATIC DEFAULTS. If any event of default referred to
in Section 8.6 hereof shall occur,
(a) all of the Commitments and the credits hereby established shall
automatically and forthwith terminate, if not theretofore terminated, and no
Bank thereafter shall be under any obligation to grant any further loan or
loans hereunder, and
(b) the principal of and interest on any Notes, then outstanding, and
all of Borrower's Debt to the Banks shall thereupon become and thereafter be
immediately due and payable in full (if it be not already due and payable), all
without any presentment, demand or notice of any kind, which are hereby waived
by Borrower.
SECTION 9.3. OFFSETS. If there shall occur or exist any Possible
Default referred to in Section 8.6 hereof or if the maturity of the Notes is
accelerated pursuant to Section 9.1 or 9.2 hereof, each Bank shall have the
right at any time to set off against, and to appropriate and apply toward the
payment of, any and all Debt then owing by Borrower to that Bank (including,
without limitation, any participation purchased or to be purchased pursuant to
Section 9.4 hereof), whether or not the same shall then have matured, any and
all deposit balances and all other indebtedness then held or owing by that Bank
to or for the credit or account of Borrower, all without notice to or demand
upon Borrower or any other person, all such notices and demands being hereby
expressly waived by Borrower.
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<PAGE> 36
SECTION 9.4. EQUALIZATION PROVISION. Each Bank agrees with the other
Banks that if it at any time shall obtain any Advantage over the other Banks in
respect of Borrower's Debt to the Banks (except under Article III or Article IV
hereof), it will purchase from the other Banks, for cash and at par, such
additional participation in Borrower's Debt to the Banks as shall be necessary
to nullify the Advantage. If any said Advantage resulting in the purchase of an
additional participation as aforesaid shall be recovered in whole or in part
from the Bank receiving the Advantage, each such purchase shall be rescinded,
and the purchase price restored (but without interest unless the Bank receiving
the Advantage is required to pay interest on the Advantage to the person
recovering the Advantage from such Bank) ratably to the extent of the recovery.
Each Bank further agrees with the other Banks that if it at any time shall
receive any payment for or on behalf of Borrower on any indebtedness owing by
Borrower to that Bank by reason of offset of any deposit or other indebtedness,
it will apply such payment first to any and all indebtedness owing by Borrower
to that Bank pursuant to this credit agreement (including, without limitation,
any participation purchased or to be purchased pursuant to this Section 9.4)
until Borrower's Debt has been paid in full. Borrower agrees that any Bank so
purchasing a participation from the other Banks pursuant to this Section may
exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Bank were a direct creditor
of Borrower in the amount of such participation.
ARTICLE X. THE AGENT
The Banks authorize Society National Bank and Society National Bank
hereby agrees to act as Agent for the Banks in respect of this credit agreement
upon the terms and conditions set forth elsewhere in this credit agreement, and
upon the following terms and conditions:
SECTION 10.1. APPOINTMENT AND AUTHORIZATION. Each Bank hereby
irrevocably appoints and authorizes the Agent to take such action as Agent on
its behalf and to exercise such powers hereunder as are delegated to the Agent
by the terms hereof, together with such powers as are reasonably incidental
thereto. Neither the Agent nor any of its directors, officers, attorneys or
employees shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct.
SECTION 10.2. NOTE HOLDERS. The Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with it signed by such payee and in form satisfactory to the Agent.
SECTION 10.3. CONSULTATION WITH COUNSEL. The Agent may consult with
legal counsel selected by it and shall not be liable for any action taken or
suffered in good faith by it in accordance with the opinion of such counsel.
SECTION 10.4. DOCUMENTS. The Agent shall not be under a duty to
examine into or pass upon the validity, effectiveness, genuineness or value of
this credit agreement, the
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<PAGE> 37
Notes, any other Related Writing furnished pursuant hereto or in connection
herewith or the value of any collateral obtained hereunder, and the Agent shall
be entitled to assume that the same are valid, effective and genuine and what
they purport to be.
SECTION 10.5. AGENT AND AFFILIATES. With respect to the loans made
hereunder, the Agent shall have the same rights and powers hereunder as any
other Bank and may exercise the same as though it were not the Agent, and the
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or affiliate
of the Borrower.
SECTION 10.6. KNOWLEDGE OF DEFAULT. It is expressly understood and
agreed that the Agent shall be entitled to assume that no Possible Default has
occurred and is continuing, unless the Agent has been notified by a Bank in
writing that such Bank considers that a Possible Default has occurred and is
continuing and specifying the nature thereof.
SECTION 10.7. ACTION BY AGENT. So long as the Agent shall be entitled,
pursuant to Section 10.6 hereof, to assume that no Possible Default shall have
occurred and be continuing, the Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights which may
be vested in it by, or with respect to taking or refraining from taking any
action or actions which it may be able to take under or in respect of, this
credit agreement. The Agent shall incur no liability under or in respect of
this credit agreement by acting upon any notice, certificate, warranty or other
paper or instrument believed by it to be genuine or authentic or to be signed
by the proper party or parties, or with respect to anything which it may do or
refrain from doing in the reasonable exercise of its judgment, or which may
seem to it to be necessary or desirable in the premises.
SECTION 10.8. NOTICES, DEFAULT, ETC. In the event that the Agent shall
have acquired actual knowledge of any Possible Default, the Agent shall
promptly notify the Banks and will take such action and assert such rights
under this credit agreement as the holders of any of the Commitments, or if
there is any borrowing hereunder, the holders of any of the Notes shall direct
and the Agent shall inform the other Banks in writing of the action taken. The
Agent may take such action and assert such rights as it deems to be advisable,
in its discretion, for the protection of the interests of the holders of the
Notes.
SECTION 10.9. INDEMNIFICATION. The Banks agree to indemnify the Agent
(to the extent not reimbursed by the Borrower) ratably according to the
respective principal amounts of their Commitments from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in its capacity as
agent in any way relating to or arising out of this credit agreement or any
action taken or omitted by the Agent with respect to this credit agreement,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence, willful
misconduct or from any action taken or omitted by the Agent in any capacity
other than as agent under this credit agreement.
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<PAGE> 38
ARTICLE XI. MISCELLANEOUS
SECTION 11.1. BANKS' INDEPENDENT INVESTIGATION. Each Bank by its
signature to this credit agreement acknowledges and agrees that the Agent has
made no representation or warranty, express or implied, with respect to the
creditworthiness, financial condition, or any other condition of Borrower or
any Subsidiary or with respect to the statements contained in any information
memorandum furnished in connection herewith or in any other oral or written
communication between the Agent and such Bank. Each Bank represents that it
has made and shall continue to make its own independent investigation of the
creditworthiness, financial condition and affairs of Borrower and any
Subsidiary in connection with the extension of credit hereunder, and agrees
that the Agent has no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information with
respect thereto (other than such notices as may be expressly required to be
given by Agent to the Banks hereunder), whether coming into its possession
before the granting of the first loans or at any time or times thereafter.
SECTION 11.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of
dealing on the part of Agent, any Bank or the holder of any Note in exercising
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder. The remedies herein provided are cumulative
and in addition to any other rights, powers or privileges held by operation of
law, by contract or otherwise.
SECTION 11.3. AMENDMENTS, CONSENTS. No amendment, modification,
termination, or waiver of any provision of this credit agreement or of the
Notes, nor consent to any variance therefrom, shall be effective unless the
same shall be in writing and signed by the holders of fifty-one percent (51%)
(by amount) of Borrower's Debt to the Banks or if there is no borrowing
hereunder, fifty-one percent (51%) (by amount) of the Commitments and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. Unanimous consent of the Commitments, or if
there is any borrowing hereunder, the holders of one hundred per cent (100%)
(by amount) of the Notes shall be required with respect to (i) the extension of
maturity of the Notes, or the payment date of interest thereunder, (ii) any
reduction in the rate of interest on the Notes, or in any amount of principal
or interest due on any Note, or in the manner of pro rata application of any
payments made by Borrower to the Banks hereunder, or (iii) any change in any
percentage voting requirement in this credit agreement. Notice of amendments
or consents ratified by the Banks hereunder shall immediately be forwarded by
Borrower to all Banks. Each Bank or other holder of a Note shall be bound by
any amendment, waiver or consent obtained as authorized by this section,
regardless of its failure to agree thereto.
SECTION 11.4. NOTICES. All notices, requests, demands and
other communications provided for hereunder shall be in writing and, if to
Borrower, mailed or delivered to it, addressed to it at the address specified
on the signature pages of this credit
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<PAGE> 39
agreement, with a copy of any such communication to Berick, Pearlman & Mills
Co., L.P.A., 1350 Eaton Center, 1111 Superior Avenue, Cleveland, Ohio
44114-2569, attn: Samuel S. Pearlman, Esq., if to a Bank, mailed or delivered
to it, addressed to the address of such Bank specified on the signature pages
of this credit agreement. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or made when
delivered or forty-eight (48) hours after being deposited in the mails with
postage prepaid by registered or certified mail or delivered to a telegraph
company, addressed as aforesaid, except that notices from Borrower to Agent or
the Banks pursuant to any of the provisions hereof shall not be effective until
received by Agent or the Banks.
SECTION 11.5. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on
demand all costs and expenses of the Banks and Agent, any expenses incurred in
connection with the preparation of this credit agreement and any Related
Writings, including (i) administration and out-of-pocket expenses of Agent in
connection with the administration of this credit agreement, the Notes, the
collection and disbursement of all funds hereunder and the other instruments
and documents to be delivered hereunder, (ii) extraordinary expenses of Agent
or the Banks in connection with the administration of this credit agreement,
the Notes and the other instruments and documents to be delivered hereunder,
(iii) the reasonable fees and out-of-pocket expenses of special counsel for the
Banks, with respect thereto and of local counsel, if any, who may be retained
by said special counsel with respect thereto, and (iv) all costs and expenses,
including reasonable attorney's fees, in connection with the restructuring or
enforcement of this credit agreement or any Related Writing. In addition,
Borrower shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution and delivery of this
credit agreement or the Notes, and the other instruments and documents to be
delivered hereunder, and agrees to save Agent and each Bank harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes or fees.
SECTION 11.6. CAPITAL ADEQUACY. If any Bank shall have determined,
after the date hereof, that the adoption of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its lending office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's capital (or
the capital of its holding company) as a consequence of its obligations
hereunder to a level below that which such Bank (or its holding company) could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies or the policies of its holding company with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, within 15 days after demand by such Bank (with a copy
to the Agent), the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank (or its holding company) for such
reduction Each Bank will designate a different lending office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank. A certificate of
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<PAGE> 40
any Bank claiming compensation under this section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods. Failure on the part of any
Bank to demand compensation for any reduction in return on capital with respect
to any period shall not constitute a waiver of such Bank's rights to demand
compensation for any reduction in return on capital in such period or in any
other period. The protection of this Section shall be available to each Bank
regardless of any possible contention of the invalidity or inapplicability of
the law, regulation or other condition which shall have been imposed.
SECTION 11.7. INDEMNITY. Borrower agrees to indemnify, pay and hold
Banks and any holder of any of the Notes, and the officers, directors,
employees and agents of Banks and such holders (collectively the "Indemnitees")
harmless from and against, any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, adminstrative or judicial proceeding,
whether or not such Indemnitee shall be designated a party thereto), which may
be imposed on, incurred by, or asserted against such Indemnitee, in any manner
relating to or arising out of any Corporate Acquisition, Banks' agreement to
make loans or the use or intended use of the proceeds of loans hereunder (the
"Indemnified Liabilities"); provided that Borrower shall have no obligation
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of any such Indemnitee. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, Borrower shall contribute the maximum portion which it is permitted to
pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.
SECTION 11.8. OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS. The
obligations of the Banks hereunder are several and not joint. Nothing
contained in this credit agreement and no action taken by Agent or the Banks
pursuant hereto shall be deemed to constitute the Banks a partnership,
association, joint venture or other entity. No default by any Bank hereunder
shall excuse the other Banks from any obligation under this credit agreement;
but no Bank shall have or acquire any additional obligation of any kind by
reason of such default. The relationship among Borrower and the Banks with
respect to this credit agreement, any Note and any Related Writing is and shall
be solely that of debtor and creditor, respectively, and no Bank has any
fiduciary obligation toward Borrower with respect to any such documents or the
transactions contemplated thereby.
SECTION 11.9. EXECUTION IN COUNTERPARTS. This credit agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
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<PAGE> 41
SECTION 11.10. BINDING EFFECT; ASSIGNMENT. This credit agreement shall
become effective when it shall have been executed by Borrower, Agent and by
each Bank and thereafter shall be binding upon and inure to the benefit of
Borrower and each of the Banks and their respective successors and assigns,
except that Borrower shall not have the right to assign its rights hereunder or
any interest herein without the prior written consent of all of the Banks. No
person, other than the Banks, shall have or acquire any obligation to grant
Borrower any loans hereunder.
SECTION 11.11. GOVERNING LAW. This credit agreement, each of the Notes
and any Related Writing shall be governed by and construed in accordance with
the laws of the State of Ohio, without regard to principles of conflict of
laws, and the respective rights and obligations of Borrower and the Banks shall
be governed by Ohio law.
SECTION 11.12. SEVERABILITY OF PROVISIONS; CAPTIONS. Any provision of
this credit agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction. The several captions to sections and subsections herein
are inserted for convenience only and shall be ignored in interpreting the
provisions of this credit agreement.
SECTION 11.13. INVESTMENT PURPOSE. Each of the Banks represents and
warrants to Borrower that it is entering into this credit agreement with the
present intention of acquiring any Note issued pursuant hereto for investment
purposes only and not for the purpose of distribution or resale, it being
understood, however, that each Bank shall at all times retain full control over
the disposition of its assets.
SECTION 11.14. ENTIRE AGREEMENT. This credit agreement, any Note and
any other agreement, document or instrument attached hereto or referred to
herein or executed on or as of the date hereof integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
representations and negotiations and prior writings with respect to the subject
matter hereof.
SECTION 11.15. JURY TRIAL WAIVER. BORROWER AND EACH OF THE BANKS WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER AND THE BANKS, OR ANY THEREOF,
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS CREDIT AGREEMENT OR
ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY
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<PAGE> 42
<TABLE>
ANY BANK'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR
COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT AMONG BORROWER AND THE BANKS, OR ANY THEREOF.
<S> <C> <C>
Address: 30195 Chagrin Boulevard THE TRANZONIC COMPANIES
Pepper Pike, Ohio 44124
By: /s/
----------------------
Title: President
-------------------
and
----------------------
Title:
-------------------
Address: 127 Public Square SOCIETY NATIONAL BANK,
Cleveland, Ohio 44114 individually and as Agent
Attn: Large Corporate Group
By: /s/
----------------------
Title: Vice President
-------------------
Address: 1900 East Ninth Street NATIONAL CITY BANK
Cleveland, Ohio 44114
Attn: Metro-Ohio East Division By: /s/
---------------------
Title: Vice President
------------------
</TABLE>
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<PAGE> 43
ANNEX A
Percentage Maximum Amount
---------- --------------
SOCIETY NATIONAL BANK 66.7% $20,000,000
NATIONAL CITY BANK 33.3% $10,000,000
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<PAGE> 1
Exhibit 10(j)
First Amendment dated as of June 30, 1994 to Credit Agreement with Society
National Bank, individually and as Agent, and National City Bank
<PAGE> 2
FIRST AMENDMENT
DATED AS OF JUNE 30, 1994
TO CREDIT AGREEMENT
DATED AS OF OCTOBER 7, 1993
This First Amendment (the "Amendment") is entered into as of June 30,
1994 by and among The Tranzonic Companies (the "Borrower"), the undersigned
banks (the "Banks") and Society National Bank as agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to that
certain Credit Agreement dated as of October 7, 1993; and
WHEREAS, the Borrower and the Banks desire to amend certain provisions
of the Credit Agreement in certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises herein contained, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used and not otherwise defined
herein shall have the meanings attributed to such terms in the Credit Agreement.
2. AMENDMENT. The Borrower and the Banks hereby amend the Credit Agreement
as follows:
2.1. Section 6.16 is amended by adding the following to the end of said
section;
minus (iv) any intangibles created as a result of the
acquisition of Ever-Ready Appliance Manufacturing Co.
2.2 Section 6.3 (a) is amended by adding the following to the end of
said section;
together with a certificate stating (A) that no Event of Default
or Default has occurred and is continuing or, if an Event of
Default or Default has occurred and is continuing, a statement
setting forth the details thereof and the action which the
Borrower has taken and proposes to take with respect thereto, and
(B) that a computation (which computation shall accompany such
certificate and shall be in reasonable detail) showing compliance
with Section 6.12, 6.15, 6.16, 6.17 and 6.18 hereof is in
conformity with the terms of this agreement;
<PAGE> 3
3. EFFECTIVE DATE. This Amendment shall become effective as of the
date first above written (the "Effective Date") upon the Agent's receipt of
counterparts of this Amendment duly executed by the Borrower and the Banks.
4. RATIFICATION. It is understood and agreed that all of the terms,
conditions and covenants of the Agreement except as amended hereby, shall
remain unaltered and in full force and effect and shall continue to be binding
upon the Borrower in all respects. The Amendment as amended hereby, is hereby
ratified, approved and confirmed in all respects.
5. REFERENCE TO CREDIT AGREEMENT. From and after the Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereof", or "hereunder"
or words of like import, and all references to the Credit Agreement in any and
all agreements, instruments, documents, notes, certificates and other writings
of every kind and nature shall be deemed to mean the Credit Agreement as
amended hereby.
6. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Borrower, the Banks and the Agent have executed
this Amendment as of the date first above written.
THE TRANZONIC COMPANIES
By:
---------------------------------
Title:
------------------------------
SOCIETY NATIONAL BANK
Individually and as Agent
By: /s/
---------------------------------
Title: Assistant Vice President
------------------------------
NATIONAL CITY BANK
By: /s/
---------------------------------
Title: Assistant Officer
------------------------------
<PAGE> 1
Exhibit 10(p)
Employment Agreement dated March 1, 1995 between Baxter Tube Company and Dennis
Kelly
<PAGE> 2
Exhibit 10(p)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made and entered into as of the 1st day of
March, 1995, by and between Baxter Tube Company, an Ohio Corporation
("Employer") and Dennis H. Kelly ("Executive").
RECITALS
--------
1. Employer is a wholly-owned subsidiary of The
Tranzonic Companies ("Tranzonic").
2. For the purpose of this Agreement, the term
"Companies" shall mean, collectively, Tranzonic and each corporation, including
Employer, which is now or hereafter shall become a subsidiary of Tranzonic,
together with their respective successors and assigns.
3. Employer desires to employ Executive as a Vice
President and Chief Operating Officer, and Executive is willing to accept such
employment all in accordance with the terms and conditions of this Agreement.
4. Through employment with Employer, Executive has
gained and will continue to gain extensive and valuable knowledge of the
business of the Companies, including without limitation the Companies' methods
and plans for doing business and certain other proprietary information in
respect of the Companies, all of which to the extent not made public by the
Companies constitute confidential information subject to the Companies'
proprietary rights therein.
5. The parties previously entered into an Employment
Agreement, as amended and restated. This Agreement restates, supersedes and
replaces the prior agreements between the parties concerning Executive's
employment by Employer.
NOW THEREFORE, in consideration of the premises, mutual
agreements and covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT OF EXECUTIVE. Employer hereby employs
Executive to serve as Vice President and Chief Operating Officer for the term,
and upon the terms and conditions, hereinafter set forth. Executive hereby
accepts such employment.
2. DUTIES AND RESPONSIBILITIES.
(a) GENERAL. Subject to Section 2(b), during
the term of employment hereunder, Executive will have (i) general
responsibility for the operation of Employer, including without limitation,
administration, planning, staffing, manufacturing, sales, marketing and overall
day-to-day operations, and (ii) such other responsibilities and
<PAGE> 3
duties as Employer's Group Vice President, its Chief Executive Officer and/or
its Board of Directors from time to time may assign to him and which are
consistent with his position.
(b) CHANGES IN RESPONSIBILITIES. Executive's
performance hereunder is, and at all times will be, subject to the direction of
Employer's Group Vice President, its Chief Executive Officer and/or its Board
of Directors, any of whom may modify, increase or decrease the scope of
Executive's responsibilities and/or authority as they may from time to time
deem necessary or desirable and in the best interests of Employer; provided,
however, that no such change shall require Executive to perform duties not
generally assigned to management employees or require Executive to be absent
from Northern Ohio on a regular and frequent basis.
(c) TRAVEL REQUIREMENTS. From time to time in
the course of employment hereunder Executive may be required to travel on
Employer's behalf, provided that such travel shall be limited to that which is
reasonably necessary for the performance by Executive of his duties hereunder.
Executive shall not be required to relocate his residence.
(d) STANDARDS OF PERFORMANCE AND CONDUCT.
Executive shall perform his duties and responsibilities diligently, in good
faith, in a manner he believes reasonably to be in the best interest of the
Companies and consistent with Employer's policies and practices, and with the
highest degree of loyalty, care, attention and energy that an executive of a
corporation, similarly situated as Employer, would use under similar
circumstances. During the term of this Agreement, Executive shall not engage
in conduct, whether acting in his capacity as an executive of Employer or
otherwise, which in a material way could reflect adversely upon any of the
Companies, their businesses, management or goodwill.
3. TIME COMMITMENT.
(a) FULL-TIME POSITION. Executive understands,
acknowledges, and agrees that the position for which he is employed hereunder
is a "full-time" position (subject to excused absences and vacations). During
the term of employment hereunder, Executive shall devote his entire business
time, attention and energy to Employer's business as is commensurate with the
position of an executive of a corporation similarly situated to Employer and,
in any event, shall devote such time as may be necessary for the full and
faithful performance of his duties and responsibilities hereunder.
(b) OTHER ACTIVITIES. Executive understands
and acknowledges that (i) the commitments of time, energy and effort required
by Employer of its executives are substantial and likely to preclude such
executives from engaging in certain other activities, and (ii) the executives
of Employer, whether or not acting in such capacity, are representatives of
Employer's goodwill and name. Executive further understands and acknowledges
that, in recognition of the foregoing, Employer maintains an executive
personnel policy which generally precludes its executives from engaging in
Outside Business Activities (as hereinafter defined), or using their business
skills, experience or time, for commercial purposes unrelated to the business
of the Companies. Accordingly, during the term of his employment hereunder,
Executive agrees that without Employer's prior written consent, he shall not be
engaged in any Outside Business Activity other than (i) passive
- 2 -
<PAGE> 4
financial investments in any business enterprise (subject to Section 7 hereof),
provided that Executive is not required to perform any services for or on
behalf of such enterprise and that Executive does not participate in the
management or control of such enterprise, and (ii) such other activities, if
any, as are identified on Exhibit A hereto. For purposes of this Agreement,
the term "Outside Business Activities" means any activity performed for any
current or future anticipated pecuniary or economic benefit for any person or
entity (including Executive) other than the Companies and other than for any
not-for-profit, charitable or trade organization.
4. TERM OF EMPLOYMENT. Subject to earlier termination
as provided herein, Executive's employment hereunder shall be for a term
commencing on March 1, 1995, and ending on February 28, 1998, inclusive;
provided that such term shall be automatically extended for successive renewal
terms of one year each unless either party shall have given written notice to
the other at least 360 days prior to the expiration of the initial or renewal
term then in effect that such party elects not to renew the term of Executive's
employment for an additional renewal term upon expiration of the initial or
renewal term then in effect.
5. COMPENSATION AND BENEFITS. As full compensation
and consideration for his services, time commitments and covenants hereunder,
Executive shall, subject to Sections 6 and 8 hereof, be entitled to
compensation as follows:
(a) BASE SALARY. During the term of employment
hereunder, other than during periods of Disability (as defined in Section 6
hereof) and periods, if any, of mutually agreed leave without pay, Executive
shall be entitled to receive a fixed salary ("Base Salary"), payable in weekly
installments, equal to $120,000 on an annualized basis (subject to upward
adjustments, if any, as hereinafter provided). It is understood and agreed
that periodically (at least one time during each twelve-month period during the
term of Executive's employment beginning on each July 1 and ending on the next
June 30) the Compensation Committee of Tranzonic's Board of Directors will
review the then current level of Executive's Base Salary and may recommend an
increase thereof to Tranzonic's and Employer's Boards of Directors, as such
Compensation Committee may deem appropriate. Tranzonic's Board of Directors
may, in its sole discretion, approve or disapprove any increase so recommended.
If the Board of Directors approves an increase in Executive's Base Salary, then
on the date on which such increase is to be effective (as determined by the
Board of Directors), this Section 5(a) shall be amended automatically to
provide for an increased Base Salary without any further action on the part of
the parties hereto.
(b) EXECUTIVE BENEFIT, INSURANCE AND WELFARE
PLANS. During the term of his employment hereunder, Executive shall be
entitled to participate in such employee benefit, insurance and welfare plans
as Employer from time to time may provide or sponsor for the benefit of all of
its employees or Tranzonic may from time to time provide or sponsor for all
executives of the Companies on a nondiscretionary basis, subject to and on the
terms and conditions of participation contained in such plans (including,
without limitation, terms and conditions in respect of eligibility and benefit
limitations).
(c) DISABILITY COMPENSATION. During periods of
Disability (as defined in Section 6 hereof), Executive shall be entitled to
such compensation as is provided for in Section 6 hereof.
- 3 -
<PAGE> 5
(d) VACATIONS. Executive shall be entitled to
such reasonable vacation time, with pay, as Executive and Employer from time to
time mutually may agree.
(e) BUSINESS EXPENSES. Executive is authorized
to incur reasonable and necessary expenses for promoting the business of
Employer, including business travel, business meals and lodging, entertainment
and similar expenses. Employer shall reimburse Executive for all such
reasonable expenses upon presentation by Executive of itemized accounts of such
expenditures.
(f) ANNUAL INCENTIVE PLAN. In addition to the
Base Salary provided in Section 5(a), annually Executive shall be eligible to
receive an incentive bonus (the "Incentive Amount") based upon Employer's net
income before federal income taxes for each Annual Period. The term "Annual
Period" shall mean the period commencing March 1, 1995 and ending on the last
day of February, 1996 and each successive twelve-month period thereafter during
which Executive shall be employed hereunder. The calculation of the Incentive
Amount shall be made in accordance with the terms set forth in Exhibit B
hereto. Payment of the Incentive Amount, if any, shall be made no later than
75 days following the Annual Period.
(6) DEATH OR DISABILITY.
(a) DEATH. In the event of Executive's death
occurring during the term of this Employment Agreement, this Agreement shall be
terminated and Executive's estate shall be entitled to no further Base Salary,
Incentive Amount or other compensation, privileges or benefits hereunder except
as to that portion of any unpaid Base Salary or portion of any Incentive Amount
accrued and earned by Executive hereunder up to and including the day of death
and except for such amounts, if any, as are payable upon Executive's death
under benefit plans provided by Employer.
(b) DISABILITY. If, during the term of this
Employment Agreement, Executive shall become disabled (herein defined),
Employer shall pay Executive in lieu of any other compensation payable under
this Agreement:
(i) For the first consecutive one
hundred eighty (180) day period of
disability--the full amount of
compensation and benefits that would
have been payable to Executive
pursuant to the provisions of
Section 5 hereof, in the same manner
and to the same extent as if he had
not been disabled, subject, however,
to an appropriate proration of the
Incentive Amount to reflect that the
amount of compensation payable
hereunder shall be calculated in
such a manner as shall include only
such portion of any Annual Periods
during which compensation shall be
payable hereunder to Executive; and
- 4 -
<PAGE> 6
(ii) Thereafter--nothing, except for such
amounts, if any, as are payable upon
Executive's disability under benefit
plans provided by Employer.
If, after a period of disability, Executive
completely shall resume his employment duties for a continuous period in excess
of one hundred eighty (180) days and thereafter shall again become disabled
(whether by reason of the same or a different cause), he shall be entitled to
receive the payments provided for hereunder to the same extent and in the same
manner as if his employment had not been interrupted by the initial period of
disability. If, however, during the period of one hundred eighty (180) days
following such resumption of his duties, Executive shall again become disabled
(whether by reason of the same or a different cause) payments during such
subsequent disability shall be in such amounts and for such period of time as
if Executive had not resumed his duties and the period of subsequent disability
had been tacked onto and become a part of the initial period of disability.
For the purpose of this Section 6, "disability" and
"disabled" shall mean such physical or mental impairment of Executive as shall
result in his inability to perform the duties required to be performed by him
hereunder.
Except to the extent provided in this Section 6, all
payments of compensation to Executive shall be abated during the period of his
disability. If such period of disability shall continue for one hundred eighty
(180) consecutive days, Employer shall have the right and option, on ten days'
notice to Executive, to terminate his Agreement and Executive's employment with
the Employer.
(c) COOPERATION. Executive shall take such
steps as are required reasonably by, and shall cooperate with, Employer for
purposes of determining the existence and duration of periods of any
disability.
7. COMPETITIVE ACTIVITIES, PROPRIETARY INFORMATION AND
BUSINESS OPPORTUNITIES. Executive recognizes and acknowledges that as Chief
Operating Officer of Employer prior to the date of this agreement and a Chief
Operating Officer prior thereto of J.C. Baxter Co., the assets of which were
acquired by Employer, Executive has developed and acquired access to
confidential and proprietary information of the Companies; that from and after
the date hereof he will acquire and have access to other confidential and
proprietary information; and that such information is highly confidential and,
if revealed to outside sources, would seriously and adversely affect the
Companies' business.
(a) PROPRIETARY INFORMATION. Executive agrees
that during the term of his employment hereunder and at all times thereafter,
directly or indirectly, he will not make known, divulge, furnish, make
available or use, other than in the course of his employment hereunder, any
invention, product, process, apparatus or design of any of the Companies or any
knowledge or information in respect thereof, or any other trade secret or
confidential information of any of the Companies (including, without
limitation, proprietary business methods and techniques, manufacturing
processes, accounting and security control procedures, sales catalogues, order
books, promotional and instructional materials, customer
- 5 -
<PAGE> 7
lists and other selling and/or marketing information), all of which have been
developed or purchased by the Companies through substantial effort and
investment and of which Executive has knowledge solely as a result of his
employment by Employer and J.C. Baxter Co.
(b) HIRING AWAY EMPLOYEES. Executive agrees
that at any time during the term of his employment hereunder or for a period of
two years thereafter, directly or indirectly, he will not solicit, attempt to
solicit, induce, or cause any person who is an employee, representative or
agent of the Companies to terminate such person's employment with the
Companies. Executive further agrees that at any time during the term of his
employment hereunder or for two years thereafter, he will not employ, engage or
retain the services of, or attempt to employ, engage or retain the services of,
any person who was an employee, agent, or representative of the Companies at
any time during the 365-day period immediately preceding the date on which such
person was engaged or employed or solicited by Executive for engagement or
employment.
(c) BUSINESS OPPORTUNITIES. During the term of
his employment hereunder and for a period of three years thereafter, Executive,
directly or indirectly, whether in his individual capacity or as an investor or
participant in or an employee, agent or representative or any business
enterprise, shall not:
(i) solicit, divert, entice, take away
or interfere with or attempt to
solicit, divert, entice, take away
or interfere with any of the
Companies' businesses, patronage,
customers or orders, provided,
however, that Executive shall not be
precluded from the solicitation of
customers of the Companies' for
products or services which are not
competitive in any material respect
with the businesses of any of the
Companies at such time.
(ii) engage or participate in, or
finance, aid or be connected with
any commercial enterprise which
competes in any material respect
with any of the businesses of any of
the Companies at such time.
(d) UNFAIR BUSINESS PRACTICES. Executive shall
not at any time defame or disparage the Companies, their directors, officers,
businesses or products nor will Executive engage in any unfair trade practices
towards any of the Companies.
(e) REMEDIES UPON BREACH BY EXECUTIVE.
Executive acknowledges, understands and agrees that the covenants contained in
this Section 7 are the essence of this Agreement and said covenants shall be
construed as independent of any other provision hereof. The existence of any
claim or cause of action of Executive against any of the Companies, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
enforcement by Employer of these covenants. Executive further understands,
acknowledges and agrees that any violation by him of the covenants herein
contained will result in irreparable injury to Employer which cannot be
compensated adequately by monetary damages. Accordingly, Executive agrees that
any violation by him of the provisions of this
- 6 -
<PAGE> 8
Section 7, in addition to any other rights and remedies Employer may have, will
be the proper subject for immediate, injunctive and other equitable relief to
Employer. In the event that it shall be judicially determined that Executive
has violated any of the covenants or agreements to be performed and/or observed
by him pursuant to this Section, then the period applicable to such covenants
or agreements as shall have been so determined to have been violated by
Executive shall be extended automatically by that period of time which shall be
coextensive with the period during which such violations have occurred.
8. TERMINATION AND FURTHER COMPENSATION.
(a) TERMINATION EVENTS. The employment of
Executive under this Agreement, and the term hereof, may be terminated at any
time, upon mutual agreement by the parties or by the Employer for cause at any
time by action of the Board of Directors of the Employer. For purposes hereof
the term "cause" shall mean:
(i) Executive engages in, undertakes or
is party to the commission of
misrepresentation or embezzlement
upon Employer or is convicted of a
crime involving veracity or honesty.
(ii) Executive breaches any material
provision of this Agreement.
(iii) Executive fails to perform his
duties, or is grossly negligent in
the performance of these duties
hereunder.
(b) EFFECT OF TERMINATION FOR CAUSE. In the
event of termination of this Agreement by Employer for cause pursuant to this
Section 8, Executive shall be entitled to no further salary, additional
compensation or other benefits under this Agreement.
(c) EFFECT OF TERMINATION WITHOUT CAUSE. In
the event of the termination of this Agreement by Employer without cause (i.e.,
other than for reasons specified in Section 8(a)), Executive shall be entitled
to his Base Salary and Incentive Amount for the balance of the term of this
Agreement; provided, however, that the payments due from Employer shall be
reduced by an amount equal to all compensation, bonuses, benefits and similar
amounts paid or payable to Executive in respect of any services performed by
Executive for any other employer during the term of this Agreement.
Notwithstanding any termination of this Agreement by Employer without cause,
Executive shall remain bound to observe the provisions of Section 7 hereof, and
breach of said Section 7 by Executive shall, in addition to the rights of
Employer under Section 7, permit Employer to cease making any further payments
pursuant to this Section 8(c).
(d) RETURN OF MATERIALS. Upon termination of
Executive's employment hereunder, Executive (or in the event of his incapacity
or death, his legal representative) immediately will surrender to Employer in
good condition, the moneys, merchandise, books, accounts, memoranda, records,
keys and other property of whatsoever nature, whether tangible or intangible,
which are in Executive's possession and which belong
- 7 -
<PAGE> 9
to or which may reasonably be considered related to or be, in any way,
connected with the businesses of Companies. In the event that said items are
not so returned, Employer shall have the right to recover said property and to
deduct from any compensation payable to Executive the reasonable value of said
items plus all proper and reasonable costs, attorneys' fees and expenses
incurred in searching for, taking, removing and recovering said property.
(e) CONTINUATION OF AGREEMENT. No termination
of Executive's employment hereunder, whether or not such termination is by
reason of expiration of the term stated in Section 2 hereof or otherwise, shall
terminate the provisions of Section 7 or Section 8(d), which shall continue in
full force and effect.
9. MISCELLANEOUS.
(a) GOVERNING LAW. The laws of the State of
Ohio shall govern the validity, performance and enforcement of this Agreement.
If any of the terms or provisions of this Agreement or the application thereof
to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement or the application of such term
or provision to persons or circumstances other than those to which it has held
invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law. If the invalidity or unenforceability of any covenant or
restriction herein is due to the unreasonableness of the time or geographic
area covered, said covenant or restriction nevertheless shall be effective for
such period of time and for such geographic area as may be determined by a
court of competent jurisdiction.
(b) ASSIGNMENT. This Agreement may not be
assigned by Employer without the written consent of Executive, except that if
Employer shall merge or consolidate with or into, or transfer substantially all
of its assets, including goodwill, to another entity or person, or if Employer
shall assign this Agreement to one of the Companies, this Agreement shall be
binding upon and inure to the benefit of the successor or assignee of Employer
resulting from such merger, consolidation, transfer or assignment.
(c) COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
(d) NOTICES. All notices hereunder shall be in
writing and delivered or mailed by registered or certified mail, return receipt
requested, or by private, overnight deliver services (such as Federal Express)
as follows:
If to the Employer:
30195 Chagrin Boulevard
Pepper Pike, Ohio 44124;
- 8 -
<PAGE> 10
If to the Executive:
1854 Langerdale Boulevard
South Euclid, Ohio 44121
Or at such other address as Employer or Executive may hereafter designate in
writing.
(e) ENTIRE AGREEMENT. The foregoing is the
entire Agreement of the parties hereto in respect of the subject matter hereof,
and no waiver, amendment or modification hereof shall be valid unless in
writing and signed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the day and year first written above.
EXECUTIVE
/s/ Dennis H. Kelly
-----------------------------------
Dennis H. Kelly
BAXTER TUBE COMPANY
By: /s/ Robert S. Reitman
--------------------------------
Robert S. Reitman, Its
Chief Executive Officer
- 9 -
<PAGE> 1
Exhibit 13
The Registrant's 1995 Annual Report to Shareholders
<PAGE> 2
THE TRANZONIC COMPANIES
[PHOT0 1]
Photo of adult incontinence products, feminine hygience products, baby diapers,
douche and enema, toilet seat covers, odor control products and washroom
accessories.
[PHOT0 2]
Photo of industrial wiping cloths, personal safety products, work apparel,
specialty chemicals, environmental protection products and washroom supplies.
Stylized
Logo [PHOT0 3]
Photo of ironing boards, pads and covers, laundry accessories, closet
organizers, step stools and travel accessories.
[PHOT0 4]
Photo of forming tubes, general-purpose tubes and sleeves.
1
9
ANNUAL REPORT
9
5
[OUTSIDE FRONT COVER PAGE]
<PAGE> 3
THE TRANZONIC COMPANIES
HEADQUARTERED IN CLEVELAND, OHIO,
THE TRANZONIC COMPANIES MANUFAC-
TURES AND DISTRIBUTES NATIONALLY A
WIDE VARIETY OF PRODUCTS TO THE
INDUSTRIAL, INSTITUTIONAL, AND CON-
SUMER SECTORS. EXPANDING OUTWARD
FROM STRENGTHS IN PAPER, CLOTH AND
VINYL PRODUCTS, TRANZONIC HAS ADDED
COMPLEMENTARY PRODUCT LINES IN
PERSONAL HYGIENE, MAINTENANCE AND
SAFETY, HOUSEWARES AND INDUSTRIAL
PACKAGING MARKETS IN ORDER TO SERVE
AS A PRIMARY SUPPLIER IN EACH OF ITS
CUSTOMER SEGMENTS. PRODUCT QUALITY
AND CUSTOMER SERVICE HAVE BEEN PRI-
MARY GROWTH DRIVERS, AND THE
COMPANY HAS BEEN ENHANCING EFFI-
CIENCY THROUGH THE IMPLEMENTATION
OF LEADING-EDGE MANAGEMENT AND
INFORMATION STRATEGIES. THE COMPANY
HAS EXPANDED STEADILY THROUGH BOTH
INTERNAL DEVELOPMENT AND STRATEGIC
ACQUISITIONS OF GROWTH BUSINESSES
THAT HAVE STRONG SYNERGY WITH EXIST-
ING OPERATIONS.
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
FINANCIAL HIGHLIGHTS
For the Years Ended February 28 1995 1994
- ------------------------------------------------------------------
<S> <C> <C>
Sales................................ $148,898,063 131,182,128
Operating earnings................... 8,956,780 4,858,423
Earnings before income taxes......... 8,639,396 4,599,265
Net earnings......................... 5,285,396 2,799,265
Net earnings per common share........ 1.51 .80
Cash dividends:
Per Class A Common Share........... .18 .18
Per Class B Common Share........... .34 .34
Total assets......................... 80,279,466 73,537,946
Long-term debt....................... 7,600,000 9,000,000
Shareholders' equity................. 52,236,347 47,479,072
Shareholders' equity per common share 15.03 13.75
Common shares outstanding............ 3,474,338 3,452,038
</TABLE>
Fiscal year 1994 includes a $1,300,000 charge to operating earnings
($792,000 after tax or 22 cents per share) for costs associated with
restructuring the Housewares Division.
[INSIDE FRONT COVER PAGE]
<PAGE> 4
TO OUR SHAREHOLDERS
Fiscal 1995 was a year of
great achievement for The
Tranzonic Companies. Net
earnings rose 89 percent from
the prior year to a record
$5,285,400, or $1.51 per share.
Even if, for comparative purpos-
es, we disregard the substantial
charge recorded in the fourth
quarter of fiscal 1994 in connec-
tion with the consolidation of
the Housewares Division, annu-
al earnings would have been 47
percent above the prior year.
Sales rose 14 percent to a
record $148,898,100, continu-
ing our uninterrupted sales
growth since our major divesti-
ture in 1983. Shareholders'
equity rose 10 percent to a new
high of $52,236,300, or $15.03
per share.
Fourth quarter net earnings
totaling $1,244,200, or 35 cents
per share, were a record for the
final period and compared to a
year ago loss in the quarter due
to the aforementioned restruc-
turing charge. Without the
charge, 1995 fourth quarter net
income would have increased
89 percent over the prior year.
Fourth quarter sales of
$36,034,100 were also a record
for the period, rising 8 percent
from the previous high regis-
tered in the 1994 final quarter.
Each of our four operating
units achieved record sales and
earnings during the year, as well
as increased share in the niche
markets we serve. This progress
was made despite very competi-
tive pricing, increasing raw
material costs, and changes in
product mix all of which exerted
downward pressure on gross
margins in certain markets. Our
net income growth in this diffi-
cult business climate resulted
[PHOTO NO. 1]
ROBERT S. REITMAN
Chairman, President and
Chief Executive Officer
from continuing implementation
of three core strategies and a
midfiscal 1994 acquisition.
Executing these core strategies
and acquisitions are central to
our plan to grow Tranzonic's
sales and profits dramatically.
IMPLEMENTING CORE STRATEGIES
More than a year ago, we
conducted an assessment of our
markets and the strengths and
weaknesses of our operating
units. We concluded that
Tranzonic has a number of
opportunities to enhance the
value of its products and ser-
vices. In response to that assess-
ment, we developed three core
strategies which will validate
<TABLE>
SALES
(In Thousands)
<S> <C>
91 $107,334
92 $110,718
93 $119,951
94 $131,182
95 $148,898
</TABLE>
<TABLE>
NET EARNINGS
(In Thousands)
<S> <C>
91 $4,319
92 $4,576
93 $4,214
94 $2,799
95 $5,285
</TABLE>
1
<PAGE> 5
our conclusion. These are:
focusing on customers, imple-
menting technology, and
enabling human resource devel-
opment.
Our customer focus strategy
is key in enhancing customer
satisfaction. Through it we are
improving both sales and prof-
itability. Our strategy obligates
our business units to invest in
objective information about
both customers and markets and
to employ that information to
align pro-actively our products,
services, and processes with
customer needs. This elevates
our importance to our customers
as we continually are helping
them increase their own profits.
We believe that the well
planned use of technology,
especially information technolo-
gy, to enable optimal operations
and marketplace performance is
the least expensive way to
achieve sustainable competitive
advantage. Technology helps
existing operations to re-engi-
neer for greater efficiency, and
helps newly acquired operations
to be efficiently integrated into
our core activities. While these
efforts often are technically diffi-
cult and organizationally stress-
ful, we are demonstrating that
they translate into profit
improvement.
Our third strategy is simply to
employ and develop the best
people. By committing energy
and resources, the critical
human component of our plan
is underwritten. In a change-ori-
ented time, identifying the best
people and investing in their
growth and development is
essential; it produces an envi-
ronment in which people grow
and lead, and change is not
merely accepted, but anticipated
for the opportunity it holds for
both the organization and the
individual.
While each of our strategies
contributed to the achievements
of fiscal 1995, we know that
many more benefits remain to
be captured. Through execution
of our three core strategies we
will increase profitably our
importance to our customers.
With that in mind, last year we
began to focus on our aspira-
tions for the future.
TOWARDS THE YEAR 2000
Fiscal 1995 gains were the
cumulative result of a carefully
targeted acquisition program
and the successful implementa-
tion of our core strategies,
which together continue to drive
our growth. Because a signifi-
cant number of our products are
sold into mature markets, we
know that their sales growth
tends to be incremental.
Therefore, if a growth goal is to
be more than a reflection of our
economic environment, i.e., if it
is to stimulate meaningful
growth, it needs to be dramatic
and rooted in a sound strategy.
With that in mind, we estab-
<TABLE>
OPERATING EARNINGS
(In Thousands)
<S> <C>
91 $6,715
92 $7,193
93 $6,817
94 $4,858
95 $8,957
</TABLE>
<TABLE>
NET EARNINGS
PER COMMON
SHARE
<S> <C>
91 $1.23
92 $1.29
93 $1.19
94 $.80
95 $1.51
</TABLE>
<TABLE>
SHAREHOLDERS'
EQUITY
PER SHARE
<S> <C>
91 $11.24
92 $12.32
93 $13.21
94 $13.75
95 $15.03
</TABLE>
<TABLE>
TOTAL
CAPITALIZATION
(In Thousands)
<S> <C> <C>
91 $38,848 $195
92 $42,744 $195
93 $46,329 $2,900
94 $47,479 $9,000
95 $52,236 $7,600
</TABLE>
Long-Term Debt
Shareholders' Equity
2
<PAGE> 6
<TABLE>
<CAPTION>
CRITERIA TO IDENTITY
ACQUISITION TARGETS
- ----------------------------------------------------
CURRENT MARKETS NEW MARKETS
<S> <C>
ENHANCE IMPORTANCE TO CUSTOMERS RAPID MARKET GROWTH
HIGH-AFFINITY PRODUCT LINE NICHE ORIENTED
DIVERSIFICATION
NEW CHANNELS
REGIONAL STRENGTH
CONSOLIDATION POTENTIAL
</TABLE>
<TABLE>
<CAPTION>
PRIORITIZING
ACQUISITION TARGETS
- ----------------------------------------------------
OPERATIONS FINANCIAL
<S> <C>
SUPERIOR MANAGEMENT EARNINGS MOMENTUM
LOW-COST TO PRODUCE BALANCE SHEET HEALTH
TECHNOLOGY RIGHT SIZE
CONSUMABLES
CRITICAL/LOW-COST COMPONENTS
</TABLE>
lished a sales target for the year
2000 (actually our fiscal 2001)
of $500 million.
With the intent of using
growth as a catalyst for change,
as opposed to a well-reasoned
stretch target, we are pursuing
this admittedly ambitious goal
with enthusiasm and confi-
dence.
ACQUISITIONS
No matter how successful we
are at implementing our three
core strategies, we will not
achieve our growth goal without
acquisitions, given the slow-
growth nature of our existing
markets. In redefining our acqui-
sition program we recognized
that we had to be aggressively
pro-active and highly focused.
Many of the markets we
serve--personal care, industrial
textiles, housewares, and indus-
trial packaging--are highly frag-
mented and are served by a
large number of small business-
es. The fragmented character of
those markets, however, offers
substantial consolidation oppor-
tunities. In these markets, target
acquisitions must make us more
important to our customers,
increase our competitive advan-
tage, and support greater prof-
itability and increased share-
holder value. In new markets
those businesses must represent
growth opportunities greater
than our fastest growing busi-
nesses and operate in a well-
defined product/market seg-
ment. We prize superior man-
agement, low cost production,
technology, and earnings
momentum. Naturally, we seek
opportunities which do not
stress our funding capacity.
More important, our acquisi-
tion program supports our cus-
tomer focus strategy by provid-
ing entry into new market areas
and expansion of product line
offerings which improve our
scale and expand our position
as a single source supplier. The
latter is especially important to
customers who are reducing the
number of vendors that serve
them. More and more, they are
focusing on suppliers who are
well capitalized and most effi-
cient; who provide broader
product lines and value-added
service; and who are able to
meet new technical require-
ments for conducting business-
to-business transactions.
PLEZALL WIPERS ACQUISITION:
A CASE IN POINT
In existing markets, acquisi-
tions must add scale to the com-
panies we currently own in a
way that is totally customer-dri-
ven and must deepen our pene-
tration of those markets.
3
<PAGE> 7
Moreover, targeted companies
must meet the tests of our acqui-
sition criteria noted on these
pages. Our cash acquisition of
the assets of Plezall Wipers,
Incorporated subsequent to the
fiscal 1995 year end (March
1995) is a good case in point.
This well-managed, profitable,
and financially sound operation
adds an important new dimen-
sion to our marketing of indus-
trial textiles.
Headquartered in Miami,
Florida, Plezall--now operated
as part of CCP Industries--con-
verts and markets woven textile
wipers to retailers and industrial
end users nationwide.
Customers include home centers
and specialty retailers such as
auto, paint, and marine stores.
While CCP Industries is a major
provider of nonwoven wipers,
Plezall is its counterpart in
wovens. Its products add scale
to the CCP offerings and posi-
tion the division as a single
source national supplier of both
woven and nonwoven products
to industrial customers. The
acquisition opens new distribu-
tion channels for CCP and adds
particular strength in the
Southeast region. Plezall's field
sales organization complements
that of CCP and offers good
cross-selling and market pene-
tration opportunities.
THE OUTLOOK
These are our goals and
strategies for realizing sustain-
able top and bottom line growth
that is the harbinger of increased
shareholder value. The
Operations Review on the fol-
lowing pages will detail fiscal
1995 progress and plans of our
divisions in the current year. We
believe that last year's results,
particularly given the market
conditions under which they
were achieved, provide clear
evidence that our strategies are
working. Thus, our outlook for
The Tranzonic Companies is
very bright indeed. We have
substantial working capital to
meet all current requirements
and access to financial
resources in support of our con-
tinuing and aggressive acquisi-
tion program.
With pride we acknowledge
and thank our employees for
their commitment to effecting
improvements at every level, our
customers for the opportunity of
serving them, our shareholders
for their loyal support, and our
directors for their contributions
in shaping the future of
Tranzonic.
Sincerely,
/S/Robert S. Reitman
Robert S. Reitman
Chairman, President and
Chief Executive Officer
May 12, 1995
4
<PAGE> 8
<TABLE>
THE OPERATIONS AND MARKETS OF
THE TRANZONIC COMPANIES
-----------------------------------------------------------------
<CAPTION>
MAJOR PRODUCTS PRINCIPAL MARKETS PRIMARY CUSTOMERS
------------------------------------------------------------------------
<S> <C> <C> <C>
HOSPITAL SPECIALTY
[PHOTO NO. 1]
Adult Incontinence Consumer Grocery and Drug Chains
Photo of items Feminine Hygiene Away from home Mass Merchandisers
listed under
"Major Products" Baby Diapers Industrial Paper Distributors
Douche and Enema Healthcare Janitorial Distributors
Toilet Seat Covers Medical Distributors
Odor Control Home Healthcare Dealers
Washroom Accessories Food Service Distributors
CCP INDUSTRIES
[PHOTO NO. 2]
Industrial Wiping Cloths Automotive Tens of thousands of small
businesses across the U.S.
Photo of items Personal Safety Industrial and Canada
listed under
"Major Products" Work Apparel Food Service
Specialty Chemicals Facility Maintenance
Environmental Protection Healthcare
Washroom Supplies Graphic Arts
DESIGN TREND
[PHOTO NO. 3]
Ironing Boards Consumer Mass Merchandisers
Photo of items Pads and Covers Grocery and Drug Chains
listed under
"Major Products" Laundry Accessories Specialty Retailers
Closet Organizers
Step stools
Travel Accessories
BAXTER TUBE
[PHOTO NO. 4]
Forming Tubes Automotive Fiberglass Manufacturers
Photo of items
listed under General-purpose Tubes Industrial Automotive and Industrial
"Major Products" Manufacturers
Sleeves Construction
Construction Products
Distributors
</TABLE>
5
<PAGE> 9
HOSPITAL SPECIALTY
...providing value-added, single source capabilities to diverse channel
partners...
Hospital Specialty is
Tranzonic's Personal Care
Division; the largest operating
unit. It provides personal care
and other washroom related
products for the consumer, insti-
tutional, healthcare and industri-
al markets, and in fiscal 1995
again scored record sales and
earnings. Factors contributing to
this success included: aggressive
marketing programs that added
revenue in a number of cate-
gories; continuous product
improvement, and new product
introductions that increased the
Division's scale and importance
to its distribution-partners and
retail customers; and improve-
ment in manufacturing process-
es and product innovation that
helped support margins in the
face of raw material price
increases.
Sales gains came primarily
from four product segments
across all markets--adult
incontinent, feminine napkins,
baby diapers, and toilet seat
covers. Hospital Specialty's con-
sumer product lines include AT
EASE(R) disposable adult inconti-
nent products which are also
available through its Healthcare
Division; GARDS(R), SAFE &
SOFT(R), EVERYDAY(R), SOFT &
THIN(R), and MAXITHINS(R)
brand feminine napkins; PRE-
CIOUS(R) and BOTTOMS UP(R)
disposable baby diapers; FRESH
GARDS(R) feminine douche; and
AT EASE(R) enema product.
Hospital Specialty private labels
one or more of these products
lines for various major retailers
nationally. AT EASE(R) adult
incontinence products represent
a significant contribution to the
division's current and future
growth opprtunities.
Product line extensions, as
well as synergistic new product
categories, continue to be an
important element of our growth
strategy. This ever-evolving,
powerful, integrated bundle of
products is marketed to institu-
tional and industrial distributors
under Hospital Specialty's new
"Total Washroom Essentials"
(TWE) program featuring MAX-
ITHINS(R) and GARDS(R) feminine
napkins, Tampax(R) brand tam-
pons, HEALTHGARDS(R) toilet
seat covers, Hospeco washroom
accessories and a new product
category HEALTHGARDS(R) odor
control systems. TWE represents
a major shift from product focus
to a program focus directed at
making the Division more
important as a value-added, sin-
gle source supplier to their dis-
tributor-partners. Representative
of this effort, in fiscal 1995
Hospital Specialty introduced a
full line of odor control products
that moved from concept to
market in only 12 months and
will play a key role in the TWE
program by positioning the
Company as a major national
resource in institutional odor
control. TWE is providing dis-
tributors value-added product
training and sales support, a
focused, innovative, marketing
effort and the economies of a
dynamic, single-source partner-
ship.
Success in developing and
marketing new quality products,
especially those which build
margin, complement current
products, and utilize existing
manufacturing capacity, tops the
Hospital Specialty agenda in fis-
cal 1996. At the same time,
existing product lines will be
bolstered by capacity increases,
particularly for rapid-growth
incontinent products. Making it
easier for customers to do busi-
ness with Hospital Specialty will
receive ongoing emphasis. In
particular, EDI, on-line order
entry and bar coding systems
will be strengthened to increase
customer service, reduce pro-
curement and marketing costs,
and serve just-in-time inventory
replenishment programs for both
retail customers and Hospital
Specialty's distributor-partners.
6
<PAGE> 10
[PHOTO NO. 6]
Photo of adult incontinence
products, feminine hygiene products,
baby diapers, douche and enema,
toilet seat covers, odor control
products and washroom
accessories.
7
<PAGE> 11
[PHOTO NO. 7]
Photo of wiping cloths, personal
safety products, work apparel,
specialty chemicals, environmental
protection products and washroom
supplies.
8
<PAGE> 12
CCP INDUSTRIES, INC.
...continuing to become more important to tens of thousands of small business
customers...
CCP Industries, our Industrial
Textiles Division, substantially
exceeded its fiscal 1995 perfor-
mance targets by continuing to
become more important to its
tens of thousands of small busi-
ness customers. Leveraging the
recent implementation of its
comprehensive new manage-
ment information system, CCP's
management team also made
significant gains in procurement,
product development and oper-
ating efficiency.
CCP serves business cus-
tomers in a myriad of industrial,
commercial and institutional
markets. CCP's products range
from wiping cloths, washroom
supplies, and specialty chemi-
cals to work apparel and safety
gear such as gloves and respira-
tors. CCP's growth is dependent
upon continuing to become a
primary value-added supplier to
its customers. This entails broad-
ening its offering of products
and services and customizing
packages of its products to spe-
cific customer needs, which in
turn requires comprehensive
market knowledge.
CCP maintains very strong
customer relationships through a
unique combination of sales
techniques. The foundation of
CCP's customer relationships is
a large field sales force of out-
standing and highly motivated
men and women. CCP's sales-
people consult with customers,
demonstrate product and even
assist customers with inventory
control. They are supported by
both customer service and tele-
marketing professionals.
Together, they provide a level of
customer satisfaction that repre-
sents a sustainable competitive
advantage for CCP.
The effectiveness of this
unique sales organization is
being enhanced by CCP's
recently implemented manage-
ment information system.
Although it is improving the
effectiveness and efficiency of
every business process, procure-
ment, new product development
and customer service are partic-
ular beneficiaries. CCP man-
agers are finding that newly
available information is invalu-
able in identifying new opportu-
nities to better serve customers
while improving CCP profitabili-
ty.
An example of this is CCP's
logistics and customer delivery
capabilities. Customer relation-
ships often hinge upon the
speed and reliability of customer
deliveries. In fiscal 1995 CCP
continued to reduce delivery
time and costs as the order cycle
was shortened through technol-
ogy-enabled process redesign.
CCP also systematized and auto-
mated the customer sampling
program, and has created cross-
functional teams to support con-
tinuous improvement in logis-
tics.
In fiscal 1996, CCP will con-
tinue build customer relation-
ships and to improve its operat-
ing capabilities. Specific areas
targeted for improvement
include market segmentation,
product development and logis-
tics. Other themes for fiscal
1996 include procurement and
acquisitions that strengthen
CCP's business base, much like
the acquisition of Plezall Wipers
early in the current fiscal year.
9
<PAGE> 13
DESIGN TREND, INC.
...focusing on consumer value and retailer profitability...
Design Trend, our House-
wares Division, represents the
consolidation of three acquisi-
tions--the most recent of
which was Ever-Ready
Appliance Manufacturing Inc. in
January 1994--into a two-
facility operation in St. Louis,
Missouri. Completed during fis-
cal 1995, the consolidation is
providing significant manufac-
turing, distribution and adminis-
trative efficiencies.
Design Trend serves con-
sumers in four distinct markets
- --non-electric laundry, closet
organization, step stools and
travel. Products include a broad
assortment of ironing boards,
ironing board pads and covers,
laundry accessories such as dry-
ing racks and hampers, closet
organization aids and travel
organization aids for clothing
and accessories.
Design Trend's customers are
the country's leading mass-mer-
chants and specialty retailers.
Becoming more important to
these demanding customers
requires innovative new product
development and value-added
merchandising support. Design
Trend continuously focuses on
new ideas to enhance retailer
profitability and consumer satis-
faction.
Complementing Design
Trend's superior products is its
ability to serve customers effi-
ciently. Through its recently
completed consolidation,
Design Trend is realizing signifi-
cant manufacturing and logistics
economies. This not only results
in high-value products for con-
sumers, but also efficient pro-
curement and distribution for
customers.
Design Trend also enhances
its competitiveness by continu-
ously improving its comprehen-
sive information system. Using
state-of-the-art information links
with customers, Design Trend
ensures that customer orders are
delivered on time at least cost,
and that consumer demand is
satisfied through optimized cus-
tomer inventories. This capabili-
ty is being reinforced through
the continuous improvement of
Design Trend's materials man-
agement system.
Design Trend will build on its
strengths in fiscal 1996. With
consolidation successfully com-
pleted, Design Trend can focus
even more aggressively on
developing new products and
expanding its customer base.
Information technology will
continue to enhance Design
Trend's competitiveness in fiscal
1996 through implementation of
systems to improve further man-
ufacturing efficiency.
10
<PAGE> 14
[PHOTO NO. 8]
Photo of ironing boards, pads and
covers, laundry accessories, closet
organizers, stepstools and travel
accessories.
11
<PAGE> 15
[PHOTO NO. 9]
Photo of forming tubes,
general-purpose tubes and
sleeves
12
<PAGE> 16
BAXTER TUBE COMPANY
...satisfying varied customer needs in well defined targeted markets...
Baxter Tube Company, our
Industrial Packaging Division,
generated substantial sales and
earnings gains during fiscal
1995 and, we believe, signifi-
cantly bettered industry perfor-
mance averages. Buoyed by the
generally good health of
American industry, Baxter's
superior performance was also a
result of continuous improve-
ment in its operating effective-
ness.
Baxter manufactures paper
tubes, cores and sleeves used in
a wide variety of industrial
applications. Baxter works to
maximize its importance to cus-
tomers through reliable delivery
of low-cost, consumable prod-
ucts that are critical to the effi-
ciency of its customers' opera-
tions. Forming tubes used in the
manufacture of fiberglass repre-
sent a good example of Baxter
products. Customers require
these reusable tubes to be both
cost-efficient and reliable, two
categories in which Baxter form-
ing tubes excel. Baxter's versa-
tile products are also used in the
automotive industry, where
applications range from packag-
ing to an actual power-drive
component that reduces noise
and vibration.
Quality and reliability are
central to Baxter's ability to
compete. Using modern manu-
facturing techniques that include
statistical process control, Baxter
uniformly manufactures prod-
ucts to specified dimensions,
crush values and other perfor-
mance criteria. Independent
confirmation of Baxter's quality
systems came in fiscal 1995, as
the Ware Shoals, South Carolina
plant received ISO 9002 certifi-
cation for its quality system.
Moreover, the Minerva, Ohio
plant expects to receive ISO
9002 certification for its quality
system during fiscal 1996.
Baxter's full use of recycling
is another component of quality
that benefits both the Company
and society; Baxter is a major
user of recycled paper because
it is a consistent, high-quality
source of supply. These factors
contribute to making Baxter an
industry leader in quality, which
is a powerful competitive advan-
tage as customers purchase from
fewer suppliers for greater effi-
ciency.
To serve its customers reli-
ably, Baxter communicates with
customers at various levels, from
purchasing to production and
engineering. Baxter people have
an intimate knowledge of cus-
tomer needs, and are therefore
able to suggest innovative ways
to use Baxter products that help
maximize productivity. A good
example is the shipping rack
service, through which return-
able shipping racks are used to
simplify material handling and
storage at customer plants.
Objectives for fiscal 1996
include initiatives to make
Baxter even more responsive to
customer needs. They include
continuous improvement in
manufacturing efficiency and
increased use of customer ser-
vice teams. Sales management
capabilities are also being
enhanced to strengthen Baxter's
regional focus.
13
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS:
FISCAL 1995 COMPARED TO
FISCAL 1994
Sales for the fiscal year ended
February 28, 1995 (fiscal 1995)
were a record $148.9 million,
13.5 percent above the $131.2
million of fiscal 1994. The
Company consistently has re-
corded sales records since its
major divestiture in August,
1983.
Each of the Company's four
divisions contributed to the sales
gain. Design Trend (The House-
wares Division) benefited from
the contribution of Ever-Ready
Appliance Mfg. Co. (Ever-
Ready), acquired late in the
prior year's second fiscal quar-
ter, and from the synergies per-
mitted by the Division's consoli-
dation begun in fiscal 1994.
Sales gains in Hospital Specialty
(the Personal Care Division)
stemmed from a growing market
in adult incontinent products
and a focus on offering cus-
tomers a broader line of prod-
ucts from a single source suppli-
er. General domestic economic
growth, as well as improved
market penetration, raised
demand for Baxter Tube's (the
Industrial Packaging Division's)
products. Improved sales in CCP
Industries (the Industrial Textiles
Division) resulted from a combi-
nation of customer focus and
significant improvements in the
use of technology to manage
information and to better serve
customers.
Programs to raise manufactur-
ing efficiency and tighten con-
trol over selling, general and
administrative expenses support-
ed net margin improvements in
the face of strong competition
and rising raw material prices.
Net earnings for fiscal 1995
increased 88.8 percent to a
record $5.3 million, or $1.51
per share, compared to the $2.8
million, or 80 cents per share,
recorded for fiscal 1994. During
the fourth quarter of fiscal 1994,
the Company incurred a one-
time charge in connection with
the consolidation of Design
Trend equal to 22 cents per
share.
The cost of goods sold
increased to 67.2 percent of
sales for fiscal 1995 from 66.7
percent for the prior fiscal year.
Raw material prices, particularly
of pulp, paper, steel and cotton,
increased sharply during the
year, and the Company also
incurred expenses in expanding
and managing its increased pro-
duction capacity. To a large
extent, these price increases
were offset by manufacturing
efficiencies and opportunistic
procurement.
Selling, general and adminis-
trative expenses decreased to
26.8 percent of sales for fiscal
1995 from 28.6 percent of sales
for fiscal 1994. This improve-
ment was supported by ongoing
programs to increase efficiency
through effective use of technol-
ogy, improved management of
human resources, and effective
control of marketing and distrib-
ution costs.
As a result, operating earn-
ings for fiscal 1995 were $9.0
million, an increase of 84.4 per-
cent over the $4.9 million of fis-
cal 1994. The operating margin
rose accordingly to 6.0 percent
from 3.7 percent.
Net interest expense in-
creased 22.5 percent, primarily
because higher interest rates
14
<PAGE> 18
during the fiscal year raised the
cost of borrowings to finance
acquisitions made in fiscal
1994. Interest coverage, calcu-
lated as operating earnings
divided by net interest expense,
stood at 28.2 times for fiscal
1995, demonstrating the
Company's capacity to fund
future growth.
Earnings before income taxes
for fiscal 1995 increased 87.8
percent year-on-year to $8.6
million. In line with increased
earnings, income taxes for fiscal
1995 rose to $3.4 million from
$1.8 million for the prior fiscal
year. The effective tax rate was
38.8 percent for fiscal 1995,
compared to 39.1 percent for
fiscal 1994.
Inflation, in general, had little
effect upon the Company's sales,
gross margins or operating
expenses in fiscal 1995.
OPERATING RESULTS:
FISCAL 1994 COMPARED TO
FISCAL 1993
Fiscal 1994 sales of $131.2
million were 9.4 percent above
fiscal 1993 sales of $120.0 mil-
lion. The acquisition of Ever-
Ready in August 1993, sales
growth in consumer-related per-
sonal hygiene products at
Hospital Specialty and increased
demand for paper tubes and
cores at Baxter Tube each played
a major part in fiscal 1994 sales
growth. Design Trend sales, ex-
cluding Ever-Ready, fell slightly
and CCP Industries sales were
essentially unchanged from the
preceding fiscal year.
Fiscal 1994 net earnings
totaled $2.8 million, or 80 cents
per share, down from $4.2 mil-
lion, or $1.19 per share in fiscal
1993. The one-time fourth quar-
ter charge to consolidate the
Housewares Division in St. Louis
resulted in an after-tax impact of
$792,000, or 22 cents per share.
Cost of goods sold in fiscal
1994 represented 66.7 percent
of sales and 65.4 percent in fis-
cal 1993. The increase was pri-
marily attributable to lower-mar-
gin new product lines, certain
short-term manufacturing ineffi-
ciencies and expenses relating to
the integration of expanded
manufacturing and warehousing
capacity.
Selling, general and adminis-
trative expenses represented
28.6 percent of sales in fiscal
1994, an improvement from
28.9 percent in fiscal 1993.
Administrative cost containment
and efficiency programs were a
primary factor supporting
improved performance.
Operating earnings for fiscal
1994 were $4.9 million, com-
pared to $6.8 million in fiscal
1993. Fiscal 1994 operating
margin was 3.7 percent, com-
pared to 5.7 percent in fiscal
1993.
Borrowing to fund the acqui-
sition of Ever-Ready caused
interest expense to more than
double in fiscal 1994, leading to
an increase in net interest
expense to $259 thousand from
$31 thousand a year ago.
Interest coverage for fiscal 1994
was 18.7 times.
Earnings before income taxes
for fiscal 1994 decreased 32.2
percent over fiscal 1993 to $4.6
million. In line with lower earn-
ings, income taxes for fiscal
1994 decreased to $1.8 million
from $2.6 million for fiscal
1993. The effective tax rate was
39.1 percent for fiscal 1994,
compared to 37.9 percent for
fiscal 1993. Increased state and
local taxes, additional acquisi-
tion related costs, combined
with a lower pretax earnings
base, resulted in the increased
rate.
SOURCES AND USES OF CAPITAL:
FISCAL 1995 COMPARED TO
FISCAL 1994
The Company maintains a
strong financial position with
good liquidity. Current assets as
of February 28, 1995 increased
21.0 percent over February 28,
1994, with working capital
increasing 19.9 percent to $30.3
million. The current ratio was
essentially unchanged at 2.9-to-
1. Current assets continue to
exceed total liabilities. Receiva-
bles rose 19.0 percent as a
result of increased sales. Inven-
tories increased 37.5 percent as
the Company moved to strength-
en its ability to respond quickly
to orders and to stock raw mate-
rials ahead of price increases.
Current liabilities increased
23.2 percent, primarily because
inventory demands led to an
increase in trade accounts
payable. Long-term debt, which
consisted solely of the
Company's $30 million revolv-
ing credit facility, totaled $7.6
million as of the end of fiscal
1995, down from $9.0 million
at the end of fiscal 1994. The
Company's debt-to-equity ratio,
calculated as the current and
noncurrent portion of long-term
debt divided by total sharehold-
ers' equity, improved to 14.5
percent from 19.2 percent.
Historically, the Company has
funded internal growth princi-
pally through cash provided by
15
<PAGE> 19
operations. These internally gen-
erated funds are used primarily
for capital expenditures, divi-
dends paid to shareholders and
other miscellaneous financing or
investing activities. Operating
activities provided net cash of
$3.9 million, compared to $7.2
million for fiscal 1994. Funding
sales growth and the strategic
build-up of inventory in view of
rising raw material costs is cause
for the current fiscal year
decline.
Cash generated by operations
was used during fiscal 1995
mostly to reduce borrowings
resulting from prior acquisitions
by $1.5 million, acquire new
property and equipment of $2.6
million and pay dividends to
shareholders of $822 thousand.
As a result, cash and cash
equivalents decreased 27.7 per-
cent to $2.4 million at the end
of fiscal 1995 from $3.3 million
at the beginning of the fiscal
year.
During fiscal 1995, the
Company continued its carefully
targeted program of investments
to strengthen its organization,
manufacturing and information
management capabilities.
Record sales and earnings for
fiscal 1995 demonstrated the
effectiveness of this program in
enhancing operating efficiencies
and long-term profitability.
SOURCE AND USE OF CAPITAL
RESOURCES: FISCAL 1994
COMPARED TO FISCAL 1993
Current assets as of February
28, 1994 increased 20.0 percent
over February 28, 1993, with
working capital increasing 19.6
percent to $25.3 million. The
current ratio was essentially
unchanged at 3.0-to-1. Cash
and cash equivalents at year-end
nearly doubled to $3.3 million
because of strong operating cash
flow. Receivables rose 10.0 per-
cent and inventories increased
17.4 percent in response to the
increase in sales.
Current liabilities increased
20.7 percent for the second year
in a row, primarily because
inventory demands caused trade
accounts payable to increase.
Long-term debt totaled $9.0 mil-
lion at year-end, up from $2.9
million at the end of fiscal 1993,
a result of the Company's use of
its revolving credit facility to
finance the acquisition of Ever-
Ready. The Company's debt-to-
equity ratio rose from 6.5 per-
cent to a still-conservative 19.2
percent.
Operating activities provided
net cash of $7.2 million, com-
pared to $4.4 million for fiscal
1993. The decrease in net earn-
ings to $2.8 million from $4.2
million for the prior year was
largely offset by an increase in
depreciation and amortization to
$4.0 million from $3.4 million
in fiscal 1993, and deferred
income taxes. Favorable changes
in the working capital compo-
nents of the business accounted
for the remainder of the gain in
operating cash flow.
During fiscal 1994, the
Company supplemented inter-
nally generated funds with bor-
rowings to finance growth.
Proceeds from revolving credit
activity therefore increased $7.7
million to $13.1 million, an
increase resulting from the
acquisition of Ever-Ready noted
above. At the same time, the
positive cash flow generated
through operations allowed the
16
<PAGE> 20
Company to repay $7.0 million
of this. In comparison, repay-
ments of long-term debt totaled
$2.7 million in fiscal 1993. For
fiscal 1994, therefore, financing
activities provided net cash of
$5.3 million. In fiscal 1993,
financing activities provided net
cash of $1.9 million.
During fiscal 1994, the
Company continued its program
of acquisitions that fit its long-
term strategic goals. Payments
for acquisitions, net of cash
acquired, totaled $6.9 million
because of the acquisition of
Ever-Ready. No such acquisitions
were made in fiscal 1993.
Purchases of property, plant and
equipment totaled $2.8 million
for fiscal 1994, a sharp decrease
from the $8.1 million used in fis-
cal 1993 for a major plant and
equipment expansion program
and the related acquisition of
production equipment and
inventory of the Maxithins(R) san-
itary napkins business of
Tambrands, Inc., both at
Hospital Specialty. As a result,
investing activities used net cash
of $10.9 million in fiscal 1995,
up from the $8.9 million used in
fiscal 1994.
Increased operating cash flow
and proceeds from revolving
credit caused cash and cash
equivalents at the end of fiscal
1994 to rise to $3.3 million from
$1.8 million at the beginning of
the fiscal year.
<TABLE>
THE TRANZONIC COMPANIES
SELECTED FINANCIAL DATA
<CAPTION>
For the Years Ended February 28/29 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales................................... $148,898,063 131,182,128 119,951,373 110,717,585 107,333,543
Operating earnings...................... 8,956,780 4,858,423 6,816,888 7,193,019 6,714,882
Earnings before income taxes............ 8,639,396 4,599,265 6,785,982 7,411,281 6,953,690
Income taxes............................ 3,354,000 1,800,000 2,572,000 2,835,000 2,635,000
Net earnings............................ 5,285,396 2,799,265 4,213,982 4,576,281 4,318,690
Net earnings per common share........... 1.51 .80 1.19 1.29 1.23
Cash dividends:
Per Class A Common Share.............. .18 .18 .165 .16 .16
Per Class B Common Share.............. .34 .34 .325 .32 .28
Total assets............................ 80,279,466 73,537,946 63,675,545 58,015,061 52,515,283
Long-term debt.......................... 7,600,000 9,000,000 2,900,000 195,000 195,000
Shareholders' equity.................... 52,236,347 47,479,072 46,328,637 42,743,659 38,848,871
Shareholders' equity per common
share................................. 15.03 13.75 13.21 12.32 11.24
Common shares outstanding............... 3,474,338 3,452,038 3,507,838 3,468,128 3,456,934
<FN>
Fiscal year 1994 includes a $1,300,000 charge to operating earnings ($792,000 after tax or 22 cents per share) for
costs associated with restructuring the Housewares Division.
</TABLE>
17
<PAGE> 21
<TABLE>
THE TRANZONIC COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
Years Ended February 28 1995 1994 1993
- ------------------------------------------------------------ ----------- -----------
<S> <C> <C> <C>
Sales......................................... $148,898,063 131,182,128 119,951,373
Costs and expenses:
Cost of goods sold.......................... 100,098,338 87,493,123 78,470,393
Selling, general and administrative expenses 39,842,945 37,530,582 34,664,092
Restructuring cost.......................... --- 1,300,000 ---
- ------------------------------------------------------------ ----------- -----------
139,941,283 126,323,705 113,134,485
- ------------------------------------------------------------ ----------- -----------
Operating earnings.................... 8,956,780 4,858,423 6,816,888
Interest income............................... 70,236 54,369 96,304
Interest expense.............................. (387,620) (313,527) (127,210)
- ------------------------------------------------------------ ----------- -----------
(317,384) (259,158) (30,906)
- ------------------------------------------------------------ ----------- -----------
Earnings before income taxes.......... 8,639,396 4,599,265 6,785,982
Income taxes (note I)......................... 3,354,000 1,800,000 2,572,000
- ------------------------------------------------------------ ----------- -----------
Net earnings.......................... $ 5,285,396 2,799,265 4,213,982
- -------------------------------------------------=========== =========== ===========
Net earnings per common share......... $1.51 .80 1.19
- -------------------------------------------------=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
18
<PAGE> 22
<TABLE>
THE TRANZONIC COMPANIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
February 28 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $349,600 in 1995
and $1,446,600 in 1994)......................................... $ 2,387,540 3,303,191
Receivables, less allowance for doubtful receivables of
$408,500 in 1995 and $337,000 in 1994........................... 16,995,651 14,285,242
Inventories (note C).............................................. 23,173,604 16,855,430
Deferred income taxes (note I).................................... 1,285,533 1,122,353
Prepaid expenses and other current assets......................... 2,046,517 2,372,529
- ----------------------------------------------------------------------------------- ----------
Total current assets....................................... 45,888,845 37,938,745
Property, plant and equipment, net (note D).......................... 23,102,181 24,375,686
Other noncurrent assets.............................................. 2,416,958 2,017,326
Intangible assets (note E)........................................... 8,871,482 9,206,189
- ----------------------------------------------------------------------------------- ----------
$80,279,466 73,537,946
- -------------------------------------------------------------------------========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion (note F).......................... $ --- 100,000
Trade accounts payable............................................ 9,657,007 7,550,266
Accrued compensation.............................................. 2,981,782 2,332,725
Other payables and accrued expenses.............................. 2,922,604 2,652,364
- ----------------------------------------------------------------------------------- ----------
Total current liabilities.................................. 15,561,393 12,635,355
Long-term debt, noncurrent portion (note F).......................... 7,600,000 9,000,000
Deferred gain........................................................ 2,071,830 2,231,430
Deferred income taxes (note I)....................................... 1,878,728 1,532,804
Other noncurrent liabilities......................................... 931,168 659,285
Shareholders' equity (notes F, G and L):
Serial preferred shares without par value.
Authorized 200,000; no shares issued............................ --- ---
Class A common shares, no par value.
Authorized 4,000,000; issued 2,660,404 in 1995 and
2,670,855 in 1994............................................ 665,101 667,714
Class B common shares, no par value.
Authorized 8,000,000; issued 1,316,385 in 1995 and
1,299,534 in 1994............................................ 329,096 324,883
Additional paid-in capital........................................ 5,643,705 5,514,568
Retained earnings................................................. 49,780,163 45,316,600
- ----------------------------------------------------------------------------------- ----------
56,418,065 51,823,765
Less cost of shares held in treasury--
Class A common shares - 483,146 in 1995 and 1994................ 3,984,012 3,984,012
Class B common shares - 19,305 in 1995 and 35,205 in 1994....... 197,706 360,681
- ----------------------------------------------------------------------------------- ----------
Total shareholders' equity................................ 52,236,347 47,479,072
- ----------------------------------------------------------------------------------- ----------
Commitments (note K)................................................. --- ---
- ----------------------------------------------------------------------------------- ----------
$80,279,466 73,537,946
- -------------------------------------------------------------------------========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
19
<PAGE> 23
<TABLE>
THE TRANZONIC COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended February 28 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings..................................................... $5,285,396 2,799,265 4,213,982
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization.................................. 4,162,427 3,958,131 3,427,274
Deferred income taxes.......................................... 183,000 574,000 (43,000)
Other, net..................................................... (92,362) 140,831 46,584
Change in assets and liabilities, net of effects of acquisitions:
Receivables, net.............................................. (2,710,409) 533,569 (512,165)
Inventories................................................... (6,318,174) (1,266,187) (2,027,734)
Prepaid expenses and other current assets..................... 326,012 (1,107,823) 390
Trade accounts payable........................................ 2,106,741 1,025,944 (449,869)
Accrued compensation.......................................... 649,057 68,247 101,864
Other payables and accrued expenses........................... 270,240 430,811 (385,543)
- ------------------------------------------------------------------------------ --------- ---------
Net cash provided by operating activities............. 3,861,928 7,156,788 4,371,783
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit................................... 3,400,000 13,100,000 5,400,000
Repayments of long-term debt..................................... (4,900,000) (6,995,000) (2,690,000)
Cash dividends................................................... (821,833) (826,501) (771,087)
- ------------------------------------------------------------------------------ --------- ---------
Net cash provided by (used in) financing activities...... (2,321,833) 5,278,499 1,938,913
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired.................. --- (6,939,193) ---
Purchase of treasury shares...................................... --- (922,953) (80,405)
Proceeds on exercise of share options............................ 276,775 93,688 114,592
Restrictive covenants............................................ (180,000) (230,000) (453,752)
Proceeds from sale of property, plant and equipment.............. 248,981 34,074 85,000
Purchases of property, plant and equipment....................... (2,586,894) (2,811,717) (8,117,382)
Acquisition of intangibles....................................... (17,697) (26,402) (231,154)
Other, net....................................................... (196,911) (138,986) (231,893)
- ------------------------------------------------------------------------------- --------- ---------
Net cash used in investing activities............................ (2,455,746) (10,941,489) (8,914,994)
- ------------------------------------------------------------------------------- --------- ---------
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the year.............................. (915,651) 1,493,798 (2,604,298)
Beginning balance................................................ 3,303,191 1,809,393 4,413,691
- ------------------------------------------------------------------------------ --------- ---------
Ending balance................................................... $2,387,540 3,303,191 1,809,393
- ------------------------------------------------------------------- ========== ========= =========
Supplemental schedule of noncash investing and financing activities:
The Company purchased all of the outstanding shares of Ever-Ready
Appliance Mfg. Co. for $7,730,651; in conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired................................ --- 8,370,094 ---
Cash paid for shares......................................... $ --- 7,730,651 ---
- ------------------------------------------------------------------------------ --------- ---------
Liabilities assumed.......................................... $ --- 639,443 ---
- ------------------------------------------------------------------- ========== ========= =========
Supplemental disclosures of cash flow information:
Income taxes paid................................................ $ 1,599,723 2,003,522 2,629,267
Interest paid.................................................... $ 393,797 305,929 131,674
- ------------------------------------------------------------------- ========== ========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
20
<PAGE> 24
<TABLE>
THE TRANZONIC COMPANIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Class A Class B Additional Treasury Shares
common common paid-in Retained -------------------
Years Ended February 28, 1995, 1994 and 1993 shares shares capital earnings Class A Class B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 29, 1992.................... $ 670,186 318,274 5,465,074 39,900,941 (3,250,135) (360,681)
Net earnings.................................... --- --- --- 4,213,982 --- ---
Cash dividends, $.165 per Class A
common share.................................. --- --- --- (367,506) --- ---
Cash dividends, $.325 per Class B
common share.................................. --- --- --- (403,581) --- ---
Exercise of 36,460 Class A
common and 25,930 Class B
common share options.......................... --- 2,162 (153,903) --- 266,333 ---
Acquisition of 5,400 Class A common
shares for treasury........................... --- --- --- --- (80,405) ---
Tax benefit associated with exercise
of incentive share options.................... --- --- 107,896 --- --- ---
Conversion of 3,520 Class A
common shares to 3,520
Class B common shares......................... (880) 880 --- --- --- ---
- ----------------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 28, 1993.................... 669,306 321,316 5,419,067 43,343,836 (3,064,207) (360,681)
Net earnings.................................... --- --- --- 2,799,265 --- ---
Cash dividends, $.18 per Class A
common share.................................. --- --- --- (400,697) --- ---
Cash dividends, $.34 per Class B
common share.................................. --- --- --- (425,804) --- ---
Exercise of 400 Class A
common and 7,900 Class B
common share options.......................... --- 1,975 88,565 --- 3,148 ---
Acquisition of 64,100 Class A common
shares for treasury........................... --- --- --- --- (922,953) ---
Tax benefit associated with exercise
of incentive share options.................... --- --- 6,936 --- --- ---
Conversion of 6,369 Class A
common shares to 6,369
Class B common shares......................... (1,592) 1,592 --- --- --- ---
- ----------------------------------------------------------- ------- --------- ---------- --------- -------
Balance at February 28, 1994.................... 667,714 324,883 5,514,568 45,316,600 (3,984,012) (360,681)
Net earnings.................................... --- --- --- 5,285,396 --- ---
Cash dividends, $.18 per Class A
common share.................................. --- --- --- (391,608) --- ---
Cash dividends, $.34 per Class B
common share.................................. --- --- --- (430,225) --- ---
Exercise of 22,300 Class B
common share options.......................... --- 1,600 112,200 --- --- 162,975
Tax benefit associated with exercise
of incentive share options.................... --- --- 16,937 --- --- ---
Conversion of 10,451 Class A
common shares to 10,451
Class B common shares......................... (2,613) 2,613 --- --- --- ---
- ----------------------------------------------------------- ------- --------- ---------- --------- -------
BALANCE AT FEBRUARY 28, 1995.................... $ 665,101 329,096 5,643,705 49,780,163 (3,984,012) (197,706)
- ---------------------------------------------------======== ======= ========= ========== ========= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
21
<PAGE> 25
THE TRANZONIC COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended February 28, 1995, 1994 and 1993
- --------------------------------------------------------------------------------
A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Principles of Consolidation
All of the Company's subsidiaries are wholly-owned
and their accounts are included in the accompanying
consolidated financial statements. All material inter-
company balances and transactions have been eliminat-
ed.
(2) Inventories
Inventories are stated at the lower of cost or market
with cost determined using the first-in, first-out (FIFO)
method.
(3) Property, Plant and Equipment
Property, plant and equipment is stated at cost.
Depreciation and amortization is computed on the
straight-line method over the estimated useful lives of
the assets.
(4) Intangibles
Goodwill is being amortized over periods of 20 to 40
years in accordance with present accounting principles,
although the Company believes there has been no
diminution in value.
(5) Income Taxes
Effective March 1, 1993, the Company adopted
Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes." The Company's
adoption of SFAS 109 resulted in no cumulative effect.
Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences
between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable
income in the years in which those temporary differ-
ences are expected to be recovered or settled. Under
SFAS 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the
period that includes the enactment date. The realization
of the Company's deferred tax asset is dependent on the
generation of future taxable income. Management
believes that it is more likely than not that the Company
will generate sufficient future taxable income to fully
utilize the established asset.
The Company previously used the asset and liability
method under SFAS No. 96. Under the asset and liabili-
ty method of SFAS 96, deferred tax assets and liabilities
were recognized for all events that had been recognized
in the financial statements. Under SFAS 96, the future
tax consequences of recovering assets or settling liabili-
ties at their financial statement carrying amounts were
considered in calculating deferred taxes. Generally,
SFAS 96 prohibited consideration of any other future
events in calculating deferred taxes.
The Company files a consolidated Federal income tax
return with its subsidiaries.
(6) Share Options
Upon the exercise of Class A common share options
granted under the Company's incentive share option
plans, the investment in the treasury share account is
credited with the cost of Class A treasury shares issued.
Upon the exercise of Class B common share options,
the Class B common share account is credited with
newly issued shares. Additional paid-in capital is adjust-
ed to reflect the balance of the option price.
(7) Net Earnings Per Common and Common
Equivalent Share
Net earnings per common and common equivalent
share have been calculated based on the weighted aver-
age Class A common and Class B common shares out-
standing during the period plus the incremental shares
(calculated using the treasury share method) for those
outstanding share options which are considered com-
mon share equivalents. Weighted average common and
common equivalent shares used in the calculation were
3,508,467, 3,515,658 and 3,554,560 in 1995, 1994
and 1993 respectively.
(8) Cash Equivalents
The Company considers all highly liquid short-term
investments, with maturities when purchased of three
months or less, to be cash equivalents.
(9) Revenue Recognition
The Company recognizes revenue as goods are
shipped to customers.
(10) Deferred Gain
The deferred gain recorded on the books of the
Company which resulted from a sale and leaseback of
certain real property is being amortized in proportion to
rental payments over 20 years, the life of the lease.
22
<PAGE> 26
(11) Reclassification
Certain prior year amounts have been reclassified to
conform to current year presentation.
(12) New Accounting Pronouncements
In March, 1995 the Financial Accounting Standards
Board issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This statement, which
becomes effective at the beginning of fiscal 1997,
should have no material impact on the Company's con-
solidated financial statements when implemented based
on information available to the Company at this time.
B ACQUISITIONS
Effective March 1, 1995 the Company acquired sub-
stantially all the assets and assumed certain liabilities of
Plezall Wipers Incorporated, a Florida corporation,
which is engaged in the business of converting, packag-
ing and distributing industrial textiles, wiping cloths and
related products.
Results of operations of Ever-Ready Appliance Mfg.
Co., acquired on August 13, 1993, have been reflected
in the Company's consolidated financial statements
from the date of acquisition.
<TABLE>
C INVENTORIES
The components of inventories are summarized
below:
<CAPTION>
1995 1994
- ---------------------------------------------------------
<S> <C> <C>
Raw materiais................. $13,318,921 9,545,411
Finished goods................ 9,854,683 7,310,019
- ------------------------------------------- ----------
$23,173,604 16,855,430
- ---------------------------------========== ==========
</TABLE>
<TABLE>
D PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment,
net, are summarized below:
<CAPTION>
1995 1994
- -------------------------------------------------------
<S> <C> <C>
Land, buildings and
improvements................. $14,490,801 14,295,727
Machinery and equipment...... 30,198,293 28,694,633
- ----------------------------------------- ----------
44,689,094 42,990,360
Accumulated depreciation
and amortization............. 21,586,913 18,614,674
- ----------------------------------------- ----------
$23,102,181 24,375,686
- -------------------------------========== ==========
</TABLE>
E INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill.
Amortizable goodwill included therein of $8,098,026
and $8,450,430 in 1995 and 1994, respectively, is
shown net of accumulated amortization of $2,118,953
and $1,766,549 in those years.
<TABLE>
F LONG-TERM DEBT
A description of the long-term debt follows:
<CAPTION>
1995 1994
- -------------------------------------------------------
<S> <C> <C>
Industrial Revenue Bonds
maturing in 1995............ $ --- 100,000
Revolving credit.............. 7,600,000 9,000,000
- ------------------------------------------- ---------
7,600,000 9,100,000
Less current portion.......... --- 100,000
- ------------------------------------------- ---------
$ 7,600,000 9,000,000
- ---------------------------------========== =========
</TABLE>
The Company has a $30,000,000 revolving credit
facility maturing June 30, 1997. Funds borrowed may
be used for working capital and/or acquisition purposes.
In lieu of a compensating balance requirement, the
agreement requires an annual fee of 3/10 of 1% on the
unused portion. At the Company's option, borrowings
under the agreement bear interest at either the bank's
prime rate, or at 1/2 of 1% above an adjusted LIBOR
rate, subject to certain conditions in the rate structure.
At February 28, 1995, interest rates applicable to total
borrowings outstanding range from 6.5% to 9.0%.
The debt agreements contain restrictions on the
Company with respect to investments, maintenance of
working capital, net worth, use of cash for payments of
dividends and purchase of treasury shares. Capital dis-
tributions during any fiscal year are limited to 50% of
average consolidated net earnings over a three-year
period. The Company was in compliance with all debt
agreement restrictions or have obtained waivers.
G SHARE OPTIONS
At the 1994 annual meeting, Shareholders approved
the 1995 Incentive Stock Option plan, adopted by the
Board of Directors effective April 25, 1994. Under this
Plan, 200,000 shares of Class B common were reserved
for issuance at not less than 100% of the market value
on the dates options are awarded.
The Company has three performance share option
plans in effect for key employees. Under these plans
180,000 Class A common shares and 400,000 Class B
23
<PAGE> 27
common shares were reserved for issuance at a per
share option price of not less than 100% of the market
price on the dates these options were awarded.
Additionally, 60,000 Class A common shares were
reserved for issuance at a per share option price from
10% to 95% of the market price on the dates these
options were awarded, and 95,000 Class B common
shares were granted as part of certain employment con-
tracts at 100% of market price at the date of grant. At
February 28, 1995, there were 164,050 Class B com-
mon shares available for grant under these plans.
Details pertaining to the Company's plans are as fol-
lows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------
<S> <C> <C> <C>
Options granted:
Class B-Common........... 35,950 48,400 65,700
Average option price:
Class B-Common........... 12.04 14.08 15.06
Options exercised:
Class A-Common............. --- 400 36,460
Class B-Common............. 22,300 7,900 25,930
Average option price:
Class A-Common........... --- 10.17 5.33
Class B-Common........... 12.41 11.34 7.23
Options which became
exercisable:
Class B-Common........... 42,900 46,300 36,900
Average option price:
Class B-Common............. 12.63 12.26 11.65
Options unexercised at
year-end:
Class A-Common........... 27,800 27,800 28,200
Class B-Common........... 281,485 279,400 253,300
Option price range per
share:
Class A-Common........... .50 .50 .50
to to to
10.17 10.17 10.17
Class B-Common........... .50 .50 .50
to to to
16.78 16.78 16.78
Options cancelled:
Class B-Common........... 11,565 14,400 4,400
</TABLE>
H RETIREMENT PLANS
In fiscal 1994, the Company began the process of
terminating the General Employee's Retirement Plan of
the Personal Care Division of The Tranzonic Companies.
Notice of the Intent to Terminate The Plan was distrib-
uted on November 15, 1994, and the Notice to
Interested Parties was posted on January 31, 1995. The
revised Plan document was submitted to the IRS to gain
approval of Plan termination, and the Company is cur-
rently awaiting the IRS ruling.
The Company fully expects to receive a positive rul-
ing from the IRS and subsequently the PBGC, and that
existing plan assets will be sufficient to meet the final
plan obligations. Distribution of benefits is expected to
occur in fiscal 1996. Pension expense under the Plan
amounted to $17,455 in 1994 and $24,000 in 1993.
The Salary Savings and Profit-sharing Plan of The
Tranzonic Companies is a defined contribution plan
covering certain qualifying employees. The Company's
contributions to The Salary Savings and Profit-sharing
Plan were $389,735 in 1995, $283,500 in 1994 and
$219,850 in 1993.
I INCOME TAXES
The provision for income taxes consists of the follow-
ing:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $2,831,000 771,000 2,028,000
State and local 340,000 455,000 587,000
- --------------------------------- --------- ---------
3,171,000 1,226,000 2,615,000
Deferred:
Federal 103,000 574,000 (43,000)
State and local 80,000 --- ---
- --------------------------------- --------- ---------
183,000 574,000 (43,000)
- --------------------------------- --------- ---------
$3,354,000 1,800,000 2,572,000
- -----------------------========== ========= =========
</TABLE>
24
<PAGE> 28
The Company's effective tax rate differs from
the statutory federal income tax rate (35 percent in
1995 and 1994, and 34 percent in 1993) as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------
<S> <C> <C> <C>
Computed income taxes at
statutory rate............35.0% 35.0% 34.0%
State and local income
taxes, net of federal
income tax benefit........ 3.2 6.9 5.4
Amortization of goodwill.... 1.3 2.1 1.0
Lower rate benefit..........(1.0) (1.0) ---
Other....................... .3 (3.9) (2.5)
- --------------------------------- ----- -----
38.8% 39.1% 37.9%
- ----------------------------===== ===== =====
</TABLE>
Significant components of the Company's
deferred tax assets and liabilities at February 28, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Bad debt reserve................ $ 149,565 110,974
Inventory valuation............. 557,984 425,792
Vacation accrual................ 55,095 81,688
Bonus accrual................... 170,032 119,888
Deferred compensation........... 293,461 216,832
Deferred gain................... 832,324 812,951
Package design costs............ 196,124 178,778
Restructuring cost reserve...... --- 321,436
Other........................... 287,620 239,300
- --------------------------------------------- ---------
Total deferred tax assets....... $2,542,205 2,507,639
- -----------------------------------========== =========
Deferred tax liabilities:
Depreciation.................... 2,334,910 2,318,234
Incentive compensation.......... 264,986 250,042
Other........................... 535,504 349,814
- --------------------------------------------- ---------
Total deferred tax liabilities.. 3,135,400 2,918,090
- --------------------------------------------- ---------
Net deferred tax liabilities...... $ 593,195 410,451
- -----------------------------------========== =========
</TABLE>
J SEGMENT DATA
The industry segment in which the Company oper-
ates is primarily the conversion of paper and allied
products.
The majority of the Company's products originate
from large rolls of paper or allied products purchased
directly from mills where such materials are manufac-
tured. As such, each of the Company's divisions display
similar purchasing function characteristics. Also, the
end-use of most of the Company's products are similar,
as the majority of sales are of disposable products used
for personal hygiene and cleaning.
The Company's foreign operations and export sales
are immaterial.
K LEASE COMMITMENTS
The Company conducts operations at certain facili-
ties under various noncancellable operating leases.
Rent expense charged to operations was $1,825,620,
$1,480,185 and $1,264,572 in fiscal years 1995, 1994
and 1993, respectively.
Rental commitments at February 28, 1995 for non-
cancellable operating leases with initial terms greater
than one year are as follows:
<TABLE>
<S> <C>
1996................................... $1,646,963
1997................................... 1,492,264
1998................................... 1,452,816
1999................................... 1,263,056
2000................................... 1,031,796
after 2000............................. 7,709,604
- --------------------------------------------------------
$14,596,499
- ---------------------------------------------===========
</TABLE>
L CLASS B COMMON SHARES
Class B common shares, each of which have one-
tenth the voting power of a Class A common share,
must be paid a per share dividend at least equal to that
paid on the Class A common shares. Class A common
shares may be converted into Class B common shares
on a one-for-one basis at the holder's option.
25
<PAGE> 29
M QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ---------------------------------------------------------------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
1995
Sales................................................. $36,647,776 38,939,766 37,276,446 36,034,075
Cost of goods sold.................................... 24,536,342 26,375,217 25,052,326 24,134,453
Earnings before income taxes.......................... 2,053,663 2,484,839 2,045,729 2,055,165
Income taxes.......................................... 793,000 995,000 755,000 811,000
Net earnings.......................................... 1,260,663 1,489,839 1,290,729 1,244,165
Per share amounts:
Net earnings........................................ .36 .43 .36 .35
Cash dividends paid:
Class A common................................... .045 .045 .045 .045
Class B common................................... .085 .085 .085 .085
1994
Sales................................................. $31,238,224 33,279,711 33,286,536 33,377,657
Cost of goods sold.................................... 20,500,210 22,143,258 22,021,079 22,828,576
Earnings before income taxes.......................... 1,774,438 1,524,013 1,611,160 (310,346)
Income taxes.......................................... 697,500 598,500 682,000 (178,000)
Net earnings.......................................... 1,076,938 925,513 929,160 (132,346)
Per share amounts:
Net earnings........................................ .30 .27 .26 (.03)
Cash dividends paid:
Class A common...................................... .045 .045 .045 .045
Class B common...................................... .085 .085 .085 .085
<FN>
A significant fourth quarter adjustment in 1994 brought about by the
restructuring of the Housewares Division resulted in a
decrease in net earnings of $792,000 or 22 cents per share.
</TABLE>
26
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Tranzonic Companies:
We have audited the accompanying consolidated bal-
ance sheets of The Tranzonic Companies and sub-
sidiaries as of February 28, 1995 and 1994 and the
related consolidated statements of earnings, sharehold-
ers' equity and cash flows for each of the years in the
three-year period ended February 28, 1995. These
consolidated financial statements are the responsibility
of the Company's management. Our responsibility is
to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reason-
able 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 princi-
ples used and significant estimates made by manage-
ment, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of The Tranzonic Companies and
subsidiaries as of February 28, 1995 and 1994 and the
results of their operations and their cash flows for each
of the years in the three-year period ended February
28, 1995, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Cleveland, Ohio
March 31, 1995
27
<PAGE> 31
SHAREHOLDER INFORMATION
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
SHARE PRICE RANGE
Traded on the American Stock Exchange
Years Ended February 28
Class A Common Class B Common
Symbol --- TNZA Symbol --- TNZB
--------------------------------- ---------------------------------
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter..... 12 1/2 10 7/8 16 1/4 14 3/4 12 3/8 10 3/4 15 1/4 14
2nd Quarter..... 14 3/8 11 1/4 16 13 1/4 13 5/8 10 1/2 14 1/2 13 3/8
3rd Quarter..... 22 1/2 13 1/4 14 1/4 13 20 3/8 12 1/8 14 1/4 13 1/8
4th Quarter..... 19 1/4 14 3/4 13 5/8 11 7/8 17 3/4 14 3/8 13 5/8 11 3/8
</TABLE>
As of April 24, 1995, there were 387 Class A Common and 383 Class B
Common shareholders of record.
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
DIVIDEND PAYMENTS
Years Ended February 28
Class A Common Class B Common
--------------------------------- ---------------------------------
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st Quarter.......... 4.5Cent(s) 4.5Cent(s) 8.5Cent(s) 8.5Cent(s)
2nd Quarter.......... 4.5Cent(s) 4.5Cent(s) 8.5Cent(s) 8.5Cent(s)
3rd Quarter.......... 4.5Cent(s) 4.5Cent(s) 8.5Cent(s) 8.5Cent(s)
4th Quarter.......... 4.5Cent(s) 4.5Cent(s) 8.5Cent(s) 8.5Cent(s)
- ----------------------------- ------- ------- -------
18.0Cent(s) 18.0Cent(s) 34.0Cent(s) 34.0Cent(s)
- ----------------------======= ======= ======= =======
</TABLE>
TRANSFER AGENT
AND REGISTRAR
Society National Bank
Cleveland, Ohio 44115
GENERAL COUNSEL
Berick Pearlman & Mills Co., L.P.A.
Cleveland, Ohio 44114
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Cleveland, Ohio 44114
FORM 10-K
Shareholders who desire a copy of
the fiscal 1995 annual report on
Form 10-K may obtain it without
charge by writing to Alayne L.
Reitman, Vice President-Finance
and Treasurer
THE TRANZONIC COMPANIES
30195 Chagrin Blvd.
Pepper Pike, Ohio 44124
216/831-5757
28
<PAGE> 32
BOARD OF DIRECTORS
*JAMES H. BERICK
Chairman, Berick, Pearlman & Mills Co., L.P.A. (Attorneys)
*JOSEPH A. CAMPANELLA
Executive Vice President, Star Banc Corporation
+DAVID J. GOLDEN
Senior Vice President
*STEVEN W. PERCY
President, BP Oil Co. and
Executive Vice President, BP America Inc.
+MORTON L. REITMAN
Executive Vice President and President-Personal Care Division
+ROBERT S. REITMAN
Chairman, President and Chief Executive Officer
SYLVIA K. REITMAN
Investor
*THOMAS S. ROBERTSON
Chairperson of the Marketing Department, The Wharton
School of the University of Pennsylvania
JAMES C. SPIRA
Group Vice President
*Members of Audit and Compensation Committees
+Members of Executive Committee
OFFICERS
ROBERT S. REITMAN
Chairman, President and Chief Executive Officer
MORTON L. REITMAN
Executive Vice President and President-Personal Care Division
JAMES C. SPIRA
Group Vice President
DAVID J. GOLDEN
Senior Vice President
RICHARD J. SIMS
Senior Vice President and President-Industrial Textiles Division
JAMES L. GLENN
Vice President and President-Housewares Division
DENNIS H. KELLY
Vice President and President-Industrial Packaging Division
ALAYNE L. REITMAN
Vice President-Finance and Treasurer
ROBERT D. WEITZNER
Vice President-Information Technology
RICHARD J. PENNZA
Chief Accounting Officer
JAMES H. BERICK
Secretary
ANTHONY M. RIBAUDO
Managing Director-Housewares Division
WILLIAM E. HEMANN
Executive Vice President-Personal Care Division
GEORGE B. MURPHY
Senior Vice President-Personal Care Division
ERNEST L. CLARKE
Vice President Medical Division-Personal Care Division
PAUL D. MARION, JR.
Vice President National Accounts-Personal Care Division
KATHLEEN A. METZGER
Vice President Administration-Personal Care Division
BETH SMYLIE RICHMAN
Vice President Retail Division-Personal Care Division
NORMAN D. SULL
Vice President Purchasing-Industrial Textiles Division
DAVID J. WILLIAMS
Vice President Sales-Industrial Textiles Division
CHRISTOPHER T. CIRA
Assistant Vice President Finance-Industrial Textiles Division
HELEN MALHOTRA
Assistant Vice President Information Systems -Industrial Textiles Division
DANIEL R. MOON
Assistant Vice President Marketing-Industrial Textiles Division
We mourn the loss of
William P. Kanther and Robert A. Mediate.
[INSIDE BACK COVER PAGE]
<PAGE> 33
THE TRANZONIC COMPANIES
30195 Chagrin Boulevard
Pepper Pike, Ohio 44124
[OUTSIDE BACK COVER PAGE]
<PAGE> 1
Exhibit 21
Subsidaries of the Registrant
<PAGE> 2
Exhibit 21
<TABLE>
<CAPTION>
State of
Subsidiaries of Registrant Incorporation
- -------------------------- -------------
<S> <C>
American Homeware Company Ohio
Baxter Tube Company Ohio
CCP Industries, Inc. Ohio
Cleveland Cotton Products Company Delaware
Design Trend, Inc. Ohio
Ever-Ready Appliance Mfg. Co. Missouri
Pressing Supply Company Ohio
Plezall Wipers Incorporated Ohio
The Tranzonic Companies Delaware
</TABLE>
<PAGE> 1
Exhibit 24
Powers of Attorney
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995, hereby constitutes and appoints ROBERT S. REITMAN and
JAMES H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
April, 1995.
/s/ Sylvia K. Reitman
----------------------------
Sylvia K. Reitman
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995, hereby constitutes and appoints ROBERT S. REITMAN with
full power of substitution and resubstitution, as attorney to sign for the
undersigned and in my name, place and stead, as Director of said corporation,
said Annual Report and any and all amendments and exhibits thereto, and any and
all applications and documents to be filed with the Securities and Exchange
Commission pertaining to such Annual Report, with full power and authority to
do and perform any and all acts and things whatsoever requisite, necessary or
advisable to be done in the premises, as fully and for all intents and purposes
as the undersigned could do if personally present, hereby approving the acts of
said attorney, and any of them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of
April, 1995.
/s/ James H. Berick
----------------------------
James H. Berick
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995, hereby constitutes and appoints ROBERT S. REITMAN and
JAMES H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of
April, 1995.
/s/ Thomas S. Robertson
---------------------------
Thomas S. Robertson
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995, hereby constitutes and appoints ROBERT S. REITMAN and
JAMES H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of
April, 1995.
/s/ Steven W. Percy
----------------------------
Steven W. Percy
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995 hereby constitutes and appoints ROBERT S. REITMAN and
JAMES H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of
April, 1995.
/s/ James C. Spira
---------------------------
James C. Spira
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995, hereby constitutes and appoints ROBERT S. REITMAN and
JAMES H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of
April, 1995.
/s/ Morton L. Reitman
--------------------------
Morton L. Reitman
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995 hereby constitutes and appoints ROBERT S. REITMAN and
JAMES H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of
April, 1995.
/s/ Joseph A. Campanella
---------------------------
Joseph A. Campanella
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned Director of The Tranzonic Companies, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the year
ended February 28, 1995 hereby constitutes and appoints ROBERT S. REITMAN and
JAMES H. BERICK, and each of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for the undersigned and in my
name, place and stead, as Director of said corporation, said Annual Report and
any and all amendments and exhibits thereto, and any and all applications and
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever requisite, necessary or advisable to be done in the
premises, as fully and for all intents and purposes as the undersigned could do
if personally present, hereby approving the acts of said attorneys, and any of
them and any such substitute.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of
April, 1995.
/s/ David J. Golden
----------------------------
David J. Golden
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENT OF EARNINGS FOR THE YEAR ENDED FEBRUARY 28, 1995, AND CONSOLIDATED
BALANCE SHEET AT FEBRUARY 28, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000001761
<NAME> TRANZONIC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1994
<PERIOD-END> FEB-28-1995
<CASH> 2,387,540
<SECURITIES> 0
<RECEIVABLES> 17,404,151
<ALLOWANCES> 408,500
<INVENTORY> 23,173,604
<CURRENT-ASSETS> 45,888,845
<PP&E> 44,689,094
<DEPRECIATION> 21,586,913
<TOTAL-ASSETS> 80,279,466
<CURRENT-LIABILITIES> 15,561,393
<BONDS> 7,600,000
<COMMON> 994,197<F1>
0
0
<OTHER-SE> 55,423,868<F2>
<TOTAL-LIABILITY-AND-EQUITY> 80,279,466
<SALES> 148,898,063
<TOTAL-REVENUES> 148,898,063
<CGS> 100,098,338
<TOTAL-COSTS> 100,098,338
<OTHER-EXPENSES> 39,842,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 387,620
<INCOME-PRETAX> 8,639,396
<INCOME-TAX> 3,354,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,285,396
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 0
<FN>
<F1>This figure consists of $665,101 Class A Commmon Shares and $329,096
Class B Common Shares.
<F2>This Figure consists of $5,643,705 of Additional Paid-in Capital and
$49,780,163 of Retained Earnings.
</FN>
</TABLE>
