<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended October 31, 1997
Commission File Number 0-588
COMMERCIAL INTERTECH CORP.
(Exact name of registrant as specified in its charter)
Ohio 34-0159880
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1775 Logan Avenue, Youngstown, Ohio 44501-0239
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(Address of principal executive offices) (Zip Code)
(330) 746-8011
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Registrant's telephone number, including area code
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, par value $1 per share New York 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 the
filing requirements for at least the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of common shares held by non-affiliates of
the Registrant at December 31, 1997 was approximately $259 million (based upon
the closing price on that date). For purposes of this calculation only,
affiliates of the Registrant are deemed to be the Registrant's directors,
executive officers and their affiliates.
As of December 31, 1997, 14,083,224 common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Notice of Annual Meeting of Shareholders March 25,
1998 and Proxy Statement filed January 21, 1998 have been incorporated by
reference into Part III, Items 10 through 13 of this Annual Report on Form 10-K.
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<TABLE>
<CAPTION>
INDEX
COMMERCIAL INTERTECH CORP.
Page No.
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PART I
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<S> <C> <C>
ITEM 1. Business.................................................................... 3
ITEM 2. Properties.................................................................. 7
ITEM 3. Legal Proceedings........................................................... 7
ITEM 4 Submission of Matters to a Vote of Security Holders......................... 8
ITEM 4A. Executive Officers of the Registrant........................................ 8
PART II.
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ITEM 5. Markets for Registrant's Common Equity and Related Stockholder
Matters.................................................................. 8
ITEM 6. Selected Financial Data..................................................... 9
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 11
ITEM 8. Financial Statements and Supplementary Data................................. 20
ITEM 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure...................................... 50
PART III
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ITEM 10. Directors and Executive Officers of the Registrant.......................... 50
ITEM 11. Executive Compensation...................................................... 50
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management............................................................... 51
ITEM 13. Certain Relationships and Related Transactions.............................. 51
PART IV
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ITEM 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.............................................................. 51
SIGNATURES................................................................................ 55
</TABLE>
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PART I
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ITEM 1. BUSINESS
(a) General development of business:
Commercial Intertech Corp. (the "Company" or "Commercial Intertech") was
formerly named Commercial Shearing, Inc. and was incorporated in Ohio in 1920.
The Company is engaged in the design, manufacture and sale of products in two
business groups: the Hydraulic Systems segment and the Building Systems and
Metal Products segment. In 1986, the Company acquired CUNO Incorporated
("CUNO"), a manufacturer of fluid purification products. The Company made a 100
percent spin-off of the common stock of the CUNO business in 1996 and reflected
the net assets and operating results for CUNO for 1996 and prior years as a
discontinued operation. Therefore, the Hydraulic Systems segment and the
Building Systems and Metal Products segment account for all of the Company's
continuing businesses. Unless otherwise noted, all references in this report of
the Registrant relate to the continuing businesses.
(b) Financial information about industry segments:
See Note I - Segment Reporting - to the Notes to Consolidated Financial
Statements on pages 42 through 44.
(c) Narrative description of business:
HYDRAULIC SYSTEMS
Hydraulic Systems consist primarily of gear pumps and motors, control
valves and telescopic cylinders for use generally on heavy-duty mobile equipment
such as dump trucks, cranes, refuse vehicles, front-end loaders, backhoes and
mining machines. Other products manufactured by the Company include hydraulic
test equipment for military and industrial applications, hydraulic steer
transmissions for military vehicles, mobile electrical power generators,
hydraulic tilt and trim mechanisms for recreational boating and axial piston
pumps and motors for industrial and marine applications. The Company's gear
pumps and motors, control valves and telescopic cylinders are sold primarily to
original equipment manufacturers by the Company's hydraulic sales organization
consisting of approximately 81 persons in the United States and Canada and
approximately 75 persons outside North America. A portion of the Company's sales
is made to independent distributors for resale primarily to the replacement
market.
In November 1996, the Company acquired all of the outstanding common stock
of Ultra Hydraulics Limited ("Ultra") through its wholly-owned subsidiary,
Commercial Intertech Limited, located in the United Kingdom. Ultra serves the
mobile equipment market primarily in the United Kingdom, Europe, the United
States and the Far East. Major customers include manufacturers of material
handling, turf care, construction, transportation and compaction equipment.
Ultra's products complement and extend the range of pumps, motors and valves
offered by Commercial Intertech.
In June 1996, the Company acquired the assets of Component Engineering
Company, a manufacturer of cartridge-valves and integrated circuits. The Company
continues to operate the business from its location in Chanhassen, Minnesota.
The Company acquired the stock of ORSTA Hydraulik in May 1994. ORSTA
Hydraulik, a former East German state-owned enterprise, is a manufacturer of
hydraulic cylinders, piston and gear pumps, power packs and hydraulic testing
equipment.
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ITEM 1. BUSINESS (Continued)
The Company believes that it is the largest supplier of gear pumps and is
among the leading single- source suppliers of hydraulic systems for mobile
equipment in the United States. The market for hydraulic components is highly
competitive. The Company's Hydraulic Systems business competes on the basis of
product quality and innovation, customer service and price.
BUILDING SYSTEMS AND METAL PRODUCTS
The Building Systems and Metal Products operations consist of two units:
Metal Stampings and Building Systems (custom-engineered metal buildings by
Astron).
Astron, the European market leader in metal building systems, produces
single and multi-story buildings that serve as aircraft hangars, indoor athletic
facilities, automobile showrooms, offices, supermarkets, factories and
warehouses. Astron buildings are sold throughout the twelve countries of the
European Economic Community, in Scandinavia and in Eastern Europe, as well as in
China and South Korea. This division developed its own computerized building
pricing and proposal system, known as Cyprion(TM), that tailors buildings to
customers' precise dimension and design requirements. Through Cyprion, Astron's
nearly 400 qualified builder/dealers can provide pricing and building plans in a
fraction of traditional architectural time. The builder/dealers are supported by
Astron's sales force of approximately 94 persons. Additionally, Astron has
developed state of the art work stations utilizing computer design technology
which automatically configures optimum parameters for more efficient use of
material maximizing manufacturing technology.
In 1991 Astron entered into a joint venture with Arbed, Europe's fifth
largest steel producer, and began producing multi-story steel buildings for
European markets. Commercial Intertech acquired the remaining interest from
Arbed effective November 1, 1995. In addition, in 1992 Astron licensed a South
Korean manufacturer to manufacture, sell and erect Astron buildings in Korea. In
1997 Astron Building Systems marketing and manufacturing rights were transferred
to a new Korean licensee.
The Company's Metal Stampings unit produces custom and standard metal
stampings, including tank ends and a wide variety of other stamped steel
products, such as wheels for tracked vehicles, components for railcar brake
activators, couplings and covers for mechanical power differential and
transmission applications, large circuit breaker covers, and circular closures
and accessories for a broad variety of vessels and containers produced in sizes
from four inches to 24 feet. Also known as tank ends or tank heads, this product
line is the most comprehensive and extensive in the United States, serving
thousands of customers from three manufacturing locations and seven
strategically located Distribution Centers.
The Metal Stampings' Distribution Center concept is unique to the industry,
and has successfully served both large and small vessel fabricators for over 35
years providing 48-hour delivery service. The Distribution Center concept
remains a major contributor to the success of the Metal Stampings operations.
The sales and marketing activities for metal stampings are conducted in North
America, with exports to the Pacific Rim and South America, by a sales
organization of approximately 24 persons. The Metal Stampings unit competes
successfully for specialty custom designed and formed products in a variety of
shapes and sizes with regional domestic companies that often have lower freight
producing costs. Additionally, standard products are offered for sale from Metal
Stampings' Distribution Centers in Saginaw, Texas; Atlanta, Georgia; Chicago,
Illinois; Hagerstown, Maryland; Seattle, Washington; Middleboro, Massachusetts
and Orange, California.
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ITEM 1. BUSINESS (Continued)
The Company purchased the former Hall F&D Head Company (renamed the
Southern Metals Division) in Saginaw, Texas, in 1995. This division along with
the Orange County facility produces specialty medium and large-diameter products
in a broad variety of circular shapes for the storage tank and pressure vessel
industries.
The Company's Building System and Metal Products businesses compete on the
basis of product performance and price.
MANUFACTURING
The Company manufactures Hydraulic Systems in 17 plants and Building
Systems and Metal Products in five plants worldwide. The Company's hydraulic
manufacturing operation is highly integrated and the Company generally purchases
few components from independent suppliers. The Company has developed tooling for
a substantial number of its fabricated metal products, which enables a reduction
in the costs and the time of manufacturing. In general, raw materials required
by the Company's manufacturing operations are available from numerous sources in
the quantities desired.
RESEARCH AND PRODUCT DEVELOPMENT
The Company conducts research and development primarily for its Hydraulics
Systems products. In fiscal 1997 the Company expended $6,984,000 for research
and development activities compared with $5,897,000 and $5,966,000 in 1996 and
1995, respectively. The Company intends to continue to make substantial research
and development expenditures in order to bring developmental products to market.
PATENTS AND TRADEMARKS
The Company currently holds registered trademarks and patents associated
with certain existing products and has filed applications for additional patents
covering certain of its newer products. Although the Company considers patents
and trademarks significant factors in all of its businesses, it does not
consider the ownership of patents essential to the operation of its Hydraulic
Systems segment or its Building Systems and Metal Products segment. The Company
relies on product quality and features, the strength of its marketing and
distribution network and on new product introductions rather than on its
existing patents to protect and improve its market position in the Hydraulic
Systems and Building Systems and Metal Products segments.
SEASONALITY
Because sales of certain hydraulic systems and custom-engineered metal
buildings are related to the construction industry, this portion of the
Company's business is affected by the seasonality of that industry.
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ITEM 1. BUSINESS (Continued)
EMPLOYEES
The Company employs 3,805 full-time employees worldwide. The Company
believes that its labor relations are generally satisfactory.
BACKLOG
The consolidated backlog of unfilled orders at the end of fiscal 1997 was
approximately $200 million. Backlogs at the end of fiscal years 1996 and 1995
were $142 million and $155 million, respectively. The Company expects a
substantial portion of its order backlog at the end of 1997 will be shipped
during fiscal 1998.
(d) Financial information about foreign and domestic operations and export
sales.
See Note I - Segment Reporting - to the Notes to Consolidated Financial
Statements on pages 42 through 44.
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ITEM 2. PROPERTIES
The principal plants of the Registrant and its subsidiaries by industry
segments are located in:
OWNED:
Building Systems and
Hydraulic Systems Metal Products
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Youngstown, Ohio Youngstown, Ohio
Hicksville, Ohio Diekirch, Luxembourg
Kings Mountain, North Carolina Orange, California
Benton, Arkansas Saginaw, Texas
Mairinque, Brazil Sternbeck, Czech Republic
Grantham, England
Minneapolis, Minnesota
Chanhassen, Minnesota
Blacktown, Australia
Port Melbourne, Australia
Warwick, England
Gloucester, England
Verona, Italy
Chemnitz, Germany
Geringswalde, Germany
LEASED:
Building Systems and
Hydraulic Systems Metal Products
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Brisbane, Australia Hagerstown, Maryland
Chicago, Illinois
Atlanta, Georgia
Seattle, Washington
Middleboro, Massachusetts
Properties of Registrant and its subsidiaries are suitably constructed and
maintained for their respective uses.
ITEM 3. LEGAL PROCEEDINGS
As of the date hereof there is no pending litigation, other than ordinary
routine litigation incidental to the business that is not of a material nature,
to which the Registrant or any of its subsidiaries is a party or which may
affect the income from, title to, or possession of, any of their respective
properties.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers of the Registrant is presented in
Part III of this report and incorporated herein by reference.
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange under
the ticker symbol TEC. The following is the range of high and low sales prices
and cash dividends paid per share by quarters for fiscal 1997 and 1996.
<TABLE>
<CAPTION>
RANGE OF SALES
PRICES
-------------------------- DIVIDENDS
HIGH LOW PER SHARE
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1997:
<S> <C> <C> <C>
First quarter . . ............. $ 13 7/8 $ 9 3/4 $ .135
Second quarter. . ............. 13 3/8 11 1/8 .135
Third quarter . . ............. 16 11 5/8 .135
Fourth quarter . .............. 19 1/4 14 3/4 .135
------
$ .540
======
1996:
First quarter.................. $ 19 3/8 $ 16 1/2 $ .135
Second quarter ................ 20 18 .135
Third quarter ................. 30 18 .135
Fourth quarter *............... 26 3/4 10 11/16 .135
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$ .540
======
<FN>
* Shares prices include periods before and after the 100
percent spin-off of Cuno Incorporated on September 10, 1996
which had a market value of $15 per share.
</FN>
</TABLE>
As of October 31, 1997, there were 3,660 holders of record of the Company's
common stock.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SUMMARY OF FINANCIAL DATA, 1987 - 1997
Commercial Intertech Corp. and Subsidiaries
(in thousands, except per-share data and ratios) 1997 1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C> <C>
INCOME DATA - Note A
Net sales ...................................... $ 526,624 $ 465,209 $ 459,137 $ 373,820 $ 317,806 $ 322,413
Gross profit ................................... 139,284 124,216 122,015 106,832 88,243 94,550
Interest expense ............................... 10,493 7,083 6,238 4,262 5,472 4,650
Income from continuing operations before
income taxes ................................ 40,318 23,738 30,379 25,760 23,151 28,163
Income taxes ................................... 13,527 8,382 6,097 7,948 8,435 9,402
Income from continuing operations .............. 26,791 15,356 24,282 17,812 14,716 18,761
Discontinued operations, accounting changes and
extraordinary items ......................... 0 2,039 6,101 7,269 (701) (1,325)
Net income .................................... 26,791 17,395 30,383 25,081 14,015 17,436
Earnings per share - Note B
Income from continuing operations:
Primary ..................................... 1.72 .87 1.42 1.03 .84 .97
Fully diluted ............................... 1.51 .83 1.35 .98 .80 .92
Net income:
Primary ..................................... 1.72 1.01 1.82 1.50 .79 .88
Fully diluted ............................... 1.51 .95 1.72 1.41 .76 .84
Dividends per share of common stock:
Cash ........................................ .54 .54 .51 .48 .45 .45
Stock ....................................... -- -- -- 50% -- --
OTHER FINANCIAL DATA - Note A
Total assets ................................... $ 384,798 $ 337,116 $ 402,679 $ 370,595 $ 302,295 $ 301,734
Current assets ................................. 189,996 190,403 182,859 172,760 114,082 113,209
Less current liabilities ....................... 127,345 116,223 117,420 99,482 78,934 76,040
Net working capital ......................... 62,651 74,180 65,439 73,278 35,148 37,169
Net plant investment ........................... 103,426 96,620 94,795 77,105 65,426 70,586
Gross capital expenditures ..................... 11,699 17,712 31,709 19,236 6,194 7,387
Long-term debt ................................. 111,342 93,415 69,869 71,846 72,479 79,974
Redeemable preferred stock ..................... 0 0 0 0 0 0
Shareholders' equity ........................... 102,830 87,161 176,593 147,982 120,106 117,405
Shareholders' equity per share - Note C ........ 6.89 5.94 11.07 9.44 7.74 7.74
Actual number of shares outstanding at year-end 14,125 13,560 15,440 15,199 15,056 14,864
Average number of shares outstanding
during the year ............................. 14,488 15,256 15,582 15,327 15,096 14,863
RATIOS - Note A
Gross profit to net sales ...................... 26.4% 26.7% 26.6% 28.6% 27.8% 29.3%
Income from continuing operations to net sales . 5.1% 3.3% 5.3% 4.8% 4.6% 5.8%
Effective income tax rate ...................... 33.6% 35.3% 20.1% 30.9% 36.4% 33.4%
Income from continuing operations to average
shareholders' equity ........................ 28.2% 11.6% 15.0% 13.3% 12.4% 16.3%
Ratio of current assets to current liabilities . 1.49:1 1.64:1 1.56:1 1.74:1 1.45:1 1.49:1
Ratio of long-term debt to shareholders' equity
plus long-term debt ......................... 52.0% 51.7% 28.3% 32.7% 37.6% 40.5%
<FN>
Note A - Years 1996 and prior have been restated to reflect the 100 percent spin-off of CUNO Incorporated as of
September 10, 1996. Fiscal years 1991-1997 have been computed in accordance with Employers' Accounting for
Postretirement Benefits Other Than Pensions, SFAS No. 106. Fiscal years 1992-1997 have been computed in accordance
with Accounting for Income Taxes, SFAS No. 109. Prior years have not been restated for SFAS No. 106 and SFAS No.
109.
Note B - Based on weighted average number of shares outstanding adjusted for all subsequent share dividends.
Note C - Based on actual number of shares outstanding at end of period adjusted for all subsequent share dividends.
</FN>
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA (Continued)
SUMMARY OF FINANCIAL DATA, 1987 - 1997
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
(in thousands, except per-share data and ratios) 1991 1990 1989 1988 1987
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME DATA - Note A
Net sales ...................................... $ 305,942 $ 322,167 $ 300,640 $ 279,369 $ 227,185
Gross profit ................................... 90,801 101,061 96,180 83,072 66,352
Interest expense ............................... 4,549 4,592 6,168 7,576 7,713
Income from continuing operations before
income taxes ................................ 32,150 41,636 42,085 27,944 15,623
Income taxes ................................... 13,242 17,809 16,251 11,552 6,193
Income from continuing operations .............. 18,908 23,827 25,834 16,392 9,430
Discontinued operations, accounting changes and
extraordinary items ......................... (7,805) 3,780 (19,104) 172 1,794
Net income .................................... 11,103 27,607 6,730 16,564 11,224
Earnings per share - Note B
Income from continuing operations:
Primary ..................................... .85 1.14 1.45 .98 .57
Fully diluted ............................... .80 1.10 1.39 .94 .57
Net income:
Primary ..................................... .32 1.36 .38 .99 .68
Fully diluted ............................... .32 1.31 .38 .95 .67
Dividends per share of common stock:
Cash ........................................ .45 .44 .40 .38 .37
Stock ....................................... -- -- -- -- --
OTHER FINANCIAL DATA - Note A
Total assets ................................... $ 289,712 $ 315,617 $ 298,252 $ 279,073 $ 255,773
Current assets ................................. 102,330 124,936 109,474 100,129 85,773
Less current liabilities ....................... 62,383 70,775 74,423 61,981 43,253
Net working capital ......................... 39,947 54,161 35,051 38,148 42,520
Net plant investment ........................... 71,753 71,376 58,166 51,628 52,509
Gross capital expenditures ..................... 11,543 16,432 12,056 7,145 5,408
Long-term debt ................................. 48,268 64,871 39,175 57,429 69,910
Redeemable preferred stock ..................... 38,491 37,594 0 0 0
Shareholders' equity ........................... 112,608 124,891 170,463 146,828 131,664
Shareholders' equity per share - Note C ........ 7.59 8.45 8.96 8.85 7.99
Actual number of shares outstanding at year-end 14,686 14,781 19,030 16,585 16,487
Average number of shares outstanding
during the year ............................. 14,888 16,994 17,852 16,664 16,565
RATIOS - Note A
Gross profit to net sales ...................... 29.7% 31.4% 32.0% 29.7% 29.2%
Income from continuing operations .............. 6.2% 7.4% 8.6% 5.9% 4.2%
Effective income tax rate ...................... 41.2% 42.8% 38.6% 41.3% 39.6%
Income from continuing operations to average
shareholders' equity ........................ 15.9% 16.1% 16.3% 11.8% 7.4%
Ratio of current assets to current liabilities . 1.60:1 1.77:1 1.47:1 1.62:1 1.98:1
Ratio of long-term debt to shareholders' equity
plus long-term debt ......................... 30.0% 34.2% 18.7% 28.1% 34.7%
<FN>
Note A - Years 1996 and prior have been restated to reflect the 100 percent spin-off of CUNO Incorporated as of
September 10, 1996. Fiscal years 1991-1997 have been computed in accordance with Employers' Accounting for
Postretirement Benefits Other Than Pensions, SFAS No. 106. Fiscal years 1992-1997 have been computed in accordance
with Accounting for Income Taxes, SFAS No. 109. Prior years have not been restated for SFAS No. 106 and SFAS No.
109.
Note B - Based on weighted average number of shares outstanding adjusted for all subsequent share dividends.
Note C - Based on actual number of shares outstanding at end of period adjusted for all subsequent share dividends.
</FN>
</TABLE>
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<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 1995 - 1997
RESULTS OF OPERATIONS
Consolidated Results
The Company announced on July 29, 1996 that the Board of Directors
had voted to declare a dividend to Commercial Intertech Corp.'s common
shareholders of 100 percent of the common stock of CUNO Incorporated ("CUNO"),
the fluid purification segment of the business. Each holder of record of
Commercial Intertech common shares at the close of business on September 10,
1996, the payable date for the Distribution, received one share of CUNO Common
Stock for every one share of Commercial Intertech common share. The financial
results and net assets of CUNO have been restated and presented as a
discontinued operation in the accompanying consolidated financial statements for
all periods prior to the Distribution Date.
CUNO and Commercial Intertech entered into a Distribution and
Interim Services Agreement (the "Services Agreement") providing for, among other
things, the principal corporate transactions required to effect the separation
of CUNO from Commercial Intertech, the Distribution, and certain other
arrangements governing the relationship between CUNO and Commercial Intertech
with respect to or in consequence of the Distribution. Subject to certain
exceptions, the Services Agreement provided for cross-indemnities to place
financial responsibility for the liabilities of the CUNO business with CUNO, and
financial responsibility for the liabilities of the Commercial Intertech
remaining businesses with Commercial Intertech. Obligations under the Services
Agreement have essentially been completed as of October 31, 1997.
CUNO and Commercial Intertech also entered into a Tax Allocation
Agreement ("Tax Agreement") which provided, among other things, for the
allocation between the parties thereto of federal, state, and foreign tax
liabilities for all periods through the distribution date. The Tax Agreement
also allocates between CUNO and Commercial Intertech any liability for taxes
which may arise in the event the Distribution does not qualify as tax-free.
Under the Tax Allocation Agreement, if the Distribution is determined to be
taxable because a change of control of Commercial Intertech occurs, then the
resulting tax liability shall be borne solely by Commercial Intertech. If the
Distribution is determined to be taxable because of a change of control of CUNO,
then the resulting tax liability shall be borne solely by CUNO. If a tax
liability arises in connection with the Distribution for any reason not set
forth above, then such liability shall be borne equally by Commercial Intertech
and CUNO. For purposes of the Tax Allocation Agreement "a change of control"
means a greater than 50 percent change in stock ownership, measured by vote and
value of either company.
Following the successful spin-off of CUNO, which is reflected as a
discontinued operation for fiscal 1996 and prior, the Company's continuing
operations include the Hydraulic Systems and Building Systems and Metal Products
segments. The remaining discussion relates to Commercial Intertech's continuing
operations and excludes CUNO's historical results.
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<PAGE> 12
ITEM 7. (Continued)
During the third quarter of 1996, the Company received an
unsolicited tender offer, which the Board of Directors voted unanimously as
inadequate and confirmed the Company's strategic plan to spin-off to
shareholders 100 percent of its wholly-owned CUNO operation. In addition, the
Board of Directors approved a program to repurchase up to 2.5 million common
shares. The cost of $8.2 million associated with the successful defense against
the hostile takeover attempt and the cost to further reorganize the remaining
core businesses of the Company were recorded as nonrecurring defense and
reorganization costs.
Strength in the U.S. economy and improved business conditions in
Europe, the United Kingdom and Brazil enabled the Corporation to achieve record
sales and earnings in 1997. Income from continuing operations before
extraordinary items of $26.8 million was nearly 75 percent higher than last
year's income of $15.4 million and more than 10 percent higher than the $24.3
million reported in 1995. Excluding nonrecurring defense and reorganization
charges of $7.1 million after taxes recorded in 1996, income from continuing
operations for 1997 exceeds last year's earnings by more than 19 percent.
Record sales of $526.6 million were higher than those in 1996 and
1995 by 17 percent and 20 percent, respectively, after adjusting for the effects
of exchange rate differences on foreign sales reported in U.S. dollars. Most of
the improvement resulted from increased volume as price increases have been
relatively modest over the three-year period. Acquisitions of the Ultra
Hydraulics and Component Engineering operations also contributed to the
improvement in 1997. Domestic sales have increased substantially over this
period for the Hydraulic and Metal Products groups. Export sales were up 12
percent over last year, reflecting increased shipments to nonaffiliated
customers in Canada and South America. Domestic operations accounted for 55
percent of the Company's total sales in 1997 versus 54 percent in 1996 and 55
percent in 1995. Sales for the Company's overseas operations increased by 20
percent over those in 1996 on a parity-adjusted basis. A significant portion of
the year-over-year gain in overseas revenue relates to the acquisition of Ultra
Hydraulics Limited in mid-November 1996. Sales were generally higher in the
United Kingdom, Europe and Brazil but were marginally lower in Australia on a
parity-adjusted basis.
Operating income of $48.8 million was higher than 1996 and 1995 by
38 percent and 42 percent, respectively, after adjusting for the $8.2 million
nonrecurring defense and reorganization costs incurred in 1996. Operating income
rebounded for the Hydraulic Systems group by increasing 37 percent after last
year's 19 percent decrease. The Building Systems and Metal Products group
reported a 39 percent increase in operating income over 1996 and was more than
double operating earnings in 1995, reflecting continuous improvement for both
the Metal Stampings Division in the U.S. and the Astron Division in Europe.
ORSTA, a manufacturer of hydraulic cylinders, piston pumps and gear
pumps, was acquired in 1994 from the Truehandanstalt ("THA"), the regulatory
agency of the Federal Republic of Germany responsible for privatizing
state-owned enterprises in this region. Under terms of the Purchase Agreement,
Commercial Intertech tendered no financial consideration to acquire the shares
of the businesses but received, in addition to net assets, cash contributions
from the THA to fund pre-existing capital investment programs and cover
estimated operating losses over a period of two years. The loss indemnification
was recorded as a deferred credit (negative goodwill) and subsequently amortized
to income through cost of products sold in accordance with a predetermined
schedule through the end of the second quarter in fiscal 1996. Additional
operating subsidies were received from the German government at the outset of
fiscal 1997 and are being amortized to income in a similar fashion through the
end of fiscal 1998. The combined German operations represented by this
acquisition incurred
-12-
<PAGE> 13
ITEM 7. (Continued)
operating losses, net of subsidy amortization, of $5.4 million in 1997, $7.8
million in 1996 and $2.2 million in 1995. Revenues amounted to $34.7 million,
$38.2 million and $35.8 million, respectively, (see Note K for further details).
Industry Segments
- -Hydraulic Systems
The Hydraulic Systems segment accounted for 67 percent of the
Company's total sales and 55 percent of total operating income in 1997. Revenues
in this segment increased by $58.7 million or 20 percent over last year, while
operating income increased by $7.2 million or 37 percent over last year. The
domestic sector of the business reported a 17 percent increase in revenue over
1996. Revenues had been flat in 1996 and 1995. Combined domestic operating
income was up 45 percent, reflecting strong recovery from weak business market
conditions in late 1996. The truck and transportation, construction and
agriculture equipment markets were particularly strong in 1997. The U.S.
Cylinder Division reported significant increases in revenue and operating income
compared with the corresponding period last year. The acquisition of Component
Engineering Company late in the third quarter of 1996 also contributed to the
increased revenue and operating income in 1997. Component Engineering is a
manufacturer of cartridge-type valves which are manifold mounted for mobile and
industrial applications. Revenue and operating income records were set by the
Hydraulic Systems group during 1997 despite problems associated with production
capacity and receipt of externally supplied components at key operating units.
Delivery dates of manufacturing equipment to increase capacity were extended by
various machine tool vendors while outside suppliers of components were unable
to respond quickly to increased requirements from the Company. Financial
performance was favorable in the foreign segment of the business during 1997 as
all business units reported improved results over last year. The combined United
Kingdom units reported improved operating results for the third consecutive
year. The operations in Germany reported lower revenue in 1997 compared to 1996,
but the operating deficit was reduced by nearly 30 percent, reflecting continued
improvements in manufacturing efficiencies and productivity. The Brazilian
operating unit posted record earnings in 1997 as the government has been able to
control inflation and normalize business conditions.
Ultra Hydraulics Limited, acquired in November, also performed well
during the first year with Commercial Intertech as time and effort was expended
to relocate and streamline the operations to better serve its customers in the
future. This unit serves the mobile equipment market in the United Kingdom,
Europe, the United States and the Far East. Major customers include
manufacturers of material handling, turf care, construction, transportation and
compaction equipment. Ultra's products complement and extend the range of pumps,
motors and valves offered by the Company.
Capital expenditures amounted to $9.9 million for this segment in
1997 versus expenditures of $13.9 million in 1996 and $28.1 million in 1995.
Included in the total for the current year are expenditures of $1.1 million for
completion of the plant expansion for the valve facility in Hicksville, Ohio,
and $1.8 million for the continuing upgrades at our facilities located in
Germany. The majority of the remaining expenditures in 1997 pertains to ongoing
equipment purchases in the U.S. to upgrade manufacturing performance and to
outfit specialized machining cells for the manufacture of new products.
Incoming orders for the Hydraulic Systems group were higher than
those in 1996 by 37 percent on a parity-adjusted basis. Excluding acquisitions,
bookings were up 22 percent from last year. The backlog of unfilled orders to
start the new fiscal year was 57 percent higher than last year, after adjusting
for currency differences (38 percent excluding Ultra Hydraulics).
-13-
<PAGE> 14
ITEM 7. (Continued)
- - Building Systems and Metal Products
Revenues were up slightly for this segment in 1997 compared to 1996
and were even with those in 1995. Operating income improved by 39 percent over
1996 and was more than double the operating income reported in 1995. Sales for
1997 were 11 percent higher than last year for the Astron Building Systems on a
parity-adjusted basis, and earnings improved significantly for the second
consecutive year. Increased demand, favorable pricing, and increased utilization
of the satellite manufacturing operation in the Czech Republic contributed to
the increase in operating income. Sales were 10 percent higher than 1996 and 6
percent higher than 1995 for the Metal Stamping Division in the U.S. Operating
income results were 23 percent higher than 1996 and 40 percent higher than 1995.
The continued strong demand comes from the significant growth in the truck
equipment and storage vessel industries. The Southern Metals Stamping Division,
located in Saginaw, Texas, reported its best year since it was acquired in
January 1995.
Capital expenditures for this segment amounted to $1.8 million in
1997 versus $3.9 million in 1996 and $3.6 million in 1995. Nearly two-thirds of
the current year expenditures pertain to automation, refurbishment and
replacement of production equipment in the U.S. while the remainder relates to
upgraded production equipment, increased production capacity and office
automation of the Astron Division. Nearly two-thirds of the 1996 expenditures
pertained to upgrade production equipment and equipment for the satellite
facility in the Czech Republic. The balance of the spending in 1996 and the
majority of the capital expenditure in 1995 were for general upgrades of
Astron's facilities and production capabilities.
Incoming orders for domestic operations in the fourth quarter were
somewhat lower than the same period last year while bookings in the Astron
Building Systems were up 9 percent over those in the final quarter of 1996 on a
parity-adjusted basis. The backlog of unfilled orders to start the new year is
equal to last year in the U.S., while the Astron backlog is 29 percent higher
after adjusting for foreign currency differences.
Nonoperating Income and Expense
Interest received from investments decreased from $1.0 million in
1996 to $0.9 million in 1997 due, primarily, to lower average invested balances
reflecting efforts to reduce long-term debt resulting from the acquisition of
Ultra Hydraulics Limited, the repurchase of common stock, and the defense
against a hostile takeover attempt. Investment yields were marginally lower than
those in previous years.
Approximately 93 percent of total interest expense incurred on
borrowed funds in 1997 resulted from long-term obligations. Most of the
long-term interest expense derives from the senior unsecured revolving credit
and term loan facilities and the senior unsecured notes. The term loan facility
was replaced in July 1997 with 7.61 percent senior unsecured notes placed with a
group of institutional investors. Remaining interest expense primarily pertains
to long-term debt to fund major construction projects, equipment leases and
short-term borrowings to support current operations. The effective interest rate
paid by the Company has decreased since last year due to the refinancing of the
term loan in July. Short-term rates have fluctuated on an interim basis.
-14-
<PAGE> 15
ITEM 7. (Continued)
Foreign currency exchange and translation gains and losses are
included in other nonoperating expense. These amounts totaled losses of $0.5
million in 1997 and $0.3 in 1995 and a gain of $0.3 in 1996. The Company
utilized foreign currency forward contracts to hedge the principal and interest
due on loans which are periodically made with foreign subsidiaries. Deferred
gains and losses from such hedging activities were negligible at the end of the
current fiscal year (see Note J).
Other nonoperating income for 1997 includes $1.0 million from the
transfer of Astron Building Systems marketing and manufacturing rights to a new
Korean licensee. Included in 1996 is a $1.6 million gain of the sale of unused
assets principally located in the United Kingdom and Germany.
Taxes
The Company's effective tax rate decreased slightly to 34 percent
in 1997 compared to 35 percent in 1996. The Company continues to utilize the tax
loss carryforwards acquired with the ORSTA business in 1994 to shelter earnings
of the Company's other German operations, including those of an Astron
subsidiary. Remaining ORSTA net operating losses of approximately $106.5 million
may be carried forward indefinitely and are expected to provide tax relief on
income earned by all operations in Germany for a number of years. Effective
rates are also reduced by the favorable tax impact of reserve contracts.
Partially offsetting these benefits were the tax consequences of repatriating
foreign earnings and state and local taxes levied on domestic income.
Impact of Year 2000
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations, causing disruptions of operations
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will
be required to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The company presently believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue will not pose
significant operational problems for its computer systems. However, if timely
modifications and conversions are not made or are not completed, the Year 2000
Issue could have a material impact on the operations of the Company.
The Company will utilize both internal and external resources to
reprogram, or replace, and test the software for Year 2000 modifications. The
Company anticipates completing the Year 2000 project prior to any anticipated
impact on its operating systems. The incremental cost of the Year 2000 project
is expected to be immaterial.
-15-
<PAGE> 16
ITEM 7. (Continued)
Management's estimates of cost and time necessary to complete the
Year 2000 project were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved, and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
Accounting Standards
In October 1996, the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 96-1, "Environmental Remediation Liabilities." The SOP does not
make changes to existing accounting rules, but it clarifies how existing
authoritative guidance on loss contingencies should be applied in determining
environmental liabilities. The Company does not believe the SOP will have any
material impact on future operations. The Company will be required to report
under the SOP in financial statements for 1998.
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement No. 123, "Accounting for Stock-Based Compensation" governing
financial accounting and reporting standards for compensation plans which award
employees in the form of stock options, restricted stock, performance shares and
similar stock awards. As permitted by this Statement, the Company elected to
continue to account for such compensation using the intrinsic value method in
accordance with Accounting Principles Board Opinion No. 25. Accordingly,
compensation cost of stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the amount
that must be paid to acquire the stock. Such cost is expensed over the period
from the date of grant to the date the stock options become exercisable.
Compensation cost for stock appreciation rights and awards of common stock are
determined based on the quoted market price of the Company's stock. Pro forma
disclosures as required by the pronouncement indicate net income would have
decreased by approximately $0.1 million in both 1997 and 1996.
In February 1997, the FASB issued Statement No. 128, "Earning Per
Share." The new statement replaces the current primary and fully diluted
earnings per share presentation with basic and diluted earnings per share. Basic
earnings per share measures operating performance assuming no dilution from
securities or contracts to issue common stock. Diluted earnings per share
measures operation performance giving effect to the dilution that would occur
assuming that securities or contracts to issue common stock are exercised or
converted. The statement is effective for the first quarter of our fiscal 1998
reporting and all prior periods are required to be restated.
The FASB also issued Statement No. 130, "Reporting Comprehensive
Income" and Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" in June 1997. Both of these statements require the Company
to evaluate its present reporting and disclosure requirements. The statements
are effective for fiscal year ending October 31, 1998 and will not effect
amounts recorded in the basic financial statements.
-16-
<PAGE> 17
ITEM 7. (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is generally defined as the ability to generate cash, by
whatever means available, to satisfy the short- and long-term needs of the
Company. With respect to cash flow in 1997, the balance of cash and cash
equivalents of $27.6 million remained essentially unchanged from the end of
1996. The ORSTA acquisition made in 1994 continues to be a consumer of Company
funds. Under terms of the Purchase Agreement, Commercial Intertech received cash
contributions from the THA and other German regulatory agencies to cover
operating losses for a period of two years and fund pre-existing capital
expenditure programs of the acquired businesses. Additional government subsidies
were received during the first quarter of 1997 to assist with the operating
losses over an extended two-year period. Cash subsidies amounted to $3.0 million
in 1997 and $17.1 million in 1995. The German operations consumed net cash of
$2.1 million in 1997, $5.2 million in 1996 and $9.3 million in 1995.
Cash generated from Commercial Intertech's continuing operations
amounted to $53.9 million in 1997, representing an increase of $8.4 million from
the previous year. A decrease in receivable from discontinued operations and
increased accounts payable and accrued expenses offset by increased trade
receivables and inventory were the principal factors in the year-over-year
increase. Income from discontinued operations, amortization of intangibles and
deferred credit, postretirement benefits and deferred income taxes are noncash
in nature and therefore had no effect on cash flow in these periods.
Cash used in investing activities amounted to $47.8 million in
1997, reflecting the $39.4 million purchase of all the outstanding common stock
of Ultra Hydraulics Limited. Capital expenditures totaled $11.4 million for the
year versus $18.0 million in 1996 and $31.8 million in 1995 (see Note I). Nearly
60 percent of the current year spending pertained to investments in the U.S. for
expansion of production capacity, equipment upgrades to improve manufacturing
performance, machine tools for the manufacture of new product introductions,
construction of a plant expansion and purchase of advanced computer systems to
support manufacturing processes and administrative functions. Investments in
technologically advanced production and other operating improvements for the
ORSTA units and Ultra Hydraulics Limited accounted for most of the overseas
capital spending. Completion of a new manufacturing facility, production
equipment and other operating improvements for the ORSTA units and the purchase
of production equipment for the Astron satellite facility in the Czech Republic
accounted for most of the capital spending overseas during 1996. Construction of
a new manufacturing plant, capacity expansion, equipment upgrades and office
automation accounted for the majority of the capital expenditures in the U.S. in
the two preceding years. Authorized, but unspent capital expenditure programs
totaled $10.2 million at fiscal year-end, including projects for
state-of-the-art production equipment cells for the Hydraulic Systems group and
upgraded production equipment to improve efficiency and increase capacity for
the Metal Products group. Proceeds were received during 1996 from the sale of
idle property and equipment located in the United Kingdom and Germany.
Cash used in financing activities totaled $3.1 million. Principal
activities included the replacement of the Company's $60.0 million term loan
agreement with unsecured private placement senior notes and the reduction of
debt following the acquisition of Ultra Hydraulics Limited. Other activities
include the payment of reserve contract premiums, the dividend from CUNO
Incorporated in connection with the 1996 spin-off and the distribution of
dividends to shareholders. Dividends totaled $9.3 million in 1997, of which $7.4
million were paid to shareholders of common stock.
-17-
<PAGE> 18
ITEM 7. (Continued)
During the hostile takeover attempt in 1996, the Company completed
a refinancing program to fund the repurchase of 2.0 million common shares,
retire the $45.0 million senior notes that were outstanding and purchase the
employee stock ownership plan's senior notes. The senior notes provide permanent
financing for the remaining life of the benefit plan.
Internal cash flows are expected to be sufficient to provide the
capital resources necessary to support operating needs and finance capital
expenditure programs in the coming year. The Company and its foreign
subsidiaries have and will continue to make loans among affiliates of the
consolidated group to fund worldwide cash requirements when interest rate
spreads make it cost effective to do so. Foreign currency forward contracts are
used to hedge the lending affiliate's receipt of principal and interest due from
these loans (see Note J). The forward contracts are an effective hedge against
fluctuations in the value of the foreign currency. The Company has $79.1 million
of a $125.0 million credit facility available which expires in 2001. The funds
available to the Company under this agreement may be used for any general
corporate purpose. Including this facility, total credit lines of $128.9
million, denominated in both domestic and foreign currencies, were available to
the Company at fiscal year-end. Borrowing rates to start the new year were
generally lower than the same period a year ago, reflecting prevailing market
conditions.
IMPACT OF INFLATION AND CHANGING PRICES
Rates of inflation were moderately lower than the previous year,
ranging from a low of 2 percent or less to a high of 3 percent in most
instances. Manufacturing and operating costs generally advanced in line with
inflation, but the continuing trend of competitive pressures and price
resistance in the marketplace limited the extent to which cost increases could
be passed along to customers in 1997. Consequently, the Corporation relied upon
volumetric efficiencies, productivity improvements and cost saving measures to
offset a shortfall in pricing and successfully maintain or improve profit
margins in most business units. Margins continued to improve for the Astron
Division where weak industry prices and price discounting in certain market
segments adversely affected profitability in fiscal 1995.
The ability to recover cost increases and maintain margins
continues to be a major challenge for most operating units, and the Company
relies upon cost containment, aggressive purchasing, quality initiatives and
cost-saving capital investments to combat profit erosion and remain competitive.
BUSINESS OUTLOOK
The consolidated backlog of unfilled orders amounted to $200
million at the end of the year which, after adjusting for the effects of
exchange rate differences on foreign segments, represents an increase of 47
percent over the previous fiscal year-end. Substantially all of the consolidated
backlog is deliverable in 1998.
Business conditions to start the new fiscal year for the Company's
domestic operations are stronger than a year ago as orders were particularly
brisk in most industry segments during the last quarter of 1997. Early signs in
fiscal 1998 indicate increased demand by most of our core product lines. Recent
reports suggest that economic growth in the U.S. will continue and the Company
intends to realize benefits from 1997 capital investments that were delayed
during the latter part of 1997 to improve productivity. New products introduced
in the last 18 months, all of which enhance our competitive position and open
new markets, as well as the continued growth in miniature and specialized
hydraulics, are experiencing increased customer demand.
-18-
<PAGE> 19
ITEM 7. (Continued)
Prospects are mixed for the Company's overseas operations to start
fiscal 1998. Operations in Germany will continue to incur losses during 1998,
but we expect significant improvement due to strengthening of market conditions
and additional volume from new product introductions. Conditions remain strong
for the Astron Division as demand is expected to increase in major European
markets, with particular strength in Eastern Europe. Elsewhere, management
expects improved results for operations in the United Kingdom, Australia and
Brazil pending continuation of favorable economic conditions.
We continue to monitor the financial crisis in the Asia Pacific
region and its potential impact on the Company. While our direct exposure in
this area is relatively minor, the greater risk to the Company lies in the
broader effect which the crisis might eventually have on economic conditions in
other parts of the world. The impact of any such effect on the Company, its
customers or suppliers cannot be determined at this time.
The Company began to accelerate the implementation of a program to
enhance its manufacturing capacity and efficiency; accordingly, capital
expenditures should be higher in fiscal 1998 as we complete our existing
program. The Company continues to identify and implement strategic initiatives,
and reduce overhead where possible to lower operating costs and improve
profitability. The competitive advantages which these programs provide, our
ability to meet the challenges of globalization and increased international
competition, and continuation of moderate growth in world economies cause us to
anticipate increased consolidated results in 1998.
FORWARD LOOKING INFORMATION
Because Commercial Intertech wants to provide shareholders with
more meaningful and useful information, this Annual Report contains certain
statements which reflect the Company's current expectations regarding the future
results of operations, performance and achievements. Commercial Intertech Corp.
has tried, wherever possible, to identify these "forward looking" statements by
using words such as "anticipate," "believe," "estimate," "expect" and similar
expressions. These statements reflect the Company's current beliefs and are
based on information currently available to it. Accordingly, these statements
are subject to risks and uncertainties which could cause the Company's actual
results, performance or achievements to differ materially from those expressed
in or implied by these statements. These risks and uncertainties include the
following: the effectiveness of the Company's program to reduce general
corporate and operating unit overhead; volumes of shipments of the Company's
products, changes in the Company's product mix and product pricing; costs of raw
materials; the rate of economic and industry growth in the United States and the
other countries in which the Company conducts its business; economic and
political conditions in the foreign countries in which the Company conducts a
substantial part of its operations and other risks associated with international
operations including taxation policies, exchange rate fluctuations and the risk
of expropriation; the Company's ability to protect its technology, proprietary
products and manufacturing techniques; changes in technology, changes in
industrial requirements and risks generally associated with new product
introductions and applications; and domestic and international competition in
the Company's global markets. The Company is not obligated to update or revise
these "forward looking" statements to reflect new events or circumstances.
-19-
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENTS OF CONSOLIDATED INCOME
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996 1995
--------- --------- ---------
(in thousands, except per-share data)
<S> <C> <C> <C>
Net sales ........................................ $ 526,624 $ 465,209 $ 459,137
Less costs and expenses:
Cost of products sold ......................... 387,340 340,993 337,122
Selling, administrative and general expenses .. 90,516 88,799 87,670
Nonrecurring defense and reorganization costs . 0 8,202 0
--------- --------- ---------
477,856 437,994 424,792
--------- --------- ---------
Operating income ................................. 48,768 27,215 34,345
Nonoperating income (expense):
Interest income ............................... 880 1,031 1,837
Interest expense .............................. (10,493) (7,083) (6,238)
Gain on sale of assets ........................ 506 1,603 204
Other ......................................... 657 972 231
--------- --------- ---------
(8,450) (3,477) (3,966)
Income from continuing operations before
income taxes and extraordinary items .......... 40,318 23,738 30,379
Provision for income taxes:
Current ....................................... 12,259 10,875 5,706
Deferred ...................................... 1,268 (2,493) 391
--------- --------- ---------
13,527 8,382 6,097
--------- --------- ---------
Income from continuing operations before
extraordinary items ........................... 26,791 15,356 24,282
Income from discontinued operations (net of income
taxes of $4,857 in 1996 and $3,462 in 1995) ... 0 6,083 6,101
Extraordinary items (losses on early retirement of
debt, net of income tax benefits of $2,694) ... 0 (4,044) 0
--------- --------- ---------
Net income ....................................... $ 26,791 $ 17,395 $ 30,383
========= ========= =========
Preferred stock dividends and adjustments ........ (1,895) (2,058) (2,084)
--------- --------- ---------
Net income applicable to common stock ............ $ 24,896 $ 15,337 $ 28,299
========= ========= =========
Earnings per share of common stock:
Primary:
Income from continuing operations before
extraordinary items ....................... $ 1.72 $ 0.87 $ 1.42
Income from discontinued operations ......... 0.00 0.40 0.40
Extraordinary items ......................... 0.00 (0.26) 0.00
Net income .................................. 1.72 1.01 1.82
Fully diluted:
Income from continuing operations before
extraordinary items ....................... $ 1.51 $ 0.83 $ 1.35
Income from discontinued operations ......... 0.00 0.36 0.37
Extraordinary items ......................... 0.00 (0.24) 0.00
Net income .................................. 1.51 0.95 1.72
</TABLE>
See notes to consolidated financial statements.
-20-
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
CONSOLIDATED BALANCE SHEETS
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
October 31,
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash (including equivalents of $21,615 in 1997 and
$19,291 in 1996) ............................................ $ 27,630 $ 27,552
Accounts and notes receivable, less allowances for doubtful
accounts of $2,456 in 1997 and $1,724 in 1996 ............... 81,886 70,399
Inventories .................................................... 60,944 58,129
Deferred income tax benefits ................................... 15,281 15,515
Prepaid expenses and other current assets ...................... 4,255 4,012
Dividend receivable from discontinued operations ............... 0 4,612
Receivable from discontinued operations ........................ 0 10,184
-------- --------
TOTAL CURRENT ASSETS ...... 189,996 190,403
NONCURRENT ASSETS
Intangible assets .............................................. 44,460 9,051
Pension assets ................................................. 42,961 37,371
Other noncurrent assets ........................................ 3,955 3,671
-------- --------
TOTAL NONCURRENT ASSETS ........... 91,376 50,093
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements ..................................... 6,194 6,379
Buildings ...................................................... 51,457 51,353
Machinery and equipment ........................................ 152,117 130,314
Construction in progress ....................................... 6,262 8,863
-------- --------
216,030 196,909
Less allowance for depreciation ................................ 112,604 100,289
-------- --------
103,426 96,620
-------- --------
TOTAL ASSETS $384,798 $337,116
======== ========
</TABLE>
-21-
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
CONSOLIDATED BALANCE SHEETS (Continued)
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
October 31,
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans ................................................................ $ 140 $ 2,745
Accounts payable .......................................................... 52,382 51,648
Accrued payrolls and related taxes ........................................ 18,989 17,116
Accrued expenses .......................................................... 37,536 37,175
Dividends payable ......................................................... 2,592 2,449
Accrued income taxes ...................................................... 11,085 4,385
Current portion of long-term debt ......................................... 4,621 705
--------- ---------
TOTAL CURRENT LIABILITIES ................... 127,345 116,223
NONCURRENT LIABILITIES
Long-term debt ............................................................ 111,342 93,415
Deferred income taxes ..................................................... 18,274 15,495
Postretirement benefits ................................................... 25,007 24,822
--------- ---------
TOTAL NONCURRENT LIABILITIES ...................... 154,623 133,732
SHAREHOLDERS' EQUITY Preferred stock, no par value:
Authorized: 10,000,000 shares
Series A participating preferred shares ................................ 0 0
Series B ESOP convertible preferred shares
Issued: 1997 - 942,552 shares
1996 - 1,039,657 shares .................................... 21,914 24,172
Common stock, $1 par value:
Authorized: 30,000,000 shares
Issued: 1997 - 14,125,175 shares (excluding 1,945,995 in treasury)
1996 - 13,559,579 shares (excluding 2,211,868 in treasury) 14,125 13,560
Capital surplus ........................................................... 5,264 0
Retained earnings ......................................................... 85,884 67,808
Deferred compensation ..................................................... (16,337) (17,594)
Translation adjustment .................................................... (8,020) (785)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ........................ 102,830 87,161
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................. $ 384,798 $ 337,116
========= =========
</TABLE>
See notes to consolidated financial statements.
-22-
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996 1995
-----------------------------------
(in thousands, except per-share data)
<S> <C> <C> <C>
PREFERRED STOCK (Series B)
Balance at beginning of year ............... $ 24,172 $ 24,494 $ 24,631
Shares converted ........................... (2,258) (322) (137)
--------- --------- ---------
Balance at end of year ..................... 21,914 24,172 24,494
COMMON STOCK
Balance at beginning of year ............... 13,560 15,440 15,199
Shares issued:
Employee Stock Ownership Plan ........... 319 99 34
Stock option and award plans ............ 246 65 207
Repurchase program ......................... 0 (2,044) 0
--------- --------- ---------
Balance at end of year ..................... 14,125 13,560 15,440
CAPITAL SURPLUS
Balance at beginning of year ............... 0 38,396 35,844
Employee Stock Ownership Plan .............. 2,291 1,458 631
Stock option and award plans ............... 2,973 1,110 1,921
Repurchase program ......................... 0 (56,937) 0
Transfer from retained earnings ............ 0 15,973 0
--------- --------- ---------
Balance at end of year ..................... 5,264 0 38,396
RETAINED EARNINGS
Balance at beginning of year ............... 67,808 112,907 91,649
Net income for the year .................... 26,791 17,395 30,383
--------- --------- ---------
94,599 130,302 122,032
Less:
Dividends:
Common (per share: 1997 - $0.54;
1996 - $0.54; 1995 - $0.51) .......... 7,603 7,847 7,862
Preferred Series B ...................... 1,863 2,055 2,082
--------- --------- ---------
9,466 9,902 9,944
Other preferred stock adjustments ........ (751) (811) (819)
Stock distribution - CUNO Incorporated ... 0 37,430 0
Transfer to capital surplus .............. 0 15,973 0
--------- --------- ---------
Balance at end of year ..................... 85,884 67,808 112,907
DEFERRED COMPENSATION ......................... (16,337) (17,594) (18,851)
TRANSLATION ADJUSTMENT ........................ (8,020) (785) 4,207
--------- --------- ---------
Total shareholders' equity .............. $ 102,830 $ 87,161 $ 176,593
========= ========= =========
Shareholders' equity per share of common stock $ 6.89 $ 5.94 $ 11.07
</TABLE>
See notes to consolidated financial statements
-23-
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
STATEMENTS OF CONSOLIDATED CASH FLOWS
Commercial Intertech Corp. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996 1995
-----------------------------------
(in thousands, except per-share data)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................. $ 26,791 $ 17,395 $ 30,383
Adjustments to reconcile net income to net
cash provided by operating activities:
Discontinued operations .............................. 0 (6,083) (6,101)
Provision for depreciation ........................... 14,071 11,999 10,710
Amortization of intangibles .......................... 1,827 567 566
Amortization of deferred credit ...................... (1,518) (3,634) (16,095)
Extraordinary losses on early retirement of debt ..... 0 6,738 0
Postretirement benefits .............................. 333 2,205 634
Pension plan credits ................................. (5,467) (2,524) (2,872)
Change in deferred income taxes ...................... 2,539 (969) 278
Change in current assets and liabilities:
(Increase) decrease in accounts receivable ........ (7,956) 10,446 (15,999)
(Increase) in inventories ......................... (1,800) (6,998) (9,073)
(Increase) decrease in prepaid expenses
and other current assets ....................... (2,796) 903 (2,843)
Decrease in receivable from discontinued operations 10,253 0 0
Increase in accounts payable and accrued expenses . 10,113 12,780 14,545
Increase in accrued income taxes .................. 7,536 2,727 5,270
--------- --------- ---------
Net cash provided by continuing operations ................. 53,926 45,552 9,403
Net cash provided by discontinued operations ............... 0 8,356 3,128
--------- --------- ---------
Net cash provided by operating activities ........ 53,926 53,908 12,531
INVESTING ACTIVITIES:
Proceeds from sale of fixed assets ......................... 849 2,934 374
Business acquisitions ...................................... (39,359) (10,731) (886)
Investments in intangibles ................................. (896) (25) (46)
Capital expenditures ....................................... (11,405) (17,950) (31,794)
Operating subsidies ........................................ 3,016 0 17,146
--------- --------- ---------
Net cash (used) by investing activities .......... (47,795) (25,772) (15,206)
FINANCING ACTIVITIES:
Proceeds from long-term debt ............................... 137,974 268,500 0
Principal payments on long-term debt ....................... (123,925) (245,435) (2,800)
Net borrowings under bank loan agreements .................. (5,371) (6,328) (251)
Repurchase of common shares ................................ 0 (58,980) 0
Debt early retirement ...................................... 0 (6,738) 0
Proceeds from reserve contracts ............................ 619 2,136 2,089
Purchase of reserve contracts .............................. (4,083) (3,566) (3,475)
Conversion of other assets ................................. (3,576) (1,706) (661)
Dividend from CUNO Incorporated ............................ 4,612 30,000 0
Dividends paid ............................................. (9,322) (10,177) (9,666)
--------- --------- ---------
Net cash (used) by financing activities .......... (3,072) (32,294) (14,764)
Effect of exchange rate changes on cash and cash equivalents .. (2,981) (1,239) 2,130
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents .......... 78 (5,397) (15,309)
Cash and cash equivalents at beginning of year ................ 27,552 32,949 48,258
--------- --------- ---------
Cash and cash equivalents at end of year ...................... $ 27,630 $ 27,552 $ 32,949
========= ========= =========
Supplemental disclosures:
Cash paid during the year for:
Interest ................................................. $ 9,523 $ 6,829 $ 7,055
Income taxes ............................................. 5,303 12,852 4,899
</TABLE>
See notes to consolidated financial statements.
-24-
<PAGE> 25
ITEM 8. (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commercial Intertech Corp. and Subsidiaries
NOTE A - ACCOUNTING POLICIES
Organization:
Commercial Intertech Corp. ("Commercial Intertech" or the "Company") is a
multinational manufacturer of Hydraulic Systems and Building Systems and Metal
Products. The Company operates 28 facilities in eight countries.
Discontinued Operations:
On July 29, 1996 the Board of Directors of Commercial Intertech Corp.
approved a plan to spin-off the Company's fluid purification business by
declaring a dividend distribution of 100 percent of the common stock of CUNO
Incorporated ("CUNO") on a pro-rata basis to the holders of Commercial Intertech
common shares (the "Distribution"). Each holder of record of Commercial
Intertech common shares at the close of business on September 10, 1996, the
payable date for the Distribution, received one share of CUNO Common Stock for
every one share of Commercial Intertech common share. No fractional shares of
CUNO were issued. The net assets and operating results of CUNO are presented in
the accompanying consolidated financial statements as a discontinued operation
through the distribution date. The CUNO revenues through the distribution date
were $147,934,000 in 1996 and $162,699,000 in 1995.
In connection with the spin-off, the Board of Directors of Commercial
Intertech declared a dividend of approximately $35,675,000 payable from the CUNO
locations to Commercial Intertech, and immediately prior to the Distribution,
CUNO assumed $30,000,000 of Commercial Intertech's debt in the form of a
dividend.
The Company and CUNO entered into a Tax Allocation Agreement in connection
with the distribution. In addition, the Company and CUNO entered into a
Distribution and Interim Services Agreement which provided that certain services
which had historically been provided to CUNO by the Company would continue to be
provided following the Distribution Date, at rates specified in such agreement,
for a period of up to 12 months.
Consolidation:
The accounts of the Company and its subsidiaries are included in the
consolidated financial statements. Intercompany accounts and transactions are
eliminated upon consolidation. All statements and amounts presented have been
restated to reflect the 100 percent spin-off of CUNO as a discontinued
operation.
Distribution and reorganization costs incurred to successfully defend
against a hostile takeover attempt and to further reorganize the remaining core
businesses were reported in operating income under the caption nonrecurring
defense and reorganization costs.
-25-
<PAGE> 26
ITEM 8. (Continued)
Inventories:
Inventories are stated at the lower of cost or market. Inventories in the
United States are primarily valued on the last-in, first-out (LIFO) cost method.
The method used for all other inventories is first-in, first-out (FIFO).
Approximately 54 percent (53 percent in 1996) of worldwide inventories are
accounted for using the LIFO method. Inventories as of October 31 consisted of
the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Raw materials...................................................... $ 20,899 $ 21,090
Work in process.................................................... 30,161 27,353
Finished goods .................................................... 9,884 9,686
----------- ---------
$ 60,944 $ 58,129
=========== ==========
</TABLE>
If all inventories were priced using the FIFO method, which approximates
replacement cost, inventories would have been $14,960,000 higher in 1997 and
$14,603,000 higher in 1996.
Intangible Assets:
Intangible assets at October 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Goodwill, less accumulated amortization (1997 - $ 2,768,000;
1996 - $1,280,000)..................................................... $ 43,165 $ 8,495
Other intangibles, less accumulated amortization (1997 -
$844,000; 1996 - $443,000)............................................. 1,295 556
----------- ----------
$ 44,460 $ 9,051
=========== ==========
</TABLE>
The excess cost over the fair value of net assets acquired (or goodwill)
generally is amortized on a straight-line basis over 25 to 40 years. Other
intangibles, including patents, know-how and trademarks, are carried at their
appraised value on the acquisition date less accumulated amortization, which is
provided using the straight-line method over 10 to 25 years.
Properties and Depreciation:
Property, plant and equipment are recorded at cost. The Company uses the
straight-line method in computing depreciation for financial reporting purposes
and generally uses accelerated methods for income tax purposes. The annual
provisions for depreciation are provided using the following estimated useful
lives:
<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements................................ 20 - 35 years
Machinery and equipment................................... 5 - 10 years
Furniture and fixtures.................................... 3 - 15 years
</TABLE>
Impairment of Long-Lived Assets:
In the event that facts and circumstances indicate that the carrying value
of intangibles and long-lived assets or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flow associated with the asset would be
compared to the asset's carrying amount to determine if a write-down is
required.
-26-
<PAGE> 27
ITEM 8. (Continued)
Income Taxes:
The Company uses the liability method in measuring the provision for income
taxes and recognizing deferred tax assets and liabilities. Deferred income tax
assets and liabilities principally arise from differences between the tax basis
of the asset or liability and its reported amount in the consolidated financial
statements. Deferred tax balances are determined by using provisions of the
enacted tax laws; the effects of future changes in tax laws or rates are not
anticipated.
Provisions are made for appropriate income taxes on undistributed earnings
of foreign subsidiaries which are expected to be remitted to the parent company
in the near term. The cumulative amount of unremitted earnings of subsidiaries,
which aggregated approximately $67,433,000 at October 31, 1997, is deemed to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, the Company would be subject to
both U.S. income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries. Determination of the
amount of unrecognized deferred U.S. tax liability is not practicable because of
the complexities associated with its hypothetical calculation; however,
unrecognized foreign tax credit carryforwards would be available to reduce some
portion of the U.S. liability.
Translation of Foreign Currencies:
The financial statements of foreign entities are translated in accordance
with Financial Accounting Standards Board (FASB) Statement No. 52, except for
those entities located in highly inflationary countries. Under this method,
revenue and expense accounts are translated at the average exchange rate for the
year, while asset and liability accounts are translated into U.S. dollars at the
current exchange rate. Resulting translation adjustments are recorded as a
separate component of shareholders' equity and do not affect income
determination. Effective for the first quarter of fiscal 1998, the Company will
change its foreign currency translation procedures for its operations located in
Brazil which reflects a change in its economy to a non-highly inflationary
status. The change will not materially impact the Company's financial
statements.
Derivative Financial Instruments:
The Company's utilization of derivative financial instruments is primarily
limited to the use of forward exchange contracts which are designated as hedges
of specific foreign currency transactions, including specific loans among
consolidated affiliates. The unrealized gains and losses related to such
contracts are deferred and included in the measurement of related foreign
currency transaction. In instances where hedge designations are, or become
inappropriate, gains and losses related to such contracts will be included in
income as nonoperating income (expense).
Earnings Per-Share Amounts:
Income per share of common stock is computed using the weighted-average
number of shares outstanding for each year. The preferred stock issuances were
determined not to be common stock equivalents for primary earnings per common
share. In computing primary earnings per common share, the Series B preferred
dividends reduce income available to common shareholders.
In computing fully diluted earnings per share, dilution is determined by
dividing net earnings by the weighted average number of common shares
outstanding during each year after giving effect to dilutive preferred stock
assumed converted to common stock. The dilutive calculation assumes conversion
of Series B preferred stock to common shares and the subsequent adjustment for
dividend rates to arrive at income available to common shareholders.
-27-
<PAGE> 28
ITEM 8. (Continued)
Cash Equivalents:
The Company considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents.
Investment in Reserve Contracts:
The Company holds corporate-owned life insurance contracts on most domestic
employees. The contracts are recorded at cash surrender value, net of policy
loans, in other noncurrent assets. The net contract expense, including interest
expense, is included in selling, administrative and general expenses in the
Statements of Consolidated Income. The related interest expense was $7,264,000
in 1997, $7,715,000 in 1996 and $7,973,000 in 1995, which in each year is
reduced for contract benefits and net amortization of contract premiums and cash
surrender value.
Concentration of Credit Risks:
The Company sells products and extends credit based on an evaluation of the
customer's financial condition, generally without requiring collateral. Exposure
to losses on receivables is principally dependent on each customer's financial
condition. The Company monitors its exposure for credit losses and maintains
allowances for anticipated losses.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition:
Revenue is recognized when the earning process is complete and the risks
and rewards of ownership have transferred to the customer, which is generally
considered to have occurred upon shipment of the finished product.
Advertising:
The Company expenses all advertising cost as incurred. Advertising expense
incurred during the period was immaterial.
Stock-Based Compensation:
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," permits the Company to continue to use the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25
to account for stock-based compensation. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of grant over the amount that must be paid to
acquire the stock. Such cost is expensed over the period from the date of grant
to the date the stock options become exercisable. Compensation cost for stock
appreciation rights and awards of common stock are determined based on the
quoted market price of the Company's stock.
-28-
<PAGE> 29
ITEM 8. (Continued)
Newly Issued Accounting Standards:
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 96-1, "Environmental Remediation Liabilities." The SOP is effective for
fiscal years beginning after December 15, 1996. The SOP does not make changes to
existing accounting rules, but it clarifies how existing authoritative guidance
on loss contingencies should be applied in determining environmental
liabilities. The Company does not believe the SOP will have any material impact
on future operations. The Company will be required to report under the SOP in
its financial statements for 1998.
In February 1997, SFAS No. 128, "Earnings Per Share" was issued. Under the
new statement, the presentations of primary and fully diluted earnings per share
which are currently required are replaced by basic and diluted earnings per
share. Basic earnings per share measures operating performance assuming no
dilution from securities or contracts to issue common stock. Diluted earnings
per share measures operating performance giving effect to the dilution that
would occur assuming that securities or contracts to issue common stock are
exercised or converted. The new statement is required for our fiscal 1998
reporting. Early adoption is not permitted. Under the new statement, basic
earnings per share from continuing operations before extraordinary items would
be $1.83, $0.91, and $1.48 for the years ended October 31, 1997, 1996 and 1995,
respectively. Diluted earnings per share from continuing operations before
extraordinary items under the new statement would be $1.56, $0.86, and $1.37 for
the years ended October 31, 1997, 1996, and 1995, respectively.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued.
SFAS No. 130 defines comprehensive income and outlines certain reporting and
disclosure requirements related to comprehensive income and is effective for
fiscal year ending October 31, 1998. The Company has not completed its
evaluation of the impact of the new disclosure requirements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued. SFAS No. 131 requires changes in the
presentation of operating segment information in both interim and annual
financial statements and is effective for fiscal year ending October 31, 1998.
The Company has not completed its evaluation of the impact of the new disclosure
requirements.
NOTE B - DEBT
Long-term debt obligations at October 31 are summarized below:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Senior unsecured notes .................................. $ 60,000 $ 0
Senior unsecured revolving credit and term loan agreement 45,855 91,000
Other ................................................... 10,108 3,120
-------- --------
115,963 94,120
Less current portion .................................... 4,621 705
-------- --------
$111,342 $ 93,415
======== ========
</TABLE>
-29-
<PAGE> 30
ITEM 8. (Continued)
Senior Unsecured Notes
- ----------------------
In July 1997, the Company completed a private placement of $60,000,000 in
senior unsecured notes with a group of institutional investors. The 7.61 percent
notes have an average life of seven years and a maturity date of 10 years. The
notes, subject to certain provisions, are callable at any time at the option of
the Company. The notes include covenants which require the maintenance of
certain financial ratios. The Company was in compliance with these covenants at
October 31, 1997.
Senior Unsecured Revolving Credit and Term Loan Agreement
- ---------------------------------------------------------
During the third and fourth quarters of fiscal 1996, the Company entered
into a $190,000,000 bridge loan agreement to fund the repurchase of 2,000,000
common shares, to purchase the outstanding loans of the Company's Employee Stock
Ownership Plan ("ESOP") and to retire the $45,000,000 senior notes outstanding.
Following the spin-off of CUNO in September 1996, $55,000,000 of the loan was
allocated to CUNO. On October 31, 1996, the Company replaced the bridge facility
with a $125,000,000 aggregate senior unsecured revolving credit and $60,000,000
senior unsecured term loan facilities. Extraordinary items associated with the
losses on the early retirement of debt were recorded in fiscal 1996.
The $125,000,000 revolving credit agreement provides the Company an option
to borrow the pounds sterling equivalent of $50,000,000 to finance the
acquisition, including working capital, of Ultra Hydraulics Limited which was
consummated in November 1996 (see Note K). The revolving credit agreement
matures on October 31, 2001.
The $60,000,000 term credit agreement which was scheduled to mature on
January 31, 2000 was repaid in July 1997 using proceeds from the senior
unsecured notes.
Under the revolving credit agreement, the Company pays a variable per-annum
fee on the unused amount of the commitment, payable quarterly in arrears. The
rate at October 31, 1997 was .15 percent and will reduce to .125 percent
effective January 1998 based on the Company's leverage ratio at October 31,
1997. The agreement has interest rate options determinable by the Company based
upon prime interest or LIBOR rates plus an applicable margin. The margin was .5
percent at October 31, 1997 and will reduce to .375 percent effective January
1998 based on the Company's leverage ratio at October 31, 1997. The credit
agreement also has a competitive bid option feature, which under certain
conditions provides lower interest rates. At October 31, 1997, approximately 90
percent of the funds drawn on the revolving credit agreement were denominated in
pounds sterling. The combined U.S. dollar and pounds sterling weighted average
interest rate was 7.69 percent. The credit agreement includes covenants which
require the maintenance of certain financial ratios. The Company was in
compliance with these covenants at October 31, 1997. Additionally, under the
most restrictive provisions of the agreement, approximately $26,600,000 of
unrestricted retained earnings is available for future dividend payments or
share purchases.
-30-
<PAGE> 31
ITEM 8. (Continued)
Other
- -----
Debt principal payments due in the five fiscal years after October 31, 1997
are:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
1998............. $ 4,621
1999............. 2,320
2000............. 1,673
2001............. 54,975
2002............. 8,698
</TABLE>
Included in debt principal payments for the fiscal year 2001 is $45,855,000
which is currently outstanding under the senior unsecured revolving credit
agreement.
The Company had available unused lines of credit in various countries
totaling approximately $49,800,000 short-term and $79,100,000 long-term at
October 31, 1997. Outstanding bank loans at October 31, 1997 and 1996 had
weighted average interest rates of 5.95 percent and 5.40 percent, respectively.
NOTE C - FOREIGN CURRENCY TRANSLATION
The cumulative effects of foreign currency translation gains and losses are
reflected in the translation adjustments section of Shareholders' Equity.
Foreign currency transaction gains and losses, which include U.S. dollar
translation losses in Brazil, are reflected in income. Foreign currency gains
and losses have (decreased) increased income from continuing operations before
income taxes and extraordinary items as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
1997.............$ (492)
1996............. 266
1995 ............ (330)
</TABLE>
-31-
<PAGE> 32
ITEM 8. (Continued)
NOTE D - STOCK OPTION AND AWARD PLANS
Under the Company's stock option and award plans, approximately 1,528,800
shares of common stock are reserved for issuance to key employees and
non-employee directors at October 31, 1997. Stock options are exercisable at
various dates and generally expire ten years from the date of grant. Stock
appreciation rights may be granted as part of a stock option or as a separate
right to the holders of any options previously granted. The present plan also
provides for awards of restricted stock and performance shares of common stock
to key employees. The restricted shares generally vest over a five-year period
and are charged to earnings over the vesting period. There were 46,890; 42,380
and 43,800 restricted shares awarded in 1997, 1996 and 1995, respectively. The
performance shares generally vest over a three-year period based on the
attainment of specified average annual earnings growth and return-on-net-asset
targets. Awards of performance shares totaled 154,950 in 1997, 900 in 1996 and
130,650 in 1995. The weighted-average grant-date fair value of the restricted
and performance share awards was $12.29 for 1997, $19.84 for 1996 and $18.97 for
1995. Charges to income before income taxes for current and future distributions
amounted to $3,117,000 in 1997, $2,183,000 in 1996 and $1,749,000 in 1995.
In January 1997, the Company established a plan which allows non-employee
directors to elect to receive shares of the Company's common stock at a future
date instead of cash otherwise payable for certain director fees. If shares are
elected, the number of shares at market value equal to 120 percent of the fees
otherwise payable are identified for distribution at a future date established
by the Management Evaluation and Compensation Committee of the Board of
Directors. In addition, non-employee directors automatically receive an option
to purchase 2,250 shares upon election to a new three-year term.
-32-
<PAGE> 33
ITEM 8. (Continued)
Information regarding stock options for 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------- -------------------------- ----------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price Shares
---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Options outstanding, beginning of year ....... 1,067,473 $ 6.90 617,051 $ 13.64 623,337
Adjustment ................................... (25,214) -- 591,219 --
Options exercised ............................ (179,056) 5.84 (235,547) 12.18 (86,536)
Options granted .............................. 147,500 4.14 142,000 2.07 123,750
Options expired .............................. 0 0 (750) 5.87 0
Options forfeited ............................ (44,828) 8.36 (46,500) 8.17 (43,500)
---------- -------- ---------- -------- ----------
Options outstanding, end of year ............. 965,875 $ 7.95 1,067,473 $ 6.90 617,051
========== ======== ========== ======== ==========
Option price range at end of year ............ $4.68 to $12.88 $4.68 to $9.76 $9.83 to $21.88
Option price range for exercised shares ...... $5.13 to $8.64 $9.83 to $21.88 $6.50 to $14.83
Options available for grant at end of year ... 562,930 767,760 796,550
Weighted-average fair value of options granted
during the year ........................... $ 4.14 $ 2.07
Options exercisable at end of year ........... 501,234 $ 6.16 485,709 $ 5.59 340,376
</TABLE>
During 1996, terms of the outstanding stock option grants were amended to
offset the dilution created by the September 10, 1996 distribution of the common
stock of CUNO to the shareholders of Commercial Intertech common stock. The
amendments, which applied to stock options outstanding as of the distribution
date, included a pro-rata reduction in the exercise price per option and an
increase in the number of shares under option, thereby restoring option holders
to the same economic position which existed prior to the distribution. The
number of options outstanding as of October 31, 1996 increased by 591,219 shares
as a result of this adjustment and no compensation expense was charged to
earnings.
The following table summarizes information about stock options outstanding
as of October 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ --------------------------
Weighted- Weighted- Weighted
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
--------------- ------------------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4.68 to $ 5.32 155,805 3.87 $ 5.09 155,805 $ 5.09
$ 5.87 246,249 5.83 5.87 246,249 5.87
$ 6.62 to $ 8.42 219,642 8.10 8.37 6,724 6.70
$ 8.48 to $ 8.64 184,912 7.42 8.62 85,732 8.63
$ 9.76 to $ 12.88 159,267 9.05 12.60 6,724 9.76
--------- ---- ------ -------- -------
$ 4.68 to $ 12.88 965,875 6.87 $ 7.95 501,234 $ 6.16
========= ==== ====== ======== =======
</TABLE>
-33-
<PAGE> 34
ITEM 8. (Continued)
As permitted under Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," the Company has elected
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"), and related Interpretations, in accounting
for stock-based awards to employees. Under APB No. 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized in
the Company's financial statements for all periods presented. Compensation
expense is recognized for performance shares based upon the current stock fair
value and the number of shares expected to be earned under APB No. 25.
If the Company had elected to follow SFAS 123, the effect on net income
and earnings per share would have been minimal in fiscal 1997 and 1996. Because
the Statement provides for pro forma amounts for option grants after December
15, 1995, the pro forma expense will likely increase in future years as the new
option grants become subject to the pricing model.
<TABLE>
<CAPTION>
1997 1996
---- ----
(in thousands, except per share data)
<S> <C> <C>
Net income - as reported.................$ 26,791 $ 17,395
Net income - pro forma................... 26,674 17,285
Net income per share:
Primary:
As reported......................... $ 1.72 $ 1.01
Pro forma........................... 1.73 1.01
Fully diluted:
As reported........................ $ 1.51 $ 0.95
Pro forma.......................... 1.53 0.96
</TABLE>
The fair value of each option grant is estimated on the date of grant,
using the Black-Scholes option- pricing model with the following
weighted-average assumptions used for grants in 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Expected life (years).................... 6.75 6.75
Risk-free interest rate (%).............. 6.00 6.00
Volatility (%)........................... 40.50 40.50
Dividend yield (%)....................... 5.63 5.63
</TABLE>
-34-
<PAGE> 35
ITEM 8. (Continued)
NOTE E - BENEFIT PLANS
The Company and its subsidiaries have a number of noncontributory defined
benefit pension plans covering most U.S. employees. Pension benefits for the
hourly employees covered by these plans are expressed as a percentage of average
earnings over a ten-year period times years of continuous service or as a flat
benefit rate times years of continuous service. Benefits for salaried employees
are based upon a percentage of the employee's average compensation during the
preceding ten years, reduced by 50 percent of the Social Security Retirement
Benefit. The Company's funding policy is to contribute amounts to the plans
sufficient to meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, plus such additional amounts as may be
deemed appropriate from time to time.
The Company also sponsors defined contribution pension plans for the hourly
employees of its operations in Benton, Arkansas; Kings Mountain, North Carolina;
Minneapolis, Minnesota; and Chanhassen, Minnesota. Contributions and expense for
these plans are computed at 3 percent of annual employee compensation or at a
discretionary rate as determined each year by the Company. Hourly employees at
the Orange, California facility are covered by a multiemployer plan which
provides benefits in a manner similar to a defined contribution arrangement.
The Company accounts for pension costs under the provisions of FASB
Statement No. 87 for contributory defined benefit pension plans covering its
employees in the United Kingdom. Benefits under these plans are generally based
on years of service and compensation during the years immediately preceding
retirement. Funding is predicated on minimum contributions as required by local
laws and regulations plus additional amounts, if any, as may be deemed
appropriate. Some employees of other foreign operations also participate in
postemployment benefit arrangements not subject to the provisions of FASB
Statement No. 87.
A summary of the various components of net periodic pension cost for
defined benefit plans and cost information for other plans for the three-year
period is shown below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Defined benefit plans:
Service cost ................. $ 2,560 $ 2,338 $ 1,829
Interest cost ................ 9,026 7,942 7,483
Actual return on plan assets . (34,695) (29,778) (24,410)
Net amortization and deferral 21,071 18,299 13,526
-------- -------- --------
Net pension (income) ......... (2,038) (1,199) (1,572)
Other plans:
Defined contribution plans ... 482 463 388
Multiemployer plan ........... 68 73 70
Foreign plans ................ 444 396 367
Termination benefit .......... 0 1,639 0
-------- -------- --------
Total pension (income) expense $ (1,044) $ 1,372 $ (747)
======== ======== ========
</TABLE>
-35-
<PAGE> 36
ITEM 8. (Continued)
Assumptions used in the accounting for the defined benefit plans as of
October 31 were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted-average discount rate ............ 7.25% 7.75% 7.25%
Rates of increase in compensation levels .. 4.5% 5.0% 4.5%
Expected long-term rate of return on assets 10.0% 10.0% 10.0%
</TABLE>
-36-
<PAGE> 37
ITEM 8. (Continued)
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheets at October 31, 1997 and 1996 for the Company's
U.S. and foreign defined benefit pension plans. Other foreign pension plans do
not determine net assets or the actuarial present value of accumulated benefits
as calculated and disclosed herein:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
--------------------------- --------------------------
Plans Whose Plans Whose Plans Whose Plans Whose
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
--------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation ....... $(101,501) $ (7,344) $ (84,866) $ (6,190)
========= ========= ========= =========
Accumulated benefit obligation .. $(106,467) $ (7,344) $ (88,304) $ (6,194)
========= ========= ========= =========
Projected benefit obligation .... $(116,448) $ (8,306) $ (99,738) $ (6,719)
Market value of plan assets ....... 186,547 3,409 146,732 2,956
--------- --------- --------- ---------
Projected benefit obligation less
than or (in excess of) plan
assets ......................... 70,099 (4,897) 46,994 (3,763)
Unrecognized net (gain) loss ...... (34,669) 1,001 (22,504) 643
Unrecognized prior service cost ... 5,009 1,034 5,309 696
Unrecognized net (asset) obligation (2,331) 567 1,872 657
Additional liability .............. 0 (1,639) 0 (1,471)
--------- --------- --------- ---------
Net pension asset (liability)
recognized in the Consolidated
Balance Sheet .................. $ 38,108 $ (3,934) $ 31,671 $ (3,238)
========= ========= ========= =========
</TABLE>
Plan assets at October 31, 1997 are invested in publicly traded and
restricted mutual funds, various corporate and government bonds, guaranteed
income contracts and listed stocks, including common stock of the Company having
a market value of $3,564,600 at that date.
In addition to pension benefits, the Company sponsors other defined benefit
postretirement plans in the U.S. which provide medical and life insurance
benefits for certain hourly and salaried employees. Benefits are provided on a
noncontributory basis for those salaried retirees who have attained the age of
55 with 15 years of service and those hourly retirees who have attained the age
of 60 with 15 years of service or 30 years of service with no age restriction,
up to 65 years of age. Coverage is also provided for surviving spouses of hourly
retirees. Medical plans for both employee groups incorporate deductibles and
coinsurance features. The plans are unfunded, and postretirement benefit claims
and premiums are paid as incurred. Company-sponsored postretirement benefits are
not available to employees of foreign subsidiaries.
-37-
<PAGE> 38
ITEM 8. (Continued)
Components of net periodic postretirement benefit cost are shown below. Net
periodic cost associated with retiree life insurance benefits amounted to
$190,000 in 1997, $190,000 in 1996 and $269,000 in 1995.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost ........................... $ 434 $ 396 $ 386
Interest cost .......................... 1,456 1,294 1,463
Actual return on plan assets ........... 0 0 0
Amortization of transition obligation .. 0 0 0
Net amortization and deferral .......... (47) (47) (11)
------- ------- -------
Net periodic postretirement benefit cost $ 1,843 $ 1,643 $ 1,838
======= ======= =======
</TABLE>
The following table shows the aggregated funded status of the benefit plans
reconciled with amounts recognized in the Company's Consolidated Balance Sheets.
The accrued postretirement cost associated with retiree life insurance benefits
amounted to $3,481,000 and $3,429,000 as of October 31, 1997 and 1996,
respectively.
<TABLE>
<CAPTION>
October 31,
---------------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees ................................. $ (7,993) $ (7,833)
Fully eligible active plan participants .. (4,119) (3,553)
Other active plan participants ........... (7,433) (5,849)
-------- --------
(19,545) (17,235)
Plan assets at fair value ..................... 0 0
-------- --------
Accumulated postretirement benefit
obligation (in excess of) plan assets ...... (19,545) (17,235)
Unrecognized net (gain) loss .................. 745 (772)
Unrecognized prior service (asset) ............ (423) (471)
Unrecognized transition obligation ............ 0 0
-------- --------
(Accrued) postretirement benefit cost ......... $(19,223) $(18,478)
======== ========
</TABLE>
The weighted-average annual assumed rate of increase in the per-capita cost
of covered benefits in the medical plans, or health care cost trend rate, was
9.0 percent for 1997 and 9.5 percent for 1996. The trend rate is assumed to
decrease gradually from 8.0 percent in 1998 to 5.0 percent in the year 2004 and
remain at that level thereafter. Increasing the assumed health care cost trend
rate by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of October 31, 1997 by $1,836,000 and the
aggregate of service and interest cost components of net periodic postretirement
benefit cost for 1997 by $210,000. The weighted-average discount rate used in
determining the accumulated postretirement benefit obligation was 7.25 percent
and 7.75 percent at October 31, 1997 and 1996, respectively. The annual assumed
rate of salary increase for retiree life insurance is 4.5 percent and 5.0
percent at October 31, 1997 and October 31, 1996, respectively.
-38-
<PAGE> 39
ITEM 8. (Continued)
NOTE F - INCOME TAXES
The components of income from continuing operations before income taxes and
extraordinary items and the provision for income taxes are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Income from continuing operations before
income taxes and extraordinary items
Domestic ............................................ $ 23,295 $ 8,466 $ 20,717
Foreign ............................................. 17,023 15,272 9,662
-------- -------- --------
40,318 23,738 30,379
Provision for income taxes
Current
Domestic
Federal .......................................... 7,021 6,261 6,258
State and local .................................. 604 1,294 374
Foreign ............................................. 6,278 4,242 2,053
-------- -------- --------
13,903 11,797 8,685
Deferred
Domestic
Federal .......................................... 872 (2,687) (699)
State and local .................................. 175 (510) (177)
Foreign ............................................. 221 704 1,267
-------- -------- --------
1,268 (2,493) 391
Benefit of operating loss
carryforwards ....................................... (1,644) (922) (2,979)
-------- -------- --------
13,527 8,382 6,097
Income from continuing operations
before extraordinary items
Domestic ............................................ 14,623 4,108 14,961
Foreign ............................................. 12,168 11,248 9,321
-------- -------- --------
$ 26,791 $ 15,356 $ 24,282
======== ======== ========
</TABLE>
A reconciliation of the effective tax rate to the U.S. statutory rate
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal income tax rate .. 35.0% 35.0% 35.0%
State and local taxes on income net of
domestic income tax benefit ........ 1.3 2.4 .4
Increase (decrease) in effective rate due
to impact of foreign subsidiaries .. 1.4 (1.7) (.2)
Benefit of operating loss carryforwards . (4.1) (3.9) (9.8)
Repatriation of foreign earnings ........ 2.9 5.1 1.2
Nonrecurring defense costs .............. .0 8.0 .0
Reserve contracts ....................... (1.8) (7.8) (7.2)
All other ............................... (1.1) (1.8) .7
---- ---- ----
Effective income tax rate ............... 33.6% 35.3% 20.1%
==== ==== ====
</TABLE>
-39-
<PAGE> 40
ITEM 8. (Continued)
Significant components of the Company's deferred income tax liabilities and
assets as of October 31 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Deferred income tax liabilities:
Tax over book depreciation ................ $ 9,976 $ 8,512 $ 8,215
Prepaid pension asset ..................... 14,500 12,615 11,555
United Kingdom property sale .............. 1,547 1,400 1,360
Other ..................................... 81 387 383
-------- -------- --------
Total deferred income tax liabilities . 26,104 22,914 21,513
Deferred income tax assets:
Postretirement benefits ................... 7,544 7,248 7,032
Employee benefits ......................... 6,891 6,241 5,404
Net operating loss carryforwards .......... 47,886 54,047 65,037
Inventory valuation ....................... 1,204 1,222 1,504
Product liability ......................... 4,479 4,237 3,484
Other ..................................... 2,993 3,986 1,616
-------- -------- --------
Total deferred income tax assets ...... 70,997 76,981 84,077
Valuation allowance for deferred income tax
assets ................................ 47,886 54,047 65,037
-------- -------- --------
Net deferred income tax assets ........ 23,111 22,934 19,040
-------- -------- --------
Net deferred income tax liabilities (assets) ... $ 2,993 $ (20) $ 2,473
======== ======== ========
</TABLE>
The valuation allowance decreased by $6,161,000 in 1997 and $10,990,000 in
1996 and increased by $9,729,000 in 1995. The decrease in fiscal 1997 is a
result of translation into the stronger dollar at October 1997 versus 1996; the
decrease in fiscal 1996 is the result of tax audits on years prior to the
acquisition of ORSTA Hydraulik. At October 31, 1997, the Company also had unused
foreign tax credit carryovers of approximately $3,257,000 of which $314,000 will
expire in 1998, $1,603,000 in 1999, and the balance will expire in the year
2001.
Tax benefits from operating loss carryforwards relate to the ORSTA
Hydraulik operations acquired in 1994 which are available indefinitely.
-40-
<PAGE> 41
ITEM 8. (Continued)
NOTE G - QUARTERLY FINANCIAL DATA (unaudited)
Selected quarterly financial data for each quarter in fiscal year 1997 and
1996 is as follows:
<TABLE>
<CAPTION>
1997 First Second Third Fourth Total
- ------------------------------------------------------------------------------------------------------------------
(in thousands, except per-share amounts)
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 116,716 $ 129,892 $ 137,051 $ 142,965 $ 526,624
Gross profit.................................... 28,313 33,524 36,542 40,905 139,284
Net income ..................................... 2,952 5,740 7,701 10,398 26,791
Earnings per share:
Primary...................................... $ 0.17 $ 0.37 $ 0.50 $ 0.68 $ 1.72
Fully diluted................................ 0.17 0.33 0.44 0.59 1.51
Dividends per common share...................... 0.135 0.135 0.135 0.135 0.540
1996 First Second Third Fourth Total
- ------------------------------------------------------------------------------------------------------------------
(in thousands, except per-share amounts)
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 106,962 $ 112,227 $ 121,009 $ 125,011 $ 465,209
Gross profit.................................... 26,853 28,960 32,299 36,104 124,216
Income from continuing operations
before extraordinary items................... 3,402 4,392 3,199 4,363 15,356
Income from discontinued operations............. 1,851 3,251 630 351 6,083
Extraordinary items............................. 0 0 0 (4,044) (4,044)
Net income ..................................... 5,253 7,643 3,829 670 17,395
Earnings per share:
Primary:
Income from continuing operations
before extraordinary items.............. $ 0.18 $ 0.25 $ 0.17 $ 0.28 $ 0.87
Income from discontinued operations........ 0.12 0.21 0.05 0.02 0.40
Extraordinary items ....................... 0.00 0.00 0.00 (0.29) (0.26)
Net income................................. 0.30 0.46 0.22 0.01 1.01
Fully diluted:
Income from continuing operations
before extraordinary items.............. 0.18 0.24 0.17 0.26 0.83
Income from discontinued operations........ 0.11 0.19 0.04 0.02 0.36
Extraordinary items ....................... 0.00 0.00 0.00 (0.25) (0.24)
Net income................................. 0.29 0.43 0.21 0.01 0.95
Dividends per common share ..................... 0.135 0.135 0.135 0.135 0.540
</TABLE>
The Company received fees from the transfer of Astron Building Systems
marketing and manufacturing rights to a new Korean licensee. The fees increased
net income by $735,000 or $0.04 per share in the second quarter of 1997.
-41-
<PAGE> 42
ITEM 8. (Continued)
The Company incurred charges of $3,637,000 or $.21 per share during the
third quarter of 1996 and $3,452,000 or $.21 per share (net of tax) during the
fourth quarter to successfully defend itself against a hostile takeover attempt
and to further reorganize the remaining core business of the Company following
the September 10, 1996 spin-off of CUNO. The Company also recorded extraordinary
charges of $4,044,000 or $.24 per share in the fourth quarter of 1996 for losses
associated with early retirement of debt.
Gains on the sale of assets were recorded during the 1996 fiscal year,
principally related to assets located in Germany and the United Kingdom. After
tax gains were as follows:
<TABLE>
<CAPTION>
<S> <C>
First quarter.............$241,000 or $0.01 per share;
Second quarter............$320,000 or $0.02 per share and
Third quarter.............$906,000 or $0.05 per share of fiscal 1996
</TABLE>
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share does not
necessarily equal the total for the year.
NOTE H - PRODUCT DEVELOPMENT COSTS
The Company maintains ongoing development programs at various facilities
to formulate, design and test new products and product alternatives, and to
further develop and significantly improve existing products. The Company intends
to continue substantial expenditures on research and development in this area.
Costs associated with these activities, which the Company expenses as incurred,
are shown below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Research and development $ 6,984 $ 5,897 $ 5,966
Engineering ............ 12,566 12,885 11,885
------- ------- -------
$19,550 $18,782 $17,851
======= ======= =======
Percent of net sales ... 3.7% 4.0% 3.9%
======= ======= =======
</TABLE>
NOTE I - SEGMENT REPORTING
The Company is engaged in the design, manufacture and sale of products in
two segments: the Hydraulic Systems consist of gear pumps and motors, control
valves and telescopic cylinders which are sold primarily to original equipment
manufacturers and to independent distributors. The Building Systems and Metal
Products consist of two units: Metal Stampings which produce custom and standard
metal stampings serving a variety of customers; Building Systems produces single
and multi-story buildings that serve many industries.
-42-
<PAGE> 43
ITEM 8. (Continued)
Operating income represents total revenue less total operating expenses.
Identifiable assets are those assets used in the operations of each business
segment or geographic area or which are allocated when used jointly. Corporate
assets are principally cash and cash equivalents, and receivables from
discontinued operations.
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS
(in thousands) Building
Systems Nonrecurring
And Defense &
Hydraulic Metal Reorganization
1997 Systems Products Costs Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales .............................. $353,043 $173,581 $ 0 $526,624
Operating income ....................... 26,863 21,905 0 48,768
Interest expense ....................... 10,493
Other income - net ..................... 2,043
Income from continuing operations before
income taxes ........................ 40,318
Identifiable assets .................... 280,610 74,655 0 355,265
Corporate assets ....................... 29,533
Total assets ........................... 384,798
Depreciation and amortization .......... 12,604 3,013 0 15,617
Capital expenditures ................... 9,907 1,792 0 11,699
1996
- -----------------------------------------------------------------------------------------------------
Net sales .............................. $294,337 $170,872 $ 0 $465,209
Operating income ....................... 19,624 15,793 (8,202) 27,215
Interest expense ....................... 7,083
Other income - net ..................... 3,606
Income from continuing operations before
income taxes and extraordinary items 23,738
Identifiable assets .................... 213,790 79,596 0 293,386
Corporate assets ....................... 43,730
Total assets ........................... 337,116
Depreciation and amortization .......... 9,241 2,935 0 12,176
Capital expenditures ................... 13,851 3,861 0 17,712
1995
- -----------------------------------------------------------------------------------------------------
Net sales .............................. $285,679 $173,458 $ 0 $459,137
Operating income ....................... 24,308 10,037 0 34,345
Interest expense ....................... 6,238
Other income - net ..................... 2,272
Income from continuing operations before
income taxes ........................ 30,379
Identifiable assets .................... 194,746 88,569 0 283,315
Corporate assets ....................... 119,364
Total assets ........................... 402,679
Depreciation and amortization .......... 7,932 3,088 0 11,020
Capital expenditures ................... 28,110 3,599 0 31,709
</TABLE>
-43-
<PAGE> 44
ITEM 8. (Continued)
In the following table, data in the column labeled "Europe" pertains to
subsidiaries operating within the European Economic Community. Data for all
remaining overseas subsidiaries is shown in the column marked "Other."
<TABLE>
<CAPTION>
GEOGRAPHIC AREA
(in thousands)
Eliminations
and
United Corporate
1997 States Europe Other Items Consolidated
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to customers.................. $ 291,453 $ 210,212 $ 24,959 $ 526,624
Inter-area sales.................... 7,837 16,088 1,058 $ 24,983
----------------------------------------------------------------------
Total sales......................... 299,290 226,300 26,017 24,983 526,624
Operating income.................... 32,984 10,707 5,077 0 48,768
Identifiable assets................. 160,452 185,252 9,561 0 355,265
1996
- ------------------------------------------------------------------------------------------------------------
Sales to customers.................. $ 252,414 $ 190,919 $ 21,876 $ 465,209
Inter-area sales.................... 6,855 6,826 918 $ 14,599
----------------------------------------------------------------------
Total sales......................... 259,269 197,745 22,794 14,599 465,209
Operating income.................... 28,501 5,503 1,413 8,202 27,215
Identifiable assets................. 150,795 133,661 8,930 0 293,386
1995
- ------------------------------------------------------------------------------------------------------------
Sales to customers.................. $ 254,533 $ 180,335 $ 24,269 $ 459,137
Inter-area sales.................... 9,803 5,465 1,326 $ 16,594
----------------------------------------------------------------------
Total sales......................... 264,336 185,800 25,595 16,594 459,137
Operating income.................... 29,193 3,222 1,930 0 34,345
Identifiable assets................. 126,864 146,318 10,133 0 283,315
</TABLE>
Net assets of foreign subsidiaries at October 31, 1997 and 1996 were
$80,205,000 and $85,708,000, respectively, of which net current assets were
$43,973,000 and $50,517,000, also respectively.
NOTE J - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures of financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and cash equivalents approximate fair value.
-44-
<PAGE> 45
ITEM 8. (Continued)
Long and short-term debt: The carrying amounts of the Company's borrowings
under its short-term and long-term revolving credit agreements approximate their
fair value. The fair values of the long-term debt are estimated using discounted
cash flow analysis, based on the Company's incremental borrowing rates for
similar types of borrowing arrangements.
Foreign currency exchange contracts: The Company utilizes foreign currency
exchange contracts to minimize the impact of currency fluctuations on
transactions. At October 31, 1997 and 1996, the Company held contracts for
$23,482,000 and $2,100,000, respectively, with fair values of $23,468,000 and
$2,051,000, also respectively. The fair values of these foreign currency
exchange contracts are estimated based on quoted exchange rates at October 31,
1997 and 1996.
The carrying amounts and fair values of the Company's financial instruments
at October 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents ...... $ 27,630 $ 27,630 $ 27,552 $ 27,552
Short-term debt ................ 140 140 2,745 2,745
Long-term debt:
Senior unsecured notes ....... $ 60,000 $ 62,201 $ 0 $ 0
Revolving credit and term loan 45,855 45,855 91,000 91,000
Industrial revenue loans ..... 1,020 1,039 1,315 1,340
Other ........................ 9,088 8,912 1,805 1,662
-------- -------- -------- --------
$115,963 $118,007 $ 94,120 $ 94,002
======== ======== ======== ========
</TABLE>
From time to time, the Company and its foreign subsidiaries make loans
among affiliates of the consolidated group. Generally, these loans are made when
the Company can borrow at lower interest rate spreads than is available to the
borrowing affiliate in its local market. Foreign currency forward contracts are
used to hedge the lending affiliate's receipt of principal and interest due from
the loans. The forward contracts are an effective hedge against fluctuations in
the value of the foreign currency.
NOTE K - ACQUISITIONS
The acquisitions described below have been accounted for as purchase
transactions and, therefore, the accounts of each have been included in the
accompanying financial statements since their respective acquisition date.
Ultra Hydraulics Limited
- ------------------------
On November 18, 1996, the Company reported it acquired all of the
outstanding common stock of Ultra Hydraulics Limited ("Ultra") for approximately
$39,400,000 through its wholly-owned subsidiary, Commercial Intertech Limited,
located in the United Kingdom. Ultra Hydraulics is headquartered near
Gloucester, England and employs more than 300 men and women in the United
Kingdom and the United States.
-45-
<PAGE> 46
ITEM 8. (Continued)
Ultra serves the mobile equipment market primarily in the United Kingdom,
Europe, the United States and the Far East. Major customers include
manufacturers of material handling, turf care, construction, transportation and
compaction equipment. Ultra's products complement and extend the range of pumps,
motors and valves now offered by Commercial Intertech.
Component Engineering Company
- -----------------------------
Effective June 28, 1996, the Company acquired the assets of Component
Engineering Company, a manufacturer of cartridge-type hydraulic valves based in
Chanhassen, Minnesota.
Hall F&D Head Company
- ---------------------
Effective January 31, 1995, the Company acquired the assets of Hall F&D
Head Company, a producer of medium and large-diameter bump and spun metal
products, located in Saginaw, Texas.
Pro forma financial results for the above acquisitions are not provided
herein because the impact of sales and net earnings on consolidated amounts are
immaterial in each case.
ORSTA Hydraulik
- ---------------
During fiscal 1994, the Company acquired the stock of Sachsenhydraulik
Chemnitz GmbH and its wholly owned subsidiary (Hydraulik Rochlitz GmbH), which
are known as ORSTA Hydraulik. The stock was acquired from the Treuhandanstalt,
the regulatory agency of the Federal Republic of Germany responsible for the
privatization of the former East German state-owned enterprises. Under terms of
the acquisition, the Company tendered no financial consideration but received,
in addition to the net business assets of the two companies, cash contributions
to fund pre-existing capital investment programs and to cover estimated
operating losses over a period of two years (May 1994 through April 1996).
The Company agreed to the following obligations and guarantees with
respect to the operations:
a) to maintain a minimum employment level for a period of three years;
the level stipulated by the Agreement is considered by the Company
to be reasonable and necessary for the intended use of the business,
b) to invest 39.0 million Deutsche marks (approximately U.S. $23.6
million) in capital programs over a period of four years,
c) to continue to operate the businesses for a minimum of five years,
and
d) to refrain from selling or transferring acquired land and buildings
for a period of six years.
The Company received a two-year extension of the operating subsidies
during the first quarter of 1997 from the German government. The Company expects
operating subsidies of approximately $1.9 million in 1998.
-46-
<PAGE> 47
ITEM 8. (Continued)
ORSTA Hydraulik income statement for the years ended October 31, 1997,
1996 and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------
(in thousands)
<S> <C> <C> <C>
Sales .............................. $ 34,650 $ 38,181 $ 35,846
Cost of products sold................. 34,956 40,165 41,918
Less: Subsidies...................... (2,702) (3,634) (16,095)
------------------------------------------
Total cost of products sold........... 32,254 36,531 25,823
------------------------------------------
Gross profit.......................... 2,396 1,650 10,023
Selling, administrative and
general expense................... 7,754 9,443 12,234
------------------------------------------
Operating loss........................ $ 5,358 $ 7,793 $ 2,211
==========================================
</TABLE>
NOTE L - PREFERRED STOCK
The Company has two separate series of preferred shares:
Series A Participating Preferred Shares
- ---------------------------------------
The Series A Participating Preferred Shares (the Series A) and related
Shareholder Rights Plan (the Plan) are designed to protect shareholders from the
disruptions created by market accumulators and certain abusive takeover
practices. The Plan provides for the distribution of one preferred share
purchase right as a dividend for each outstanding share of common stock. Each
right, when exercisable, entitles shareholders to buy one one-hundredth of a
share of the Series A preferred stock for $75. Each one one-hundredth of a share
of preferred stock is intended to be the practical economic equivalent of a
share of common stock and will have one one-hundredth of a vote on all matters
submitted to a vote of shareholders of the Company. Until the rights become
exercisable, they have no dilutive effect on earnings per share.
The rights may be exercised, in general, only if a person or group
acquires 20 percent or more of the common stock without the prior approval of
the Board of Directors of the Company or announces a tender or exchange offer
that would result in ownership of 20 percent or more of the common stock. In the
event of the acquisition of 20 percent or more of the common stock without the
prior approval of the Board, all rights holders except the acquirer may purchase
the common stock of the Company having a value of twice the exercise price of
the rights. If the Company is acquired in a merger, after the acquisition of 20
percent of the voting power of the Company, rights holders except the acquirer
may purchase shares in the acquiring company at a similar discount. The Plan was
not adopted in response to any pending takeover proposal, and the rights will
expire on November 29, 1999.
-47-
<PAGE> 48
ITEM 8. (Continued)
Series B ESOP Convertible Preferred Stock
- -----------------------------------------
During 1990, the Company established two leveraged employee stock
ownership plans (the "ESOPs") and sold to the ESOPs 1,074,107 shares of a newly
created cumulative ESOP Convertible Preferred Stock Series B (the Series B) for
a total of $24,973,000. During fiscal year 1997, the Company combined the two
ESOPs into one plan. The ESOP currently covers most domestic employees. The
remaining Series B shares are convertible into 2,849,092 shares of common stock
at any time (3.023 shares of common stock for each Series B share), subject to
anti-dilution adjustments. The Series B shares are entitled to one vote per
share and will vote together with the common stock as a single class. The Series
B shares are held by a trustee which votes the allocated shares as directed by
Plan participants. The ESOP trust agreement provides that unallocated shares
held by the trustee are to be voted in the same proportion as are the allocated
shares. Annual dividends are $1.97625 per share. The ESOP has borrowed to
purchase the Series B shares, and the Company guaranteed the repayment of the
remaining outstanding balance of that loan. In 1996, the notes were purchased by
the Company.
The Company paid to the ESOPs $1,911,000 in 1997 ($2,061,000 in 1996
and $2,084,000 in 1995) in preferred stock dividends, and accrued or paid an
additional $1,192,000 ($1,907,000 in 1996 and $1,787,000 in 1995) in Company
match of employees' contributions to the Plan and to cover amounts sufficient to
meet the debt service. These expenses were determined on the shares allocated
method. In turn, the ESOPs made debt service payments of $2,360,000 in 1997
($2,362,000 in 1996 and $2,364,000 in 1995) primarily for interest charges.
The number of ESOP shares outstanding at October 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Allocated shares .............. 240 283
Committed-to-be-released shares 54 54
Suspense shares ............... 649 703
----- -----
Total ESOP Shares .......... 943 1,040
===== =====
</TABLE>
-48-
<PAGE> 49
ITEM 8. (Continued)
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
Commercial Intertech Corp.
Youngstown, Ohio
We have audited the accompanying consolidated balance sheets of Commercial
Intertech Corp. and subsidiaries as of October 31, 1997 and 1996, and the
related statements of consolidated income, shareholders' equity and cash flows
for each of the three years in the period ended October 31, 1997. Our audits
also included the financial statement schedule listed in the index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Commercial
Intertech Corp. and subsidiaries at October 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/Ernst & Young LLP
Cleveland, Ohio
December 8, 1997
-49-
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Regarding the directors of the Registrant, reference is made to the
information set forth under the caption "Election of Directors" in the Company's
definitive Proxy Statement filed January 21, 1998, which information is
incorporated herein by reference.
The principal executive officers of the Company and their recent business
experience are as follows:
<TABLE>
<CAPTION>
Name Office Held Age
---- ----------- ---
<S> <C> <C>
Paul J. Powers Chairman of the Board of Directors, 62
President and Chief Executive Officer
Steven J. Hewitt Senior Vice President and Chief Financial Officer 48
Bruce C. Wheatley Senior Vice President-Administration 56
Robert A. Calcagni Group Vice President-Building Systems and 57
Metal Products
John Gilchrist Group Vice President-Hydraulic Systems 52
Gilbert M. Manchester Vice President and General Counsel 53
Kenneth E. Stumbaugh Controller 51
</TABLE>
None of the executive officers are related and they are each elected from
year to year or until their successors are duly elected and qualified.
All of the executive officers have been continuously employed by the
Company for more than five years.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption "Executive
Compensation" and "Section 16(a) Beneficial Ownership Reporting Compliance"
appearing in the Company's definitive Proxy Statement filed January 21, 1998,
which information is incorporated herein by reference.
-50-
<PAGE> 51
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Reference is made to the information contained under the captions "Security
Ownership of Management" and "Security Ownership of Certain Beneficial Owners"
in the Company's definitive Proxy Statement filed January 21, 1998, which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information contained under the caption
"Compensation of Directors" in the Company's definitive Proxy Statement filed
January 21, 1998, which information is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this report:
(1) The following consolidated financial statements of Commercial
Intertech Corp. and Subsidiaries are included in Item 8:
<TABLE>
<CAPTION>
Page Number
In This Report
--------------
<S> <C> <C>
Statements of Consolidated Income - Years ended
October 31, 1997, 1996 and 1995......................................... 20
Consolidated Balance Sheets as of October 31, 1997
and 1996................................................................ 21 and 22
Statements of Consolidated Shareholders' Equity -
Years ended October 31, 1997, 1996 and 1995............................. 23
Statements of Consolidated Cash Flows - Years ended
October 31, 1997, 1996 and 1995......................................... 24
Notes to Consolidated Financial Statements.................................... 25 - 48
Report of Independent Auditors................................................ 49
(2) The following consolidated financial statement schedule of Commercial Intertech Corp. and
Subsidiaries is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts .............................. S-1
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
-51-
<PAGE> 52
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (Continued)
(3) Exhibits
<TABLE>
<CAPTION>
<S> <C> <C>
3.1 Articles of Incorporation Filed as of April 17, 1992, incorporated by reference to
Exhibit 3 filed with Registrant's Annual Report on Form 10-K for the year ended
October 31, 1992
3.2 Code of Regulations of Commercial Intertech Corp. as amended through March 26, 1997
(filed herewith)
* 10.18 Employment Agreement - Paul J. Powers dated July 27, 1994, incorporated by
reference to Exhibit 10.18 filed with Registrant's Annual Report on Form 10-K for the
year ended October 31, 1994
* 10.19 Termination and Change of Control Agreement - Paul J. Powers dated October 1,
1996, incorporated by reference to Exhibit 10.19 filed with Registrant's Annual Report
on Form 10-K for the year ended October 31, 1996
* 10.20 Termination and Change of Control Agreement - Bruce C. Wheatley dated October 1,
1996, incorporated by reference to Exhibit 10.20 filed with Registrant's Annual Report
on Form 10-K for the year ended October 31, 1996
* 10.21 Termination and Change of Control Agreement - Steven J. Hewitt dated December 1,
1996, incorporated by reference to Exhibit 10.21 filed with Registrant's Annual Report
on Form 10-K for the year ended October 31, 1996
* 10.22 Termination and Change of Control Agreement - John Gilchrist dated October 1,
1996, incorporated by reference to Exhibit 10.22 filed with Registrant's Annual Report
on Form 10-K for the year ended October 31, 1996
* 10.23 Termination and Change of Control Agreement - Robert A. Calcagni dated October
1, 1996, incorporated by reference to Exhibit 10.23 filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1996
* 10.24 Termination and Change of Control Agreement - Gilbert M. Manchester dated
October 1, 1996, incorporated by reference to Exhibit 10.24 filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1996
* 10.25 Termination and Change of Control Agreement - Kenneth E. Stumbaugh dated October
1, 1996, incorporated by reference to Exhibit 10.25 filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1996
</TABLE>
-52-
<PAGE> 53
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
10.26 Form of Distribution and Interim Service Agreement by and between CUNO Incorporated
and Commercial Intertech Corp., incorporated by reference to Exhibit 10.4 filed with
the Form 10 of CUNO Incorporated (as filed with Amendment No. 2 thereto dated August
20, 1996) (File No. 0-21109)
10.27 Form of Tax Sharing Agreement by and between CUNO Incorporated and Commercial
Intertech Corp., incorporated by reference to Exhibit 10.5 filed with the Form 10 of
CUNO Incorporated (as filed with Amendment No. 2 thereto dated August 20, 1996) (File
No. 0-21109)
10.28 Form of Employee Benefits and Compensation Allocation Agreement by and between CUNO
Incorporated and Commercial Intertech Corp., incorporated by reference to Exhibit 10.6
filed with the Form 10 of CUNO Incorporated (as filed with Amendment No. 2 thereto
dated August 20, 1996) (File No. 0-21109)
10.29 Credit Agreement by and among Commercial Intertech Corp. and Commercial Intertech
Holdings Limited, as borrowers, and the banks party thereto and Mellon Bank, N.A., as
agent, dated October 31, 1996 (filed herewith)
10.30 Commercial Intertech Corp. Note Purchase Agreement dated as of June 30, 1997 (filed
herewith)
* 10.31 Commercial Shearing, Inc. Stock Option and Award Plan of 1985 incorporated by
reference to Exhibit 4.1 filed with Registration Statement No. 2-62512 on Form S-8
* 10.32 Non-Qualified Stock Purchase Plan of Commercial Intertech Corp. incorporated by
reference to Exhibit 4.1 filed with Registration Statement No. 33-25795 on Form S-8
* 10.33 Commercial Intertech Corp. Stock Option and Award Plan of 1989 incorporated by
reference to Exhibit 4.1 filed with Registration Statement No. 33-29980 on Form S-8
10.34 Commercial Intertech Corp. Retirement Stock Ownership and Savings Plan incorporated by
reference to Exhibit 4.1 filed with Registration Statement No. 33-43907 on Form S-8
* 10.35 Commercial Intertech Corp. Stock Option and Award Plan of 1993 incorporated by
reference to Exhibit 4.1 filed with Registration Statement No. 33-52443 on Form S-8
* 10.36 Commercial Intertech Corp. Stock Option and Award Plan of 1995 incorporated by
reference to Exhibit 4.1 filed with Registration Statement No. 33-61453 on Form S-8
</TABLE>
-53-
<PAGE> 54
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
* 10.37 Commercial Intertech Corp. Non-Employee Directors' Stock Plan incorporated by
reference to Exhibit 4.1 filed with Registration Statement No. 333-28903 on Form S-8
* 10.38 Commercial Intertech Corp. Non-Employee Directors' Performance Share Plan
incorporated by reference to Exhibit 4.1 filed with Registration Statement No.
333-41551 on Form S-8
* 10.39 Commercial Intertech Corp. Nonqualified Deferred Compensation Plan for Paul J.
Powers, as amended and restated effective January 1, 1996 (filed herewith)
* 10.40 Commercial Intertech Corp. Nonqualified Deferred Compensation Plan for Bruce C.
Wheatley, as amended and restated effective January 1, 1996 (filed herewith)
* 10.41 First Amendment to the Commercial Intertech Corp. Nonqualified Deferred
Compensation Plan for Bruce C. Wheatley, as amended and restated effective as of
January 1, 1996 (filed herewith)
* 10.42 Commercial Intertech Corp. Supplemental Executive Retirement Plan, as amended
and restated effective as of January 1, 1996 (filed herewith)
* 10.43 First Amendment to the Commercial Intertech Supplemental Executive Retirement
Plan, as amended and restated effective as of January 1, 1996 (filed herewith)
11 Statement re: Computation of Per Share Earnings (filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
23 Consent of Independent Auditors (filed herewith)
27 Financial Data Schedule (filed herewith)
</TABLE>
* Denotes management contracts and compensatory plans and arrangements
required to be identified by Item 14(a)(3).
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
(c) The Company hereby files as exhibits to this Form 10-K the exhibits set
forth in Item 14(a)(3) hereof which are not incorporated by reference.
(d) The Company hereby files as financial statement schedules to this Form
10-K the financial statement schedules set forth in Item 14(a)(2) hereof.
-54-
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
January, 1998.
COMMERCIAL INTERTECH CORP.
(Registrant)
/s/ Paul J. Powers /s/ Steven J. Hewitt
- ----------------------------------------- ----------------------------------
Paul J. Powers Steven J. Hewitt
Chairman of the Board of Directors, Senior Vice President and
President and Principal Executive Officer Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William J. Bresnahan
- -----------------------------------------
William J. Bresnahan Director January 28, 1998
/s/ Charles B. Cushwa III
- -----------------------------------------
Charles B. Cushwa III Director January 28, 1998
/s/ William W. Cushwa
- -----------------------------------------
William W. Cushwa Director January 28, 1998
/s/ John M. Galvin
- -----------------------------------------
John M. Galvin Director January 28, 1998
/s/ Richard J. Hill
- -----------------------------------------
Richard J. Hill Director January 28, 1998
/s/ Neil D. Humphrey
- -----------------------------------------
Neil D. Humphrey Director January 28, 1998
/s/ William E. Kassling
- -----------------------------------------
William E. Kassling Director January 28, 1998
/s/ Gerald C. McDonough
- -----------------------------------------
Gerald C. McDonough Director January 28, 1998
/s/ C. Edward Midgley
- -----------------------------------------
C. Edward Midgley Director January 28, 1998
/s/ George M. Smart
- -----------------------------------------
George M. Smart Director January 28, 1998
/s/ Don E. Tucker
- -----------------------------------------
Don E. Tucker Director January 28, 1998
</TABLE>
-55-
<PAGE> 56
<TABLE>
<CAPTION>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
(in thousands)
==================================================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------------------------------------------------------------------------------------
Balance at Balance at
Description Beginning ADDITIONS Deductions End of
of Period Period
---------------------------
Charged to Charged to
Costs and Other
Expenses Accounts-
Describe
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1997
Deducted from asset accounts:
Allowance for doubtful accounts
receivable.................................... $ 1,724 $1,607 $ 105 (B) $ 980 (A) $ 2,456
======== ====== ======== ======== ========
Valuation allowance for deferred $ 1,644 (C)
income tax assets............................. $ 54,047 $ 0 $ 0 $ 4,517 (F) $ 47,886
======== ====== ======== ======== ========
Year ended October 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts
receivable.................................... $ 2,306 $ 850 $ 0 $ 1,432 (A) $ 1,724
======== ====== ======== ======== ========
Valuation allowance for deferred 10,068 (D)
income tax assets............................. $ 65,037 $ 0 $ 0 $ 922 (C) $ 54,047
======== ====== ======== ======== ========
Year ended October 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts
receivable.................................... $ 2,016 $ 745 $ 0 $ 455 (A) $ 2,306
======== ====== ======== ======== ========
Valuation allowance for deferred
income tax assets............................. $ 55,308 $ 0 $ 12,708 (E) $ 2,979 (C) $ 65,037
======== ====== ======== ======== ========
<FN>
(A) Uncollectible accounts written off.
(B) Represents beginning balance acquired with Ultra Hydraulics Limited acquisition.
(C) Net operating loss carryforwards utilized or expired.
(D) Decrease due to German Tax Audits
(E) Increase in net operating loss carryforwards for the year.
(F) Primarily represents impact of foreign currency translation.
</FN>
</TABLE>
S-1
<PAGE> 57
Commercial Intertech Corp.
Index To Exhibits Filed Herewith
Exhibit No. Description
----------- -----------
3.2 Code of Regulations of Commercial Intertech Corp. (As
amended through March 26, 1997)
10.29 Credit Agreement by and among Commercial Intertech Corp.
and Commercial Intertech Holdings Limited, as borrowers,
and the banks party hereto and Mellon Bank, N.A., as
agent, dated October 31, 1996
10.30 Commercial Intertech Corp. Note Purchase Agreement dated
as of June 30, 1997
10.39 Commercial Intertech Corp. Nonqualified Deferred
Compensation Plan for Paul J. Powers, as amended and
restated effective January 1, 1996
10.40 Commercial Intertech Corp. Nonqualified Deferred
Compensation Plan for Bruce C. Wheatley, as amended and
restated effective January 1, 1996
10.41 First Amendment to the Commercial Intertech Corp.
Nonqualified Deferred Compensation Plan for Bruce C.
Wheatley, as amended and restated effective as of January
1, 1996
10.42 Commercial Intertech Corp. Supplemental Executive
Retirement Plan, as amended and restated effective as of
January 1, 1996
10.43 First Amendment to the Commercial Intertech Supplemental
Executive Retirement Plan, as amended and restated
effective as of January 1, 1996
11 Statement re: Computation of Per Share Earnings
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.2
CODE OF REGULATIONS
[COMMERCIAL INTERTECH LOGO]
YOUNGSTOWN, OHIO
<PAGE> 2
<TABLE>
<CAPTION>
INDEX
PAGE
ARTICLE I - MEETING OF SHAREHOLDERS
<S> <C> <C> <C>
Section 1. Definitions ................................................ 3
Section 2. Annual Meetings ............................................ 3
Section 3. Special Meetings ........................................... 3
Section 4. Notice of Meetings ......................................... 4
Section 5. Waiver of Notice of Meeting ................................ 4
Section 6. Dispensing With Notice of Meeting .......................... 4
Section 7. Quorum ..................................................... 4
Section 8. Voting ..................................................... 5
Section 9. Proxies .................................................... 5
Section 10. Procedure .................................................. 5
Section 11. Action Without Meeting ..................................... 5
ARTICLE II - DIRECTORS
Section 1. Number ................................................... 6
Section 2. Election and Term. ......................................... 6
Section 3. Resignations and Vacancies ................................. 6
Section 4. Meetings ................................................... 6
Section 5. Quorum ................................................... 7
Section 6. Compensation ............................................... 7
Section 7. General Powers of Board .................................... 7
Section 8. Action Without Meeting ..................................... 7
Section 9. ByLaws ..................................................... 7
ARTICLE III - OFFICERS
Section 1. Principal Officers ......................................... 8
Section 2. Election, Term and Removal ................................. 8
Section 3. Subordinate and Temporary Officers ......................... 8
Section 4. Bond ....................................................... 8
ARTICLE IV - DUTIES OF OFFICERS
Section 1. Chairman of the Board ...................................... 9
Section 2. Vice Chairman of the Board ................................. 9
Section 3. President .................................................. 9
Section 4. Vice Presidents ............................................ 9
Section 5. Secretary .................................................. 9
Section 6. Treasurer .................................................. 9
Section 7, Controller and Chief Accounting Officer .................... 9
Section 8. General Provisions ......................................... 10
Section 9. Duties of Officers May Be Delegated ........................ 10
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS ......................... 10
ARTICLE VI - COMMITTEES
Section 1. Executive Committee ........................................ 11
Section 2. Other Committees............................................ 11
ARTICLE VII - SHARES
Section 1. Certificates for Shares .................................... 12
Section 2. Transfers of Shares ........................................ 12
Section 3. Lost, Stolen, Destroyed Or Mutilated Certificates.. ........ 12
Section 4. Registered Shareholders .................................... 12
Section 5. Transfer Agents and Registrars ............................. 13
ARTICLE VIII - CORPORATE SEAL ................................................. 13
ARTICLE IX - FISCAL YEAR ...................................................... 13
ARTICLE X - AMENDMENTS ........................................................ 13
</TABLE>
2
<PAGE> 3
CODE OF REGULATIONS
OF
COMMERCIAL INTERTECH CORP.
(AS AMENDED THROUGH MARCH 26, 1997)
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. DEFINITIONS. Whenever used in these regulations, the words
"shareholder" and "shareholders" shall mean, respectively, a holder, and
holders, of common shares of the corporation, and the words "voting shares"
shall mean outstanding common shares of the corporation (not including treasury
shares), unless, under the Articles or the law, holders of shares of one or more
other classes shall be entitled to vote, at the meeting in question, on a parity
with holders of common shares, and without distinction of class, in which case
said words shall mean and include, respectively, holders of shares of such other
class or classes, and shares of such class or classes, or unless, under the
Articles, holders of shares of one or more classes, other than the common
shares, shall be entitled to vote, at the meeting in question, to the exclusion
of the common shares, in which case said words shall mean, respectively, only
the holders of shares of such other class or classes, and shares of such class
or classes.
Whenever the circumstances shall require, and the context permit, the
masculine gender wherever used in these regulations, shall include the feminine
and neuter, and the plural number the singular, and vice versa.
The word "Articles" shall mean the Articles of Incorporation of the
corporation, including all amendments thereto.
Section 2. ANNUAL MEETING. The annual meeting of the shareholders of
this corporation shall be held at the principal office of the corporation in
Youngstown, Ohio, or at such other place, within or without the State of Ohio,
as the board of directors, by resolution, may designate, at 2:00 P.M. on the
last Wednesday in March of each year, or at such other date and time as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. At such annual meeting, the board of directors shall be elected,
the statements required by law shall be laid before the shareholders, and there
may be transacted any other business which shall properly be brought before the
meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the chairman of the board, the president (or in case of
a vacancy in the office of president, or of the president's absence or inability
to act, by a vice president authorized to exercise the authority of the
president), of the corporation, or by a majority of the members of the board of
directors of the corporation, then in office, acting with or without a meeting,
or by the holders of forty percent (40%) of the voting shares of the
corporation. Upon delivery to the chairman of the board, or to the president (or
in any of the cases hereinabove specified, to a vice president) or the
secretary, or an assistant secretary of the corporation, by the persons
entitled, as above provided, to call a special meeting, of a written request,
stating the time, place and purpose of the requested meeting, it shall be the
duty of the chairman of the board, the president, such vice president, the
secretary or such assistant secretary, as the case may be, to give notice of
such meeting as hereafter in these regulations provided. If the officer to whom
such request is presented refuses the same, or fails to give such notice within
five (5) business days next following the presentation to him of such request,
then the person or persons making such request may call a meeting of the
shareholders by giving notice in the manner hereafter in these regulations
provided.
3
<PAGE> 4
If the special meeting be called by the chairman of the board, the
president, or a vice president, without written request by directors or
shareholders as above provided, such call may be made by the delivery by such
officer, to the secretary or an assistant secretary of the corporation, of a
written instruction to call such meeting specifying the time, place and purpose
thereof, and it shall then be the duty of the secretary, or of such assistant
secretary, as the case may be, to give notice of such meeting as hereafter in
these regulations provided, but the officer calling such meeting may, if he so
elects, himself give such notice in said manner.
Any special meeting of shareholders may be held at such place, within
or without the State of Ohio, as shall be specified in the request or
instructions to call the same, or in the notice thereof, if there be no such
request or instruction.
Section 4. NOTICE OF MEETINGS. Unless waived, a written, printed or
typewritten notice of each annual or special meeting specifying the time and
place of such meeting and the purpose or purposes for which it is called shall
be given to each shareholder entitled to receive notice thereof, by mailing such
notice to the last-known address of each such shareholder as the same appears
upon the records of the corporation not more than sixty (60) days nor less than
seven (7) days before any such meeting; provided, however, no failure or
irregularity of notice of any meeting shall invalidate the same or any
proceeding thereat.
All notices with respect to any shares of record in the names of two or
more persons may be given to the person first named on the records of the
corporation and notice so given shall be effective as to all the holders of
record of such shares.
Every person who by operation of law, transfer, or otherwise, shall
become entitled to any share or right or interest therein, shall be bound by
every notice in respect to such share which, prior to his name and address being
entered upon the books of the corporation as a registered holder of such share,
shall have been given to the person in whose name such share appeared of record.
Section 5. WAIVER OF NOTICE OF MEETING. Unless otherwise provided by
law, any shareholder may waive notice of any shareholders' meeting either by
writing, specifying the date and place of the meeting and signed, and filed
with, or entered upon, the records of the meeting, either before or after such
meeting, or by attendance at such meeting, either in person or by proxy, and
upon such written waiver or attendance by all shareholders, a meeting of the
shareholders may be held without notice at any time and place and at such
meeting any actions may be taken.
Section 6. DISPENSING WITH NOTICE OF MEETING. Any requirement imposed
by law, the Articles, or these regulations, with respect to the giving or
sending of any notice or communication to any shareholder as such whose address
as it appears upon the records of the corporation is outside of the United
States, may be dispensed with, and no action taken shall be affected or
invalidated by the failure to give or send any such notice or communication in
so far as compliance with any such requirement is at the time prohibited by, or
dependent upon the obtaining of a license or consent under any act of Congress
or any rules, regulations, proclamations, or executive orders issued under
authority of any such act.
Section 7. QUORUM. The shareholders present in person or by proxy at
any meeting for the determination of the number of directors, or the election of
directors, or for consideration of an action upon reports required to be laid
before such meeting, shall constitute a quorum; and, unless otherwise specified
by law, the holders, present in person or by proxy, of a majority of the voting
shares of the corporation, shall constitute a quorum at any meeting of
shareholders for any other purpose; but, at any meeting, the shareholders
present, in person or by proxy, shall constitute a quorum for the purpose of
adjourning the meeting from time to time and from place to place without notice
other than announcement at such meeting, until a quorum competent to act on any
matter or proposal is present, and any such adjourned meeting there may be
transacted any business which might have transacted at the meeting as originally
called.
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Section 8. VOTING. Each voting share of the corporation shall, unless
otherwise provided by law or the Articles, entitle the holder thereof,
registered on the books of the corporation, at the date fixed for the
determination of the persons entitled to vote at the meeting (or, if no date has
been so fixed, then at the date of the meeting), to one vote for each director
to be elected, and to one vote on any other question, at any meeting,
notwithstanding the prior or subsequent sale, or other disposal of such share or
shares or transfer of the same on the books of the corporation on or after the
date so fixed.
Section 9. PROXIES. Subject to any applicable provision of law or of
the Articles, any person who is entitled to attend a shareholders' meeting, to
vote thereat, or to execute consents, waivers or releases, may, by instrument in
writing, signed by himself or by his duly authorized attorney, or by the
chairman of the board, the president, a vice president, the secretary, or the
treasurer of a corporate shareholder, authorized any other person or persons
(and no such person need be a shareholder), to vote, and otherwise act, for such
person, at any shareholders' meeting, or otherwise, and to execute consents,
waivers and releases, and to exercise any of his other rights. Every such
instrument shall, before the person authorized thereby shall vote or act
thereunder, be filed with the secretary of the corporation.
Section 10. PROCEDURE. Shareholders' meetings shall be called to order,
and, unless the shareholders shall otherwise order, be presided over by the
chairman of the board, or in his absence, by the vice chairman of the board, if
one be elected, or in his absence, by the president of the corporation, or in
his absence, by a vice president of the corporation designated as hereinafter
provided. The secretary or an assistant secretary of the corporation shall keep
the minutes of every shareholders' meeting and shall include therein a copy of
any request or instruction to call, and a copy of the notice of, the meeting. In
the absence of the chairman of the board, the vice chairman of the board, the
president and all vice presidents, or of the secretary and all assistant
secretaries, of the corporation, any shareholder (or any person authorized to
act for a shareholder, as provided in Section 9 of this article) may be chosen
by the shareholders to preside, or to keep the minutes, as the case may be. A
quorum being present, all questions coming before the shareholders for decision
shall, unless otherwise provided by law or the Articles, be decided by vote of
the holders of a majority of the voting shares represented at the meeting.
The order of business at the annual meeting and at any special meeting
of shareholders shall be prescribed by the presiding officer thereof.
The decision of any parliamentary question not herein provided for
shall be in accordance with the latest edition of Robert's Rules of Order.
Section 11. ACTION WITHOUT MEETING. Any action which, under any
provision of law, the Articles, or these regulations, may be authorized or taken
at a shareholders' meeting, may be authorized or taken without a meeting, if
authorized by a writing signed by all of the shareholders who would be entitled
to notice of a meeting of shareholders held for such purpose; except that
regulations for the government of the corporation, the conduct of its affairs
and the management of its property, consistent with law and the Articles, may be
adopted, and these regulations may be amended, or new regulations may be
adopted, without a meeting of shareholders by the written consent of the holders
of shares entitling them to exercise a majority of the voting power of the
corporation on such proposals as permitted by law.
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ARTICLE II
DIRECTORS
Section 1. NUMBER. The board of directors of the corporation shall
consist of not less than nine (9) nor more than fifteen (15) directors. The
exact number shall be determined, from time to time, by resolution adopted by
the affirmative vote of a majority of the directors in office at the time of
adoption of such resolution. Upon adoption of this amendment to the Code of
Regulations, the number of directors is twelve (12).
Section 2. ELECTION AND TERM. The directors shall be classified with
respect to the time for which they shall severally hold office by dividing them
into three (3) classes entitled directors of the first class, directors of the
second class and directors of the third class. Upon adoption of this amendment
to the Code of Regulations, each class consists of four (4) directors. At each
succeeding annual meeting of shareholders, the successors to the class of
directors whose terms expire at the election to be held at such meeting shall be
elected (or if not then elected, or if such meeting be not held at the time
fixed therefor, than at a special meeting called for that purpose) to hold
office for a term of three (3) years. Each director shall serve for the term for
which he or she shall have been elected and until his or her successor shall
have been elected and shall qualify. The election of directors shall, if the
number of persons nominated be greater than the number of directorships to be
filled, be by ballot.
If the number of directors is changed, any increase or decrease shall
be apportioned among the classes by the board of directors, provided that the
number of directors of any one class shall not be less than three (3), and
provided further that no decrease in the number of directors shall of itself
have the effect of shortening the term of any incumbent director. In case of any
increase in the number of directors of any class, any director chosen to fill
any directorship created by such increase shall hold office for a term which
shall be coincident with the term of the class for which he or she is chosen.
The board of directors may adopt such further regulations governing the
election of directors, not inconsistent with the foregoing, as shall to the
board seem proper and expedient.
Section 3. RESIGNATIONS AND VACANCIES. Any director may, at any time,
resign, by written resignation delivered to the secretary, or an assistant
secretary, of the corporation, and such resignation shall, unless otherwise
specified therein, be effective upon such delivery. The board of directors may,
in any case provided by law, declare vacant the office of a director. The
remaining directors, though fewer than a majority of the whole board, may, by
vote of a majority of their number, fill any vacancy in the board for the
unexpired term.
Section 4. MEETINGS. Immediately after the adjournment of the
shareholders' meeting at which a board of directors is elected, the newly
elected board shall, without notice, hold an organization meeting for the
purpose of electing officers and transacting such other business, within the
powers of the board of directors, as shall come before the meeting.
The board of directors may provide, by resolution or bylaw, for the
holding of regular meetings of the board, without notice, and at such times and
places as the board shall determine.
Special meetings of the board of directors may be held at any time upon
call of the chairman of the board, the president, a vice president, or any two
(2) directors, upon causing notice to be given, in writing, to each director,
addressed to him at his residence or usual place of business, at least two (2)
days before such meeting is to be held, or by giving notice to each director
personally or by telephone, telegram, or cablegram, at least four (4) hours
before such meeting, which notice need not specify the purposes of the meeting;
provided that a lawful meeting of the board of directors may be held at any time
and any place and without notice thereof if all of the directors are present or
shall waive notice thereof. Notice of adjournment of a meeting need not be given
if the time and place to which it is adjourned are fixed and announced at such
meeting.
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All meetings of the board of directors shall be held at the office of
the corporation in the City of Youngstown, Ohio, or at any other place, within
or without the State of Ohio.
Section 5. QUORUM. A majority of the number of directors last fixed by
the shareholders, as hereinbefore provided, shall (subject to the provisions of
Section 3 of this Article II as to the filling of vacancies), constitute a
quorum for the transaction of business, provided that whenever less than a
quorum is present at the time and place appointed for any meeting of the board,
a majority of those present may adjourn the meeting from time to time, without
notice other than by announcement at the meeting, until a quorum shall be
present. A majority of such quorum may decide any question that may come before
the meeting.
Section 6. COMPENSATION. For their attendance at meetings of the board
of directors or of any committee thereof, directors may be paid such
compensation as the board of directors shall from time to time fix, and there
may be paid to all directors their reasonable expenses incurred in attending
meetings of the board of directors or of any committee thereof. Additional
compensation may be paid to directors for special services rendered, including
their reasonable expenses in connection therewith.
Section 7. GENERAL POWERS OF BOARD. The board of directors shall have
such authority in the conduct, control and management of the business and
property of the corporation as shall be consistent with law, the Articles, and
these regulations, including (but not hereby limiting the generality of the
foregoing grant of power) authority to adopt and alter the corporate seal; to
fix the fiscal year of the corporation; to fix within the limits prescribed in
the Articles, the place of its principal office; to establish and discontinue,
at such times and places as the board of directors shall deem proper, offices of
the corporation, in addition to its principal office; and to appoint, from the
board's own number, change the membership of, and remove, such committees having
such authority (including the authority to act by writing signed by all members
of the committee without a meeting) and duties, not inconsistent with the law,
the Articles, and these regulations, as the board of directors shall from time
to time provide; and, unless otherwise provided by law or the Articles, or
specifically otherwise provided in these regulations, any authority herein or by
law conferred upon the board of directors, may, in the interval between meetings
of the board of directors, be exercised by any committee of the board to whom
the board shall delegate the same.
Section 8. ACTION WITHOUT MEETING. Any action which, under any
provision of law, the Articles, or these regulations, may be authorized or taken
at a meeting of the directors, may be authorized or taken without a meeting if
authorized by a writing signed by all of the directors who would be entitled to
notice of a meeting of the directors held for such purpose.
Section 9. BYLAWS. For the government of its actions, the board of
directors may adopt bylaws consistent with the Articles and these regulations.
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ARTICLE III
OFFICERS
Section 1. PRINCIPAL OFFICERS. The principal officers of the
corporation shall be a chairman of the board of directors, a president, a vice
president or such number of vice presidents as the board of directors may from
time to time by resolution determine, a secretary, a treasurer, a controller and
chief accounting officer, and if the board of directors so determines, a vice
chairman of the board of directors. Such principal officers shall have such
duties and authority as may be prescribed by these regulations and such duties
and authority, not inconsistent with these regulations, as may be prescribed by
the board of directors. The president and the chairman of the board shall be
members of the board of directors, but no other officer need be a director. Any
two (2) of the principal offices may be held by the same person (except that the
same person shall not be both president and vice president nor shall the same
person be both chairman and vice chairman of the board of directors), and the
holder of any of the principal offices may also hold any office or offices
assistant or subordinate to any other of the principal offices. The board of
directors may leave any of the principal offices unfilled for such period as the
board in its discretion may determine.
Section 2. ELECTION, TERM AND REMOVAL. All principal officers shall be
elected, and all vacancies in such offices be filled, by the board of directors.
The terms of office of said officers shall extend from their respective
elections to the next organization meeting of the board of directors, and until
their respective successors are elected and qualified, but the board of
directors may, at any time, by vote of two-thirds (2/3) of the number of
directors last fixed by the shareholders as hereinbefore provided, remove any
officer, with or without cause.
Section 3. SUBORDINATE AND TEMPORARY OFFICERS. The board of directors
may, from time to time, in its discretion, create and fill by election one or
more assistant secretaryships, one or more assistant treasurerships, and such
other offices, assistant or subordinate to any of the principal offices above
named, as it shall deem necessary to the proper conduct of business of the
corporation, and may prescribe the terms of office, qualifications, authorities
and duties of the holders of such offices. Each such officer shall hold office
during the pleasure of the board of directors. The board of directors may, at
any time, abolish any such office created by it, and the term of office of any
holder of such office shall thereupon terminate, anything in these regulations
contained to the contrary notwithstanding. In case of the absence or disability
of any officer of the corporation, the board of directors may, unless otherwise
provided herein, delegate to any other officer or director of the corporation
all or any part of the authority and duties of such absent or disabled officer.
Section 4. BOND. The board of directors may, in its discretion, at any
time, require any officer of the corporation to give bond for the faithful
performance of his duties in such form and amount and with such surety as shall
be satisfactory to the board of directors.
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ARTICLE IV
DUTIES OF OFFICERS
Section 1. CHAIRMAN OF THE BOARD. The chairman of the board of
directors shall have such powers and perform such duties as the board of
directors may from time to time prescribe or confer upon him. He shall preside
at all meetings of the shareholders and of the board of directors.
Section 2. VICE CHAIRMAN OF THE BOARD. The vice chairman of the board,
if one be elected, shall perform the duties of the chairman of the board during
the chairman's absence or inability to serve the corporation. He shall have such
other authority and perform such other duties as shall be assigned to or
conferred upon him by the board of directors.
Section 3. PRESIDENT. The president shall have such powers and perform
such duties as the board of directors may from time to time prescribe or confer
upon him. In the absence of the chairman or vice chairman of the board, he shall
preside at all meetings of the shareholders and of the board of directors.
Section 4. VICE PRESIDENTS. The vice president, or vice presidents as
the case may be, shall perform such duties as are conferred upon them by these
regulations or as may from time to time be assigned to or conferred upon them by
the board of directors, the chairman of the board, or the president. At the
request of the president, or in his absence or disability, the vice president
designated by the president (or in the absence of such designation, the vice
president designated by the board of directors) shall perform all the duties of
the president, and when so acting, shall have all the powers of the president.
Section 5. SECRETARY. The secretary, in addition to all authority and
duties provided by law, shall attend, as hereinbefore or by law provided, to the
giving of notices of meetings of shareholders and directors; shall keep and sign
the minutes of all meetings of shareholders and of the board of directors; shall
keep such other records as the board of directors or any committee thereof shall
require; shall have charge of the corporate seal, and (subject to the rules and
regulations of the board of directors and of the transfer agents and registrars,
if any, of the shares of the corporation) shall have custody of the share
certificate books and share records and shall attend to the issuance of
certificates for shares of the corporation; shall sign all deeds, mortgages,
notes, bonds, contracts and other instruments executed by the corporation
requiring his signature; shall file all reports to states and to the Federal
Government; and shall perform such other and further duties as may from time to
time be assigned to him by the board of directors, or by the chairman of the
board, or by the president.
Section 6. TREASURER. The treasurer shall, subject to the direction of
the board of directors of the corporation, have custody of the corporate funds
and securities; shall deposit all moneys and other funds of the corporation in
such depositories as shall from time to time be designated by the board of
directors, the same to be withdrawn as the board of directors shall from time to
time direct; shall render such financial statements of the corporation at
meetings of shareholders as shall be required by law and as prepared by the
controller and chief accounting officer; shall from time to time, as requested
by the chairman of the board, or by the president, or board of directors of the
corporation, render statements of his transactions and accounts and of the
financial condition of the corporation; and shall upon the expiration of his
term of office, account for and deliver to the corporation all books, vouchers,
papers, moneys and other property of the corporation which may be in his
possession or under his control; and he shall perform such other duties as from
time to time may be assigned to him by the board of directors, or by the
chairman of the board, or the president.
Section 7. CONTROLLER AND CHIEF ACCOUNTING OFFICER. The controller and
chief accounting officer shall have supervision of the books of account of the
corporation and of all books and papers relating thereto, and shall examine all
vouchers and audit all accounts. He shall keep such records
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as will at all times show the condition of the business, finances and accounts
of the corporation and shall prepare the necessary financial statements required
by law to be laid before the annual meeting of shareholders or before any other
meeting at which directors are to be elected. He shall make such reports and
statements as shall be required of him by the president or the board of
directors, or by the chairman of the board, and shall at least once during each
year verify the assets of the corporation.
Section 8. GENERAL PROVISIONS. In addition to the authority and duties
hereinbefore provided, the principal officers of the corporation shall have such
other authority and duties as are usually incident to such offices in
corporations engaged in business similar to that of this corporation, and such
other authority and duties as shall from time to time be conferred upon or
required of them, respectively, by the board of directors. Anything in these
regulations to the contrary notwithstanding, the board of directors may at any
time provide, either for specific cases, or generally, that any written
instrument to be executed, signed or delivered, or any other thing to be done,
in the name or upon behalf of the corporation, may be signed, executed,
delivered or done by any one or more of the principal officers, or by any other
officer, agent, or attorney of the corporation designated for such purpose by
the board of directors; provided, however, that certificates for shares of the
corporation shall be signed as provided in Section I of Article VII of these
regulations.
Section 9. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any
officer of the corporation, or for any other reason the board of directors may
deem sufficient, the board of directors may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer or to any
director. The respective authority and duties of the secretary and of the
treasurer may be delegated by them or by the board of directors, to any
assistant secretary or assistant treasurer of the corporation respectively,
subject, nevertheless, to the general control and direction of such secretary or
treasurer as the case may be.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
The corporation shall indemnify each director, whether active, honorary
or emeritus, and each officer or employee, each such former director, officer or
employee, and each person who is serving or has served at its request as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other organization or enterprise, against expenses (including
attorneys' fees), judgments, decrees, fines, penalties and amounts paid in
settlement (whether with or without court approval) in connection with the
defense of any pending or threatened action, suit, or proceeding, whether
criminal, civil, administrative or investigative, to which he is or may be made
a party by reason of being or having been such director, officer or employee, or
by reason of any action alleged to have been taken or not taken by him while
acting in any such capacity, provided that a determination is made (a) that he
was not and has not been adjudicated to have been negligent or guilty of
misconduct in the performance of his duty to the corporation, partnership, joint
venture, trust or other enterprise, of which he is or was such director, officer
or employee, (b) that he acted in good faith in what he reasonably believed to
be in, or not opposed to, the best interest of the corporation, and (c) that, in
any matter the subject of a criminal action, suit or proceeding, he had no
reasonable cause to believe that his conduct was unlawful. The determination as
to (b) and (c) and, in the absence of an adjudication as to (a) by a court of
competent jurisdiction, the determination as to (a), shall be made (i) by the
directors of the corporation acting at a meeting at which a quorum consisting of
directors who are not parties to or threatened with such action, suit or
proceeding is present and on which determination only such directors vote, or
(ii) if such a quorum is not obtainable to vote on such indemnification, or,
even if obtainable and a quorum of directors qualified to vote so directs, by
independent legal counsel in a written opinion.
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The termination of any threatened or actual action, suit or proceeding
by judgment, order settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that any such
director, officer or employee did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation or had reasonable cause to believe that his conduct was unlawful.
Expenses incurred by any person in defending any threatened or actual action,
suit or proceeding may be paid by the corporation in advance of the final
disposition thereof as authorized by the board of directors in the specific
case, whether a disinterested quorum exists or not, upon the receipt of an
undertaking by or on behalf of such person to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as herein authorized. The corporation may purchase and maintain
insurance for and on behalf of any person who is or was such a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as such director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other organization or
enterprise, against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of these regulations. The indemnification herein provided shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any regulation, bylaw, agreement,
insurance purchased by the corporation, vote of shareholders or disinterested
directors, or otherwise, or of any other indemnification which may be entitled
under any regulation, bylaw, agreement, insurance purchased by the corporation,
ceased to be such a director, officer or employee and shall inure to the benefit
of the heirs, executors and administrators of such a person.
ARTICLE VI
COMMITTEES
Section 1. EXECUTIVE COMMITTEE. There shall be an executive committee
of the board of directors, which shall consist of the chairman of the board, the
president of the corporation and not less than two (2) directors to be appointed
by the board of directors. Except as otherwise provided herein, such committee
shall, during the intervals between the meetings of the board of directors,
possess and may exercise all the powers of the board of directors in the
management of the business and affairs of the corporation in so far as may be
permitted by law, except that no obligations or indebtedness other than those
properly pertaining to current business shall be contracted without
authorization by the board of directors; and such executive committee shall have
such other powers and perform such other duties as shall from time to time be
prescribed by the board of directors. Such executive committee shall at all
times act under the direction and control of the board of directors and shall
make reports of its acts and transactions to the board at its meeting next
succeeding such action. Vacancies in the executive committee shall be filled by
the board of directors, which may also appoint one or more directors as
alternate members of such committee to take the place of any absent member or
members at any meeting of such committee. The committee may establish its own
rules of procedure, and may act, with or without a meeting, in such manner as it
may determine.
Section 2. OTHER COMMITTEES. The board of directors may by resolution
provide for such other standing or special committees as it deems desirable, and
discontinue the same at its pleasure. Any such committee shall have such powers
and perform such duties, not inconsistent with law, as may be delegated to it by
the board of directors.
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ARTICLE VII
SHARES
Section 1. CERTIFICATES FOR SHARES. Each shareholder of the corporation
shall be entitled to a certificate, certifying (or, certificates, certifying in
the aggregate) the number and class of paid-up shares of the corporation held by
him, but no certificate shall be issued for a share until it is fully paid. Such
certificates shall be of such form and content, not inconsistent with law and
the Articles, as shall be determined by the board of directors, shall be
consecutively numbered in each class of shares, shall be signed by the chairman
of the board of directors or the president or any vice president, and by the
secretary, or any assistant secretary, or the treasurer, or any assistant
treasurer, and shall bear an impression of the seal of the corporation;
provided, however, that when any such certificate is countersigned by a transfer
agent who is not an employee of the corporation, or by a transfer agent and/or
registrar, the signature of any of said officers, and the seal of the
corporation, upon such certificate, may be facsimilies, engraved, lithographed,
stamped or printed. If any officer or officers who shall have signed, or whose
facsimile signature shall have been used, lithographed, engraved, stamped or
printed on any certificate or certificates for shares, shall cease to be such
officer or officers, because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the corporation, such
certificate or certificates, if authenticated by the endorsement thereon of the
signature of a transfer agent or registrar, shall nevertheless be conclusively
deemed to have been adopted by the corporation by the use and delivery thereof
and shall be as effective in all respects as though signed by a duly elected,
qualified and authorized officer or officers, and as though the person or
persons who signed such certificate or certificates, or whose facsimile
signature or signatures shall have been used thereon had not ceased to be an
officer or officers of the corporation.
A full record of each certificate so issued shall be kept by the
secretary, or by a transfer agent of the shares, of the corporation. Such
records shall show the number of the certificate, the number and class of shares
represented thereby, the date of issuance, the name of the shareholder, his
address as furnished by him to the corporation, and, if the certificate be
issued upon a transfer of shares, from whom transferred, and the number of the
certificate surrendered for transfer. Certificates may, if authorized by the
board of directors, be issued for fractions of shares.
Section 2. TRANSFERS OF SHARES. Subject to any applicable provisions of
law or of the Articles, transfers of shares of the corporation shall be made
only upon its books upon surrender and cancellation of a certificate or
certificates for the shares so transferred and upon compliance with such
reasonable requirements as shall be prescribed by the board of directors or by
the respective transfer agents and registrars of the corporation.
Section 3. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. The board
of directors may, in its discretion, upon evidence satisfactory to it of the
loss, theft or destruction of any certificate for shares of the corporation,
authorize the issuance of a new certificate in lieu thereof, and shall require,
as a condition precedent to such issuance, the giving by the owner of such
alleged lost, stolen or destroyed certificate, of a bond of indemnity in such
form and amount and with such surety as shall be satisfactory to the board of
directors against any loss or damage which may result to, or claim which may be
made against, the corporation or any transfer agent or registrar of its shares
in connection with such alleged lost, stolen or destroyed, or such new
certificate. If any certificate for shares of the corporation becomes worn,
defaced or mutilated, the board of directors may, upon production and surrender
thereof, order that the same be cancelled and that a new certificate be issued
in lieu thereof.
Section 4. REGISTERED SHAREHOLDERS. A person in whose name shares are
of record on the books of the corporation shall conclusively be deemed the
unqualified owner thereof for all purposes and to have capacity to exercise all
rights of ownership. Neither the corporation nor any transfer agent of the
corporation shall be bound to recognize any equitable interest in or claim to
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such shares on the part of any other person, whether disclosed upon such
certificate or otherwise, save as expressly provided by the laws of Ohio, nor
shall they be obliged to see to the execution of any trust or obligation.
Section 5. TRANSFER AGENTS AND REGISTRARS. The board of directors may,
from time to time, appoint and remove one or more agents, to keep the records of
the corporation's shares and to transfer or register (or both) such shares, in
such places, and with such powers, not inconsistent with law and these
regulations, as the board of directors shall deem proper.
ARTICLE VIII
CORPORATE SEAL
The seal of the corporation shall be in such form as the board of
directors may designate or approve.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be from the 1st day of
November to the 31st day of October, inclusive, in each year, or between such
other dates as the board of directors may by resolution designate.
ARTICLE X
AMENDMENTS
These regulations may be amended, added to, or repealed and new
regulations may be adopted, at any meeting of shareholders called for that
purpose, by the affirmative vote of the holders of record of shares entitling
them to exercise a majority of the voting power on such proposal, or, without a
meeting, by the written consent of the holders of record of shares entitling
them to exercise a majority of the voting power on such proposal; provided that
if such action is taken without a meeting of the shareholders the secretary of
the corporation shall record said amendment, addition or change with respect to
these regulations in the records of the corporation and shall mail a copy of
said amendment, addition or change to each shareholder of record who would have
been entitled to vote thereon at a meeting of shareholders but who did not
participate in the adoption thereof.
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EXHIBIT 10.29
EXECUTION COPY
$125,000,000 AGGREGATE SENIOR UNSECURED REVOLVING CREDIT FACILITIES
$60,000,000 SENIOR UNSECURED TERM LOAN FACILITY
CREDIT AGREEMENT
by and among
COMMERCIAL INTERTECH CORP. and
COMMERCIAL INTERTECH HOLDINGS LIMITED, as Borrowers
and
THE BANKS PARTY HERETO
and
MELLON BANK, N.A., as Agent
Dated as of October 31, 1996
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TABLE OF CONTENTS
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1. CERTAIN DEFINITIONS..........................................................................1
1.1 Certain Definitions................................................................1
1.2 Construction......................................................................27
1.2.1 Number; Inclusion......................................................28
1.2.2 Determination..........................................................28
1.2.3 Agent's Discretion and Consent.........................................28
1.2.4 Documents Taken as a Whole.............................................28
1.2.5 Headings...............................................................28
1.2.6 Implied References to this Agreement...................................28
1.2.7 Persons................................................................28
1.2.8 Modifications to Documents.............................................29
1.2.9 From, To and Through...................................................29
1.2.10 Shall; Will...........................................................29
1.3 Accounting Principles.............................................................29
2. REVOLVING CREDIT FACILITY AND TERM FACILITY.................................................29
2.1 Revolving Credit Commitments......................................................29
2.1.1 TEC Revolving Credit Commitments.......................................29
2.1.2 CIH Revolving Credit Commitments.......................................30
2.2 Nature of Banks' Obligations with Respect to Revolving Credit Loans...............30
2.3 Revolving Credit and Term Loan Commitment Fees....................................31
2.3.1 TEC's Fees.............................................................31
2.3.2 CIH's Fees.............................................................31
2.4 Voluntary Reduction of Revolving Credit and Term Loan Commitments.................31
2.4.1 General Requirements...................................................31
2.4.2 Collateral for Letter of Credit/Guarantee Outstandings to TEC..........32
2.4.3 Collateral for Bank Guarantee Outstandings.............................32
2.5 Revolving Credit Loan Requests....................................................33
2.6 Making Revolving Credit Loans.....................................................34
2.7 Revolving Credit Notes............................................................34
2.8 Use of Revolving Credit Proceeds..................................................34
2.9 Letters of Credit Subfacility for TEC.............................................35
2.9.1 Issuance of Letters of Credit for TEC's Account........................35
2.9.2 Participations.........................................................35
2.9.3 Letter of Credit Fees..................................................36
2.9.4 Disbursements; Reimbursement...........................................36
2.9.5 Documentation..........................................................37
2.9.6 Determinations to Honor Drawing Requests...............................37
2.9.7 Nature of Participation and Reimbursement Obligations..................37
2.9.8 Indemnity..............................................................38
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TABLE OF CONTENTS
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2.9.9 Liability for Acts and Omissions.......................................39
2.10 Bank Guarantee Subfacility for CIH...............................................40
2.10.1 Issuance of Bank Guarantees on Behalf of CIH..........................40
2.10.2 Restrictions on Bank Guarantees.......................................40
2.10.3 Participations........................................................40
2.10.4 Bank Guarantee Fees...................................................41
2.10.5 Counter-Indemnities...................................................41
2.10.6 Claims under Bank Guarantees..........................................42
2.11 Term Facility....................................................................43
2.11.1 Term Loan Commitments.................................................43
2.11.2 Nature of Banks' Obligations With Respect to Term Loans...............43
2.11.3 Term Loan Notes.......................................................43
2.11.4 Use of Term Loan Proceeds.............................................44
3. COMPETITIVE BID FACILITY....................................................................44
3.1 Bid Loan Requests.................................................................44
3.2 Bidding for, Accepting and Making Bid Loans.......................................45
3.2.1 Bidding................................................................45
3.2.2 Accepting Bids.........................................................46
3.2.3 Funding Bid Loans......................................................47
3.2.4 Several Obligations....................................................47
3.2.5 Bid Loan Interest Periods..............................................47
3.3 Bid Loan Notes....................................................................47
4. INTEREST RATES..............................................................................47
4.1 Interest..........................................................................47
4.1.1 Interest Rate Options..................................................48
4.2 Revolving Credit Loan Interest Periods............................................48
4.2.1 Ending Date and Business Day...........................................48
4.2.2 Amount of Borrowing Tranche............................................48
4.2.3 Termination Before Expiration Date.....................................49
4.2.4 Renewals...............................................................49
4.3 Interest After Default............................................................49
4.3.1 Letters of Credit Fees, Bank Guarantee Fees, Interest Rate.............49
4.3.2 Other Obligations......................................................49
4.3.3 Acknowledgment.........................................................49
4.4 Euro-Rate Unascertainable.........................................................49
4.4.1 Unascertainable........................................................49
4.4.2 Illegality; Increased Costs; Deposits Not Available....................50
4.4.3 Agent's and Bank's Rights..............................................50
4.5 Selection of Interest Rate Options................................................51
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5. PAYMENTS....................................................................................51
5.1 Payments..........................................................................51
5.2 Pro Rata Treatment of Banks.......................................................52
5.2.1 Revolving Credit Loans.................................................52
5.2.2 Term Loans.............................................................52
5.3 Interest Payment Dates............................................................52
5.4 Voluntary Prepayments.............................................................53
5.4.1 Right to Prepay........................................................53
5.5 Mandatory Reduction of Commitments; Mandatory Payments and Prepayments............54
5.5.1 Sale of Assets.........................................................54
5.5.2 Termination of Ultra Acquisition.......................................55
5.5.3 Qualified Note Placement...............................................55
5.5.4 Mandatory Prepayments Resulting from Currency Exchange.................55
5.6 Additional Compensation in Certain Circumstances..................................55
5.6.1 Increased Costs or Reduced Return Resulting From Taxes, Reserves,
Capital Adequacy Requirements, Expenses, Etc........................55
5.6.2 Indemnity..............................................................56
5.7 Interbank Market Presumption......................................................57
5.8 Taxes.............................................................................57
5.8.1 No Deductions..........................................................57
5.8.2 Stamp Taxes............................................................58
5.8.3 Indemnification for Taxes Paid by a Bank...............................58
5.8.4 Certificate............................................................58
5.8.5 Survival...............................................................58
5.9 Judgment Currency and other Currency Conversions..................................59
5.9.1 Currency Conversion Procedures.........................................59
5.9.2 Indemnity in Certain Events............................................59
6. REPRESENTATIONS AND WARRANTIES..............................................................59
6.1 Representations and Warranties....................................................59
6.1.1 Organization and Qualification.........................................59
6.1.2 Subsidiary and Joint Venture Matters...................................60
6.1.3 Power and Authority....................................................60
6.1.4 Validity and Binding Effect............................................60
6.1.5 No Conflict............................................................60
6.1.6 Litigation.............................................................61
6.1.7 Title to Properties....................................................61
6.1.8 Financial Statements...................................................61
6.1.9 Margin Stock...........................................................63
6.1.10 Full Disclosure.......................................................63
6.1.11 Taxes.................................................................63
6.1.12 Consents and Approvals................................................64
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6.1.13 No Event of Default; Compliance with Instruments......................64
6.1.14 Patents, Trademarks, Copyrights, Licenses, Etc........................64
6.1.15 Insurance.............................................................64
6.1.16 Compliance with Laws..................................................64
6.1.17 Material Contracts....................................................65
6.1.18 Investment Companies..................................................65
6.1.19 Plans and Benefit Arrangements........................................65
6.1.20 Employment Matters....................................................67
6.1.21 Environmental Matters.................................................67
6.1.22 Senior Debt Status....................................................69
6.1.23 Solvency..............................................................69
6.1.24 Schedule of Indebtedness..............................................69
6.1.25 Material Adverse Change...............................................70
6.2 Updates to Schedules..............................................................70
7. CONDITIONS OF LENDING.......................................................................70
7.1 First TEC Revolving Credit Loans, Letter of Credit Issuances and Term Loans.......70
7.1.1 Officer's Certificate..................................................70
7.1.2 Secretary's Certificate................................................71
7.1.3 Delivery of Loan Documents.............................................71
7.1.4 Opinions of Counsel....................................................71
7.1.5 Legal Details..........................................................71
7.1.6 Payment of Fees and Reimbursement of Expenses..........................72
7.1.7 Consents...............................................................72
7.1.8 Officer's Certificate Regarding MACs...................................72
7.1.9 No Violation of Laws...................................................72
7.1.10 No Actions or Proceedings.............................................72
7.1.11 Insurance Policies; Certificates of Insurance.........................73
7.1.12 Termination of Existing Debt..........................................73
7.1.13 Solvency Certificate..................................................73
7.1.14 Borrowing of the Term Loan............................................73
7.2 First CIH Revolving Credit Loans and Bank Guarantee Issuances.....................73
7.3 Each Additional Loan or Letter of Credit or Bank Guarantee Issuance...............75
7.4 Syndication.......................................................................75
7.4.1 Syndication Representations and Warranties.............................75
7.4.2 Syndication Documents..................................................76
7.4.3 Syndication Cooperation................................................76
8. COVENANTS...................................................................................76
8.1 Affirmative Covenants.............................................................76
8.1.1 Preservation of Existence, Etc.........................................76
8.1.2 Payment of Liabilities, Including Taxes, Etc...........................77
8.1.3 Maintenance of Insurance...............................................77
8.1.4 Maintenance of Properties and Leases...................................77
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8.1.5 Maintenance of Patents, Trademarks, Etc................................78
8.1.6 Visitation Rights......................................................78
8.1.7 Keeping of Records and Books of Account................................78
8.1.8 Plans and Benefit Arrangements.........................................78
8.1.9 Compliance with Laws...................................................79
8.1.10 Use of Proceeds.......................................................79
8.1.11 Subordination of Intercompany Loans...................................79
8.1.12 Post-Closing Matters..................................................79
8.1.13 Payment of Intercompany Obligations Related to CUNO...................79
8.1.14 Interest Rate Protection..............................................79
8.2 Negative Covenants................................................................80
8.2.1 Indebtedness...........................................................80
8.2.2 Liens; Further Negative Pledges........................................81
8.2.3 Loans and Investments..................................................81
8.2.4 Upstream Dividends, Distributions, Loans and Advances..................83
8.2.5 Liquidations, Mergers, Consolidations, Acquisitions....................83
8.2.6 Dispositions of Assets or Restricted Subsidiaries......................85
8.2.7 Affiliate Transactions.................................................87
8.2.8 Guaranties by Material Domestic Subsidiaries...........................88
8.2.9 Continuation of or Change in Business..................................88
8.2.10 Plans and Benefit Arrangements........................................88
8.2.11 Fiscal Year...........................................................89
8.2.12 Issuance of Stock.....................................................89
8.2.13 Changes in Organizational Documents...................................90
8.2.14 Minimum Fixed Charge Coverage Ratio...................................90
8.2.15 Maximum Leverage Ratio................................................90
8.2.16 Minimum Combined Net Worth............................................90
8.2.17 Amendments to Certain Documents.......................................90
8.2.18 No Prepayment of Existing Indebtedness................................91
8.3 Reporting Requirements............................................................91
8.3.1 Quarterly Financial Statements.........................................91
8.3.2 Annual Financial Statements............................................91
8.3.3 Certificate of TEC.....................................................92
8.3.4 Notice of Default......................................................92
8.3.5 Notice of Litigation...................................................92
8.3.6 Budgets, Forecasts, Other Reports and Information......................93
8.3.7 Notices Regarding Plans and Benefit Arrangements.......................94
9. DEFAULT.....................................................................................95
9.1 Events of Default.................................................................95
9.1.1 Payments Under Loan Documents..........................................95
9.1.2 Breach of Warranty.....................................................96
9.1.3 Breach of Negative Covenants and Sections 8.1.12 or 8.1.14.............96
9.1.4 Breach of Other Covenants..............................................96
9.1.5 Defaults in Other Agreements or Indebtedness...........................96
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9.1.6 Final Judgments or Orders..............................................97
9.1.7 Loan Document Unenforceable............................................97
9.1.8 Notice of Lien or Assessment...........................................97
9.1.9 Insolvency.............................................................97
9.1.10 Events Relating to Plans and Benefit Arrangements.....................98
9.1.11 Cessation of Business.................................................98
9.1.12 Change of Control.....................................................98
9.1.13 Involuntary Proceedings...............................................99
9.1.14 Voluntary Proceedings.................................................99
9.1.15 Material Adverse Change...............................................99
9.2 Consequences of Event of Default..................................................99
9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings...........................................................99
9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings..................100
9.2.3 Set-off...............................................................100
9.2.4 Suits, Actions, Proceedings...........................................100
9.2.5 Application of Proceeds...............................................101
9.2.6 Other Rights and Remedies.............................................101
10. THE AGENT.................................................................................102
10.1 Appointment.....................................................................102
10.2 Delegation of Duties............................................................102
10.3 Nature of Duties; Independent Credit Investigation..............................102
10.4 Actions in Discretion of Agent; Instructions from the Banks.....................103
10.5 Reimbursement and Indemnification of Agent by the Borrowers.....................103
10.6 Exculpatory Provisions..........................................................104
10.7 Reimbursement and Indemnification by Banks of the Agent.........................104
10.8 Reliance by Agent...............................................................105
10.9 Notice of Default...............................................................105
10.10 Notices........................................................................105
10.11 Banks in Their Individual Capacities...........................................105
10.12 Holders of Notes...............................................................106
10.13 Equalization of Banks..........................................................106
10.14 Successor Agent................................................................106
10.15 Other Fees.....................................................................107
10.16 Availability of Funds..........................................................107
10.17 Calculations...................................................................107
10.18 Beneficiaries..................................................................107
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11. MISCELLANEOUS.............................................................................108
11.1 Modifications, Amendments or Waivers............................................108
11.1.1 Increase of Commitments; Extension of Expiration Date................108
11.1.2 Extension of Payment; Reduction of Principal, Interest or Fees;
Modification of Terms of Payment...................................108
11.1.3 Release of Guarantor.................................................108
11.1.4 Miscellaneous........................................................108
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.......................109
11.3 Reimbursement and Indemnification of Banks by the Borrowers; Taxes..............109
11.4 Holidays........................................................................110
11.5 Funding by Branch, Subsidiary or Affiliate......................................110
11.5.1 Notional Funding.....................................................110
11.5.2 Actual Funding.......................................................110
11.5.3 Changes to Other Branches, Subsidiaries or Affiliates................111
11.6 Notices.........................................................................111
11.7 Severability....................................................................111
11.8 Governing Law...................................................................112
11.9 Prior Understanding.............................................................112
11.10 Duration; Survival.............................................................112
11.11 Successors and Assigns.........................................................112
11.12 Confidentiality................................................................114
11.13 Counterparts...................................................................114
11.14 Agent's or Bank's Consent......................................................114
11.15 Exceptions.....................................................................114
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.........................................115
11.17 Tax Withholding Clause.........................................................115
11.18 Joinder of Subsidiaries........................................................116
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LIST OF SCHEDULES AND EXHIBITS
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SCHEDULE
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SCHEDULE 1.1(B) - COMMITMENTS OF BANKS
SCHEDULE 1.1(P)(1) - EXISTING DEPOSITORY INSTITUTIONS
SCHEDULE 1.1(P)(2) - PERMITTED LIENS
SCHEDULE 6.1.1 - SUBSIDIARIES
SCHEDULE 6.1.2 - SUBSIDIARY MATTERS
SCHEDULE 6.1.6 - LITIGATION
SCHEDULE 6.1.12 - CONSENTS AND APPROVALS
SCHEDULE 6.1.19 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 6.1.21 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 6.1.24 INDEBTEDNESS
SCHEDULE 7.1.4 - COUNSEL TO LOAN PARTIES
SCHEDULE 8.1.12 - POST-CLOSING MATTERS
SCHEDULE 8.2.3 - LOANS AND INVESTMENTS
SCHEDULE 8.2.7 - AFFILIATE TRANSACTIONS
EXHIBITS
EXHIBIT 1.1(A)(1) - FORM OF CLOSING DATE CERTIFICATE
EXHIBIT 1.1(A)(2) - FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(B)(1) FORM OF CIH BID LOAN NOTE
EXHIBIT 1.1(B)(2) - FORM OF TEC BID LOAN NOTE
EXHIBIT 1.1(I) - FORM OF INTERCOMPANY NOTE
EXHIBIT 1.1(M)(1) - FORM OF GUARANTEE AGREEMENT
EXHIBIT 1.1(M)(2) - FORM OF MASTER INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(R)(1) - FORM OF CIH REVOLVING CREDIT NOTE
EXHIBIT 1.1(R)(2) - FORM OF TEC REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - FORM OF SYNDICATION ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(T) - FORM OF TERM NOTE
EXHIBIT 2.5(A) - FORM OF TEC REVOLVING CREDIT LOAN REQUEST
EXHIBIT 2.5(B) - FORM OF CIH REVOLVING CREDIT LOAN REQUEST
EXHIBIT 2.9.1 - FORM OF APPLICATION AND AGREEMENT FOR LETTERS OF CREDIT
EXHIBIT 2.10 - FORM OF BANK GUARANTEE REQUEST
EXHIBIT 2.10.1 - FORM OF BANK GUARANTEE
EXHIBIT 3.1 - FORM OF BID LOAN REQUEST
EXHIBIT 3.2 - FORM OF BID
EXHIBIT 7.1.4 - OPINIONS OF COUNSEL
EXHIBIT 8.2.5 - FORM OF TRANSACTION NOTICE CERTIFICATE
EXHIBIT 8.3.3 - FORM OF COMPLIANCE CERTIFICATE
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of October 31, 1996 and is
made by and among COMMERCIAL INTERTECH CORP., an Ohio corporation ("TEC"),
COMMERCIAL INTERTECH HOLDINGS LIMITED, a corporation formed under the laws of
Great Britain ("CIH") (TEC and CIH being each a "Borrower" and collectively,
the "Borrowers"), the BANKS (as hereinafter defined), and MELLON BANK, N.A.,
in its capacity as Agent.
WITNESSETH:
WHEREAS, TEC has requested for TEC as the Borrower (i) a
senior unsecured revolving credit facility in the principal amount of US
$75,000,000 (including a $20,000,000 sublimit for letters of credit) and (ii)
a US $60,000,000 term loan facility;
WHEREAS, TEC and CIH have requested for CIH as the Borrower
a senior unsecured revolving credit facility in the principal amount of up to
the pounds sterling equivalent of US $50,000,000 (including a sublimit for the
issuance of the Bank Guarantees, as defined below); and
WHEREAS, the Banks are willing to provide such credit
facilities upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of
their mutual covenants and agreements hereinafter set forth and intending to
be legally bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS.
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following meanings,
respectively, unless the context hereof clearly requires otherwise:
ACQUISITION shall mean the acquisition of a 50% or greater
direct and/or indirect ownership interest by merger, purchase or otherwise of
all or substantially all of the stock or other equity interests or assets of any
other Person or of any division or Subsidiary of a Person which constitutes a
"reportable industry segment" or "class of similar products" of an industry
segment (as such term is defined in Item 101(c) of Regulation S-K promulgated
under the Securities Act of 1933 and the Securities Exchange Act of 1934).
ACQUISITION CAP shall mean an overall limit on Acquisitions of
Restricted Subsidiaries by the Combined TEC Group which shall be determined by
calculating the
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Leverage Ratio, effective immediately after the closing of a proposed
Acquisition, in the manner required in clause (C) of Section 8.2.5 and applying
it as follows:
(A) If the Leverage Ratio is greater than 2.75 to 1.00, then
the Acquisition is permitted only if upon closing it the aggregate Consideration
paid or given for all Acquisitions pursuant to Section 8.2.5(vi) will not exceed
$30,000,000 in the preceding 12 months or $100,000,000 since the Closing Date,
exclusive of the Consideration paid or given for CIH to acquire Ultra and for
TEC to acquire Gens Component Engineering;
(B) If the Leverage Ratio is less than or equal to 2.75 to
1.00 but greater than 2.00 to 1.00, then the Acquisition is permitted only if
upon closing it the aggregate Consideration paid or given for all Acquisitions
pursuant to Section 8.2.5(vi) will not exceed $100,000,000 since the Closing
Date, exclusive of the Consideration paid or given for CIH to acquire Ultra and
for TEC to acquire Gens Component Engineering; and
(C) If the Leverage Ratio is less than or equal to 2.00 to
1.00, Acquisitions pursuant to Section 8.2.5(vi) shall not be subject to any
limit on the Consideration paid or given.
AFFILIATE as to any Person shall mean any other Person (i)
which directly or indirectly controls, is controlled by, or is under common
control with such Person, (ii) which beneficially owns or holds 5% or more of
any class of the voting or other equity interests of such Person, or (iii) 5% or
more of any class of voting or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
AGENT shall mean Mellon Bank, N.A., in its capacity as agent
and its successors and assigns.
AGENT'S FEES shall have the meaning assigned to that term in
Section 10.15.
AGREEMENT shall mean this Credit Agreement, as the same may be
supplemented or amended from time to time, including all schedules and exhibits.
APPLICABLE LENDING OFFICE shall mean, in relation to the CIH
Revolving Credit Loans, the CIH Bid Loans, the Bank Guarantees and CIH's
Reimbursement Obligations, the Agent's London Office and, in relation to the TEC
Revolving Credit Loans, the TEC Bid Loans, the Term Loans, the Letters of Credit
and TEC's Reimbursement Obligations, the Agent's Principal Office.
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APPLICABLE MARGIN, with respect to the Revolving Credit Loans,
the Term Loans and the Commitment Fees payable under Section 2.3 and the Letters
of Credit Fees payable under Section 2.9.3 and Bank Guarantee Fees payable under
Section 2.10.4, shall mean the rate specified for such Obligation below, subject
to adjustment as hereinafter provided:
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Applicable Margin
For Eurodollar
Loans, Standby Applicable Margin
Applicable Margin Letters of Credit For Documentary Applicable Margin
When the Status For Base Rate Fees and Bank Letters of Credit For Commitment Fees
Below Exists Loans Is: Guarantee Fees Is: Fees Is: Is:
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Level I Status 0% .25% .375% .1%
Level II Status 0% .375% .375% .125%
Level III Status 0% .5% .375% .15%
Level IV Status 0% .625% .375% .2%
Level V Status 0% .75% .375% .25%
Level VI Status 0% .875% .375% .3%
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For purposes of determining the Applicable Margin:
(a) The Applicable Margin shall be determined on the Closing
Date based on the Leverage Ratio computed on such date pursuant to a
certificate in the form of EXHIBIT 1.1(A)(1) to be delivered on the
Closing Date.
(b) The Applicable Margin shall be recomputed as of the end of
each fiscal quarter ending after the Closing Date and on the closing
date of each transaction under Section 8.2.3, 8.2.5 or 8.2.6 which is
conditioned upon the delivery of a Transaction Notice Certificate,
based on the Leverage Ratio computed as required by this Agreement
under the relevant circumstances. Any increase or decrease in the
Applicable Margin computed as of a quarter end shall be effective on
the date on which the Compliance Certificate under Section 8.3.3 or the
Transaction Notice Certificate under Section 8.2.3, 8.2.5 or 8.2.6
evidencing such computation is due to be delivered.
ASSIGNMENT AND ASSUMPTION AGREEMENT shall mean an Assignment
and Assumption Agreement by and among an "Assignor" and an "Assignee" (each as
defined therein) and the Agent on behalf of the other Banks, substantially in
the form of EXHIBIT 1.1(A)(2).
AUTHORIZED OFFICER shall mean those individuals, designated by
written notice to the Agent from the Borrower, authorized to execute notices,
reports and other
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documents on behalf of the Loan Parties required hereunder. TEC may amend such
list of individuals from time to time by giving written notice of such amendment
to the Agent.
BANK GUARANTEE shall have the meaning assigned to that term in
Section 2.10.1.
BANK GUARANTEE FEE shall have the meaning assigned to that
term in Section 2.10.1 and shall be issued in substantially the form of Exhibit
2.10.1.
BANK GUARANTEE OUTSTANDINGS shall mean, collectively at any
time, the sum of the aggregate uncalled amount of all issued Bank Guarantees and
all unpaid and outstanding Reimbursement Obligations due pursuant to Section
2.10.5.
BANKS shall mean the financial institutions named on SCHEDULE
1.1(B) and their respective successors and assigns as permitted hereunder, each
of which is referred to herein as a "Bank."
BASE RATE OPTION shall mean the UK Base Rate Option or the US
Base Rate Option, as applicable
BASE NET WORTH shall mean, as of any date of determination,
the sum of (A) 80% of the Combined Net Worth of the Combined TEC Group as of
October 31, 1996, plus (B) 50% of the cash proceeds received after October 31,
1996 by TEC from any issuance by TEC of capital stock of TEC (and if such
issuances are permitted by the Required Banks, from the issuance by any
Restricted Subsidiary of its capital stock or other equity interests other than
to a Combined TEC Group Entity) after deducting expenses incurred in connection
with such issuance plus (C) 50% of combined net income of the Combined TEC Group
for each fiscal year after 1996 in which net income was earned (as opposed to a
net loss) Interim determinations made during the second, third and fourth
quarters of each fiscal year shall include 50% of year to date combined net
income of the Combined TEC Group during such fiscal year through the last day of
the immediately preceding fiscal quarter. The foregoing shall be determined in
accordance with GAAP, but without currency translation adjustments required by
FAS 52.
BENEFIT ARRANGEMENT shall mean at any time an "employee
benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a
Plan nor a Multiemployer Plan and which is maintained, sponsored or otherwise
contributed to by any member of the ERISA Group.
BID shall have the meaning assigned to such term in Section
3.2.1.
BID LOAN EURO-RATE OPTION shall mean the option of a Borrower
to have Bid Loans bearing interest at the Euro-Rate plus or minus a Margin
offered by any of the Banks under the terms and conditions set forth in Section
3.1.
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BID LOAN FIXED RATE OPTION shall mean the option of a Borrower
to have Bid Loans bearing interest at a fixed rate per annum offered by any of
the Banks under the terms and conditions set forth in Section 3.1.
BID LOAN INTEREST PERIOD shall have the meaning assigned to
such term in Section 3.1(iii).
BID LOAN NOTES shall mean the TEC Bid Loan Notes and the CIH
Bid Loan Notes and BID LOAN NOTE shall mean separately any of them.
BID LOAN PROCESSING FEE shall have the meaning assigned to
such term in Section 10.15.
BID LOAN REQUEST shall have the meaning assigned to such term
in Section 3.1.
BID LOANS shall mean the CIH Bid Loans and the TEC Bid Loans
and BID LOAN shall mean separately any of them.
BORROWERS and BORROWER shall have the meanings assigned in the
heading of this Agreement.
BORROWING DATE shall mean, with respect to any Loan, the date
for the making thereof or the renewal or conversion thereof at or to the same or
a different Interest Rate Option, which shall be a Business Day.
BORROWING TRANCHE shall mean specified portions of Loans
outstanding as follows: (i) any Loans to the same Borrower under the Euro-Rate
Option requested under the same Loan Request and having the same Interest Period
and which are denominated in the same currency shall constitute one Borrowing
Tranche, (ii) any Euro-Rate Bid Loans to the same Borrower requested under the
same Bid Loan Request having the same Interest Period and which are denominated
in the same currency shall constitute one Borrowing Tranche, (iii) any Fixed
Rate Bid Loans to the same Borrower requested under the same Bid Loan Request
and having the same Interest Period and which are denominated in the same
currency shall constitute one Borrowing Tranche, and (iv) all Loans to the same
Borrower to which the Base Rate Option applies shall constitute one Borrowing
Tranche.
BUSINESS DAY shall mean any day other than a Saturday or
Sunday or a legal holiday on which commercial banks are authorized or required
to be closed for business in Pittsburgh, Pennsylvania and (i) with respect to
advances or payments of Loans or any other matters relating to Loans denominated
in Pounds Sterling, such day also shall be a day on which dealings in deposits
in Pounds Sterling are carried on in the London interbank market, and (ii) with
respect to advances or payments of Loans denominated in Pounds Sterling, such
day shall also be a day on which all applicable banks into which Loan proceeds
may be deposited are open for business and foreign exchange markets are open for
business in London.
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CAPITALIZED LEASE shall mean any lease of Property by a Person
as lessee which is a capital lease in accordance with GAAP.
CIH BID LOANS shall mean collectively, and CIH BID LOAN shall
mean separately, all of the Euro-Rate Bid Loans and Fixed Rate Bid Loans or any
individual Euro-Rate Bid Loan or Fixed Rate Bid Loan made by any of the Banks to
CIH pursuant to Section 3.1.
CIH BID LOAN NOTES shall mean collectively and CIH BID LOAN
NOTE shall mean separately all of the Bid Loan Notes of CIH in the form of
EXHIBIT 1.1(B)(1) evidencing its Bid Loans, together with all amendments,
extensions, renewals, replacements, refinancings or refundings thereof in whole
or in part.
CIH REVOLVING CREDIT COMMITMENT shall mean, as to any Bank at
any time the amount initially set forth opposite its name on SCHEDULE 1.1(B) (as
amended from time to time pursuant to Section 11.11 of this Agreement) in the
column labeled "CIH Revolving Credit Commitment" as the same may have been
reduced in accordance with Section 2.4 or Section 5.5.1 and CIH REVOLVING CREDIT
COMMITMENTS shall mean the aggregate CIH Revolving Credit Commitments of all of
the Banks.
CIH REVOLVING CREDIT LOAN and CIH REVOLVING LOANS shall have
the respective meanings assigned to those terms in Section 2.1.2.
CIH REVOLVING CREDIT NOTES shall mean collectively and CIH
REVOLVING CREDIT NOTE shall mean separately all the CIH Revolving Credit Notes
in the form attached hereto as EXHIBIT 1.1(R)(1) evidencing the CIH Revolving
Credit Loans together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
CLOSING DATE shall mean the Business Day on which the first
Loan shall be made, which shall be October 31, 1996, or, if all of the
conditions specified in Section 7.1 have not been satisfied or waived by such
date, not later than November 29, 1996, as designated by the Borrowers at least
three Business Days' advance notice to the Agent at its Principal Office, or
such other date as the parties agree. The closing shall take place at 10:00
a.m., Pittsburgh time, on the Closing Date at the offices of Buchanan Ingersoll
Professional Corporation, Pittsburgh, Pennsylvania, or at such other time and
place as the parties agree.
COLI shall mean a life insurance program owned and established
by TEC pursuant to which TEC would make deposits in a special employee benefit
grantor trust to be created, which trust in turn would (i) invest such deposits
in reserve contracts underwritten by financially sound and reputable life
insurance companies rated A:VI or higher by A.M. Best Company, Inc., (ii) borrow
against such reserve contracts, and (iii) pay reversions to TEC (on a tax free
basis) with respect to such borrowings; provided, however, that the repayment
obligation of TEC with respect to any amounts borrowed by TEC shall be without
recourse to TEC and to such trust, such that the sole recourse for repayment of
such loans would be to such reserve contracts. Under GAAP, the income and
expense components of such program would not be reported separately but would be
netted in TEC's consolidated statement of income.
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COMBINED ADJUSTED CAPITAL EXPENDITURES for any period of
determination shall mean, the aggregate of all expenditures (whether paid in
cash or accrued as liabilities and including that portion of Capitalized Leases
which is capitalized on a combined balance sheet of the Combined TEC Group, but
excluding with respect to Sachsenhydraulik GmbH Chemnitz and Hydraulik Rochlitz
GmbH those capital expenditures and any portion of any payments in respect of
Capitalized Leases funded during any period by the Federal Republic of Germany,
the Treuhandanstalt or the State of Saxony pursuant to that certain agreement
with the Treuhandanstalt dated May 3, 1994, as the same may be modified, amended
or supplemented after the Closing Date) by any Combined TEC Group Entity during
that period that, in conformity with GAAP, are required to be included in or
reflected in the property, plant or equipment or similar fixed asset accounts
reflected on a combined balance sheet of the Combined TEC Group. Any amount
which is included in any period as an accrual shall not be duplicated in any
calculation at the time payment thereof is actually made to the extent included
in such prior accrual.
COMBINED EBITDA for any period of determination shall mean an
amount equal to the sum of (i) the net income (excluding income (or loss) of any
Person in which any Combined TEC Group Entity has an equity interest of 50% or
less, except to the extent of the amount of dividends or other distributions
actually paid in cash by such Person to any Combined TEC Group Entity during
such period) for such period, plus (ii) interest expense in respect of
Indebtedness to the extent deducted in determining net income for such period
("Interest Expense"), plus (iii) the provision for domestic and foreign taxes
for such period based on income or profits to the extent such income or profits
were included in computing net income for such period, plus (iv) depreciation
deducted in determining net income for such period, plus (v) amortization
deducted in determining net income for such period, plus (vi) only with respect
to TEC's 1996 and 1997 fiscal years, expense to the extent deducted in
determining net income for such period in respect of fees and costs which were
incurred in connection with the Tender Offer and the CUNO Spin-Off (provided,
that no such expense described in this clause (vi) shall be added to determine
Combined EBITDA for any period of determination if the aggregate expense for
that period of determination together with all expense included in determining
net income in all periods prior to the period of determination for all such fees
and costs would exceed $8,000,000), in each case of the Combined TEC Group for
such period determined on a combined basis in accordance with GAAP; provided,
however, that there shall be excluded from the foregoing computation (A) all
non-cash extraordinary income, gains and losses and (B) all gains or losses from
the sale of assets not sold in the ordinary course of business, to the extent
either or both were included in net income under the foregoing clause (i) for
such period.
COMBINED FUNDED INDEBTEDNESS as of any date of determination
shall mean the aggregate of any and all indebtedness, obligations or liabilities
of the Combined TEC Group (as well as of each Unrestricted Subsidiary to the
extent that there is recourse against any Combined TEC Group Entity with respect
thereto), determined on a combined basis in accordance with GAAP for or in
respect of: (i) borrowed money, (ii) amounts raised under or liabilities in
respect of any note purchase or acceptance credit facility, (iii) reimbursement
obligations under (A) any letter of credit or bank guarantee drawn upon and not
reimbursed
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<PAGE> 17
within the time period required, or (B) under any currency swap agreement,
interest rate swap, cap, collar or floor agreement or other interest rate
management device (net of any payments made to either Borrower under any of
the foregoing interest rate management devices), (iv) any other transaction
(including forward sale or purchase agreements, capitalized leases (but not
operating leases) and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables, trade
credits and accrued expenses incurred in the ordinary course of business which
are not represented by a promissory note or other evidence of indebtedness and
which are not more than sixty (60) days past due), or (v) any Guarantee
(without duplication) of any liability described in the foregoing clauses (i)
through (iv).
COMBINED INCOME TAX EXPENSE for any period of determination
shall be equal to the combined income tax expense (domestic and foreign) of the
Combined TEC Group in respect of their combined net income for such period.
COMBINED INTEREST EXPENSE for any period of determination
shall be equal to the Interest Expense of the Combined TEC Group as defined and
determined in clause (ii) of the definition of the term "Combined EBITDA" for
such period on a combined basis in accordance with GAAP, less any amortization
of fees and costs which were incurred and paid in a period prior to the period
of determination in connection with the Tender Offer and the CUNO Spin-Off to
the extent the same are included in Interest Expense for such period.
COMBINED NET WORTH shall mean as of any date of determination
total stockholders' equity of the Combined TEC Group as of such date determined
and combined in accordance with GAAP, but without currency translation
adjustments required by FAS 52.
COMBINED TEC GROUP shall mean TEC and the Restricted
Subsidiaries.
COMBINED TEC GROUP ENTITY shall mean TEC or any Restricted
Subsidiary.
COMMITMENT shall mean as to any Bank the aggregate of its
Revolving Credit Commitment and Term Loan Commitment, and COMMITMENTS shall mean
the aggregate of the Revolving Credit Commitments and Term Loan Commitments of
all of the Banks.
COMMITMENT FEES shall have the meaning assigned to that term
in Section 2.3.2.
CONSIDERATION shall mean (A) with respect to any
Acquisition, the aggregate of (i) the cash paid by the Combined TEC Group,
directly or indirectly, to the seller in connection therewith, (ii) the
Indebtedness incurred or assumed by the Combined TEC Group (including
Indebtedness owed by any target which is a Restricted Subsidiary immediately
after the Acquisition), whether in favor of the seller or otherwise and whether
fixed or contingent, (iii) any Guarantee (other than of Indebtedness described
in clause (ii) above) given or incurred by the Combined TEC Group in connection
therewith and (iv) the present value of any other consideration (including stock
or other securities issued by the Combined TEC Group) given or obligation
incurred by the Combined TEC Group in connection therewith; and (B) with respect
to
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<PAGE> 18
any disposition of assets, the aggregate of (i) the cash paid to the Combined
TEC Group, (ii) any Indebtedness of the Combined TEC Group assumed by the
purchaser and (iii) the present value of any other consideration received by the
Combined TEC Group in connection therewith.
CONSOLIDATED TEC GROUP shall mean TEC and its Subsidiaries.
CONSOLIDATED TEC GROUP ENTITY shall mean TEC or any of its
Subsidiaries.
CUNO SPIN-OFF shall mean the dividend distribution of the
shares of capital stock of CUNO Incorporated to the shareholders of TEC which
occurred on September 10, 1996.
DOCUMENTARY LETTERS OF CREDIT shall mean documentary letters
of credit issued for trade finance purposes and which require as part of a
drawing thereunder the presentation of a draft payable at sight together with a
document of title.
DOLLAR EQUIVALENT shall mean, at any time, as determined by
the Agent (which determination shall be conclusive absent manifest error), an
equivalent amount of Pounds Sterling expressed in Dollars and determined by
converting from Dollars at Agent's spot selling rate in London (based on the
market rates then prevailing and available to Agent) for the sale of Dollars for
Pounds Sterling at a time determined by the Agent on the second Business Day
immediately preceding the event for which such calculation is made.
DOLLAR, DOLLARS, U.S. DOLLARS and the symbol $ shall mean
lawful money of the United States of America.
DOMESTIC RESTRICTED SUBSIDIARY shall mean any Domestic
Subsidiary that is a Restricted Subsidiary and DOMESTIC RESTRICTED SUBSIDIARIES
shall mean more than one Domestic Restricted Subsidiary.
DOMESTIC SUBSIDIARY shall mean any Subsidiary of TEC other
than a Foreign Subsidiary and DOMESTIC SUBSIDIARIES shall mean more than one
Domestic Subsidiary.
DRAWING means any drawing by any Borrower of any part of the
Loans.
ENVIRONMENTAL COMPLAINT shall mean any written complaint
setting forth a cause of action for personal or property damage or natural
resource damage or equitable relief, order, notice of violation, citation,
request for information issued pursuant to any Environmental Laws by an Official
Body, subpoena or other written notice of any type relating to, arising out of,
or issued pursuant, to any of the Environmental Laws or any Environmental
Conditions, as the case may be.
ENVIRONMENTAL CONDITIONS shall mean any conditions of the
environment, including the workplace, the ocean, natural resources (including
flora or fauna), soil, surface water, groundwater, any actual or potential
drinking water supply sources, substrata or the
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<PAGE> 19
ambient air, relating to or arising out of, or caused by, the use, handling,
storage, treatment, recycling, generation, transportation, release, spilling,
leaking, pumping, emptying, discharging, injecting, escaping, leaching,
disposal, dumping, threatened release or other management or mismanagement of
Regulated Substances resulting from the use of, or operations on, any
Property.
ENVIRONMENTAL LAWS shall mean all federal, state, local and
foreign Laws and regulations, including permits, licenses, authorizations,
bonds, orders, judgments, and consent decrees issued, or entered into, pursuant
thereto, relating to pollution or protection of human health or the environment
or employee safety in the workplace.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
ERISA GROUP shall mean, at any time, TEC and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
TEC, are treated as a single employer under Section 414 of the Internal Revenue
Code.
EURO-RATE shall mean the UK Euro-Rate or the US Euro-Rate, as
applicable.
EURO-RATE BID LOANS shall have the meaning assigned in Section
3.1(ii).
EURO-RATE OPTION shall mean the UK Euro-Rate Option or the US
Euro-Rate Option.
EURO RESERVE COST RATE shall mean, in relation to any
Borrowing Tranche to which the UK Euro Rate applies for any Interest Period, at
a rate equal to the cost to the Agent of its compliance with any mandatory
prudential, reserve liquidity, special deposit or other reserve requirements
imposed upon it by (as applicable) the Bank of England or the Federal Reserve
System or any other applicable governmental or monetary or other regulatory
authority, expressed as a percentage and rounded upwards to the nearest 1/100 of
1 percent.
EURO-RATE RESERVE PERCENTAGE shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Agent which is in effect during any relevant period: (i) as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of a member bank in such System; and
(ii) to be maintained by a Bank as required for reserve liquidity, special
deposit, or a similar purpose by any governmental or monetary authority of any
country or political subdivision thereof (including any central bank), against
(A) any category of liabilities that includes deposits
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by reference to which a Euro-Rate is to be determined, or (B) any category of
extension of credit or other assets that includes Loans or Borrowing Tranches to
which a Euro-Rate applies.
EVENT OF DEFAULT shall mean any of the events described in
Section 9.1.
EXECUTIVE OFFICER shall mean as to any designated Person a
natural Person who constitutes an executive officer of such designated Person
for purposes of item 401(b) of Regulation S-K promulgated under the Securities
Act of 1933 and the Securities Exchange Act of 1934.
EXPIRATION DATE shall mean, with respect to the Revolving
Credit Commitments, the fifth anniversary of the date of this Agreement.
FEDERAL FUNDS EFFECTIVE RATE for any day shall mean the rate
per annum (based on a year of 360 days and actual days elapsed and rounded
upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New
York (or any successor) on such day as being the weighted average of the rates
on overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; PROVIDED, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day of which such rate was announced.
FINANCIAL PROJECTIONS shall have the meaning assigned to that
term in Section 6.1.8(ii)
FIXED CHARGE COVERAGE RATIO shall mean on any date of
determination, the ratio of (i) Combined EBITDA minus Combined Adjusted Capital
Expenditures to (ii) the sum of (x) Combined Interest Expense, (y) Combined
Income Tax Expense and (z) dividends paid in cash during the period of
determination by TEC in respect of its Class B Preferred Stock or any other
preferred stock issued from time to time, with such ratio determined as of the
end of each fiscal quarter commencing on October 31, 1996, for the four fiscal
quarters ended on the date of determination.
FIXED RATE BID LOAN shall have the meaning assigned in Section
3.1(ii).
FOREIGN RESTRICTED SUBSIDIARY shall mean any Foreign
Subsidiary that is a Restricted Subsidiary and FOREIGN RESTRICTED SUBSIDIARIES
means more than one Foreign Restricted Subsidiary.
FOREIGN SUBSIDIARY shall mean any Subsidiary of TEC that is
formed under the laws of a jurisdiction other than the United States, any state
of the United States, the District of Columbia or any territory or possession of
the United States and FOREIGN SUBSIDIARIES means more than one Foreign
Subsidiary.
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FORM 10 shall mean CUNO Incorporated's Form 10 filed with the
Securities and Exchange Commission on July 29, 1996, as amended.
GAAP shall mean generally accepted accounting principles as
are in effect in the United States from time to time, subject to the provisions
of Section 1.3, and applied on a consistent basis both as to classification of
items and amounts.
GOVERNMENTAL ACTS shall have the meaning assigned to that term
in Section 2.9.8.
GUARANTOR shall mean TEC (with respect to the Obligations of
CIH) and each of the Material Domestic Subsidiaries of TEC existing on the
Closing Date and each other Domestic Subsidiary of TEC which joins the Master
Guarantee Agreement and the other Loan Documents as a Guarantor after the date
hereof pursuant to Section 11.18.
GUARANTOR JOINDER shall mean a joinder to the Master Guarantee
Agreement as provided in the Master Guarantee Agreement.
GUARANTEE of any Person shall mean any obligation of such
Person guaranteeing or in effect guaranteeing any liability or obligation of any
other Person in any manner, whether directly or indirectly (whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent or joint or several), including any agreement to indemnify or hold
harmless any other Person, any performance bond or other suretyship arrangement
and any other form of assurance against loss, except endorsement of negotiable
or other instruments for deposit or collection in the ordinary course of
business.
GUARANTEE AGREEMENT shall mean the Guarantee and Suretyship
Agreement in substantially the form of EXHIBIT 1.1(G) or in such other form as
is acceptable to the Agent in form and substance in its sole discretion, in all
cases executed and delivered by TEC to the Agent for the benefit of the Banks.
INDEBTEDNESS shall mean, as to any Person at any time, any and
all indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under (A) any standby letter of credit or bank guarantee or (B)
currency swap agreement, interest rate swap, cap, collar or floor agreement or
other interest rate management device (net of any payments made to a Borrower
under any of the foregoing interest rate management devices), (iv) any other
transaction (including forward sale or purchase agreements, capitalized leases
(but not operating leases) and conditional sales agreements) having the
commercial effect of a borrowing of money entered into by such Person to finance
its operations or capital requirements (but not including trade payables, trade
credits and accrued expenses incurred in the ordinary course of business which
are not represented by a promissory note or other evidence of indebtedness and
which are not more than sixty (60) days past due), or (v) any Guarantee of the
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Indebtedness described in the foregoing clauses (i) through (iv). For purposes
of any calculation of an aggregate amount of Indebtedness, any Guarantee of
Indebtedness shall be excluded to the extent the underlying Indebtedness to
which such Guarantee relates is included in such calculation, and vice versa.
INSOLVENCY PROCEEDING shall mean, with respect to any Person,
(a) any case, action or proceeding with respect to such Person (i) before any
court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Combined TEC Group Entity
or otherwise relating to liquidation, dissolution, winding-up or relief of such
Person, or (b) any general assignment for the benefit of creditors, composition,
marshaling of assets for creditors, or other, similar arrangement in respect of
such Person's creditors generally or any substantial portion of its creditors,
undertaken under any Law.
INTERCOMPANY LOANS shall mean loans made by one Consolidated
TEC Group Entity to one or more other Consolidated TEC Group Entities, which in
each case shall be evidenced by Intercompany Notes.
INTERCOMPANY NOTES shall mean the notes, in the form attached
hereto as Exhibit 1.1(I), executed by a Consolidated TEC Group Entity in favor
of one or more other Consolidated TEC Group Entities.
INTEREST PAYMENT DATE shall mean each date specified for the
payment of interest in Section 5.3.
INTEREST PERIOD shall mean, as applicable, an interest period
with respect to any Revolving Credit Loan subject to a Euro-Rate Option as
described in Section 4.2 or a Bid Loan Interest Period.
INTEREST RATE OPTION shall mean any Euro-Rate Option or Base
Rate Option.
INTERNAL REVENUE CODE shall mean the Internal Revenue Code of
1986, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
JOINT VENTURE shall mean any corporation, partnership, limited
liability company, joint venture, or any other entity in which TEC owns,
directly or indirectly, 50% of the Control (as such term is defined in the
definition of "Affiliate").
LABOR CONTRACTS shall mean all employment agreements,
employment contracts, collective bargaining agreements and other agreements
between TEC or any Subsidiary of TEC and its employees.
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<PAGE> 23
LAW shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
LETTER OF CREDIT shall have the meaning assigned to that term
in Section 2.9.1.
LETTER OF CREDIT/GUARANTEE OUTSTANDINGS shall mean
collectively at any time the sum of: (i) the aggregate undrawn face amount of
all Letters of Credit; (ii) the aggregate uncalled amount of all Bank
Guarantees; and, (iii) without duplication of clauses (i) or (ii), all unpaid
and outstanding Reimbursement Obligations.
LETTERS OF CREDIT FEES shall have the meaning assigned to that
term in Section 2.9.3.
LEVEL I STATUS shall mean that the Leverage Ratio is less than
1.5 to 1.0.
LEVEL II STATUS shall mean that the Leverage Ratio is greater
than or equal to 1.5 to 1.0 and less than 2.0 to 1.0.
LEVEL III STATUS shall mean that the Leverage Ratio is greater
than or equal to 2.0 to 1.0 and less than 2.5 to 1.0.
LEVEL IV STATUS shall mean that the Leverage Ratio is greater
than or equal to 2.5 to 1.0 and less than 3.0 to 1.0.
LEVEL V STATUS shall mean that the Leverage Ratio is greater
than or equal to 3.0 to 1.0 and less than 3.3 to 1.0.
LEVEL VI STATUS shall mean that the Leverage Ratio is greater
than or equal to 3.3 to 1.0.
LEVERAGE RATIO shall mean at any time of determination the
ratio of Combined Funded Indebtedness on the relevant date to the Combined
EBITDA for the relevant four fiscal quarters. For purposes of the foregoing, the
Combined EBITDA for a given four fiscal quarter period shall be calculated on an
historic PRO FORMA basis which includes (in the case of an acquisition) or
excludes (in the case of a disposition) the financial results of (x) prior to
the Closing Date, the acquisition of Gens Component Engineering Company and the
disposition of Cuno Incorporated via the Cuno Spin-Off and (y) on and after the
Closing Date, each transaction with respect to which a Transaction Notice
Certificate was required pursuant to Section 8.2.3, Section 8.2.5 or Section
8.2.6, in each case as if such transaction described in either clause (x) or (y)
of this sentence had occurred on the first day of such four quarter fiscal
period. When the Leverage Ratio is being determined in connection with the
delivery of a Transaction Notice Certificate, the numerator shall be Combined
Funded Indebtedness as of the last day of the month preceding the relevant
transaction date (adjusting to such date for any changes in the
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<PAGE> 24
amount of any Indebtedness for borrowed money under lines of credit (excluding
overdraft facilities), revolving credit facilities or term loans) and the
denominator shall be the Combined EBITDA for the four fiscal quarters ending on
the last day of the most recently ended fiscal quarter of TEC prior to such
transaction date for which financial statements have become due pursuant to
Section 8.3.1 or Section 8.3.2 (provided that for this purpose, the due date of
the annual financial statements required under Section 8.3.2 shall be deemed to
be 60 days after the end of the fiscal year). When the Leverage Ratio is being
determined for purposes of each certificate required pursuant Section 8.3.3, the
numerator shall be Combined Funded Indebtedness on the last day of the fiscal
quarter or fiscal year end to which it relates and the denominator shall be the
Combined EBITDA for the four fiscal quarters ending on the same date.
LEVERAGE RATIO STATUS shall mean any of Level I Status, Level
II Status, Level III Status, Level IV Status, Level V Status or Level VI Status.
LIEN shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LOAN DOCUMENTS shall mean this Agreement, the Master Guarantee
Agreement, the Guarantee Agreement, the Master Intercompany Subordination
Agreement, the Notes, the Intercompany Notes, and any other instruments,
certificates or documents delivered or contemplated to be delivered hereunder or
thereunder or in connection herewith or therewith, as the same may be
supplemented or amended from time to time in accordance herewith or therewith,
and LOAN DOCUMENT shall mean any of the Loan Documents.
LOAN PARTIES shall mean collectively the Borrowers and the
Guarantors and LOAN PARTY shall mean separately any one of them.
LOANS shall mean collectively the Revolving Credit Loans, the
Bid Loans and the Term Loans and LOAN shall mean separately any of the Loans.
LONDON OFFICE shall mean the Agent's London lending office at
the address shown on the signature page hereto.
MASTER GUARANTEE AGREEMENT shall mean the Master Guarantee and
Suretyship Agreement in substantially the form of EXHIBIT 1.1(M)(1) or in such
other form as is acceptable to the Agent in form and substance in its sole
discretion, in all cases executed and delivered by the Guarantors to the Agent
for the benefit of the Banks.
MASTER INTERCOMPANY SUBORDINATION AGREEMENT shall mean a
subordination agreement among the Consolidated TEC Group Entities in the form
attached hereto as EXHIBIT 1.1(M)(2).
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MATERIAL ADVERSE CHANGE shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of this Agreement
or any other Loan Document, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Combined TEC Group taken as a whole,
(c) impairs materially or could reasonably be expected to impair materially the
ability of the Combined TEC Group taken as a whole to duly and punctually pay or
perform their Indebtedness, or (d) impairs materially or could reasonably be
expected to impair materially the ability of the Agent or any of the Banks, to
the extent permitted, to enforce their legal remedies pursuant to this Agreement
or any other Loan Document.
MATERIAL DOMESTIC SUBSIDIARY shall mean any Material
Subsidiary that is not a Foreign Subsidiary.
MATERIAL SUBSIDIARY shall mean CIH and any other Subsidiary of
TEC having at least 5% of the total consolidated assets of TEC and its
Subsidiaries or at least 5% of the total consolidated revenues of TEC and its
Subsidiaries for the 12-month period ending on the last day of the most recent
fiscal quarter of TEC.
MONTH, with respect to an Interest Period or Bid Loan Interest
Period, as applicable, under the Euro-Rate Option, shall mean the interval
between the days in consecutive calendar months numerically corresponding to the
first day of such Interest Period or Bid Loan Interest Period, as applicable. If
any Euro-Rate Interest Period begins on a day of a calendar month for which
there is no numerically corresponding day in the month in which such Interest
Period or Bid Loan Interest Period, as applicable, is to end, the final month of
such Interest Period or Bid Loan Interest Period, as applicable, shall be deemed
to end on the last Business Day of such final month.
MULTIEMPLOYER PLAN shall mean any employee benefit plan which
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and
to which TEC or any member of the ERISA Group is then making or accruing an
obligation to make contributions or, within the preceding five plan years, has
made or had an obligation to make such contributions.
MULTIPLE EMPLOYER PLAN shall mean a Plan which has two or more
contributing sponsors (including TEC or any member of the ERISA Group) at least
two of whom are not under common control, as such a plan is described in
Sections 4063 and 4064 of ERISA.
NOTES shall mean collectively the Revolving Credit Notes, the
Bid Loan Notes and the Term Notes and NOTE shall mean separately any of the
Notes.
NOTICES shall have the meaning assigned to that term in
Section 11.6.
OBLIGATION shall mean any obligation or liability of any
Consolidated TEC Group Entity to the Agent or any of the Banks, howsoever
created, arising or evidenced, whether
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direct or indirect, absolute or contingent, now or hereafter existing, or due or
to become due, under or in connection with this Agreement, the Notes, the Master
Guarantee Agreement, the Guarantee Agreement, the Letters of Credit, the Bank
Guarantees or any other Loan Document.
OFFERED AMOUNT shall have the meaning assigned to such term in
Section 3.2.1.
OFFICIAL BODY shall mean any national, federal, state, local
or other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
ORIGINAL CURRENCY shall have the meaning assigned to such term
in Section 5.9.1.
OTHER CURRENCY shall have the meaning assigned to such term in
Section 5.9.1.
PARTICIPATION ADVANCE shall mean, with respect to any Bank,
such Bank's payment in respect of its participation in a Letter of Credit
borrowing or Bank Guarantee borrowing according to its Revolving Credit Ratable
Share pursuant to Section 2.9.4 or Section 2.10.3.
PBGC shall mean the Pension Benefit Guarantee Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor
thereto.
PERMITTED CASH EQUIVALENT INVESTMENTS shall mean readily
marketable:
(i) direct obligations of the United States of America or
any agency or instrumentality thereof or obligations backed by the full faith
and credit of the United States of America maturing in six (6) months or less
from the date of acquisition;
(ii) commercial paper maturing in six (6) months or less
rated not lower than "A-1" by Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc. or "P-1" by Moody's Investors Service, Inc. on
the date of acquisition;
(iii) demand deposits, time deposits or certificates of
deposit maturing within six (6) months which either (x) are held by any domestic
or foreign commercial bank which has capital and surplus in excess of
$500,000,000 or the relevant foreign currency equivalent or by a domestic
commercial bank, the holding company of which has obligations rated not lower
than "A-1" by Standard & Poor's Ratings Services, a division of The McGraw Hill
Companies, Inc. or "P-1" by Moody's Investors Service, Inc. on the date of
acquisition, (y) are deposited, held or issued, as applicable, by a financial
institution reasonably and prudently chosen by a Borrower, provided the
aggregate amount of any such deposits at any such
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institution shall not exceed $500,000 (or the relevant foreign currency
equivalent) at any one time or (z) are listed on SCHEDULE 1.1(P)(1);
(iv) repurchase obligations of any commercial bank described
in clause (iii) above with a term of not more than seven days for underlying
securities of the type described in clause (i) above; and
(v) investments in mutual funds which invest exclusively in
obligations of the type described in clauses (i) through (iv) above.
PERMITTED LIENS shall mean:
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(iv) Good-faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property or the value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(vi) Liens and security interests in favor of the Agent for
the benefit of the Banks in the application for a Letter of Credit;
(vii) Liens on property leased by any Combined TEC Group
Entity or other interest or title of the lessor under operating leases securing
obligations of such Combined TEC Group Entity to the lessor under such leases;
(viii) Any Lien or rights or restrictions with respect
thereto existing on the date of this Agreement and described on SCHEDULE
1.1(P)(2), PROVIDED that the
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principal amount secured thereby is not hereafter increased (although it may be
refinanced), and no additional assets become subject to such Lien, other than
additions or accessions to the assets which are subject to such Lien or any
replacements of any such assets acquired in the ordinary course of business;
(ix) Purchase Money Security Interests to the extent that
(X) such Purchase Money Security Interests attach to inventory purchased in the
ordinary course of business pursuant to customary payment terms and are not
perfected by the filing of financing statements or other public filings or (Y)
the aggregate amount of loans and deferred payments secured by Purchase Money
Security Interests not described in the foregoing clause (X) do not exceed at
any one time outstanding $15,000,000 (excluding for the purpose of this
computation any loans or deferred payments secured by Liens described on
SCHEDULE 1.1(P)(2)) on the date of this Agreement;
(x) Liens relating to the licensing by TEC or its
Subsidiaries of intellectual property;
(xi) The following, (A) if the validity or amount thereof is
being contested in good faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final judgment is entered and such judgment is discharged
within thirty (30) days of entry or (C) if payments thereof are covered in full
(subject to customary deductibles) by an insurance company of reputable standing
which insurance company has acknowledged that the applicable policy applies to
the following and is not reserving any right to contest applicability, and in
any case they do not in the aggregate, materially impair the ability of any
Combined TEC Group Entity to perform its Obligations hereunder or under the
other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges by the
United States, or any department, agency or instrumentality thereof, or
by any state, county, municipal or other governmental agency, including
the PBGC, due and payable and subject to interest or penalty, PROVIDED
that the applicable Combined TEC Group Entity maintains such reserves
or other appropriate provisions as shall be required by GAAP and pays
all such taxes, assessments or charges forthwith upon the commencement
of proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of title
to, real or personal property, including any attachment of personal or
real property or other legal process prior to adjudication of a dispute
on the merits;
(3) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens; and
(xii) additional Liens securing Indebtedness not to exceed
at any time an amount equal to 5% of Combined Net Worth;
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(xiii) Liens granted in favor of the Federal Republic of
Germany, the Treuhandanstalt or the State of Saxony to secure payment of the
amounts expended in connection with the transaction with such Persons described
in the definition of the term "Combined Adjusted Capital Expenditures";
(xiv) Liens in the nature of a lease entered into as part
of a sale/leaseback transaction permitted pursuant to Section 8.2.6(v);
(xv) Liens on assets of a Person which exist on the date
such Person becomes the subject of an Acquisition by any Combined TEC Group
Entity, provided that the same (A) do not attach to assets of such Person having
a value in excess of 10% of the aggregate value of all assets of such Person
acquired as part of the Acquisition, as such value is reflected on the books of
such Person as of the date of consummation of such Acquisition, (B) secure only
Indebtedness owed by such Person immediately prior to the Acquisition and (C)
were not originated in anticipation of such Acquisition; and
(xvi) Liens created in connection with the refinancing of
any Indebtedness which relates to any of the Liens described in this definition
of Permitted Liens, subject, however to the proviso set forth in clause (viii)
of this definition of Permitted Liens.
PERSON shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, limited liability company, government or political subdivision or
agency thereof, or any other entity.
PLAN shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
POTENTIAL DEFAULT shall mean any event or condition which with
notice, passage of time or a determination by the Agent or the Required Banks,
or any combination of the foregoing, would constitute an Event of Default.
POUNDS STERLING and the symbol (POUND) shall mean lawful money
of the United Kingdom.
PRINCIPAL OFFICE shall mean the main banking office of the
Agent in Pittsburgh, Pennsylvania at the address shown on the signature page
hereto.
PROHIBITED TRANSACTION shall mean any prohibited transaction
as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
for which neither an individual nor a class exemption has been issued by the
United States Department of Labor.
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PROPERTY shall mean all real property and fixtures, both owned
and leased, of a Consolidated TEC Group Entity.
PURCHASE MONEY SECURITY INTEREST shall mean any Lien upon real
or personal property to the extent the same secures no obligation other than (i)
loans to a Combined TEC Group Entity the proceeds of which were used to acquire
such property or (ii) payments owed by such Combined TEC Group Entity
constituting the balance of the purchase price for such property.
QUALIFIED INVESTMENTS shall have the meaning assigned to that
term in Section 8.2.6
QUALIFIED NOTE PLACEMENT shall mean a private or public
placement of senior unsecured notes issued by TEC after the Closing Date, having
terms acceptable to the Agent and which in the judgment of the Agent (i) is for
an aggregate amount not to exceed the lesser of (A) the sum of the Term Loans
then outstanding plus $15,000,00 or (B) $60,000,000; (ii) has an average life
longer than the then remaining unexpired term of the Revolving Credit
Commitments; and (iii) has covenants that are no more restrictive than those
under this Agreement; provided that the proceeds thereof are immediately applied
as a mandatory prepayment of the Term Loans in inverse chronological order and
that the Term Loan Commitments are permanently reduced by the amount of the
paydown and provided further that (x) if such placement of senior unsecured
notes issued by TEC is a public, and not a private, placement and (y) the Agent
for any reason does not act as Agent with respect thereto, then the provisions
of the fee letter referred to in Section 10.15 relating to such placement shall
not be applicable.
QUALIFIED SURVIVOR shall mean a Person which is the surviving
entity following any acquisition of capital stock or merger, provided such
surviving Person (i) after giving effect to such acquisition of capital stock or
merger has a net worth equal to or greater than the net worth of the entities
which were the subject of such acquisition of capital stock or merger and (ii)
assumes or continues to perform, as applicable, all Obligations under the Loan
Documents to which each was a party prior to such acquisition of capital stock
or merger.
RATABLE SHARE shall mean at any time of determination:
(i) prior to the earlier of the Expiration Date or the
termination of all of the Commitments hereunder pursuant to Section 9.2.1 or
9.2.2, the proportion that the sum of a Bank's Revolving Credit Commitment plus
its Term Loan Commitment bears to the Commitments of all of the Banks; and
(ii) thereafter, the proportion that the sum of a Bank's Loans
and Letter of Credit/Guarantee Outstandings outstanding at such time bears to
the total principal amount of all of the Loans and Letter of Credit/Guarantee
Outstandings then outstanding.
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REGULATED SUBSTANCES shall mean any substance including any
solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive material,
refuse, garbage, wastes, chemicals, petroleum products, by-products and
coproducts, impurities, dust, scrap, and heavy metals defined as a "hazardous
substance," "pollutant," "pollution," "contaminant," "hazardous or toxic
substance," "extremely hazardous substance," "toxic chemical," "toxic waste,"
"hazardous waste," "industrial waste," "residual waste," "solid waste,"
"municipal waste," "mixed waste," "infectious waste," "chemotherapeutic waste,"
"medical waste," or "regulated substance" or any related materials, substances
or wastes as now or hereafter defined pursuant to any Environmental Laws,
ordinances, rules, regulations or other directives of any Official Body, the
generation, manufacture, extraction, processing, distribution, treatment,
storage, disposal, transport, recycling, reclamation, use, reuse, spilling,
leaking, dumping, injection, pumping, leaching, emptying, discharge, escape,
release or other management or mismanagement of which is regulated by the
Environmental Laws.
REGULATION U shall mean Regulation U, T, G or X as promulgated
by the Board of Governors of the Federal Reserve System, as amended from time to
time.
REIMBURSEMENT OBLIGATION shall mean a reimbursement obligation
of TEC described in Section 2.9.4 or a reimbursement obligation of CIH described
in Section 2.10.5 and REIMBURSEMENT OBLIGATIONS shall mean more than one
Reimbursement Obligation.
REPORTABLE EVENT shall mean a reportable event described in
Section 4043 of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
REQUESTED AMOUNT shall have the meaning assigned to such term
in Section 3.1(iv).
REQUIRED BANKS shall mean at any time of determination:
(i) prior to the earlier of the Expiration Date or a
termination of all of the Commitments hereunder pursuant to Section 9.2.1 or
9.2.2, Banks, whose Commitments aggregate at least 66 2/3% of the total amount
of all Commitments at such time; and
(ii) thereafter, Banks whose Loans and Letter of
Credit/Guarantee Outstandings outstanding at such time aggregate at least
66 2/3% of the total principal amount of all of the Loans and Letter of
Credit/Guarantee Outstandings then outstanding.
Letter of Credit/Guarantee Outstandings shall be deemed, for purposes of this
definition, to be in favor of the Agent and not a participating Bank if such
Bank has not made its Participation Advance in respect thereof and shall be
deemed to be in favor of such Bank to the extent of its Participation Advance
if it has made its Participation Advance in respect thereof.
RESTRICTED SUBSIDIARY shall mean any Subsidiary consolidated
with TEC (including CIH) that is owned directly or indirectly by TEC (exclusive
of any interest owed indirectly through any Unrestricted Subsidiary) and as to
which such ownership interest is
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(i) greater than or equal to 80% or (ii) less than 80% but greater than 50%, but
only if it has been designated as a Restricted Subsidiary by a resolution by
TEC's board of directors. Any such designations shall be irrevocable.
REVOLVING CREDIT BASE RATE OPTION shall mean the option of the
Borrower to have Revolving Credit Loans bear interest at the rate and under the
terms and conditions set forth in Section 4.1.1.
REVOLVING CREDIT COMMITMENT shall mean, as to any Bank at any
time the aggregate of its TEC Revolving Credit Commitment and its CIH Revolving
Credit Commitment, as initially set forth opposite its name on Schedule 1.1(B)
in the column labeled Total Revolving Credit Commitment and thereafter on
Schedule I to the most recent Assignment and Assumption Agreement, as the same
may have been reduced in accordance with Section 2.4 and REVOLVING CREDIT
COMMITMENTS shall mean the aggregate Revolving Credit Commitments of all of the
Banks.
REVOLVING CREDIT EURO-RATE OPTION shall mean the option of a
Borrower to have its Revolving Credit Loans bear interest at the rate and under
the terms and conditions set forth in Section 4.1.1.
REVOLVING CREDIT LOAN REQUEST shall have the meaning assigned
to that term in Section 2.5.
REVOLVING CREDIT LOANS shall mean collectively the TEC
Revolving Credit Loans and the CIH Revolving Credit Loans and REVOLVING CREDIT
LOAN shall mean separately any of them.
REVOLVING CREDIT NOTES shall mean the TEC Revolving Credit
Notes and CIH Revolving Credit Notes and REVOLVING CREDIT NOTE shall mean
separately any of them.
REVOLVING CREDIT RATABLE SHARE shall mean the proportion that
a Bank's Revolving Credit Commitment bears to the Revolving Credit Commitments
of all of the Banks.
SOLVENT shall mean, with respect to any Person on a particular
date, that on such date (i) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (ii) the present fair saleable value of
the assets (including general intangibles) of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (iii) such Person is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (iv) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person is
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engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.
SUBSIDIARY of any Person at any time shall mean (i) any
corporation or trust of which more than 50% (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, any partnership of which such Person is a
general partner or any partnership or limited liability company of which such
Person is a limited partner or member, respectively, and as to which more than
50% of the partnership interests or membership interests are at the time
directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, or (ii) any corporation, trust, partnership, limited liability
company or other entity which is controlled or capable of being controlled by
such Person and/or one or more of such Person's Subsidiaries.
SYNDICATION ASSIGNMENT AND ASSUMPTION AGREEMENT shall mean a
Syndication Assignment and Assumption Agreement by and among the "Assignees" and
Mellon Bank, N.A. as the "Assignor" (each as defined therein) and the Agent,
substantially in the form of EXHIBIT 1.1(S).
SYNDICATION DATE shall mean a date after the Closing Date
selected by the Agent and notice of which is given by the Agent to the Borrowers
at least five (5) Business Days prior thereto.
TEC BID LOANS shall mean collectively, and TEC BID LOAN shall
mean separately, all of the Euro-Rate Bid Loans and Fixed Rate Bid Loans or any
individual Euro-Rate Bid Loan or Fixed Rate Bid Loan made by any of the Banks to
TEC pursuant to Section 3.1.
TEC BID LOAN NOTES shall mean collectively and TEC BID LOAN
NOTE shall mean separately all of the Bid Loan Notes of TEC in the form of
EXHIBIT 1.1(B)(2) evidencing its Bid Loans, together with all amendments,
extensions, renewals, replacements, refinancings or refundings thereof in whole
or in part.
TEC COMMITMENT shall have the meaning assigned to that term in
Section 2.3.1.
TEC REVOLVING CREDIT LOANS and TEC REVOLVING CREDIT LOAN shall
have the respective meanings assigned to those terms in Section 2.1.1.
TEC REVOLVING CREDIT NOTES shall mean collectively and TEC
REVOLVING CREDIT NOTE shall mean separately all the TEC Revolving Credit Notes
of TEC in the form attached hereto as EXHIBIT 1.1(R)(2) evidencing the TEC
Revolving Credit Loans together with
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all amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
TENDER OFFER shall mean the July, 1996 offer by United
Dominion, Inc. to TEC's shareholders to purchase any and all shares of the
common stock of TEC.
TEC REVOLVING CREDIT COMMITMENT shall mean, as to any Bank at
any time the amount initially set forth opposite its name on SCHEDULE 1.1(B) (as
amended from time to time pursuant to Section 11.11 of this Agreement) in the
column labeled "TEC Revolving Credit Commitment" as the same may have been
reduced in accordance with Section 2.4 and TEC REVOLVING CREDIT COMMITMENTS
shall mean the aggregate TEC Revolving Credit Commitments of all of the Banks.
TERM LOANS shall mean collectively and TERM LOAN shall mean
separately all Term Loans or any Term Loan made by the Banks or one of the Banks
to TEC pursuant to Section 2.11.1 hereof.
TERM LOAN BASE RATE OPTION shall mean the option of TEC to
have Term Loans bear interest at the rate and under the terms and conditions set
forth in Section 4.1.1.
TERM LOAN COMMITMENT shall mean, as to any Bank at any time,
the amount initially set forth opposite its name on SCHEDULE 1. 1(B) (as amended
from time to time pursuant to Section 11.11 of this Agreement) hereto in the
column labeled "Amount of Commitment for Term Loans,," and TERM LOAN COMMITMENTS
shall mean the aggregate Term Loan Commitments of all of the Banks.
TERM LOAN EURO-RATE OPTION shall mean the option of TEC to
have Term Loans bear interest at the rate and under the terms and conditions set
forth in Section 4.1.1.
TERM LOAN RATABLE SHARE shall mean the proportion that a
Bank's Term Loan Commitment bears to the Term Loan Commitments of all of the
Banks.
TERM NOTES shall mean collectively and TERM NOTE shall mean
separately all of the Term Notes of TEC in the form of EXHIBIT 1.1(T) hereto
evidencing the Term Loans together with all amendments, extensions, renewals,
replacements, refinancings or refunds thereof in whole or in part.
TRANSACTION NOTICE CERTIFICATE shall mean any Transaction
Notice Certificate referred to in Section 8.2.3, 8.2.5 or 8.2.6.
UK BASE RATE shall mean the base lending rate from time to
time of the Royal Bank of Scotland plc plus one percent per annum.
UK BASE RATE OPTION shall mean a fluctuating rate per annum
(computed on the basis of a year of 365 days and actual days elapsed) equal to
the UK Base Rate plus the
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Applicable Margin, such interest rate to change automatically from time to time
effective as of the effective date of each change in the UK Base Rate.
UK EURO-RATE shall mean, with respect to Loans in Pounds
Sterling comprising any Borrowing Tranche to which the Euro-Rate Option applies:
(A) for any Interest Period of one month or longer, the
aggregate (rounded upward to the nearest 1/16 of 1 percent per annum) of (i) the
rate determined by the Agent to be the rate of interest per annum quoted for
deposits for such Interest Period of an amount comparable to the principal
amount of such Borrowing Tranche in the London inter-bank market which appears
on the relevant Telerate screen at approximately 11:00 a.m. London time on the
first day of such Interest Period for delivery on the first day of such Interest
Period plus (ii) the Euro Reserve Cost Rate from time to time. If no such
quotation is available from Telerate, the average London inter-bank rate quoted
on the Reuters Monitor Money Rate Service (or appropriate successor) shall be
substituted in its place; and
(B) for any Interest Period shorter than one month, the
aggregate (rounded upward to the nearest 1/16 of 1 percent per annum) of (i) the
rate determined by the Agent to be the average of the rates of interest per
annum quoted by the Agent, prior to the Syndication Date, and thereafter, by the
Agent and Banks acting as co-agents, if any, by 2:30 p.m. London time two
Business Days prior to the first day of such Interest Period as its cost of
funds for such Interest Period in an amount comparable to the principal amount
of such Borrowing Tranche for delivery on the first day of such Interest Period
plus (ii) the Euro Reserve Cost Rate from time to time.
The Agent shall give prompt notice to the Borrowers of the UK Euro-Rate as
determined in clause (A) above, and give notice to the Borrowers by 3:00 p.m.
London time two Business Days prior to the first day of the relevant Interest
Period of the UK Euro-Rate as determined in clause (B) above. Any such
determination by the Agent shall be conclusive absent manifest error.
UK EURO-RATE OPTION shall mean a rate per annum (computed on
the basis of a year of 365 days and actual days elapsed) equal to the UK
Euro-Rate plus the Applicable Margin.
UNRESTRICTED SUBSIDIARY shall mean (i) any Subsidiary of TEC
as to which TEC's direct and indirect ownership interests are less than 80% and
greater than 50% and which was formed or acquired by TEC after the Closing Date
and not designated by a resolution of TEC's board of directors as a Restricted
Subsidiary; and (ii) all Joint Ventures in which any Consolidated TEC Group
Entity owns a 50% joint venture interest.
US BASE RATE shall mean the greater of (i) the interest rate
per annum announced from time to time by the Agent at its Principal Office as
its then prime rate, which rate may not be the lowest rate then being charged
commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus
1/2% per annum.
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US BASE RATE OPTION shall mean a fluctuating rate per annum
(computed on the basis of a year of 365 days and actual days elapsed) equal to
the US Base Rate plus the Applicable Margin, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the US Base Rate.
US EURO-RATE shall mean, with respect to Loans in Dollars
comprising any Borrowing Tranche to which the Euro-Rate Option applies for any
Interest Period, the interest rate per annum determined by the Agent by dividing
(the resulting quotient rounded upward to the nearest 1/16 of 1% per annum) (i)
the rate of interest determined by the Agent in accordance with its usual
procedures (which determination shall be conclusive absent manifest error) to be
the average of the London interbank offered rates set forth on the "LIBO" page
of the Reuters Monitor Money Rate Service (or appropriate successor) or, if
Reuters or its successor ceases to provide such quotes, a comparable replacement
determined by the Agent, at approximately 11:00 a.m. London time two (2)
Business Days prior to the first day of such Interest Period for an amount
comparable to such Borrowing Tranche and having a maturity comparable to such
Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve
Percentage. Such Euro-Rate may also be expressed by the following formula:
Average of London interbank offered rates
on LIBO page of Reuters Monitor Money
US Euro-Rate = Rate Service or appropriate successor
------------------------------------------
1.00 - Euro-Rate Reserve Percentage
The US Euro-Rate shall be adjusted with respect to any Euro-Rate Option
outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The Agent shall give prompt notice to
the Borrower of the US Euro-Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.
US EURO-RATE OPTION shall mean a rate per annum (computed on
the basis of a year of 365 days and actual days elapsed) equal to the US
Euro-Rate plus the Applicable Margin.
ULTRA shall mean Ultra Group Limited, a company organized
under the laws of Great Britain.
ULTRA ACQUISITION shall mean the acquisition by CIH of all of
the stock of Ultra, as contemplated by that certain letter of intent between
them dated September 10, 1996.
1.2 CONSTRUCTION.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
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1.2.1 NUMBER; INCLUSION.
References to the plural include the singular, the plural, the
part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 DETERMINATION.
References to "determination" of or by the Agent or the Banks
shall be deemed to include good-faith estimates by the Agent or the Banks (in
the case of quantitative determinations) and good-faith beliefs by the Agent or
the Banks (in the case of qualitative determinations) and such determination
shall be conclusive absent manifest error;
1.2.3 AGENT'S DISCRETION AND CONSENT.
Whenever the Agent or the Banks are granted the right herein
to act in its or their sole discretion or to grant or withhold consent such
right shall be exercised in good-faith;
1.2.4 DOCUMENTS TAKEN AS A WHOLE.
The words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
1.2.5 HEADINGS.
The section and other headings contained in this Agreement or
such other Loan Document and the Table of Contents (if any) preceding this
Agreement or such other Loan Document are for reference purposes only and shall
not control or affect the construction of this Agreement or such other Loan
Document or the interpretation thereof in any respect;
1.2.6 IMPLIED REFERENCES TO THIS AGREEMENT.
Article, section, subsection, clause, schedule and exhibit
references are to this Agreement or such other Loan Document, as the case may
be, unless otherwise specified;
1.2.7 PERSONS.
Reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or such other Loan Document, as the case may be, and reference to
a Person in a particular capacity excludes such Person in any other capacity;
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1.2.8 MODIFICATIONS TO DOCUMENTS.
Reference to any agreement (including this Agreement and any
other Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
1.2.9 FROM, TO AND THROUGH.
Relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.10 SHALL; WILL.
References to "shall" and "will" are intended to have the same
meaning.
1.3 ACCOUNTING PRINCIPLES.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP. In the event that on or after the date hereof, a
material change occurs in GAAP, the Banks and the Borrowers will consult in good
faith regarding whether such change in GAAP affects any financial covenants
contained herein that should be adjusted due to such change in GAAP. For
purposes of this Agreement, whenever combined financial statements or items are
required for the Combined TEC Group "in accordance with GAAP," or represented to
be such, the same shall be determined based on consolidated and consolidating
statements of the Consolidated TEC Group, making such adjustments as are
necessary as if the Unrestricted Subsidiaries were not Subsidiaries of TEC.
Income tax expense of the Consolidated TEC Group shall be allocated on a
reasonable basis acceptable to the Agent between the Combined TEC Group, on the
one hand, and all Unrestricted Subsidiaries on the other, as if reasonable tax
sharing agreements were in place between them.
2. REVOLVING CREDIT FACILITY AND TERM FACILITY
2.1 REVOLVING CREDIT COMMITMENTS.
2.1.1 TEC REVOLVING CREDIT COMMITMENTS.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, each Bank severally agrees
to make Loans to TEC in Dollars (each a "TEC Revolving Credit Loan" and
collectively, the "TEC Revolving
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Credit Loans") at any time or from time to time on or after the date hereof to
the Expiration Date in an aggregate principal amount not to exceed at any one
time such Bank's TEC Revolving Credit Commitment MINUS the sum of (i) such
Bank's TEC Revolving Credit Loans then outstanding, plus (ii) such Bank's
Revolving Credit Ratable Share of the Letter of Credit/Guarantee Outstandings to
TEC then outstanding plus (iii) the Revolving Credit Ratable Share of the then
outstanding TEC Bid Loans that would be allocable to such Bank if TEC Bid Loans
were TEC Revolving Credit Loans. Within such limits of time and amount and
subject to the other provisions of this Agreement, TEC may borrow, repay and
reborrow pursuant to this Section 2.1.1.
2.1.2 CIH REVOLVING CREDIT COMMITMENTS.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, each Bank severally agrees
to make Loans to CIH in Dollars or Pounds Sterling (each a "CIH Revolving Credit
Loan" and collectively, the "CIH Revolving Credit Loans") at any time or from
time to time on or after the date hereof to the Expiration Date in an aggregate
principal amount (taking into account the Dollar Equivalent of any Drawing in
Pounds Sterling) not to exceed at any one time such Bank's CIH Revolving Credit
Commitment MINUS the sum of (i) such Bank's CIH Revolving Credit Loans then
outstanding, plus (ii) such Bank's Revolving Credit Ratable Share of the Letter
of Credit/Guarantee Outstandings to CIH then outstanding plus (iii) the
Revolving Credit Ratable Share of the then outstanding CIH Bid Loans that would
be applicable to such Bank if CIH Bid Loans were CIH Revolving Credit Loans.
Within such limits of time and amount and subject to the other provisions of
this Agreement, CIH may borrow, repay and reborrow pursuant to this Section
2.1.2. Notwithstanding anything to the contrary in the foregoing, to the extent
that the aggregate amount of seller financing obtained in connection with the
Ultra Acquisition is not secured by Bank Guarantees, availability of CIH
Revolving Credit Loans shall be further reduced by such amount except for the
purpose of repaying such seller financing.
2.2 NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO REVOLVING CREDIT
LOANS.
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.5 in accordance with its Revolving
Credit Ratable Share. The aggregate of each Bank's TEC Revolving Credit Loans
outstanding hereunder to TEC at any time shall never exceed its TEC Revolving
Credit Commitment minus its Revolving Credit Ratable Share of the Letter of
Credit/Guarantee Outstandings to TEC, and the aggregate of all of the Banks' TEC
Revolving Credit Loans plus Letter of Credit/Guarantee Outstandings to TEC plus
TEC Bid Loans outstanding shall not exceed the TEC Revolving Credit Commitments.
The aggregate of each Bank's CIH Revolving Credit Loans outstandings hereunder
to CIH at any time (taking the Dollar Equivalent at such time of any Drawing in
Pounds Sterling) shall never exceed its CIH Revolving Credit Commitment minus
its Revolving Credit Ratable Share of the Letter of Credit/Guarantee
Outstandings to CIH, and the aggregate of all of the Banks' CIH Revolving Credit
Loans plus Letter of Credit/Guarantee Outstandings to CIH plus CIH Bid Loans
outstanding shall not exceed the CIH Revolving Credit Commitments (converting
any
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amount drawn in Pounds Sterling to the Dollar Equivalent thereof). The
obligations of each Bank hereunder are several. The failure of any Bank to
perform its obligations hereunder shall not affect the Obligations of the
Borrowers to any other party nor shall any other party be liable for the failure
of such Bank to perform its obligations hereunder. The Banks shall have no
obligation to make Revolving Credit Loans hereunder on or after the Expiration
Date.
2.3 REVOLVING CREDIT AND TERM LOAN COMMITMENT FEES.
2.3.1 TEC'S FEES.
Accruing from the Closing Date until the Expiration Date, TEC
agrees to pay to the Agent at the Applicable Lending Office in Dollars for the
account of each Bank, as consideration for such Bank's TEC Revolving Credit
Commitment and its Term Loan Commitment (together for any Bank, its "TEC
Commitment," and collectively for all the Banks the "TEC Commitments")
hereunder, a nonrefundable commitment fee (the "TEC Commitment Fee") equal to
the Applicable Margin per annum (computed on the basis of a year of 360 days and
actual days elapsed) times the average daily difference between (i) the amount
of such Bank's TEC Commitment as the same may be constituted from time to time,
and (ii) the sum of such Bank's TEC Revolving Credit Loans outstanding, plus its
Term Loans outstanding plus its then outstanding Letter of Credit/Guarantee
Outstandings excluding any Documentary Letters of Credit.
2.3.2 CIH'S FEES.
Accruing from the Closing Date until the Expiration Date, CIH
agrees to pay to the Agent at the Applicable Lending Office in Dollars for the
account of each Bank (to such account as the Agent may nominate in writing from
time to time), as consideration for such Bank's CIH Revolving Credit Commitment
(its "CIH Revolving Credit Commitment") hereunder, a nonrefundable commitment
fee (the "CIH Commitment Fee") equal to the Applicable Margin per annum
(computed on the basis of a year of 360 days and actual days elapsed) times the
average daily difference between (i) the amount of such Bank's CIH Revolving
Credit Commitment as the same may be constituted from time to time, and (ii) the
sum of such Bank's CIH Revolving Credit Loans outstanding plus its then
outstanding Letter of Credit/Guarantee Outstandings.
The TEC Commitment Fee and the CIH Commitment Fee
(collectively, the "Commitment Fees") shall be payable in arrears on the first
Business Day of each January, April, July and October and on the earlier of the
Expiration Date or acceleration of the Notes.
2.4 VOLUNTARY REDUCTION OF REVOLVING CREDIT AND TERM LOAN
COMMITMENTS.
2.4.1 GENERAL REQUIREMENTS.
TEC, with respect to the TEC Revolving Credit Commitments and
separately with respect to the Term Loan Commitments, and CIH with respect to
the CIH Revolving Credit
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Commitments, shall have the right at any time and from time to time upon not
less than three (3) Business Days' prior written notice to the Agent at the
Applicable Lending Office to permanently reduce, in a minimum amount of
$5,000,000 (or the Dollar Equivalent in the case of CIH) and in integral
multiples of $1,000,000 (or the Dollar Equivalent in the case of CIH), or
terminate their respective Commitments, both without penalty or premium, except
as hereinafter set forth, provided that any such reduction or termination shall
be accompanied by (a) the payment in full by the Borrower so reducing its
applicable Commitment of any applicable Commitment Fee then accrued on the
amount of such reduction or termination and (b) prepayment of the Revolving
Credit Notes and/or Term Notes of such Borrower in an amount equal to the amount
by which the then outstanding balance of (i) Revolving Credit Loans plus Bid
Loans plus Letter of Credit Outstandings to such Borrower exceeds the Revolving
Credit Commitments to such Borrower or (ii) the Term Notes exceeds the Term Loan
Commitments, in either case after such reduction or termination, as applicable,
together with the full amount of interest accrued on the principal sum to be
prepaid (and all amounts referred to in Section 5.6). From the effective date of
any such reduction or termination, the obligations of TEC or CIH, as the case
may be, to pay the relevant Commitment Fee pursuant to Section 2.3 shall
correspondingly be reduced or cease.
2.4.2 COLLATERAL FOR LETTER OF CREDIT/GUARANTEE OUTSTANDINGS
TO TEC.
In the case of a voluntary reduction by TEC or the termination for
any reason of the TEC Revolving Credit Commitments, TEC shall deposit in a
non-interest bearing blocked cash collateral account with the Agent (provided
that (i) with the consent of the Agent, such account shall bear interest and
(ii) the Agent shall utilize good faith efforts to grant such consent), as cash
collateral for its Obligations in respect of the Letters of Credit and related
applications and agreements, the amount, if any, by which the resulting TEC
Revolving Credit Usage exceeds the TEC Revolving Credit Commitments as so
reduced or terminated, and TEC hereby pledges to the Agent and the Banks, and
grants to the Agent and the Banks a security interest in, all such cash as
security for such Obligations. From time to time the Agent shall return to TEC
any excess of the amount held in such account over the amount by which the TEC
Revolving Credit Usage then exceeds the TEC Revolving Credit Commitments. For
the purposes of this Section 2.4.2, the phrase "TEC Revolving Credit Usage"
shall mean, at any time, the sum of the TEC Revolving Credit Loans and TEC Bid
Loans outstanding plus the Letters of Credit/Guarantee Outstandings to TEC.
2.4.3 COLLATERAL FOR BANK GUARANTEE OUTSTANDINGS.
In the case of a voluntary reduction by CIH or the termination, for
any reason, of the CIH Revolving Credit Commitments, CIH shall deposit in a
non-interest bearing blocked cash collateral account with the Agent (provided
that (i) with the consent of the Agent, such account shall bear interest and
(ii) the Agent shall utilize good faith efforts to grant such consent) or as the
Agent may direct, as cash collateral for its Obligations in respect of the Bank
Guarantees and related applications and agreements, the amount, if any, by which
the resulting CIH Revolving Credit Usage exceeds the CIH Revolving Credit
Commitments as so reduced or
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terminated, and CIH hereby pledges to the Agent and the Banks, and grants to the
Agent and the Banks a security interest in, all such cash as security for such
Obligations and agrees to grant to the Agent such further security over such
cash as it may require from time to time. From time to time the Agent shall
return to CIH any excess of the amount held in such account over the amount by
which the CIH Revolving Credit Usage then exceeds the CIH Revolving Credit
Commitments. For the purposes of this Section 2.4.3, the phrase "CIH Revolving
Credit Usage" shall mean, at any time, the sum of the CIH Revolving Credit Loans
and CIH Bid Loans outstanding plus the Letters of Credit/Guarantee Outstandings
to CIH.
2.5 REVOLVING CREDIT LOAN REQUESTS.
Except as otherwise provided herein, TEC may from time to time prior
to the Expiration Date request the Banks to make Revolving Credit Loans to it,
or renew or convert the Interest Rate Option applicable to its existing
Revolving Credit Loans pursuant to Section 4.1.1, by delivering to the Agent, at
its Principal Office, not later than 12:00 p.m., Pittsburgh, Pennsylvania time,
(i) three (3) Business Days prior to the proposed Borrowing Date with respect to
the making of TEC Revolving Credit Loans to which the Revolving Credit Euro-Rate
Option applies or the conversion to or the renewal of the Revolving Credit
Euro-Rate Option for any Revolving Credit Loans; and (ii) not later than 12:00
p.m., Pittsburgh, Pennsylvania time on the proposed Borrowing Date with respect
to the making of a Revolving Credit Loan to which the Revolving Credit Base Rate
Option applies or the last day of the preceding Interest Period with respect to
the conversion to the Revolving Credit Base Rate Option for any Revolving Credit
Loan, of a duly completed request therefor substantially in the form of EXHIBIT
2.5(A) or a request by telephone immediately confirmed in writing by letter,
facsimile or telex in such form (each, a "Revolving Credit Loan Request"), it
being understood that the Agent may rely on the authority of any individual
making such a telephonic request without the necessity of receipt of such
written confirmation. Each Loan Request shall be irrevocable and shall specify
the following information and such other information as is set forth on EXHIBIT
2.5(A): (i) the proposed Borrowing Date; (ii) the aggregate amount of the
proposed Revolving Credit Loans comprising each Borrowing Tranche, which shall
be in integral multiples of $1,000,000 and not less than $5,000,000 for each
Borrowing Tranche to which the Revolving Credit Euro-Rate Option applies and not
less than the lesser of $1,000,000 (or the Dollar Equivalent) or the maximum
amount available for Borrowing Tranches to which the Revolving Credit Base Rate
Option applies; (iii) whether the Revolving Credit Euro-Rate Option or Revolving
Credit Base Rate Option shall apply to the proposed Revolving Credit Loans
comprising the applicable Borrowing Tranche; and (iv) in the case of a Borrowing
Tranche to which the Revolving Credit Euro-Rate Option applies, an appropriate
Interest Period for the proposed Revolving Credit Loans comprising such
Borrowing Tranche. CIH shall be entitled to make Drawings of the CIH Revolving
Credit Loan or renew or convert the Interest Rate Option applicable to its then
existing Revolving Credit Loans pursuant to Section 4.1.1 as set out above in
relation to TEC but substituting, as applicable, the Agent's London Office,
11:00 a.m. London time, Exhibit 2.5(B), a requirement that requests for
Borrowing Tranches to which the Revolving Credit Base Rate Option is to apply
shall be received one (1) Business Day prior to the proposed Borrowing Date
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or conversion date, as applicable, and minimum Borrowing Tranches of
(pound)1,000,000 and integral multiples of (pound)500,000 in excess thereof.
2.6 MAKING REVOLVING CREDIT LOANS.
The Agent shall, promptly after receipt by it of a Loan Request
pursuant to Section 2.5, notify the Banks of its receipt of the related Loan
Request specifying: (i) the proposed Borrower and Borrowing Date of such
Revolving Credit Loans; (ii) the amount and type of each such Revolving Credit
Loan and the applicable Interest Period (if any); and (iii) the apportionment
among the Banks of such Revolving Credit Loans as determined by the Agent in
accordance with Section 2.2. In addition, after the applicable interest rate is
determined, the Agent will promptly notify the Banks and each of the Borrowers
of the interest rate. After the Syndication Date, if the Loan Request is for a
CIH Revolving Credit Loan subject to the UK Euro-Rate Option for an Interest
Period of less than one Month, each co-agnet shall notify the Agent of its cost
of funds quote by the required time as contemplated in clause (B) of the
definition of UK Euro-Rate. Each Bank shall remit the principal amount of each
Revolving Credit Loan to the Agent (to such account as the Agent may nominate in
writing from time to time) such that the Agent is able to, and the Agent shall,
to the extent the Banks have made funds available to it for such purpose, fund
such Revolving Credit Loans to the requesting Borrower in Dollars or (as
applicable) Pounds Sterling at the Applicable Lending Office prior to (as
applicable) 2:00 p.m. Pittsburgh time or 1:00 p.m. London time in immediately
available funds on the applicable Borrowing Date, PROVIDED that if the Agent
assumes pursuant to Section 10.16 that a Bank will make available to the Agent
such Bank's portion of a Revolving Credit Loan and such Bank fails to remit such
funds to the Agent in a timely manner, the Agent may elect in its sole
discretion to fund with its own funds the Revolving Credit Loans of such Bank on
such Borrowing Date, and such Bank shall be subject to the repayment obligation
in Section 10.16.
2.7 REVOLVING CREDIT NOTES.
The Obligation of a Borrower to repay the aggregate unpaid principal
amount of the Revolving Credit Loans made to it by each Bank, together with
interest thereon, shall be evidenced by an appropriate Revolving Credit Note in
the form of EXHIBIT 1.1(R)(1) OR (2) payable to the order of such Bank in a face
amount equal to the Revolving Credit Commitment of such Bank to such Borrower.
2.8 USE OF REVOLVING CREDIT PROCEEDS.
The proceeds of the TEC Revolving Credit Loans shall be used for
general corporate purposes. The proceeds of the CIH Revolving Credit Loans shall
be used as follows: (i) to finance the acquisition by CIH of Ultra in an amount
not to exceed the lesser of $44,000,000 or the Dollar Equivalent of
(pound)26,000,000, in either case, minus the amount of financing of the purchase
price provided by the seller (the "Seller Loan"); (ii) if a Seller Loan is
obtained, to repay the Seller Loan; and (iii) the balance (not to exceed
$10,000,000 or its Dollar Equivalent), if any, for general corporate purposes.
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2.9 LETTERS OF CREDIT SUBFACILITY FOR TEC.
2.9.1 ISSUANCE OF LETTERS OF CREDIT FOR TEC'S ACCOUNT.
TEC may request the issuance of (or modification of any
issued) letters of credit (each a "Letter of Credit" and in the aggregate the
"Letters of Credit") on behalf of itself for its general corporate purposes by
delivering no later than 12:00 p.m., Pittsburgh, Pennsylvania time three (3)
Business Days prior to the requested date of issuance of such Letter of Credit
to the Agent a written notice specifying the proposed beneficiary, date of
issuance and expiry date for such Letter of Credit or modification to an
existing Letter of Credit and the nature of the transactions to be supported
thereby. Subject to the terms and conditions hereof and to the execution of a
completed application and continuing agreement for letters of credit in the form
attached hereto as EXHIBIT 2.9.1 or such other form as the Agent may specify
from time to time and in reliance on the agreements of the Banks set forth in
this Section 2.9, the Agent will issue a Letter of Credit provided that each
Letter of Credit shall (A) have a maximum maturity of 365 days from and
including the date of issuance, (B) in no event expire later than five Business
Days prior to the Expiration Date and provided further that in no event shall
(i) the Letter of Credit/Guarantee Outstandings to TEC exceed, at any one time,
$20,000,000 or (ii) the sum of the TEC Revolving Credit Loans plus TEC Bid Loans
plus Letter of Credit/Guarantee Outstandings to TEC then outstanding exceed, at
any one time, the TEC Revolving Credit Commitments. In the event of any conflict
between the terms of this Agreement and the terms of the forms of application
and agreement for letters of credit, the terms of this Agreement shall control
(provided that terms of the Agent's form of application and continuing agreement
for letters of credit which are in addition to those contained herein and which
do not expressly conflict with the terms contained herein shall not be deemed to
be in conflict with this Agreement), provided, however, that notwithstanding the
foregoing, the provisions of the application and agreement for letters of
credit, to the extent the same pertain to remedies, shall govern and control.
Notwithstanding the minimum draw requirements for Revolving Credit Loans, any
standby Letter of Credit may be requested for an amount greater than or equal to
$250,000 and any Documentary Letter of Credit may be requested for an amount
greater than or equal to $50,000.
2.9.2 PARTICIPATIONS.
Immediately upon issuance of each Letter of Credit, and
without further action, each Bank shall be deemed to, and hereby agrees that it
shall have irrevocably purchased for such Bank's own account and risk from the
Agent an individual participation interest in such Letter of Credit and drawings
thereunder in an amount equal to such Bank's Revolving Credit Ratable Share of
the maximum amount which is or at any time may become available to be drawn
thereunder, and each Bank shall be responsible to reimburse the Agent
immediately for its Revolving Credit Ratable Share of any disbursement under any
Letter of Credit which has not been reimbursed by TEC in accordance with Section
2.9.4 by making its Revolving Credit Ratable Share of the Revolving Credit Loans
referred to in Section 2.9.4 available to the Agent. Upon the request of any
Bank and upon the issuance and the termination of each Letter of
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Credit, the Agent shall notify each Bank of the amount of such Bank's
participation in Letters of Credit.
2.9.3 LETTER OF CREDIT FEES.
TEC shall pay to the Agent for the ratable account of the
Banks as provided in Section 5.2.1 fees ("Letters of Credit Fees") with respect
to Letter of Credit/Guarantee Outstandings to TEC in respect of Letters of
Credit in an amount equal to such Letter of Credit/Guarantee Outstandings to TEC
multiplied by a rate per annum (computed on the basis of a year of 360 days and
actual days elapsed) as specified in the definition of Applicable Margin
separately for standby Letters of Credit and for Documentary Letters of Credit,
for the applicable period specified in such definition, payable quarterly in
arrears on the first Business Day of each January, April, July and October
following the Closing Date and on the earlier of the Expiration Date or the
acceleration of the Notes. Such rates (per annum) of the foregoing Letters of
Credit Fees shall change on the effective date of any change in the Applicable
Margin.
TEC shall also pay to the Agent for its sole account (i) a
fronting fee equal to one-eighth of one percent (0.125%) per annum of the
aggregate undrawn face amount of each Letter of Credit payable quarterly in
arrears, and (ii) its then in effect customary issuance fees and administrative
expense payable with respect to its Letters of Credit as the Agent may generally
charge or incur from time to time in connection with the issuance, maintenance,
modification (if any), assignment or transfer (if any), negotiation, and
administration of letters of credit, payable at such times as the Agent may
specify.
2.9.4 DISBURSEMENTS; REIMBURSEMENT.
TEC shall be obligated immediately to reimburse the Agent for
all amounts which the Agent is required to pay pursuant to the Letters of Credit
issued by the Agent on or before the date on which the Agent is required to make
payment with respect to a draft presented thereunder. The Agent will promptly
notify TEC of each demand or presentment for payment or draft accepted for
payment or other drawing under each Letter of Credit issued by the Agent. The
Agent shall promptly notify each Bank of the amount required to be paid by such
Bank as a result of a drawing upon such Letter of Credit if TEC has not timely
reimbursed the Agent for such draw. If such notice is received by a Bank before
1:00 p.m., Pittsburgh, Pennsylvania time, such Bank shall deliver such Bank's
Revolving Credit Ratable Share of such payment in immediately available funds to
the Agent on that Business Day. If such notice is received by a Bank after 1:00
p.m., Pittsburgh, Pennsylvania time, such Bank shall before 10:00 a.m.,
Pittsburgh, Pennsylvania time, on the next succeeding Business Day, deliver to
the Agent such Bank's Ratable Share of such payment as a TEC Revolving Credit
Loan from such Bank in immediately available funds.
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2.9.5 DOCUMENTATION.
TEC agrees to be bound by the terms of the Agent's application
and agreement for letters of credit and the Agent's written regulations and
customary practices relating to letters of credit, though such interpretation
may be different from TEC's own. In the event of a conflict between such
application or agreement and this Agreement, this Agreement shall govern
(provided that terms of the Agent's application and agreement for letters of
credit which are in addition to those contained herein and which do not
expressly conflict with the terms contained herein shall be deemed not to be in
conflict with this Agreement). It is understood and agreed that, except in the
case of gross negligence or willful misconduct, the Agent shall not be liable
for any error, negligence and/or mistakes, whether of omission or commission, in
following TEC's instructions or those contained in the Letters of Credit issued
by the Agent or any modifications, amendments or supplements thereto.
2.9.6 DETERMINATIONS TO HONOR DRAWING REQUESTS.
In determining whether to honor any request for drawing under
any Letter of Credit by the beneficiary thereof, the Agent shall be responsible
only to determine that the documents and certificates required to be delivered
under such Letter of Credit have been delivered and that they appear to comply
on their face with the requirements of such Letter of Credit.
2.9.7 NATURE OF PARTICIPATION AND REIMBURSEMENT OBLIGATIONS.
The obligation of the Banks to participate in Letters of
Credit pursuant to Section 2.9.2 and the obligation of the Banks pursuant to
Section 2.9.4 to fund TEC Revolving Credit Loans upon a draw under a Letter of
Credit or to make Participation Advances in Letters of Credit and the
Obligations of TEC to reimburse the Agent upon a draw under any Letter of Credit
pursuant to Section 2.9 shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of such sections under
all circumstances, including the following circumstances:
(i) the failure of any Borrower or any other
Person to comply with the conditions set
forth in this Agreement for the making of a
TEC Revolving Credit Loan, it being
acknowledged that such conditions are not
required for the making of a TEC Revolving
Credit Loan under Section 2.9.4;
(ii) any lack of validity or enforceability of
any Letter of Credit;
(iii) the existence of any claim, set-off, defense
or other right which the Agent, any Bank or
any other Person may have at any time
against a beneficiary or any transferee of
any
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<PAGE> 47
Letter of Credit (or any Persons for whom
any such transferee may be acting), the
Agent, any Bank or any other Person or
whether in connection with this Agreement,
the transactions contemplated herein or any
unrelated transaction (including any
underlying transaction between any
Consolidated TEC Group Entity and the
beneficiary for which any Letter of Credit
was procured);
(iv) any draft, demand, certificate or other
document presented under any Letter of
Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or
any statement therein being untrue or
inaccurate in any respect even if the Agent
has been notified thereof;
(v) payment by the Agent under any Letter of
Credit against presentation of a demand,
draft or certificate or other document which
does not comply with the terms of such
Letter of Credit;
(vi) any adverse change in the business,
operations, properties, assets, condition
(financial or otherwise) or prospects of any
Consolidated TEC Group Entity;
(vii) any breach of this Agreement or any other
Loan Document by any party thereto;
(viii) any other circumstance or happening
whatsoever, whether or not similar to any of
the foregoing;
(ix) the fact that an Event of Default or a
Potential Default shall have occurred and be
continuing; and
(x) the fact that the Expiration Date shall have
passed or this Agreement or the TEC
Revolving Credit Commitments hereunder shall
have been terminated.
2.9.8 INDEMNITY.
In addition to amounts payable as provided in Section 10.5,
TEC hereby agrees to pay and to protect, indemnify and save harmless the Agent
and the Banks from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable fees,
expenses and disbursements of counsel and/or allocated costs of internal
counsel) which any of them may incur or be subject to as a consequence, direct
or indirect, of (i) the issuance of any Letter of Credit, other than as a result
of (A) the gross negligence or willful misconduct of the Agent with respect to
the Letters of Credit as determined
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by a final judgment of a court of competent jurisdiction or (B) subject to the
following clause (ii), the wrongful dishonor by the Agent of a proper demand for
payment made under any Letter of Credit or (ii) the failure of the Agent to
honor a drawing under any such Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or omissions herein
called "Governmental Acts").
2.9.9 LIABILITY FOR ACTS AND OMISSIONS.
As between any Borrower and the Agent, such Borrower assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit by,
the respective beneficiaries of the Letters of Credit. In furtherance and not in
limitation of the foregoing, neither the Agent nor any Bank shall be responsible
for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for
issuance of any Letter of Credit issued by the Agent, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged (even if the Agent shall have been notified thereof); (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of the Agent, including any Governmental Acts, and none of the above
shall affect or impair, or prevent the vesting of, any of the Agent's rights or
powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth above, any action taken or omitted by the Agent
under or in connection with the Letters of Credit issued by it or any documents
and certificates delivered thereunder, if taken or omitted in good faith, shall
not put the Agent under any resulting liability to TEC or any Banks.
No Bank or Consolidated TEC Group Entity may commence a
proceeding against the Agent for wrongful disbursement under a Letter of Credit
issued by the Agent as a result of acts or omissions constituting gross
negligence or willful misconduct of the Agent, until the Banks have made and the
Borrowers have repaid the Revolving Credit Loans described in Section 2.9.4;
provided, however, that nothing in this Section 2.9.9 shall adversely affect the
right of TEC, after such payment, to commence any proceeding against the Agent
for any breach of its obligations hereunder.
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<PAGE> 49
2.10 BANK GUARANTEE SUBFACILITY FOR CIH.
2.10.1 ISSUANCE OF BANK GUARANTEES ON BEHALF OF CIH.
CIH may request the Agent's London Office to issue one or more
Bank Guarantees (each a "Bank Guarantee" and collectively, the "Bank
Guarantees") in favor of nominated beneficiaries to guarantee CIH's liability
for deferred purchase consideration arising out of the closing of the Ultra
Acquisition or for other corporate purposes by delivering to the Agent at its
London Office by no later than 12:00 p.m., London time at least three Business
Days before the requested date of issuance of the relevant Bank Guarantee a
written notice (a "Request") in substantially the form of EXHIBIT 2.10.1
specifying the proposed beneficiary, date of issuance, the expiry date of the
Bank Guarantee, the nature of the transactions to be supported thereby and
whether or not the guaranteed liability is to be in Dollars or Pounds Sterling.
Subject to the terms and conditions of this Agreement and provided that at the
time of the delivery of the relevant Request and upon the proposed date of
issuance (a) the representations and warranties set out in Section 6 of this
Agreement are true and correct on and as of each such time as if each were made
with reference to the facts and circumstances existing at such time, and (b) no
Event of Default or Potential Default shall have occurred and be continuing or
would result from the issuance of the relevant Bank Guarantee, the Agent's
London Lending Office will issue the relevant Bank Guarantee.
2.10.2 RESTRICTIONS ON BANK GUARANTEES.
Each Bank Guarantee shall (A) expire no later than 365 days
from and including its date of issuance; and (B) not expire later than five (5)
Business Days prior to the Expiration Date. In any event, Bank Guarantee
Outstandings (i) shall not exceed at any one time the sum of the Bank Guarantees
issued in connection with the consummation of the Ultra Acquisition, plus the
equivalent in Pounds Sterling of $2,000,000 (measured at the time of incurrence)
with respect to Bank Guarantees not used in connection with the Ultra
Acquisition and (ii) the sum of the Bank Guarantee Outstandings, CIH Revolving
Credit Loans and CIH Bid Loans then outstanding shall not, at any one time,
exceed the CIH Revolving Credit Commitments.
2.10.3 PARTICIPATIONS.
Immediately upon the issuance of any Bank Guarantee, and
without further action, each Bank shall be deemed to, and hereby agrees that it
shall, have irrevocably purchased for such Bank's Revolving Credit own account
and risk from the Agent an individual participation interest in such Bank
Guarantee in an amount equal to such Bank's Revolving Credit Ratable Share of
the maximum amount of the Agent's liability under such Bank Guarantee, and each
Bank shall reimburse the Agent immediately for its Revolving Credit Ratable
Share of any payment by the Agent of its liability under any Bank Guarantee
which has not been reimbursed by CIH in accordance with Section 2.10.5.
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<PAGE> 50
Upon the request of any Bank and no less frequently than once
in each calendar month, the Agent shall notify each Bank of the amount of such
Bank's participation in Bank Guarantees.
2.10.4 BANK GUARANTEE FEES.
CIH shall pay to the Agent in Dollars into such account as the
Agent may nominate in writing from time to time for the ratable account of the
Banks fees ("Bank Guarantee Fee") with respect to Bank Guarantee Outstandings in
an amount equal to such Bank Guarantee Outstandings multiplied by a rate per
annum (computed on the basis of a year of 365 days and actual days elapsed) as
specified in the definition of Applicable Margin for Bank Guarantees, for the
applicable period specified in such definition, payable quarterly in arrears on
the first Business Day of each of January, April, July and October following the
Closing Date and on the earlier of the Expiration Date or the date upon which
any demand is made for the repayment of the Loans. Such rates (per annum) of the
Bank Guarantee Fees shall change on the effective date of any change in the
Applicable Margin.
CIH shall also pay to the Agent in the same manner and
currency as it shall pay the Bank Guarantee Fee for its sole account (i) a
fronting fee equal to 0.125% per annum of the aggregate guarantee liability of
the Agent under each Bank Guarantee issued, payable quarterly in arrears, and
(ii) all administrative and other costs and expenses incurred by the Agent in
connection with the issuance, maintenance, modification, assignment, transfer,
negotiation and administration of any Bank Guarantee, payable upon request from
the Agent.
2.10.5 COUNTER-INDEMNITIES.
CIH unconditionally and irrevocably agrees and undertakes to
the Agent and each of the Banks that:
(A) it will pay the Agent, on demand and in the currency in
which such amount shall have been demanded, made, suffered or
incurred, an amount equal to all payments made, suffered or
incurred by it (whether by direct payment or by way of
set-off, counterclaim or otherwise) under or in respect of any
Bank Guarantee; and
(B) it will at all times reimburse and indemnify the Agent and
each of the Banks and keep each of them indemnified, as
primary obligor and not merely as surety, and notwithstanding
the insufficiency, illegality or unenforceability of any Bank
Guarantee, from and against all actions, proceedings, claims,
liabilities, damages, losses, costs, charges and expenses
(including reasonable legal fees and disbursements, whether of
internal or external counsel) whatsoever in relation to or
arising out of each Bank Guarantee and/or its participation
therein, including without limitation any amount paid by any
Bank under Section 2.10.6, other than
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<PAGE> 51
as a result of the gross negligence or willful misconduct of
the Agent (as determined by a final judgment of a court of
competent jurisdiction).
CIH and each of the Banks hereby irrevocably authorizes the
Agent to comply with the terms of and make any payment in accordance with any
demand made or appearing or purporting to be made on the Agent pursuant to any
Bank Guarantee without any reference to, or further authority from, and despite
any objection by, CIH or any Bank and without any inquiry by the Agent into the
justification for or validity of such demand. CIH agrees that any payment which
the Agent shall make in accordance or purporting to be in accordance with such a
demand shall be binding on CIH and the Banks and be accepted by them as
conclusive and binding evidence that the Agent was liable to comply with the
terms of such demand, in the manner and the amount demanded.
The obligations and liability of CIH under this Section 2.10.5
shall not be affected or impaired by (a) any waiver or time or indulgence
granted to or by the Agent; (b) any release or dealings with any rights or
security of the Agent; (c) any invalidity of any Bank Guarantee; (d) any
variation or extension of any Bank Guarantee provided that such variation or
extension shall have been approved by CIH and the Agent respectively; or (e) any
other circumstances which might but for this provision affect or impair, or
exonerate or discharge CIH from, such obligations or liability.
The indemnity contained in this Section shall constitute and
be a continuing security to the Agent and each of the Banks and shall be in
addition to, and shall not prejudice or be prejudiced by, any other security,
guarantee, indemnity, lien or other right of the Agent or any Bank.
CIH will forthwith inform the Agent of all facts or
circumstances of which it is or becomes aware which may result in any claim or
demand being made on the Agent under any Bank Guarantee.
Neither CIH nor any Bank may make any claim or commence a
proceeding against the Agent for wrongful payment under a Bank Guarantee arising
from the Agent's gross negligence or willful misconduct unless and until the
relevant Bank or Banks or CIH (as applicable) has made all such payments to the
Agent as are required pursuant to this Section 2.10.5 or Section 2.10.6.
2.10.6 CLAIMS UNDER BANK GUARANTEES.
If any claim or demand is made under a Bank Guarantee being or
purporting to be in accordance with its terms, the Agent shall promptly notify
CIH and each Bank, specifying:
(A) the Bank Guarantee in respect of which the claim or demand
has been made;
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<PAGE> 52
(B) the date on which payment is to be made; and
(C) the aggregate amount and currency of the claim or demand
and each Bank's participation in such amount.
If CIH fails to pay any amount to the Agent on demand under
Section 2.10.5, the Agent shall promptly notify each of the Banks. Each of the
Banks shall, if so notified under this paragraph, pay in accordance with Section
2.10.5 and by way of indemnity to the Agent for the Agent's account, not later
than 12:00 noon, London time on the due date for payment under the relevant Bank
Guarantee in immediately available funds, its Revolving Credit Ratable Share of
the amount which CIH has so failed to pay.
2.11 TERM FACILITY.
2.11.1 TERM LOAN COMMITMENTS.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, each Bank severally agrees
to make a term loan (the "Term Loan") to TEC on the Closing Date in an amount
equal to such Bank's Term Loan Commitment.
2.11.2 NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO TERM
LOANS.
The obligations of each Bank to make a Term Loan to TEC shall
be in the proportion that such Bank's Term Loan Commitment bears to the Term
Loan Commitments of all Banks to TEC, but each Bank's Term Loan to TEC shall
never exceed its Term Loan Commitment. The failure of any Bank to make a Term
Loan shall not relieve any other Bank of its obligations to make a Term Loan nor
shall it impose any additional liability on any other Bank hereunder. The Banks
shall have no obligation to make Term Loans hereunder after the Closing Date.
The Term Loan Commitments are not revolving credit commitments and TEC shall not
have the right to borrow, repay and reborrow under Section 2.11.1.
2.11.3 TERM LOAN NOTES.
The obligation of TEC to repay the unpaid principal amount of
the Term Loan made to it by each Bank, together with interest thereon, shall be
evidenced by a promissory note of TEC dated the Closing Date in substantially
the form attached hereto as EXHIBIT 1.1(T) payable to the order of each Bank in
a face amount equal to the Term Loan Commitment of such Bank. The outstanding
principal amount of the Term Notes shall be payable in the following
installments:
<TABLE>
<CAPTION>
Installment Installment
Due Date Amount
-------- ------
<S> <C>
1/31/98 $ 5,125,000
</TABLE>
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<PAGE> 53
<TABLE>
<CAPTION>
Installment Installment
Due Date Amount
-------- ------
<S> <C>
4/30/98 $ 5,125,000
7/31/98 $ 5,125,000
10/31/98 $ 5,125,000
1/31/99 $7,500,000
4/30/99 $ 7,500,000
7/31/99 $ 7,500,000
10/31/99 $ 8,500,000
1/31/00 $ 8,500,000
-----------
$60,000,000
</TABLE>
2.11.4 USE OF TERM LOAN PROCEEDS.
The proceeds of the Term Loans will be used by TEC to
refinance existing indebtedness owed by it to Mellon Bank, N.A. and for other
general corporate purposes.
3. COMPETITIVE BID FACILITY
3.1 BID LOAN REQUESTS.
Except as otherwise provided herein, each Borrower may from time to
time prior to the Expiration Date request that in lieu of Revolving Credit Loans
the Banks make Euro-Rate Bid Loans or Fixed Rate Bid Loans by delivering to the
Agent at its Applicable Lending Office not later than 11:00 A.M. Pittsburgh or
London time, as the case may be, one Business Day prior to the proposed
Borrowing Date if it is a Fixed Rate Bid Loan and 11:00 A.M. Pittsburgh or
London time, as the case may be, four (4) Business Days prior to the proposed
Borrowing Date if it is a Euro-Rate Bid Loan of a duly completed request
therefor substantially in the form of EXHIBIT 3.1 or a request by telephone
immediately confirmed in writing by letter, facsimile or telex (each, a "Bid
Loan Request"), it being understood that the Agent may rely on the authority of
any individual making such a telephonic request without the necessity of receipt
of such written confirmation. Each Bid Loan Request shall be irrevocable and
shall specify the following:
(i) the proposed Borrowing Date,
(ii) whether the Borrower desires that such Bid Loan bear
interest at (A) a fixed rate per annum (which shall be expressed as a percentage
rate per annum in the form of a decimal to no more than four places and computed
on a year of 365 or 366 days) specified by the Bank making such Bid Loan in its
Bid (a "Fixed Rate Bid Loan") or (B) the applicable Euro-Rate plus or minus a
margin (the "Margin") (which shall be expressed as a percentage rate per annum
in the form of a decimal to no more than four decimal places and based on a year
of 360 days, in
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<PAGE> 54
the case of TEC Bid Loans, or a year of 365 days in the case of CIH Bid Loans)
as specified by the Bank making such Bid Loan in its Bid (a "Euro-Rate Bid
Loan");
(iii) the term of the proposed Bid Loan (the "Bid Loan
Interest Period"), which may be (A) no less than seven (7) days and no longer
than ninety (90) days in the case of a Fixed Rate Bid Loan, or (B) one, two or
three Months in the case of a Euro-Rate Bid Loan; and in all cases, such term
may not extend beyond the Expiration Date; and
(iv) the maximum principal amount (the "Requested Amount") of
such Bid Loan, which shall be (i) not less than $5,000,000 and shall be an
integral multiple of $1,000,000, in the case of TEC Bid Loans, and (ii) not less
than (pound)1,000,000 and shall be an integral multiple of (pound)500,000 in the
case of CIH Bid Loans.
After giving effect to any such TEC Bid Loan and any TEC Revolving Credit Loans
made to TEC on or before the Borrowing Date for such TEC Bid Loan, (i) the
aggregate amount of the TEC Bid Loans of all Banks outstanding shall not exceed
$25,000,000, (ii) the aggregate amount of the TEC Bid Loans of any one Bank
outstanding shall not exceed $25,000,000, and (iii) the aggregate amount of all
TEC Revolving Credit Loans, TEC Bid Loans and Letter of Credit/Guarantee
Outstandings to TEC then outstanding shall not exceed the aggregate amount of
the TEC Revolving Credit Commitments.
After giving effect to any such CIH Bid Loan and any CIH Revolving Credit Loans
made to CIH on or before the Borrowing Date for such CIH Bid Loan, (i) the
aggregate amount of the CIH Bid Loans of all Banks outstanding shall not exceed
$5,000,000 or its Dollar Equivalent, (ii) the aggregate amount of the CIH Bid
Loans of any one Bank outstanding shall not exceed $5,000,000 or its Dollar
Equivalent, and (iii) the aggregate amount of all CIH Revolving Credit Loans,
CIH Bid Loans and Letter of Credit/Guarantee Outstandings to CIH shall not
exceed the aggregate amount of the CIH Revolving Credit Commitments.
3.2 BIDDING FOR, ACCEPTING AND MAKING BID LOANS.
3.2.1 BIDDING.
The Agent shall promptly after receipt by it of a Bid Loan
Request pursuant to Section 3.1 notify the Banks of its receipt of such Bid Loan
Request, specifying (i) the proposed Borrower and Borrowing Date, (ii) the Bid
Loan Interest Period, (iii) the principal amount of the proposed Bid Loan and
(iv) whether such Bid Loan is to be a Euro-Rate Bid Loan or a Fixed Rate Bid
Loan. Each Bank may submit a bid (a "Bid") to the Agent at the Applicable
Lending Office by telephone (immediately confirmed in writing in the form of
EXHIBIT 3.2 by letter, facsimile or telex) not later than 10:00 A.M. Pittsburgh
time or London time (as applicable) on the proposed Borrowing Date specified in
the Bid Loan Request in the case of a Fixed Rate Bid Loan and 10:00 A.M.
Pittsburgh or London time (as applicable) three (3) Business Days before the
proposed Borrowing Date in the case of a Euro-Rate Bid Loan. Each Bid shall
specify: (A) the principal amount of proposed Bid Loans offered by such Bank
(the "Offered Amount"), which (i) may be less than, but shall not exceed, the
Requested Amount,
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<PAGE> 55
(ii) shall be at least $2,000,000 (or the Dollar Equivalent) and shall be an
integral multiple of $500,000 (or the Dollar Equivalent) if it is a Euro-Rate
Bid Loan or an integral multiple or $500,000 if it is a Fixed Rate Bid Loan, and
(iii) may exceed such Bank's Commitment, and (B) the interest rate in the case
of a Fixed Rate Bid Loan or the Margin in the case of a Euro-Rate Bid Loan
applicable to such proposed Bid Loan offered by such Bank. If any Bid omits
information required hereunder, the Agent may in its sole discretion attempt to
notify the Bank submitting such Bid. If the Agent so notifies a Bank, such Bank
may resubmit its Bid, provided that it does so prior to 10:00 A.M. Pittsburgh
time or London time (as applicable) on the Borrowing Date in the case of a Fixed
Rate Bid Loan or 10:00 A.M. Pittsburgh or London time (as applicable) three (3)
Business Days before the Borrowing Date in the case of a Euro-Rate Bid Loan. The
Agent shall promptly notify the Borrower of each Bid provided that the Agent has
received such Bid on or before 10:00 A.M. Pittsburgh time or London time (as
applicable) on the Borrowing Date in the case of a Fixed Rate Bid Loan or 10:00
A.M. Pittsburgh or London time (as applicable) three (3) Business Days before
the Borrowing Date in the case of a Euro-Rate Bid Loan. If the Agent in its
capacity as a Bank shall, in its sole discretion, make a Bid, it shall notify
the Borrower of such Bid before 9:30 A.M. Pittsburgh time or London time (as
applicable) on the Borrowing Date in the case of a Fixed Rate Bid Loan or 9:30
A.M. Pittsburgh or London time (as applicable) three (3) Business Days before
the Borrowing Date in the case of a Euro-Rate Bid Loan.
3.2.2 ACCEPTING BIDS.
The requesting Borrower shall, in its sole discretion,
irrevocably accept or reject any one or all of the Bids and shall notify the
Agent at the Applicable Lending Office of its acceptance or rejection by
telephone (immediately confirmed in writing by letter, facsimile or telex). If
the Borrower elects to accept any Bids, its acceptance must meet the following
conditions: (1) such acceptance must be received by Agent by 11:30 A.M.
Pittsburgh time or London time (as applicable) on the Borrowing Date if the
Borrower is accepting a Bid for a Fixed Rate Bid Loan and by 11:30 A.M.
Pittsburgh or London time (as applicable) three (3) Business Days before the
Borrowing Date if the Borrower is accepting a Bid for a Euro-Rate Bid Loan; (2)
the total amount which the Borrower accepts from all Banks must equal or exceed
$1,000,000 and be in an integral multiple of $500,000 (or in each case as
applicable, the Dollar Equivalent) if it is a Euro-Rate Bid Loan or an integral
multiple of $500,000 if it is a Fixed Rate Bid Loan and in either instance may
not exceed the Requested Amount; (3) the Borrower must accept Bids based solely
on the amount of the interest rates of each Bid in ascending order of the amount
of such interest rates; (4) the Borrower may not borrow Bid Loans from any Bank
on the relevant Borrowing Date in an amount exceeding such Bank's Offered
Amount; (5) if two or more Banks make Bids at the same interest rate and the
Borrower desires to accept a portion but not all of the Bids at such interest
rate, the Borrower shall accept a portion of each such Bid equal to the product
of the Offered Amount of each such Bid times the fraction obtained by dividing
the total amount of Bids which the Borrower is accepting at such interest rate
by the sum of the Offered Amounts of the Bids at such rate; PROVIDED that the
Borrower shall round the Bid Loan allocated to each such Bank upward or downward
as the Borrower may select to an integral multiple of $500,000 (or the Dollar
Equivalent). The Agent shall (i) promptly notify a
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<PAGE> 56
Bank that has made a Bid of the amount of its Bid that was accepted or rejected
by the Borrower and (ii) as promptly as practical notify all of the Banks of all
Bids submitted and those which have been accepted.
3.2.3 FUNDING BID LOANS.
Each Bank whose Bid or portion thereof is accepted shall remit
the principal amount of its Bid Loan to the Agent at its Applicable Lending
Office by 1:00 P.M. Pittsburgh time or 12:00 P.M. London time (as applicable) on
the Borrowing Date. The Agent shall make such funds available to the Borrower on
or before 2:00 P.M. on the Borrowing Date provided that the conditions precedent
to the making of such Bid Loan set forth in Section 7.3 have been satisfied not
later than 10:00 A.M. Pittsburgh time or London time (as applicable) on the
proposed Borrowing Date. The Agent may assume that the applicable Borrower has
satisfied such conditions precedent if such Borrower has not notified the Agent
that such Borrower has not satisfied any conditions precedent.
3.2.4 SEVERAL OBLIGATIONS.
The obligations of the Banks to make Bid Loans after their
Bids have been accepted are several. No Bank shall be responsible for the
failure of any other Bank to make any Bid Loan which another Bank has agreed to
make.
3.2.5 BID LOAN INTEREST PERIODS.
If any Bid Loan Interest Period for a Euro-Rate Bid Loan
Option is scheduled to end on a date which is not a Business Day, such Bid Loan
Interest Period shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such Bid Loan
Interest Period shall end on the next preceding Business Day.
3.3 BID LOAN NOTES.
The obligation of each Borrower to repay the aggregate unpaid principal
amount of the Bid Loans made to it by each Bank, together with interest thereon,
shall be evidenced by a Bid Loan Note dated as of the Closing Date payable to
the order of such Bank in a face amount equal to the aggregate Revolving Credit
Commitments of all of the Banks to such Borrower.
4. INTEREST RATES
4.1 INTEREST.
Each Borrower shall pay interest in respect of the outstanding unpaid
principal amount of such Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrowers may select
different Interest Rate Options and different Interest
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<PAGE> 57
Periods to apply simultaneously to the Loans comprising different Borrowing
Tranches and may convert to or renew one or more Interest Rate Options with
respect to all or any portion of the Revolving Credit Loans or Term Loans
comprising any Borrowing Tranche by delivering to the Agent at the applicable
Lending Office a duly completed Loan Request by the time described in Section
2.5 for conversion or renewal of such Interest Rate Option for a Revolving
Credit, PROVIDED that there shall not be at any one time outstanding (i) more
than twelve (12) Borrowing Tranches in the aggregate for all the Loans to TEC or
(ii)more than four (4) Borrowing Tranches in the aggregate for all the Loans to
CIH. If at any time the designated rate applicable to any Loan made by any Bank
exceeds such Bank's highest lawful rate, the rate of interest on such Bank's
Loan shall be limited to such Bank's highest lawful rate.
4.1.1 INTEREST RATE OPTIONS.
(i) The TEC Revolving Credit Loans and the Term Loans shall
accrue interest at the US Base Rate Option or at the US Euro-Rate Option as
selected by TEC in accordance with the provisions of this Agreement; and
(ii) The CIH Revolving Credit Loans shall accrue interest at
the UK Base Rate Option or the UK Euro-Rate Option as selected by CIH in
accordance with the provisions of this Agreement.
4.2 REVOLVING CREDIT LOAN INTEREST PERIODS.
The Interest Period specified in a Loan Request during which a Euro
Rate Option shall apply shall be one, two, three or six Months and as additional
periods, with respect to CIH Revolving Credit Loans only, one, two, or three
weeks; PROVIDED that prior to the Business Day following the Syndication Date,
no Interest Period may be longer than one month, and provided FURTHER, that:
4.2.1 ENDING DATE AND BUSINESS DAY.
Any such Interest Period which would otherwise end on a date
which is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day;
4.2.2 AMOUNT OF BORROWING TRANCHE.
Each Borrowing Tranche of a Loan to which the Euro-Rate Option
applies shall be in integral multiples of (i) $1,000,000 and not less than
$5,000,000, with respect to TEC and (ii) (pound)500,000 and not less than
(pound)1,000,000, with respect to CIH;
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4.2.3 TERMINATION BEFORE EXPIRATION DATE.
The Borrowers shall not select, convert to or renew an
Interest Period for any portion of the Loans that would end after the Expiration
Date; and
4.2.4 RENEWALS.
In the case of the renewal of a Euro-Rate Option at the end of
an Interest Period, the first day of the new Interest Period shall be the last
day of the preceding Interest Period, without duplication in payment of interest
for such day.
4.3 INTEREST AFTER DEFAULT.
To the extent permitted by Law, upon the occurrence of an Event of
Default and until such time such Event of Default shall have been cured or
waived:
4.3.1 LETTERS OF CREDIT FEES, BANK GUARANTEE FEES, INTEREST
RATE.
The Letters of Credit Fees, the Bank Guarantee Fees and the
rate of interest for each Loan otherwise applicable pursuant to Section 2.9.3,
2.10.4 or Section 4.1, respectively, shall be increased by 2.0% per annum;
4.3.2 OTHER OBLIGATIONS.
Each other Obligation hereunder if not paid when due shall
bear interest at a rate per annum equal to the sum of the rate of interest
applicable under the US Base Rate Option plus an additional 2.0% per annum from
the time such Obligation becomes due and payable and until it is paid in full;
and
4.3.3 ACKNOWLEDGMENT.
The Borrowers acknowledge that the increased rates referred to
in this Section 4.3 reflect, among other things, the fact that the Loans or
other amounts have become a substantially greater risk given their default
status and that the Banks are entitled to additional compensation for such risk.
All such interest payable by a Borrower shall be paid by it upon demand by the
Agent.
4.4 EURO-RATE UNASCERTAINABLE.
4.4.1 UNASCERTAINABLE.
If on any date on which a Euro-Rate would otherwise be
determined, the Agent shall have determined that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
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(ii) a contingency has occurred which materially and
adversely affects the London interbank market
relating to the Euro-Rate,
then the Agent shall have the rights specified in Section 4.4.3.
4.4.2 ILLEGALITY; INCREASED COSTS; DEPOSITS NOT AVAILABLE.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan to
which a Euro-Rate Option applies has been made
impracticable or unlawful by compliance by such
Bank in good faith with any Law or any
interpretation or application thereof by any
Official Body or with any request or directive of
any Official Body (whether or not having the force
of Law), or
(ii) such Euro-Rate Option will not adequately and
fairly reflect the cost to such Bank of the
establishment or maintenance of any such Loan, or
(iii) in relation to any Drawing made in US Dollars and
after making all reasonable efforts, deposits of
the relevant amount in Dollars for the relevant
Interest Period for a Loan to which a Euro-Rate
Option applies, are not available to such Bank
with respect to such Loan in the London interbank
market,
then, subject to the provisions of Section 11.5.3, such Bank shall have the
rights specified in Section 4.4.3.
4.4.3 AGENT'S AND BANK'S RIGHTS.
In the case of any event specified in Section 4.4.1, the Agent
shall promptly so notify the Banks and the Borrowers thereof, and in the case of
a determination specified in Section 4.4.2, such Bank shall promptly so notify
the Agent and endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send copies of such
notice and certificate to the other Banks and the Borrowers. Upon such date as
shall be specified in such notice (which shall not be earlier than the date such
notice is given) the obligation of (A) the Banks, in the case of such notice
given by the Agent in respect of Section 4.4.1, or (B) such Bank, in the case of
such notice given by such Bank in respect of Section 4.4.2, to allow the
applicable Borrower to select, convert to or renew a Euro-Rate Option shall be
suspended until the Agent shall have later notified the applicable Borrower, or
such Bank shall have later notified the Agent, of the Agent's or such Bank's, as
the case may be, determination that the circumstances giving rise to such
previous determination no longer exist.
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If at any time the Agent makes a determination under Section 4.4.1 and either
Borrower has previously notified the Agent of its selection of, conversion to or
renewal of a Euro-Rate Option and such Interest Rate Option has not yet gone
into effect, such notification shall be deemed to provide for selection of,
conversion to or renewal of the Base Rate Option otherwise available with
respect to the affected Loans. If any Bank notifies the Agent of a determination
under Section 4.4.2, the applicable Borrower shall, subject to such Borrower's
indemnification Obligations under Section 5.6.2, as to any Loan of such Bank to
which a Euro-Rate Option applies, on the date specified in such notice convert
such Loan to the Base Rate Option otherwise available with respect to such Loan.
Absent due notice from the applicable Borrower of conversion, such Loan shall
automatically be converted to the Base Rate Option otherwise available with
respect to such Loan upon such specified date. Upon any such conversion, the
applicable Borrower shall have the right to prepay Loans in the amount of such
Loan on the date of such conversion without providing the notice otherwise
required by Section 5.4.1. If an event occurs that makes the applicable
Euro-Rate Option no longer available to a Borrower, such Borrower, the Agent and
the Banks shall negotiate in good faith to provide a replacement Interest Rate
Option for the affected Euro-Rate Option that is mutually satisfactory.
4.5 SELECTION OF INTEREST RATE OPTIONS.
If a Borrower fails (i) to select a new Interest Period to apply to any
Borrowing Tranche to which a Euro-Rate Option applies at the expiration of an
existing Interest Period applicable to such Borrowing Tranche in accordance with
the provisions of Section 4.2, or (ii) to select the Base Rate Option otherwise
available with respect to such Loan, TEC shall be deemed to have converted such
Borrowing Tranche to such Base Rate Option commencing upon the last day of such
Interest Period and CIH shall be deemed to have converted such Borrowing Tranche
to the UK Euro Rate Option for a one month Interest Period.
5. PAYMENTS
5.1 PAYMENTS.
All payments and prepayments to be made in respect of principal,
interest, Commitment Fees, Letters of Credit Fees, the Agent's Fee, or other
amounts due from the Borrowers hereunder (other than the fees and expenses
referenced in Section 2.9.3 and 2.10.4 which are to be paid to the Agent as
provided in such Sections and the fees and expenses referenced in Section 10.15,
each of which shall be paid in accordance with such Sections) shall be payable
prior to (i) 11:00 a.m., London time, with respect to payments to be made at the
London Office or (ii) 12:00 p.m., Pittsburgh, Pennsylvania time, with respect to
all payments to be made at the Principal Office, on the date when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by such Borrower, and without set-off, counterclaim or other
deduction of any nature, and an action therefor shall immediately accrue to the
extent of any non-payment thereof. Payments of principal and interest on Loans
and of Commitment Fees, Letters of Credit Fees and Bank Guarantee Fees shall be
made to the Agent at the Applicable Lending Office (or as the Agent may direct
in writing from time to time)
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for the ratable accounts of the Banks in Dollars or (as applicable) Pounds
Sterling and in immediately available funds, and the Agent shall promptly
distribute such amounts to the Banks in immediately available funds; provided
that in the event payments are received by (x) 11:00 a.m., London time, with
respect to payments to be made at the London Office or (y) 12:00 p.m.
Pittsburgh, Pennsylvania time, with respect to all payments to be made at the
Principal Office, in the Applicable Lending Office by the Agent (or as the Agent
may have directed) with respect to the Loans and such payments are not
distributed to the Banks on the same day received by the Agent, the Agent shall
pay the Banks the Federal Funds Effective Rate with respect to the amount of
such payments for each day held by the Agent and not distributed to the Banks.
The Agent's and each Bank's statement of account, ledger or other relevant
record shall, in the absence of manifest error, be conclusive as the statement
of the amount of principal of and interest on the Loans and other amounts owing
under this Agreement and shall be deemed an "account stated."
5.2 PRO RATA TREATMENT OF BANKS.
5.2.1 REVOLVING CREDIT LOANS.
Each borrowing of a Revolving Credit Loan shall be allocated
to each Bank according to its Revolving Credit Ratable Share, and each selection
of, conversion to or renewal of any Interest Rate Option and each payment or
prepayment by a Borrower with respect to principal, interest, Commitment Fees
related to the Revolving Credit Loans, Letters of Credit Fees, Bank Guarantee
Fees, or other fees (except for the Agent's Fee, and any fees to the Agent with
respect to the issuance, administration or payments under Letters of Credit or
Bank Guarantees) or amounts due from a Borrower hereunder to the Banks with
respect to Revolving Credit Loans to it, shall (except as provided in Section
4.4.2 [Illegality, Increased Costs; Deposits not Available], 5.4 [Voluntary
Prepayments] or 5.6 [Additional Compensation in Certain Circumstances]) be made
in proportion to the applicable Revolving Credit Loans to both Borrowers
outstanding from each Bank and, if no such Revolving Credit Loans are then
outstanding, in proportion to the Revolving Credit Ratable Share of each Bank.
5.2.2 TERM LOANS.
Each selection of, conversion to or renewal of any Interest
Rate Option and each payment or prepayment by TEC with respect to principal,
interest, Commitment Fees related to the Term Loans, or amounts due from TEC
hereunder to the Banks with respect to Term Loans to it, shall (except as
provided in Section 4.4.2 [Illegality, Increased Costs; Deposits not Available],
5.4 [Voluntary Prepayments] or 5.6 [Additional Compensation in Certain
Circumstances]) be made in proportion to the applicable Term Loans outstanding
from each Bank.
5.3 INTEREST PAYMENT DATES.
Interest on Loans to which a Base Rate Option applies shall be due and
payable in arrears on the first Business Day of each January, April, July and
October after the date hereof
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and (i) on the Expiration Date in the case of Revolving Credit Loans, or (ii) in
the case of Term Loans, at maturity date thereof, and in either case, upon
acceleration of the Notes. Interest on Loans to which a Euro-Rate Option applies
and on Euro-Rate Bid Loans shall be due and payable on the last day of each
Interest Period for those Loans and, if any such Interest Period is longer than
three Months, also on the last day of every third Month during such Interest
Period. Interest on Fixed Rate Bid Loans shall be due and payable in arrears on
the first Business Day of each January, April, July and October and at the
maturity thereof. Without limitation on Section 5.4.1, interest on mandatory
prepayments of principal under Section 5.5 shall be due on the date such
mandatory prepayment is due. Interest on the principal amount of each Loan or
other monetary Obligation shall be due and payable on demand after such
principal amount or other monetary Obligation becomes due and payable (whether
on the stated maturity date, upon acceleration or otherwise).
5.4 VOLUNTARY PREPAYMENTS.
5.4.1 RIGHT TO PREPAY.
Each Borrower shall have the right at its option from time to
time to prepay its respective portion of the Loans in whole or part without
premium or penalty (except as provided in Section 5.6):
(i) at any time with respect to any Loan to which the
Base Rate Option applies,
(ii) on the last day of the applicable (A) Interest
Period with respect to Loans (other than Loans
described in subclause (B) hereof)to which a
Euro-Rate Option applies or (B) Bid Loan Interest
Period with respect to Bid Loans to which a
Euro-Rate Option or a Bid Loan Fixed Rate Option
applies, and
(iii) on the date specified in a notice by any Bank
pursuant to Section 4.4 [Euro-Rate
Unascertainable], with respect to any Loan to
which a Euro-Rate Option applies.
Whenever a Borrower desires to prepay any part of the Loans,
it shall provide a prepayment notice to the Agent not later than 10:00 a.m.,
Pittsburgh or London time (as applicable) in the Applicable Lending Office on
the Business Day prior to the date of prepayment of Loans setting forth the
following information (provided no notice from the applicable Borrower is
required pursuant to subsection (iii) above):
(w) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
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(x) a statement indicating the application of the prepayment
to the Revolving Credit Loans, Bid Loans and/or Term Loans;
(y) the total principal amount of such prepayment, which shall
not be less than $1,000,000 (or the Dollar Equivalent) or integral
multiples thereof; and
(z) if applicable, that such prepayment is intended as an
early payment of Excess Consideration (as defined in Section 8.2.6)
to be credited against any mandatory prepayment that may become due
with respect thereto pursuant to Sections 8.2.6 and 5.5.1.
All prepayment notices shall be irrevocable. The principal
amount of the Loans for which a prepayment notice is given, together with
interest on such principal amount shall be due and payable on the date specified
in such prepayment notice as the date on which the proposed prepayment is to be
made. If a Borrower prepays a Loan pursuant to this Section but fails to specify
the applicable Borrowing Tranche which such Borrower is prepaying, the
prepayment shall be applied first to Loans to which the Base Rate Option
applies, then to Loans to which the Bid Loan Fixed Rate Option applies, then to
Loans to which the Euro-Rate Option applies. If TEC prepays a Loan pursuant to
this Section but fails to specify whether the TEC Bid Loans, Term Loans or TEC
Revolving Credit Loans are being prepaid, unless the prepayment notice contains
the information in clause (z) above, the prepayment shall be applied first to
TEC Revolving Credit Loans, then to TEC Bid Loans and then to the Term Loans.
All prepayments, other than mandatory prepayments pursuant to Section 5.5.1 and
Section 8.2.6, applied to the Term Loans shall be applied to the then remaining
installments due in the order of maturity thereof. If such prepayment notice
contains the information in clause (z) above, then, whether or not TEC has
specified the application of such prepayment, such prepayment shall be applied
to Term Loans in the manner set forth in Section 5.5.1. Upon any voluntary
prepayment of Term Loans pursuant to this Section 5.4, the Term Loan Commitments
shall be automatically and permanently reduced in an amount equal to the amount
of the prepayment of the Term Loans. Any prepayment hereunder shall be subject
to the Borrower's Obligation to indemnify the Banks under Section 5.6.2.
5.5 MANDATORY REDUCTION OF COMMITMENTS; MANDATORY PAYMENTS AND
PREPAYMENTS.
5.5.1 SALE OF ASSETS.
Within five (5) Business Days after the end of any fiscal year
of TEC in which insufficient Qualified Investments were made so as to require a
prepayment pursuant to Section 8.2.6, TEC shall make a mandatory prepayment of
principal on the Term Loans (together with accrued interest on such principal
amount) equal to the lesser of (i) the amount of the prepayment so required or
(ii) the amount of the outstanding Term Loans, provided, however, that no such
prepayment shall be required (x) if and to the extent that TEC shall have made a
prepayment of the type described in clause (z) of Section 5.4 or (y) with
respect to the disposition described in clause (iv) of Section 8.2.6, the time
described in the final sentence of such Section
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8.2.6. All proceeds received for prepayment of Term Loans pursuant to this
Section 5.5.1 or pursuant to clause (z) of Section 5.4 shall be applied to the
payment PRO RATA of each of the then remaining scheduled installments of
principal. Further, all proceeds received for prepayment of Loans pursuant to
this Section 5.5.1 shall be first applied to Loans to which the US Base Rate
Option applies, then to Loans to which the US Euro-Rate Option applies. Upon
each mandatory prepayment of Term Loans pursuant to this Section 5.5.1, the Term
Loan Commitments automatically shall be permanently and irrevocably reduced by
an amount equal to such prepayment.
5.5.2 TERMINATION OF ULTRA ACQUISITION.
If the Ultra Acquisition does not close on or before January
31, 1997, or if prior to such date CIH's obligations to proceed to close the
Ultra Acquisition are terminated, then upon the earlier to occur of such events
the CIH Revolving Credit Commitments shall be automatically terminated.
5.5.3 QUALIFIED NOTE PLACEMENT.
If TEC issues notes pursuant to a Qualified Note Placement,
simultaneously with the closing thereof, the proceeds of such issuance shall be
applied and the Term Loan Commitments shall be reduced in the same manner as set
forth in Section 5.5.1.
5.5.4 MANDATORY PREPAYMENTS RESULTING FROM CURRENCY EXCHANGE.
If on the last day of an Interest Period or a Bid Loan
Interest Period or the last day of any fiscal quarter of TEC the Dollar
Equivalents of the outstanding CIH Revolving Credit Loans (including any Bank
Guarantee Outstandings) and CIH Bid Loans exceeds the CIH Revolving Credit
Commitments, then CIH shall immediately, without demand or notice, make a
mandatory pre-payment of CIH Revolving Credit Loans and CIH Bid Loans in an
amount sufficient to reduce the outstanding balance of the CIH Revolving Credit
Loans, CIH Bid Loans and Bank Guarantee Outstandings to an amount less than or
equal to the CIH Revolving Credit Commitments.
5.6 ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES.
5.6.1 INCREASED COSTS OR REDUCED RETURN RESULTING FROM TAXES,
RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC.
If any Law, guideline or interpretation or any change in any
Law, guideline or interpretation or application thereof by any Official Body
charged with the interpretation or administration thereof or compliance with any
request or directive (whether or not having the force of Law) of any central
bank or other Official Body:
(i) subjects any Bank to any tax or changes the basis
of taxation with respect to this Agreement, the
Notes, the
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Loans or payments by the Borrowers of principal,
interest, Commitment Fees, or other amounts due
from the Borrowers hereunder or under the Notes
(except for taxes on the overall net income of
such Bank),
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against
credits or commitments to extend credit extended
by, or assets (funded or contingent) of, deposits
with or for the account of, or other acquisitions
of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A)
against assets (funded or contingent) of, or
letters of credit, bank guarantees, other credits
or commitments to extend credit extended by, any
Bank, or (B) otherwise applicable to the
obligations of any Bank under this Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on any
Bank's capital, taking into consideration such Bank's customary policies with
respect to capital adequacy) by an amount which such Bank in its sole discretion
deems to be material, such Bank shall from time to time notify the applicable
Borrower and the Agent of the amount determined in good faith (using any
averaging and attribution methods employed in good faith, which shall be binding
upon the parties absent manifest error) by such Bank to be necessary to
compensate such Bank for such increase in cost, reduction of income or
additional expense or reduced rates of return. Such notice shall set forth in
reasonable detail the basis for such determination. Such amount shall be due and
payable by the applicable Borrower to such Bank ten (10) Business Days after
such notice is given, subject, however, to the provisions of Section 11.5.3.
5.6.2 INDEMNITY.
In addition to the compensation required by Section 5.6.1, the
Borrowers shall indemnify each Bank against all liabilities, losses or expenses
(including loss of margin, any loss or expense incurred in liquidating or
employing deposits from third parties and any loss or expense incurred in
connection with funds acquired by a Bank to fund or maintain Loans subject to a
Euro-Rate Option or a Bid Loan Fixed Rate Option) which such Bank sustains or
incurs as a consequence of any
(i) payment, prepayment, conversion or renewal of any
Loan to which a Euro-Rate Option or a Bid Loan
Fixed Rate Option applies on a day other than the
last day of the corresponding Interest Period or
Bid Loan Interest Period,
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as applicable (whether or not such payment or
prepayment is mandatory, voluntary or automatic
and whether or not such payment or prepayment is
then due),
(ii) attempt by either Borrower to revoke (expressly,
by later inconsistent notices or otherwise) in
whole or part any Loan Requests under Section 2.5
or any notice relating to prepayments under
Section 5.4, or
(iii) default by either Borrower in the performance or
observance of any covenant or condition contained
in this Agreement or any other Loan Document,
including any failure of either Borrower to pay
when due (by acceleration or otherwise) any
principal, interest, Commitment Fee or any other
amount due hereunder.
If any Bank sustains or incurs any such loss or expense, it shall from
time to time notify the applicable Borrower of the amount determined in good
faith by such Bank (which determination may include such assumptions,
allocations of costs and expenses and averaging or attribution methods as such
Bank shall deem reasonable and shall be binding on the parties absent manifest
error) to be necessary to indemnify such Bank for such loss or expense. Such
notice shall set forth in reasonable detail the basis for such determination.
Such amount shall be due and payable by the applicable Borrower to such Bank ten
(10) Business Days after such notice is given.
5.7 INTERBANK MARKET PRESUMPTION.
For all purposes of this Agreement and each Note with respect to any
aspects of the Euro-Rate, any Loan under the Euro-Rate Option or any Optional
Currency, each Bank and Agent shall be presumed to have obtained rates, funding,
currencies, deposits, and the like in the applicable interbank market regardless
whether it did so or not; and, each Bank's and Agent's determination of amounts
payable under, and actions required or authorized by, Sections 4.4 and 5.6 shall
be calculated, at each Bank's and Agent's option, as though each Bank and Agent
funded its share of each Borrowing Tranche of Loans under the Euro-Rate Option
through the purchase of deposits of the types and maturities corresponding to
the deposits used as a reference in accordance with the terms hereof in
determining the Euro-Rate applicable to such Loans, whether in fact that is the
case.
5.8 TAXES.
5.8.1 NO DEDUCTIONS.
All payments made by each Borrower hereunder and under each
Note shall be made free and clear of and without deduction for any present or
future taxes, levies, imposts, deductions, charges, or withholdings, and all
liabilities with respect thereto, excluding taxes
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imposed on the net income of any Bank and all income and franchise taxes
applicable to any Bank of the United States or the United Kingdom (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings, and
liabilities being hereinafter referred to as "TAXES"). If either Borrower shall
be required by Law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) each Bank receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the applicable Borrower
shall timely pay the full amount deducted to the relevant tax authority or other
authority in accordance with applicable Law.
5.8.2 STAMP TAXES.
In addition, each Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges, or
similar levies which arise from any payment made hereunder or from the
execution, delivery, or registration of, or otherwise with respect to, this
Agreement or any Note (hereinafter referred to as "Other Taxes").
5.8.3 INDEMNIFICATION FOR TAXES PAID BY A BANK.
Each Borrower shall indemnify each Bank for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section) paid by any
Bank and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30 days
from the date a Bank makes written demand therefor.
5.8.4 CERTIFICATE.
Within 30 days after the date of any payment of any Taxes by
either Borrower, such Borrower shall furnish to each Bank, at its address
referred to herein, the original or a certified copy of a receipt evidencing
payment thereof. If no Taxes are payable in respect of any payment by either
Borrower, such Borrower shall, if so requested by a Bank, provide a certificate
of an officer of such Borrower to that effect.
5.8.5 SURVIVAL.
Without prejudice to the survival of any other agreement of
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in Sections 5.8.1 through 5.8.4 shall survive the payment in full of principal
and interest hereunder and under any instrument delivered hereunder.
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5.9 JUDGMENT CURRENCY AND OTHER CURRENCY CONVERSIONS.
5.9.1 CURRENCY CONVERSION PROCEDURES.
If for the purposes of obtaining judgment in any court or
calculating any fee payable under this Agreement it is necessary to convert a
sum due hereunder or under a Note or any other sum in any currency (the
"Original Currency") into another currency (the "Other Currency"), the parties
hereby agree, to the fullest extent permitted by Law, that the rate of exchange
used shall be that at which in accordance with normal banking procedures each
Bank or (as applicable) the Agent (in its capacity as Agent) could purchase the
Original Currency with the Other Currency after any premium and costs of
exchange on the Business Day preceding that on which final judgment is given or
any fee is to be paid.
5.9.2 INDEMNITY IN CERTAIN EVENTS.
The obligation of the Borrowers in respect of any sum due from
them to any Bank hereunder shall, notwithstanding any judgment in an Other
Currency, whether pursuant to a judgment or otherwise, be discharged only to the
extent that, on the Business Day following receipt by any Bank of any sum
adjudged to be so due in such Other Currency, such Bank may in accordance with
normal banking procedures purchase the Original Currency with such Other
Currency. If the amount of the Original Currency so purchased is less than the
sum originally due to such Bank in the Original Currency, the applicable
Borrower agrees, as a separate obligation and notwithstanding any such judgment
or payment, to indemnify such Bank against such loss.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES.
TEC, as to all matters below, and CIH, as to matters relating to it and
its Subsidiaries, represent and warrant to the Agent and each of the Banks as
follows:
6.1.1 ORGANIZATION AND QUALIFICATION.
Each Consolidated TEC Group Entity is a corporation or
partnership, duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each Consolidated TEC Group Entity has
the lawful power to own or lease its properties and to engage in the business it
presently conducts or proposes to conduct. Each Consolidated TEC Group Entity is
listed on SCHEDULE 6.1.1 and is duly licensed or qualified and in good standing
in each jurisdiction where the property owned or leased by it or the nature of
the business transacted by it or both makes such licensing or qualification
necessary (except where the failure to be so licensed or qualified would not
constitute a Material Adverse Change), and upon request of the Agent, TEC will
promptly furnish a written list of every jurisdiction where each Consolidated
TEC Group Entity is so qualified.
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6.1.2 SUBSIDIARY AND JOINT VENTURE MATTERS.
SCHEDULE 6.1.2 (i) sets forth the authorized, issued and
outstanding capital stock of or ownership interest in each Subsidiary and each
Joint Venture and the record owner of such capital stock or other ownership
interest, as the case may be, and (ii) identifies each Subsidiary as a
Restricted Subsidiary or an Unrestricted Subsidiary. Other than as set forth on
SCHEDULE 6.1.2, each of TEC's Subsidiaries is directly or indirectly wholly
owned by TEC and all of the issued and outstanding shares of capital stock of
each such Subsidiary (referred to herein as the "Subsidiary Shares") are owned
free and clear in each case of any Lien and each Joint Venture interest is owned
by a Consolidated TEC Group Entity free and clear of any Lien. All Subsidiary
Shares have been validly issued, and all Subsidiary Shares are fully paid and,
except as otherwise set forth on such SCHEDULE 6.1.2, nonassessable. There are
no options, warrants or other rights outstanding to purchase any Subsidiary
Shares except as indicated on SCHEDULE 6.1.2.
6.1.3 POWER AND AUTHORITY.
Each Loan Party has full power to enter into, execute, deliver
and carry out this Agreement and the other Loan Documents to which it is a
party, to incur the Indebtedness contemplated by the Loan Documents and to
perform its Obligations under the Loan Documents to which it is a party, and all
such actions have been duly authorized by all necessary proceedings on its part.
6.1.4 VALIDITY AND BINDING EFFECT.
This Agreement has been duly and validly executed and
delivered by each Borrower and each other Loan Document which any Loan Party is
required to execute and deliver on or after the date hereof will have been duly
executed and delivered by such Loan Party on the required date of delivery of
such Loan Document. This Agreement and each other Loan Document constitutes, or
will constitute, legal, valid and binding obligations of each Loan Party which
is or will be a party thereto on and after its date of delivery thereof,
enforceable against such Loan Party in accordance with its terms, except to the
extent that enforceability of any such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
6.1.5 NO CONFLICT.
Neither the execution and delivery of this Agreement or the
other Loan Documents by any Loan Party nor the consummation of the transactions
herein or therein contemplated or compliance with the terms and provisions
hereof or thereof by any of them (i) will conflict with, constitute a default
under or result in any breach of (A) the terms and conditions of the certificate
of incorporation, bylaws or other organizational documents of any Consolidated
TEC Group Entity which is a party thereto or (B) any Law or any agreement or
instrument or order, writ, judgment, injunction or decree to which any such
Consolidated TEC Group Entity is a party, is bound by or is subject, which
conflict, default or breach reasonably
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would be expected to result in a Material Adverse Change, or (ii) will result in
the creation or enforcement of any Lien whatsoever upon any property (now or
hereafter acquired) of any Consolidated TEC Group Entity (other than Liens
granted under the Loan Documents).
6.1.6 LITIGATION.
Except as set forth on SCHEDULE 6.1.6, there are no actions,
suits, proceedings or investigations pending or, to the knowledge of any
Consolidated TEC Group Entity, threatened against it at law or equity before any
Official Body which individually or in the aggregate may result in any Material
Adverse Change. No Consolidated TEC Group Entity is in violation of any order,
writ, injunction or any decree of any Official Body which reasonably would be
expected to result in any Material Adverse Change.
6.1.7 TITLE TO PROPERTIES.
Each Consolidated TEC Group Entity has good and marketable
title to or a valid leasehold interest in all material properties, assets and
other rights which it purports to own or lease or which are reflected as owned
or leased on its books and records, free and clear of all Liens except Permitted
Liens, and subject to the terms and conditions of the applicable leases. All
material leases of property are in full force and effect without the necessity
for any consent which has not previously been obtained upon consummation of the
transactions contemplated hereby.
6.1.8 FINANCIAL STATEMENTS.
(i) HISTORICAL STATEMENTS OF TEC. TEC has delivered to
the Agent copies of its (A) audited consolidated
year-end financial statements for and as of the
end of the three fiscal years ended October 31,
1993, 1994 and 1995 (the "TEC Audited
Statements"), (B) unaudited consolidated interim
financial statements for the fiscal year to date
and as of the end of the fiscal quarter ended July
31, 1996 (the "TEC Interim Statements," and
together with the TEC Audited Statements, the "TEC
Historical Consolidated Statements"), (C) combined
year-end financial statements of the Combined TEC
Group for and as of the end of the three fiscal
years ended October 31, 1993, 1994 and 1995 (the
"TEC Combined Statements") and (D) combined
interim financial statements of the Combined TEC
Group for the fiscal year to date and as of the
end of the fiscal quarter ended July 31, 1996 (the
"TEC Interim Combined Statements," and together
with the TEC Interim Statements, the "TEC
Historical Combined Statements") (the TEC
Historical Consolidated Statements and the TEC
Historical Combined Statements being collectively
referred to as the
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"TEC Historical Statements"). The TEC Historical
Statements were compiled from the books and
records maintained by the Borrowers' management,
are correct and complete and fairly represent in
all material respects the consolidated financial
condition of the Consolidated TEC Group or the
combined financial condition of the Combined TEC
Group, as the case may be, as of their dates and
the results of operations for the fiscal periods
then ended and have been prepared in accordance
with GAAP consistently applied;
(ii) FINANCIAL PROJECTIONS. TEC has delivered to the
Agent (A) financial projections of the Combined
TEC Group for TEC's fiscal years 1996, 1997, 1998,
1999, 2000, and 2001 and (B) financial projections
of the Consolidated TEC Group for TEC's fiscal
years 1996, 1997, 1998, 1999, 2000, and 2001, in
each case, derived from various assumptions of
TEC's management (the "Financial Projections").
The Financial Projections reflect the reasonable
expectations of TEC's management as of the Closing
Date in light of the history of the business,
actual costs incurred, present and foreseeable
conditions and intentions of TEC's management
(excluding the anticipated closing of the Ultra
Acquisition), all based on the assumptions
thereto, which assumptions were made and based
upon information available at the time of
preparation of such projections and have been
provided to the Agent. The Financial Projections
accurately reflect the liabilities of the Combined
TEC Group or the Consolidated TEC Group, as the
case may be, incurred pursuant to the Loan
Documents upon consummation of the transactions
contemplated hereby as of the Closing Date; and
(iii) ACCURACY OF FINANCIAL STATEMENTS. No Consolidated
TEC Group Entity has as of the date of the TEC
Historical Statements, any material liabilities,
contingent or otherwise, or forward or long-term
commitments that are not disclosed in the TEC
Historical Statements or in the notes thereto, and
except as disclosed therein there are no
unrealized or anticipated losses from any
commitments of any Consolidated TEC Group Entity
which reasonably would be expected to cause a
Material Adverse Change.
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6.1.9 MARGIN STOCK.
No Combined TEC Group Entity engages or intends to engage
principally, or as one of its important activities, in the business of extending
credit for the purpose, immediately, incidentally or ultimately, of purchasing
or carrying margin stock (within the meaning of Regulation U), other than
purchases by TEC of capital stock of TEC. No part of the proceeds of any Loan
(other than purchases by TEC of capital stock of TEC or to refinance
Indebtedness incurred to do so) or issued Letter of Credit has been or will be
used, immediately, incidentally or ultimately, to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock or to refund Indebtedness originally incurred for such
purpose(other than the Term Loans), or for any purpose which entails a violation
of or which is inconsistent with the provisions of the regulations of the Board
of Governors of the Federal Reserve System.
6.1.10 FULL DISCLOSURE.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to the Agent or
any Bank in connection herewith or therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to any Executive
Officer of any Consolidated TEC Group Entity which materially adversely affects
the business, property, assets, financial condition, results of operations or
prospects of any Consolidated TEC Group Entity which has not been set forth in
this Agreement or in the certificates, statements, agreements or other documents
furnished in writing to the Agent and the Banks prior to or at the date hereof
in connection with the transactions contemplated hereby.
6.1.11 TAXES.
All federal, state, local and other tax returns required to
have been filed with respect to each Consolidated TEC Group Entity have been
filed, other than those for which the failure to file the same would not
reasonably be expected to result in a Material Adverse Change, and payment or
adequate provision has been made for the payment of all taxes, fees, assessments
and other governmental charges shown to be owing pursuant to said returns or to
assessments received, except to the extent that such taxes, fees, assessments
and other charges are being contested in good faith by appropriate proceedings
diligently conducted and for which such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made. Except
with respect to the Federal income tax return for the Consolidated TEC Group for
the fiscal year ended October 31, 1993, there are no agreements or waivers
extending the statutory period of limitations applicable to any federal income
tax return of any Consolidated TEC Group Entity for any period.
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6.1.12 CONSENTS AND APPROVALS.
No consent, approval, exemption, order or authorization of, or
a registration or filing with, any Official Body or any other Person is required
by any Law or any agreement in connection with the execution, delivery and
carrying out of this Agreement and the other Loan Documents by any Loan Party,
except as listed on SCHEDULE 6.1.12, all of which shall have been obtained or
made on or prior to the Closing Date except as otherwise indicated on SCHEDULE
6.1.12.
6.1.13 NO EVENT OF DEFAULT; COMPLIANCE WITH INSTRUMENTS.
No event has occurred and is continuing and no condition
exists now or will exist after giving effect to and as a result of the
extensions of credit to be made on the Closing Date under the Loan Documents
which constitutes an Event of Default or Potential Default. No Consolidated TEC
Group Entity is in violation of (i) any term of its certificate of
incorporation, bylaws, or other organizational documents or (ii) any material
agreement or instrument to which it is a party or by which it or any of its
properties may be subject or bound where such violation would constitute a
Material Adverse Change.
6.1.14 PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
Each Consolidated TEC Group Entity owns or possesses all the
material patents, trademarks, service marks, trade names, copyrights, licenses,
registrations, franchises, permits and rights necessary to own and operate its
properties and to carry on its business as presently conducted and planned to be
conducted by the Consolidated TEC Group taken as a whole, without known conflict
by, or with the rights of, others.
6.1.15 INSURANCE.
TEC has delivered to the Agent a true and correct listing of
the property and general liability insurance of the Consolidated TEC Group. No
notice has been given or claim made and to the best knowledge of the Executive
Officers and the individual responsible for insurance matters of the
Consolidated TEC Group Entities no grounds exist to cancel or avoid any of such
policies or bonds or to reduce the coverage provided thereby. Such policies and
bonds provide adequate coverage from reputable and financially sound insurers in
amounts sufficient to insure the assets and risks of each Consolidated TEC Group
Entity in accordance with prudent business practice in the industry of the
Consolidated TEC Group.
6.1.16 COMPLIANCE WITH LAWS.
The Consolidated TEC Group Entities are in compliance in all
material respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in Section 6.1.21) in all jurisdictions in which any
Consolidated TEC Group Entity is presently or currently anticipates it will be
doing business except where the failure to do so would not constitute a Material
Adverse Change.
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6.1.17 MATERIAL CONTRACTS.
Each material contract relating to the business operations of
each Consolidated TEC Group Entity is valid, binding and enforceable upon the
Consolidated TEC Group Entity which is a party thereto in accordance with its
respective terms, and the Consolidated TEC Group Entity which is a party thereto
has not received actual notice of a default thereunder with respect to parties
other than such Consolidated TEC Group Entity. For purposes of this Section
6.1.17 the term "material contracts" shall mean those contracts or other
agreements which TEC would be required to file with the Securities and Exchange
Commission pursuant to item 601(a)(10) of Regulation S-K promulgated under the
Securities Act of 1933 and the Securities Exchange Act of 1934.
6.1.18 INVESTMENT COMPANIES.
No Consolidated TEC Group Entity is an "investment company"
registered or required to be registered under the Investment Company Act of 1940
or under the "control" of an "investment company" as such terms are defined in
the Investment Company Act of 1940 and shall not become such an "investment
company" or under such "control."
6.1.19 PLANS AND BENEFIT ARRANGEMENTS.
Except as set forth on SCHEDULE 6.1.19:
(i) TEC and each other member of the ERISA Group are
in compliance in all material respects with any
applicable provisions of ERISA with respect to all
Benefit Arrangements, Plans and Multiemployer
Plans. There has been no Prohibited Transaction
with respect to any Benefit Arrangement or any
Plan or, to the best knowledge of TEC, with
respect to any Multiemployer Plan or Multiple
Employer Plan, which reasonably would be expected
to result in any material liability of TEC or any
other member of the ERISA Group. TEC and all other
members of the ERISA Group have made when due any
and all payments required to be made under any
agreement relating to a Multiemployer Plan or a
Multiple Employer Plan or any Law pertaining
thereto. With respect to each Plan and
Multiemployer Plan, TEC and each other member of
the ERISA Group (i) have fulfilled in all material
respects their obligations under the minimum
funding standards of ERISA, (ii) have not incurred
any liability to the PBGC, and (iii) have not had
asserted against them any penalty for failure to
fulfill the minimum funding requirements of ERISA;
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(ii) To the best of each Borrower's knowledge, each
Multiemployer Plan and Multiple Employer Plan is
able to pay benefits thereunder when due;
(iii) Neither TEC nor any other member of the ERISA
Group has instituted or intends to institute
proceedings to terminate any Plan;
(iv) No event requiring notice to the PBGC under
Section 302(f)(4)(A) of ERISA has occurred or is
reasonably expected to occur with respect to any
Plan, and no amendment with respect to which
security is required under Section 307 of ERISA
has been made or is reasonably expected to be made
to any Plan;
(v) The aggregate actuarial present value of all
benefit liabilities (whether or not vested) under
the Plans, determined on an ongoing basis, as
disclosed in, and as of the date of, the most
recent actuarial report for each such Plan, does
not exceed the aggregate fair market value of the
assets of such Plans;
(vi) Neither TEC nor any other member of the ERISA
Group has incurred or reasonably expects to incur
any material withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan.
Neither TEC nor any other member of the ERISA
Group has been notified by any Multiemployer Plan
or Multiple Employer Plan that such Multiemployer
Plan or Multiple Employer Plan has been terminated
within the meaning of Title IV of ERISA and, to
the best knowledge of TEC, no Multiemployer Plan
or Multiple Employer Plan is reasonably expected
to be reorganized or terminated, within the
meaning of Title IV of ERISA;
(vii) To the extent that any Benefit Arrangement is
insured, TEC and all other members of the ERISA
Group have paid when due all premiums required to
be paid for all periods through the Closing Date.
To the extent that any Benefit Arrangement is
funded other than with insurance, TEC and all
other members of the ERISA Group have made when
due all contributions required to be paid for all
periods through the Closing Date; and
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(viii) All Plans, Benefit Arrangements and Multiemployer
Plans have been administered in all material
respects in accordance with their terms and
applicable Law.
6.1.20 EMPLOYMENT MATTERS.
Each Consolidated TEC Group Entity is in compliance with the
Labor Contracts and all applicable federal, state and local labor and employment
Laws including those related to equal employment opportunity and affirmative
action, labor relations, minimum wage, overtime, child labor, medical insurance
continuation, worker adjustment and relocation notices, immigration controls and
worker and unemployment compensation, where the failure to comply reasonably
would be expected to constitute a Material Adverse Change. There are no
outstanding grievances, arbitration awards or appeals therefrom arising out of
the Labor Contracts or current or threatened strikes, picketing, handbilling or
other work stoppages or slowdowns at facilities of any Consolidated TEC Group
Entity which in any case would constitute a Material Adverse Change.
6.1.21 ENVIRONMENTAL MATTERS.
Except as disclosed on SCHEDULE 6.1.21:
(i) Except for notices which would not reasonably be
expected to result in a Material Adverse Change,
no Consolidated TEC Group Entity has received any
Environmental Complaint from any Official Body or
private Person alleging that such Consolidated TEC
Group Entity or any prior owner of any Property or
acquirer of any Property from any Consolidated TEC
Group Entity is a potentially responsible party
under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section
9601, ET SEQ., and no Consolidated TEC -- ----
Group Entity has any reason to believe that such
an Environmental Complaint might be received.
There are no pending or, to any Consolidated TEC
Group Entity's knowledge, threatened Environmental
Complaints relating to any Consolidated TEC Group
Entity or, to any Consolidated TEC Group Entity's
knowledge, any prior or subsequent owner of any
Property pertaining to, or arising out of, any
Environmental Conditions which reasonably would be
expected to result in a Material Adverse Change,
(ii) Except for Environmental Conditions, violations or
failures which individually and in the aggregate
would not reasonably be expected to result in a
Material Adverse Change, there are no
circumstances at, on or under any
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Property that constitute a breach of or
non-compliance with any of the Environmental Laws,
and there are no past or present Environmental
Conditions at, on or under any Property or, to any
Consolidated TEC Group Entity's knowledge, at, on
or under adjacent property, that prevent
compliance with the Environmental Laws at any
Property,
(iii) Neither any Property nor any structures,
improvements, equipment, fixtures, activities or
facilities thereon or thereunder contain or use
Regulated Substances, except in compliance with
Environmental Laws, which would reasonably be
expected to result in a Material Adverse Change.
There are no processes, facilities, operations,
equipment or other activities at, on or under any
Property, or, to any Consolidated TEC Group
Entity's knowledge, at, on or under adjacent
property, that currently result in the release or
threatened release of Regulated Substances onto
any Property, except to the extent that such
releases or threatened releases are not a breach
of or otherwise not a violation of the
Environmental Laws or would not reasonably be
expected to result in a Material Adverse Change,
(iv) There are no aboveground storage tanks,
underground storage tanks or underground piping
associated with such tanks, used for the
management of Regulated Substances at, on or under
any Property that (a) do not have, to the extent
required by Environmental Laws, a full operational
secondary containment system in place, and (b) are
not otherwise in compliance with all Environmental
Laws, except in any case where such would not
reasonably be expected to result in a Material
Adverse Change. There are no abandoned underground
storage tanks or underground piping associated
with such tanks, previously used for the
management of Regulated Substances at, on or under
any Property that have not either been closed in
place in accordance with Environmental Laws or
removed in compliance with all applicable
Environmental Laws and no contamination associated
with the use of such tanks exists on any Property
that is not in compliance with Environmental Laws,
except in any case where such would not reasonably
be expected to result in a Material Adverse
Change,
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(v) Each Consolidated TEC Group Entity has all
permits, licenses, authorizations, plans and
approvals necessary under the Environmental Laws
for the conduct of the business of the
Consolidated TEC Group taken as a whole, except in
any case where the failure to so have would not
reasonably be expected to result in a Material
Adverse Change. Each Consolidated TEC Group Entity
has submitted all notices, reports and other
filings required by the Environmental Laws to be
submitted to an Official Body which pertain to
past and current operations on any Property,
except in any case where the failure to so submit
would not reasonably be expected to result in a
Material Adverse Change, and
(vi) Except for violations which individually and in
the aggregate would not result in a Material
Adverse Change, all past and present on-site
generation, storage, processing, treatment,
recycling, reclamation, disposal or other use or
management of Regulated Substances at, on, or
under any Property and all off-site
transportation, storage, processing, treatment,
recycling, reclamation, disposal or other use or
management of Regulated Substances have been done
in accordance with the Environmental Laws.
6.1.22 SENIOR DEBT STATUS.
The Obligations of each Loan Party under this Agreement, the
Notes, the Master Guarantee Agreement, the Guarantee Agreement and each of the
other Loan Documents to which it is a party do rank and will rank no less than
PARI PASSU in priority of payment with all other Indebtedness of such Loan Party
except Indebtedness of such Loan Party to the extent secured by Permitted Liens.
There is no Lien upon or with respect to any of the properties or income of any
Consolidated TEC Group Entity which secures indebtedness or other obligations of
any Person except for Permitted Liens.
6.1.23 SOLVENCY.
Each Borrower, the Consolidated TEC Group, the Combined TEC
Group and each Material Domestic Subsidiary is Solvent.
6.1.24 SCHEDULE OF INDEBTEDNESS.
The Combined TEC Group has no Indebtedness not listed on
SCHEDULE 6.1.24 except items not exceeding $1,000,000 individually or $2,000,000
in the aggregate.
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6.1.25 MATERIAL ADVERSE CHANGE.
Since October 31, 1995, no Material Adverse Change has
occurred, provided however, that neither the Tender Offer nor the CUNO Spin-Off
shall be deemed to constitute a Material Adverse Change for the purposes of this
Section 6.1.25.
6.2 UPDATES TO SCHEDULES.
Except as set forth in the next sentence, no Schedule to this Agreement
may be updated, amended or modified without the consent of the Required Banks
given or withheld in their sole and absolute discretion. The Borrower shall
provide to the Agent updates to Schedule 6.1.1, 6.1.2 and 6.1.24 on a quarterly
basis provided, however, that the Agent's receipt of any such update shall not
imply that the Agent or any Bank has consented to any event, transaction or
change of circumstance reflected in such update, all of which shall continue to
be governed by the other provisions of this Agreement.
7. CONDITIONS OF LENDING
The obligation of each Bank to make Loans and of the Agent to
issue Letters of Credit and Bank Guarantees is subject to the performance by
each of the Loan Parties of its Obligations to be performed hereunder at or
prior to the making of any such Loans or issuance of such Letters of Credit or
Bank Guarantees and to the satisfaction of the following further conditions:
7.1 FIRST TEC REVOLVING CREDIT LOANS, LETTER OF CREDIT ISSUANCES AND
TERM LOANS.
On the Closing Date:
7.1.1 OFFICER'S CERTIFICATE.
The representations and warranties of each of the Borrowers
contained in Article 6 and in each of the other Loan Documents shall be true and
accurate on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and each of the Borrowers shall
have performed and complied with all covenants and conditions hereof and
thereof, no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; and there shall be delivered to the Agent for the
benefit of each Bank a certificate of each Borrower, and each of the Material
Domestic Subsidiaries, dated the Closing Date and signed by the Chief Executive
Officer, President or Chief Financial Officer of such Person or, in the case of
Orange County Metal Works and Cylinder City, Inc., any officer specifically
authorized by corporate resolution to do so, to each such effect.
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7.1.2 SECRETARY'S CERTIFICATE.
There shall be delivered to the Agent for the benefit of each
Bank a certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary of each Borrower and each other Loan Party, certifying as
appropriate as to:
(i) all corporation action taken by such Loan Party in
connection with this Agreement and the other Loan
Documents;
(ii) the names of the officer or officers authorized to
sign this Agreement and the other Loan Documents
and the true signatures of such officer or
officers and specifying the Authorized Officers
permitted to act on behalf of such Loan Party for
purposes of this Agreement and the true signatures
of such officers, on which the Agent and each Bank
may conclusively rely; and
(iii) copies of its organizational documents, including
its certificate of incorporation and bylaws (or
their equivalents) as in effect on the Closing
Date certified by the appropriate governmental
official where such documents are filed in a
governmental office together with certificates
from the appropriate governmental officials as to
the continued existence and good standing of such
Loan Party in each jurisdiction where organized or
qualified to do business.
7.1.3 DELIVERY OF LOAN DOCUMENTS.
The Loan Documents shall have been executed and delivered to
the Agent for the benefit of the Banks.
7.1.4 OPINIONS OF COUNSEL.
There shall be delivered to the Agent for the benefit of each
Bank written opinions of counsel for the Borrowers who are listed on SCHEDULE
7.1.4 (who may rely on the opinions of such other counsel as may be acceptable
to the Agent), dated the Closing Date and in form and substance satisfactory to
the Agent and its counsel.
7.1.5 LEGAL DETAILS.
All legal details and proceedings in connection with the
transactions contemplated by this Agreement, and the other Loan Documents shall
be in form and substance reasonably satisfactory to the Agent and its counsel,
and the Agent shall have received all such
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other counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance
reasonably satisfactory to the Agent and said counsel, as the Agent or said
counsel may reasonably request.
7.1.6 PAYMENT OF FEES AND REIMBURSEMENT OF EXPENSES.
The Borrowers shall have paid or caused to be paid to the
Agent for itself (and, as applicable, for the account of the Banks) to the
extent not previously paid (i) all fees accrued through the Closing Date set
forth in the commitment letter and related fee letter, each dated October 15,
1996 and (ii) all costs and expenses for which the Agent and the Banks are
entitled to be reimbursed thereunder and under this Agreement, to the extent
they have been incurred as of the Closing Date.
7.1.7 CONSENTS.
All material consents required to effectuate the transactions
contemplated hereby as set forth on SCHEDULE 6.1.12 shall have been obtained.
7.1.8 OFFICER'S CERTIFICATE REGARDING MACS.
Since October 31, 1995 (i) no Material Adverse Change shall
have occurred and (ii) there shall have been no material change in the
management of TEC (except as disclosed to the Banks in a writing referencing
this provision); and there shall have been delivered to the Agent for the
benefit of each Bank a certificate dated the Closing Date and signed by the
Chief Executive Officer, President or Chief Financial Officer of TEC to each
such effect; provided, however neither the Tender Offer nor the CUNO Spin-Off
shall be deemed to constitute a Material Adverse Change.
7.1.9 NO VIOLATION OF LAWS.
The making of the Loans and issuance of the Letters of Credit
shall not contravene any Law applicable to any Consolidated TEC Group Entity or
any of the Banks.
7.1.10 NO ACTIONS OR PROCEEDINGS.
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed against any
Consolidated TEC Group Entity, the Agent, any Bank or any of their respective
officers or directors before any court, governmental agency or legislative body
to enjoin, restrain or prohibit, or to obtain damages in respect of, this
Agreement or the other Loan Documents, which, in the Agent's sole discretion,
would make it inadvisable to consummate the transactions contemplated by this
Agreement or any of the other Loan Documents.
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7.1.11 INSURANCE POLICIES; CERTIFICATES OF INSURANCE.
TEC shall have delivered to the Agent upon its request
evidence acceptable to the Agent that adequate insurance in compliance with
Section 8.1.3 is in full force and effect and that all premiums then due thereon
have been paid, together with, if requested by the Agent, a certified copy of
each Consolidated TEC Group Entity's casualty insurance policy or policies.
7.1.12 TERMINATION OF EXISTING DEBT.
TEC simultaneously shall have terminated the Indebtedness
created under and paid all obligations owed under the Amended and Restated
Credit Agreement dated as of August 9, 1996 among TEC, the banks parties thereto
and Mellon Bank, N.A., as Agent.
7.1.13 SOLVENCY CERTIFICATE.
The Chief Financial Officer or any other Person specifically
authorized by resolution of each Borrower, the Consolidated TEC Group, the
Combined TEC Group and each Material Domestic Subsidiary shall certify as to the
solvency and capital adequacy of each Borrower and each Material Domestic
Subsidiary after giving effect to the transactions contemplated hereby.
7.1.14 BORROWING OF THE TERM LOAN.
TEC must borrow the entire $60,000,000 Term Loan as a
condition to borrowing any TEC Revolving Credit Loan or obtaining the issuance
of any Letter of Credit.
7.2 FIRST CIH REVOLVING CREDIT LOANS AND BANK GUARANTEE ISSUANCES.
On the date of the first CIH Revolving Credit Loans or Bank Guarantee
issuance, all of the conditions set forth in Section 7.1 shall have been
satisfied. In addition, the Ultra Acquisition shall have closed or shall close
simultaneously with such first CIH Revolving Credit Loan or Bank Guarantee
issuance (the "Ultra Closing"), subject to the following:
(i) the Agent and the Required Banks shall have
been satisfied with the terms (including the maturity date),
of any seller financing, which must be unsecured, or if
secured, then subordinated on terms satisfactory to the Agent
and the Required Banks;
(ii) the share purchase price given or paid by CIH
shall not exceed (pound)26,000,000 (and the equivalent thereof
in Dollars shall not exceed $44,000,000) and the Indebtedness
assumed shall not exceed (pound)8,200,000 (and the equivalent
thereof in Dollars shall not exceed $13,500,000);
(iii) the Agent shall have received a copy of a
substantially final draft of the purchase agreement with
respect to the Ultra Acquisition, including substantially
final drafts of all exhibits and
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schedules thereto and, the same shall be satisfactory to the
Agent and the Required Banks;
(iv) the Agent shall have received at least five
(5) Business Days prior to the Ultra Closing (A) unaudited
consolidated interim financial statements of Ultra for the
fiscal year to date and any other interim financial statements
of Ultra which then are available (B) audited consolidated
year-end financial statements for and as of the end of the two
fiscal years ended March 31, 1995 and 1996 of Ultra, and (C)
unaudited historical financial statements of the businesses
being acquired pursuant to the Ultra Acquisition and intended
to be retained by TEC (the "Ultra Historical Statements"),
which shall be satisfactory to the Agent and the Required
Banks. Delivery of the foregoing shall be deemed to be a
representation and warranty under this Agreement by TEC to the
Agent and the Banks that the Ultra Historical Statements were
compiled from the books and records maintained by Ultra's
management, are correct and complete and fairly represent in
all material respects the consolidated financial condition of
Ultra and its Subsidiaries, in the case of clauses (A) and (B)
above, and the combined financial condition of the businesses
intended to be retained, in the case of clause (C) above, in
each case as of their dates, and the results of operations for
the fiscal periods then ended and have been prepared in
accordance with (i) generally accepted accounting principles
in the United Kingdom with respect to clauses (A) and (B)
above and (ii) GAAP with respect to clause (C) above, in each
case consistently applied;
(v) the Agent shall have received at least five
(5) Business Days prior to the Ultra Closing (A) PRO FORMA
financial projections of the Combined TEC Group including
Ultra as if it were a Restricted Subsidiary for TEC's fiscal
years 1996, 1997, 1998, 1999, 2000, and 2001, (B) PRO FORMA
financial projections of the Consolidated TEC Group including
Ultra as if it were a Restricted Subsidiary for TEC's fiscal
years 1996, 1997, 1998, 1999, 2000, and 2001, in each case,
derived from various assumptions of TEC's management (the
"Ultra Financial Projections"). Delivery of the foregoing
shall be deemed to be a representation and warranty under this
Agreement by TEC to the Agent and the Banks that (A) the Ultra
Financial Projections reflect the reasonable expectations of
TEC's management as of the Closing Date in light of the
history of the business, actual costs incurred, present and
foreseeable conditions and intentions of TEC's management, all
based on the assumptions thereto, which assumptions were made
and based upon information available at the time of
preparation of such projections and have been provided to
Agent, and (B) the Ultra Financial Projections accurately
reflect the liabilities of the Combined TEC Group or the
Consolidated TEC Group, as the case
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may be, incurred pursuant to the Loan Documents upon
consummation of the transactions contemplated by this
Agreement and the Ultra Acquisition.
(vi) the Ultra Financial Projections shall be
satisfactory in form and substance to the Agent and the
Required Banks.
(vii) the Agent shall have received and be
satisfied with the form and substance of a reconciliation
between the Ultra Historical Statements referred to in clause
(iv)(B) above for Ultra's 1995 and 1996 fiscal years and the
Ultra Historical Statements referred to in clause (iv)(C)
above for the same period.
7.3 EACH ADDITIONAL LOAN OR LETTER OF CREDIT OR BANK GUARANTEE
ISSUANCE.
At the time of making any Loans or issuance of any Letter of Credit or
Bank Guarantee other than Loans made or Letters of Credit or Bank Guarantees
issued on the Closing Date and after giving effect to the proposed extensions of
credit: the representations and warranties of the Borrowers contained in Article
6 and in the other Loan Documents shall be true on and as of the date of such
additional Loan, Letter of Credit or Bank Guarantee with the same effect as
though such representations and warranties had been made on and as of such date
(except representations and warranties which expressly relate solely to an
earlier date or time, which representations and warranties shall be true and
correct on and as of the specific dates or times referred to therein) and the
Borrowers shall have performed and complied with all covenants and conditions
hereof; no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; the making of the Loans or issuance of such Letter of
Credit or Bank Guarantee shall not contravene any Law applicable to any
Consolidated TEC Group Entity or any of the Banks; and the applicable Borrower
shall have delivered to the Agent, a duly executed and completed Loan Request,
Bid Loan Request or application for a Letter of Credit or Bank Guarantee, as the
case may be.
7.4 SYNDICATION.
7.4.1 SYNDICATION REPRESENTATIONS AND WARRANTIES.
On the Syndication Date, the representations and warranties of
the Borrowers contained in Article 6 and in the other Loan Documents shall be
true on and as of such date with the same effect as though such representations
and warranties had been made on and as of such date (except representations and
warranties which expressly relate solely to an earlier date or time, which
representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein) and the Borrowers shall have
performed and complied with all covenants and conditions hereof; and no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist.
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7.4.2 SYNDICATION DOCUMENTS.
On the Syndication Date, TEC shall deliver to the Agent for
the benefit of the Banks (a) an Officer's Certificate dated as of the
Syndication Date with respect to the matters set forth in Section 7.4.1 and
Section 7.1.8(i), (b) a Secretary's Certificate dated as of the Syndication Date
with respect to the matters set forth in Section 7.1.2(i) and 7.1.2(ii) and that
there have been no changes in the charter documents or bylaws of either Borrower
or any Material Subsidiary since the Closing Date, (c) Notes dated as of the
Syndication Date which give effect to the syndication on the Syndication Date of
the Commitments of the Banks which originally executed the Credit Agreement in
exchange for the original Notes issued to such Banks, (d) written opinions of
the counsel to the Borrowers identified in Section 7.1.4 with respect to such
matters as the Agent may request and (e) acknowledgments dated as of the
Syndication Date to the Loan Documents in form and substance satisfactory to the
Agent.
7.4.3 SYNDICATION COOPERATION.
The Agent, with the Borrowers' assistance, will prepare and
distribute a Confidential Information Memorandum (the "Memorandum") for the
purpose of syndicating the credit facilities provided under this Agreement to
financial institutions. The Agent will not distribute the Memorandum to any
party that is not subject to a customary confidentiality agreement. The
Borrowers will use all reasonable efforts to assist the Agent in syndicating the
credit facilities, including participating in meetings with potential syndicate
members. Until the closing on the initial syndication, except as otherwise
required by Law, the Borrowers will not, and will not permit any of its
affiliates to, syndicate or issue, attempt to syndicate or issue, announce or
otherwise authorize the announcement of the syndication or issuance of, or enter
into discussions concerning the syndication of the credit facilities or any
other debt facility to be syndicated, in each case without the prior written
consent of the Agent, which will not be unreasonably withheld.
8. COVENANTS
8.1 AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that until payment in full of the
Loans and Reimbursement Obligations and interest thereon, expiration or
termination of all Letters of Credit and Bank Guarantees, satisfaction of all of
the Loan Parties' other Obligations under the Loan Documents and termination of
the Commitments, the Consolidated TEC Group shall comply at all times with the
following affirmative covenants:
8.1.1 PRESERVATION OF EXISTENCE, ETC.
Each Borrower and, except as permitted by Section 8.2.5 or
8.2.6, each Material Subsidiary, shall maintain its corporate existence and its
license or qualification and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its
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business makes such license or qualification necessary, except where the failure
to be so licensed or qualified would not result in a Material Adverse Change.
8.1.2 PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC.
Each Borrower shall, and shall cause each other Consolidated
TEC Group Entity to, duly pay and discharge all liabilities to which it is
subject or which are asserted against it, promptly as and when the same shall
become due and payable, including all taxes, assessments and governmental
charges upon it or any of its properties, assets, income or profits, prior to
the date on which penalties attach thereto, except to the extent that such
liabilities, including taxes, assessments or charges, are being contested in
good faith and by appropriate and lawful proceedings diligently conducted and
for which such reserve or other appropriate provisions, if any, as shall be
required by GAAP shall have been made, but only to the extent that failure to
discharge any such liabilities would not result in any additional liability
which would adversely affect to a material extent the financial condition of the
Consolidated TEC Group taken as a whole, PROVIDED that the Consolidated TEC
Group will pay all such liabilities forthwith upon the commencement of
proceedings to foreclose any Lien which may have attached as security therefor
unless and as long as such proceedings are stayed.
8.1.3 MAINTENANCE OF INSURANCE.
Each Borrower shall, and shall cause each other Consolidated
TEC Group Entity to, insure its properties and assets against loss or damage by
fire and such other insurable hazards as such assets are commonly insured
(including fire, extended coverage, property damage, workers' compensation,
public liability and business interruption insurance) and against other risks
(including errors and omissions with respect to directors and officers) in such
amounts as similar properties and assets are insured by prudent companies in
similar circumstances carrying on similar businesses, and with reputable and
financially sound insurers, including self-insurance to the extent customary,
for each such Consolidated TEC Group Entity within its respective industry. At
the request of the Agent, the Borrowers shall deliver to the Agent on the
Closing Date and annually thereafter an original certificate of insurance signed
by the Borrowers' independent insurance broker describing and certifying as to
the existence of the insurance required to be maintained by this Agreement and
the other Loan Documents.
8.1.4 MAINTENANCE OF PROPERTIES AND LEASES.
Each Borrower shall, and shall cause each other Consolidated
TEC Group Entity to, maintain in good repair, working order and condition
(ordinary wear and tear excepted) in accordance with the general practice of
other businesses of similar character and size, all of those material properties
necessary to its business, and from time to time, such Borrower or other
Consolidated TEC Group Entity will make or cause to be made all appropriate
repairs, renewals or replacements thereof.
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8.1.5 MAINTENANCE OF PATENTS, TRADEMARKS, ETC.
Each Borrower shall, and shall cause each other Consolidated
TEC Group Entity to, maintain in full force and effect all patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and other
authorizations necessary for the ownership and operation of its properties and
business if the failure so to maintain the same would constitute a Material
Adverse Change.
8.1.6 VISITATION RIGHTS.
Each Borrower shall, and shall cause each other Consolidated
TEC Group Entity to, permit any of the officers or authorized employees or
representatives of the Agent (at the applicable Borrower's expense) or any of
the Banks to visit and inspect any of its properties and to examine and make
excerpts from its books and records and discuss its business affairs, finances
and accounts with its Authorized Officers, all in such detail as any of the
Banks may reasonably request, PROVIDED that each Bank shall provide the Borrower
and the Agent with reasonable notice prior to any visit or inspection, the Banks
shall attempt to reasonably coordinate such requests and all information
obtained by any Bank shall be subject to Section 11.12.
8.1.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.
Each Borrower shall, and shall cause each other Consolidated
TEC Group Entity to, maintain and keep proper books and records which will
enable the Consolidated TEC Group to issue consolidated and consolidating
financial statements and the Combined TEC Group to issue combined financial
statements, in each case in accordance with GAAP and as otherwise required by
applicable Laws of any Official Body having jurisdiction over any Consolidated
TEC Group Entity, and in which full, true and correct entries shall be made in
all material respects of all dealings and business and financial affairs on a
consolidated, consolidating and combined basis, as the case may be.
8.1.8 PLANS AND BENEFIT ARRANGEMENTS.
TEC shall, and shall cause each other member of the ERISA
Group to, comply with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Plans and Benefit Arrangements except where such failure, alone or
in conjunction with any other failure, would not result in a Material Adverse
Change. Without limiting the generality of the foregoing, TEC shall cause all of
its Plans and all Plans maintained by any other member of the ERISA Group to be
funded in accordance with the minimum funding requirements of ERISA and shall
make, and cause each other member of the ERISA Group to make, in a timely
manner, all contributions due to Plans, Benefit Arrangements and Multiemployer
Plans.
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8.1.9 COMPLIANCE WITH LAWS.
Each Borrower shall, and shall cause each Consolidated TEC
Group Entity to, comply with all applicable Laws, including all Environmental
Laws, in all respects, PROVIDED that it shall not be deemed to be a violation of
this Section 8.1.9 if any failure to comply with any Law would not result in
fines, penalties, remediation costs, other similar liabilities or injunctive
relief which in the aggregate would reasonably be expected to constitute a
Material Adverse Change.
8.1.10 USE OF PROCEEDS.
The Borrowers will use the Letters of Credit, the Bank
Guarantees and the proceeds of the Loans only for lawful purposes in accordance
with Sections 2.8 and 2.11.4 and the other provisions of this Agreement and such
uses shall not contravene any applicable Law or any other provision hereof.
8.1.11 SUBORDINATION OF INTERCOMPANY LOANS.
Each Borrower shall cause any Intercompany Loans owed by any
Borrower or any Guarantor to any other Consolidated TEC Group Entity to be
subordinated pursuant to the terms of the Master Intercompany Subordination
Agreement and evidenced by an Intercompany Note.
8.1.12 POST-CLOSING MATTERS.
The Borrowers shall deliver to the Agent for the benefit of the Banks
the documents set forth on SCHEDULE 8.1.12 at the times indicated therein.
8.1.13 PAYMENT OF INTERCOMPANY OBLIGATIONS RELATED TO CUNO.
The Consolidated TEC Group shall settle all obligations owed by them in
respect of all Indebtedness owed as of the date of the Spin-Off to CUNO and its
Subsidiaries (after the Spin-Off) in a manner (including by set-off to the
extent feasible) and within the time period that will enable CUNO and its
Subsidiaries to meet its similar obligations in the manner and within the time
set forth in CUNO's Form 10.
8.1.14 INTEREST RATE PROTECTION.
On or before the earlier of eighteen (18) months after the Closing Date
or the Trigger Date, the Borrowers collectively shall have entered into an
interest rate protection agreement or agreements in each case for a period of at
least three years which in the aggregate are in an amount equal to at least 33
1/3% of Combined Funded Indebtedness at such time, and with such other terms and
conditions as shall be acceptable to the Agent (the "Interest Rate Protection
Agreements"). Documentation for the Interest Rate Protection Agreements shall be
in a standard International Swap Dealer Association Agreement, and shall not
require that any
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collateral be provided as security for such agreement. As used in this Section
8.1.14, "Trigger Date" means 15 days after the last day of the first thirty (30)
consecutive day period in which the Euro-Rate with respect to Loans in Dollars
was greater than or equal to at least eight percent (8%) for at least ten (10)
days. Notwithstanding the foregoing provisions, if, within the time period set
forth herein, TEC shall have completed a Qualified Note Placement, Borrowers
will be deemed to have satisfied, or partially satisfied, the requirements of
this Section 8.1.14 to the extent of the aggregate principal amount of the Notes
issued in the Qualified Note Placement.
8.2 NEGATIVE COVENANTS.
Each Borrower covenants and agrees that until payment in full of the
Loans and Reimbursement Obligations and interest thereon, expiration or
termination of all Letters of Credit and Bank Guarantees, satisfaction of all of
the Loan Parties' other Obligations hereunder and termination of the
Commitments, the Consolidated TEC Group shall comply with each of the following
negative covenants:
8.2.1 INDEBTEDNESS.
Each Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, at any time create, incur, assume or suffer to exist
any Indebtedness, except the following :
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness of Foreign Restricted Subsidiaries to
Persons other than a Borrower or any Restricted
Subsidiary (excluding Indebtedness referred to in
clause (vi) below but including any portion
thereof, if any, that is payable more than
eighteen (18) months after the closing of the
Ultra Acquisition and which both (A) is not
secured by a Bank Guarantee and (B) as to which
there is not then in effect blocked availability
under the CIH Revolving Credit Commitments for
CIH Revolving Credit Loans allocated for the
purpose of paying such portion of Indebtedness),
provided that the ratio of all such Indebtedness
to the portion of Combined EBITDA (calculated on
an historic pro forma basis in the manner
provided in the second sentence of the definition
of Leverage Ratio) attributable to all Foreign
Restricted Subsidiaries in the aggregate shall
always be less than 2.50 to 1.0;
(iii) Indebtedness for borrowed money other than under
the Loan Documents which does not have covenants
that in the judgment of the Agent individually or
in the aggregate are
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more restrictive in any material respect than
under the Loan Documents;
(iv) Indebtedness (to the extent not of a type included
in Combined Funded Indebtedness) of Domestic
Restricted Subsidiaries which shall not exceed
$10,000,000 in the aggregate;
(v) any Indebtedness listed on Schedule 6.1.24 on the
Closing Date;
(vi) any Indebtedness to the seller in connection with
the Ultra Acquisition that meets the requirements
in Section 7.2; and
(vii) any Indebtedness incurred as part of a Qualified
Note Placement.
8.2.2 LIENS; FURTHER NEGATIVE PLEDGES.
Each of the Borrowers shall not, and shall not permit any of
its Restricted Subsidiaries to, (i) at any time create, incur, assume or suffer
to exist any Lien on any of its assets, whether real or personal property or
fixtures, tangible or intangible, or now owned or hereafter acquired (the
"Assets"), or agree or become liable to do so, except Permitted Liens, (ii)
suffer to exist any Indebtedness which if unpaid might by Law or upon bankruptcy
or insolvency, or otherwise, be given priority over its general creditors or
(iii) at any time, directly or indirectly, enter into any agreement,
understanding or other arrangement which purports to restrict in any manner the
ability of any Consolidated TEC Group Entity to grant security interests or
Liens to the Agent for the benefit of the Agent and the Banks with respect to
any Asset or Assets of any Consolidated TEC Group Entity that have not
theretofore been encumbered or made subject to the grant of a security interest
in favor of or for the benefit of the Agent and the Banks; provided however that
a written agreement of a type described in the preceding clause (iii) containing
terms satisfactory to the Agent may be entered into by one or more Combined TEC
Group Entities in favor of the note purchasers in a Qualified Note Placement
that is privately placed.
8.2.3 LOANS AND INVESTMENTS.
Each Borrower shall not, and shall not permit any Restricted
Subsidiary to, at any time make or suffer to remain outstanding any loan or
advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any equity interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except as set forth on SCHEDULE 8.2.3 and:
(i) trade credit extended on usual and customary terms
in the ordinary course of business;
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(ii) advances to employees to meet expenses incurred by
such employees in the ordinary course of business;
(iii) Permitted Cash Equivalent Investments;
(iv) loans and advances to or from, and investments in
a Combined TEC Group Entity;
(v) loans to Unrestricted Subsidiaries, PROVIDED that
prior to the consummation of any such loan
transaction:
(A) both immediately before and after the
consummation of the transaction there exists no
Event of Default or Potential Default,
(B) the Borrowers are in compliance with their
representations, warranties and covenants
hereunder after giving effect to the transaction,
(C) in the event the proposed loan is in excess of
$1,500,000, the Borrowers shall have computed the
Leverage Ratio (in the manner required in the
definition thereof) as of the date (the
"Transaction Date") of such transaction and there
shall be an adjustment of the fees and interest
rates effective on the Transaction Date if the
Leverage Ratio Status changes on such date, and
(D) there was delivered to the Agent no later than
five (5) Business Days after the Transaction Date
a Transaction Notice Certificate executed by an
Executive Officer of TEC certifying as to
compliance with the foregoing clauses (A) and (B)
and where applicable, (C) above.
(vi) liquidations, mergers, consolidations and
acquisitions permitted by Section 8.2.5;
(vii) capital expenditures made in the ordinary course
of business by a Combined TEC Group Entity;
(viii) contributions and investments pursuant to a COLI;
and
(ix) debt securities having maturities no longer than 6
months in an aggregate amount not exceeding
$2,500,000 at any one time.
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8.2.4 UPSTREAM DIVIDENDS, DISTRIBUTIONS, LOANS AND ADVANCES.
Except for the Orsta Restrictions, the Borrowers shall not,
and shall not permit any other Combined TEC Group Entity to, be or become a
party to or otherwise be bound by any agreement or other restriction (other than
mandated by applicable Law) which would require it not to or otherwise inhibit
its ability to declare, make or pay, or agree to become or remain liable to make
or pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock or other equity interests on account of the purchase, redemption,
retirement or acquisition of its shares of capital stock (or warrants, options
or rights therefor) or equity interests, or from making any loans or advances to
the Borrowers. As used above, "Orsta Restrictions" means the obligations of TEC,
as stated in the purchase contract dated May 3, 1994, between TEC and the
Treuhandanstalt, not to distribute dividends from the assets of Sachsenhydraulik
GmbH Chemnitz and Hydraulik Rochlitz GmbH unless such dividends are paid from
profits earned.
8.2.5 LIQUIDATIONS, MERGERS, CONSOLIDATIONS, ACQUISITIONS.
Each Borrower shall not, and shall not permit any Consolidated
TEC Group Entity to, dissolve, liquidate or wind-up its affairs, or become a
party to any merger or consolidation, or acquire by purchase, lease or otherwise
all or substantially all of the assets, capital stock or equity interests of any
other Person except, subject in each case to Section 8.2.7, as follows:
(i) TEC may acquire by merger (provided TEC is
thereafter a Qualified Survivor), or may acquire
the capital stock or other equity interests of or
in, or may acquire all or a portion of the assets
of (including as a result of a liquidation or
dissolution of), any Subsidiary of TEC;
(ii) CIH and each Foreign Restricted Subsidiary may
acquire by merger (provided that in the case of
CIH it is thereafter a Qualified Survivor or in
the case of a Foreign Restricted Subsidiary, the
survivor is a Qualified Survivor and is thereafter
a Combined TEC Group Entity), or may acquire the
capital stock or other equity interests of or in,
or may acquire all or a portion of the assets of
(including as a result of a liquidation or
dissolution of), any other Foreign Subsidiary;
(iii) any Domestic Restricted Subsidiary may acquire by
merger (provided that in the case of a Domestic
Restricted Subsidiary which is a Guarantor, it is
thereafter a Qualified Survivor and in the case of
any other Domestic Restricted Subsidiary which is
not a Guarantor, the survivor is a Qualified
Survivor and is thereafter a Combined TEC
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Group Entity), or may acquire the capital stock or
other equity interests of or in, or may acquire
all or a portion of the assets of (including as a
result of a liquidation or dissolution of), any
other Domestic Subsidiary or any Foreign
Subsidiary;
(iv) any Domestic Unrestricted Subsidiary may acquire
by merger (provided the survivor is a Qualified
Survivor and is thereafter a Consolidated TEC
Group Entity), or may acquire the capital stock or
other equity interests of or in, or may acquire
all or a portion of the assets of (including as a
result of a liquidation or dissolution of), any
other Domestic Unrestricted Subsidiary or any
Foreign Unrestricted Subsidiary;
(v) any Foreign Unrestricted Subsidiary may acquire by
merger (provided the survivor is a Qualified
Survivor and is thereafter a Consolidated TEC
Group Entity), or may acquire the capital stock or
other equity interests of or in, or may acquire
all or a portion of the assets of (including as a
result of a liquidation or dissolution of), any
other Foreign Unrestricted Subsidiary;
(vi) each Combined TEC Group Entity may make
Acquisitions of Persons (other than an existing
Combined TEC Group Entity) that are or are in the
same or a similar line of business then being
conducted by any Combined TEC Group Entity
pursuant to which the acquired Person immediately
becomes a Restricted Subsidiary, if, immediately
after giving effect to any such Acquisition the
aggregate Consideration paid or given by the
Combined TEC Group with respect to all
Acquisitions then made by the Combined TEC Group
pursuant to this clause (vi) does not exceed the
then applicable Acquisition Cap; and
(vii) each Consolidated TEC Group Entity may make
Acquisitions of Persons (other than an existing
Consolidated TEC Group Entity) that are or are in
the same or a similar line of business then being
conducted by any Consolidated TEC Group Entity
pursuant to which the acquired Person immediately
becomes an Unrestricted Subsidiary or Joint
Venture;
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PROVIDED, HOWEVER, that any of the foregoing which involves the merger of an
Unrestricted Subsidiary into a Combined TEC Group Entity, the acquisition of
assets of an Unrestricted Subsidiary by a Combined TEC Group Entity, or an
Acquisition permitted in clause (vi) or (vii) above shall be permitted only if
(A) both immediately before and after the
consummation of the transaction there exists no
Event of Default or Potential Default,
(B) the Borrowers are in compliance with their
representations, warranties and covenants
hereunder after giving effect to the transaction,
(C) in the event the proposed transaction is for
Consideration in excess of $1,500,000, the
Borrowers shall have computed the Leverage Ratio
(in the manner required in the definition thereof)
as of the date (the "Transaction Date") of such
transaction and there shall be an adjustment of
the fees and interest rates effective on the
Transaction Date if the Leverage Ratio Status
changes on such date, and
(D) there was delivered to the Agent no later than
five (5) Business Days after the Transaction Date
a certificate in the form of Exhibit 8.2.5 (the
"Transaction Notice Certificate") executed by an
Executive Officer of TEC certifying as to
compliance with the foregoing clauses (A), (B) and
(C) above;
and PROVIDED FURTHER, that if, as a result of any such permitted transaction, a
Domestic Subsidiary that is not a Material Domestic Subsidiary thereby becomes
such, it shall have become a Guarantor and delivered to the Agent on or before
the closing of such transaction a signature page to the Master Guarantee
Agreement and the Master Intercompany Subordination Agreement.
8.2.6 DISPOSITIONS OF ASSETS OR RESTRICTED SUBSIDIARIES.
Each Borrower shall not, and shall not permit any Restricted
Subsidiary to, sell, convey, assign, lease, abandon, spin-off as an in-kind
dividend distribution or otherwise transfer or dispose of, voluntarily or
involuntarily, any of its properties or assets, tangible or intangible
(including sale, assignment, discount or other disposition of accounts, contract
rights, chattel paper, equipment or general intangibles with or without recourse
or of capital stock, partnership interests or other equity interests issued by a
Subsidiary of TEC), except as permitted by Sections 8.2.3 or 8.2.5 and except as
follows:
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(i) transactions involving the sale of inventory in
the ordinary course of business;
(ii) any sale, transfer, lease or abandonment of assets
in the ordinary course of business which are no
longer necessary or required in the conduct of
such Combined TEC Group Entity's business;
(iii) any sale, transfer or lease of assets by a
Combined TEC Group Entity to any other Combined
TEC Group Entity not otherwise addressed in
Section 8.2.5;
(iv) the sale of a particular line of business and for
a minimum purchase price identified in a separate
letter from TEC to the Agent of even date with
this Agreement;
(v) any sale/leaseback transaction by any Combined TEC
Group Entity provided that upon the closing
thereof the present value of the Consideration to
be received by the seller in respect of the sale
(without netting any required payments under the
lease) together with all such Consideration in
respect of all other sale/leaseback transactions
consummated on and after the Closing Date does not
exceed 5% of Combined Net Worth measured as of the
end of the most recent fiscal quarter;
(vi) any licensing of intellectual property in the
ordinary course of business; and
(vii) any sale of assets, other than those specifically
excepted pursuant to clauses (i) through (vi)
above, provided that upon the closing thereof the
present value of the Consideration to be received
by the seller in respect of the sale together with
all such Consideration in respect of all other
such sale transactions consummated on and after
the Closing Date does not exceed $30,000,000 in
any fiscal year of TEC in the aggregate.
PROVIDED, HOWEVER, that no transactions identified in clauses (iv), (v), or
(vii) above shall be permitted unless:
(A) both immediately before and after the
consummation of the transaction there exists no
Event of Default or Potential Default,
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(B) the Borrowers are in compliance with their
representations, warranties and covenants
hereunder after giving effect to the transaction,
(C) in the event the proposed transaction is for
Consideration in excess of $1,500,000, the
Borrowers shall have computed the Leverage Ratio
(in the manner required in the definition thereof)
as of the date (the "Transaction Date") of such
transaction and there shall be an adjustment of
the fees and interest rates effective on the
Transaction Date if the Leverage Ratio Status
changes on such date, and
(D) there was delivered to the Agent no later than
five (5) Business Days after the Transaction Date
a Transaction Notice Certificate executed by an
Executive Officer of TEC certifying as to
compliance with the foregoing clauses (A), (B) and
(C) above.
As of the end of each fiscal year of TEC, it shall be determined whether
during such year the Combined TEC Group received Consideration aggregating in
excess of $5,000,000 with respect to transactions occurring during such year
under clauses (iv), (v) and (vii) above (such amount, if any, in excess of
$5,000,000 being herein called the "Excess Consideration"). If so, and if as of
the end of such fiscal year of TEC, the Combined TEC Group in the aggregate has
not made Qualified Investments during such fiscal year in an amount equal to the
Excess Consideration received during such fiscal year, then, subject to the
provisions of the final sentence of this paragraph, TEC shall make a mandatory
prepayment of the Term Loans pursuant to Section 5.5.1 in an amount equal to 75%
of the amount by which such Excess Consideration received during such fiscal
year exceeds such Qualified Investments made during such fiscal year. As used in
the foregoing sentence, "Qualified Investments" for any fiscal year period of
determination means the sum (determined in each case for the Combined TEC Group
in the aggregate during the relevant fiscal year) of the following: (i) capital
expenditures in excess of $9,000,000 made by any Combined TEC Group Entity
during such fiscal year, PLUS (ii) Acquisitions permitted pursuant to Section
8.2.5(vi) and made during such fiscal year. Notwithstanding anything contained
herein to the contrary, if any transaction described in clause (iv) shall be
consummated, TEC shall not be required to make a prepayment of the Term Loans
with any Excess Consideration which is attributable to such transaction until
six (6) months have elapsed since the closing thereof, and any Qualified
Investments made during such six (6) month period shall be deemed to be made
with the proceeds of such transaction.
8.2.7 AFFILIATE TRANSACTIONS.
Except as set forth on SCHEDULE 8.2.7 each of the Borrowers
shall not, and shall not permit any Consolidated TEC Group Entity to, enter into
or carry out any transaction with any of its Affiliates (including purchasing
property or services from or selling property or
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services to any Affiliate of any Loan Party) unless such transaction is not
otherwise prohibited by this Agreement and, is entered into in the ordinary
course of business upon fair and reasonable arm's-length terms and conditions or
is approved by the applicable Borrower's independent Board of Directors or an
appropriate committee thereof as being upon fair and reasonable arm's length
terms and conditions (including without limitation employment arrangements with
any Executive Officer of a Consolidated TEC Group Entity), all of which are
fully disclosed to the Agent and the Banks and are in accordance with all
applicable Law.
8.2.8 GUARANTIES BY MATERIAL DOMESTIC SUBSIDIARIES.
Each Borrower shall not, and shall not permit any of its
Subsidiaries to, own or create directly or indirectly any Material Domestic
Subsidiary which has not joined the Master Guarantee Agreement as a Guarantor
and executed the Master Intercompany Subordination Agreement.
8.2.9 CONTINUATION OF OR CHANGE IN BUSINESS.
Each Borrower shall not, and shall not permit any other
Consolidated TEC Group Entity to, engage in any line of business other than
substantially those lines of businesses as conducted and operated by the
Consolidated TEC Group on the Closing Date and those businesses reasonably
related thereto.
8.2.10 PLANS AND BENEFIT ARRANGEMENTS.
Each of the Borrowers shall not, and shall not permit any of
its Restricted Subsidiaries to:
(i) fail to satisfy the minimum funding requirements
of ERISA and the Internal Revenue Code with
respect to any Plan where such would result in a
Material Adverse Change;
(ii) request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which,
alone or in conjunction with any other
circumstances or set of circumstances resulting in
liability under ERISA, would constitute a Material
Adverse Change;
(iv) permit the aggregate actuarial present value of
all benefit liabilities (whether or not vested)
under the Plans, determined on an ongoing basis,
as disclosed in the most recent actuarial report
completed with respect to each such
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Plan, to exceed, as of any actuarial valuation
date, 120% of the fair market value of the assets
of such Plans;
(v) fail to make when due any contribution to any
Multiemployer Plan that TEC or any member of the
ERISA Group may be required to make under any
agreement relating to such Multiemployer Plan, or
any Law pertaining thereto where such would result
in a Material Adverse Change;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under
Section 4062(e) of ERISA to withdraw) from any
Multiple Employer Plan, where any such withdrawal
would result in a material liability of TEC or any
member of the ERISA Group;
(vii) terminate, or institute proceedings to terminate,
any Plan, where such termination would result in a
material liability to TEC or any member of the
ERISA Group;
(viii) make any amendment to any Plan with respect to
which security is required under Section 307 of
ERISA; or
(ix) fail to give any and all notices and make all
disclosures and governmental filings required
under ERISA or the Internal Revenue Code, where
such failure would result in a Material Adverse
Change.
8.2.11 FISCAL YEAR.
Each Borrower shall not, and shall not permit any other
Consolidated TEC Group Entity to, change its fiscal year from the fiscal year
ending on October 31 each year.
8.2.12 ISSUANCE OF STOCK.
Each Borrower shall not, and shall not permit any other
Consolidated TEC Group Entity to, issue any additional shares of its capital
stock or any options, warrants or other rights in respect thereof other than to
another Consolidated TEC Group Entity or to a Person which becomes a
Consolidated TEC Group Entity, including as a result thereof. Notwithstanding
the foregoing, nothing contained herein shall prohibit TEC from issuing shares
of its capital stock or other equity interests of TEC.
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8.2.13 CHANGES IN ORGANIZATIONAL DOCUMENTS.
Except as permitted by Section 8.2.5, each of the Borrowers
shall not, and shall not permit any of its Restricted Subsidiaries to, amend in
any respect its certificate of incorporation (including any provisions or
resolutions relating to capital stock), by-laws or other organizational
documents without providing at least five (5) calendar days' prior written
notice to the Agent and the Banks and, in the event such change would be adverse
to the Banks as determined by the Required Banks in their sole discretion,
obtaining the prior written consent of the Required Banks.
8.2.14 MINIMUM FIXED CHARGE COVERAGE RATIO.
The Borrowers shall not permit the Fixed Charge Coverage Ratio
to be less than as follows:
(i) 1.20 to 1.00 with respect to the relevant periods
ended on October 31, 1996, and January 31, April
30 and July 31, 1997; or
(ii) 1.50 to 1.00 with respect to each period of
determination ending on or after October 31, 1997.
8.2.15 MAXIMUM LEVERAGE RATIO.
The Borrowers shall not permit at any time during the
respective periods set forth below the Leverage Ratio to be greater than as
follows:
<TABLE>
<CAPTION>
DATES RATIO
----- -----
<S> <C>
Closing Date through October 30, 3.75 to 1.00
1997:
October 31, 1997 through October 30, 3.50 to 1.00
1998:
October 31, 1998 through October 30, 3.25 to 1.00
1999:
October 31, 1999 through October 30, 2.75 to 1.00
2000:
October 31, 2000 and thereafter: 2.50 to 1.00
</TABLE>
8.2.16 MINIMUM COMBINED NET WORTH.
The Borrowers shall not permit at any time Combined Net Worth
to be less than Base Net Worth.
8.2.17 AMENDMENTS TO CERTAIN DOCUMENTS.
The Borrowers shall not permit, without the prior written
consent of the Required Banks, any material amendment, waiver or modification to
any document, indenture, agreement or instrument evidencing any Indebtedness set
forth on SCHEDULE 6.1.24 except for
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amendments, waivers or modifications to provisions which do not change or
otherwise affect the terms of such agreements or instruments in a material
manner.
8.2.18 NO PREPAYMENT OF EXISTING INDEBTEDNESS.
The Borrowers shall not permit the prepayment, directly or
indirectly (including without limitation on the foregoing any purchase of one or
more of the notes issued thereunder or any interest or participation in any such
notes), prior to the stated maturity thereof of any principal of any
Indebtedness set forth on section 1 of SCHEDULE 6.1.24 or any notes issued in a
Qualified Note Placement.
8.3 REPORTING REQUIREMENTS.
The Borrowers covenant and agree that until payment in full of the
Loans and Reimbursement Obligations and interest thereon, expiration or
termination of all Letters of Credit and Bank Guarantees, satisfaction of all of
the Loan Parties' other Obligations hereunder and under the other Loan Documents
and termination of the Commitments, the Borrowers will furnish or cause to be
furnished to the Agent for itself and on behalf of each of the Banks (wherever
referenced in this Section 8.3, the term "consolidating" is limited to
consolidating information on a basis consistent with TEC's current accounting
practices):
8.3.1 QUARTERLY FINANCIAL STATEMENTS.
As soon as available and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters in each
fiscal year, financial statements of (A) the Consolidated TEC Group, consisting
of a consolidated and consolidating balance sheet as of the end of such fiscal
quarter and related consolidated and consolidating statements of income,
stockholders' equity and cash flows for the fiscal quarter then ended and the
fiscal year through that date and (B) the Combined TEC Group, consisting of a
combined balance sheet as of the end of such fiscal quarter and related combined
statements of income, stockholders' equity and cash flows for the fiscal quarter
then ended and the fiscal year through that date, all in reasonable detail and
certified (subject to normal year-end audit adjustments) by the Chief Executive
Officer, President or Chief Financial Officer of TEC as having been prepared in
accordance with GAAP and as to fairness of presentation, consistently applied,
and setting forth in comparative form the respective financial statements for
the corresponding date and period in the previous fiscal year.
8.3.2 ANNUAL FINANCIAL STATEMENTS.
As soon as available and in any event within ninety (90)
calendar days after the end of each fiscal year of TEC, (A) consolidated and
consolidating financial statements of the Consolidated TEC Group consisting of a
consolidated and consolidating balance sheet as of the end of such fiscal year,
and related consolidated and consolidating statements of income, stockholders'
equity and cash flows for the fiscal year then ended, (B) combined financial
statements of the Combined TEC Group consisting of a combined balance sheet as
of the end of
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such fiscal year, and related combined statements of income, stockholders'
equity and cash flows for the fiscal year then ended, all in reasonable detail
and setting forth in comparative form the financial statements as of the end of
and for the preceding fiscal year, and with respect to the consolidated
statements, certified by independent certified public accountants of nationally
recognized standing reasonably satisfactory to the Agent. The certificate or
report of accountants shall be free of qualifications (other than any
consistency qualification that may result from a change in the method used to
prepare the financial statements as to which such accountants concur), and shall
be accompanied by a letter or report of such accountants addressed to the Agent
for the benefit of the Banks confirming TEC's calculations with respect to the
certificate to be delivered pursuant to Section 8.3.3 with respect to such
financial statements.
8.3.3 CERTIFICATE OF TEC.
Concurrently with the financial statements of TEC furnished to
the Agent and to the Banks pursuant to Sections 8.3.1 and 8.3.2, a certificate
of TEC signed by the Chief Executive Officer, President or Chief Financial
Officer of TEC, in the form of EXHIBIT 8.3.3, to the effect that, except as
described pursuant to Section 8.3.4, (i) the representations and warranties
contained in Article 6 and in the other Loan Documents are true on and as of the
date of such certificate with the same effect as though such representations and
warranties had been made on and as of such date (except representations and
warranties which expressly relate solely to an earlier date or time) and the
Loan Parties have performed and complied in all material respects with all
covenants and conditions hereof, (ii) no Event of Default or Potential Default
exists and is continuing on the date of such certificate and (iii) containing
calculations in sufficient detail to demonstrate compliance as of the date of
such financial statements with all financial covenants contained in Section 8.2.
The certificate delivered with the annual financial statements pursuant to
Section 8.3.2 shall include a determination in reasonable detail of the amount
of the mandatory prepayment, if any, required to be made pursuant to Section
8.2.6 and Section 5.5.1 related to a shortfall in Qualified Investments (as
defined in Section 8.2.6) made during such fiscal year.
8.3.4 NOTICE OF DEFAULT.
Promptly after any Executive Officer of any Consolidated TEC
Group Entity has learned of the occurrence of an Event of Default or Potential
Default, a certificate signed by the Chief Executive Officer, President or Chief
Financial Officer of TEC or such Consolidated TEC Group Entity setting forth the
details of such Event of Default or Potential Default and the action which it
proposes to take with respect thereto.
8.3.5 NOTICE OF LITIGATION.
Promptly after the commencement thereof, notice of all
actions, suits, proceedings or investigations before or by any Official Body or
any other Person against any Consolidated TEC Group Entity which involve a claim
or series of uninsured claims (provided that a claim shall be deemed to be
uninsured unless the insurance company is a reputable insurance company and has
acknowledged that the claim is covered by the applicable insurance
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policy without any reservation to challenge the applicability thereof) in excess
of $5,000,000 or which if adversely determined would reasonably be expected to
constitute a Material Adverse Change.
8.3.6 BUDGETS, FORECASTS, OTHER REPORTS AND INFORMATION.
Promptly upon their becoming available to any Consolidated TEC
Group Entity:
(i) a summary (in detail reasonably satisfactory to
the Agent) of the consolidated annual operating
budget of the Consolidated TEC Group and the
combined annual operating budget of the Combined
TEC Group, which shall be (x) certified by the
Chief Financial Officer of TEC as being prepared
based on reasonable assumptions and (y), supplied
not later than the end of the first quarter of the
fiscal year to which such budgets pertain;
(ii) any reports, notices or proxy statements generally
distributed by TEC to its stockholders on a date
no later than the date supplied to such
stockholders;
(iii) regular or periodic reports, including Forms 10-K,
10-Q and 8-K, registration statements and
prospectuses, as may be filed by TEC with the
Securities and Exchange Commission;
(iv) a copy of any order in any proceeding to which any
Consolidated TEC Group Entity is a party issued by
any Official Body, which order, if carried out,
reasonably would be expected to result in a
Material Adverse Change; and
(v) such other reports and information as any of the
Banks may from time to time reasonably request.
The Borrowers shall also notify the Banks promptly
of the enactment or adoption of any Law which
reasonably would be expected to result in a
Material Adverse Change.
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8.3.7 NOTICES REGARDING PLANS AND BENEFIT ARRANGEMENTS.
8.3.7.1 CERTAIN EVENTS.
Promptly upon becoming aware of the occurrence
thereof, notice (including the nature of the event and, when known, any action
taken or threatened by the Internal Revenue Service or the PBGC with respect
thereto) of:
(i) any Reportable Event with respect to TEC or any
other member of the ERISA Group (regardless of
whether the obligation to report said Reportable
Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject TEC
or any other member of the ERISA Group to a civil
penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan,
any Benefit Arrangement or any trust created
thereunder,
(iii) any assertion of material withdrawal liability
with respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a
Multiemployer Plan by TEC or any other member of
the ERISA Group under Title IV of ERISA (or
assertion thereof), where such withdrawal is
likely to result in material withdrawal liability,
(v) any cessation of operations (by TEC or any other
member of the ERISA Group) at a facility in the
circumstances described in Section 4063(e) of
ERISA,
(vi) withdrawal by TEC or any other member of the ERISA
Group from a Multiple Employer Plan,
(vii) a failure by TEC or any other member of the ERISA
Group to make a payment to a Plan required to
avoid imposition of a Lien under Section 302(f) of
ERISA,
(viii) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to
Section 307 of ERISA, or
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(ix) any change in the actuarial assumptions or funding
methods used for any Plan, other than those
required by GAAP, where the effect of such change
is to materially increase or materially reduce the
unfunded benefit liability or obligation to make
periodic contributions.
8.3.7.2 NOTICES OF INVOLUNTARY TERMINATION AND ANNUAL
REPORTS.
Promptly after receipt thereof, copies of (a) all
notices received by TEC or any other member of the ERISA Group of the PBGC's
intent to terminate any Plan administered or maintained by TEC or any member of
the ERISA Group, or to have a trustee appointed to administer any such Plan; and
(b) at the request of the Agent or any Bank each annual report (IRS Form 5500
series) and all accompanying schedules, the most recent actuarial reports, the
most recent financial information concerning the financial status of each Plan
administered or maintained by TEC or any other member of the ERISA Group, and
schedules showing the amounts contributed to each such Plan by or on behalf of
TEC or any other member of the ERISA Group in which any of their personnel
participate or from which such personnel may derive a benefit, and each Schedule
B (Actuarial Information) to the annual report filed by TEC or any other member
of the ERISA Group with the Internal Revenue Service with respect to each such
Plan.
8.3.7.3 NOTICE OF VOLUNTARY TERMINATION.
Promptly upon the filing thereof, copies of any Form
5310, or any successor or equivalent form to Form 5310, filed with the PBGC in
connection with the termination of any Plan.
9. DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall mean the occurrence or existence of any one
or more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
9.1.1 PAYMENTS UNDER LOAN DOCUMENTS.
Either Borrower shall fail to pay when due any principal of
any Loan (including scheduled installments, mandatory prepayments or the payment
due at maturity) or any Reimbursement Obligations or shall fail to pay within
two (2) Business Days when due any interest on any Loan or on any Reimbursement
Obligations or any other amount owing hereunder or under the other Loan
Documents after such principal, interest or other amount becomes due in
accordance with the terms hereof or thereof;
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9.1.2 BREACH OF WARRANTY.
Any representation or warranty made or deemed made at any time
by any of Borrower herein or by any of the Loan Parties in any other Loan
Document, or in any certificate, other instrument or statement furnished
pursuant to the provisions hereof or thereof, shall prove to have been false or
misleading in any material respect as of the time it was made or deemed made or
furnished;
9.1.3 BREACH OF NEGATIVE COVENANTS AND SECTIONS 8.1.12 OR
8.1.14.
Any of the Borrowers shall default in the observance or
performance of any covenant contained in Section 8.2 or the covenants contained
in Sections 8.1.12 or 8.1.14;
9.1.4 BREACH OF OTHER COVENANTS.
Any of the Borrowers shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document and such default shall continue unremedied for a period of thirty
(30) Business Days after any Executive Officer of a Borrower becomes aware of
the occurrence thereof (such grace period to be applicable only in the event
such default can be remedied by corrective action of the Borrowers as determined
by the Agent in its sole discretion);
9.1.5 DEFAULTS IN OTHER AGREEMENTS OR INDEBTEDNESS.
If a breach, default or event of default shall occur at any
time under the terms of any other agreement involving borrowed money or the
extension of credit or any other Indebtedness under which any Consolidated TEC
Group Entity may be obligated as a borrower or guarantor in excess of $5,000,000
in the aggregate and such breach, default or event of default consists of the
failure to pay (beyond any period of grace permitted with respect thereto) any
indebtedness when due (whether at stated maturity, by acceleration or otherwise)
or such breach or default permits or causes the acceleration of any Indebtedness
or the termination of any commitment to lend; provided, however, that no default
shall exist under this Section 9.1.5 if any such breach, default or event of
default described herein is waived in a manner that fully cures or eliminates
such breach, default or event of default except that if (i) such waiver is with
respect to a breach, default or event of default arising under the agreement in
question which is the result of (A) the failure by a Consolidated TEC Group
Entity to (1) make any payments of principal or interest under such agreement
when due thereunder or (2) comply with any financial covenants set forth in such
agreement or (B) any representation or warranty made by a Consolidated TEC Group
Entity in such agreement proving to be false or misleading in any material
respect at the time such representation or warranty was made or deemed made, or
(ii) the Indebtedness under such agreement actually is accelerated as a result
of such breach, default or event of default, then a default shall exist under
this Section 9.1.5, notwithstanding any waiver described herein or rescission of
acceleration.
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9.1.6 FINAL JUDGMENTS OR ORDERS.
Any final judgments or orders for the payment of money in
excess of $5,000,000 in the aggregate shall be entered against any Consolidated
TEC Group Entity by a court having jurisdiction in the premises, which judgment
either (i) is not discharged, vacated, bonded or stayed pending appeal within a
period of sixty (60) days from the date of entry, or (ii) is not fully insured
(provided that a judgment shall be deemed to be uninsured unless the insurance
company is a reputable insurance company and has acknowledged that the judgment
is covered by the applicable insurance policy without any reservation to
challenge the applicability thereof) or any Consolidated TEC Group Entity's
assets having a book value in excess of $5,000,000 are attached, seized, levied
upon or subjected to a writ or distress warrant; or such come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors and the same is not cured within sixty (60) days thereafter;
9.1.7 LOAN DOCUMENT UNENFORCEABLE.
Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested;
9.1.8 NOTICE OF LIEN OR ASSESSMENT.
A notice of Lien or assessment in excess of $5,000,000 which
is not a Permitted Lien is filed of record or otherwise created with respect to
all or any part of any Consolidated TEC Group Entity's assets by the United
States or the United Kingdom, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other governmental agency,
including the PBGC, or if any taxes or debts owing at any time or times
hereafter to any one of these becomes payable and the same is not paid within
sixty (60) days after the same becomes payable (unless the validity or amount
thereof is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed);
9.1.9 INSOLVENCY.
A Borrower, any Material Subsidiary, or one or more
Consolidated TEC Group Entities which individually or in the aggregate represent
more than five percent (5%) of the book value of the consolidated assets of the
Consolidated TEC Group, ceases to be able to pay its debts as they become due,
admits in writing its inability to pay its debts as they mature or is no longer
Solvent;
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9.1.10 EVENTS RELATING TO PLANS AND BENEFIT ARRANGEMENTS.
Any of the following occurs: (i) any Reportable Event, which
the Agent and the Required Banks determine in good faith constitutes grounds for
the termination of any Plan by the PBGC or the appointment of a trustee to
administer or liquidate any Plan, shall have occurred and be continuing; (ii)
proceedings shall have been instituted or other action taken to terminate any
Plan, or a termination notice shall have been filed with respect to any Plan;
(iii) a trustee shall be appointed to administer or liquidate any Plan; (iv) the
PBGC shall give notice of its intent to institute proceedings to terminate any
Plan or Plans or to appoint a trustee to administer or liquidate any Plan; and,
in the case of the occurrence of (i), (ii), (iii) or (iv) above, the Agent
determines in good faith that the amount of TEC's liability is likely to exceed
10% of its Consolidated Net Worth; (v) TEC or any member of the ERISA Group
shall fail to make any contributions when due to a Plan or a Multiemployer Plan;
(vi) TEC or any other member of the ERISA Group shall make any amendment to a
Plan with respect to which security is required under Section 307 of ERISA;
(vii) TEC or any other member of the ERISA Group shall withdraw completely or
partially from a Multiemployer Plan; (viii) TEC or any other member of the ERISA
Group shall withdraw (or shall be deemed under Section 4062(e) of ERISA to
withdraw) from a Multiple Employer Plan; or (ix) any applicable Law is adopted,
changed or interpreted by any Official Body with respect to or otherwise
affecting one or more Plans, Multiemployer Plans or Benefit Arrangements and,
with respect to any of the events specified in (v), (vi), (vii), (viii) or (ix),
the Agent and the Required Banks determine in good faith that any such
occurrence would be reasonably likely to materially and adversely affect the
total enterprise represented by TEC and the other members of the ERISA Group;
9.1.11 CESSATION OF BUSINESS.
Except as permitted by Section 8.2.5 or Section 8.2.6, a
Borrower, a Material Subsidiary, or one or more other Consolidated TEC Group
Entities which individually or in the aggregate represent more than five percent
(5%) of the book value of the consolidated assets of the Consolidated TEC Group,
ceases to conduct its or their business as contemplated or is enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of its business and such injunction, restraint or other preventive
order is not dismissed within thirty (30) days after the entry thereof;
9.1.12 CHANGE OF CONTROL.
(i) Any person or group of persons (within the meaning of
Section 13(a) or 14(a) of the Securities Exchange Act of 1934, as amended) shall
have acquired beneficial ownership of (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) 20% or
more of the voting capital stock of TEC; or (ii) within a period of twelve (12)
consecutive calendar months, individuals who were directors on the board of
directors of TEC on the first day of such period together with any directors
whose election by such board of directors or whose nomination for election by
the shareholders was approved by a
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vote of the majority of the directors then in office shall cease to constitute a
majority of the board of directors of TEC;
9.1.13 INVOLUNTARY PROCEEDINGS.
An Insolvency Proceeding shall have been instituted by a
Person other than a Consolidated TEC Group Entity in a court having jurisdiction
in the premises seeking a decree or order for relief in respect of a
Consolidated TEC Group Entity, and such proceeding shall remain undismissed or
unstayed and in effect for a period of sixty (60) consecutive days (in the
United States) or fourteen (14) consecutive days in England and Wales or such
court shall enter a decree or order granting any of the relief sought in such
proceeding; unless in the case of any Consolidated TEC Group Entity that is not
a Borrower or a Material Subsidiary, the same would not be a Material Adverse
Change.
9.1.14 VOLUNTARY PROCEEDINGS.
A Borrower or any Material Subsidiary shall, or if it would be
a Material Adverse Change any other Subsidiary shall, commence a voluntary
Insolvency Proceeding, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.
9.1.15 MATERIAL ADVERSE CHANGE.
There shall have occurred a Material Adverse Change.
9.2 CONSEQUENCES OF EVENT OF DEFAULT.
9.2.1 EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY OR
REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Sections 9.1.1 through
9.1.12 shall occur and be continuing, the Banks and the Agent shall be under no
further obligation to make Loans or issue Letters of Credit or Bank Guarantees,
as the case may be, and the Agent may, and upon the request of the Required
Banks, shall (i) by written notice to the Borrowers, terminate the Commitments,
declare the unpaid principal amount of the Notes and all Reimbursement
Obligations then outstanding and all interest accrued thereon, any unpaid fees
and all other Indebtedness of the Borrowers to the Banks hereunder and
thereunder to be forthwith due and payable, and the same shall thereupon become
and be immediately due and payable to the Agent for the benefit of each Bank
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, and (ii) require TEC and/or CIH to, and TEC
or CIH (as applicable) shall thereupon, deposit in a non-interest bearing
account with the Agent or as the Agent may direct, as cash collateral for its
Obligations under the Loan Documents, an amount equal to the maximum amount
currently or at any time thereafter available to be drawn on all outstanding
Letters of Credit or Bank Guarantees, and each of TEC and CIH (as applicable)
hereby pledges to the Agent and the Banks, and grants to the Agent and the Banks
a
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security interest in, all such cash as security for such Obligations and
agrees to grant such other security over such cash collateral as the Agent may
require. Upon the curing of all existing Events of Default to the satisfaction
of the Required Banks, the Agent shall return (or cause to be returned) such
cash collateral to TEC;
9.2.2 BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Section 9.1.13 or
9.1.14 shall occur, the Commitments shall automatically terminate, the Banks
shall make no Loans hereunder and the unpaid principal amount of the Notes, and
all Reimbursement Obligations then outstanding and all interest accrued thereon,
any unpaid fees and all other Indebtedness of TEC to the Banks hereunder and
thereunder shall be immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived;
9.2.3 SET-OFF.
If an Event of Default shall occur and be continuing, any Bank
to whom any Obligation is owed by any Loan Party hereunder or under any other
Loan Document or any participant of such Bank which has agreed in writing to be
bound by the provisions of Section 10.13 and any branch, Subsidiary or Affiliate
of such Bank or participant anywhere in the world shall have the right, subject
to the approval of the Required Banks, in addition to all other rights and
remedies available to it, to set off against and apply to the then unpaid
balance of all the Loans and all other Obligations of the Borrowers and the
other Loan Parties hereunder or under any other Loan Document any debt owing to,
and any other funds held in any manner for the account of, a Borrower or such
other Loan Party by such Bank or participant or by such branch, Subsidiary or
Affiliate, including all funds in all deposit accounts (whether time or demand,
general or special, provisionally credited or finally credited, or otherwise)
now or hereafter maintained by a Borrower or such other Loan Party for its own
account (but not including funds held in custodian or trust accounts) with such
Bank or participant or such branch, Subsidiary or Affiliate; provided, however,
that the Agent shall use reasonable, good faith efforts to notify the applicable
Loan Party of the exercise of such right of set-off as soon as possible after
such exercise . Such right shall exist whether or not any Bank or the Agent
shall have made any demand under this Agreement or any other Loan Document,
whether or not such debt owing to or funds held for the account of a Borrower or
such other Loan Party is or are matured or unmatured and regardless of the
existence or adequacy of any collateral, any Guarantee or any other security,
right or remedy available to any Bank or the Agent;
9.2.4 SUITS, ACTIONS, PROCEEDINGS.
If an Event of Default shall occur and be continuing, and
whether or not the Agent shall have accelerated the maturity of Loans pursuant
to any of the foregoing provisions of this Section 9.2, the Agent or any Bank,
with the approval of the Required Banks, if owed any amount with respect to the
Notes, may proceed to protect and enforce its rights by suit in equity, action
at law and/or other appropriate proceeding, whether for the specific performance
of any covenant or agreement contained in this Agreement or the Notes, including
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as permitted by applicable Law the obtaining of the EX PARTE appointment of a
receiver, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right of the Agent or such Bank;
9.2.5 APPLICATION OF PROCEEDS.
From and after the date on which the Agent has taken any
action pursuant to this Section 9.2 and until all Obligations of the Loan
Parties have been paid in full, any and all proceeds received by the Agent from
any sale or other disposition of any collateral, or any part thereof, the
exercise of any other remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the Banks for
reasonable out-of-pocket costs, expenses and
disbursements, including reasonable attorneys' and
paralegals' fees and legal expenses, incurred by
the Agent or the Banks in connection with
realizing on any collateral or collection of any
Obligations of any of the Loan Parties under any
of the Loan Documents, including advances made by
the Banks or any one of them or the Agent for the
reasonable maintenance, preservation, protection
or enforcement of, or realization upon, any
collateral, including advances for taxes,
insurance, repairs and the like and reasonable
expenses incurred to sell or otherwise realize on,
or prepare for sale or other realization on, any
collateral;
(ii) second, to the repayment of all Indebtedness then
due and unpaid of the Loan Parties to the Banks
incurred under this Agreement or any of the other
Loan Documents, whether of principal, interest,
fees, expenses or otherwise, in such manner as the
Agent may determine in its discretion; and
(iii) the balance, if any, to the Borrowers or as
required by Law.
9.2.6 OTHER RIGHTS AND REMEDIES.
The Agent may, and upon the request of the Required Banks
shall, exercise all post-default rights granted to the Agent and the Banks under
the Loan Documents or applicable Law.
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10. THE AGENT
10.1 APPOINTMENT.
Each Bank hereby irrevocably designates, appoints and authorizes Mellon
Bank, N.A. to act as Agent for such Bank under this Agreement and to execute and
deliver or accept on behalf of each of the Banks the other Loan Documents. Each
Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and any other instruments and agreements referred to herein, and
to exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. Mellon Bank, N.A. agrees to act as
the Agent on behalf of the Banks to the extent provided in this Agreement.
10.2 DELEGATION OF DUTIES.
The Agent may perform any of its respective duties hereunder by or
through agents or employees (PROVIDED such delegation does not constitute a
relinquishment of its duties as Agent) and, subject to Sections 10.5 and 10.6,
shall be entitled to engage and pay for the advice or services of any attorneys,
accountants or other experts concerning all matters pertaining to its duties
hereunder and to rely upon any advice so obtained.
10.3 NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION.
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature. Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Each Bank expressly acknowledges (i) that the Agent
has not made any representations or warranties to it and that no act by the
Agent hereafter taken, including any review of the affairs of any Consolidated
TEC Group Entity, shall be deemed to constitute any representation or warranty
by the Agent to any Bank; (ii) that it has made and will continue to make,
without reliance upon the Agent, its own independent investigation of the
financial condition and affairs and its own appraisal of the creditworthiness of
each of the Consolidated TEC Group Entities in connection with this Agreement
and the making and continuance of the Loans hereunder; and (iii) except as
expressly provided herein, that the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Bank with any credit
or other information with respect thereto, whether coming into its possession
before the making of any Loan or at any time or times thereafter.
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10.4 ACTIONS IN DISCRETION OF AGENT; INSTRUCTIONS FROM THE BANKS.
The Agent agrees, upon the written request of the Required Banks, to
take or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, PROVIDED that the Agent shall not
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
Law. In the absence of a request by the Required Banks, the Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Banks or
all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
10.6. Subject to the provisions of Section 10.6, no Bank shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks, or in the absence of such instructions, in the absolute
discretion of the Agent.
10.5 REIMBURSEMENT AND INDEMNIFICATION OF AGENT BY THE BORROWERS.
The Borrowers agree unconditionally upon demand to pay or reimburse the
Agent and to save the Agent harmless against (i) liability for the payment of
all reasonable out-of-pocket costs, expenses and disbursements, including fees
and expenses of counsel, appraisers and environmental consultants, except with
respect to clauses (A), (B) and (C) below, incurred by the Agent (a) in
connection with the development, negotiation, preparation, printing, execution,
syndication, administration, performance and interpretation of this Agreement
and the other Loan Documents, and other instruments and documents to be
delivered hereunder, (b) relating to any amendments, waivers or consents
pursuant to provisions hereof, (c) in connection with the enforcement of this
Agreement or any other Loan Document, or collection of amounts due hereunder or
thereunder or the proof and allowability of any claim arising under this
Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (d) in any workout, restructuring or in connection
with the protection, preservation, exercise or enforcement of any of the terms
hereof or of any rights hereunder or under any other Loan Document or in
connection with any foreclosure, collection or bankruptcy proceedings; (ii) all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted by or asserted against the Agent, in its
capacity as such, as a result of the use of the proceeds of the Loans; and (iii)
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
such, in any way relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by the Agent hereunder or thereunder,
PROVIDED that the Borrowers shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (A) if the same results from the Agent's gross
negligence or willful misconduct, or (B) if the applicable Borrower was not
given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that such Borrower shall remain liable
to the extent such failure to give notice does not result in a loss to
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such Borrower), or (C) if the same results from a compromise or settlement
agreement entered into without the consent of the applicable Borrower, which
shall not be unreasonably withheld. In addition, the Borrowers agree to
reimburse and pay all reasonable out-of-pocket expenses of the Agent's regular
employees and agents engaged to perform audits of the books, records and
properties of the Consolidated TEC Group. Notwithstanding the foregoing, CIH's
liability for the foregoing shall be limited to a PRO RATA share based on the
Commitments.
10.6 EXCULPATORY PROVISIONS.
None of the Agent or any of its respective directors, officers,
employees, agents, attorneys or Affiliates shall (a) be liable to any Bank for
any action taken or omitted to be taken by it or them hereunder, or in
connection herewith including pursuant to any Loan Document, unless caused by
its or its respective directors, officers, employees, agents, attorneys or
Affiliates own gross negligence or willful misconduct, (b) be responsible in any
manner to any of the Banks for the effectiveness, enforceability, genuineness,
validity or due execution of this Agreement or any other Loan Documents or for
any recital, representation, warranty, document, certificate, report or
statement herein or made or furnished under or in connection with this Agreement
or any other Loan Documents, or (c) be under any obligation to any of the Banks
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of the Loan
Parties, or the financial condition of the Loan Parties, or the existence or
possible existence of any Event of Default or Potential Default. None of the
Agent or any Bank or any of their respective directors, officers, employees,
agents, attorneys or Affiliates shall be liable to any of the Loan Parties for
any consequential, special or indirect damages, losses or expenses (including
without limitation, counsel fees) resulting from any breach of contract, tort or
other wrong in connection with the negotiation, documentation, administration or
collection of the Loans or any of the Loan Documents.
10.7 REIMBURSEMENT AND INDEMNIFICATION BY BANKS OF THE AGENT.
Each Bank agrees to reimburse and indemnify the Agent (to the extent
not reimbursed by the Borrowers and without limiting the Obligation of the
Borrowers to do so) in proportion to its Ratable Share from and against 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 such or
in its capacity of issuing Letters of Credit or Bank Guarantees, in any way
relating to or arising out of this Agreement or any other Loan Documents or any
action taken or omitted by the Agent hereunder or thereunder, PROVIDED that no
Bank shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
(a) if the same results from the Agent's gross negligence or willful misconduct,
or (b) if such Bank was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense (except that
such Bank shall remain liable to the extent such failure to give notice does not
result in a loss to the Bank), or (c) if the same results from a compromise and
settlement agreement entered into without the consent of such Bank, which shall
not be unreasonably withheld. In addition, each Bank agrees promptly upon demand
to
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reimburse the Agent (to the extent not reimbursed by the Borrowers and
without limiting the Obligation of the Borrowers to do so) in proportion to its
Ratable Share for all amounts due and payable by the Borrowers to the Agent in
connection with the Agent's periodic audit of the Loan Parties' books, records
and business properties.
10.8 RELIANCE BY AGENT.
The Agent shall be entitled to rely upon any writing, telegram, telex
or teletype message, resolution, notice, consent, certificate, letter,
cablegram, statement, order or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon the advice and opinions of
counsel and other professional advisers selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense (other than a liability or expense relating to gross
negligence or willful misconduct) which may be incurred by it by reason of
taking or continuing to take any such action.
10.9 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Potential Default or Event of Default unless the Agent has
received written notice from a Bank or the Borrowers referring to this
Agreement, describing such Potential Default or Event of Default and stating
that such notice is a "notice of default."
10.10 NOTICES.
The Agent shall promptly send to each Bank a copy of all notices and
other documents received from the Borrowers pursuant to the provisions of this
Agreement or the other Loan Documents promptly upon receipt thereof. The Agent
shall promptly notify the Borrowers and the other Banks of each change in the
Base Rate and the effective date thereof.
10.11 BANKS IN THEIR INDIVIDUAL CAPACITIES.
With respect to the Commitments and the Loans made by it, 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 term "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates and each of the Banks and their
respective Affiliates may, without liability to account, except as prohibited
herein, make loans to, accept deposits from, discount drafts for, act as trustee
under indentures of, and generally engage in any kind of banking or trust
business with, the Consolidated TEC Group and their Affiliates, in the case of
the Agent, as though it were not acting as Agent hereunder and in the case of
each Bank, as though such Bank were not a Bank hereunder.
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10.12 HOLDERS OF NOTES.
The Agent may deem and treat any payee of any Note as the owner thereof
for all purposes hereof unless and until written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority or
consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
10.13 EQUALIZATION OF BANKS.
The Banks and the holders of any participations in any Notes agree
among themselves that, with respect to all amounts received by any Bank or any
such holder for application on any Obligation hereunder or under any Note or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Sections 4.4.2 or 5.6.1. The Banks or any such holder
receiving any such amount shall purchase for cash from each of the other Banks
an interest in such Bank's Loans in such amount as shall result in a ratable
participation by the Banks and each such holder in the aggregate unpaid amount
under the Notes, PROVIDED that if all or any portion of such excess amount is
thereafter recovered from the Bank or the holder making such purchase, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, together with interest or other amounts, if any, required by law
(including court order) to be paid by the Bank or the holder making such
purchase.
10.14 SUCCESSOR AGENT.
The Agent (i) may resign as Agent or (ii) shall resign if such
resignation is requested by the Required Banks (if the Agent is a Bank, the
Agent's Loans and its Commitment shall be considered in determining whether the
Required Banks have requested such resignation), in either case of (i) or (ii)
by giving not less than thirty (30) days' prior written notice to the Borrowers.
If the Agent shall resign under this Agreement, then subject to the consent of
the Borrowers (which consent shall not be unreasonably withheld and which
consent shall not be required during any period in which an Event of Default
exists) either (a) the Required Banks shall appoint from among the Banks a
successor agent for the Banks, or (b) if a successor agent shall not be so
appointed and approved within the thirty (30) day period following the Agent's
notice to the Banks of its resignation, then the Agent shall appoint a successor
agent who shall serve as Agent until such time as the Required Banks appoint a
successor agent. Upon its appointment, such successor agent shall succeed to the
rights, powers and duties of the Agent and the term "Agent" shall mean such
successor effective upon its appointment, and the former Agent's rights, powers
and duties as Agent shall be terminated without any other or further act or deed
on the part of such former Agent or any of the parties to this Agreement. After
the
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resignation of any Agent hereunder, the provisions of this Article 10 shall
inure to the benefit of such former Agent and such former Agent shall not by
reason of such resignation be deemed to be released from liability for any
actions taken or not taken by it while it was an Agent under this Agreement.
Notwithstanding anything herein to the contrary, any successor Agent must have a
London lending office so long as the CIH Revolving Credit Commitments, any Bank
Gurarantees or any CIH Bid Loans remain outstanding or in effect.
10.15 OTHER FEES.
The Borrowers shall pay to the Agent the fees, including in the case of
TEC a non-refundable fee (the "Bid Loan Processing Fee") in connection with each
processing of a Bid Loan Request (collectively the "Agent's Fees") due pursuant
to that certain commitment letter and related fee letter, each dated October 15,
1996 at the times and in the amounts set forth in such letters.
10.16 AVAILABILITY OF FUNDS.
Unless the Agent shall have been notified by a Bank prior to the date
upon which a Loan is to be made that such Bank does not intend to make available
to the Agent such Bank's portion of such Loan, the Agent may assume that such
Bank has made or will make such proceeds available to the Agent on such date and
the Agent may, in reliance upon such assumption (but shall not be required to),
make available to the Borrowers a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Bank, the Agent shall
be entitled to recover such amount on demand from such Bank (or, if such Bank
fails to pay such amount forthwith upon such demand, from the Borrowers)
together with interest thereon, in respect of each day during the period
commencing on the date such amount was made available to the Borrowers and
ending on the date the Agent recovers such amount, at a rate per annum equal to
the Federal Funds Effective Rate.
10.17 CALCULATIONS.
In the absence of gross negligence or willful misconduct, the Agent
shall not be liable for any error in computing the amount payable to any Bank
whether in respect of the Loans, fees or any other amounts due to the Banks
under this Agreement. In the event an error in computing any amount payable to
any Bank is made, the Agent, the Borrowers and each affected Bank shall,
forthwith upon discovery of such error, make such adjustments as shall be
required to correct such error, and any compensation therefor will be calculated
at the Federal Funds Effective Rate.
10.18 BENEFICIARIES.
Except as expressly provided herein, the provisions of this Article 10
are solely for the benefit of the Agent and the Banks, and the Loan Parties
shall not have any rights to rely on or enforce any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be
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deemed to have assumed any obligation toward or relationship of agency or trust
with or for any of the Loan Parties.
11. MISCELLANEOUS
11.1 MODIFICATIONS, AMENDMENTS OR WAIVERS.
With the written consent of the Required Banks, the Agent, acting on
behalf of all the Banks, and the Borrowers, on behalf of the Loan Parties, may
from time to time enter into written agreements amending or changing any
provision of this Agreement or any other Loan Document or the rights of the
Banks or the Loan Parties hereunder or thereunder, or may grant written waivers
or consents to a departure from the due performance of the Obligations of the
Loan Parties hereunder or thereunder; provided, however, that the written
consent of the Required Banks shall not be required with respect to the joinder
of additional Loan Parties pursuant to Section 11.18. Any such agreement, waiver
or consent made with such written consent shall be effective to bind all the
Banks and the Loan Parties; PROVIDED, that, without the written consent of all
the Banks, no such agreement, waiver or consent may be made which will:
11.1.1 INCREASE OF COMMITMENTS; EXTENSION OF EXPIRATION DATE.
Increase the amount of the Commitment of any Bank hereunder or
extend the Expiration Date;
11.1.2 EXTENSION OF PAYMENT; REDUCTION OF PRINCIPAL, INTEREST
OR FEES; MODIFICATION OF TERMS OF PAYMENT.
Whether or not any Loans are outstanding, extend the time for
payment of principal or interest of any Loan, the Commitment Fee or any other
fee payable to any Bank, or reduce the principal amount of or the rate of
interest borne by any Loan or reduce the Commitment Fee or any other fee payable
to any Bank, or otherwise affect the terms of payment of the principal of or
interest of any Loan, the Commitment Fee or any other fee payable to any Bank;
11.1.3 RELEASE OF GUARANTOR.
Release any Material Domestic Subsidiary from its Obligations
under the Master Guarantee Agreement; or
11.1.4 MISCELLANEOUS.
Amend Sections 5.2 [Pro Rata Treatment of Banks], 10.6
[Exculpatory Provisions] or 10.13 [Equalization of Banks] or this Section 11.1,
alter any provision regarding the pro rata treatment of the Banks, change the
definition of Required Banks, or change any requirement providing for the Banks
or the Required Banks to authorize the taking of any action hereunder.
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No agreement, waiver or consent which would modify the
interests, rights or obligations of the Agent in its capacity as Agent, or its
capacity as the issuer of Letters of Credit shall be effective without the
written consent of the Agent.
11.2 NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED.
No course of dealing and no delay or failure of the Agent or any Bank
in exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Agent and the Banks under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
11.3 REIMBURSEMENT AND INDEMNIFICATION OF BANKS BY THE BORROWERS;
TAXES.
The Borrowers agree unconditionally upon demand to pay or reimburse to
each Bank and to save each Bank harmless against (i) liability for the payment
of all reasonable out-of-pocket costs, expenses and disbursements (including
fees and expenses of counsel for each Bank except with respect to (A), (B) and
(C) below), incurred by such Bank (a) in connection with the administration and
interpretation of this Agreement, the other Loan Documents, and the other
instruments and documents to be delivered hereunder, provided such reimbursement
with respect to administration only shall be available to such Bank at a time
when an Event of Default shall have occurred and be continuing, (b) relating to
any amendments, waivers or consents pursuant to provisions hereof, (c) in
connection with the enforcement of this Agreement or any other Loan Document, or
collection of amounts due hereunder or thereunder or the proof and allowability
of any claim arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d) in any workout,
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings; (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted by or
asserted against such Bank as a result of the use of the proceeds of the Loans;
and (iii) 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 such Bank,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by such Bank
hereunder or thereunder, PROVIDED that the Borrowers shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (A) if the same results from
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such Bank's gross negligence or willful misconduct, or (B) if a Borrower was not
given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that such Borrower shall remain liable
to the extent such failure to give notice does not result in a loss to such
Borrower), or (C) if the same results from a compromise or settlement agreement
entered into without the consent of the applicable Borrower, which shall not be
unreasonably withheld. The Banks will attempt to minimize the fees and expenses
of legal counsel for the Banks which are subject to reimbursement by the
applicable Borrower hereunder by considering the usage of one law firm to
represent the Banks and the Agent if appropriate under the circumstances. The
Borrowers agree unconditionally to pay all stamp, document, transfer, recording
or filing taxes or fees and similar impositions now or hereafter determined by
the Agent or any Bank to be payable in connection with this Agreement or any
other Loan Document, and the Borrowers agree unconditionally to save the Agent
and the Banks harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions, except as provided
otherwise above.
11.4 HOLIDAYS.
Whenever any payment or action to be made or taken hereunder shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day (except as provided in
Section 4.2.1 with respect to Interest Periods under a Euro-Rate Option), and
such extension of time shall be included in computing interest or fees, if any,
in connection with such payment or action.
11.5 FUNDING BY BRANCH, SUBSIDIARY OR AFFILIATE.
11.5.1 NOTIONAL FUNDING.
Each Bank shall have the right from time to time, without
notice to the Borrowers, to deem any branch, Subsidiary or Affiliate (which for
the purposes of this Section 11.5 shall mean any corporation or association
which is directly or indirectly controlled by or is under direct or indirect
common control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any Loan to
which a Euro-Rate Option applies at any time, PROVIDED that immediately
following (on the assumption that a payment were then due from the applicable
Borrower to such other office), and as a result of such change, the applicable
Borrower would not be under any greater financial obligation pursuant to Section
5.6 than it would have been in the absence of such change. Notional funding
offices may be selected by each Bank without regard to such Bank's actual
methods of making, maintaining or funding the Loans or any sources of funding
actually used by or available to such Bank.
11.5.2 ACTUAL FUNDING.
Each Bank shall have the right from time to time to make or
maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such
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Loan subject to the last sentence of this Section 11.5.2. If any Bank causes a
branch, Subsidiary or Affiliate to make or maintain any part of the Loans
hereunder, all terms and conditions of this Agreement shall, except where the
context clearly requires otherwise, be applicable to such part of the Loans to
the same extent as if such Loans were made or maintained by such Bank, but in no
event shall any Bank's use of such a branch, Subsidiary or Affiliate to make or
maintain any part of the Loans hereunder cause such Bank or such branch,
Subsidiary or Affiliate to incur any cost or expenses payable by the applicable
Borrower hereunder or require the applicable Borrower to pay any other
compensation to any Bank (including any expenses incurred or payable pursuant to
Section 5.6) which would otherwise not be incurred.
11.5.3 CHANGES TO OTHER BRANCHES, SUBSIDIARIES OR AFFILIATES.
If a Bank claims any additional amounts payable pursuant to
Section 5.6 or that it is unable to make Loans to which a Euro-Rate Option
applies, it shall use its reasonable efforts (consistent with legal and
regulatory restrictions) to avoid the need for paying such additional amounts or
such inability, including changing the jurisdiction of its applicable lending
office or moving the Loan to a Subsidiary or Affiliate; provided, however, that
the taking of any such action would not, in the reasonable judgment of such
Bank, be disadvantageous to such Bank.
11.6 NOTICES.
All notices, requests, demands, directions and other communications (as
used in this Section 11.6, collectively referred to as "notices") given to or
made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on the signature pages hereof or in accordance with
any subsequent unrevoked written direction from any party to the others. All
notices shall, except as otherwise expressly herein provided, be effective (a)
in the case of telex or facsimile, when received, (b) in the case of
hand-delivered notice, when hand-delivered, (c) in the case of telephone, when
telephoned, PROVIDED, however, that in order to be effective, telephonic notices
must be confirmed in writing no later than the next day by letter, facsimile or
telex, (d) if given by mail, four (4) days after such communication is deposited
in the mail with first-class postage prepaid, return receipt requested, and (e)
if given by any other means (including by air courier), when delivered;
PROVIDED, that notices to the Agent shall not be effective until received. Any
Bank giving any notice to any Loan Party shall simultaneously send a copy
thereof to the Agent, and the Agent shall promptly notify the other Banks of the
receipt by it of any such notice.
11.7 SEVERABILITY.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or
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unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
11.8 GOVERNING LAW.
Each Letter of Credit and Section 2.9 shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be revised or amended
from time to time, and to the extent not inconsistent therewith, the internal
laws of the Commonwealth of Pennsylvania without regard to its conflict of laws
principles and the balance of this Agreement shall be deemed to be a contract
under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles. Each Bank Guarantee shall be governed by English Law and subject to
the non-exclusive jurisdiction of the English Courts.
11.9 PRIOR UNDERSTANDING.
This Agreement and the other documents and instruments executed in
connection herewith supersede all prior understandings and agreements, whether
written or oral, between the parties hereto and thereto relating to the
transactions provided for herein and therein, including any prior
confidentiality agreements and commitments except that the Borrowers' fee
payment obligations contained in the fee letter referred to in Section 10.15
shall continue in full force and effect.
11.10 DURATION; SURVIVAL.
All representations and warranties of the Borrowers contained herein or
made in connection herewith shall survive the making of Loans and issuance of
Letters of Credit and shall not be waived by the execution and delivery of this
Agreement, any investigation by the Agent or the Banks, the making of Loans,
issuance of Letters of Credit, or payment in full of the Loans. All covenants
and agreements of the Borrowers contained in Sections 8.1, 8.2 and 8.3 shall
continue in full force and effect from and after the date hereof so long as the
Borrowers may borrow or request Letters of Credit and Bank Guarantees hereunder
and until termination of the Commitments, repayment of all Loans and expiration
or termination of all Letters of Credit and Bank Guarantees. All covenants and
agreements of the Borrowers contained herein relating to the payment of
principal, interest, premiums, additional compensation or expenses and
indemnification, including those set forth in the Notes, Article 5 and Sections
10.5, 10.7 and 11.3, shall survive payment in full of the Loans, expiration or
termination of the Letters of Credit and Bank Guarantees and termination of the
Commitments.
11.11 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
the Banks, the Agent, the Loan Parties and their respective successors and
assigns, except that, other than as
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contemplated by Sections 8.2.5 and 8.2.6, none of the Loan Parties may assign or
transfer any of its rights and Obligations hereunder or any interest herein
without consent of all Banks. Each Bank may, at its own cost, make assignments
of or sell participations in all or any part of its Commitment and Loans and its
Revolving Credit Ratable Share of Letter of Credit/Guarantee Outstandings to one
or more banks or other entities, subject to the consent of the Borrowers (which
consent shall not be required during any period in which an Event of Default
exists) and the Agent with respect to any assignee, such consents not to be
unreasonably withheld, and PROVIDED that (i) assignments may not be made in
amounts less than $5,000,000 and (ii) after giving effect to any such
assignment, no Bank which remains a Bank thereafter shall have Commitments of
less than $10,000,000. In the case of an assignment, upon receipt by the Agent
of the Syndication Assignment and Assumption Agreement with respect to all
assignments made as part of the initial syndication of the credit facilities
under this Agreement after the Closing Date, or the Assignment and Assumption
Agreement with respect to each subsequent assignment, the assignee or assignees
shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would have if it had
been a signatory Bank hereunder, the Commitments in Section 2.1 shall be
adjusted accordingly and Schedule 1.1(B) to this Agreement shall be modified by
Schedule I to the Syndication Assignment and Assumption Agreement with respect
to all assignments made as part of the initial syndication of the credit
facilities under this Agreement after the Closing Date or by Schedule I to each
Assignment and Assumption Agreement with respect to subsequent assignments, and
upon surrender of any Notes subject to such assignment, the Borrower shall
execute and deliver new Notes to the assignee in an amount equal to the amount
of the Commitments assumed by it and new Notes to the assigning Bank in an
amount equal to the Commitments retained by it hereunder. Any assigning Bank
shall pay to the Agent a service fee in the amount of $3,500 for each
assignment, which amount shall not be subject to reimbursement or
indemnification by the Borrowers. In the case of a participation, the
participant shall only have the rights specified in Section 9.2.3 (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto and not to include any voting rights), all of such
Bank's obligations under this Agreement or any other Loan Document shall remain
unchanged, and all amounts payable by any Loan Party hereunder or thereunder
shall be determined as if such Bank had not sold such participation. Any
assignee or participant which is not incorporated under the Laws of the United
States of America or a state thereof shall deliver to the Borrowers and the
Agent (i) the form of certificate described in Section 11.17 relating to federal
income tax withholding, and (ii) if the assignment or participation includes an
interest in the Revolving Credit Commitments, the form of certificate described
in Section 11.17 relating to taxes in the United Kingdom. Each Bank may furnish
any publicly available information concerning any Consolidated TEC Group Entity
and any other information concerning any Consolidated TEC Group Entity in the
possession of such Bank from time to time to assignees and participants
(including prospective assignees or participants), PROVIDED that such assignees
and participants agree to be bound by the provisions of Section 11.12.
Notwithstanding any other language in this Agreement, any Bank may at any time
assign all or any portion of its rights under this
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Agreement and its Notes to a Federal Reserve Bank as collateral in accordance
with Regulation A and the applicable Operating Circular of such Federal Reserve
Bank.
11.12 CONFIDENTIALITY.
The Agent and the Banks each agree to keep confidential all information
obtained from any Consolidated TEC Group Entity which is nonpublic and
confidential or proprietary in nature (including any information either Borrower
specifically designates as confidential), except as provided below, and to use
such information only in connection with their respective capacities under this
Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement and who are
notified that the information is to be treated as confidential, (ii) to
assignees and participants as contemplated by Section 11.11, (iii) to the extent
requested by any bank regulatory authority or, with notice to the applicable
Borrower if not prohibited, as otherwise required by applicable Law or by any
subpoena or similar legal process, or in connection with any investigation or
proceeding arising out of the transactions contemplated by this Agreement, (iv)
if it becomes publicly available other than as a result of a breach of this
Agreement or becomes available from a source not known to be subject to
confidentiality restrictions, (v) if the applicable Borrower shall have
consented to such disclosure, or (vi) after notice to the applicable Borrower
unless such Borrower is an adverse party in such litigation, in connection with
any litigation to which any Bank is a party the subject matter of which involves
this Agreement or is deemed necessary upon the advice of legal counsel of such
Bank by such Bank in any defense of such litigation.
11.13 COUNTERPARTS.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, including facsimiles, each of which, when so
executed and delivered, shall be an original, and all such counterparts shall
together constitute one and the same instrument.
11.14 AGENT'S OR BANK'S CONSENT.
Whenever the Agent's or any Bank's consent is required to be obtained
under this Agreement or any of the other Loan Documents as a condition to any
action, inaction, condition or event, the Agent and each Bank shall be
authorized to give or withhold such consent in its sole discretion and to
condition its consent upon the giving of additional collateral, the payment of
money or any other matter.
11.15 EXCEPTIONS.
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein
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unless expressly provided, nor shall any such exceptions be deemed to permit any
action or omission that would be in contravention of applicable Law.
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE OR INCONVENIENT FORUM. EACH LOAN PARTY, THE AGENT AND THE
BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT
OR THE COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
11.17 TAX WITHHOLDING CLAUSE.
Each Bank or assignee or participant of a Bank that is not organized
under the Laws of the United States of America or a state thereof (each a
"non-US Bank") and each Bank or assignee or participant of a Bank that is not
organized under the Laws of the United Kingdom or a political subdivision
thereof (each, a "non-UK Bank") agrees that it will deliver to each of the
Borrowers and the Agent two (2) duly completed copies of the following: (i) for
a non-US Bank, United States Internal Revenue Service Form W-9, 4224 or 1001, or
other applicable form prescribed by the Internal Revenue Service, certifying
that such Bank, assignee or participant is entitled to receive payments under
this Agreement and the other Loan Documents without deduction or withholding of
any United States federal income taxes, or is subject to such tax at a reduced
rate under an applicable tax treaty, or (ii) Internal Revenue Service Form W-8
or other applicable form or a certificate of such Bank, assignee or participant
indicating that no such exemption or reduced rate is allowable with respect to
such payments and for a non-UK Bank, United Kingdom Inland Revenue Form REF FD
13, or other applicable form prescribed by Inland Revenue, certifying such Bank,
assignee, or participant is entitled to receive payments under this Agreement
and the other Loan Documents without deduction or withholding of any United
Kingdom or English income or other tax. Each Bank, assignee or participant
required to deliver to the Borrowers and the Agent a form or certificate
pursuant to the preceding sentence shall deliver such form or certificate as
follows: (A) each Bank which is a party hereto on the Closing Date shall deliver
such form or certificate at least five (5) Business Days prior to the first date
on which any interest or fees are payable by a Borrower hereunder for the
account of such
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Bank; (B) each assignee or participant shall deliver such form or certificate at
least five (5) Business Days before the effective date of such assignment or
participation (unless the Agent in its sole discretion shall permit such
assignee or participant to deliver such form or certificate less than five (5)
Business Days before such date in which case it shall be due on the date
specified by the Agent). Each Bank, assignee or participant which so delivers a
Form W-8, W-9, 4224 or 1001 or an Inland Revenue Form REF FD 13 further
undertakes to deliver to each of the Borrowers and the Agent two (2) additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the
Borrowers or the Agent, either certifying that such Bank, assignee or
participant is entitled to receive payments under this Agreement and the other
Loan Documents without deduction or withholding of any United States federal
income taxes or United Kingdom or English income and other taxes or is subject
to such tax at a reduced rate under an applicable tax treaty or stating that no
such exemption or reduced rate is allowable. The Agent shall be entitled to
withhold United States federal income taxes and Borrowers shall be entitled to
withhold United Kingdom or English income and other taxes at the full
withholding rate unless the Bank, assignee or participant (x) with respect to
United States federal income taxes, establishes an exemption or that it is
subject to a reduced rate as established pursuant to the above provisions or (y)
with respect to United Kingdom or English income or other tax, provides such
Inland Revenue form as set forth above; and, (z) with respect to any Bank, the
provisions of Section 5.8.1 and 5.8.2 shall not apply as to United Kingdom or
English law matters until such Inland Revenue form is provided as set forth in
this Section 11.17. If at any time for any reason under applicable income or
other tax Law of the United Kingdom or England the Borrowers are required to
withhold any portion of any amounts owed to any Bank under this Agreement or the
Notes, such Bank shall not be permitted to claim additional compensation under
Section 5.6 unless it has notified the Agent and the Borrowers of the change in
Law or factual circumstances giving rise to such withholding requirement within
30 days after the occurrence thereof. In such event the Borrowers shall have the
right to require the affected Bank to assign, pursuant to an Assignment and
Assumption Agreement, its entire interest in the Loans and the Loan Documents to
an assignee selected by the Borrowers and consented to by the Agent (prior to
the occurrence and continuance of an Event of Default, such consent not to be
unreasonably withheld) for a purchase price at par.
11.18 JOINDER OF SUBSIDIARIES.
Any Consolidated TEC Group Entity which is required to join the Master
Guarantee Agreement pursuant to Section 8.2.8 shall execute and deliver to the
Agent a signature page to the Master Guarantee Agreement and to the Master
Intercompany Subordination Agreement. The Borrowers shall deliver such Guarantor
Joinder and the other documents required by this Section 11.18 to the Agent
within five (5) Business Days after the date of the filing of such Subsidiary's
articles of incorporation if the Subsidiary is a corporation, the date of the
filing of its certificate of limited partnership if it is a limited partnership
or the date of its organization if it is an entity other than a limited
partnership or corporation or, if acquired, the date of acquisition. The Agent
shall have received, for its benefit and the benefit of the Banks
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opinions of such Loan Party's legal counsel in form and substance satisfactory
to the Agent together with such other documents, certificates and agreements as
the Agent may request to effectuate the provisions of this Section 11.18.
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[SIGNATURE PAGE 1 OF 2 TO CREDIT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
BORROWERS:
ATTEST: COMMERCIAL INTERTECH CORP.
By:
----------------------------------
Title:
-------------------------------
[Seal]
Address for Notices:
1775 Logan Avenue
P.O. Box 239
Youngstown, OH 44501-0239
Telecopier No. (330) 740-8400
Attention: Treasurer
Telephone No. (330) 740-8268
COMMERCIAL INTERTECH HOLDINGS LIMITED
By:
----------------------------------
Address for Notices:
1775 Logan Avenue
P.O. Box 239
Youngstown, OH 44501-0239
Telecopier No. (330) 744-3212
Attention: Treasurer
Telephone NO. (330) 740-8304
and
Techbrook Park Drive, Techbrook Park
Warwick, CV34 6TU, United Kingdom
Telecopier No. 441 926 889 000
Attention: Cathy Thanangadan, Financial
Director
Telephone No. 441 926 888 239
<PAGE> 128
[SIGNATURE PAGE 2 OF 2 TO CREDIT AGREEMENT]
MELLON BANK, N.A., Individually as a
Bank and as Agent
By:
----------------------------------
Title:
-------------------------------
Address for Notices:
Legal Documents and Principal Office:
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258-001
Telecopier No. (412) 236-1914
Attention: Mark F. Johnston
Telephone No. (412) 234-2793
Administrative Notices:
Mellon Bank, N.A.
Loan Administration
Three Mellon Bank Center
Pittsburgh, PA 15259
Telecopier No. (412) 236-2027
Mellon's Wiring Instructions:
MELLON BANK
PITTSBURGH, PA
ABA #043000261
ATTN: LOAN ADMINISTRATION
CREDIT ACCOUNT #990873800
REF: Commercial Intertech Corp.
<PAGE> 129
CREDIT MATTERS OPERATIONAL MATTERS
-------------- -------------------
NAME MELLON BANK, N.A. MELLON BANK, N.A.
PRINCESS HOUSE PRINCESS HOUSE
1 SUFFOLK LANE 1 SUFFOLK LANE
LONDON EC4R OAN LONDON EC4R OAN
ATTN: Robert Manderscheid ATTN: V. Baxter/R. Burton
SWIFT: MELNGB2X
TELEX NO: 885962 885962
TELEPHONE: 0171-623-0806 0171-623-0899/0896
FAX NO: 0171-283-9323 0171-397-9012
PAYMENT DETAILS
- ---------------
POUNDS STERLING US DOLLARS
ROYAL BANK OF SCOTLAND PLC FIRST CHICAGO INTL
8 - 10 Great Tower Street NEW YORK
LONDON A/C1524502USN50-01
SORT CODE 16 55 55 For the account of
A/C 12214888 Mellon Bank London
<PAGE> 1
Exhibit 10.30
================================================================================
- --------------------------------------------------------------------------------
COMMERCIAL INTERTECH CORP.
--------------------------
NOTE PURCHASE AGREEMENT
--------------------------
DATED AS OF JUNE 30, 1997
$60,000,000
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 2
7.61% SENIOR NOTES DUE JUNE 30, 2007
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
1. AUTHORIZATION OF NOTES................................................................................. 1
2. SALE AND PURCHASE OF NOTES............................................................................. 1
3. CLOSING................................................................................................ 2
4. CONDITIONS TO CLOSING.................................................................................. 2
4.1 Representations and Warranties................................................................ 2
4.2 Performance; No Default....................................................................... 2
4.3 Compliance Certificates....................................................................... 2
4.4 Opinions of Counsel........................................................................... 3
4.5 Purchase Permitted By Applicable Law, etc..................................................... 3
4.6 Sale of Other Notes........................................................................... 3
4.7 Payment of Special Counsel Fees............................................................... 3
4.8 Private Placement Number...................................................................... 4
4.9 Changes in Corporate Structure................................................................ 4
4.10 Proceedings and Documents..................................................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................... 4
5.1 Organization; Power and Authority............................................................. 4
5.2 Authorization, etc............................................................................ 4
5.3 Disclosure.................................................................................... 5
5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.............................. 5
5.5 Financial Statements.......................................................................... 6
5.6 Compliance with Laws, Other Instruments, etc.................................................. 6
5.7 Governmental Authorizations, etc.............................................................. 6
5.8 Litigation; Observance of Agreements, Statutes and Orders..................................... 6
5.9 Taxes......................................................................................... 7
5.10 Title to Property; Leases..................................................................... 7
5.11 Licenses, Permits, etc........................................................................ 7
5.12 Compliance with ERISA......................................................................... 8
5.13 Private Offering by the Company............................................................... 9
5.14 Use of Proceeds; Margin Regulations........................................................... 9
5.15 Existing Indebtedness; Future Liens........................................................... 9
5.16 Foreign Assets Control Regulations, etc....................................................... 10
5.17 Status under Certain Statutes................................................................. 10
5.18 Environmental Matters......................................................................... 10
6. REPRESENTATIONS OF THE PURCHASER....................................................................... 10
6.1 Purchase for Investment....................................................................... 10
6.2 Source of Funds............................................................................... 11
</TABLE>
i
<PAGE> 4
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
7. INFORMATION AS TO COMPANY.............................................................................. 12
7.1 Financial and Business Information............................................................ 12
7.2 Officer's Certificate......................................................................... 15
7.3 Inspection.................................................................................... 16
8. PREPAYMENT OF THE NOTES................................................................................ 16
8.1 Required Prepayments.......................................................................... 16
8.2 Optional Prepayments.......................................................................... 16
8.3 Allocation of Partial Prepayments............................................................. 17
8.4 Maturity; Surrender, etc...................................................................... 17
8.5 Purchase of Notes............................................................................. 17
8.6 Make-Whole Amount; Adjusted Make-Whole Amount................................................. 17
9. AFFIRMATIVE COVENANTS.................................................................................. 19
9.1 Compliance with Law........................................................................... 19
9.2 Insurance..................................................................................... 20
9.3 Maintenance of Properties..................................................................... 20
9.4 Payment of Taxes and Claims................................................................... 20
9.5 Corporate Existence, etc...................................................................... 20
9.6 Additional Priority Debt Protection........................................................... 21
10. NEGATIVE COVENANTS..................................................................................... 21
10.1 Transactions with Affiliates.................................................................. 21
10.2 Liens......................................................................................... 21
10.3 Maintenance of Consolidated Debt.............................................................. 23
10.4 Consolidated Net Worth........................................................................ 23
10.5 Sale of Assets, etc........................................................................... 24
10.6 Merger, Consolidation, etc.................................................................... 24
10.7 Priority Debt................................................................................. 25
10.8 Ranking of Notes.............................................................................. 25
11. EVENTS OF DEFAULT...................................................................................... 26
12. REMEDIES ON DEFAULT, ETC............................................................................... 27
12.1 Acceleration.................................................................................. 27
12.2 Other Remedies................................................................................ 28
12.3 Rescission.................................................................................... 28
12.4 No Waivers or Election of Remedies, Expenses, etc............................................. 29
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.......................................................... 29
13.1 Registration of Notes......................................................................... 29
13.2 Transfer and Exchange of Notes................................................................ 29
</TABLE>
ii
<PAGE> 5
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
13.3 Replacement of Notes.......................................................................... 30
14. PAYMENTS ON NOTES...................................................................................... 30
14.1 Place of Payment.............................................................................. 30
14.2 Home Office Payment........................................................................... 30
15. EXPENSES, ETC.......................................................................................... 31
15.1 Transaction Expenses.......................................................................... 31
15.2 Survival...................................................................................... 31
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT........................................... 31
17. AMENDMENT AND WAIVER................................................................................... 32
17.1 Requirements.................................................................................. 32
17.2 Solicitation of Holders of Notes.............................................................. 32
17.3 Binding Effect, etc........................................................................... 32
17.4 Notes held by Company, etc.................................................................... 33
18. NOTICES................................................................................................ 33
19. REPRODUCTION OF DOCUMENTS.............................................................................. 33
20. CONFIDENTIAL INFORMATION............................................................................... 34
21. SUBSTITUTION OF PURCHASER.............................................................................. 35
22. MISCELLANEOUS.......................................................................................... 35
22.1 Certain Changes in GAAP....................................................................... 35
22.2 Successors and Assigns........................................................................ 35
22.3 Payments Due on Non-Business Days............................................................. 35
22.4 Severability.................................................................................. 36
22.5 Construction.................................................................................. 36
22.6 Counterparts.................................................................................. 36
22.7 Governing Law................................................................................. 36
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 3 -- PAYMENT INSTRUCTIONS AT CLOSING
</TABLE>
iii
<PAGE> 6
SCHEDULE 5.4 -- SUBSIDIARIES OF THE COMPANY AND OWNERSHIP
OF SUBSIDIARY STOCK
SCHEDULE 5.5 -- FINANCIAL STATEMENTS
SCHEDULE 5.12 -- CERTAIN ERISA MATTERS
SCHEDULE 5.14 -- USE OF PROCEEDS
SCHEDULE 5.15 -- EXISTING DEBT
EXHIBIT 1 -- FORM OF 7.61% SENIOR NOTE DUE JUNE 30, 2007
EXHIBIT 4.4(a) -- FORM OF OPINION OF GENERAL COUNSEL OF THE
COMPANY
EXHIBIT 4.4(b) -- FORM OF OPINION OF SPECIAL COUNSEL FOR THE
COMPANY
EXHIBIT 4.4(c) -- FORM OF OPINION OF SPECIAL COUNSEL FOR THE
PURCHASERS
EXHIBIT 10.2(e) -- BANK LOAN AGREEMENT -- CIH REVOLVING CREDIT
LOANS
EXHIBIT 10.7 -- SECTION 8.2.1(ii) OF THE BANK LOAN AGREEMENT
iv
<PAGE> 7
COMMERCIAL INTERTECH CORP.
1775 LOGAN AVENUE
YOUNGSTOWN, OHIO 44505
$60,000,000
7.61% SENIOR NOTES DUE JUNE 30, 2007
As of June 30, 1997
[SEPARATELY ADDRESSED TO EACH OF THE
PURCHASERS LISTED IN SCHEDULE A HERETO]
Ladies and Gentlemen:
COMMERCIAL INTERTECH CORP., an Ohio corporation (the "COMPANY"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $60,000,000 aggregate
principal amount of its 7.61% Senior Notes due June 30, 2007 (the "NOTES", such
term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements (as hereinafter defined)).
The Notes shall be substantially in the form set out in Exhibit 1, with such
changes therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement; references to a "Section" are, unless
otherwise specified, to a Section of this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the principal amount specified opposite your
name in Schedule A at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified opposite
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
<PAGE> 8
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Hebb & Gitlin, One State Street,
Hartford, Connecticut 06103, at 10:00 a.m., local time, at a closing (the
"CLOSING") on July 9, 1997. At the Closing the Company will deliver to you one
or more Notes (as set forth below your name in Schedule A), in the denominations
indicated in Schedule A, in the aggregate principal amount of your purchase,
dated the date of the Closing and registered in your name or in the name of your
nominee, as indicated in Schedule A, against payment by federal funds wire
transfer in immediately available funds in the amount of the purchase price
therefor as directed by the Company in Schedule 3. If at the Closing the Company
shall fail to tender such Notes to you as provided above in this Section 3, or
any of the conditions specified in Section 4 shall not have been fulfilled to
your satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Significant Subsidiary shall have
entered into any transaction since May 1, 1997 that would have been prohibited
by Section 10 hereof had such Section applied since such date.
4.3 COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to
you an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered
to you a certificate certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization,
execution and delivery of the Notes and the Agreements.
2
<PAGE> 9
4.4 OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing,
(a) from Gilbert M. Manchester, Esq., general counsel of the
Company, substantially in the form of Exhibit 4.4(a) and covering such
other matters incident to the transactions contemplated hereby as you
or your counsel may reasonably request (and the Company hereby
instructs its general counsel to deliver such opinion to you),
(b) from Kahn Kleinman Yanowitz and Arnson Co., LPA, special
counsel for the Company, substantially in the form of Exhibit 4.4(b)
and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and
the Company hereby instructs its special counsel to deliver such
opinion to you), and
(c) from Hebb & Gitlin, your special counsel in connection
with such transactions, substantially in the form set forth in Exhibit
4.4(c) and covering such other matters incident to such transactions as
you may reasonably request.
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (a) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (c) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6 SALE OF OTHER NOTES.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
3
<PAGE> 10
4.7 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the reasonable fees, charges and disbursements of
your special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least three Business Days
prior to the Closing.
4.8 PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.9 CHANGES IN CORPORATE STRUCTURE.
The Company shall not have changed its jurisdiction of incorporation or
been a party to any merger or consolidation and shall not have succeeded to all
or any substantial part of the liabilities of any other entity, at any time
following the date of the most recent financial statements referred to in
Schedule 5.5.
4.10 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreements and the Notes and to perform the provisions
hereof and thereof.
4
<PAGE> 11
5.2 AUTHORIZATION, ETC.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3 DISCLOSURE.
The Company, through its agent, A.G. Edwards & Sons, Inc., has
delivered to you and each Other Purchaser a copy of a Private Placement
Memorandum, dated May 1997 (the "MEMORANDUM"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
its Subsidiaries. This Agreement, the Memorandum, the documents, certificates or
other writings delivered to you by or on behalf of the Company in connection
with the transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since April 30, 1997, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete
and correct lists (i) of the Company's Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and
each other Subsidiary and whether such Subsidiary is a Significant
Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries,
and (iii) of the Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 as being
owned by the Company and its
5
<PAGE> 12
Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of
any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign corporation or other legal entity
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or
other power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business it
transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 5.4 and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to
pay dividends out of profits or make any other similar distributions of
profits to the Company or any of its Subsidiaries that owns outstanding
shares of capital stock or similar equity interests of such Subsidiary.
5.5 FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the financial
statements of the Company and its Subsidiaries listed on Schedule 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, note, purchase or credit agreement, Material lease,
corporate charter or by-laws, or any other agreement or instrument to which the
Company or any Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected, (ii) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.
6
<PAGE> 13
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before
or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
(b) Neither the Company nor any Subsidiary is in default under
any term of any agreement or instrument to which it is a party or by
which it is bound, or any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority or is in violation of any
applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
5.9 TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of federal, state or
other taxes for all fiscal periods are adequate. The federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended October 31, 1994.
7
<PAGE> 14
5.10 TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11 LICENSES, PERMITS, ETC.
(a) The Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict
with the rights of others.
(b) To the best knowledge of the Company, no product of the
Company infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark,
trade name or other right owned by any other Person, which infringement
would have a Material Adverse Effect.
(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or
any of its Subsidiaries.
5.12 COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate, in either case pursuant
to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the accrued benefits under each of
the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended
8
<PAGE> 15
plan year on the basis of the actuarial assumptions specified for
funding purposes on an ongoing basis in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value
of the assets of such Plan allocable to such accrued benefits. The
terms "accrued benefits", "current value" and "present value" have the
meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its
Subsidiaries is not Material.
(e) Schedule 5.12 sets forth all ERISA Affiliates and all
"employee benefit plans" maintained by the Company (or any "affiliate"
thereof) or in respect of which the Notes could constitute an "employer
security" ("employee benefit plan" has the meaning specified in section
3 of ERISA, "affiliate" has the meaning specified in section 407(d) of
ERISA and section V of PTCE 95-60 and "employer security" has the
meaning specified in section 407(d) of ERISA).
(f) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406 of ERISA
or in connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
first sentence of this Section 5.12(f) is made in reliance upon and
subject to the accuracy of your representation in Section 6.2 as to the
sources of the funds used to pay the purchase price of the Notes to be
purchased by you.
5.13 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you, the Other Purchasers and not more than 50 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
9
<PAGE> 16
5.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 2% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 2% of the
value of such assets. As used in this Section, the terms "margin stock" and
"purpose of buying or carrying" shall have the meanings assigned to them in said
Regulation G.
5.15 EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a
complete and correct list of all outstanding Indebtedness of the
Company and its Subsidiaries as of May 31, 1997, since which date there
has been no Material change in the amounts, interest rates, sinking
funds, instalment payments or maturities of the Indebtedness of the
Company or its Subsidiaries. Neither the Company nor any Subsidiary is
in default and no waiver of default is currently in effect, in the
payment of any principal or interest on any Indebtedness of the Company
or such Subsidiary and no event or condition exists with respect to any
Indebtedness of the Company or any Subsidiary that would permit (or
that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Indebtedness to become due and payable
before its stated maturity or before its regularly scheduled dates of
payment.
(b) Except as disclosed in Schedule 5.15, neither the Company
nor any Subsidiary has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a
Lien not permitted by Section 10.2.
5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Subject to the accuracy and truthfulness of the representations of the
Purchasers in Section 6, neither the sale of the Notes by the Company hereunder
nor its use of the proceeds thereof will violate the Trading with the Enemy Act,
as amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto.
10
<PAGE> 17
5.17 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts, as amended, or the
Federal Power Act, as amended.
5.18 ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of
any facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or
their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored
any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them and has not disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case
in any manner that could reasonably be expected to result in a Material
Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company
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<PAGE> 18
is not required to register the Notes. You represent and warrant that you are an
"accredited investor" (as defined in Rule 501 promulgated under the Securities
Act) and that you are not any of the proscribed persons referred in the Trading
with the Enemy Act, as amended, or any of the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating thereto.
6.2 SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(A) GENERAL ACCOUNT -- you are an insurance company and the
Source is an "insurance company general account," as such term is
defined in Department of Labor Prohibited Transaction Class Exemption
95-60 (issued July 12, 1995) ("PTCE 95-60"), and there is no employee
benefit plan, treating as a single plan all plans maintained by the
same employer (and affiliates thereof as defined in section V(a)(1) of
PTCE 95-60) or by the same employee organization, with respect to which
the amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds 10% of the total
reserves and liabilities of such general account as determined under
PTCE 95-60 (exclusive of separate account liabilities) plus surplus, as
set forth in the National Association of Insurance Commissioners Annual
Statement filed with your state of domicile; or
(B) SEPARATE ACCOUNT -- the Source is a separate account:
(I) 10% POOLED SEPARATE ACCOUNT -- that is an
insurance company pooled separate account, within the meaning
of Department of Labor Prohibited Transaction Class Exemption
90-1 (issued January 29, 1990), and to the extent that there
are any plans whose assets in such separate account exceed 10%
of the assets of such separate account, you have disclosed the
names of such plans to the Company in writing; or
(II) IDENTIFIED PLAN ASSETS -- that is comprised of
employee benefit plans identified by you in writing and with
respect to which the Company hereby warrants and represents
that, as of each Closing Date, neither the Company nor any
ERISA Affiliate is a "party in interest" (as defined in
section 3 of ERISA) or a "disqualified person" (as defined in
section 4975 of the Code) with respect to any plan so
identified; or
(III) GUARANTIED SEPARATE ACCOUNT -- that is
maintained solely in connection with fixed contractual
obligations of an insurance company, under which any amounts
payable, or credited, to any employee benefit plan having an
interest in such account and to any participant or beneficiary
of such plan (including an annuitant) are not affected in any
manner by the investment
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<PAGE> 19
performance of the separate account (as provided by 29 CFR
?2510.3-101(h)(1)(iii)); or
(C) QPAM -- the Source constitutes assets of an "investment
fund" (within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a Person controlling
or controlled by the QPAM (applying the definition of "control" in
section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
Section 6.2(c); or
(D) GOVERNMENTAL PLAN -- the Source is a governmental plan; or
(E) IDENTIFIED PLANS, ETC. -- the Source is one or more
employee benefit plans, or a separate account or trust fund comprised
of one or more employee benefit plans, each of which has been
identified to the Company in writing pursuant to this Section 6.2(e);
or
(F) EXEMPT, ETC. -- the Source does not include assets of any
employee benefit plan, other than a plan exempt from the coverage of
ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarter, and
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<PAGE> 20
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified
above of copies of the Company's Quarterly Report on Form 10-Q prepared
in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) ANNUAL STATEMENTS -- within 105 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied
(A) by an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that such
financial statements present fairly, in all material
respects, the financial position of the companies
being reported upon and their results of operations
and cash flows and have been prepared in conformity
with GAAP, and that the examination of such
accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants
stating that they have reviewed this Agreement and
stating further whether, in making their audit, they
have become aware of any condition or event that then
constitutes a Default or an Event of Default arising
out of the Company's obligations set forth in
Sections 10.3, 10.4 and 10.7 insofar as such events
or conditions relate to accounting matters (excluding
any calculation of Pro Forma Acquisition EBITDA),
and, if they are aware that any such condition or
event then exists, specifying the nature and period
of the existence thereof
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<PAGE> 21
(it being understood that such accountants shall not
be liable, directly or indirectly, for any failure to
obtain knowledge of any Default or Event of Default
unless such accountants should have obtained
knowledge thereof in making an audit in accordance
with generally accepted auditing standards or did not
make such an audit),
provided that the delivery within the time period specified above of
the Company's Annual Report on Form 10-K for such fiscal year (together
with the Company's annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
with the requirements therefor and filed with the Securities and
Exchange Commission, together with the accountant's certificate
described in clause (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary to public
securities holders generally, (ii) each regular or periodic report and
all amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary to
the public concerning developments that are Material, and (iii) each
final (and upon your request, each other) registration statement (other
than a registration statement or a prospectus, in each case, related to
an employee benefit plan) and prospectus filed by the Company or any
Subsidiary with the Securities and Exchange Commission;
(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in
any event within five Business Days after a Responsible Officer
becoming aware of the existence of any Default or Event of Default or
that any Person has given any notice or taken any action with respect
to a claimed default hereunder or that any Person has given any notice
or taken any action with respect to a claimed default of the type
referred to in Section 11(f), a written notice specifying the nature
and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;
(e) ERISA MATTERS -- promptly, and in any event within five
Business Days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof
which could reasonably be expected to have a Material Adverse
Effect; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
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<PAGE> 22
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(F) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
the Company or any Subsidiary from any federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect;
(G) RULE 144A -- promptly upon request, to any holder of Notes
and any "qualified institutional buyer" (as defined in Rule 144A) to
whom any Note may be offered or sold by such holder, the information
required under paragraph (d)(4) of Rule 144A, as in effect on the date
of the Closing, to permit compliance with Rule 144A in connection with
a resale of such Note; and
(H) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any such holder of Notes.
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.2 through Section 10.6
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
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<PAGE> 23
(b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or
event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
7.3 INSPECTION.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor, subject to the provisions of Section
20:
(a) NO DEFAULT -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in
writing; and
(b) DEFAULT -- if a Default or Event of Default then exists,
at the expense of the Company to visit and inspect any of the offices
or properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.
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<PAGE> 24
8. PREPAYMENT OF THE NOTES.
8.1 REQUIRED PREPAYMENTS.
On June 30, 2001 and on each June 30 thereafter to and including June
30, 2006 the Company will prepay $8,571,428.57 principal amount (or such lesser
principal amount as shall then be outstanding) of the Notes at par and without
payment of the Make-Whole Amount or any premium, and the Company will pay all of
the principal amount of the Notes remaining outstanding, if any, on June 30,
2007, provided that upon any partial prepayment of the Notes pursuant to Section
8.2 or purchase of the Notes permitted by Section 8.5, the principal amount of
each required prepayment of the Notes becoming due under this Section 8.1 on and
after the date of such prepayment or purchase shall be reduced in the same
proportion as the aggregate unpaid principal amount of the Notes is reduced as a
result of such prepayment or purchase.
8.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay
at any time all, or from time to time any part of, the Notes, in an amount not
less than 10% of the aggregate principal amount of the Notes then outstanding in
the case of a partial prepayment, at 100% of the principal amount so prepaid,
plus the Make-Whole Amount determined for the prepayment date with respect to
such principal amount. The Company will give each holder of Notes written notice
of each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 8.3), and the interest to be
paid on the prepayment date with respect to such principal amount being prepaid,
and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to such
prepayment, the Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.
8.3 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment.
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8.4 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5 PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
. 8.6 MAKE-WHOLE AMOUNT; ADJUSTED MAKE-WHOLE AMOUNT
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero.
The term "ADJUSTED MAKE-WHOLE AMOUNT" means, with respect to any Note,
an amount equal to the excess, if any, of the Adjusted Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such Note
over the amount of such Called Principal, provided that the Adjusted Make-Whole
Amount may in no event be less than zero.
For the purpose of determining the Make-Whole Amount or the Adjusted Make-Whole
Amount, the following terms have the following meanings:
"ADJUSTED DISCOUNTED VALUE" means, with respect to the Called
Principal of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on the same periodic basis as that on
which interest on the Notes is payable) equal to the Adjusted
Reinvestment Yield with respect to such Called Principal.
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<PAGE> 26
"ADJUSTED REINVESTMENT YIELD" means, with respect to the
Called Principal of any Note, the sum of (x) 1.00% plus (y) the yield
to maturity implied by (i) the yields reported, as of 10:00 A.M. (New
York City time) on the second Business Day preceding the Settlement
Date with respect to such Called Principal, on the display designated
as "Page 678" on the Telerate Access Service (or such other display as
may replace Page 678 on Telerate Access Service) for actively traded
U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date, or
(ii) if such yields are not reported as of such time or the yields
reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for which such
yields have been so reported as of the second Business Day preceding
the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the duration closest to and less than the
Remaining Average Life.
"CALLED PRINCIPAL" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Note, the sum of (x) 0.50% plus (y) the yield to
maturity implied by (i) the yields reported, as of 10:00 A.M. (New York
City time) on the second Business Day preceding the Settlement Date
with respect to such Called Principal, on the display designated as
"Page 678" on the Telerate Access Service (or such other display as may
replace Page 678 on Telerate Access Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, or (ii) if
such yields are not reported as of such time or the yields reported as
of such time are not ascertainable, the Treasury Constant Maturity
Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement
Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of
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<PAGE> 27
such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the duration closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is subject, including, without limitation, Environmental Laws, and will obtain
and maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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9.2 INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
9.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
9.4 PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
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9.5 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.5 and 10.6, the Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Subsidiaries (unless merged into the Company or a
Subsidiary) and all rights and franchises of the Company and its Subsidiaries
unless, in the good faith judgment of the Company, the termination of or failure
to preserve and keep in full force and effect such corporate existence, right or
franchise could not, individually or in the aggregate, have a Material Adverse
Effect.
9.6 ADDITIONAL PRIORITY DEBT PROTECTION.
The Company will not, at any time, permit any Subsidiary (other than an
Initial Guarantor) to become liable (as principal or as guarantor or other
surety) in respect of any Indebtedness under the Bank Loan Agreement unless
before or contemporaneously with becoming so liable in respect of such
Indebtedness such Subsidiary shall become a guarantor of the Notes by executing
and delivering, to each holder of the Notes, a guaranty agreement in form and
substance satisfactory to the Required Holders. Each such guaranty agreement
shall be accompanied by (a) copies of the constitutive documents of such
Subsidiary and corporate resolutions (or equivalent) authorizing such
transaction, in each case certified as true and correct by a Responsible Officer
of the Company and an officer of such Subsidiary and (b) a legal opinion of
independent counsel (addressed to the holders of Notes) reasonably satisfactory
in form and substance to the Required Holders to the effect that such agreement
constitutes a legal, valid and binding obligation of such Subsidiary and is
enforceable against such Subsidiary in accordance with its terms.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1 TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter into
directly or indirectly any transaction or Material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or any Significant Subsidiary), except in the ordinary
course and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
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<PAGE> 30
10.2 LIENS.
The Company will not, and will not permit any Significant Subsidiary
to, directly or indirectly create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to any
property or asset (including, without limitation, any document or instrument in
respect of goods or accounts receivable) of the Company or any such Significant
Subsidiary, whether now owned or held or hereafter acquired, or any income or
profits therefrom or assign or otherwise convey any right to receive income or
profits (unless it makes, or causes to be made, effective provision whereby the
Notes will be equally and ratably secured with any and all other obligations
thereby secured, such security to be pursuant to an agreement reasonably
satisfactory to the Required Holders and, in any such case, the Notes shall have
the benefit, to the fullest extent that, and with such priority as, the holders
of the Notes may be entitled under applicable law, of an equitable Lien on such
property), except:
(a) Liens existing on the date of the Closing and securing the
Indebtedness of the Company or any Significant Subsidiary outstanding
on such date, provided that each such Lien and the Indebtedness secured
thereby are described in Schedule 5.15;
(b) any Lien created to secure all or any part of the purchase
price, or to secure Indebtedness incurred or assumed to pay all or any
part of the purchase price or cost of construction, of tangible
property (or any improvement thereon) acquired or constructed by the
Company or any Subsidiary after the date of the Closing, provided that
(i) any such Lien shall extend solely to the item or
items of such property (or improvement thereon) so acquired or
constructed and, if required by the terms of the instrument
originally creating such Lien, other property (or improvement
thereon) which is an improvement to or is acquired for
specific use in connection with such acquired or constructed
property (or improvement thereon) or which is real property
being improved by such acquired or constructed property (or
improvement thereon),
(ii) the principal amount of the Indebtedness secured
by any such Lien shall at no time exceed an amount equal to
100% of the cost to the Company or such Subsidiary of the
property (or improvement thereon) so acquired or constructed
and such Lien does not extend to any other property (other
than to the extent permitted in clause (i) of this paragraph
(b)), and
(iii) any such Lien shall be created
contemporaneously with, or within 365 days after, the
acquisition or construction of such property;
(c) any Lien existing on property of a Person immediately
prior to its being consolidated with or merged into the Company or any
Significant Subsidiary or its becoming a Significant Subsidiary, or any
Lien existing on any property acquired by the
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<PAGE> 31
Company or any Significant Subsidiary at the time such property is so
acquired (whether or not the Indebtedness secured thereby shall have
been assumed), provided that (i) no such Lien shall have been created
or assumed in contemplation of such consolidation or merger or such
Person's becoming a Significant Subsidiary or such acquisition of
property, and (ii) each such Lien shall extend solely to the item or
items of property so acquired and, if required by the terms of the
instrument originally creating such Lien, other property which is an
improvement to or is acquired for specific use in connection with such
acquired property;
(d) Liens on property or assets of any Significant Subsidiary
securing Indebtedness owing to the Company or to a Wholly-Owned
Subsidiary;
(e) other Liens not otherwise permitted by paragraphs (a)
through (d) of this Section 10.2, provided that, at any time on or
after the date of creation of any such Lien, Priority Debt does not
exceed 15% of Consolidated Capitalization; and
(f) any Lien renewing, extending or refunding any Lien
permitted by paragraphs (a) through (e) of this Section 10.2, provided
that (i) the principal amount of Indebtedness secured by such Lien
immediately prior to such renewal, extension or refunding is not
increased (except, in the case of a Lien described in paragraph (b) of
this Section 10.2, any increased principal amount of such Indebtedness
(herein referred to as "LIEN INCREASE DEBT") shall be deemed to be
secured by a Lien permitted by paragraph (e) of this Section 10.2),
(ii) such Lien is not extended to any other property, and (iii)
immediately after such renewal, extension or refunding no Default or
Event of Default would exist.
10.3 MAINTENANCE OF CONSOLIDATED DEBT.
The Company will not, at any time, during each period noted in the
table below, permit Consolidated Debt to exceed an amount equal to the
percentage of EBITDA at such time set forth opposite the applicable period:
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<PAGE> 32
<TABLE>
<CAPTION>
Period Covering: Percentage of EBITDA:
<S> <C>
From the date of Closing through October 31, 1997 375%
From November 1, 1997 through October 31, 1998 350%
From November 1, 1998 through October 31, 1999 325%
From November 1, 1999 through October 31, 2000 275%
From November 1, 2000 and thereafter 250%
</TABLE>
10.4 CONSOLIDATED NET WORTH.
The Company will not, at any time, permit Consolidated Net Worth to be
less than the sum of
(a) $71,833,000, plus
(b) an aggregate amount equal to 25% of Consolidated Net
Income (but only if a positive number) for the period commencing on
February 1, 1997 and ending on October 31, 1997, plus
(c) an aggregate amount equal to 25% of Consolidated Net
Income (but, in each case, only if a positive number) for each
completed fiscal year beginning with the fiscal year ended October 31,
1998.
10.5 SALE OF ASSETS, ETC.
Except as permitted under Section 10.6, the Company will not, and will
not permit any Significant Subsidiary to, make any Asset Disposition unless:
(a) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair Market Value
at least equal to that of the property exchanged and is in the best
interest of the Company or such Significant Subsidiary; and
(b) immediately after giving effect to the Asset Disposition,
no Default or Event of Default would exist; and
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<PAGE> 33
(c) immediately after giving effect to the Asset Disposition,
the Disposition Value of all property that was the subject of any Asset
Disposition occurring in the period of 365 days ending on the date of
such Asset Disposition would not exceed 15% of Consolidated
Capitalization as of the last day of the fiscal quarter of the Company
then most recently ended.
If the Net Proceeds Amount for any Transfer is applied to either
(i) a Debt Prepayment Application and immediately after giving
effect to such Transfer, no Default or Event of Default exists, or
(ii) a Property Reinvestment Application,
in each case within 18 months after such Transfer, then such Transfer, only for
the purpose of determining compliance with clause (c) of this Section 10.5 as of
a date on or after the Net Proceeds Amount is so applied, shall be deemed not to
be an Asset Disposition.
10.6 MERGER, CONSOLIDATION, ETC.
The Company will not, and will not permit any Significant Subsidiary
to, consolidate with or merge with any other corporation or convey, transfer or
lease as lessor substantially all of its assets in a single transaction or
series of transactions to any Person (except that a Significant Subsidiary of
the Company may
(x) consolidate with or merge with, or convey, transfer or
lease substantially all of its assets in a single transaction or series
of transactions to, the Company (provided that the Company is the
Successor Corporation) or any Wholly-Owned Subsidiary of the Company,
and/or
(y) convey, transfer or lease all of its assets in compliance
with the provisions of Section 10.5),
provided that the foregoing restriction does not apply to the consolidation or
merger of the Company with, or the conveyance, transfer or lease of
substantially all of the assets of the Company in a single transaction or series
of transactions to, any Person so long as:
(a) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety, as
the case may be (the "SUCCESSOR CORPORATION"), shall be a solvent
corporation organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes
its assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement,
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<PAGE> 34
the Other Agreements and the Notes (pursuant to such agreements and
instruments as shall be reasonably satisfactory to the Required
Holders), and the Company shall have caused to be delivered to each
holder of Notes an opinion of nationally recognized independent
counsel, or other independent counsel reasonably satisfactory to the
Required Holders, to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with their
terms and comply with the terms hereof; and
(c) immediately after giving effect to such transaction no
Default or Event of Default would exist.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement or the Notes.
10.7 PRIORITY DEBT.
The Company will at all times comply with the provisions set forth in
Section 8.2.1(ii) of the Bank Loan Agreement (as in effect on the date of
Closing and in the form (along with the defined terms therein) attached hereto
as Exhibit 10.7), as such Section may be amended, modified or supplemented. If
at any time the Bank Loan Agreement contains any other covenant or provision,
which, directly or indirectly, limits the ability of any Significant Subsidiary
to incur, or have outstanding, Priority Debt, that is not substantially provided
for in this Agreement, or is more favorable to the lenders or other creditors
thereunder or is more onerous to the Company or such Significant Subsidiary, as
the case may be, than the covenants or provisions provided for in this
Agreement, then the Company agrees for the benefit of the holders of the Notes
to comply with, or cause such Significant Subsidiary to comply with, such
covenant or provision as such covenant or provision is amended, modified or
supplemented from time to time.
10.8 RANKING OF NOTES.
The Notes shall at all times rank as direct senior obligations of the
Company, shall rank at least pari passu with all other Senior Debt of the
Company, present and future, and shall rank senior to all Subordinated Debt,
capital stock and all other equity interests in the Company that may from time
to time exist.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note for more than one (1) Business
Day after the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise; or
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<PAGE> 35
(b) the Company defaults in the payment of any interest on any
Note for more than five (5) Business Days after the same becomes due
and payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Sections 10.2 through 10.7 and such default
is not remedied within 15 days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a "notice of default" and to
refer specifically to this paragraph (c) of Section 11); or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is not
remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a "notice of default" and to
refer specifically to this paragraph (d) of Section 11); or
(e) (i) the Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount of at
least $5,000,000 beyond any period of grace provided with respect
thereto, or (ii) the Company or any Subsidiary is in default in the
performance of or compliance with any term of any evidence of any
Indebtedness in an aggregate outstanding principal amount of at least
$5,000,000 or of any mortgage, indenture or other agreement relating to
such Indebtedness or any other condition exists, and as a consequence
of such default or condition such Indebtedness has become, or has been
declared, due and payable before its stated maturity or before its
regularly scheduled dates of payment; or
(f) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
(g) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against one or more of
the Company and its Significant Subsidiaries and which judgments are
not, within 60 days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(h) the Company or any Significant Subsidiary (i) is generally
not paying, or admits in writing its inability to pay, its debts as
they become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any
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<PAGE> 36
bankruptcy, insolvency, reorganization, moratorium or other similar law
of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(i) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Company
or any Significant Subsidiary, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief
or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any
Significant Subsidiary, or any such petition shall be filed against the
Company or any Significant Subsidiary and such petition shall not be
dismissed within 60 days; or
(j) the occurrence of a Change in Control.
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company
described in paragraph (h) or (i) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (h) or described in clause
(vi) of paragraph (h) by virtue of the fact that such clause
encompasses clause (i) of paragraph (h)) has occurred, all the Notes
then outstanding shall automatically become immediately due and
payable.
(b) If a Control Event has occurred and is continuing and an
Event of Default described in paragraph (c) or paragraph (d) of Section
11 has also occurred and is continuing, any holder or holders of more
than 51% in principal amount of the Notes at the time outstanding may
at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due
and payable.
(c) If any Event of Default (other than an Event of Default
giving rise to an acceleration of the Notes described in Section
12.1(a)) has occurred and is continuing and the condition which could
give rise to a declaration of all Notes becoming immediately due and
payable as described in Section 12.1(b) does not exist, any holder or
holders of more than 51% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(d) If any Event of Default described in paragraph (a) or (b)
of Section 11 has occurred and is continuing, any holder or holders of
Notes at the time outstanding affected
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<PAGE> 37
by such Event of Default may at any time, at its or their option, by
notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.
Upon any Notes becoming due and payable under paragraph (a), (c) or (d)
of this Section 12.1, whether automatically or by declaration, such Notes will
forthwith mature and the entire unpaid principal amount of such Notes, plus (x)
all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined
in respect of such principal amount (to the full extent permitted by applicable
law), shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
Upon any Notes becoming due and payable under paragraph (b) of this Section
12.1, such Notes will forthwith mature and the entire unpaid principal amount of
such Notes, plus (x) all accrued and unpaid interest thereon and (y) the
Adjusted Make-Whole Amount determined in respect of such principal amount (to
the full extent permitted by applicable law), shall all be immediately due and
payable, in each and every case without presentment, demand, protest or further
notice, all of which are hereby waived.
The Company acknowledges, and the parties hereto agree, that each
holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and that
the provision for payment of a Make-Whole Amount or an Adjusted Make-Whole
Amount, as the case may be, by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such circumstances.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
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<PAGE> 38
12.3 RESCISSION.
At any time after any Notes have been declared due and payable pursuant
to clause (b) or (c) of Section 12.1, the holders of not less than 51% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
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<PAGE> 39
13.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $1,000,000, provided that (i) any
holder may transfer any Note to an Affiliate of such holder in a denomination of
not less than $500,000 and (ii) if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $1,000,000. Any transferee, by its acceptance of a
Note registered in its name (or the name of its nominee), shall be deemed to
have made the representation set forth in Section 6.2. Notwithstanding anything
else contained in this Agreement, prior to an Event of Default, neither you nor
any other holder of Notes will transfer any Note to any Person that at the time
of such transfer is not an Institutional Investor.
13.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth of at least $100,000,000, such Person's
own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
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<PAGE> 40
14. PAYMENTS ON NOTES.
14.1 PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in
Pittsburgh, Pennsylvania at the principal office of Mellon Bank, N.A. in such
jurisdiction. The Company may at any time, by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
14.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing at least 10 days prior to any payment date for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, you shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office or at
the place of payment most recently designated by the Company pursuant to Section
14.1. Prior to any sale or other disposition of any Note held by you or your
nominee you will, at your election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid thereon
or surrender such Note to the Company in exchange for a new Note or Notes
pursuant to Section 13.2. The Company will afford the benefits of this Section
14.2 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by you under this Agreement and that has made the same
agreement relating to such Note as you have made in this Section 14.2.
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<PAGE> 41
15. EXPENSES, ETC.
15.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses if any, of
brokers and finders (other than those retained by you).
15.2 SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS.
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<PAGE> 42
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
17.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes. The
Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of
this Section 17 to each holder of outstanding Notes promptly following
the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the
entering into by any holder of Notes or any waiver or amendment of any
of the terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to each holder of Notes then outstanding even if such
holder did not consent to such waiver or amendment.
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
36
<PAGE> 43
17.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(a) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in writing,
(b) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(c) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of Steven J. Hewitt, Senior
Vice President and Chief Financial Officer, or at such other address as
the Company shall have specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
37
<PAGE> 44
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
38
<PAGE> 45
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal
or state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
39
<PAGE> 46
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS.
22.1 CERTAIN CHANGES IN GAAP.
If at any time the Company shall, in its reasonable judgment and after
consulting with its independent certified public accountants, determine that a
change in GAAP shall have occurred after the date of the Closing and that such
change will have a material adverse effect on the ability of the Company to
comply with any one or more of the covenants in this Agreement, each holder of
Notes will, upon the written request of the Company, negotiate in good faith and
on a timely basis with the Company, and the Company will negotiate in good faith
with each holder of Notes, to attempt to reach agreement within a reasonable
period of time as to the terms of one or more mutually agreeable amendments or
waivers, in accordance with Section 17, with respect to such covenants (or the
definitions utilized therein) such that the material adverse effect of such
change in GAAP on the ability of the Company to comply with such covenants is
fairly and equitably adjusted for, taking into account the nature of such change
and the original purpose of such covenants (or the definitions utilized
therein). Unless and until such mutually agreeable amendments or waivers shall
have become effective in accordance with Section 17 within 120 days of the
delivery of such request, such covenants (and the definitions used therein)
shall remain unchanged and in full force and effect.
22.2 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.3 PAYMENTS DUE ON NON-BUSINESS DAYS.
40
<PAGE> 47
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
22.4 SEVERABILITY.
Any provision of this Agreement that 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, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.5 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.7 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF OHIO
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank; next page is signature page.]
41
<PAGE> 48
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
COMMERCIAL INTERTECH CORP.
By______________________________
[Name]
[Title]
The foregoing is hereby
agreed to as of the date
of the Closing.
[Separately executed by each of
the following Purchasers]
<PAGE> 49
SCHEDULE A
<TABLE>
<CAPTION>
PURCHASER NAME JEFFERSON-PILOT LIFE INSURANCE COMPANY
<S> <C>
Name in Which Note is Registered JEFFERSON-PILOT LIFE INSURANCE COMPANY
Note Registration Number; Principal R-1; $10,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Jefferson-Pilot Life Insurance Company
c/o The Bank of New York
ABA #021 000 018 BNF: IOC566
Attention: P & I Department
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments Jefferson-Pilot Life Insurance Company
c/o The Bank of New York
Attention: P & I Department
P.O. Box 19266
Newark, New Jersey 07195
with a duplicate to:
Jefferson-Pilot Life Insurance Company
P.O. Box 21008
Greensboro, NC 27420
Attn: Securities Administration - 3630
Fax: 910/691-3025
Address for all other Notices Jefferson-Pilot Life Insurance Company
P.O. Box 21008
Greensboro, NC 27420
Attn: Securities Administration - 3630
Fax: 910/691-3025
Other Instructions JEFFERSON-PILOT LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
Instructions re Delivery of Notes Bank of New York
One Wall Street
3rd Floor, Window A
For Jefferson-Pilot Life Acct. 186100
</TABLE>
Schedule A-1
<PAGE> 50
<TABLE>
<CAPTION>
PURCHASER NAME JEFFERSON-PILOT LIFE INSURANCE COMPANY
<S> <C>
New York, New York 10286
With duplicate copy to:
Jefferson-Pilot Life Insurance Company
P.O. Box 21008
Greensboro, NC 27420
Attn: Securities Administration - 3630
Tax Identification Number 56-0359860
</TABLE>
Schedule A-2
<PAGE> 51
<TABLE>
<CAPTION>
PURCHASER NAME CHUBB LIFE INSURANCE COMPANY OF AMERICA
<S> <C>
Name in Which Note is Registered CHUBB LIFE INSURANCE COMPANY OF AMERICA
Note Registration Number; Principal R-2; $10,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Chubb Life Insurance Company of America
c/o The Bank of New York
ABA #021 000 018 BNF: IOC566
Attention: P & I Department
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments Chubb Life Insurance Company of America
c/o The Bank of New York
Attention: P & I Department
P.O. Box 19266
Newark, New Jersey 07195
with a duplicate to:
Chubb Life Insurance Company of America
P.O. Box 21008
Greensboro, NC 27420
Attn: Securities Administration - 3630
Fax: 910/691-3025
Address for all other Notices Chubb Life Insurance Company of America
P.O. Box 21008
Greensboro, NC 27420
Attn: Securities Administration - 3630
Fax: 910/691-3025
Other Instructions CHUBB LIFE INSURANCE COMPANY OF AMERICA
By: Jefferson-Pilot Life Insurance Company
Its Investment Manager
By: _________________________________
Name:
Title:
Instructions re Delivery of Notes Bank of New York
One Wall Street
3rd Floor, Window A
</TABLE>
Schedule A-3
<PAGE> 52
<TABLE>
<CAPTION>
PURCHASER NAME CHUBB LIFE INSURANCE COMPANY OF AMERICA
<S> <C>
For Chubb Life Acct. 060352
New York, New York 10286
With duplicate copy to:
Chubb Life Insurance Company of America
P.O. Box 21008
Greensboro, NC 27420
Attn: Securities Administration - 3630
Tax Identification Number 62-0395665
</TABLE>
Schedule A-4
<PAGE> 53
<TABLE>
<CAPTION>
PURCHASER NAME PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
<S> <C>
Name in Which Note is Registered PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
Note Registration Number; Principal R-3; $8,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA No. 073 000 228
Account No. 014752
OBI PFGSE(S)B61106()
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attn: Investment Accounting and Treasury-Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 248-8301
Address for all other Notices Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attn: Investment Department-Securities Division
Telefacsimile: (515) 248-2490
Confirmation: (515) 248-3495
Other Instructions PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
Instructions re Delivery of Notes Law Department of Purchaser
Tax Identification Number 42-0127290
</TABLE>
Schedule A-5
<PAGE> 54
<TABLE>
<CAPTION>
PURCHASER NAME PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
<S> <C>
Name in Which Note is Registered PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
Note Registration Number; Principal R-4; $5,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA No. 073 000 228
Account No. 032395
OBI PFGSE(S)B61106()
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attn: Investment Accounting and Treasury-Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 248-8301
Address for all other Notices Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attn: Investment Department-Securities Division
Telefacsimile: (515) 248-2490
Confirmation: (515) 248-3495
Other Instructions PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By_______________________
Name:
Title:
Instructions re Delivery of Notes Law Department of Purchaser
Tax Identification Number 42-0127290
</TABLE>
Schedule A-6
<PAGE> 55
<TABLE>
<CAPTION>
PURCHASER NAME GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<S> <C>
Name in Which Note is Registered GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Note Registration Number; Principal R-5; $9,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information ABA No.: 091-000-019 NW MPLS/TRUST CLEARING
Account No.: 08-40-245 ATTN: Acct# 12468800
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Investors Building, 5th Floor
Minneapolis, Minnesota 55479-0047
Attn: Income Collections
Address for all other Notices Great-West Life & Annuity Insurance Company
8515 East Orchard Road
3rd Floor, Tower 2
Englewood, Colorado 80111
Attention: U.S. Private Placements
Fax: (303) 689-6193
Other Instructions GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By_______________________
Name:
Title:
By_______________________
Name:
Title:
Instructions re Delivery of Notes Norwest Bank Minnesota, N.A.
Attn: Security Clearance
733 Marquette Avenue, 5th Floor
Minneapolis, Minnesota 55479-0047
Tax Identification Number 84-0467907
</TABLE>
Schedule A-7
<PAGE> 56
<TABLE>
<CAPTION>
PURCHASER NAME THE GREAT-WEST LIFE ASSURANCE COMPANY
<S> <C>
Name in Which Note is Registered THE GREAT-WEST LIFE ASSURANCE COMPANY
Note Registration Number; R-6; $4,000,000
Principal Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Citibank NYC/Cust
ABA #021000089
Credit A/C #36853718
For further credit to: A/C #091595 Great-West Life Assurance Co. Bonds U.S.
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among
principal, Make-Whole Amount and interest)
of the payment being made:
Address for Notices Related to Citibank, N.A.
Payments Investor Services Division
Securities Processing Services
20 Exchange Place/Level C
New York, New York 10043
Address for all other Notices The Great-West Life Assurance Company
100 Osborne Street North
Winnipeg, Manitoba
CANADA R3C 3A5
Attention: Securities Accounting
Fax: (204) 946-8849
with a copy to:
Great-West Life & Annuity Insurance Company
Investments Division
8515 East Orchard Road, 3T2
Englewood, Colorado 80111
Other Instructions THE GREAT-WEST LIFE ASSURANCE COMPANY
By_______________________
Name:
Title:
By_______________________
Name:
Title:
</TABLE>
Schedule A-8
<PAGE> 57
<TABLE>
<CAPTION>
PURCHASER NAME THE GREAT-WEST LIFE ASSURANCE COMPANY
<S> <C>
Instructions re Delivery of Notes Citibank, N.A.
Investor Services Division
Securities Processing Services
20 Exchange Place/Level C
New York, New York 10043
Custody Account #091595 Great-West Life Assurance Co. - Bonds U.S.
Tax Identification Number [None]
</TABLE>
Schedule A-9
<PAGE> 58
<TABLE>
<CAPTION>
PURCHASER NAME CUNA MUTUAL LIFE INSURANCE COMPANY
<S> <C>
Name in Which Note is Registered CUNA MUTUAL LIFE INSURANCE COMPANY
Note Registration Number; Principal R-7; $5,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information State Street Bank
ABA No.: 011000028
BNF: CUNA Mutual Life Insurance Company
AG: DDA: 1044-854-6
OBI: ZT2A
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments CIMCO Inc.
5910 Mineral Point Road
Madison, WI 53705
Attn: Private Placements
Fax: (608) 238-2316
Address for all other Notices CIMCO Inc.
5910 Mineral Point Road
Madison, WI 53705
Attn: Private Placements
Fax: (608) 238-2316
Other Instructions CUNA MUTUAL LIFE INSURANCE COMPANY
By: CIMCO Inc.
By_______________________
Name:
Title:
Instructions re Delivery of Notes The Chase Manhattan Bank and Trust Company
A/C State Street Bank
4 New York Plaza, Ground Floor
New York, NY 10004
A/C CUNA Mutual Group
A/C Number: ZT2A
Tax Identification Number 42-0388260
</TABLE>
Schedule A-10
<PAGE> 59
<TABLE>
<CAPTION>
PURCHASER NAME CUNA MUTUAL INSURANCE SOCIETY
<S> <C>
Name in Which Note is Registered CUNA MUTUAL INSURANCE SOCIETY
Note Registration Number; Principal R-8; $2,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information State Street Bank
ABA No.: 011000028
BNF: CUNA Mutual Insurance Society
AG: DDA: 1044-851-2
OBI: ZT1E
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments CIMCO Inc.
5910 Mineral Point Road
Madison, WI 53705
Attn: Private Placements
Fax: (608) 238-2316
Address for all other Notices CIMCO Inc.
5910 Mineral Point Road
Madison, WI 53705
Attn: Private Placements
Fax: (608) 238-2316
Other Instructions CUNA MUTUAL INSURANCE SOCIETY
By: CIMCO Inc.
By_______________________
Name:
Title:
Instructions re Delivery of Notes The Chase Manhattan Bank and Trust Company
A/C State Street Bank
4 New York Plaza, Ground Floor
New York, NY 10004
A/C CUNA Mutual Group
A/C Number: ZT1E
Tax Identification Number 39-0230590
</TABLE>
Schedule A-11
<PAGE> 60
<TABLE>
<CAPTION>
PURCHASER NAME LIBERTY LIFE INSURANCE COMPANY/LINCOLN NATIONAL
<S> <C>
Name in Which Note is Registered HARE & CO (201709 A* 3)
Note Registration Number; Principal R-9; $5,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information The Bank of New York
BNF IOC 566 ABA #021000018
Attn: P&I Dept.
Acct. Name: Commercial Intertech
Account No. 214869 - Liberty Life/Lincoln National
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments Liberty Investment Group
Post Office Box 789
Greenville, South Carolina 29602
Attention: Barbara Stegall
and
Liberty Capital Advisors
Post Office Box 789
Greenville, South Carolina 29602
Attention: Pat Holbert
Address for all other Notices Liberty Life Insurance Company/Lincoln National
c/o Liberty Capital Advisors
Post Office Box 789
Greenville, South Carolina 29602
Attention: Patrick Weston
Other Instructions LIBERTY LIFE INSURANCE COMPANY/LINCOLN NATIONAL
By_____________________________________________
Name:
Title:
Instructions re Delivery of Notes Bank of New York
One Wall Street
Window A, 3rd Floor
New York, New York 10286
F/A#: 214869
</TABLE>
Schedule A-12
<PAGE> 61
<TABLE>
<CAPTION>
PURCHASER NAME LIBERTY LIFE INSURANCE COMPANY/LINCOLN NATIONAL
<S> <C>
Account Name: Liberty Life/Lincoln National
Tax Identification Number 57-0249218
</TABLE>
Schedule A-13
<PAGE> 62
<TABLE>
<CAPTION>
PURCHASER NAME TMG LIFE INSURANCE COMPANY
<S> <C>
Name in Which Note is Registered TMG LIFE INSURANCE COMPANY
Note Registration Number; Principal R-10; $2,000,000
Amount
Payment on Account of Note
Method Federal Funds Wire Transfer
Account Information Norwest Bank MN, N.A.
ABA: 091000019
Trust Clearing Acct: 08-40-245
Attn: Michael Eiynck
FFC to: 12250600
Accompanying Information Name of Company: Commercial Intertech Corp.
Description of
Security: 7.61% Senior Notes due June 30, 2007
PPN: 201709 A* 3
Due Date and Application (as among principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Related to Payments TMG Life Insurance Company
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Attention: Investment Department - PP
Phone: (414) 641-4029
Fax: (414) 641-4055
with a copy to:
Ms. Lisa Harris
The Mutual Group (U.S.), Inc.
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Phone: (414) 641-4029
Fax: (414) 797-2318
Address for all other Notices TMG Life Insurance Company
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Attention: Investment Department - PP
Phone: (414) 641-4029
Fax: (414) 641-4055
with a copy to:
Ms. Lisa Harris
The Mutual Group (U.S.), Inc.
401 North Executive Drive, Suite 300
Brookfield, WI 53008-0503
Phone: (414) 641-4029
</TABLE>
Schedule A-14
<PAGE> 63
<TABLE>
<CAPTION>
PURCHASER NAME TMG LIFE INSURANCE COMPANY
<S> <C>
Fax: (414) 797-2318
Other Instructions TMG LIFE INSURANCE COMPANY
by The Mutual Group (U.S.), Inc., its agent
By_____________________________________________
Name:
Title:
By_____________________________________________
Name:
Title:
Instructions re Delivery of Notes Law Department of Purchaser
Tax Identification Number 45-0208990
</TABLE>
Schedule A-15
<PAGE> 64
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
ADJUSTED MAKE-WHOLE AMOUNT -- is defined in Section 8.6.
AFFILIATE -- means, at any time, and with respect to any Person, (a)
any other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company.
AGREEMENT -- this is defined in Section 17.3.
ASSET DISPOSITION -- means any Transfer except:
(a) any
(i) Transfer from a Significant Subsidiary to the
Company or to a Wholly-Owned Subsidiary;
(ii) Transfer from the Company to a Wholly-Owned
Subsidiary;
(iii) Transfer from the Company to a Significant
Subsidiary (other than a Wholly-Owned Subsidiary) or from a
Significant Subsidiary to another Significant Subsidiary,
which in either case is for Fair Market Value, and
(iv) Transfer from the Company or a Significant
Subsidiary to a Subsidiary (other than a Significant
Subsidiary), provided that the aggregate Disposition Value of
such Transfer and all other such Transfers occurring in the
then current fiscal year of the Company does not exceed
$2,500,000,
so long as, in each case, immediately before and immediately after the
consummation of any such Transfer and after giving effect thereto, no
Default or Event of Default exists; and
(b) any Transfer made in the ordinary course of business and
involving only property that is either (i) inventory or (ii) any assets
no longer required in the operation of
Schedule B-1
<PAGE> 65
the business of the Company or any of its Significant Subsidiaries or
that is obsolete, written off or otherwise having insignificant value.
BANK LOAN AGREEMENT -- means the Credit Agreement, dated as of October
31, 1996, by and among the Company, Intertech Holdings, certain credit
institutions and Mellon Bank, N.A., as agent for the such credit institutions,
as such agreement may from time to time be amended, supplemented, or any other
agreement which replaces such agreement as a consequence of refinancing or
otherwise.
BUSINESS DAY -- means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Cleveland, Ohio, Youngstown, Ohio or
Pittsburgh, Pennsylvania are required or authorized to be closed.
CAPITALIZED LEASE OBLIGATION -- means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease that would, in accordance with GAAP, appear as a liability on
a balance sheet of such Person.
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
CAPITAL STOCK -- means any class of capital stock, share capital or
similar equity interest of a Person.
CHANGE IN CONTROL -- means
(a) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of either (A)
the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of
the then-outstanding Voting Stock of the Company; provided, that for
purposes of this paragraph (a) the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, (iv) any
acquisition by a lender to the Company pursuant to a debt restructuring
of the Company, or (v) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of
paragraph (c) hereafter;
(b) individuals who, as of the date of the Closing, constitute
the Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; provided,
that any individual becoming a director subsequent to the
Schedule B-2
<PAGE> 66
date of the Closing whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than a member of the
Incumbent Board;
(c) consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Voting Stock
of the Company immediately prior to such Business Combination
beneficially own, outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and Voting
Stock of the Company, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
or indirectly, twenty percent (20%) or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting
from such Business Combination, or the combined voting power of the
then-outstanding Voting Stock of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
CLOSING -- is defined in Section 3.
CODE -- means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
COMPANY -- is defined in the introductory sentence to this Agreement.
CONFIDENTIAL INFORMATION -- is defined in Section 20.
Schedule B-3
<PAGE> 67
CONSOLIDATED ASSETS -- means, at any time, the total assets of the
Company and its Subsidiaries which would be shown as assets on a consolidated
balance sheet of the Company and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock and surplus of its Subsidiaries.
CONSOLIDATED CAPITALIZATION -- means, at any time, the sum of (a)
Consolidated Debt at such time plus (b) Consolidated Net Worth at such time plus
(c) deferred tax liabilities as such amounts would be shown on a consolidated
balance sheet of the Company and the Subsidiaries as of such time prepared in
accordance with GAAP.
CONSOLIDATED DEBT -- means, at any time, the total of all Indebtedness
of the Company and its Subsidiaries outstanding at such time, after eliminating
all offsetting debits and credits between the Company and its Subsidiaries and
all other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP.
CONSOLIDATED INTEREST EXPENSE -- means, for any period,
(a) the sum (without duplication) of the following (in each
case, eliminating all offsetting debits and credits between the Company
and its Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of
the Company and its Subsidiaries in accordance with GAAP): (i) all
interest in respect of Indebtedness of the Company and its Subsidiaries
(including imputed interest on Capital Lease Obligations) deducted in
determining Consolidated Net Income for such period, plus (ii) all debt
discount and expense amortized or required to be amortized in the
determination of Consolidated Net Income for such period, minus
(b) if such period includes all or any portion of the
Company's 1996 or 1997 fiscal year, any amortization during such period
of fees and costs that shall have been incurred and paid by the Company
and its Subsidiaries in connection with the CUNO Spin-Off or the
Unsolicited Offer, to the extent that such fees and costs shall have
been previously included as an interest expense of the Company for the
Company's 1996 and 1997 fiscal years.
CONSOLIDATED NET INCOME -- means, for any period, the net income (or
loss) of the Company and its Subsidiaries for such period (taken as a cumulative
whole), as determined in accordance with GAAP, after eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP, provided that there shall be excluded:
Schedule B-4
<PAGE> 68
(a) proceeds from any life insurance policy (other than any
income (or loss) attributable to reversions to the Company in
connection with the Corporate Owned Life Insurance Program),
(b) any aggregate net gain or net loss for such period arising
from the sale, conversion, exchange or other disposition of any assets
(other than current assets) (including, without limitation, any
extraordinary non-cash gains or losses),
(c) any income of any Person (other than a Subsidiary) in
which the Company or any Subsidiary has an ownership interest, except
to the extent that (i) any such income has been actually received by
the Company or such Subsidiary in the form of cash dividends or similar
cash distribution or (ii) such income, together with all other
undistributed income of all such Persons, is less than $100,000 in the
fiscal year in respect of which such income is being measured,
(d) any income of any Person accrued prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Company
or a Subsidiary, and any income of any Person, substantially all of the
assets of which have been acquired in any manner, realized by such
other Person prior to the date of acquisition,
(e) in the case of a successor to the Company by consolidation
or merger or as a transferee of its assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer
of assets,
(f) any deferred credit (or amortization of a deferred credit
excluding advance operating subsidies from the Federal Republic of
Germany, Treuhandanstalt or the State of Saxony) arising from the
acquisition of any Person, and
(g) any extraordinary non-cash gains or losses not included in
paragraph (b) above.
CONSOLIDATED NET WORTH -- means, at any time,
(a) the sum of (i) the par value (or value stated on the books
of the corporation) of the Capital Stock (but excluding (A) treasury
stock, (B) Capital Stock subscribed and unissued and (C) other
contra-equity accounts) of the Company and its Subsidiaries plus (ii)
the amount of the paid-in capital and retained earnings of the Company
and its Subsidiaries, in each case as such amounts would be shown on a
consolidated balance sheet of the Company and its Subsidiaries as of
such time prepared in accordance with GAAP, minus
(b) to the extent included in clause (a), all amounts properly
attributable to minority interests, if any, in the stock and surplus of
its Subsidiaries,
Schedule B-5
<PAGE> 69
provided that the effect of any cumulative foreign currency translation
adjustments shall be excluded from Consolidated Net Worth.
CONTROL -- means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
CONTROL EVENT -- means:
(a) the execution by the Company or any Subsidiary or
Affiliate of any agreement or letter of intent with respect to any
proposed transaction or event or series of transactions or events that,
individually or in the aggregate, may reasonably be expected to result
in a Change in Control;
(b) the execution of any written agreement that, when fully
performed by the parties thereto, would result in a Change in Control;
or
(c) the making of any written offer by any person (as such
term is used in section 13(d) and section 14(d)(2) of the Exchange Act
as in effect on the date of the Closing) or related persons
constituting a group (as such term is used in Rule 13d-5 under the
Exchange Act as in effect on the date of the Closing) to the holders of
any of the Capital Stock of the Company, which offer, if accepted by
the requisite number of holders, would result in a Change in Control.
CORPORATE OWNED LIFE INSURANCE PROGRAM -- means a life insurance
program owned and established by the Company pursuant to which the Company would
make deposits in a special employee benefit grantor trust to be created, which
trust in turn would (a) invest such deposits in reserve contracts underwritten
by financially sound and reputable life insurance companies rated A:VI or higher
by A.M. Best Company, Inc., (b) borrow against such reserve contracts, and (c)
pay reversions to the Company (on a tax free basis) with respect to such
borrowings; so long as (x) the repayment obligation of the Company with respect
to any amounts borrowed by the Company shall be without recourse to the Company
and to such trust, such that the sole recourse for repayment of such loans would
be to such reserve contracts and (y) the GAAP treatment of the income and
expense components of such program are not reported separately but netted in the
Company's consolidated statement of income.
CUNO SPIN-OFF -- means the distribution of the CUNO, Incorporated
common shares by the Company to the holders of the Company's common shares on
September 10, 1996.
DEBT PREPAYMENT APPLICATION -- means, with respect to any Transfer of
property, the application by the Company or any Significant Subsidiary of cash
in an amount equal to the Net Proceeds Amount with respect to such Transfer to
pay Senior Debt of the Company (other than Senior Debt owing to the Company, any
Significant Subsidiary or any Affiliate).
Schedule B-6
<PAGE> 70
DEFAULT -- means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
DEFAULT RATE -- means a rate of interest per annum that is the greater
of (i) 9.61% and (ii) 2.00% over the rate of interest publicly announced by
Mellon Bank, N.A. (or its successor) from time to time in Pittsburgh,
Pennsylvania as its "base" or "prime" rate.
DISPOSITION VALUE -- means, at any time, with respect to any property
(a) in the case of property that does not constitute
Significant Subsidiary Stock, the book value thereof, valued at the
time of such disposition in good faith by the Company, and
(b) in the case of property that constitutes Significant
Subsidiary Stock, an amount equal to that percentage of book value of
the assets of its Significant Subsidiary that issued such stock as is
equal to the percentage that the book value of such Significant
Subsidiary Stock represents of the book value of all of the outstanding
Capital Stock of such Significant Subsidiary (assuming, in making such
calculations, that all securities convertible into such Capital Stock
are so converted and giving full effect to all transactions that would
occur or be required in connection with such conversion) determined at
the time of the disposition thereof, in good faith by the Company.
DOLLARS -- and the symbol $ each mean United States of America dollars.
EBITDA -- means, at any time, the sum of
(a) Consolidated Net Income for the period of four consecutive
fiscal quarters of the Company then most recently ended, plus
(b) the amounts of all
(i) Consolidated Interest Expense,
(ii) depreciation, amortization and other non-cash
charges,
(iii) domestic and foreign income taxes, and
(iv) expenses in respect of the fees and costs,
including extraordinary charges, related to the write-off of
capitalized fees and expenses incurred in connection with the
CUNO Spin-Off and the Unsolicited Offer,
but only to the extent that such amounts have been deducted in the
determination of such Consolidated Net Income, plus
(c) Pro Forma Acquisition EBITDA for such period.
Schedule B-7
<PAGE> 71
ENVIRONMENTAL LAWS -- means any and all federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
ERISA AFFILIATE -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
EVENT OF DEFAULT -- is defined in Section 11.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended.
FAIR MARKET VALUE -- means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
GAAP -- means generally accepted accounting principles as in effect
from time to time in the United States of America.
GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America or any State or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
GUARANTY -- means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
Schedule B-8
<PAGE> 72
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
HAZARDOUS MATERIAL -- means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
HOLDER -- means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
INDEBTEDNESS -- with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding trade payables, trade
credits and accrued expenses incurred in the ordinary course of
business which are not represented by a promissory note or other
evidence of indebtedness and which are not more than 60 days past due
(unless payment thereof is being contested in good faith by the
Company) but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any
such property);
(c) its Capitalized Lease Obligations;
Schedule B-9
<PAGE> 73
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of amounts drawn on letters
of credit or bank guarantees or instruments serving a similar function
issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed
money);
(f) each Swap of such Person which has a notional principal
amount of at least $100,000,000; and
(g) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
INITIAL GUARANTORS -- means (a) Orange County Metal Works, a California
corporation, and (b) Cylinder City, Inc. a Minnesota corporation.
INSTITUTIONAL INVESTOR -- means (a) any original Purchaser of a Note,
or any Affiliate of any such Purchaser and (b) any bank, trust company, savings
and loan association or other financial institution, any charitable foundation,
any pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form.
INTERTECH HOLDINGS -- means Commercial Intertech Holdings, Limited, a
corporation formed under the laws of Great Britain.
LIEN -- means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements), in each case securing Indebtedness.
LIEN INCREASE DEBT -- is defined in Section 10.2(f).
MAKE-WHOLE AMOUNT -- is defined in Section 8.6.
MATERIAL -- means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
Schedule B-10
<PAGE> 74
MATERIAL ADVERSE EFFECT -- means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the Notes, or (c) the
validity or enforceability of this Agreement or the Notes.
MEMORANDUM -- is defined in Section 5.3.
MULTIEMPLOYER PLAN -- means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
NET PROCEEDS AMOUNT -- means, with respect to any Transfer of any
Property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the
Fair Market Value of such consideration at the time of the consummation
of such Transfer) received by such Person in respect of such Transfer,
minus
(b) the sum of (i) all ordinary and reasonable out-of-pocket
costs and expenses actually incurred by such Person in connection with
such Transfer, plus (ii) all taxes payable with respect to such
Transfer (including any tax associated with the gain or loss thereon).
NOTES -- is defined in Section 1.
OFFICER'S CERTIFICATE -- means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
OTHER AGREEMENTS -- is defined in Section 2.
OTHER PURCHASERS -- is defined in Section 2.
PBGC -- means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
PERSON -- means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
PLAN -- means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
Schedule B-11
<PAGE> 75
PREFERRED STOCK -- means any class of Capital Stock of a corporation
that is preferred over any other class of Capital Stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
PRIORITY DEBT -- means, without duplication, at any time, the sum
(without duplication) of
(a) all Indebtedness of the Company and its Significant
Subsidiaries outstanding at such time and secured by any Lien with
respect to any property owned by the Company or any Significant
Subsidiary not permitted by paragraphs (a) through (d) or paragraph (f)
of Section 10.2, including, without limitation, all Lien Increase Debt,
plus
(b) all Indebtedness of its Significant Subsidiaries
outstanding at such time (other than (i) Indebtedness referred to in
paragraph (a) above, (ii) Indebtedness owing to the Company or a
Significant Subsidiary, and (iii) Indebtedness outstanding under the
CIH Revolving Credit Loans (as such term is defined in the Bank Loan
Agreement on the date of the Closing and in the form attached hereto as
Exhibit 10.2(e)), as such commitment may be replaced from time to time,
provided, however, that in any case such amount under this clause (iii)
shall not exceed $50,000,000).
PRO FORMA ACQUISITION EBITDA -- means, for any period, with respect to
any calculation of EBITDA for such period, an amount equal to the adjustment
(either positive or negative) to such EBITDA which would be required if it is
assumed that each acquisition of any Person or other operating business acquired
during such period shall have been acquired on the first day of such period and
further assuming the assets, liabilities, results of operations and cash flows
of the operating business being acquired, the Person becoming a Subsidiary or
the Person with or into which the Company shall be merging or consolidating had
been combined with those of the Company and its Subsidiaries since the first day
of such period.
PROPERTY or PROPERTIES -- means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
PROPERTY REINVESTMENT APPLICATION -- means, with respect to any
Transfer of property, the application of an amount equal to the Net Proceeds
Amount with respect to such Transfer to the acquisition by the Company or any
Subsidiary of operating assets of the Company or any Subsidiary to be used in
the principal business of such Person.
PTCE 95-60 is defined in Section 6.2(a).
PURCHASER -- means any Person identified in Schedule A as a purchaser
of one or more Notes.
QPAM EXEMPTION -- means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
Schedule B-12
<PAGE> 76
REQUIRED HOLDERS -- means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
RESPONSIBLE OFFICER -- means any Senior Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this agreement.
RULE 144A -- means Rule 144A promulgated under the Securities Act, as
such rule may be amended from time to time.
SECURITIES ACT -- means the Securities Act of 1933, as amended from
time to time.
SENIOR DEBT -- means any Indebtedness of the Company other than any
Indebtedness that is in any manner subordinated in right of payment or security
in any respect to the Indebtedness evidenced by the Notes.
SENIOR FINANCIAL OFFICER -- means the chief financial officer,
principal accounting officer, treasurer or controller of the Company.
SENIOR OFFICER -- means a Senior Financial Officer and any other
executive officer of the Company.
SIGNIFICANT SUBSIDIARY -- means, at any time, any Subsidiary that
satisfies at least one of the following conditions:
(a) the portion of Consolidated Net Income, determined for the
then most recently completed fiscal year of the Company, attributable
to such Subsidiary pursuant to GAAP is at least 10% of such
Consolidated Net Income; or
(b) the portion of Consolidated Assets, determined as of the
end of the then most recently completed fiscal year of the Company,
attributable to such Subsidiary pursuant to GAAP is at least 10% of
such Consolidated Total Assets.
SIGNIFICANT SUBSIDIARY STOCK -- means the Capital Stock (or any options
or warrants to purchase stock or other securities exchangeable for or
convertible into any Capital Stock) of any Significant Subsidiary.
SOURCE -- is defined in Section 6.2.
SUBORDINATED DEBT -- means any Indebtedness that is in any manner
subordinated in right of payment or security in any respect to the Indebtedness
evidenced by the Notes.
SUBSIDIARY -- means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group)
Schedule B-13
<PAGE> 77
ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries (unless such partnership can and
does ordinarily take major business actions without the prior approval of such
Person or one or more of its Subsidiaries). Unless the context otherwise clearly
requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the
Company.
SUCCESSOR CORPORATION -- is defined in Section 10.6.
SWAPS -- means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
TRANSFER -- means, with respect to any Person, any transaction in which
such Person sells, conveys, transfers, leases (as lessor) or otherwise disposes
of any of its property, including, without limitation, Significant Subsidiary
Stock, and including, without limitation, any consolidation, merger or other
transaction the direct or indirect result of which is a disposition of all or a
portion of any equity or other interest in any Person. For purposes of
determining the application of the Net Proceeds Amount in respect of any
Transfer, the Company may designate any Transfer as one or more separate
Transfers each yielding a separate Net Proceeds Amount. In any such case, the
Disposition Value of any property subject to each such separate Transfer
attributable to any property subject to each such separate Transfer shall be
determined by ratably allocating the aggregate Disposition Value of all property
subject to all such separate Transfers to each such separate Transfer on a
proportionate basis.
ULTRA ACQUISITION -- means the acquisition by the Company of 100% of
the outstanding common shares of Ultra Hydraulics Limited pursuant to an
acquisition agreement, dated November 16, 1996.
UNSOLICITED OFFER -- means that certain unsolicited offer made by an
unrelated third party in June, 1996 (and subsequently withdrawn in August, 1996)
to acquire Control of the outstanding voting shares of the Company.
VOTING STOCK -- means, with respect to any Person, any shares of
Capital Stock of such Person whose holders are entitled under ordinary
circumstances to vote for the election of directors of such Person (irrespective
of whether at the time shares of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).
Schedule B-14
<PAGE> 78
WHOLLY-OWNED SUBSIDIARY -- means, at any time, any Significant
Subsidiary one hundred percent (100%) of all of the equity interests (except
directors' qualifying shares) and voting interests of which are owned by any one
or more of the Company and the Company's other Wholly-Owned Subsidiaries at such
time.
Schedule B-15
<PAGE> 79
SCHEDULE 3
PAYMENT INSTRUCTIONS AT CLOSINGS
Intentionally Omitted.
Schedule 3-1
<PAGE> 80
SCHEDULE 5.4
SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK
Intentionally Omitted.
Schedule 5.4-1
<PAGE> 81
SCHEDULE 5.5
FINANCIAL STATEMENTS
Intentionally Omitted.
Schedule 5.5-1
<PAGE> 82
SCHEDULE 5.12
CERTAIN ERISA MATTERS
Intentionally Omitted.
Schedule 5.12-1
<PAGE> 83
SCHEDULE 5.14
USE OF PROCEEDS
Intentionally Omitted.
Schedule 5.14-1
<PAGE> 84
SCHEDULE 5.15
EXISTING INDEBTEDNESS
Intentionally Omitted.
Schedule 5.15-1
<PAGE> 85
EXHIBIT 1
FORM OF NOTE
COMMERCIAL INTERTECH CORP.
7.61% SENIOR NOTE DUE JUNE 30, 2007
No. R-_____ [Date]
$__________ PPN: 201709 A* 3
FOR VALUE RECEIVED, the undersigned, COMMERCIAL INTERTECH CORP. (herein
called the "COMPANY"), a corporation organized and existing under the laws of
the State of Ohio, hereby promises to pay to __________, or registered assigns,
the principal sum of _______________ DOLLARS ($__________) on June 30, 2007,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) on the unpaid balance thereof at the rate of 7.61% per annum from the date
hereof, payable semiannually, on the 30th day of June and December in each year,
commencing with the June 30 or December 30 next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount or Adjusted Make-Whole Amount (as such terms
are defined in the Note Purchase Agreements referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the greater of (i) 9.61%
or (ii) 2.00% over the rate of interest publicly announced by Mellon Bank, N.A.
from time to time in Pittsburgh, Pennsylvania as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount or
Adjusted Make-Whole Amount with respect to this Note are to be made in lawful
money of the United States of America at Mellon Bank, N.A., Pittsburgh,
Pennsylvania or at such other place as the Company shall have designated by
written notice to the holder of this Note as provided in the Note Purchase
Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"NOTES") issued pursuant to separate Note Purchase Agreements, dated as of June
30, 1997 (as from time to time amended, the "NOTE PURCHASE Agreements"), between
the Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly
Exhibit 1-1
<PAGE> 86
authorized in writing, a new Note for a like principal amount will be issued to,
and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount or Adjusted Make-Whole Amount) and with the effect
provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF OHIO, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF
SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION
OTHER THAN SUCH STATE.
COMMERCIAL INTERTECH CORP.
By_________________________
[Name:]
[Title:]
Exhibit 1-2
<PAGE> 1
EXHIBIT 10.39
COMMERCIAL INTERTECH CORP.
NONQUALIFIED DEFERRED COMPENSATION PLAN
FOR PAUL J. POWERS
(As Amended and Restated Effective January 1, 1996)
ARTICLE I
ESTABLISHMENT AND CONSTRUCTION
1.1 ESTABLISHMENT. Commercial Intertech Corp. (the "Company") established,
effective as of January 1, 1995, an unfunded deferred compensation plan
on behalf of Paul J. Powers to be provided to supplement the Pension
Plan for Salaried Employees of Commercial Intertech Corp. ("Pension
Plan"). This document amends and restates the provisions of such plan
effective January 1, 1996 and shall be known as the "Commercial
Intertech Corp. Nonqualified Deferred Compensation Plan for Paul J.
Powers" (the "Plan").
1.2 PURPOSE. The Company maintains the Pension Plan which is intended to
meet the requirements of a "qualified" retirement plan under Section
401(a) of the Internal Revenue Code. The Pension Plan contains certain
restrictions that sometimes result in a diminution of benefits
available to certain highly compensated employees or preclude payment
of a full benefit without twenty-five (25) years of service. This Plan
is established to replace benefits lost under specified circumstances
due to this diminution and preclusion or upon a Change of Control.
Also, this Plan is intended to be an unfunded deferred compensation
plan for a member of a select group of management or highly compensated
employees, as described in Sections 201(2), 301(a)(3), and 401(a)(1) of
the Employee Retirement Income Security Act of 1974 ("ERISA").
<PAGE> 2
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the meaning stated below
unless the context clearly indicates otherwise.
(a) "COMPENSATION COMMITTEE" means the Committee described in
section 4.1 of this Plan, which has been delegated the
authority to administer this Plan.
(b) "MONTHLY PAY" means one-twelfth (1/12) of a Participant's
Compensation, as defined in the Pension Plan, received from
the Company and any Subsidiary, determined without regard to
the limitations of Section 401(a)(17) of the Code. If the
Participant separates from service at or after attainment of
age sixty-two (62) or dies as an active employee of the
Company or Subsidiary, a Participant's Compensation shall also
include annual bonuses paid under the target award programs
("SEIP" and "SMTIP"). However, a Participant's Compensation
shall not include the premium under the stock payout option of
the target award programs.
(c) "PARTICIPANT" means Paul J. Powers.
(d) "YEARS OF CREDITED SERVICE" means
(i) with respect to separation from service, or death
while in active employment, with the Company or a
Subsidiary at or after attainment of age sixty-two
(62), twenty-five (25) years;
(ii) with respect to separation from service with the
Company or a Subsidiary prior to attainment of age
sixty-two (62), his Credited Service under the
Pension Plan; or
(iii) with respect to death while in active employment with
the Company or a Subsidiary prior to age sixty-two
(62), his Years of Credited Service determined as if
he had separated from service at age sixty-two (62)
(as if the amount determined in (i) above were based
on attainment of age sixty-two (62)) reduced by the
number of years and fractional years (1/12th for each
complete calendar month) by which his actual date of
death precedes the date as of which he would have
attained age sixty-two (62).
Years of Credited Service shall not be affected by a
Participant performing services for Cuno Incorporated prior to
separation from service with the Company or a Subsidiary.
Unless the context clearly indicates otherwise, terms not defined in
this document shall have the meaning specified in the Pension Plan (if
defined therein). Where the defined meaning is intended, the term is
capitalized.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
words in the masculine gender shall include the feminine and neuter
genders; the plural shall include the singular and the singular shall
include the plural.
2
<PAGE> 3
2.3 EMPLOYMENT RIGHTS. Establishment of the Plan shall not be construed to
give the Participant the right to be retained by the Company or any
Subsidiary or to any benefits not specifically provided by the Plan.
2.4 SEVERABILITY. In the event any provision of the Plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall
not affect the remaining parts of the Plan, but the Plan shall be
construed and enforced as if the illegal or invalid provision had never
been inserted, and the Company shall have the privilege and opportunity
to correct and remedy such questions of illegality or invalidity by
amendment as provided in the Plan.
2.5 APPLICABLE LAW. This Plan is fully exempt from Titles II, III and IV of
ERISA. The Plan shall be governed and construed in accordance with
Title I of ERISA and the laws of the State of Ohio.
3
<PAGE> 4
ARTICLE III
BENEFITS
3.1 AMOUNT OF RETIREMENT BENEFITS. Except as provided in Section 3.2,
benefits will commence to a Participant, at the election of the
Participant as provided in Section 3.3, in amounts hereinafter
described.
(a) COMMENCEMENT OF BENEFITS ON AND AFTER ATTAINMENT OF AGE
SIXTY-TWO (62). Benefits under the Plan become payable to the
Participant on or after the date he attains age sixty-two
(62). The monthly benefit calculated in the form of a single
life annuity under the Plan to the Participant shall be equal
to (1) minus (2) where -
(1) is two percent (2%) of the average of the
Participant's Monthly Pay during the highest three
(3) years during the ten (10) year period immediately
preceding his Normal Retirement Date, or if earlier,
his separation from service date, times his Years of
Credited Service (not to exceed twenty-five (25)
years);
(2) is the sum of the monthly benefit which would be
payable under the Pension Plan had such benefit
commenced on the same date and been paid in the form
of a single life annuity to the Participant, and
fifty percent (50%) of the Participant's primary
Social Security Retirement Benefit estimated to be
payable as of such date.
(b) COMMENCEMENT OF BENEFITS PRIOR TO ATTAINMENT OF AGE SIXTY-TWO
(62). If benefits under the Plan become payable to the
Participant prior to his attainment of age sixty-two (62), the
monthly benefit payable in the form of a single life annuity
under the Plan to the Participant shall be equal to (1) minus
(2) where -
(1) is the amount determined in 3.1(a)(1) reduced
three-tenths of one percent (3/10 of 1%) for each
complete calendar month by which the date of
commencement precedes the date as of which the
Participant attains sixty-two (62); and
(2) is the sum of the monthly benefit which would be
payable, if any, under the Pension Plan had such
benefit commenced on the same date and been paid in
the form of a single life annuity to the Participant,
and fifty percent (50%) of the Participant's primary
Social Security Benefit estimated to be payable at
the later of actual retirement or his attainment of
age sixty-two (62), reduced by three-tenths of one
percent (3/10 of 1%) for each complete calendar month
by which the date of commencement precedes the date
as of which the Participant attains age sixty-two
(62).
3.2 DISABILITY BENEFITS. If a Participant's employment terminates at any
time by reason of a disability, the benefit payable under this Plan,
calculated under Section 3.1, shall be reduced by:
(a) any monthly disability benefits paid to the Participant
pursuant to a long-term disability plan maintained by the
Company or any Subsidiary and any monthly
4
<PAGE> 5
(or equivalent) wage replacement amounts paid to the
Participant pursuant to Worker's Compensation laws; and
(b) if the Participant receives disability benefits under Social
Security, fifty percent (50%) of the excess of such monthly
disability benefit over the Participant's primary Social
Security Retirement Benefit used in Sections 3.1(a)(2) or
3.1(b)(2), as adjusted.
The existence of a disability shall be determined by the Compensation
Committee in its sole discretion. Such determination shall be based
upon such criteria and medical evidence as the Compensation Committee
deems appropriate. Benefits to a Participant whose employment
terminates by reason of a disability shall begin on the first day of
the month following the Compensation Committee's declaration that the
Participant is disabled. The benefits payable to a disabled Participant
shall not be reduced to reflect the early starting date thereof.
3.3 FORM AND COMMENCEMENT OF RETIREMENT BENEFITS
(a) FORM. Benefits payable under this Plan shall be paid in the
same manner as benefits payable under the Pension Plan.
However, in the sole discretion of the Participant, any
benefit due to the Participant under the Plan may be paid in
any of the forms of benefit payments available to the
Participant under the Pension Plan. Each alternate form of
payment shall be the Actuarial Equivalent of a single life
annuity. Additionally, a Participant may elect to have a
benefit due under the Plan paid in a single lump sum payment,
provided notice thereof is received by the Compensation
Committee at least six months prior to the Participant's
separation from service with the Company. The lump sum shall
be the present value of the annuity calculated under this Plan
using the basis defined below that produces the largest lump
sum amount:
(1) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date of the Participant's retirement,
or
(2) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date six (6) months prior to the date
of the Participant's retirement, or
(3) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section 417(e)(3) for the month in
which the Participant's retirement occurs, or
(4) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section 417(e)(3) for the month
which is six (6) months prior to the Participant's
retirement.
5
<PAGE> 6
(b) COMMENCEMENT. Benefits under Section 3.1 of this Plan shall be
payable to the Participant, beginning on the first day of the
month coincident with or next following his separation from
service with the Company or a Subsidiary.
3.4 DEATH BENEFITS. No death benefit shall be paid under this Plan except
as provided in this Section.
(a) SPOUSE'S BENEFIT. If the Participant dies before benefit
payments begin under the Plan, the Spouse of such Participant
at the date of his death shall be paid a monthly benefit under
the Plan as calculated under Section 3.1(b), but without
inclusion of the early payment reduction in Section 3.1(b)(1),
and adjusted under the assumption that the Participant had
commenced to receive benefits from the Plan on the day
immediately prior to his date of death and had elected to
receive a fifty percent (50%) joint and survivor annuity. For
this purpose, the Spouse shall be entitled to make the same
elections with respect to the form and commencement of this
death benefit as would have been available to the Participant
had he lived, provided, however, Actuarial Equivalency shall
be based upon the life expectancy of the Spouse and benefit
commencement dates shall be based upon the life of the
Participant had he not died.
(b) If the Participant dies before benefit payments begin under
the Plan and has no Spouse, no death benefit shall be payable
under this Plan.
(c) If a Participant dies after benefit payments begin under this
Plan, a death benefit shall be payable under the Plan to a
Spouse of the Participant only if a death benefit is payable
under the optional form of payment selected by the
Participant.
3.5 CHANGE OF CONTROL.
(a) "Change of Control" shall have the meaning as defined in the
agreement providing severance compensation to the Participant
upon a change in the control of the management of the Company
then existing between the Company and the Participant (the
"Severance Compensation Agreement"). In the event of a Change
of Control, a monthly benefit shall be payable to the
Participant equal to the benefit calculated in Subsection
3.1(a) above adjusted as follows:
(i) "Years of Credited Service", as defined in
Section 2.1(d), for purposes of this Section 3.5,
shall mean twenty five (25) years.
(ii) "Monthly Pay", as defined in Section 2.1(b), for
purposes of this Section 3.5, shall mean one twelfth
(1/12) of a Participant's Compensation, as defined in
the Pension Plan. A Participant's Compensation also
shall include annual bonuses paid under the target
award programs ("SEIP" and "SMTIP") received from the
Company or any Subsidiary, determined without regard
to the limitations of Section 401(a)(17) of the Code.
A Participant's Compensation, for purposes of this
Section 3.5, shall not include the twenty percent
(20%) premium under the stock payment option of the
target award programs.
6
<PAGE> 7
(b) Unless the Participant elects to defer the commencement of benefits
to a later date, benefits under this Section 3.5 shall be payable to
the Participant, beginning on the first day of the month coincident
with or next following his separation from service with the Company or
a Subsidiary.
(c) Benefits payable under this Section 3.5 shall be paid in the same
manner as benefits payable under the Pension Plan. However, in the sole
discretion of the Participant, any benefit due to the Participant under
the Plan may be paid in any of the forms of benefit payments available
to the Participant under the Pension Plan or in the form of annual
installments for a specified period of years. Each alternate form of
payment shall be the Actuarial Equivalent of a single life annuity.
Additionally, a Participant may elect to have a benefit due under this
Section 3.5 paid in a single lump sum payment, provided notice thereof
is received by the Compensation Committee prior to separation from
service. The lump sum shall be the present value of the annuity
calculated under this Plan using the basis defined below that produces
the largest lump sum amount:
(1) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date of the Participant's election, or
(2) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date six (6) months prior to the date
of the Participant's election, or
(3) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section 417(e)(3) for the month in
which the Participant's election occurs, or
(4) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section 417(e)(3) for the month
which is six (6) months prior to the Participant's
election.
The Participant may elect any combination of form of benefits not
exceeding two (2).
3.6 MINIMUM BENEFIT. Notwithstanding any other provision contained in this
Plan, the monthly benefit calculated in the form of a single life
annuity under the Plan, prior to the Pension plan offset, to the
Participant shall not be less than forty one thousand six hundred and
sixty seven dollars ($41,667) per month.
7
<PAGE> 8
3.7 EARLY DISTRIBUTION. Notwithstanding any other provision contained in
this Plan, the Company shall make distributions to the Participant
before such distributions otherwise are payable under this Plan if it
determines upon the advice of counsel, based on a change in the Code, a
published ruling or similar announcement issued by the Internal Revenue
Service ("IRS"), a regulation issued by the Secretary of the Treasury
or his delegate, a decision of a court of competent jurisdiction
involving the Participant or a closing agreement involving the
Participant that is approved by the IRS, that the Participant has
recognized or will recognize income for federal income tax consequences
with respect to amounts that are or will be distributable to him.
8
<PAGE> 9
ARTICLE IV
GENERAL PROVISIONS
4.1 ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board of Directors. The Compensation Committee shall
have, to the extent appropriate, the same powers, rights, duties and
obligations with respect to this Plan as the plan administrator under
the Pension Plan has under such Pension Plan.
4.2 FINALITY OF DETERMINATION. Except with respect to questions arising
from benefits payable upon a Change of Control, the determination of
the Compensation Committee as to any disputed questions arising under
this Plan, including questions of construction and interpretation,
shall be final, binding and conclusive upon all persons.
4.3 EXPENSES. The expenses of administering the Plan shall be borne by the
Company.
4.4 INDEMNIFICATION AND EXCULPATION. The members of the Compensation
Committee, its agents and officers, directors and employees of the
Company and the Subsidiaries shall be indemnified and held harmless by
the Company against and from any and all loss, cost, liability or
expense that may be imposed upon or reasonably incurred by them in
connection with or resulting from any claim, action, suit or proceeding
to which they may be a party or in which they may be involved by reason
of any action taken or failure to act under this Plan and against and
from any and all amounts paid by them in settlement (with the Company's
written approval) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding. The foregoing provision shall not be
applicable to any person if the loss, cost, liability or expense is due
to such person's gross negligence or willful misconduct.
4.5 FUNDING. While all benefits payable under the Plan constitute general
corporate obligations, the Company shall establish a separate
irrevocable grantor trust for the benefit of the Participant, which
trust shall be subject to the claims of the general creditors of the
Company in the event of such corporation's insolvency, to be used as a
reserve for the discharge of the Company's obligations under the Plan
to such Participant. The Company shall contribute to such trust an
amount sufficient to fund the aggregate present value of all
liabilities potentially owed to the Participant under this Plan and
such funding shall occur no later than the date on which a Change of
Control occurs. Any payments made to the Participant under the separate
trust for his benefit shall reduce dollar for dollar the amount payable
to the Participant from the general assets of the Company. The amounts
payable under the Plan shall be reflected on the accounting records of
the Company but shall not be construed to create or require the
creation of a trust, custodial or escrow account, except as described
above in this section. No Participant (or Spouse of the Participant)
shall have any right, title or interest whatever in or to any
investment reserves, accounts, or funds that the Company or Subsidiary
may purchase, establish or accumulate to aid in providing benefits
under this Plan. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create a trust or fiduciary
relationship of any kind between the Company or any Subsidiary and the
Participant or any other person, except as described above in this
section. Neither the Participant nor his Spouse shall acquire any
interest greater than that of an unsecured creditor.
9
<PAGE> 10
4.6 CORPORATE ACTION. Any action required of or permitted by the Company or
any Subsidiary under this Plan shall be by resolution of its Board of
Directors or any person or persons authorized by resolution of such
Board of Directors.
4.7 INTERESTS NOT TRANSFERABLE. The interests of the Participant and his
Spouse under the Plan are not subject to the claims of their creditors
and may not be voluntarily or involuntarily transferred, assigned,
alienated or encumbered.
4.8 EFFECT ON OTHER BENEFIT PLANS. Amounts credited or paid under this Plan
shall not be considered to be compensation for the purposes of the
Pension Plan maintained by the Company or any Subsidiary. The treatment
of such amounts under other employee benefits plans shall be determined
pursuant to the provisions of such plans.
4.9 TAX LIABILITY. The Company or Subsidiary may withhold from any payment
of benefits hereunder any taxes required to be withheld and such sum as
such employer may reasonably estimate to be necessary to cover any
taxes for which the Company or Subsidiary may be liable and which may
be assessed with regard to such payment.
4.10 LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Participant may incur as a result of the Company's
or any Subsidiary's contesting the validity, enforceability or the
Participant's interpretation of, or determinations under, this Plan.
4.11 SUCCESSORS AND ASSIGNS. This Plan and all of the obligations hereunder
shall be binding on the successors and assigns of the Company.
10
<PAGE> 11
ARTICLE V
AMENDMENT AND TERMINATION
The Company by action of this Board of Directors reserves the right to amend
this Plan from time to time or to terminate the Plan at any time, but without
the written consent of the Participant, no such action may reduce or relieve the
Company or any Subsidiary of any obligation with respect to any benefit accrued
under the Plan by such Participant as of the date of such amendment or
termination.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers on this 25 day of September, 1996.
COMMERCIAL INTERTECH CORP.
By: /s/ J. Patrick Downey
Name: J. Patrick Downey
Title: Vice President and Assistant
Secretary
<PAGE> 1
EXHIBIT 10.40
COMMERCIAL INTERTECH CORP.
NONQUALIFIED DEFERRED COMPENSATION PLAN
FOR BRUCE C. WHEATLEY
(As Amended and Restated Effective as of January 1, 1996)
ARTICLE I
ESTABLISHMENT AND CONSTRUCTION
1.1 ESTABLISHMENT. Commercial Intertech Corp. (the "Company") established,
effective as of January 1, 1996, an unfunded deferred compensation plan
on behalf of Bruce C. Wheatley to be provided to supplement the Pension
Plan for Salaried Employees of Commercial Intertech Corp. ("Pension
Plan"). This document amends and restates the provisions of such plan
effective as of January 1, 1996 and shall be known as the "Commercial
Intertech Corp. Nonqualified Deferred Compensation Plan for Bruce C.
Wheatley" (the "Plan").
1.2 PURPOSE. The Company maintains the Pension Plan which is intended to
meet the requirements of a "qualified" retirement plan under Section
401(a) of the Internal Revenue Code. The Pension Plan contains certain
restrictions that sometimes result in a diminution of benefits
available to certain highly compensated employees or precludes payment
of a full benefit without twenty-five (25) years of service. This Plan
is established to replace some of the benefits lost due to this
diminution and preclusion or upon a Change of Control. Also, this Plan
is intended to be an unfunded deferred compensation plan for a member
of a select group of management or highly compensated employees, as
described in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA"). Except as provided in
Section 3.4, benefits are only payable under this Plan if the
Participant retires from active service with the Company or any
Subsidiary at or after attainment of age sixty-five (65) or dies at or
after the completion of five (5) years of Service.
<PAGE> 2
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the meaning stated below
unless the context clearly indicates otherwise.
(a) "COMPENSATION COMMITTEE" means the Committee described in
section 4.1 of this Plan, which has been delegated the
authority to administer this Plan.
(b) "MONTHLY PAY" means one-twelfth (1/12) of a Participant's
Compensation, as defined in the Pension Plan, received from
the Company and any Subsidiary determined without regard to
the limitations of Section 401(a)(17) of the Code.
(c) "PARTICIPANT" means Bruce C. Wheatley.
(d) "YEARS OF CREDITED SERVICE" means
(i) with respect to separation from service with the
Company or any Subsidiary at or after attainment of
age sixty-five (65), twenty-five (25) years;
(ii) with respect to death after completion of five (5)
years of Service and prior to age sixty-five (65),
his Years of Credited Service determined as if he had
separated from service at age sixty-five (65) reduced
by the number of years and fractional years (1/12th
for each complete calendar month) by which his actual
date of death precedes the date as of which he would
have attained age sixty-five (65).
Unless the context clearly indicates otherwise, terms not defined in
this document shall have the meaning specified in the Pension Plan (if
defined therein). Where the defined meaning is intended, the term is
capitalized.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
words in the masculine gender shall include the feminine and neuter
genders; the plural shall include the singular and the singular shall
include the plural.
2.3 EMPLOYMENT RIGHTS. Establishment of the Plan shall not be construed to
give the Participant the right to be retained by the Company or any
Subsidiary or to any benefits not specifically provided by the Plan.
2.4 SEVERABILITY. In the event any provision of the Plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall
not affect the remaining parts of the Plan, but the Plan shall be
construed and enforced as if the illegal or invalid provision had never
been inserted, and the Company shall have the privilege and opportunity
to correct and remedy such questions of illegality or invalidity by
amendment as provided in the Plan.
2.5 APPLICABLE LAW. This Plan is fully exempt from Titles II, III and IV of
ERISA. The Plan shall be governed and construed in accordance with
Title I of ERISA and the laws of the State of Ohio.
2
<PAGE> 3
ARTICLE III
BENEFITS
3.1 AMOUNT OF RETIREMENT BENEFITS. If the Participant retires from active
service with the Company at or after attainment of age sixty-five (65),
benefits will be payable to the Participant and will commence, at the
election of the Participant as provided in Section 3.2, and shall equal
the excess, if any, of (a) minus (b) where:
(a) is the benefit calculated under the Pension Plan as if the
provisions of the Pension Plan were administered using this
Plan's definition of compensation (Monthly Pay) and Years of
Credited Service and without regard to the benefit and
compensation limitations found in Code Sections 415 and
401(a)(17); and
(b) is the actual limited Pension Plan benefit which is payable to
such Participant.
3.2 FORM AND COMMENCEMENT OF BENEFITS. Benefits payable under this Plan
shall be paid in the same manner and form and at the same time as
benefits payable under the Pension Plan.
3.3 DEATH BENEFITS. No death benefit shall be paid under this Plan except
as provided in this Section.
(a) SPOUSE'S BENEFIT. If the Participant dies after completion of
five (5) years of Service but before benefit payments begin
under the Plan, the Spouse, at the date of the Participant's
death, shall be paid a monthly benefit under the Plan in the
form of a life annuity calculated as under section 3.1
adjusted by applying the provisions of the Pre-Retirement
Survivor Annuity under the Pension Plan.
(b) If the Participant dies before benefit payments begin under
the Plan and has no Spouse, no death benefit shall be payable
under this Plan.
(c) If the Participant dies after benefit payments begin under
this Plan, a death benefit shall be payable under the Plan to
the Spouse of the Participant only if a death benefit is
payable to such Spouse under the form of payment selected by
the Participant.
3.4 CHANGE OF CONTROL.
(a) "Change of Control" shall have the meaning as defined in the
agreement providing severance compensation to the Participant
upon a change in control of the management of the Company then
existing between the Company and the Participant (the
"Severance Compensation Agreement"). In the event of a Change
of Control, a monthly benefit shall be payable to the
Participant equal to the benefit calculated in Subsection
3.1(a) above adjusted as follows:
3
<PAGE> 4
(i) Monthly Pay, as defined in Section 2.1(b) above,
shall mean one twelfth (1/12th) of a Participant's
Compensation, as defined in the Pension Plan, and,
for purposes of this Section 3.4, shall include
annual bonuses paid under the target award programs
("SEIP" and "SMTIP") but shall not include the
premium under the stock payout option of the target
award programs, determined without regard to the
limitations of Section 401(a)(17) of the Code.
(ii) Years of Credited Service, as defined in Section
2.1(d) above, shall mean fifteen (15) years, for
purposes of this Section 3.5.
(b) Unless the Participant elects to defer the commencement of benefits
to a later date, benefits under this Section 3.4 shall be payable to
the Participant, beginning on the first day of the month coincident
with or next following his separation from service with the Company or
a Subsidiary.
(c) Benefits payable under this Section 3.4 shall be paid in the same
manner as benefits payable under the Pension Plan. However, in the sole
discretion of the Participant, any benefit due to the Participant under
the Plan may be paid in any of the forms of benefit payments available
to the Participant under the Pension Plan or in the form of annual
installments for a specified period of years. Each alternate form of
payment shall be the Actuarial Equivalent of a single life annuity.
Additionally, a Participant may elect to have a benefit due under this
Section 3.4 paid in a single lump sum payment, provided notice thereof
is received by the Compensation Committee prior to separation from
service. The lump sum shall be the present value of the annuity
calculated under this Plan using the basis defined below that produces
the largest lump sum amount:
(1) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date of the Participant's election, or
(2) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date six (6) months prior to the date
of the Participant's election, or
(3) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section 417(e)(3) for the month in
which the Participant's election occurs, or
(4) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section 417(e)(3) for the month
which is six (6) months prior to the Participant's
election.
The Participant may elect any combination of form of benefits not exceeding two
(2).
4
<PAGE> 5
3.5 EARLY DISTRIBUTION. Notwithstanding any other provision contained in
this Plan, the Company shall make distributions to the Participant
before such distributions otherwise are payable under this Plan if it
determines upon the advice of counsel, based on a change in the Code, a
published ruling or similar announcement issued by the Internal Revenue
Service ("IRS"), a regulation issued by the Secretary of the Treasury
or his delegate, a decision of a court of competent jurisdiction
involving the Participant or a closing agreement involving the
Participant that is approved by the IRS, that the Participant has
recognized or will recognize income for federal income tax consequences
with respect to amounts that are or will be distributable to him.
5
<PAGE> 6
ARTICLE IV
GENERAL PROVISIONS
4.1 ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board of Directors. The Compensation Committee shall
have, to the extent appropriate, the same powers, rights, duties and
obligations with respect to this Plan as the plan administrator under
the Pension Plan has under such Pension Plan.
4.2 FINALITY OF DETERMINATION. Except with respect to questions arising
from benefits payable upon a Change of Control, the determination of
the Compensation Committee as to any disputed questions arising under
this Plan, including questions of construction and interpretation,
shall be final, binding and conclusive upon all persons.
4.3 EXPENSES. The expenses of administering the Plan shall be borne by the
Company.
4.4 INDEMNIFICATION AND EXCULPATION. The members of the Compensation
Committee, its agents and officers, directors and employees of the
Company and the Subsidiaries shall be indemnified and held harmless by
the Company against and from any and all loss, cost, liability or
expense that may be imposed upon or reasonably incurred by them in
connection with or resulting from any claim, action, suit or proceeding
to which they may be a party or in which they may be involved by reason
of any action taken or failure to act under this Plan and against and
from any and all amounts paid by them in settlement (with the Company's
written approval) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding. The foregoing provision shall not be
applicable to any person if the loss, cost, liability or expense is due
to such person's gross negligence or willful misconduct.
4.5 FUNDING. While all benefits payable under the Plan constitute general
corporate obligations, the Company shall establish a master rabbi trust
for the benefit of the Participant, which trust shall be subject to the
claims of the general creditors of the Company (and of any Subsidiary
which has employed the Participant and become obligated under the Plan)
in the event of such corporation's insolvency, to be used as a reserve
for the discharge of the Company's or Subsidiary's obligations under
the Plan to such Participant. The Company shall contribute to such
trust an amount sufficient to fund the aggregate present value of all
liabilities potentially owed to the Participant under this Plan and
such funding shall occur no later than the date on which a Change of
Control occurs. Any payments made to the Participant under the trust
for his benefit shall reduce dollar for dollar the amount payable to
the Participant from the general assets of the Company or Subsidiary.
The amounts payable under the Plan shall be reflected on the accounting
records of the Company or Subsidiary but shall not be construed to
create or require the creation of a trust, custodial or escrow account,
except as described above in this section. The Participant (or Spouse
of Participant) shall not have any right, title or interest whatever in
or to any investment reserves, accounts or funds that the Company or
any Subsidiary may purchase, establish or accumulate to aid in
providing benefits under this Plan. Nothing contained in this Plan, and
no action taken pursuant to its provisions, shall create a trust or
fiduciary relationship of any kind between the Company or any
Subsidiary and the Participant or any other person, except as
6
<PAGE> 7
described above in this section. Neither the Participant nor Spouse of
the Participant shall acquire any interest greater than that of an
unsecured creditor.
4.6 CORPORATE ACTION. Any action required of or permitted by the Company or
any Subsidiary under this Plan shall be by resolution of its Board of
Directors or any person or persons authorized by resolution of such
Board of Directors.
4.7 INTERESTS NOT TRANSFERABLE. The interests of the Participant and his
Spouse under the Plan are not subject to the claims of their creditors
and may not be voluntarily or involuntarily transferred, assigned,
alienated or encumbered.
4.8 EFFECT ON OTHER BENEFIT PLANS. Amounts credited or paid under this Plan
shall not be considered to be compensation for the purposes of the
Pension Plan maintained by the Company or any Subsidiary. The treatment
of such amounts under other employee benefits plans shall be determined
pursuant to the provisions of such plans.
4.9 TAX LIABILITY. The Company or Subsidiary may withhold from any payment
of benefits hereunder any taxes required to be withheld and such sum as
such employer may reasonably estimate to be necessary to cover any
taxes for which the Company or Subsidiary may be liable and which may
be assessed with regard to such payment.
4.10 LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Participant may incur as a result of the Company's
or any Subsidiary's contesting the validity, enforceability or the
Participant's interpretation of, or determinations under, this Plan.
4.11 SUCCESSORS AND ASSIGNS. This Plan and all of the obligations hereunder
shall be binding on the successors and assigns of the Company.
4.12 NONDUPLICATION OF BENEFITS. Any benefits payable under this Plan to a
Participant shall be offset by any benefits payable to such Participant
under the Commercial Intertech Corp. Supplemental Executive Retirement
Plan.
7
<PAGE> 8
ARTICLE V
AMENDMENT AND TERMINATION
The Company by action of this Board of Directors reserves the right to amend
this Plan from time to time or to terminate the Plan at any time, but without
the written consent of the Participant, no such action may reduce or relieve the
Company or any Subsidiary of any obligation with respect to any benefit accrued
under the Plan by such Participant as of the date of such amendment or
termination.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers on this 25 day of September, 1996.
COMMERCIAL INTERTECH CORP.
By: /s/ J. Patrick Downey
Name: J. Patrick Downey
Title: Vice President and Assistant
Secretary
8
<PAGE> 1
EXHIBIT 10.41
First Amendment to the Commercial Intertech Corp.
Nonqualified Deferred Compensation Plan for Bruce C. Wheatley
(as Amended and Restated Effective as of January 1, 1996)
The Commercial Intertech Corp. Non-Qualified Deferred Compensation Plan
for Bruce C. Wheatley (the "Plan") shall be and is hereby amended, effective
July 23, 1997, to read as follows:
1. Amend Section 1.2 by deleting the second and final
sentences of such section.
2. Amend the definition of "Monthly Pay" in Section 2.1(b) by
adding the following to the end of such Section:
"Effective on the earlier of (1) the death of the Participant
after the completion of five (5) years of Service; or (2)
November 1, 1997, "Monthly Pay" means one twelfth (1/12) of a
Participant's Compensation, as defined in the Pension Plan,
and shall include annual bonuses paid under the target award
programs ("SEIP" and "SMTIP") but shall not include the
premium under the stock payout option of the target award
programs, determined without regard to the limitations of
Section 401(a)(17) of the Code."
3. Amend the definition of "Years of Credited Service" in
Section 2.1(d) as follows:
"Years of Credited Service" means
(i) with respect to separation of service with the Company or
any Subsidiary at or after the attainment of age sixty (60)
but prior to attainment of age sixty-two (62), the greater of
twelve (12) years or actual Years of Service under the Pension
Plan;
(ii) with respect to separation of service with the Company or
any Subsidiary at or after attainment of age sixty-two (62)
but before attainment of age sixty-five (65), the greater of
seventeen (17) years or actual Years of Service under the
Pension Plan;
(iii) with respect to separation of service with the Company
or any Subsidiary at or after attainment of age sixty-five
(65), twenty-five (25) years;
(iv) with respect to death after completion of five (5) Years
of Service and prior to age sixty-five (65), Years of Credited
Service determined as if he had separated from service at age
sixty-five (65) reduced by the number of years and fractional
years one twelfth (1/12th for each complete calendar month) by
which his actual date of death precedes the date as of which
he would have attained age sixty-five (65)."
<PAGE> 2
4. Amend Section 3.1 by deleting the phrase:
"If the Participant retires from active
service with the Company at or after attainment of
age sixty-five (65)"
5. Amend Section 3.2 by adding the following to the end of
such section:
"Except as provided in Section 3.4, the
Participant will not voluntarily separate from
service with the Company until after due consultation
with the Company and the Committee.
This First Amendment to the Commercial Intertech Corp. Nonqualified
Deferred Compensation Plan for Bruce C. Wheatley is executed this 23rd day of
July, 1997.
COMMERCIAL INTERTECH CORP.
By: /s/ Paul J. Powers
Title: Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.42
COMMERCIAL INTERTECH CORP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated Effective as of January 1, 1996)
ARTICLE I
ESTABLISHMENT AND CONSTRUCTION
1.1 ESTABLISHMENT. Commercial Intertech Corp. (the "Company") established,
effective as of January 1, 1996, an unfunded deferred compensation plan
on behalf of certain designated management or highly compensated
employees ("Eligible Employees") of the company or any subsidiary
("Subsidiary") of the Company which has adopted the Pension Plan for
Salaried Employees of Commercial Intertech Corp. ("Pension Plan"). This
document amends and restates the provisions of such plan effective
January 1, 1996 and shall be known as the "Commercial Intertech Corp.
Supplemental Executive Retirement Plan" (the "SERP").
1.2 PURPOSE. The Company maintains the Pension Plan which is intended to
meet the requirements of a "qualified" retirement plan under Section
401(a) of the Internal Revenue Code of 1986. The Pension Plan contains
certain restrictions required by the Code that sometimes result in a
diminution of benefits available to certain highly compensated
employees. This SERP is established to replace benefits lost due to
this diminution for Eligible Employees or upon a Change of Control.
Also, this SERP is intended to be an unfunded deferred compensation
plan for a select group of management or highly compensated employees,
as described in Sections 201(2), 301(a)(3), and 401(a)(1) of the
Employee Retirement Income Security Act of 1974 ("ERISA").
1.3 APPLICATION OF SERP. The terms of this SERP are applicable only to
Eligible Employees who are in the active employ of the Company or any
Subsidiary on or after January 1, 1996.
<PAGE> 2
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. The following terms shall have the meaning stated below
unless the context clearly indicates otherwise.
(a) "COMPENSATION COMMITTEE" means the Committee described in
section 5.1 of this SERP, which has been delegated the
authority to administer this SERP.
(b) "PARTICIPANT" means a person who has satisfied the requirement
of section 3.1.
Unless the context clearly indicates otherwise, terms not defined in
this document shall have the meaning specified in the Pension Plan (if
defined therein). Where the defined meaning is intended, the term is
capitalized.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
words in the masculine gender shall include the feminine and neuter
genders; the plural shall include the singular and the singular shall
include the plural.
2.3 EMPLOYMENT RIGHTS. Establishment of the SERP shall not be construed to
give any Participant the right to be retained by the Company or any
Subsidiary or to any benefits not specifically provided by the SERP.
2.4 SEVERABILITY. In the event any provision of the SERP shall be held
invalid or illegal for any reason, any illegality or invalidity shall
not affect the remaining parts of the SERP, but the SERP shall be
construed and enforced as if the illegal or invalid provision had never
been inserted, and the Company shall have the privilege and opportunity
to correct and remedy such questions of illegality or invalidity by
amendment as provided in the SERP.
2.5 APPLICABLE LAW. This SERP is fully exempt from Titles II, III and IV of
ERISA. The SERP shall be governed and construed in accordance with
Title I of ERISA and the laws of the State of Ohio.
2
<PAGE> 3
ARTICLE III
PARTICIPATION
3.1 ELIGIBILITY TO PARTICIPATE. Each Member of the Pension Plan who is
designated by the Compensation Committee as eligible to participate in
this SERP shall be a Participant in this SERP and shall be eligible to
receive benefits hereunder. Each such person shall be set forth in the
schedule of Appendix I attached hereto. The Compensation Committee may
designate, on the schedule in Appendix II attached hereto, certain
Participants as "Group A" Participants who have all of the rights of
Participants as well as additional rights defined in this Plan. The
Compensation Committee may, in its sole discretion, create additional
groups for certain participants, granting or redefining rights as it
deems appropriate. The Compensation Committee may designate, on the
schedule in Appendix III attached hereto, certain Members of the
Pension Plan as "Group B Participants" who shall have certain limited
rights effective upon Change of Control, as defined herein.
3
<PAGE> 4
ARTICLE IV
BENEFITS
4.1 AMOUNT OF RETIREMENT BENEFITS. Benefits will commence to a Participant,
at the election of the Participant as provided in Section 4.2, and
shall equal the excess, if any, of (a) minus (b) where:
(a) is the Participant's benefit calculated under the Pension Plan
as if the provisions of the Pension Plan were administered
without regard to the benefit and compensation limitations
found in Code Sections 415 and 401(a)(17); and
(b) is the actual limited Pension Plan benefit which is payable to
such Participant.
4.2 FORM AND COMMENCEMENT OF BENEFITS. Benefits payable under this SERP
shall be paid in the same manner and form, and at the same time as
benefits payable under the Pension Plan. In the event of the
Participant's death prior to commencement of benefits under this Plan,
the Participant's Spouse will receive a benefit from this Plan
calculated in conjunction with the Pre-Retirement Survivor Annuity
under the Pension Plan.
4.3 CHANGE OF CONTROL.
(a) "Change of Control" shall have the meaning as defined in the
agreement providing severance compensation to the Participant
upon a change in the control of the management of the Company
then existing between the Company and such Participant (the
"Severance Compensation Agreement"). In the event of a Change
of Control, a monthly benefit shall be payable to the
Participant equal to the benefit calculated in Subsection
4.1(a) above adjusted as follows:
(i) Compensation for a Group A Participant, for purposes
of this Section 4.3, shall mean Compensation as
defined in the Pension Plan and shall include annual
bonuses paid under the target award programs ("SEIP"
and "SMTIP), determined without regard to the
limitations of Section 401(a)(17) of the Code.
Compensation, for purposes of this Section 4.3, shall
not include the premium under the stock payout option
of the target award programs. For all other
Participants, Compensation, for purposes of this
Section 4.3, shall mean Compensation as defined in
the Pension Plan determined without regard to Section
401(a) (17) of the Code.
(ii) For purposes of this Section 4.3, Service and
Credited Service, as defined in the Pension Plan,
shall include any additional service granted under
the Severance Compensation Agreement, and the
granting of such service shall be solely defined by
the terms and conditions of such agreement.
4
<PAGE> 5
(b) In the event of a Change of Control, a monthly benefit shall
be payable to a Group B Participant equal to the excess, if
any, of (a) minus (b) where:
(a) is the Group B Participant's benefit under the Pension
Plan calculated using the definitions of Service and Credited
Service including any additional service granted under the
Severance Compensation Agreement, and the granting of such
service shall be defined solely by the terms and conditions of
such agreement: and
(b) is the actual Pension Plan Benefit which is payable to
such Participant.
The provisions of this Plan concerning form and commencement
of benefits shall apply equally to Participants and Group B
Participants.
(c) Unless the Participant elects to defer the commencement of
benefits to a later date, benefits under this Section 4.3
shall be payable to the Participant, beginning on the first
day of the month coincident with or next following his
separation from service with the Company or a Subsidiary.
(d) Benefits payable under this Section 4.3 shall be paid in the
same manner as benefits payable under the Pension Plan.
However, in the sole discretion of the Participant, any
benefit due to the Participant under the Plan may be paid in
any of the forms of benefit payments available to the
Participant under the Pension Plan or in the form of annual
installments for a specified period of years. Each alternate
form of payment shall be the Actuarial Equivalent of a single
life annuity. Additionally, a Participant may elect to have a
benefit due under this Section 4.3 paid in a single lump sum
payment, provided notice thereof is received by the
Compensation Committee prior to separation from service. The
lump sum shall be the present value of the annuity calculated
under this Plan using the basis defined below that produces
the largest lump sum amount:
(1) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date of the Participant's election, or
(2) the UP-1984 mortality table and the PBGC interest
rate used for purposes of determining present value
of a lump sum distribution on plan termination as in
effect on the date six (6) months prior to the date
of the Participant's election, or
(3) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section 417(e)(3) for the month in
which the Participant's election occurs, or
(4) the 1983 GAM mortality table and the applicable
interest rate promulgated by the Internal Revenue
Service under Code Section
5
<PAGE> 6
417(e)(3) for the month which is six (6) months prior
to the Participant's election.
The Participant may elect any combination of form of benefits not exceeding two
(2).
4.4 EARLY DISTRIBUTION. Notwithstanding any other provision in this Plan, the
Company shall make distributions to the Participant before such distributions
otherwise are payable under this Plan if it determines upon the advice of
counsel, based on a change in the Code, a published ruling or similar
announcement issued by the Internal Revenue Service ("IRS"), a regulation issued
by the Secretary of the Treasury or his delegate, a decision of a court of
competent jurisdiction involving the Participant or a closing agreement
involving the Participant that is approved by the IRS, that the Participant has
recognized or will recognize income for federal income tax consequences with
respect to amounts that are or will be distributable to him.
6
<PAGE> 7
ARTICLE V
GENERAL PROVISIONS
5.1 ADMINISTRATION. This SERP shall be administered by the Compensation
Committee of the Board of Directors. The Compensation Committee shall
have, to the extent appropriate, the same powers, rights, duties and
obligations with respect to this SERP as the plan administrator under
the Pension Plan has under such Pension Plan.
5.2 FINALITY OF DETERMINATION. Except with respect to questions arising
from benefits payable upon a Change of Control, the determination of
the Compensation Committee as to any disputed questions arising under
this SERP, including questions of construction and interpretation,
shall be final, binding and conclusive upon all persons.
5.3 EXPENSES. The expenses of administering the SERP shall be borne by the
Company.
5.4 INDEMNIFICATION AND EXCULPATION. The members of the Compensation
Committee, its agents and officers, directors and employees of the
Company and the Subsidiaries shall be indemnified and held harmless by
the Company against and from any and all loss, cost, liability or
expense that may be imposed upon or reasonably incurred by them in
connection with or resulting from any claim, action, suit or proceeding
to which they may be a party or in which they may be involved by reason
of any action taken or failure to act under this SERP and against and
from any and all amounts paid by them in settlement (with the Company's
written approval) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding. The foregoing provision shall not be
applicable to any person if the loss, cost, liability or expense is due
to such person's gross negligence or willful misconduct.
5.5 FUNDING. While all benefits payable under the SERP constitute general
corporate obligations, the Company shall establish a master rabbi trust
for the benefit of each Participant, which trust shall be subject to
the claims of the general creditors of the Company (and of any
Subsidiary which has employed the Participant and become obligated
under the SERP) in the event of such corporation's insolvency, to be
used as a reserve for the discharge of the Company's or Subsidiary's
obligations under the SERP to such Participant. The Company shall
contribute to such trust an amount sufficient to fund the aggregate
present value of all liabilities potentially owed to the Participant
under this Plan and such funding shall occur no later than the date on
which a Change of Control occurs. Any payments made to a Participant
under the trust for his benefit shall reduce dollar for dollar the
amount payable to the Participant from the general assets of the
Company or Subsidiary. The amounts payable under the SERP shall be
reflected on the accounting records of the Company or Subsidiary but
shall not be construed to create or require the creation of a trust,
custodial or escrow account, except as described above in this section.
No Participant (or Spouse of a Participant) shall have any right, title
or interest whatever in or to any investment reserves, accounts, or
funds that the Company or any Subsidiary may purchase, establish or
accumulate to aid in providing benefits under this SERP. Nothing
contained in this SERP, and no action taken pursuant to its provisions,
shall create a trust or fiduciary relationship of any kind between the
Company or any Subsidiary and a Participant or any other person, except
as
7
<PAGE> 8
described above in this section. Neither a Participant nor Spouse of a
Participant shall acquire any interest greater than that of an
unsecured creditor.
5.6 CORPORATE ACTION. Any action required of or permitted by the Company or
any Subsidiary under this SERP shall be by resolution of its Board of
Directors or any person or persons authorized by resolution of such
Board of Directors.
5.7 INTERESTS NOT TRANSFERABLE. The interests of the Participants and their
Spouses under the SERP are not subject to the claims of their creditors
and may not be voluntarily or involuntarily transferred, assigned,
alienated or encumbered.
5.8 EFFECT ON OTHER BENEFIT PLANS. Amounts credited or paid under this SERP
shall not be considered to be compensation for the purposes of a
qualified pension plan maintained by the Company or any Subsidiary. The
treatment of such amounts under other employee benefits plans shall be
determined pursuant to the provisions of such plans.
5.9 TAX LIABILITY. The Company or Subsidiary may withhold from any payment
of benefits hereunder any taxes required to be withheld and such sum as
such employer may reasonably estimate to be necessary to cover any
taxes for which the Company or Subsidiary may be liable and which may
be assessed with regard to such payment.
5.10 LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Participant may incur as a result of the Company's
or any Subsidiary's contesting the validity, enforceability or the
Participant's interpretation of, or determinations under, this SERP.
5.11 SUCCESSORS AND ASSIGNS. This Plan and all of the obligations hereunder
shall be binding on the successors and assigns of the Company.
8
<PAGE> 9
ARTICLE VI
AMENDMENT AND TERMINATION
The Company by action of this Board of Directors reserves the right to amend
this SERP from time to time or to terminate the SERP at any time, but without
the written consent of each Participant, no such action may reduce or relieve
the Company or any Subsidiary of any obligation with respect to any benefit
accrued under the SERP by such Participant as of the date of such amendment or
termination.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers on this 25 day of September, 1996.
COMMERCIAL INTERTECH CORP.
By: /s/ Paul J. Powers
Name: Paul J. Powers
Title: Chief Executive Officer
9
<PAGE> 10
APPENDIX I
The Compensation Committee has appointed the following Members of the Pension
Plan to be Participants in this SERP:
Bruce C. Wheatley
Hubert Jacobs van Merlen
Gilbert M. Manchester
John Gilchrist
Robert A. Calcagni
10
<PAGE> 11
APPENDIX II
The Members of the Pension Plan who are Group A Participants in this SERP are:
Bruce C. Wheatley
Hubert Jacobs van Merlen
Gilbert M. Manchester
11
<PAGE> 12
APPENDIX III
The Compensation Committee has appointed the following Members of the Pension
Plan to be Group B Participants in this SERP:
Edward K. Barnard
William W. Cushwa
J. Patrick Downey
Steven J. Hewitt
Kenneth W. Marcum
Patrick C. Reardon
Shirley M. Shields
Kenneth E. Stumbaugh
12
<PAGE> 1
EXHIBIT 10.43
First Amendment to the Commercial Intertech Corp.
Supplemental Executive Retirement Plan
(as Amended and Restated Effective as of January 1, 1996)
The Commercial Intertech Corp. Supplemental Executive Retirement Plan
(the "Plan") shall be and hereby is amended, effective July 23, 1997, to read as
follows:
1. Section 3.1 is amended by adding the following to the end
of such Section:
"The Compensation Committee may
designate, on the Schedule in Appendix IV attached
hereto, certain Members of the Pension Plan as "Bonus
Participants" who shall have all of the rights of
Participants as well as additional rights defined by
this Plan."
2. Article IV of the Plan is amended by adding a new Section
4.1A as follows:
"4.1A AMOUNT OF RETIREMENT BENEFITS
FOR BONUS PARTICIPANTS. Effective on the earlier of
(1) the death of the Bonus Participant after the
completion of five (5) years of service, or (2)
November 1, 1997, benefits to a Bonus Participant
shall equal the excess, if any, of (a) minus (b)
where:
(a) is the benefit calculated under
the Pension Plan as if the provisions of the Pension
Plan were administered using the definition of
Compensation (Monthly Pay) as defined below and
without regard to the benefit and compensation
limitations found in Sections 415 and 401(a)(17) of
the Code; and
(b) is the actual limited Pension
Plan benefit which is payable to such Bonus
Participant.
"Monthly Pay", for purposes of this
Section 4.1A, means one twelfth (1/12) of a
Participant's Compensation, as defined in the Pension
Plan, and shall include annual bonuses paid under the
target award programs ("SEIP" and "SMTIP") but shall
not include the premium under the stock payout option
of the target award programs, determined without
regard to the limitations of Section 401(a)(17) of
the Code.
<PAGE> 2
3. Appendix I of the Plan is amended to include the
following Members of the Pension Plan:
Bruce C. Wheatley
Gilbert M. Manchester
John Gilchrist
Robert A. Calcagni
Steven J. Hewitt
4. Appendix II of the Plan is amended to include the
following Group A Participants:
Bruce C. Wheatley
Gilbert M. Manchester
Steven J. Hewitt
5. Appendix III is amended to delete William W. Cushwa.
6. A new Appendix IV is added and shall state as follows:
The Compensation Committee has appointed the
following Members of the Pension Plan to be Bonus Participants
in this SERP:
Bruce C. Wheatley
Steven J. Hewitt
Gilbert M. Manchester
This First Amendment to the Commercial Intertech Corp. Supplemental
Executive Retirement Plan is executed this 23rd day of July, 1997.
COMMERCIAL INTERTECH CORP.
By: /s/ Paul J. Powers
Title: Chief Executive Officer
2
<PAGE> 1
Exhibit 11
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996 1995
---- ---- ----
(in thousands except per-share data)
<S> <C> <C> <C>
Primary
- -------
Average shares outstanding .......................................... 14,032 14,916 15,381
Net effect of dilutive stock options - based on
the treasury stock method using average
market price ............................................. 456 340 201
-------- -------- --------
Total .......... 14,488 15,256 15,582
======== ======== ========
Income from continuing operations
before extraordinary items ...................................... $ 26,791 $ 15,356 $ 24,282
Preferred stock dividends and adjustments ........................... (1,895) (2,058) (2,084)
-------- -------- --------
Income applicable to common stock ................................... $ 24,896 $ 13,298 $ 22,198
======== ======== ========
Per share amount .................................................... $ 1.72 $ 0.87 $ 1.42
Income from discontinued operations ................................. $ 0 $ 6,083 $ 6,101
Per share amount .................................................... $ 0.00 $ 0.40 $ 0.40
Extraordinary items ................................................. $ 0 $ (4,044) $ 0
Per share amount .................................................... $ 0.00 $ (0.26) $ 0.00
Net income .......................................................... $ 26,791 $ 17,395 $ 30,383
Preferred stock dividends and adjustments ........................... (1,895) (2,058) (2,084)
-------- -------- --------
Income applicable to common stock ................................... $ 24,896 $ 15,337 $ 28,299
======== ======== ========
Per share amount .................................................... $ 1.72 $ 1.01 $ 1.82
Fully Diluted
- -------------
Average shares outstanding .......................................... 14,032 14,916 15,381
Net effect of dilutive stock options - based on
the treasury stock method using the year
end price, if higher than average market
price ........................................................... 544 478 202
Common share equivalents:
Series B Preferred .............................................. 2,898 1,545 1,302
-------- -------- --------
Total .......... 17,474 16,939 16,885
======== ======== ========
Income from continuing operations before
extraordinary items ............................................. $ 26,791 $ 15,356 $ 24,282
Preferred stock (Series B) dividends rate
adjustment ...................................................... (330) (1,223) (1,420)
-------- -------- --------
Income applicable to common stock ................................... $ 26,461 $ 14,133 $ 22,862
======== ======== ========
Per share amount .................................................... $ 1.51 $ 0.83 $ 1.35
Income from discontinued operations ................................. $ 0 $ 6,083 $ 6,101
Per share amount .................................................... $ 0.00 $ 0.36 $ 0.37
Extraordinary items ................................................. $ 0 $ (4,044) $ 0
Per share amount .................................................... $ 0.00 $ (0.24) $ 0.00
Net income .......................................................... $ 26,791 $ 17,395 $ 30,383
Preferred stock (Series B) dividends
rate adjustment ................................................. (330) (1,223) (1,420)
-------- -------- --------
Income applicable to common stock ................................... $ 26,461 $ 16,172 $ 28,963
======== ======== ========
Per share amount .................................................... $ 1.51 $ 0.95 $ 1.72
</TABLE>
<PAGE> 1
Exhibit 21
Subsidiaries of the Registrant
Listed below, as of January 3, 1998, are the subsidiaries of the Company
and their jurisdictions of organization. All of such subsidiaries are either
directly of indirectly wholly-owned by the Company. Certain subsidiaries of the
Company have been omitted because, considered in the aggregate as a single
subsidiary, they would not constitute a significant subsidiary as of the end of
the year covered by this report.
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Organization
------------------ ---------------
100% Owned
- ----------
<S> <C>
Orange County Metal Works........................................................California
Cylinder City, Inc...............................................................Minnesota
Commercial Hydraulics Pty., Ltd..................................................Australia
Commercial Intertech do Brasil, Ltda.............................................Brazil
Commercial Intertech, s.r.o......................................................Czech Republic
Commercial Intertech Limited.....................................................England
Astron S.A.R.L...................................................................France
Sachsenhydraulik Chemnitz GmbH...................................................Germany
Commercial Hydraulics S.r.l......................................................Italy
Commercial Intertech S.A.........................................................Luxembourg
Astron Building Systems (Shenzhen) Co. Ltd. .....................................People's Republic of China
Other: (see Note A)
- ------ ------------
Hydraulik Rochlitz GmbH .........................................................Germany
Commercial Intertech GmbH .......................................................Germany
Ultra Hydraulics Limited.........................................................England
Note A Commercial Intertech GmbH is 100% owned by Hydraulik Rochlitz
- ------ GmbH, which is 100% owned by Sachsenhydraulik Chemnitz GmbH.
Ultra Hydraulics Limited is 100% owned by Commercial Intertech Limited.
</TABLE>
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference of our report dated December 8,
1997, with respect to the consolidated financial statements and schedule of
Commercial Intertech Corp. and subsidiaries included in this Annual Report (Form
10-K) for the year ended October 31, 1997, in the prospectus contained in the
following registration statements:
<TABLE>
<CAPTION>
Registration
Number Description Filing Date
------------ ---------------------------------------------- ------------------
<S> <C> <C>
2-62512 Commercial Shearing, Inc. Stock Option and
Award Plan of 1985 - Forms S-8 and S-3
Registration Statement April 24, 1986
33-25795 Non-Qualified Stock Purchase Plan of
Commercial Intertech Corp. - Form S-8
Registration Statement November 29, 1988
33-29980 Commercial Intertech Corp. Stock Option and
Award Plan of 1989 including Pre-Effective
Amendment No. 1 to Form S-8 Registration
Statement filed July 24, 1989 July 10, 1989
33-43907 Commercial Intertech Corp. Retirement Stock
Ownership and Savings Plan - Form S-8
Registration Statement November 13, 1991
33-52443 Commercial Intertech Corp. Stock Option
and Award Plan of 1993 - Form S-8
Registration Statement February 28, 1994
33-61453 Commercial Intertech Corp. Stock Option
and Award Plan of 1995 - Form S-8
Registration Statement August 1, 1995
333-28903 Commercial Intertech Corp. Non-Employee
Directors' Stock Plan - Form S-8
Registration Statement June 10, 1997
333-41551 Commercial Intertech Corp. Non-Employee
Directors' Performance Share Plan - Form S-8
Registration Statement December 5, 1997
</TABLE>
/s/Ernst & Young LLP
Cleveland, Ohio
January 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<CASH> 27,630
<SECURITIES> 0
<RECEIVABLES> 84,342
<ALLOWANCES> 2,456
<INVENTORY> 60,944
<CURRENT-ASSETS> 189,996
<PP&E> 216,030
<DEPRECIATION> 112,604
<TOTAL-ASSETS> 384,798
<CURRENT-LIABILITIES> 127,345
<BONDS> 111,342
0
21,914
<COMMON> 14,125
<OTHER-SE> 66,791
<TOTAL-LIABILITY-AND-EQUITY> 384,798
<SALES> 526,624
<TOTAL-REVENUES> 526,624
<CGS> 387,340
<TOTAL-COSTS> 387,340
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,607
<INTEREST-EXPENSE> 10,493
<INCOME-PRETAX> 40,318
<INCOME-TAX> 13,527
<INCOME-CONTINUING> 26,791
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,791
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.51
</TABLE>
