<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996 Commission file number 0-784
------------- -----
DETREX CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-0480840
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24901 Northwestern Hwy., Ste. 500, Southfield, MI 48075
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 358-5800
--------------------------
Securities registered pursuant to section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None None
Securities registered pursuant to Section (g) of the Act:
Common Capital Stock, $2 Par Value
----------------------------------
(Title of Class)
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 and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------------ ------------
As of July 1, 1996 1,583,414 shares of the registrant's stock were outstanding.
------------
<PAGE> 2
DETREX CORPORATION
INDEX
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1 Consolidated Condensed Unaudited Balance
Sheets - June 30, 1996 and December 31, 1995 3
Consolidated Condensed Unaudited Statements
of Operations -Six Months Ended June 30, 4
1996 and 1995
Consolidated Unaudited Statements of Cash Flows-
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Condensed Unaudited
Financial Statements 6-7
Item 2 Management's Discussion and Analysis of
Interim Financial Information 8-9
PART II OTHER INFORMATION
- ------- -----------------
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
<PAGE> 3
DETREX CORPORATION
CONSOLIDATED CONDENSED UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
June 30, 1996 December 31, 1995
------------- ------------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 1,586,931 $ 2,764,360
Accounts receivable (less allowance for uncollectible accounts
of $478,000 in 1996 and $459,000 in 1995) 14,885,590 13,956,017
Refundable U.S. income taxes 3,040,772
Inventories:
Raw materials 2,988,832 2,861,900
Work in process 968,723 678,339
Finished goods 5,084,542 4,897,266
----------- -----------
Total Inventories 9,042,097 8,437,505
Prepaid expenses and other 634,756 978,819
Deferred income taxes 1,957,835 1,991,087
----------- -----------
Total Current Assets 28,107,209 31,168,560
Land, buildings, and equipment-net 19,386,841 20,136,691
Land, buildings, and equipment held for sale or lease 2,664,773 2,664,773
Prepaid pensions 1,226,348 1,226,348
Deferred income taxes 1,133,348 1,412,973
Other assets 976,549 1,049,376
----------- -----------
$53,495,068 $57,658,721
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Loans payable-short-term $ 6,330,575 $ 8,500,000
Current portion of capital lease obligations 606,779 606,779
Accounts payable 7,932,035 9,007,603
Environmental reserve 1,527,000 1,527,000
Accrued compensation 517,607 643,089
Accrued expenses - non- active locations 136,891 558,319
Other accruals 4,342,492 4,008,678
----------- -----------
Total Current Liabilities 21,393,379 24,851,468
Long term portion of capital lease obligations 338,117 518,258
Accrued postretirement benefits 4,165,885 3,985,885
Environmental reserve 7,807,987 8,681,199
Minority interest 1,707,838 1,586,221
Accrued pensions 1,064,381 1,142,388
Stockholders' Equity:
Common capital stock, $2 par value, authorized 4,000,000 shares,
outstanding 1,583,414 shares 3,166,828 3,166,828
Additional paid-in capital 22,020 22,020
Retained earnings 13,828,633 13,704,454
----------- -----------
Total Stockholders' Equity 17,017,481 16,893,302
----------- -----------
$53,495,068 $57,658,721
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
3
<PAGE> 4
DETREX CORPORATION
CONSOLIDATED CONDENSED UNAUDITED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $24,311,963 $22,642,748 $48,311,533 $47,414,679
Cost of sales 18,577,300 17,381,220 37,100,716 36,550,508
Selling, general and administrative expenses 4,501,708 5,009,743 9,084,792 10,000,915
Provision for depreciation and amortization 787,343 865,627 1,585,733 1,710,934
Other income and deductions (161,449) (68,309) (307,187) (159,489)
Minority interest 94,336 57,253 151,618 115,213
Interest expense 267,552 220,958 515,112 420,754
----------- ----------- ----------- -----------
Income (loss) before income taxes 245,173 (823,744) 180,749 (1,224,156)
Provision (credit) for income taxes 132,194 (484,468) 56,570 (516,396)
----------- ----------- ----------- -----------
Net income (loss) $ 112,979 $ (339,276) $ 124,179 $ (707,760)
=========== =========== =========== ===========
Net income (loss) per common share $ .07 $ (.21) $ .08 $ (.45)
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
4
<PAGE> 5
<TABLE>
<CAPTION>
DETREX CORPORATION
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS Six Months Ended
June 30
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 124,179 $ (707,760)
Adjustments to reconcile net income [loss] to net cash provided by
operating activities:
Depreciation and amortization 1,585,733 1,710,934
Loss on disposal of property 17,186 3,363
Deferred income taxes 312,876 (409,829)
Minority interest 121,617 55,212
Changes to operating assets and liabilities that provided (used) cash:
Accounts receivable (929,573) 2,136,249
Refundable U.S. income taxes 3,040,772 --
Inventories (604,592) 273,191
Prepaid expenses and other 344,063 309,471
Other assets 30,828 79,158
Accounts payable (1,075,568) (3,332,132)
Environmental reserve (873,212) (390,018)
Accrued compensation (125,482) (83,608)
Accrued expenses - non-active locations (421,428) (191,801)
Other accruals 255,807 154,230
Postretirement benefits 180,000 180,000
----------- -----------
Total adjustments 1,859,027 494,420
----------- -----------
Net cash provided by (used in) operating activities 1,983,206 (213,340)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (683,545) (638,612)
Proceeds from disposal of property 3,007 --
----------- ------------
Net cash used in investing activities (680,538) (638,612)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings -- 1,500,000
Repayment of short-term bank debt (2,169,425) --
Repayment of long-term bank debt -- (500,000)
Principal payments under capital lease obligations (310,672) (405,099)
----------- -----------
Net cash provided by (used in) financing activities (2,480,097) 594,901
----------- -----------
Net decrease in cash and cash equivalents (1,177,429) (257,051)
Cash and cash equivalents at beginning of period 2,764,360 2,015,962
----------- -----------
Cash and cash equivalents at end of period $ 1,586,931 $ 1,758,911
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 643,848 $ 411,516
Income taxes $ 117,132 $ 149,900
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations incurred with the acquisition of equipment $ 177,900 $ 157,684
Capital lease terminations $ (47,369) $ (96,735)
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
5
<PAGE> 6
DETREX CORPORATION
NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying consolidated condensed
unaudited financial statements reflect all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position as of
June 30, 1996 and December 31, 1995, and the results of operations for the six
months ended June 30, 1996 and 1995, and changes in cash flows for the six
months ended June 30, 1996 and 1995. Certain amounts for 1995 have been
reclassified to conform with 1996 classifications. The information furnished
for the six months may not be indicative of results to be expected for the full
year.
2. The Company has two divisions that supply major industrial equipment. The
divisions generally use the completed contract method of accounting, only using
percentage-of-completion accounting for large contracts and when use of that
method versus the completed contract method of accounting has a material effect
on the results of operations. In the three month periods ended March 31, 1996
and June 30, 1996 the Company recognized revenue on one large contract using the
percentage-of-completion method of accounting; no transactions new were recorded
under the percentage-of-completion method during the second quarter of 1996.
3. The Environmental Protection Agency ("EPA") has notified the Company and at
least seventeen other companies that they may be potentially responsible for
sharing the costs in a proceeding to clean up contaminated sediments in the
Fields Brook watershed in Ashtabula, Ohio. The EPA issued a Record of Decision
in 1986 concerning the methods it recommends using to accomplish this task at
an estimated total cost of $48,000,000. The Company and the other potentially
responsible parties have expressed their disagreement with this recommendation
and are continuing to negotiate with the EPA as to how best to effect the clean
up operation. The Company believes that the Fields Brook remedial
investigation and feasibility studies referred to below will be an important
factor in the negotiation with the EPA.
The Company maintains a reserve for anticipated expenditures over the next
several years in connection with remedial investigations, feasibility studies,
remedial design, and remediation relating to the clean up of contamination at
several sites including property owned by the Company. The Company conducted a
comprehensive review of its reserves during the fourth quarter of 1994 and
added $8.5 million to this reserve. The total amount of the reserve at June 30,
1996 is $9.3 million, which amount was calculated without taking into
consideration any possible insurance recoveries.
The reserve includes a provision for the Company's anticipated share of
remedial investigation and feasibility studies to determine sources of
contamination and methods of remediation in the Fields Brook watershed referred
to above, as well as a provision for costs that may be incurred in connection
with remediation of the Fields Brook watershed and other sites. Some of these
studies have been completed; others are ongoing. In many cases, the methods of
remediation remain to be agreed upon.
The Company expects to continue to incur professional fees, expenses and
capital expenditures in connection with its environmental compliance efforts.
In addition to the above, there are several other claims and lawsuits
pending against the Company and its subsidiaries.
6
<PAGE> 7
DETREX CORPORATION
NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
The amount of liability to the Company with respect to costs of
remediation of contamination of the Fields Brook watershed and of other sites,
and the amount of liability with respect to several other claims and lawsuits
against the Company, was based on available data. The Company has established
its reserves in accordance with its interpretation of the principles outlined
in Statement of Financial Accounting Standards No. 5 and Securities and
Exchange Commission Staff Accounting Bulletin No. 92. In the event that any
additional accruals should be required in the future with respect to such
matters, the amounts of such additional accruals could have a material impact
on the results of operations to be reported for a specific accounting period
but should not have a material impact on the Company's consolidated financial
position.
7
<PAGE> 8
DETREX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF INTERIM FINANCIAL INFORMATION
Results of Operations
Summarized below is selected operating data for the current fiscal period and
the comparable data for the same period last year (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 June 30
1996 1995 1996 1995
------------- --------------- ------------------ ---------------
$ % $ % $ % $ %
------ ----- ------ ------ ------ ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 24,312 100.0 22,643 100.0 48,312 100.0 47,415 100.0
Gross margin 5,735 23.6 5,262 23.2 11,211 23.2 10,864 22.9
Selling, general and administrative expenses 4,502 18.5 5,010 22.1 9,085 18.8 10,001 21.1
Depreciation and amortization 787 3.2 866 3.8 1,586 3.3 1,711 3.6
Net income (loss) 113 0.5 (339) (1.5) 124 0.3 (708) (1.5)
</TABLE>
Detrex Corporation and its consolidated subsidiaries (the Company) reported net
income of $112,979 for the second quarter of 1996, compared to a net loss of
$339,276 for the second quarter of 1995. For the six month period, the
Company earned $124,179, compared to a net loss of $707,760 in 1995. The
year-to-year improvement is $831,939.
Net sales for the first half of 1996 were $48.3 million compared to $47.4
million last year. Increased sales from the Company's equipment division and
lubricants subsidiary were partially offset by lower sales in the Company's
solvents and environmental services division and its industrial furnace
division.
Cost of sales as a percent of sales was approximately the same in both years.
Gross margin percentages were 23.2% for the first six months of 1996, compared
to 22.9% for the first six months of 1995.
The decrease in selling, general and administrative expenses in 1996 is
attributable to the cost cutting activities that took place in 1995 and the
absence of termination costs in the first half of 1996.
The provision for depreciation and amortization is approximately the same as
the prior year for all of the Company's current business units, with the overall
reduction primarily attributable to no depreciation in 1996 on a former
production facility which is being held for sale.
Interest expense is higher in 1996 when compared to 1995, reflecting higher
rates.
The income tax expense in 1996 reflects state, local, and federal income taxes,
partially offset by a credit that was recorded in the first quarter of 1996 to
reflect the recognition of a rate differential resulting from the carry-back of
certain components of prior year net operating losses to tax years in which the
statutory rate was 46%.
8
<PAGE> 9
DETREX CORPORATION
Liquidity, Financial Condition, and Capital Resources
The Company utilized a combination of internally generated funds and receipt of
federal income tax refunds to finance its activities during the first six
months of 1996. On June 13, 1996, the Company finalized a new Revolving Credit
Agreement with Comerica Bank. The new agreement contains, among other
provisions, requirements for maintaining defined levels of tangible net worth
and various financial statement ratios, including working capital, debt to
equity, and cash coverage ratios. The credit facility is collateralized by the
Company's inventory, accounts receivable, certain fixed assets, and stock of
subsidiaries. Borrowings under the former credit facility were $8.5 million at
December 31, 1995; borrowings under the new facility were $6.3 million at June
30, 1996.
Working capital was $6.7 million at June 30, 1996 compared to $6.3 million at
December 31, 1995. The Company has paid no dividends since the second quarter
of 1991 and cannot forecast when the dividend will be restored.
9
<PAGE> 10
DETREX CORPORATION
PART II - OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 71st Annual Meeting of the Stockholders of Detrex Corporation
was held in Southfield, Michigan on the 25th day of April 1996.
(b) Election of Messrs. John F. Mangold and William C. King as
Directors of the First Class to hold office for three year terms
and until their successors have been elected and qualify:
Mr. Mangold Mr. King
--------------- ------------
For 1,082,387 1,083,767
Against -- --
Abstain 303,663 302,283
Election of Mr. Thomas E. Mark as Director of the Third Class to
hold office for a two year term and until his successor has been
elected and qualify:
For 1,083,801
Against --
Abstain 302,249
Messrs. Cox, Emmett, McCleary, Thalacker , and Withrow continue as
directors.
(c) Vote on an individual shareholder proposal to amend the by-laws of
the Corporation in order to create a Shareholder Committee:
For 373,646
Against 951,090
Abstain 61,314
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) 10(p) - Credit Agreement with Comerica Bank dated as of
June 13, 1996.
(b) No reports on Form 8-K have been filed for the quarter ended June
30, 1996.
10
<PAGE> 11
DETREX CORPORATION
SIGNATURES
Pursuant to the requirements 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.
DETREX CORPORATION
Date 7/26/96 E.R. Rondeau
--------- ---------------------------------------
E.R. Rondeau
Controller and Chief Accounting Officer
Date 7/26/96 G.J. Israel
--------- ---------------------------------------
G.J. Israel
Vice President - Finance and Chief Financial Officer
11
<PAGE> 12
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
10(p) Credit Agreement with Comerica Bank
dated as of June 13, 1996
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10(p)
________________________________________________________________________________
________________________________________________________________________________
DETREX CORPORATION
CREDIT AGREEMENT
DATED AS OF JUNE 13, 1996
COMERICA BANK
________________________________________________________________________________
________________________________________________________________________________
Execution Copy
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. THE INDEBTEDNESS: REVOLVING CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Types of Advances and Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Requests for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Disbursement of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.5 Revolving Credit Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6 Optional Reduction or Termination of
Revolving Credit Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7 Borrowing Base Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.9 Mandatory Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Conditions to Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Issuance Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 Existing Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4. ADVANCES: INTEREST, PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Deposits and Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Execution of Notes and This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Collateral Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.5 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Compliance with Certain Documents and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Company's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Other Documents and Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
- i -
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.11 Borrowing Base Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.12 Continuing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.13 Termination of Existing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.14 Term Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.15 NBD Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 No Negative Pledges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.7 Enforceability of Agreement and Loan
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 Non-contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.9 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.10 Consents, Approvals and Filings, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.12 No Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.13 Agreements Affecting Financial
Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.14 Title to Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.15 Environmental Matters and Safety
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.16 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.4 Conduct of Business and Maintenance of
Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.6 Inspection of Property; Books and
Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.9 Further Assurances; Financing
Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.10 Compliance with Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.12 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.13 Bowling Green Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Cash Flow Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.5 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Prohibition of Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 Prohibition on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.10 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.11 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.12 Negative Pledge of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Exercise of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.3 Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.4 Waiver by Companies of Certain Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5 Waiver of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.1 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.3 Law of Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.5 Closing Costs and Other Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.7 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.9 Indulgence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.11 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.13 Effective Upon Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.14 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.15 Complete Agreement; Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.17 Table of Contents and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.18 Construction of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.19 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
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11.20 Reliance on and Survival of Various
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.21 Concerning Joint and Several Liability of
the Companies and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.22 Conflict between Security Agreements and Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
Exhibits
- --------
Exhibit A - Form of Borrowing Base Report
Exhibit B - Existing Letters of Credit
Exhibit C - Form of Letter of Credit Agreement
Exhibit D - Eligible Inventory Summary Form
Exhibit E - Revolving Credit Note Form
Exhibit F - Compliance Certificate
Exhibit G - Real Property
Exhibit H - Month End Aging and Ineligible Summary Form
- iv -
<PAGE> 6
CREDIT AGREEMENT
THIS AGREEMENT (the "Agreement"), is made as of the 13th day of June,
1996, by and between Comerica Bank ("Bank") and the borrowers listed on
Schedule 1, each having its chief executive office at the location listed below
its name on Schedule 1 (individually a "Company" and collectively "Companies").
1. DEFINITIONS
For purposes of this Agreement the following terms (when capitalized)
will have the following meanings:
"Account Debtor" shall mean the party who is obligated on or under any
Account.
"Account(s)" shall mean, with respect to any Person, any right of such
Person to payment for goods sold or leased or for services rendered, as further
defined under the UCC.
"Advance" shall mean a borrowing requested by Companies and funded by
Bank under this Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person
or group acting in concert in respect of the Person that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under the common control with such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person or group of Persons, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Applicable Increase" shall for purposes of the provisions of Section
9.4 mean for any given fiscal quarter an amount (rounded to the nearest $1,000)
equal to one hundred percent (100%) of Consolidated Net Income for the fiscal
quarter ending on such date (but in any event not less than zero).
"Borrowing Base Report" shall mean the report to be furnished by
Companies to Bank pursuant to the provisions of Sections 6.11 and 8.2(c)
hereof, substantially in the form of Exhibit "A" attached hereto.
"Bowling Green Property" shall mean the real property located at 325
Emmett Avenue, Bowling Green, Kentucky.
1
<PAGE> 7
"Business Day" shall mean any day on which commercial banks are open
for domestic and international business in Detroit, Michigan.
"Capital Expenditures" shall mean, with respect to any Person, without
duplication, any amounts accrued in respect of a period in respect of any
purchase or other acquisition for value of fixed or capital assets; provided
that, in no event shall Capital Expenditures include amounts expended in
respect of normal repair and maintenance of plant facilities, machinery,
fixtures and other like capital assets utilized in the ordinary conduct of
business (to the extent such amounts would not be capitalized in preparing a
balance sheet determined in accordance with GAAP).
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) which, in conformity with GAAP is
required to be capitalized on the balance sheet of that Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean all property or rights in which a security
interest, mortgage, lien or other encumbrance for the benefit of the Bank is or
has been granted or arises or has arisen, under or in connection with this
Agreement, the Loan Documents or otherwise, to secure the Indebtedness of the
Companies to the Bank.
"Collateral Documents" shall mean the Security Agreements, the
Mortgages, the Pledge Agreement and all of the other security documents
executed by Companies and delivered to the Bank as of the date hereof or, from
time to time, subsequent thereto, in connection with this Agreement, as such
Collateral Documents may be amended from time to time.
"Commonly Controlled Entity" shall mean, with respect to any Person,
an entity, whether or not incorporated, which is under common control with
Detrex within the meaning of Section 414(b) or (c) of the Code.
"Companies" shall mean the borrowers listed on Schedule 1.
"Consolidated Adjusted Net Income" shall mean as of any date of
determination thereof net income from continuing operations of Detrex and its
consolidated Subsidiaries for the applicable Measuring Period, determined in
accordance with GAAP, as consolidated in accordance with GAAP, less to the
extent added in calculating such net income, the amount of any recoveries in
environmental reserves (net of applicable taxes) and plus to the extent
deducted in calculating such net income, the amount of any deductions related
to increases in environmental reserves (net of applicable taxes).
2
<PAGE> 8
"Consolidated Cash Flow Coverage Ratio" shall mean as of any date of
determination thereof, a ratio, the numerator of which is Consolidated Adjusted
Net Income for the applicable Measuring Period, plus depreciation and
amortization expenses for such period, of Detrex and its consolidated
Subsidiaries and the denominator of which is the sum of Capital Expenditures,
payments on capital leases and dividends paid or payable during such period, of
Detrex and its consolidated Subsidiaries plus the amount which would be
classified as of such date of determination as the current maturities of
long-term indebtedness of Detrex and its consolidated Subsidiaries (excluding
balloon payments), plus, to the extent not reflected in the calculation of
Consolidated Adjusted Net Income, the amount of any cash expenditures during
such period by Detrex and its consolidated Subsidiaries which are deductions
from long term or short term environmental reserves, all as determined in
accordance with GAAP, as consolidated in accordance with GAAP.
"Consolidated Current Assets" shall mean as of the date of any
determination thereof, all assets of Detrex and its consolidated Subsidiaries
which in accordance with GAAP may be properly classified as current assets, as
consolidated in accordance with GAAP, excluding deferred income taxes.
"Consolidated Current Liabilities" shall mean as of the date of any
determination thereof, all liabilities of Detrex and its consolidated
Subsidiaries which in accordance with GAAP may be properly classified as
current liabilities, as consolidated in accordance with GAAP.
"Consolidated Leverage Ratio" shall mean as at the time any
determination thereof is to be made, a ratio, the numerator of which is
Consolidated Total Liabilities and the denominator of which is Consolidated
Tangible Net Worth.
"Consolidated Net Income" shall mean, for any period, the aggregate
of the net income of Detrex and its consolidated Subsidiaries determined in
accordance with GAAP, as consolidated in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean as of the date of any
determination thereof, the total shareholders' equity (including capital stock
and additional paid in capital and retained earnings after deducting treasury
stock) of Detrex and its consolidated Subsidiaries which would appear as such
on a consolidated balance sheet of Detrex and its consolidated Subsidiaries as
at such time prepared in accordance with GAAP, less any amounts reflected
therein for any goodwill and intangible assets and less any amounts reflected
therein for minority interests.
"Consolidated Total Liabilities" shall mean as to Detrex and its
consolidated Subsidiaries, as of the date of any determination
3
<PAGE> 9
thereof, all items which in accordance with GAAP appear as liabilities on the
balance sheet of Detrex and its consolidated Subsidiaries.
"Contingent Obligation" as to any Person shall mean any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other financial obligations ("primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Contractual Obligation" shall mean as to any Person, any provision of
any security issued by such Person or of any financial agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Detrex" shall mean Detrex Corporation, a Michigan corporation.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, supplemented, or modified or any successor act or code.
"Effective Date" shall mean June 13, 1996 upon which date the
obligations of Companies and Bank under this Agreement shall be effective.
"Eligible Account" shall mean an Account which has been included in a
Borrowing Base Report to determine the Lending Availability, and as to which
Account the following is true and accurate as of the time it was utilized to
determine the Lending
4
<PAGE> 10
Availability and as of the time Companies have requested an Advance based in
part thereon:
(a) it is not owing more than ninety (90) days after the date of
the original invoice or other writing evidencing such Account;
(b) it arises from the sale of goods and such goods have been
shipped or delivered to the Account Debtor under such Account;
or it arises from services rendered and such services have
been performed;
(c) it is payable in U.S. Dollars and is evidenced by an invoice,
dated not later than the date of shipment or performance,
rendered to such Account Debtor or some other evidence of
billing (including computer records) reasonably acceptable to
the Bank, and is not evidenced by any note, trade acceptance,
draft or other instrument or by any chattel paper;
(d) it is a valid, legally enforceable obligation of the Account
Debtor thereunder, and is not subject to any offset,
counterclaim or other defense on the part of such Account
Debtor, whether or not asserted by such Account Debtor or to
any claim on the part of such Account Debtor denying liability
thereunder in whole or in part, other than routine adjustments
in the ordinary course of business with Account Debtor which
may require refunds from time to time which are not material
in the aggregate;
(e) it is not subject to any sale of accounts, any rights of
offset, assignment, lien or security interest whatsoever other
than to Bank;
(f) it is not owing by a subsidiary or Affiliate of any of the
Companies, nor by an Account Debtor which (i) does not
maintain its chief executive office in the United States of
America, (ii) is not organized under the laws of the United
States of America, or any state thereof, or (iii) is the
government of any foreign country or sovereign state, or of
any state, province, municipality or other instrumentality
thereof;
(g) it is not owing by an Account Debtor for which Companies have
received a notice of (i) the death of the Account Debtor or
any partner of the Account Debtor, (ii) the dissolution,
liquidation, termination of existence, insolvency or business
failure of the Account Debtor, (iii) the appointment of a
receiver for any part of the property of the Account Debtor,
or (iv) an assignment for the benefit of creditors, the filing
5
<PAGE> 11
of a petition in bankruptcy, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or
against the Account Debtor;
(h) it is not owing by any Account Debtor whose obligations Bank,
acting in its sole discretion, shall have notified Companies
are not deemed to constitute Eligible Accounts.
Any Account which is at any time an Eligible Account but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account.
"Eligible Inventory" shall mean Inventory consisting of raw materials
or finished goods of any of the Companies (other than Detrex) which has been
included in a Borrowing Base Report to determine the Lending Availability and
as to which Inventory the following is true and accurate as of the time it was
utilized to determine the Lending Availability and as of the time the Companies
have requested an Advance based in part thereon:
(a) such item of Inventory is of merchantable quality and
is usable or salable by Companies in the ordinary course of their
business;
(b) Companies have granted to the Bank a perfected
security interest in such item of Inventory prior in right to all
other persons or entities and such item of Inventory has not been
sold, transferred or otherwise assigned by Companies to any person
other than the Bank;
(c) such item of Inventory is located within the
continental United States of America at such location or locations as
Company shall have represented in the Loan Documents, relating to
Inventory;
(d) the value of each item of Inventory utilized to
determine the Lending Availability was determined in accordance with
GAAP utilizing "first in, first out", at the lower of cost or market
value;
(e) it is not Inventory that Bank, acting in its sole
discretion, after having notified Companies, excludes from Eligible
Inventory.
Any Inventory which is at any time Eligible Inventory, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be
Eligible Inventory.
"Environmental Material Adverse Event" shall mean any event relating
to any environmental condition (including any final adverse determination in
any litigation, arbitration or
6
<PAGE> 12
governmental investigation or proceeding) which has or is likely to impose on
any of the Companies a liability or assessment in a material amount unless such
liability or assessment has been reflected in the environmental reserve
included in the financial statements of Detrex most recently filed with the
Securities and Exchange Commission.
"Event of Default" shall mean any of the Events of Default specified
in Section 10.1 hereof.
"Existing Agreement" shall mean the Detrex Corporation Credit
Agreement dated as of March 11, 1994 by and among Companies, Comerica Bank as
Agent and the lenders signatories thereto, as amended.
"Existing Letters of Credit" means those letters of credit listed on
Exhibit "B" hereto which were issued by the Bank for the account of the
Companies listed on Exhibit "B" hereto before the date of this Agreement, as
such letters of credit may be amended, modified, or supplemented from time to
time in accordance with the terms hereof and thereof.
"Formula Debt" shall mean at any time, the sum of all outstanding
Advances hereunder and the undrawn portion of outstanding Letters of Credit.
"GAAP" shall mean generally accepted accounting principles in effect
from time to time.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled (through stock or capital ownership or otherwise) by any of the
foregoing.
"Hazardous Material" shall mean and include any hazardous, toxic or
dangerous waste, substance or material defined as such in (or for purposes of)
the Hazardous Material Laws.
"Hazardous Material Law(s)" shall mean all laws, codes, ordinances,
rules, regulations, orders, decrees and directives issued by any federal,
state, local, foreign or other governmental or quasi-governmental authority or
body (or any agency, instrumentality or political subdivision thereof)
pertaining to Hazardous Material on or about any facilities owned, leased or
operated by any of the Companies, any Material Property or any portion thereof
including, without limitation, those relating to soil, surface, subsurface
ground water conditions and the condition of the ambient air and further
including, without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended from time to time; the Superfund
Amendments and
7
<PAGE> 13
Reauthorization Act, Public Law 99-499, 100 Stat. 1613; the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801; the Clean Air Act, 42 U.S.C.
Section 7401, et seq.; and the regulations promulgated in connection therewith;
the Environmental Protection Agency regulations pertaining to asbestos
(including 40 C.F.R. Part 61, Subpart M); Occupational Safety and Health
Administration regulations pertaining to asbestos (including 29 C.F.R. Sections
1910.1001 and 1926.58); the Michigan Environmental Response Act, as amended,
M.C.L.A. 299.601, et seq.; and any state and local laws and regulations
pertaining to Hazardous Wastes and/or asbestos; any so-called "Superfund" or
"Superlien" law, any so-called "superfund" or "superlien" law; and any other
federal, state, foreign or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
"Hereof", "Hereto", "Hereunder" and similar terms shall refer to this
Agreement and not to any particular paragraph or provision of this Agreement.
"Indebtedness" of any Person shall mean, as of any date, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
person as lessee under any lease which, in accordance with GAAP, is or should
be capitalized on the books of the lessee, (c) all obligations which are
secured by any lien or encumbrance existing on any asset or property of such
Person whether or not the obligation secured thereby shall have been assumed by
such Person and (d) all obligations of others similar in character to those
described in clauses (a) through (c) of this definition for which such Person
is liable, contingently or otherwise, as obligor, guarantor or in any other
capacity, or in respect of which obligations such Person assures a creditor
against loss or agrees to take any action to prevent any such loss (other than
endorsements of negotiable instruments for collection in the ordinary course of
business), including without limitation all reimbursement obligations of such
Person in respect of letters of credit, surety bonds or similar obligations and
all obligations of such person to advance funds to, or to purchase assets,
property or services from, any other person in order to maintain the financial
condition of such other Person.
"Inventory" shall have the meaning ascribed to such term in the UCC.
"Issuing Office" shall mean Bank's International Banking Department,
Letter of Credit Division, 13th Floor, 500 Woodward Avenue, Detroit, Michigan,
or such other office as Bank shall designate as its Issuing Office.
8
<PAGE> 14
"Lending Availability" shall mean as of any date of determination
thereof, the sum of (a) eighty percent (80%) of Eligible Accounts plus (b)
fifteen percent (15%) of Eligible Inventory; provided, however, in no event
shall the amount of Lending Availability determined under clause (b) exceed Two
Million Dollars ($2,000,000).
"Letter of Credit Agreement" shall mean, in respect of each Letter of
Credit, the application of Companies requesting Bank to issue such Letter of
Credit (including the terms and conditions on the reverse side thereof or
otherwise provided therein), substantially in the form attached hereto as
Exhibit "C".
"Letter of Credit Fees" shall mean the fees payable to the Bank in
connection with Letters of Credit pursuant to Section 3.3 hereof.
"Letter of Credit Maximum Amount" shall mean the lesser of: (a) One
Million Two Hundred Fifty Thousand Dollars ($1,250,000) or (b) the Revolving
Credit Commitment minus the principal amount of Advances outstanding from time
to time under the Revolving Credit Note.
"Letter of Credit Obligation" shall mean the obligation of Companies
under each Letter of Credit Agreement to reimburse the Bank for each payment
made by the Bank under the Letter of Credit issued pursuant to such Letter of
Credit Agreement, together with all other sums, fees, charges and amounts which
may be owing to the Bank under such Letter of Credit Agreement.
"Letter of Credit Payment" shall mean any amount paid or required to
be paid by the Bank as a result of a draw against any Letter of Credit.
"Letter(s) of Credit" shall mean any standby letters of credit issued
by Bank, titled as such, at the request of or for the accounts of Companies
pursuant to Article 3 hereof.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit-arrangement, encumbrance, lien (statutory or other) or preference,
priority or other security agreement (including without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any related financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Loan Documents" shall mean collectively, this Agreement, the
Revolving Credit Note, the Collateral Documents, any Letter of Credit
Agreements and any other documents, instruments or agreements executed pursuant
to or in connection with any such document.
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"Material Property" shall mean with respect to each of the Companies
any property, whether personal or real, owned, leased or otherwise used by such
Company which is material to the operations of such Company.
"Measuring Period" shall mean for the determination date referred to
below the applicable period shown opposite such determination date:
Determination Date Measuring Period
------------------ ----------------
March 31, 1996 January 1, 1996 through March 31, 1996
June 30, 1996 January 1, 1996 through June 30, 1996
September 30, 1996 January 1, 1996 through September 30, 1996
December 31, 1996 The four preceding fiscal quarters
and the last day of ending on such determination date
each fiscal quarter
thereafter
"Minimum Amount" shall mean $15,200,000 plus an amount equal to the
Applicable Increase for each fiscal quarter of Detrex ending on or after March
31, 1996.
"Mortgages" shall mean the Continuing Collateral Mortgages encumbering
the real property described in attached Exhibit "G" executed and delivered by
Companies to the Bank as of the date hereof, as amended from time to time.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Encumbrances" shall mean with respect to any Person:
(a) the liens and encumbrances granted under or established by
this Agreement or the Loan Documents;
(b) liens for taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently pursued,
provided that such provision for the payment of all such taxes known to
such Person has been made on the books of such Person as may be required
by GAAP, and, in the case of any such contest, if so requested by the
Agent, an opinion of counsel (or other evidence satisfactory to the
Agent) to the effect that non-payment of such taxes will not endanger the
lien or security interest afforded by the Collateral Documents and that
none of the
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Collateral will be subject to loss or forfeiture as a result of such
nonpayment;
(c) mechanics', materialmen's, carriers', warehousemen's and
similar liens and encumbrances arising in the ordinary course of business
and securing obligations of such Person that are not overdue for a period
of more than 60 days or are being contested in good faith by appropriate
proceedings diligently pursued, provided that in the case of any such
contest (i) any proceedings commenced for the enforcement of such liens
and encumbrances shall have been duly suspended; and (ii) such provision
for the payment of such liens and encumbrances has been made on the books
of such Person as may be required by GAAP;
(d) liens arising in connection with worker's compensation,
unemployment insurance, old age pensions (subject to the applicable
provisions of this Agreement) and social security benefits which are not
overdue or are being contested in good faith by appropriate proceedings
diligently pursued, provided that in the case of any such contest (i) any
proceedings commenced for the enforcement of such liens shall have been
duly suspended; and (ii) such provision for the payment of such liens has
been made on the books of such Person as may be required by GAAP;
(e)(i) liens incurred in the ordinary course of business to secure
the performance of statutory obligations arising in connection with
progress payments or advance payments due under contracts with the United
States or any foreign government or any agency thereof entered into in
the ordinary course of business and (ii) liens incurred or deposits made
in the ordinary course of business to secure the performance of statutory
obligations, bids, leases, fee and expense arrangements with trustees and
fiscal agents and other similar obligations (exclusive of obligations
incurred in connection with the borrowing of money, any lease-purchase
arrangements or, except to the extent permitted pursuant to the
provisions of subsection (g) below, the payment of the deferred purchase
price of property), provided that full provision for the payment of all
such obligations set forth in clauses (i) and (ii) has been made on the
books of such Person as may be required by GAAP;
(f) Liens listed in attached Schedule 2; and
(g) Purchase money security interests to secure purchase money
indebtedness, not to exceed Five Hundred Thousand Dollars ($500,000) in
aggregate principal amount at any one time outstanding, incurred for the
purpose of purchasing or acquiring fixed assets, so long as such security
interests are created substantially contemporaneously with the
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respective assets so purchased or acquired, do not extend to any other
property or assets of Companies other than the fixed assets so financed,
and secure only the purchase money indebtedness incurred specifically to
purchase or acquire the respective fixed assets.
"Person" shall mean an individual, corporation, partnership, trust,
incorporated or unincorporated organization, joint venture, joint stock
company, or a government or any agency or political subdivision thereof or
other entity of any kind.
"Plan" shall mean any pension plan which is covered by Title IV of ERISA
and in respect of which any of the Companies or a Commonly Controlled Entity is
an "employer" as defined in Section 4(5) of ERISA.
"Pledge Agreements" shall mean the Security Agreements (Negotiable
Collateral) pursuant to which Detrex and The Elco Corporation have pledged to
the Bank all of their respective interests in their Subsidiaries, as amended
from time to time.
"Prime Rate" shall mean the per annum interest rate established by Bank
as its prime rate for its borrowers as such rate may vary from time to time,
which rate is not necessarily the lowest rate on loans made by Bank at any such
time.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requirement of Law" shall mean, as to any Person, the Articles of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Responsible Officer" shall mean, as to any Person, the chief executive
officer or chief operating officer of such Person or, with respect to financial
matters, the chief financial officer of such Person.
"Revolving Credit Commitment" shall mean Twelve Million Dollars
($12,000,000), subject to reduction or termination pursuant to Section 2.6
hereof.
"Revolving Credit Commitment Fee" shall mean the commitment fee payable
to Bank pursuant to Section 2.5(a) hereof.
"Revolving Credit Maturity Date" shall mean May 1, 1997.
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"Revolving Credit Note" shall mean the Note described in Section 2.1
hereof made by Companies to the Bank in the form annexed to this Agreement as
Exhibit "E" hereto.
"Security Agreements" shall mean those certain security agreements
encumbering the accounts, inventory, general intangibles, machinery, equipment
and all other personal property of Companies, executed and delivered by
Companies to the Bank, as of the date hereof, as amended from time to time.
"Single Employer Plan" shall mean any Plan which is not a Multiemployer
Plan.
"Subsidiary" shall mean, as to any Person, a corporation of which shares
of stock having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation are at the time owned, or
the management of which is otherwise controlled, directly or indirectly,
through one or more intermediaries by such Person and in any event shall
include, as to any Person, a corporation of which fifty percent (50%) of the
shares of voting stock are owned by such Person.
"UCC" shall mean the Uniform Commercial Code, as adopted in the State of
Michigan.
Defined terms in this Agreement shall include in the singular number the
plural and in the plural number the singular.
2. THE INDEBTEDNESS: REVOLVING CREDIT
2.1 Commitment. Subject to the terms and conditions of this Agreement,
the Bank agrees to lend to Companies at any time and from time to time from the
Effective Date until the Revolving Credit Maturity Date, and Companies may
borrow, sums not to exceed the Revolving Credit Commitment. All of the Advances
under this Section 2.1 shall be evidenced by the Revolving Credit Note under
which advances, repayments and readvances may be made, subject to the terms and
conditions of this Agreement.
2.2 Types of Advances and Maturity. The Revolving Credit Note, and all
principal and interest outstanding thereunder, shall mature and become due and
payable in full on the Revolving Credit Maturity Date. The amount and date of
each Advance and the amount and date of any repayment shall be noted on Bank's
records, which records will be presumed correct.
2.3 Requests for Advances. The Bank may advance funds under the
Revolving Credit Note upon telephone request (utilizing Bank's Flexline system)
made by any one of those officers or agents of Detrex authorized by resolution
of its Board of Directors to make
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such requests. Companies hereby authorize Bank to disburse Advances pursuant to
the instructions of any officer or agent so identified. The telephone request
shall constitute the Companies' certification of the matters set forth below:
(i) the principal amount of such Advance, plus the principal
amount of all other Advances and the undrawn amount of all
Letters of Credit which shall be outstanding as of the date
of the requested Advance, shall not exceed the Revolving
Credit Commitment;
(ii) both before and after the Advance, the obligations of the
Companies set forth in this Agreement are and will be the
valid and binding obligations of the Companies, enforceable
in accordance with their respective terms, except as the
validity or enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally or other equitable
principles (regardless of whether enforcement is considered
in proceedings in law or equity);
(iii) all conditions set forth in this Agreement to the making of
the Advances have been satisfied, and shall remain satisfied
to the date of such Advance;
(iv) there is no Event of Default, in existence, and no event
which, with the giving of notice or the lapse of time, or
both, would constitute such an Event of Default, and none
will exist as a result of the making of the Advance;
(v) the representations and warranties contained in this
Agreement and the Loan Documents are true and correct in all
material respects and shall be true and correct in all
material respects as of the making of the Advance;
(vi) the execution of the Request for Advance will not violate the
terms and conditions of any material contract, agreement or
other borrowing of any of the Companies;
(vii) upon the funding of the requested Advance, the Formula Debt
shall not exceed the Lending Availability.
2.4 Disbursement of Advances. Unless the conditions for Advances are
not met by Companies or the Revolving Credit Commitment shall have been
suspended or terminated in accordance
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with this Agreement, the Bank shall make available to Companies not later than
4:00 p.m. (Detroit time) on such date the aggregate of the amounts so received
by it in like funds by credit to an account of Companies maintained with Bank
or to such other account or third party as Companies may direct.
2.5 Revolving Credit Commitment Fee.
(a) From the date of execution of this Agreement to the Revolving
Credit Maturity Date, the Companies shall pay to the Bank a
Revolving Credit Commitment Fee monthly in arrears commencing June
1, 1996, and within three Business Days after the last day of each
month thereafter. The Revolving Credit Commitment Fee shall be an
amount equal to the average daily balance of the unborrowed portion
of the Revolving Credit Commitment for the monthly period then
ending, minus the average daily face amount of any outstanding
Letters of Credit during such period, multiplied by three quarters
of one percent (3/4%). The Revolving Credit Commitment Fee shall be
computed on the basis of a year of three hundred sixty (360) days
and assessed for the actual number of days elapsed. Upon request of
Companies, Bank shall provide to Companies the detail of Bank's
computation of the Revolving Credit Commitment Fee. Whenever any
payment of the Revolving Credit Commitment Fee shall be due on a
day which is not a Business Day, the date for payment thereof shall
be extended to the next Business Day;
(b) It is expressly understood that the fees described in this Section
are not refundable under any circumstances.
2.6 Optional Reduction or Termination of Revolving Credit Commitment.
Upon at least five (5) Business Days' prior written or facsimile notice by
Detrex, on behalf of the Companies, to the Bank, the Companies may permanently
reduce the Revolving Credit Commitment in whole at any time, or in part from
time to time, without premium or penalty, provided that: (i) each partial
reduction of the Revolving Credit Commitment shall be in an aggregate amount
equal to One Million Dollars ($1,000,000) or any larger amount in One Million
Dollars ($1,000,000) increments; (ii) each reduction or termination shall be
accompanied by the payment of the Revolving Credit Commitment Fee, if any,
accrued on the amount of the Revolving Credit Commitment so reduced through the
date of such reduction or termination; (iii) the Revolving Credit Commitment,
as so reduced, shall not be less than the aggregate face amount of outstanding
Letters of Credit; and (iv) the Companies shall prepay the amount, if any, by
which the sums of aggregate unpaid principal amount of the Revolving Credit
Note plus the aggregate face amount of outstanding Letters of Credit exceeds
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<PAGE> 21
the amount of the Revolving Credit Commitment as so reduced, together with
interest thereon to the date of prepayment.
2.7 Borrowing Base Limitation. Notwithstanding anything to the contrary
herein, at no time shall the Formula Debt exceed the Lending Availability. If
at any time the Formula Debt shall exceed the Lending Availability, Companies
shall forthwith make a principal payment on the Revolving Credit Note in an
amount sufficient to bring Formula Debt in compliance with the Lending
Availability. Lending Availability shall be determined on the basis of the most
recent Borrowing Base Report to be delivered by Detrex, on behalf of the
Companies, to Bank pursuant to the provisions of Section 8.2(c) hereof.
2.8 Facility Fee. Upon execution of this Agreement, Companies shall pay
to the Bank a non-refundable facility fee in the amount of Fifty Thousand
Dollars ($50,000).
2.9 Mandatory Payment. Upon the receipt by any of the Companies of the
proceeds of any tax refund or the proceeds of any sale of real property, such
proceeds shall on such date of receipt by paid to Bank as a prepayment of the
Advances.
3. LETTERS OF CREDIT.
3.1 Letters of Credit. Subject to the terms and conditions of this
Agreement, Bank may through its Issuing Office, in its sole discretion, at any
time and from time to time from the Effective Date until the Revolving Credit
Maturity Date, upon the request of Detrex, on behalf of the Companies, issue
standby Letters of Credit for the account of Companies, in an aggregate amount
at any one time outstanding not to exceed the Letter of Credit Maximum Amount.
Each Letter of Credit shall provide an initial expiration date not later than
one (1) year from its date of issuance or such later date as is acceptable to
Bank (subject to renewals in Bank's sole discretion) and that it is available
by drafts drawn at sight and presentation of documents (which shall be payable
within three (3) Business Days of sight, provided that the terms and conditions
of the Letter of Credit are complied with); provided that each Letter of Credit
shall expire upon (notwithstanding any renewals thereof) three (3) Business
Days prior to the Revolving Credit Maturity Date, unless such condition is
waived by Bank. Provided further, that all applications will be submitted and
all Letters of Credit issued in accordance with applicable provisions of U.S.
law and regulations, including, without limitation, the Trading with the Enemy
Act, Export Administration Act, International Emergency Economic Powers Act and
the Regulations of the Office of Foreign Assets Control of the U.S. Department
of the Treasury.
3.2 Conditions to Issuance. No Letter of Credit shall be issued for
Companies unless, as of the date the issuance of such Letter of Credit is
requested:
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(a) the face amount of the Letter of Credit requested, plus the
face amount of all other outstanding Letters of Credit does
not exceed the Letter of Credit Maximum Amount;
(b) the face amount of the Letter of Credit requested, plus the
principal amount of all Advances under the Revolving Credit
Note outstanding and other outstanding Letters of Credit,
does not exceed the Revolving Credit Commitment;
(c) the obligations of Companies set forth in this Agreement and
any of the Loan Documents are valid, binding and enforceable
obligations of each of the Companies, subject to bankruptcy,
reorganization or similar laws limiting the enforceability of
creditor's rights generally and be subject to the
availability of equitable remedies;
(d) no Event of Default exists and no event which, with the
giving of notice or lapse of time, or both, would constitute
an Event of Default exists;
(e) the representations and warranties contained in this
Agreement and the Loan Documents are true in all material
respects;
(f) the execution of the Letter of Credit Agreement with respect
to the Letter of Credit requested will not violate the terms
and conditions of any contract, agreement or other borrowing
of Companies (or any of them);
(g) the Companies shall have delivered to Bank and the Issuing
Office, not less than five (5) Business Days prior to the
requested date for issuance, the Letter of Credit Agreement
related thereto, together with such other documents and
materials as may be required pursuant to the terms thereof,
and the terms of the proposed Letter of Credit shall be
satisfactory to Bank and its Issuing Office;
(h) no order, judgment or decree of any court, arbitrator or
governmental authority shall purport by its terms to enjoin
or restrain Bank from issuing the Letter of Credit, and no
applicable law, rule, regulation, request or directive
(whether or not having the force of
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law) shall prohibit or request that Bank refrain from issuing
the Letter of Credit requested or letters of credit generally;
(i) Bank shall have received the issuance fee required in
connection with the issuance of such Letter of Credit
pursuant to Section 3.3 hereof.
Each Letter of Credit Agreement submitted to Bank pursuant hereto shall
constitute the requesting party's certification of the matters set forth in
this Section 3.2 (a) through (i).
3.3 Letter of Credit Fees. Companies agree to pay to Bank, Letter of
Credit Fees with respect to the undrawn face amount of such Letter of Credit
issued pursuant hereto, at a per annum rate equal to two and one half percent
(2-1/2%). Such fees shall be payable annually in advance and shall be
calculated on the basis of a 360 day year and assessed for the actual number of
days elapsed from the date of the issuance of each Letter of Credit until the
date of expiration set forth in such Letter of Credit.
3.4 Issuance Fees. In connection with the Letters of Credit, the
Companies will pay the Bank, letter of credit issuance fees and standard
administration, payment and cancellation charges assessed by Bank or its
Issuing Office.
3.5 Existing Letters of Credit. Each Existing Letter of Credit shall be
deemed for all purposes of this Agreement to be a Letter of Credit, and each
application submitted in connection with each Existing Letter of Credit shall
be deemed for all purposes of this Agreement to be a Letter of Credit
Agreement.
4. ADVANCES: INTEREST, PREPAYMENTS.
4.1 Interest. The Revolving Credit Notes and the Advances under Section
2 hereof shall bear interest from the date thereof on the unpaid principal
balance thereof from time to time outstanding, at a rate per annum equal to one
percent (1%) plus the Prime Rate. Interest shall be payable monthly on the
first Business Day of each calendar month, commencing on the first Business Day
of the calendar month during which such Advance is made, and at maturity.
Notwithstanding the foregoing, from and after the occurrence of any Event of
Default and during the continuation thereof, the Advances shall bear interest,
payable on demand, at a rate per annum equal to four percent (4%) above the
Prime Rate. Interest on all Advances shall be calculated on the basis of a 360
day year for the actual number of days elapsed. The interest rate with respect
to any Advance shall change on the effective date of any change in the Prime
Rate.
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4.2 Optional Prepayments. At their option, the Companies may prepay the
Advances in whole at any time or in part from time to time, without premium or
penalty.
5. PAYMENTS.
5.1 Payment Procedure.
(a) All payments by Companies of principal of, or interest on,
the Revolving Credit Note or of Revolving Credit Commitment Fees, the
Overformula Fee, Letter of Credit Obligations, Letter of Credit Fees and other
fees due and payable under this Agreement shall be made without setoff or
counterclaim on the date specified for payment under this Agreement not later
than noon (Detroit time) in immediately available funds by Companies to Bank.
Each of the Companies irrevocably authorizes Bank to charge any amount
maintained by such Company with Bank for any amounts due and payable under this
Agreement.
(b) Whenever any payment to be made shall otherwise be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest, if any, in connection with such payment.
5.2 Application of Proceeds. Notwithstanding anything to the contrary
in this Agreement, after an Event of Default, the proceeds of any offsets,
voluntary payments by Companies or others and any other sums received or
collected in respect of the obligations under this Agreement, shall be applied
to the obligations under this Agreement in such order and manner as reasonably
determined by the Bank, and then, if there is any excess, to Companies.
5.3 Deposits and Accounts. In addition to and not in limitation of any
rights of the Bank or other holder of the Revolving Credit Note or assignee of
Letter of Credit Agreements and Letter of Credit Obligations under applicable
law, the Bank and each other such holder shall, in the event of a default under
the Revolving Credit Note or any Letter of Credit Agreement or an Event of
Default hereunder, and without notice or demand of any kind, have the right to
liquidate and collect all property or assets of Companies (including deposits
and other credits), whether presently owned or hereafter acquired, in
possession or control of (or owing by) the Bank or other holder for any
purpose, and to apply the proceeds of any such liquidations and collections,
and offset any amounts owing to Companies (or any of them), against Companies'
obligations hereunder and under the Revolving Credit Note and Loan Documents.
6. CONDITIONS. The obligation of Bank to make Advances and issue
Letters of Credit pursuant to this Agreement is subject to,
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<PAGE> 25
and the Effective Date of this Agreement shall be the date of, Companies'
satisfaction of the following conditions:
6.1 Execution of Notes and This Agreement. Companies shall have
executed and delivered to Bank, the Revolving Credit Note and this Agreement
(including all schedules, exhibits, certificates, opinions, financial
statements and other documents to be delivered pursuant hereto) and the
Revolving Credit Note, the Loan Documents and this Agreement shall be in full
force and effect.
6.2 Corporate Authority. Bank shall have received: (i) certified copies
of resolutions of the Board of Directors of each of the Companies evidencing
approval of the borrowings hereunder and execution and delivery of the Loan
Documents to which it is party; (ii) certified copies of each Company's
Articles of Incorporation and Bylaws; (iii) a certificate of good standing from
the state of each Company's incorporation, and from every state in which any of
the Companies is qualified to do business; and (iv) an incumbency certificate
for each Company.
6.3 Opinion of Counsel. Companies shall furnish Bank prior to the
initial Advance under this Agreement, an opinion of counsel to the Companies
dated the date hereof, and covering such matters as required by and otherwise
satisfactory in form and substance to the Bank.
6.4 Collateral Documents. As security for all Indebtedness of Company
to the Banks hereunder, Company shall have furnished, executed and delivered to
Bank, or caused to be furnished, executed and delivered to Bank, prior to or
concurrently with the initial borrowing hereunder, in form and substance
satisfactory to the Bank and supported by appropriate resolutions in certified
form authorizing same, the Collateral Documents. In addition, if required or
advisable under applicable law to perfect the liens granted thereby, the Bank
shall have received, concurrently with or prior to the making of Advances
hereunder, proof that appropriate financing statements, collateral and other
documents covering such Collateral have been executed and delivered by the
appropriate parties and recorded or filed in such jurisdictions and such other
steps have been taken as necessary to perfect the security interests, or other
liens granted thereby.
6.5 Representations and Warranties. The representations and warranties
made by Companies under this Agreement and any of the Loan Documents shall have
been true and correct when made and shall be true and correct in all material
respects on and as of the date of any of the Advances hereunder, and the
representations and warranties of any of the foregoing which are contained in
any certificate, document or financial or other statement furnished at any time
hereunder or thereunder or in connection herewith or therewith shall have been
true and correct when made.
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6.6 Compliance with Certain Documents and Agreements. Companies shall
have each performed and complied in all material respects with all agreements
and conditions contained in this Agreement, the Loan Documents and any
agreement or other document executed hereunder or thereunder and required to be
performed or complied with by each of them and none of such parties shall be in
default in the performance or compliance with any of the terms or provisions
hereof or thereof.
6.7 No Default. No Event of Default or event which with the lapse of
time or giving of notice or both would constitute an Event of Default shall
have occurred and be continuing.
6.8 No Material Adverse Change. There shall have been no material
adverse change in the condition (financial or otherwise), properties, business,
prospects of, results or operations of Companies (taken as a whole) from April
30, 1996.
6.9 Company's Certificate. The Bank shall have received a certificate
of a responsible senior officer of each Company, dated the date of the making
of Advances hereunder, stating that the conditions of Sections 6.1 and 6.5
through 6.8, hereof have been fully satisfied.
6.10 Other Documents and Instruments. The Bank shall have received such
other instruments and documents as the Bank may reasonably request in
connection with the making of the Advances hereunder, and all such instruments
and documents shall be satisfactory in form and substance to the Bank.
6.11 Borrowing Base Report. The Bank shall have received a Borrowing
Base Report for the period ended June 7, 1996.
6.12 Continuing Conditions. The obligations of the Bank to make Advances
under this Agreement, shall be subject to the continuing conditions that all
documents executed or submitted pursuant hereto shall be reasonably
satisfactory in form and substance to Bank and its counsel; Bank and its
counsel shall have received all information, and such counterpart originals or
such certified or other copies of such materials, as the Bank and its counsel
may reasonably request; and all legal matters incident to the transactions
contemplated by this Agreement (including, without limitation, matters arising
from time to time as a result of changes occurring with respect to any
statutory, regulatory or decisional law applicable hereto) shall be
satisfactory to counsel to the Bank.
6.13 Termination of Existing Agreement. The Bank shall have received
evidence satisfactory to the Bank of the termination of the Existing Agreement
and the refunding in full by Companies of all of their obligations thereunder.
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6.14 Term Sheet. The Bank shall have received evidence satisfactory to
Bank of the satisfaction of the conditions set forth in the Term Sheet dated
March 22, 1996.
6.15 NBD Loans. The Bank shall have received evidence satisfactory to
Bank of the release of all blanket liens on the assets of Companies in favor of
NBD Equipment Finance, Inc.
7. REPRESENTATIONS AND WARRANTIES
Companies jointly and severally represent and warrant and such
representations and warranties shall be deemed to be continuing representations
and warranties during the entire life of this Agreement:
7.1 Corporate Authority. Each Company is a corporation duly organized
and existing in good standing under the laws of its state of incorporation; and
each Company is duly qualified and authorized to do business as a foreign
corporation in each jurisdiction where the character of its assets or the
nature of its activities makes such qualification necessary and where failure
to be so qualified would have a material adverse effect on its business.
7.2 Due Authorization. With respect to each Company, the execution,
delivery and performance of this Agreement, the Loan Documents and any other
documents and instruments required under this Agreement to which it is party,
and the issuance of the Revolving Credit Note by it, are within its corporate
powers, have been duly authorized by each Company, are not in contravention of
law or the terms of such Company's Articles of Incorporation or Bylaws, and do
not require the consent or approval of any governmental body, agency or
authority material to the transactions contemplated by this Agreement or the
Loan Documents; and this Agreement, the Loan Documents and any other documents
and instruments to which such Company is a party, when issued and delivered
under this Agreement, will all be valid and binding upon such Company in
accordance with their terms.
7.3 Encumbrances. There are no security interests in, liens, mortgages,
or other encumbrances on any of the Companies' property except for those not
prohibited by the provisions of this Agreement.
7.4 No Negative Pledges. None of the Companies is a party to, or
subject to, any agreement, document or instrument which would restrict or
prevent it from granting first priority liens upon, security interests in and
pledges of assets to Bank.
7.5 Subsidiaries. There is no Subsidiary of any Company which is not a
party to this Agreement, except as disclosed on Schedule 7.5 hereto.
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7.6 Taxes. Each Company has filed on or before their respective due
dates, all federal, state and foreign tax returns which are to the knowledge of
Companies required to be filed or have obtained extensions for filing such tax
returns and are not delinquent in filing such returns in accordance with such
extensions and have paid all taxes which have become due pursuant to those
returns or pursuant to any assessments received by any such party, as the case
may be, to the extent such taxes have become due except to the extent such tax
payments are being actively contested in good faith and to the extent such
Company has created reserves for such taxes in accordance with GAAP.
7.7 Enforceability of Agreement and Loan Documents. This Agreement and
each of the Loan Documents to which any of the Companies is a party and all
other certificates, agreements and documents executed and delivered by
Companies under or in connection herewith have each been duly executed and
delivered by their duly authorized officers and constitute the valid and
binding obligations of each Company, enforceable in accordance with their
respective terms, except as the validity or enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally or other equitable principles (regardless
of whether enforcement is considered in proceedings in law or equity).
7.8 Non-contravention. The execution, delivery and performance of this
Agreement and the Loan Documents and any other documents and instruments
required under or in connection with this Agreement by each Company are not in
contravention of the terms of any agreement relating to Indebtedness of any
Company for borrowed money or any other material indenture, agreement or
undertaking to which any Company is a party or by which it is bound.
7.9 No Litigation. Except as disclosed by Companies to Bank in writing
prior to the Effective Date, there are no actions, claims, suits or proceedings
pending or, to the knowledge of any Company threatened against or affecting any
Company in any court or before or by any governmental department, agency or
instrumentality, an adverse decision in which would materially adversely affect
the financial condition of the Companies (taken as a whole) or their respective
abilities to perform their respective obligations under this Agreement or any
of the Loan Documents to which they are party.
7.10 Consents, Approvals and Filings, Etc. No authorization, consent,
approval, license, qualification or formal exemption from, nor any filing,
declaration or registration with, any court, governmental agency or regulatory
authority or any securities exchange or any other person is required in
connection with the execution, delivery and performance by any Company of this
Agreement, any of the Loan Documents to which it is a party or any
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other documents or instruments to be executed and or delivered by any Company
in connection therewith or herewith.
7.11 ERISA. None of the Companies maintains or contributes to any
employee pension benefit plan subject to Title IV of ERISA, except as set forth
in Schedule 7.11 hereto. Except as set forth in Schedule 7.11, as of the date
hereof, there is no unfunded "actuarial accrued liabilities" of the Plans, and
there are no accumulated funding deficiencies within the meaning of ERISA, or
any existing liability with respect to the Plans owed to the PBGC or any
successor thereto.
7.12 No Investment Company. None of the Companies is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
None of the Companies is engaged principally, or as one of its important
activities, directly or indirectly, in the business of extending credit for the
purpose of purchasing or carrying margin stock, and none of the proceeds of any
of the Advances will be used, directly or indirectly, for any purpose which
would violate the provisions of Regulation U or X of the Board of Governors of
the Federal Reserve System. Terms for which meanings are provided in
Regulation U of the Board of Governors of the Federal Reserve System or any
regulations substituted therefor, as from time to time in effect, are used in
this paragraph with such meanings.
7.13 Agreements Affecting Financial Condition. None of the Companies is
party to any agreement or instrument or subject to any charter or other
corporate restriction which materially adversely affects the financial
condition, operations or prospects of any such party, as the case may be,
except as disclosed on the most recent Form 10-K or 10-Q for Detrex.
7.14 Title to Collateral. Each Company has good and valid title to the
property pledged, mortgaged or otherwise encumbered or to be encumbered under
the Collateral Documents and, to the Material Property owned by such Company.
7.15 Environmental Matters and Safety Matters. (a) Each Company is in
substantial compliance with all federal, state and local laws, ordinances and
regulations relating to safety and industrial hygiene or to the environmental
condition, including without limitation all Hazardous Materials Laws in
jurisdictions in which it owns or operates, or has owned or operated, a
facility or site, or arranges or has arranged for disposal or treatment of
hazardous substances, solid waste, or other wastes, accepts or has accepted for
transport any hazardous substances, solid wastes or other wastes or holds or
has held any interest in real property or otherwise, except as disclosed on
Schedule 7.15 hereto, and as to such matters disclosed on such Schedule, none
will have a material adverse effect on the financial condition or business of
the Companies (taken as a whole).
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(b) No demand, claim, notice, suit, suit in equity, action,
administrative action, investigation or inquiry whether brought by any
governmental authority, private person or entity or otherwise, arising
under, relating to or in connection with any applicable Hazardous
Materials Laws is pending or, to the best knowledge of any Company,
threatened against any Company, any real property in which any Company
holds or has held an interest or any past or present operation of any
Company, except as disclosed on Schedule 7.15 hereto, and as to such
matters disclosed on such Schedule, none will have a material adverse
effect on the financial condition or business of the Companies (taken as
a whole).
(c) Each Company (i) is, to the best of its knowledge, not the
subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any toxic
substances, radioactive materials, hazardous wastes or related materials
into the environment, (ii) has not received any notice of any toxic
substances, radioactive materials, hazardous waste or related materials
in, or upon any of its properties in violation of any applicable
Hazardous Materials Laws, or (iii) does not know of any basis for any
such investigation, notice or violation, except as disclosed on Schedule
7.15 hereto, and as to such matters disclosed on such Schedule, none will
have a material adverse effect on the financial condition or business of
the Companies (taken as a whole).
(d) No release, threatened release or disposal of hazardous
waste, solid waste or other wastes is occurring or, to the knowledge of
any Company, has occurred on, under or to any real property in which any
Company holds any interest or performs any of its operations, in
violation of any Hazardous Material Law except as disclosed on Schedule
7.15 hereto, and as to such matters disclosed on such Schedule, none are
expected to have a material adverse effect on the financial condition or
business of the Companies (taken as a whole).
7.16 Accuracy of Information. The consolidated financial statements of
Companies dated as of April 30, 1996, furnished the Bank by Companies on May
28, 1996, are correct in all material respects and fairly present the financial
condition of Companies and the results of their operations as of the date
thereof; since such date there has been no material adverse change in the
financial condition of Companies. To the knowledge of Companies' respective
financial officers and except as previously disclosed in writing by Companies
to Bank, Companies do not have any material contingent obligations (including
any liability for taxes) not disclosed by or reserved against said balance
sheets, and at the present time there are no material unrealized or anticipated
losses from any present commitment of Companies (or any of them).
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8. AFFIRMATIVE COVENANTS
Companies jointly and severally covenant and agree that they will, so
long as the Bank is committed to make any Advances under this Agreement and
thereafter so long as any obligations remain outstanding under this Agreement:
8.1 Financial Statements. Furnish to Bank:
(a) as soon as available, but in any event within ninety (90) days
after the end of each fiscal year of Harvel Plastics, Inc., a copy
of the balance sheet of Harvel Plastics, Inc. as at the end of such
year and the related statements of income and changes in
shareholders' equity and financial position (including changes in
cash flow) for such year, setting forth in each case in comparative
form the figures for the previous year, certified without
qualification or exception arising out of the scope of the audit,
by Deloitte & Touche or other independent certified public
accountants of nationally recognized standing;
(b) as soon as available, but in any event within ninety (90) days
after the end of each fiscal year of Detrex, a copy of either the
consolidated balance sheet of Detrex and its consolidated
Subsidiaries as at the end of such year and the related
consolidated statements of income and changes in shareholders'
equity and financial position (including changes in cash flow) for
such year, setting forth in each case in comparative form the
figures for the previous year, certified without qualification or
exception arising out of the scope of the audit, by Deloitte &
Touche or other independent certified public accountants of
nationally recognized standing, or a copy of the Annual Report on
Form 10-K of Detrex as filed with the Securities and Exchange
Commission; and
(c) as soon as available, but in any event within thirty (30) days
after the end of each month (other than December), the unaudited
consolidated balance sheets of Detrex and its consolidated
Subsidiaries as at the end of such month and the related unaudited
consolidated statements of income and changes in shareholders'
equity and financial position of Detrex and its consolidated
Subsidiaries for such month certified by a Responsible Officer of
Detrex, on behalf of the Companies as being correct in all material
respects (subject to normal year-end audit adjustments);
(d) as soon as available, but in any event within thirty (30) days
after the end of each month, the unaudited
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balance sheets of Harvel Plastics, Inc., The Elco Corp., and
Seibert-Oxidermo, Inc. as at the end of such month and the related
unaudited statements of income and changes in shareholders' equity
and financial position of Harvel Plastics, Inc., The Elco Corp., and
Seibert-Oxidermo, Inc. for such month certified by a Responsible
Officer of Harvel Plastics, Inc., The Elco Corp., and
Seibert-Oxidermo, Inc., on behalf of the Companies as being correct
in all material respects (subject to normal year-end audit
adjustments);
all such financial statements to be complete and correct in all material
respects and, in the case of the financial statements to be delivered pursuant
to subsections (a) and (b) above, be prepared in accordance with GAAP applied
consistently throughout the prior periods reflected therein (except as
disclosed therein).
8.2 Certificates; Other Information. Furnish to Agent and each Bank:
(a) concurrently with the delivery of the financial statements referred
to in Sections 8.1(b) and (c) above, a certificate of a Responsible
Officer of Detrex, on behalf of the Companies, in the form attached
as Exhibit "F" stating that, to the best of such officer's
knowledge, the Companies, during such period have observed or
performed in all material respects all of their covenants and other
agreements, and satisfied every condition, contained in this
Agreement and in the Revolving Credit Note and any other Loan
Document to be observed, performed or satisfied by them, and that
such officer has obtained no knowledge of any default or Event of
Default except as specified in such certificate and setting forth
in detail the calculations supporting such statement in the case of
compliance with Sections 9.1 through 9.4, inclusive;
(b) within five (5) days after the same are sent, copies of all
financial statements and reports which Detrex sends to its
stockholders generally, and within five (5) days after the same are
filed, copies of all financial statements and reports which Detrex
may make to, or file with, the Securities and Exchange Commission
or any successor or analogous Governmental Authority;
(c) on Thursday of each week, a Borrowing Base Report (in the form
attached as Exhibit "A") calculating the Lending Availability as of
the end of the preceding week;
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(d) within twenty (20) days after and as of the end of each month (i)
in form satisfactory to Bank, a detailed accounts payable list;
(ii) in the form attached hereto as Exhibit "D", a summary of
Companies' Eligible Inventory, (iii) in form satisfactory to the
Bank, a detailed aging of Companies' Accounts, and (iv) in the form
attached hereto as Exhibit "H", a Month End Aging and Ineligible
Summary.
(e) as soon as available and in any event not later than thirty (30)
days after the end of each fiscal year, financial projections for
the Companies for the current fiscal year; and
(f) as soon as available and in any event not later than forty five
(45) days after the end of each fiscal quarter of Detrex, updated
financial projections for the Companies for the current fiscal
year;
(g) within thirty (30) days after and as of the end of each month, in
form satisfactory to Bank, monthly statements of income for each of
Companies' business units;
(h) promptly, such additional financial and other information as Bank
may from time to time reasonably request.
8.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
Indebtedness and other obligations of whatever nature, except to the extent
being contested in good faith by appropriate proceedings diligently pursued and
against which reserves as required by GAAP have been established and except for
the payment of trade payables in the ordinary course of business in a manner
consistent with past practice.
8.4 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by them, and
preserve, renew and keep in full force and effect their corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of their businesses; comply with
all Contractual Obligations, Requirements of Law and applicable Environmental
Laws except to the extent that the failure to comply therewith could not, in
the aggregate, have a material adverse effect on the business, operations,
property or financial or other condition of the Companies taken as a whole.
8.5 Maintenance of Property. In a manner consistent with past practice
and prudent business practices, keep all property owned or leased by any of the
Companies in good working order and condition.
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8.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of record and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to their business and activities; and permit
representatives of Bank (a) to visit and inspect any of their properties and,
unless otherwise prohibited by law or any rule, regulation or court order
promulgated or issued by any Governmental Authority, examine and make abstracts
from any of their books and records at any reasonable time and as often as may
reasonably be desired, (b) for the purposes of determining compliance by
Companies with the terms of this Agreement, conduct collateral audits of
Companies, (c) to discuss the business, operations, properties and financial
and other condition of Companies with officers of Companies and with their
independent certified public accountants; and (d) to verify with Account
Debtors Accounts balances owed to Companies.
8.7 Notices. Promptly give notice to the Bank:
(a) of the occurrence of any default or Event of Default;
(b) of the occurrence of any default or event of default under any
Contractual Obligation of any of Companies or of any litigation,
investigation or proceeding which may exist at any time between
Companies (or any of them) and any Governmental Authority, which in
either case, if adversely determined, would have a material adverse
effect on the business, operations, property or financial or other
condition of Companies taken as a whole;
(c) of any litigation or proceeding affecting Companies (or any of
them) (i) in which the anticipated liability or assessment against
Companies (or any of them) is Five Hundred Thousand Dollars
($500,000) or more individually or Two Million Dollars ($2,000,000)
or more in the aggregate and not covered by insurance or reserved
against by Companies in accordance with GAAP or (ii) in which
injunctive or similar relief is sought and which could have a
material adverse effect on the business, operations, property or
financial or other condition of Companies taken as a whole;
(d) of the following events, to the extent applicable, as soon as
possible and in any event within thirty (30) days after any of the
Companies knows or has reason to know thereof: (i) the occurrence
or expected occurrence of any Reportable Event with respect to any
Plan, or (ii) the institution of proceedings or the taking or
expected taking of any other action by PBGC or any Company or any
Commonly Controlled Entity to terminate, withdraw or partially
withdraw from any Plan and with
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respect to a Multiemployer Plan, the reorganization or insolvency
of the Plan, and in addition to such notice, deliver to the Agent
and each Bank whichever of the following may be applicable: (1) a
certificate of the chief financial officer of Detrex setting forth
details as to such Reportable Event and the action that the
applicable Company or Commonly Controlled Entity proposes to take
with respect thereto, together with a copy of any notice of such
Reportable Event that may be required to be filed with PBGC, or (2)
any notice delivered by PBGC evidencing its intent to institute
such proceedings or any notice to PBGC that such Plan is to be
terminated, as the case may be; and
(e) of a material adverse change in the business, operations, property
or financial or other condition of the Companies (taken as a
whole).
Each notice pursuant to this Section 8.7 shall be accompanied by a
statement of a Responsible Officer of Detrex, on behalf of the Companies,
setting forth details of the occurrence referred to therein and stating what
action (including the timing thereof) the Companies propose to take with
respect thereto.
8.8 Indemnification. Indemnify and save Bank harmless from all loss,
cost, damage, liability or expenses, including attorney fees, incurred by Bank
by reason of an Event of Default or in exercising in good faith any of its
rights, remedies or prerogatives under or in connection with this Agreement or
any of the Loan Documents, provided, however, Companies shall have no such
indemnification obligations with respect to losses, costs, damages, liabilities
or expenses arising from the gross negligence or willful misconduct of the
Bank.
8.9 Further Assurances; Financing Statements. Furnish to Bank and at
Companies' expense, upon Bank's request, in form satisfactory to Agent,
assignments, lien instruments or other security instruments, consents,
acknowledgments, subordinations and financing statements covering any or all of
the Collateral pledged, assigned, or encumbered pursuant to the Collateral
Documents of every nature and description, whether now owned or hereafter
acquired, to the extent that Bank may reasonably require, or execute and
deliver or cause to be executed and delivered such other documents or
instruments as Bank may reasonably require to effectuate more fully the
purposes of this Agreement.
8.10 Compliance with Leases. Comply with the material terms and
conditions of any leases covering any premises or property (real or personal)
wherein any of the Collateral pledged, assigned or encumbered pursuant to the
Collateral Documents is located, or covering any of the Material Property, and
any orders, ordinances, laws or statutes of any city, state or other
governmental
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department having jurisdiction with respect to such premises or property, or
the conduct of business thereon.
8.11 Insurance. Maintain insurance coverage on its physical assets and
against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature, and in the event
of acquisition of additional property, real or personal, or of incurrence of
additional risks of any nature, increase such insurance coverage in such manner
and to such extent as prudent business judgment and then current practice would
dictate; and in the case of all policies covering property subject to the
Collateral Documents, or property in which the Banks shall have a security
interest of any kind whatsoever, other than those policies protecting against
casualty liabilities to strangers, all such insurance policies shall provide
that the loss payable thereunder shall be payable to Companies, and the Bank;
all said policies or copies thereof, including all endorsements thereon and
those required hereunder, to be deposited with the Bank; and Companies assign
to the Bank as additional security for the repayment of the Indebtedness and
the performance of all other obligations hereunder, all their rights to receive
insurance proceeds of any kind.
8.12 Power of Attorney. Each Company does hereby make, constitute and
appoint any officer or agent of Bank as its true and lawful attorney-in-fact,
with power, upon the occurrence of any Event of Default (exercisable following
the expiration of any applicable period of cure and for so long as such Event
of Default is continuing), to endorse its name or any of its officers or agents
upon any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under any policy of insurance) or collateral that
may come into possession of the Agent in full or part payment of any amounts
owing to the Bank; to sign and endorse its name and/or any of its officers or
agents upon any invoice, freight or express bill, bill of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with its Accounts, and any instrument or document
relating thereto or to its rights therein; to execute on its behalf, any
financing statements, amendments, subordinations or other filings pursuant to
this Agreement or any of the Loan Documents, granting unto Bank, as its
attorney-in-fact, full power to do any and all things necessary to be done in
and about the premises as fully and effectually as Companies might or could do,
and hereby ratifying all that any said attorney shall lawfully do or cause to
be done by virtue hereof. The power of attorney described herein shall be
deemed coupled with an interest and shall be irrevocable until the Revolving
Credit Maturity Date and thereafter until payment in full of all the
Indebtedness of Companies to the Bank under this Agreement and the performance
by Companies of all other obligations under this Agreement and the Loan
Documents; Bank may, at any time after the occurrence of an Event of Default,
but before the expiration of any applicable cure
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period or delivery of any required notice, notify Account Debtors that
Collateral has been assigned to Bank and that payments shall be made directly
to Bank. Upon request of the Bank, Companies will so notify such Account
Debtors and will indicate on all billings to such Account Debtors that their
accounts must be paid to or as directed by Bank. The Bank shall have full power
to collect, compromise, endorse, sell or otherwise deal with the Collateral or
proceeds thereof in the name of the Bank or in the name of Companies, provided
only that Bank shall act in a commercially reasonable manner.
8.13 Bowling Green Property. If the Bowling Green Property has not been
sold on or before August 1, 1996, provide to the Bank, at Companies' expense,
an appraisal of the Bowling Green Property from an appraiser satisfactory to
Bank.
9. NEGATIVE COVENANTS
Companies jointly and severally covenant and agree that so long as any
Indebtedness or the commitment to lend under this Agreement remains
outstanding, they will not, without the prior written consent of the Bank:
9.1 Leverage Ratio. Permit the Consolidated Leverage Ratio at any time
to be more than the following amounts during the periods specified below:
Present through December 30, 1996 3.25 to 1.0
December 31, 1996 and thereafter 3.0 to 1.0.
9.2 Cash Flow Coverage Ratio. Permit the Consolidated Cash Flow
Coverage Ratio at any time to be less than the amounts specified below for the
determination date specified below:
March 31, 1996 .55 to 1.0
June 30, 1996 .55 to 1.0
September 30, 1996 .55 to 1.0
December 31, 1996 .60 to 1.0
March 31, 1997 and as of .85 to 1.0.
the last day of each fiscal
quarter thereafter
9.3 Current Ratio. Permit the ratio of Consolidated Current Assets to
Consolidated Current Liabilities at any time to be less than the following
amounts during the periods specified below:
December 31, 1995 through June 29, 1996 1.15 to 1.0
June 30, 1996 through December 30, 1996 1.175 to 1.0
December 31, 1996 and thereafter 1.25 to 1.0.
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For purposes of calculation of this ratio, all Indebtedness of Companies to
Bank outstanding under the Revolving Credit Note shall be treated as a part of
Consolidated Current Liabilities.
9.4 Consolidated Tangible Net Worth. Permit Consolidated Tangible Net
Worth at any time to be less than the Minimum Amount.
9.5 Indebtedness. Become or remain obligated for any indebtedness for
borrowed money, or for any indebtedness incurred in connection with the
acquisition of any property, real or personal, tangible or intangible, except:
(a) indebtedness to the Bank;
(b) indebtedness set forth on Schedule 9.5 hereof;
(c) purchase money indebtedness incurred in connection with the
acquisition of fixed assets to the extent not exceeding Five
Hundred Thousand Dollars ($500,000) in the aggregate at any time
outstanding.
9.6 Limitation on Liens. Create, incur, assume or suffer to exist, any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired except:
(a) Liens established under the Collateral Documents;
(b) Permitted Encumbrances.
9.7 Contingent Obligations. Create, assume or suffer to exist any
Contingent Obligation.
9.8 Prohibition of Fundamental Changes. Enter into any transaction or
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or a substantial part of its business or assets, or acquire
by purchase or otherwise all or substantially all the business or assets of, or
stock or other evidences of beneficial ownership of, any Person, or make any
material change in its present method of conducting business, except that:
(a) any Subsidiary of Detrex may be merged or consolidated with or into
Detrex (provided that Detrex shall be the continuing or surviving
corporation) or with any one or more Subsidiaries of Detrex
(provided that if any such transaction shall be between a
Subsidiary and a wholly-owned Subsidiary, the wholly-owned
Subsidiary shall be the continuing or surviving corporation);
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(b) any Subsidiary of Detrex may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to Detrex or another wholly-owned Subsidiary of Detrex;
(c) Detrex may sell its Bowling Green, Kentucky manufacturing plant to
Eagle Wire Company, Inc. for cash consideration of approximately
$1,200,000 and its real property located at 26000 Capitol Avenue,
Redford, Michigan for approximately $1,500,000 and Companies may,
in addition, sell, transfer or otherwise dispose of properties and
assets having an aggregate book value of not more than One Hundred
Thousand Dollars ($100,000) whether in one transaction or in a
series of transactions during any single fiscal year of Detrex; and
(d) Companies may acquire any assets or business, or the capital stock
of businesses in the same or a related enterprise, provided, that
immediately after each such transactions and after giving effect
thereto, Companies are in compliance with the terms of this
Agreement and provided further, that the aggregate purchase price
for such acquisitions shall not exceed One Hundred Thousand Dollars
($100,000) during any single fiscal year of Detrex.
9.9 Prohibition on Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of any of its assets (including, without limitation,
receivables and leasehold interests) whether now owned or hereafter acquired,
except as permitted by Section 9.8 hereof and except for dispositions of
obsolete or worn out property and other property (including inventory) disposed
of in the ordinary course of business.
9.10 Investments. Make or commit to make, any advance, loan, extension
of credit or capital contribution to, or purchase of any stock, bonds, notes,
debentures or other securities of, or make any other investment in, any Person
(all such transactions being herein called "investments") except:
(a) investments in accounts, contract rights and chattel paper (as
defined in the UCC) and notes receivable, arising or acquired in
the ordinary course of business;
(b) investments arising from sales of property (including products and
services) not prohibited by this Section 9;
(c) investments in bank certificates of deposit or eurodollar deposit
accounts (but only with banks having a combined capital and surplus
in excess of Fifty
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Million Dollars ($50,000,000), open market commercial paper
maturing within one year having the rating of either Standard &
Poor's Corporation of A-2 or better or of Moody's Investors
Service, Inc. of P-2 or better, U.S. Treasury Bills subject to
repurchase agreement and short-term obligations issued or
guaranteed by the U.S. Government or any agency thereof;
(d) Companies' existing investments described in Schedule 9.10 attached
hereto; and
(e) investments permitted by Section 9.8 hereof.
9.11 Sale and Leaseback. Enter into any transaction with any Person
providing for the leasing by one of the Companies of real or personal property
which has been or is to be sold or transferred by such Company to such Person
or to any other Person to whom funds have been or are to be advanced by such
Person on the security of such property or rental obligations of such Company,
except any such transaction involving assets having an aggregate book value
which does not exceed One Hundred Thousand Dollars ($100,000).
9.12 Negative Pledge of Assets. Enter into, or allow to exist, any
agreement, document or instrument which would restrict or prevent any of the
Companies from granting Agent on behalf of the Banks first priority liens upon,
security interests in and mortgages upon any of their respective assets subject
only to Liens permitted by the provisions of Section 9.7 of this Agreement.
10. DEFAULTS
10.1 Events of Default. Any of the following events is an "Event of
Default":
(a) Non-payment of the principal, when due, under the Revolving Credit
Note issued hereunder, or of any Letter of Credit Obligation to be
paid hereunder or under any Letter of Credit Agreement in
accordance with the terms hereof and thereof or non-payment of
interest, when due, under the Revolving Credit Note issued
hereunder;
(b) Default in the payment of any money payable by Companies to the
Bank hereunder, other than as set forth in subsection (a), above
within three (3) Business Days of the date the same is due and
payable;
(c) Default is made in the due observance or performance of any term,
covenant or agreement contained in Sections 8.1 though 8.13 or
Sections 9.1 through 9.12 of this Agreement;
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(d) Default is made in the due observance or performance of any other
term, covenant or agreement contained in this Agreement or any
other Loan Document and such default continues unremedied for a
period of thirty (30) days after written notice of such default by
Bank to Companies;
(e) Any representation or warranty made by Companies (or any of them)
herein or in any instrument submitted pursuant hereto or by any
other party to the Loan Documents proves untrue in any material
respect when made or deemed made;
(f) Any of the Companies shall (i) default in any payment of principal
or of interest on any Indebtedness in an aggregate amount exceeding
Fifty Thousand Dollars ($50,000) (other than the Revolving Credit
Note) beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created;
or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to
cause, with the giving of notice if required, such Indebtedness to
become due prior to its stated maturity; or
(g) (i) Any of the Companies shall commence any case, proceeding or
other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
assets, or any of the Companies shall make a general assignment for
the benefit of its creditors; or (ii) there shall be commenced
against any of the Companies any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in
the entry of any order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded
for a period of sixty (60) days; or (iii) there shall be commenced
against any of the Companies any case, proceeding or other action
seeking issuance
36
<PAGE> 42
of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within
sixty (60) days from the entry thereof; or (iv) any of the
Companies shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii) or (iii) above; or (v) any of the
Companies shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become
due; or
(h) To the extent applicable, (i) any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or
Section 4875 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan, (iii) a
Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, an Single Employer Plan,
which Reportable Event or institution of proceedings is, in the
reasonable opinion of the Bank likely to result in the termination
of such Plan for purposes of Title IV of ERISA, and, in the case of
a Reportable Event, the continuance of such Reportable Event
unremedied for thirty (30) days after notice of such Reportable
Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or
the continuance of such proceedings for thirty (30) days after
commencement thereof, as the case may be, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA, or (v) any
other event or condition shall occur or exist with respect to a
Single Employer Plan; and in each case in clauses (i) through (v)
above, such event or condition, together with all other such events
or conditions, if any, could subject any of the Companies to any
tax, penalty or other liabilities in the aggregate material in
relation to the business, operations, property or financial or
other condition of the Companies taken as a whole; or
(i) One or more judgments or decrees shall be entered against the
Companies (or any of them) involving in the aggregate a liability
(not paid or not fully covered by insurance) of One Hundred
Thousand Dollars ($100,000) or more and all such judgments or
decrees shall not have been vacated, discharged, or stayed pending
appeal within sixty (60) days from the entry thereof; or
37
<PAGE> 43
(j) There shall be any Environmental Material Adverse Event or there
shall be any other material adverse change in the business,
operations, assets or in the financial or other condition, of the
Companies taken as a whole;
(k) There shall be any change for any reason in the management,
ownership or control of any of the Companies which shall in the
reasonable judgment of the Bank materially adversely affect the
prospects for the successful operation of any of the Companies.
10.2 Exercise of Remedies. If an Event of Default has occurred and is
continuing hereunder: (v) the Bank may declare the Revolving Credit Commitment
terminated; (w) the Bank may declare the entire unpaid principal Indebtedness,
including the Revolving Credit Note, immediately due and payable, without
presentment, notice or demand, all of which are hereby expressly waived by
Companies; (x) upon the occurrence of any Event of Default specified in
subsection (g), above, and notwithstanding the lack of any declaration by Bank
under preceding clause (w), the entire unpaid principal Indebtedness, including
the Revolving Credit Note, shall become automatically and immediately due and
payable, and the Revolving Credit Commitment shall be automatically and
immediately terminated; and (y) the Bank may exercise any remedy permitted by
this Agreement, the Loan Documents or law.
10.3 Rights Cumulative. No delay or failure of Bank in exercising any
right, power or privilege hereunder shall affect such right, power or
privilege, nor shall any single or partial exercise thereof preclude any
further exercise thereof, or the exercise of any other power, right or
privilege. The rights of Bank under this Agreement are cumulative and not
exclusive of any right or remedies which Bank would otherwise have.
10.4 Waiver by Companies of Certain Laws. To the extent permitted by
applicable law, each Company hereby agrees to waive, and does hereby absolutely
and irrevocably waive and relinquish the benefit and advantage of any
valuation, stay, appraisement, extension or redemption laws now existing or
which may hereafter exist, which, but for this provision, might be applicable
to any sale made under the judgment, order or decree of any court, or any claim
for interest on the Revolving Credit Note, or any security interest or mortgage
contemplated by or granted under or in connection with this Agreement. These
waivers have been voluntarily given, with full knowledge of the consequences
thereof.
10.5 Waiver of Defaults. No Event of Default shall be waived by the Bank
except in a writing signed by an officer of the Bank in accordance with Section
11.11 hereof. No single or partial exercise of any right, power or privilege
hereunder, nor any delay in the exercise thereof, shall preclude other or
further exercise of their rights by the Bank. No waiver of any Event of Default
shall extend
38
<PAGE> 44
to any other or further event of default. No forbearance on the part of the
Bank in enforcing any of its rights shall constitute a waiver of any of their
rights. Each Company expressly agrees that this Section may not be waived or
modified by the Bank by course of performance, estoppel or otherwise.
11. MISCELLANEOUS
11.1 Accounting Principles. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done, unless otherwise specified
herein, in accordance with GAAP.
11.2 Consent to Jurisdiction. Each of the Companies and Bank hereby
irrevocably submit to the non-exclusive jurisdiction of any United States
Federal or Michigan state court sitting in Detroit in any action or proceeding
arising out of or relating to this Agreement or any of the Loan Documents and
Companies and Bank hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in any such United States
Federal or Michigan state court. Companies irrevocably consent to the service
of any and all process in any such action or proceeding brought in any court in
or of the State of Michigan by the delivery of copies of such process to
Companies at their addresses specified on Schedule 1 hereto or by certified
mail directed to such address or such other address as may be designated by
Companies in a notice to the other parties that complies as to delivery with
the terms of Section 11.6. Nothing in this Section shall affect the right of
the Bank to serve process in any other manner permitted by law or limit the
right of the Bank to bring any such action or proceeding against Companies or
any of their property in the courts of any other jurisdiction. Each Company
hereby irrevocably waives any objection to the laying of venue of any such suit
or proceeding in the above described courts.
11.3 Law of Michigan. This Agreement and the Revolving Credit Note have
been delivered at Detroit, Michigan, and shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan, except to the
extent that the Uniform Commercial Code, other personal property law or real
property law of a jurisdiction where Collateral is located is applicable and
except as and to the extent expressed to the contrary in any of the Loan
Documents. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
39
<PAGE> 45
11.4 Interest. In the event the obligation of Companies to pay interest
on the principal balance of the Revolving Credit Note is or becomes in excess
of the maximum interest rate which Companies are permitted by law to contract
or agree to pay, giving due consideration to the execution date of this
Agreement, then, in that event, the rate of interest applicable to the
Revolving Credit Note shall be deemed to be immediately reduced to such maximum
rate and all previous payments in excess of the maximum rate shall be deemed to
have been payments in reduction of principal and not of interest.
11.5 Closing Costs and Other Costs. Companies agree to pay, or reimburse
the Bank for payment of, on demand (a) all closing costs and expenses,
including, by way of description and not limitation, house and outside attorney
fees and advances, appraisal and accounting fees, and lien search fees incurred
by Bank in connection with the commitment, consummation and closing of the
loans contemplated hereby or in connection with any amendment, refinancing or
restructuring of the credit arrangements provided under this Agreement; (b) all
stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing or recording of this Agreement
and the Loan Documents and the consummation of the transactions contemplated
hereby, and any and all liabilities with respect to or resulting from any delay
in paying or omitting to pay such taxes or fees, and (c) all reasonable costs
and expenses of the Bank (including reasonable fees and expenses of counsel and
whether incurred through negotiations, legal proceedings or otherwise) in
connection with any Event of Default or the enforcement of this Agreement, or
the Loan Documents or in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement. All of said amounts
required to be paid by Companies, as aforesaid, may, at Bank's option, be
charged by Bank as an Advance.
11.6 Notices. Except as expressly provided otherwise in this Agreement,
all notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing and shall be given by
personal delivery, by mail, by reputable overnight courier, by telex or by
facsimile and addressed or delivered to it at its address set forth on Schedule
1 hereto or at such other address as may be designated by such party in a
notice to the other parties that complies as to delivery with the terms of this
Section 11.6. Any notice, if personally delivered or if mailed and properly
addressed with postage prepaid and sent by registered or certified mail, shall
be deemed given when received; any notice, if given to a reputable overnight
courier and properly addressed, shall be deemed given two (2) Business Days
after the date on which it was sent, unless it is actually received sooner by
the named addressee; and any notice, if transmitted by telex or facsimile,
shall be deemed given when received (answerback confirmed in the case of
telexes and receipt confirmed in the case
40
<PAGE> 46
of telecopies). Bank may, but shall not be required to, take any action on the
basis of any notice given to it by telephone, but the giver of any such notice
shall promptly confirm such notice in writing or by telex or facsimile, and
such notice will not be deemed to have been received until such confirmation is
deemed received in accordance with the provisions of this Section set forth
above. If such telephonic notice conflicts with any such confirmation, the
terms of such telephonic notice shall control.
11.7 Further Action. Companies, from time to time, upon written request
of Bank will make, execute, acknowledge and deliver or cause to be made,
executed, acknowledged and delivered, all such further and additional
instruments, and take all such further action as may reasonably be required to
carry out the intent and purpose of this Agreement or the Loan Documents, and
to provide for Advances under and payment of the Revolving Credit Note,
according to the intent and purpose herein and therein expressed.
11.8 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Companies may not assign or
otherwise transfer any of their rights under this Agreement without the prior
written consent of the Bank.
11.9 Indulgence. No delay or failure of the Bank in exercising any
right, power or privilege hereunder shall affect such right, power or privilege
nor shall any single or partial exercise thereof preclude any further exercise
thereof, nor the exercise of any other right, power or privilege. The rights of
the Bank hereunder are cumulative and are not exclusive of any rights or
remedies which the Bank would otherwise have.
11.10 Counterparts. This Agreement may be executed in several
counterparts, and each executed copy shall constitute an original instrument,
but such counterparts shall together constitute but one and the same
instrument.
11.11 Amendment and Waiver. No amendment or waiver of any provision of
this Agreement or any Loan Document, nor consent to any departure by Companies
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
11.12 Confidentiality. Bank agrees that it will not disclose without the
prior consent of Companies (other than to its employees or to its auditors or
counsel) any information with respect to Companies, which is furnished pursuant
to this Agreement or any of the Loan Documents and specifically designated in
writing by Companies as confidential information; provided that Bank may
disclose any such information (a) as has become generally available
41
<PAGE> 47
to the public or has been lawfully obtained by Bank from any third party under
no duty of confidentiality to Companies, (b) as may be required or appropriate
in any report, statement or testimony submitted to, or in respect to any
inquiry, by, any municipal, state or federal regulatory body having or claiming
to have jurisdiction over such Bank, including the Board of Governors of the
Federal Reserve System of the United States, the Office of the Comptroller of
the Currency or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(c) as may be required or appropriate in respect to any summons or subpoena or
in connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to the Bank, and (e) to any transferee or
assignee or to any participant of, or with respect to, the Revolving Credit
Note.
11.13 Effective Upon Execution. This Agreement shall become effective
upon the execution hereof by Bank and Companies and the issuance by Companies
of the Revolving Credit Note hereunder, and shall remain effective until the
Indebtedness has been repaid and discharged in full and no commitment to extend
any credit hereunder or under any of the other Loan Documents, whether optional
or obligatory, remains outstanding.
11.14 Waiver of Jury Trial. The Bank and Companies, after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right any of them may have to a trial by jury in any
litigation based upon or arising out of this Agreement or any related
instrument or agreement or any of the transactions contemplated by this
Agreement or any course of conduct, dealing, statements (whether oral or
written) or action of any of them. Neither the Bank nor Companies shall seek to
consolidate, by counterclaim or otherwise, any such action in which a jury
trial has been waived with any other action in which a jury trial cannot be or
has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by the Bank or Companies except by a
written instrument executed by all of them.
11.15 Complete Agreement; Conflicts. This Agreement, the Revolving Credit
Note, any Requests for Advance hereunder, and the Loan Documents contain the
entire agreement of the parties hereto, superseding all prior agreements,
discussions and understandings relating to the subject matter hereof, and none
of the parties shall be bound by anything not expressed in writing. In the
event of any conflict between the terms of this Agreement and the other Loan
Documents, this Agreement shall govern.
11.16 Severability. In case any one or more of the obligations of
Companies under this Agreement, the Revolving Credit Note or any of the other
Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and
42
<PAGE> 48
enforceability of the remaining obligations of Companies shall not in any way
be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of Companies under this Agreement, the
Revolving Credit Note or any of the other Loan Documents in any other
jurisdiction.
11.17 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for convenience of reference
only and shall in no way modify or affect any of the terms or provisions
hereof.
11.18 Construction of Certain Provisions. If any provision of this
Agreement or any of the Loan Documents refers to any 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,
whether or not expressly specified in such provision.
11.19 Independence of Covenants. Each covenant hereunder shall be given
independent effect (subject to any exceptions stated in such covenant) so that
if a particular action or condition is not permitted by any such covenant
(taking into account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the limitations of,
another covenant shall not avoid the occurrence of an Event of Default or any
event or condition which with notice or lapse of time, or both, could become
such an Event of Default if such action is taken or such condition exists.
11.20 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of Companies or any party
to any of the Loan Documents made herein or in any of the Loan Documents or in
any certificate, report, financial statement or other document furnished by or
on behalf of Companies in connection with this Agreement or any of the Loan
Documents shall be deemed to have been relied upon by the Bank, notwithstanding
any investigation heretofore or hereafter made by the Bank or on the Bank's
behalf, and those covenants and agreements of Companies set forth in Sections
8.8 and 11.5 (together with any other indemnities of Companies contained
elsewhere in this Agreement or in any of the Loan Documents) shall survive the
repayment in full of the Indebtedness and the termination of the Revolving
Credit Commitment.
11.21 Concerning Joint and Several Liability of the Companies and Related
Matters.
(a) Each of the Companies authorizes Detrex with full power and
authority as attorney-in-fact, to execute and deliver Requests for Advances,
requests for issuance of Letters of Credit and each other instrument,
certificate and report to be delivered by the
43
<PAGE> 49
Companies to the Bank pursuant to this Agreement. Each of the Companies agrees
that it shall be bound by any action taken by Detrex on its behalf pursuant to
such appointment.
(b) Each of the Companies is accepting joint and several liability
hereunder in consideration of the financial accommodations to be provided by
the Bank under this Agreement, for the mutual benefit, directly and indirectly,
of each of the Companies and in consideration of the undertakings of each of
the Companies to accept joint and several liability for the obligations of each
of them.
(c) Each of the Companies jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with each other Company, with respect to the payment and
performance of all of the obligations arising under this Agreement, it being
the intention of the parties hereto that all the obligations shall be the joint
and several obligations of all the Companies without preferences or distinction
among them.
(d) If and to the extent that any of the Companies shall fail to make
any payment with respect to any of the obligations hereunder as and when due or
to perform any of such obligations in accordance with the terms thereof, then
in each such event, the other Companies will make such payment with respect to,
or perform, such obligation.
(e) The obligations of each Company under the provisions of this
Agreement constitute full recourse obligations of such Company enforceable
against it to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement or any other
circumstance whatsoever.
(f) The obligations of each Company under this Agreement shall not be
diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to
any Company or any Bank or the Agent. The joint and several liability of the
Companies hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of any Company or the Bank.
(g) The provisions of this Section 11.21 are made for the benefit of
the Bank and its successors and assigns, and may be enforced by them from time
to time against any of the Companies as often as occasion therefor may arise
and without requirement on the part of the Bank first to marshall any of its
claims or to exercise any of its rights against the other Companies or to
exhaust any remedies available to it against the other Companies or to resort
to any other source or means of obtaining payment of any of the
44
<PAGE> 50
obligations hereunder or to elect any other remedy. The provisions of this
Section 11.21 shall remain in effect until all the obligations hereunder shall
have been paid in full or otherwise fully satisfied. If at any time, any
payment, or any part thereof, made in respect of any of the obligations, is
rescinded or must otherwise be restored or returned by the Bank upon the
insolvency, bankruptcy or reorganization of the Companies, or otherwise, the
provisions of this Section 11.21 will forthwith be reinstated in effect, as
though such payment had not been made.
11.22 Conflict between Security Agreements, Mortgages and
Agreement. In the event of any express inconsistency between the terms and
provisions of the Security Agreements or the Mortgages and the terms and
provisions of this Agreement, the terms and provisions of this Agreement shall
control.
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK DETREX CORPORATION
By: By:
--------------------------- ----------------------------
Mark A. Reifel Gerald J. Israel
Its: Assistant Vice President Its: Vice President-Finance and
500 Woodward Avenue Chief Financial Officer
P.O. Box 75000
Detroit, Michigan 48275-3258
Attention: Business Finance
Division II
Fax No. (313) 222-9325
THE ELCO CORPORATION
By:
----------------------------
Gerald J. Israel
Its: Treasurer
HARVEL PLASTICS, INC.
By:
----------------------------
Gerald J. Israel
Its: Director
45
<PAGE> 51
SEIBERT-OXIDERMO, INC.
By:
----------------------------
Gerald J. Israel
Its: Treasurer
46
<PAGE> 52
EXHIBIT "A"
[SEE ATTACHED]
<PAGE> 53
EXHIBIT "E"
REVOLVING CREDIT NOTE
Detroit, Michigan
$12,000,000 June 13, 1996
On or before May 1, 1997, FOR VALUE RECEIVED, the undersigned
(collectively "Companies") jointly and severally promise to pay to the order of
Comerica Bank, a Michigan banking corporation ("Bank") at 500 Woodward Avenue,
Detroit, Michigan, in lawful money of the United States of America the
Indebtedness to Bank or so much of the sum of Twelve Million Dollars
($12,000,000) as may from time to time have been advanced and then be
outstanding hereunder pursuant to the Credit Agreement ("Agreement") dated as
of June 13, 1996, made by and between Companies and Bank, together with
interest thereon as hereinafter set forth. Capitalized terms used herein,
unless defined to the contrary, have the meanings given them in the Agreement.
Each of the Advances made hereunder shall bear interest at the interest
rate from time to time applicable thereto under the Agreement or as otherwise
determined thereunder, and interest shall be computed, assessed and payable as
set forth in the Agreement.
This Note is a note under which advances, repayments and readvances may
be made from time to time, but only in accordance with the terms and conditions
of the Agreement. This Note evidences borrowing under, is subject to, and may
be accelerated or matured under, the terms of the Agreement, to which reference
is hereby made.
Companies agree that in the event of a default hereunder or any default
or Event of Default under the Agreement, Bank shall be entitled to liquidate
and collect all property or assets (including deposits and other credits)
whether presently owned or hereafter acquired, of Companies in possession or
control of (or owing by) the Bank for any purpose, and to apply the proceeds of
such liquidations and collections, and offset any amounts owing by Bank,
against Companies' obligations hereunder and under the Agreement.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Companies hereby waive presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agree that no obligation
hereunder shall be discharged by reason of any extension, indulgence, release,
or forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note. Any transferees
<PAGE> 54
of, or endorser, guarantor or surety paying this Note in full shall succeed to
all rights of Bank, and Bank shall be under no further responsibility for the
exercise thereof or the loan evidenced hereby.
Nothing herein shall limit any right granted Bank by any other instrument
or by law.
DETREX CORPORATION
By:
----------------------------
Gerald J. Israel
Its: Vice President-Finance
and Chief Financial Officer
THE ELCO CORPORATION
By:
-----------------------------
Gerald J. Israel
Its: Treasurer
HARVEL PLASTICS, INC.
By:
-----------------------------
Gerald J. Israel
Its: Director
SEIBERT-OXIDERMO, INC.
By:
-----------------------------
Gerald J. Israel
Its: Treasurer
<PAGE> 55
EXHIBIT "F"
CERTIFICATE OF COVENANT COMPLIANCE
To: Comerica Bank
Re: Credit Agreement dated as of June 13, 1996 ("Credit Agreement"), by
and between Comerica Bank, and Companies.
Gentlemen:
This certificate is furnished pursuant to Section 10.2(a) of the Credit
Agreement and sets forth various information as of ______________ , 199_ (the
"Computation Date").
1. Leverage Ratio. On the Computation Date, the Consolidated Leverage
Ratio, which is required to be not more than ____ to 1, was _____ ________ as
computed in the supporting documents attached hereto as Schedule 1.
2. Tangible Net Worth. On the Computation Date, Consolidated Tangible
Net Worth, which is required to be at least $_________ was ______ ________ as
computed in the supporting documents attached hereto as Schedule 1.
3. Current Ratio. On the Computation Date, the ratio of Consolidated
Current Assets to Consolidated Current Liabilities, which is required to be at
least _____ to 1 was _____________ as computed in the supporting documents
attached hereto as Schedule 1.
4. Cash Flow Coverage Ratio. On the Computation Date, Consolidated
Cash Flow Coverage Ratio, which was required to be at least ____ to 1.0 was
_____________ as computed in the supporting documents attached as Schedule 1.
The undersigned officer of Detrex, on behalf of Companies, hereby
certifies that:
A. All of the information set forth in this Compliance Certificate
(and in any Schedule attached hereto) is true and correct in all material
respects; and
B. As of the Computation Date, the Companies have observed and
performed all of their covenants and other agreements, and satisfied every
condition, contained in the Credit Agreement and in the Revolving Credit Note
and any other Loan Documents to be observed, performed and satisfied by them.
C. I have personally reviewed the Credit Agreement and this Compliance
Certificate is based on an examination sufficient to assure that this
Compliance Certificate is accurate.
<PAGE> 56
D. Except as stated as Schedule 2 hereto (which shall describe any
existing Event of Default or event which with the passage of time and/or the
giving of notice, would constitute an Event of Default and the notice and
period of existence thereof and any action taken with respect thereto or
contemplated to be taken by Companies), no default or Event of Default has
occurred and is continuing on the date of this Compliance Certificate.
Capitalized terms used herein and in the schedules hereto, unless
specifically defined to the contrary, have the meanings given to them in the
Credit Agreement.
IN WITNESS WHEREOF, Detrex, on behalf of the Companies, has caused this
Certificate to be executed and delivered by its duly authorized officer this
______ day of __________________, 199_.
DETREX CORPORATION, on behalf
of the Companies
By:
---------------------------
Its:
---------------------------
<PAGE> 57
Schedule 1 to Exhibit H
[TO BE PREPARED BY DETREX]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,587
<SECURITIES> 0
<RECEIVABLES> 15,364
<ALLOWANCES> 478
<INVENTORY> 9,042
<CURRENT-ASSETS> 28,107
<PP&E> 46,764
<DEPRECIATION> 27,377
<TOTAL-ASSETS> 53,495
<CURRENT-LIABILITIES> 21,393
<BONDS> 607
0
0
<COMMON> 3,167
<OTHER-SE> 13,851
<TOTAL-LIABILITY-AND-EQUITY> 53,495
<SALES> 48,312
<TOTAL-REVENUES> 48,312
<CGS> 37,101
<TOTAL-COSTS> 37,101
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</TABLE>
