<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------------- ----------------------
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, Suite 500, Southfield, Michigan 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 12(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 / /
----- -----
Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE> 2
FORM 10-K
The aggregate market value (based upon the NASDAQ Closing Price) of Common
Capital Stock on March 19, 1996 of Detrex Corporation held by nonaffiliates was
approximately $13,459,019.
The number of shares of Common Capital Stock, $2 Par Value outstanding on
March 19, 1996 was 1,583,414.
Documents incorporated by reference:
Part and Item Number
of Form 10-K into
Document which Incorporated
-------- ---------------------
1. Detrex Corporation Part II Items 5 through 8
Annual Report to Part IV, Item 14
Stockholders for the year
ended December 31, 1995
2. Detrex Corporation Part III, Items 10, 11, 12
Notice of Annual and 13
Meeting of Stockholders
and Proxy Statement for
the Annual Meeting of
Stockholders to be held
April 25, 1996
2
<PAGE> 3
FORM 10-K
PART I
ITEM 1. BUSINESS
Detrex Corporation was incorporated in Michigan in 1925. Detrex Corporation
and its subsidiaries (the Company) operate predominantly in a single industry,
chemicals and allied products, services, and supply processes for use by
manufacturing and service industries.
The principal products of Detrex Corporation include specialty chemicals,
industrial cleaners, process equipment, coatings, lubricant additives,
chlorinated solvents, hydrochloric acid, pharmaceutical intermediates, PVC
plastic pipe, industrial finishing materials and paints, industrial furnaces,
degreasing equipment, and environmental and analytical laboratory services.
The products are primarily sold by sales-service engineers and most sales are
direct to industrial users. Net sales by product line for each of the last
five years are set forth below:
<TABLE>
<CAPTION>
Product Line
-------------------------
Chemical
Products Chemical
and Services Equipment Total
------------ ----------- ------------
<S> <C> <C> <C>
1995 $76,992,417 $16,603,228 $ 93,595,645
1994 79,975,998 20,120,445 100,096,443
1993 85,895,760 19,682,709 105,578,469
1992 79,326,021 17,428,137 96,754,158
1991 70,092,135 11,305,378 81,397,513
</TABLE>
Of the $77 million included in 1995 Chemical Products and Services sales,
approximately $17 million (22%) represent sales by the Company's solvents
division, $13 million (17%) represent sales by its paint subsidiary, $20
million (26%) represent sales by its lubricants subsidiary and $26 million
(34%) represent sales by its plastic pipe subsidiary and $1 million (1%) of
other related chemical products and services.
All of the Company's business units operate in highly competitive markets which
are mainly national in scope, although some business is done internationally by
its lubricants subsidiary and its plastic pipe subsidiary. Generally, for all
products there are numerous competitors with no one company or a small number
of companies being dominant. The Company operates in niche markets and its
principal methods of competition in various markets include service, price and
quality, depending on the market serviced. No material part of the business is
dependent upon a single customer or a few customers.
3
<PAGE> 4
FORM 10-K
PART I (CONTINUED)
ITEM 1. BUSINESS (Continued)
The backlog of orders at any one time is generally not significant to the
Company's business. At December 31, 1995, the Company's backlog of Chemical
Equipment orders was $9,276,000 and the Company expects to complete all of
these orders in 1996. At December 31, 1994, the Company's backlog of Chemical
Equipment orders was $10,174,000.
Raw materials essential to the Company's various products are generally
commodity materials and are readily available from competitive sources. The
Company's solvents division is going through a major transition in the
marketplace, primarily because of the rapid phasing out of ozone depleting
solvents. As a result, the division is increasingly marketing substitutes for
such solvents, including aqueous based cleaners, and is becoming increasingly
involved in the supply of environmental services.
The Company owns various patents and trademarks which aid in maintaining the
Company's competitive position; these expire at various times within the next
seventeen years. The expiration of such patents and trademarks should not have
a material adverse effect on the Company's operations. No material portion of
the Company's business is seasonal or subject to renegotiation of profits or
termination of contracts or subcontracts at the election of the government.
The approximate dollar amounts spent during 1995, 1994, and 1993 on research
sponsored by the Company were $1,272,000, $1,784,000, and $2,532,000,
respectively. The number of professional employees engaged in such activities
were 17 for 1995, 28 for 1994, and 40 for 1993.
There are no customers to which sales were made in an amount which equals ten
percent or more of consolidated revenues.
The Company does not expect to incur significant capital expenditures for
environmental compliance in 1996. However, the Company does expect to continue
to incur significant professional fees and expenses in connection with its
environmental compliance efforts. The Company maintains an environmental
reserve which at December 31, 1995 totaled $10.2 million, of which $1.5 million
is estimated to be spent in 1996. A more detailed discussion of environmental
matters is included under Item 3 - Legal Proceedings and in Management's
Discussion and Analysis in the Annual Report.
The Company employed 347 persons as of December 31, 1995.
The Company is not engaged in manufacturing operations in foreign countries,
nor is a material portion of sales or revenues derived from customers in
foreign countries, although the Company intends to increase its international
business at certain of its business units.
4
<PAGE> 5
FORM 10-K
PART I (CONTINUED)
ITEM 1. BUSINESS (Concluded)
The Company utilized a combination of internally generated funds and net
additional bank borrowings of $2.0 million to finance its activities during
1995. As of December 31, 1995, working capital was $6.3 million compared to
the $7.0 million at December 31, 1994. For a discussion of the Company's
credit agreements, see Footnote 5 to the Consolidated Financial Statements and
Management's Discussion and Analysis in the Annual Report.
ITEM 2. PROPERTIES
The Company's administrative offices are located in approximately 7,500 square
feet of leased space at 24901 Northwestern Hwy., Suite 500, Southfield,
Michigan.
Detrex and its subsidiaries conduct manufacturing and research operations in
eleven principal locations of which ten are owned as follows:
1) A 50,000 square foot plant in Redford Township, Michigan is located on seven
acres of land. There are above ground storage facilities for raw materials and
finished products. The plant also houses administrative personnel for one of
the Company's divisions. The plant has recently been listed for sale. In the
event of a sale, the personnel from the one division will be moved to leased
office space.
2) A plant located on 57 acres in Ashtabula, Ohio is used in connection with
the manufacture of hydrochloric acid, reagent grade chemicals, pharmaceutical
intermediates and N-methyl pyrrole.
3) The Company's lubricants subsidiary manufactures gear and oil additives in a
plant located in Cleveland, Ohio on 5 acres of land and 59,000 square feet of
office, research and plant space. This plant is equipped with mixing and
blending equipment and storage facilities. Additional manufacturing of
additives is done in a plant consisting of 12,800 square feet at Hooven
(Cincinnati), Ohio located on 3.6 acres of leased land. The present lease at
Hooven expires in June 1996 and the company is negotiating for an extension of
the lease and has alternative plans for relocation if necessary.
4) The Company's plastic pipe subsidiary manufactures plastic pipe in a plant
located on 20 acres of land and 228,500 square feet of office and plant space
located in Easton, Pennsylvania. Extruders and special dies are used to
manufacture the plastic PVC pipe from resin. Production and warehouse
facilities have been expanded several times since this subsidiary was acquired
in 1968, and leased warehouse space has been added in California.
5) Seibert-Oxidermo, Inc. manufactures industrial finishing materials and
automotive paints in a plant located in Detroit, Michigan containing 26,200
square feet of office and plant space on one acre of land. Additional
manufacturing of automotive paints is done in a plant located in Romulus,
Michigan containing 35,300 square feet of office, research and plant space on
40 acres of land.
5
<PAGE> 6
FORM 10-K
PART I (CONTINUED)
ITEM 2. PROPERTIES (Concluded)
6) The Company owns a building used as a research laboratory and office in
Bowling Green, Kentucky. The plant formerly used for manufacturing in Bowling
Green is currently leased to a third party.
7) The Company owns a warehouse and sales office facility located in Detroit,
Michigan. The building area is approximately 20,000 square feet and is located
on approximately one-half acre of land.
8) The Company owns a warehouse and sales office facility located in Los
Angeles, California. The Building area is approximately 10,000 square feet and
is located on one acre of land in the industrial section of the city.
9) The Company owns a warehouse and sales office facility located in Charlotte,
North Carolina. The Building area is approximately 11,000 square feet and is
located on one acre land.
10)The Company owns a warehouse and sales office facility located in
Indianapolis, Indiana. The building area is approximately 8,600 square feet
and is located on one acre land.
ITEM 3. LEGAL PROCEEDINGS
The Environmental Protection Agency ('EPA') has notified the Company and at
least seventeen other companies that they may be potentially responsible for
sharing costs in a proceeding to clean up contaminated sediments in the Fields
Brook watershed in Ashtabula, Ohio. The EPA has 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 environmental
contamination at several sites, including properties owned by the Company. The
Company conducted a comprehensive review of its reserves during the fourth
quarter of the 1994 and added $8.5 million to this reserve. The total amount
of the reserve at December 31, 1995 and 1994 is $10.2 million and $12.6
million, respectively, which amount was calculated without taking into
consideration any possible insurance recoveries.
6
<PAGE> 7
FORM 10-K
PART I (CONTINUED)
ITEM 3. LEGAL PROCEEDINGS (Concluded)
The reserve described above 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 those
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.
The Company is a defendant in an action brought by the Carrier Corporation in
Superior Court for Los Angeles County, California. An order granting the
Company Summary Judgement was reversed by an appellate court in late 1992.
Carrier has alleged that a product manufactured by the company has
malfunctioned causing environmental damage to its property. The Court ordered
that the trial be separated into two phases. The first phase proceeded to
trial in October of 1994 and was completed in December of 1994. On March 29,
1995 the Court rendered its decision and ruled on the issues as follows:
- - The court ruled that the contract at issue consisted of Carrier's Purchase
Order, which was accepted by the Company in April of 1979.
- - The Court ruled that the Company was negligent in connection with the
design and installation of the product which constituted a defect in
workmanship.
- - The Court ruled that the sump installed in connection with the operation
of the product was defectively designed, manufactured and installed, but
the Court concluded that Carrier had failed to prove by a preponderance of
evidence that the Company designed or installed the sump or otherwise
failed to exercise any requisite care in connection with the design or
installation of the sump.
- - The Court ruled that the Company had failed to prove by a preponderance of
the evidence that either Carrier or some third party designed or installed
the sump.
The second phase of the trial is expected to begin during 1996.The Company
believes it has valid defenses to the claims and is vigorously defending the
action. The Company's products liability insurance carrier is paying the costs
of defense under a reservation of rights. The Company believes that any
judgement against it would be covered by its products liability insurance.
In addition to the above, there are several other claims and lawsuits pending
against the Company and its subsidiaries.
7
<PAGE> 8
FORM 10-K
PART 1 (CONTINUED)
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 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.
8
<PAGE> 9
FORM 10-K
PART I (CONTINUED)
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the registrant at March 25,
1996 and their positions and offices with the registrant are as follows:
Name and Age Positions and Offices
------------ ----------------------------------
W. C. King (51) Chairman and Chief Executive Officer (a)
T. E. Mark (43) President and Chief Operating Officer (b)
G. J. Israel (55) Vice President - Finance, Treasurer and Chief
Financial Officer (c)
J. F. Schatt (50) Vice President - Administration (d)
R. M. Currie (42) Secretary and General Counsel (e)
E. R. Rondeau (61) Controller (f)
(a) Mr. King joined the Company as President and Chief Executive Officer in
April 1995. He was elected Chairman of the Board in January 1996. Prior to
joining the Company, Mr. King was President and Chief Operating Officer of
Masland Industries from 1992 to 1994 and prior to that, Vice President and
Group Executive of Allied Signal.
(b) Mr. Mark joined the Company as President and Chief Operating Officer in
January 1996. Prior to that he was President and General Manager of ABB Paint
Finishing from 1990 to 1996.
(c) Mr. Israel was elected Vice President - Finance and Chief Financial
Officer on February 25, 1993. Mr. Israel came to the Company from Chrysler
Corporation where he served for 26 years in numerous financial positions. His
most recent position was Vice President and Controller-Treasurer of Chrysler
Canada Ltd.
(d) Mr. Schatt was elected Vice President- Administration on
December 11, 1995. He had been Vice President- Human Resources. Mr. Schatt
came to the Company in April 1993 from McLouth Steel where he served as Vice
President - Administration.
(e) Mr. Currie joined the Company as General Counsel on July 16, 1993. He was
named Secretary and General Counsel on November 1, 1994. Prior to joining the
Company, Mr. Currie was engaged in private law practice.
(f) Mr. Rondeau served as Assistant Controller of the Company for more than
the past five years before being elected Controller on March 25, 1993.
All officers of the Company are elected annually and hold office until their
successors are chosen and qualify in their stead.
9
<PAGE> 10
FORM 10-K
PART II
CROSS REFERENCE SHEET
Page (and caption) in 1995
Detrex Corporation
10-K Item Annual Report to Stockholders*
--------- ------------------------------
5. Market for Registrant's Common
Stock and Related Stockholder Matters:
(a) Market and market prices
of the common stock 16- Selected Quarterly Data
(b) Approximate number of
holders of common stock - Highlights
(c) Dividend history 16- Selected Quarterly Data
6. Selected Financial Data 15- Selected Financial Data
7. Management's Discussion and 12-14 -Management's Discussion and
Analysis of Financial Condition Analysis of Financial
and Results of Operations Condition and Results of
Operations
8. Financial Statements and Supplementary
Data:
- Detrex Corporation Consolidated
Balance Sheets, December 31,
1995 and 1994 4,5
- Consolidated Statements of
Operations and Retained Earnings
for the Years Ended December 31,
1995, 1994, and 1993 3
- Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1995, 1994, and 1993 6
- Notes to Consolidated Financial
Statements 7-11
- Independent Auditors' Report 2
With the exception of the aforementioned
information and the information
incorporated by reference in Items 5, 6
and 7, the Annual Report to Stockholders
is not to be deemed filed as part of
this Form 10-K Annual Report.
9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure Not Applicable
* Detrex Corporation's Annual Report to Stockholders for the year ended
December 31, 1995 is incorporated herein as Exhibit 13 under Item 14(a) 3 of
Part IV.
10
<PAGE> 11
FORM 10-K
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from the
information set forth under the caption "Respecting the Election of Directors"
in the Detrex Corporation Proxy Statement (the "Proxy Statement") for the
Annual Meeting of Stockholders to be held April 25, 1996. The information
required for Executive Officers of the Company is included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the
information set forth under the captions "Executive Compensation and Other
Transactions" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated by reference from the
information set forth under the captions "Principal Stockholders" and
"Respecting the Election of Directors" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the
information set forth under the captions "Respecting the Election of Directors"
and "Executive Compensation and Other Transactions" in the Proxy Statement.
11
<PAGE> 12
FORM 10-K
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. All Financial Statements
Detrex Corporation and Subsidiaries (incorporated by reference to the
Company's Annual Report to Stockholders for the year ended
December 31, 1995-see Part II)
(a) 2. Financial Statement Schedules Page
----
Independent Auditors' Report 16
Schedule II - Valuation and Qualifying Accounts for
the Years Ended December 31, 1995, 1994, and 1993. 17
Financial Statements and Financial Statement Schedules Omitted:
Other financial statement schedules are omitted because of the absence of the
conditions under which they are required.
12
<PAGE> 13
FORM 10-K
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Continued)
(a) 3. Exhibits
3(a) Articles of Incorporation, as amended, is hereby
incorporated by reference to Commission file #0-784,
Annual Report on Form 10-K for the year ended
December 31, 1987, as Exhibit 3(a) --
3(b) Bylaws, as amended, are hereby incorporated by reference
to Commission file #0-784, Annual Report on Form 10-K
for the year ended December 31, 1993, as Exhibit 3(b) --
4 Shareholders Rights Plan is hereby incorporated by
reference to Commission file #0-784 8-K Report dated
May 4, 1990, as Exhibit 4 --
Executive Compensation Plans and Arrangements
10(a) 1993 Stock Option Plan is hereby incorporated by reference
to Commission file # 0-784 1993 proxy statement dated
March 26, 1993, as Exhibit 10(a) --
10(b) 1993 Stock Option Plan for outside directors is hereby
incorporated by reference to 1993 proxy statement dated
March 2, 1993, as Exhibit 10(b)
10(c) 1994 Stock-Cash Incentive Plan is hereby incorporated by --
reference to Commission file #0-784 Annual Report on Form
10-K for the year ended December 31, 1993, as exhibit 10(c)
10(d) Employment Agreement - Gerald J. Israel, is hereby
incorporated by reference to Commission file # 0-784
Annual Report on Form 10-K for the year ended
December 31, 1992 as Exhibit 10(h) --
10(e) Employment Agreement - Joseph L. Wenzler, is hereby
incorporated by reference to Commission file #0-784 Annual
Report on Form 10-k for the year ended December 31, 1992,
as Exhibit 10(k) --
13
<PAGE> 14
FORM 10-K
PART IV (CONCLUDED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Concluded))
(a) 3. Exhibits (Concluded)
10(f) Employment Agreement - Joseph F. Schatt, is hereby
incorporated by reference to Commission file # 0-784
Annual Report on Form 10-K for the year ended December 31,
1993, as Exhibit 10(i) --
10(g) Employment Agreement - Robert M. Currie, is hereby
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1994, as Exhibit 10(g) --
10(h) Employment Agreement - Anthony E. Porter, is hereby
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1994, as Exhibit 10(h) --
10(i) Temporary Employment Agreement - William C. King Attached as
an Exhibit
10(j) Employment Agreement - William C. King Attached as
an Exhibit
10(k) Employment Agreement - Thomas E. Mark Attached as
an Exhibit
Other Material Contracts
10(l) Revolving Credit Agreement and Amended Term Loan Agreement
dated March 11, 1994 in the aggregate amount of $12 Million --
is hereby incorporated by reference to Commission
file #0-784 Annual Report on Form 10-K for the year
ended December 31, 1993
10(m) First Amendment to Credit Agreement and Waiver, dated as of
December 31, 1994, is hereby incorporated by reference to
Commission file #0-784 Annual Report on Form 10-K for the
year ended December 31, 1994 as Exhibit 10(j) --
10(n) Forbearance Letter from Comerica Bank as agent for Attached as
Comerica Bank and NBD Bank dated as of March 22, 1996 an Exhibit
10(o) Commitment Letter from Comerica Bank Attached as
dated March 22, 1996 an Exhibit
14
<PAGE> 15
FORM 10-K
PART IV (CONCLUDED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K (Concluded)
13 Annual Report to Stockholders for the year Attached as
ended December 31, 1995 an Exhibit
21 Subsidiaries of the Registrant Attached as
an Exhibit
Consents of Experts and Counsel
23 Consent of Auditors Attached as
an Exhibit
27 Financial Data Schedule Attached as
an Exhibit
(b) No Form 8-K was filed in the fourth quarter of 1995.
15
<PAGE> 16
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Detrex Corporation
We have audited the consolidated financial statements of Detrex Corporation and
its subsidiaries as of December 31, 1995 and 1994 and for each of the three
years in the period ended December 31, 1995, and have issued our report thereon
dated February 21, 1996 (March 22, 1996 as to Note 5); such consolidated
financial statements and report are included in this Annual Report on Form 10-K
of Detrex Corporation for the year ended December 31, 1995. Our audits also
included the financial statement schedule of Detrex Corporation and its
subsidiaries, listed in Item 14(a)(2). This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
Deloitte & Touche LLP
February 21, 1996
16
<PAGE> 17
DETREX CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULES
<PAGE> 18
FORM 10-K
SCHEDULE II
DETREX CORPORATION AND SUBSIDIARIES
VALUATION RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additions
--------------------
Balance Charged to Charged Balance
Beginning Costs and to Other at End
Description of Year Expenses Accounts Deductions of Year
- ---------------------------- --------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
- ----------------------------
Inventory Valuation Reserves $235,617 221,458 158,441 285,265 $330,251
Finished Machines Valuation
Reserves $899,332 30,000 530,382 $398,950
Allowance for Uncollectible
Accounts $329,634 546,991 417,932 $458,693
Year Ended December 31, 1994
- ----------------------------
Inventory Valuation Reserves $876,783 74,548 715,714 $235,617
Finished Machines Valuation
Reserves $934,169 34,837 $899,332
Allowance for Uncollectible
Accounts $240,171 229,738 140,275 $329,634
Year Ended December 31, 1993
- ----------------------------
Inventory Valuation Reserves $180,684 859,843 163,744 $876,783
Finished Machines Valuation
Reserves $ 0 934,169 $934,169
Allowance for Uncollectible
Accounts $253,416 404,427 417,672 $240,171
</TABLE>
17
<PAGE> 19
FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Detrex Corporation
-------------------------
(Registrant)
Date March 25, 1996 By W. C. King
-------------------- -----------------------
W. C. King
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on this twenty-fifth day of March 1996 by the
following persons on behalf of the Registrant and in the capacities indicated.
Signature Title
--------- -----
W. C. King Chairman and Chief Executive
- -------------------------------- Officer
W. C. King
T. E. Mark President and Chief Operating
- -------------------------------- Officer
T. E. Mark
G. J. Israel Vice President, Treasurer and
- -------------------------------- Chief Financial Officer
G. J. Israel
E. R. Rondeau Controller and Chief Accounting
- -------------------------------- Officer
E. R. Rondeau
B. W. Cox Director
- --------------------------------
B. W. Cox
R. A. Emmett, III Director
- --------------------------------
R. A. Emmett, III
J. F. Mangold Director
- --------------------------------
J. F. Mangold
B. W. McCleary Director
- --------------------------------
B. W. McCleary
A. R. Thalacker Director
- --------------------------------
A. R. Thalacker
J. D. Withrow Director
- --------------------------------
J. D. Withrow
18
<PAGE> 20
DETREX CORPORATION AND SUBSIDIARIES
EXHIBITS
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
<S> <C> <C>
3(a) Articles of Incorporation, as amended, is hereby
incorporated by reference to Commission file #0-784,
Annual Report on Form 10-K for the year ended
December 31, 1987, as Exhibit 3(a) --
3(b) Bylaws, as amended, are hereby incorporated by reference
to Commission file #0-784, Annual Report on Form 10-K
for the year ended December 31, 1993, as Exhibit 3(b) --
4 Shareholders Rights Plan is hereby incorporated by
reference to Commission file #0-784 8-K Report dated
May 4, 1990, as Exhibit 4 --
Executive Compensation Plans and Arrangements
10(a) 1993 Stock Option Plan is hereby incorporated by reference
to Commission file #0-784 1993 proxy statement dated
March 26, 1993, as Exhibit 10(a) --
10(b) 1993 Stock Option Plan for outside directors is hereby
incorporated by reference to 1993 proxy statement dated
March 2, 1993, as Exhibit 10(b)
10(c) 1994 Stock-Cash Incentive Plan is hereby incorporated by --
reference to Commission file #0-784 Annual Report on Form
10-K for the year ended December 31, 1993, as Exhibit 10(c)
10(d) Employment Agreement - Gerald J. Israel, is hereby
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended
December 31, 1992 as Exhibit 10(h) --
10(e) Employment Agreement - Joseph L. Wenzler, is hereby
incorporated by reference to Commission file #0-784 Annual
Report on Form 10-K for the year ended December 31, 1992,
as Exhibit 10(k) --
</TABLE>
13
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
<S> <C> <C>
10(f) Employment Agreement - Joseph F. Schatt, is hereby
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1993, as Exhibit 10(i) --
10(g) Employment Agreement - Robert M. Currie, is hereby
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1994, as Exhibit 10(g) --
10(h) Employment Agreement - Anthony E. Porter, is hereby
incorporated by reference to Commission file #0-784
Annual Report on Form 10-K for the year ended December 31,
1994, as Exhibit 10(h) --
10(i) Temporary Employment Agreement - William C. King Attached as
an Exhibit
10(j) Employment Agreement - William C. King Attached as
an Exhibit
10(k) Employment Agreement - Thomas E. Mark Attached as
an Exhibit
Other Material Contracts
10(l) Revolving Credit Agreement and Amended Term Loan Agreement
dated March 11, 1994 in the aggregate amount of $12 Million --
is hereby incorporated by reference to Commission
file #0-784 Annual Report on Form 10-K for the year
ended December 31, 1993
10(m) First Amendment to Credit Agreement and Waiver, dated as of
December 31, 1994, is hereby incorporated by reference to
Commission file #0-784 Annual Report on Form 10-K for the
year ended December 31, 1994 as Exhibit 10(j) --
10(n) Forbearance Letter from Comerica Bank as agent for Attached as
Comerica Bank and NBD Bank dated as of March 22, 1996 an Exhibit
10(o) Commitment Letter from Comerica Bank Attached as
dated March 22, 1996 an Exhibit
</TABLE>
14
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
<S> <C> <C>
13 Annual Report to Stockholders for the year Attached as
ended December 31, 1995 an Exhibit
21 Subsidiaries of the Registrant Attached as
an Exhibit
Consents of Experts and Counsel
23 Consent of Auditors Attached as
an Exhibit
27 Financial Data Schedule Attached as
an Exhibit
</TABLE>
(b) No Form 8-K was filed in the fourth quarter of 1995.
15
<PAGE> 1
EXHIBIT 10(i)
TEMPORARY EMPLOYMENT AGREEMENT
This Agreement made as of this 11th day of April, 1995 by and between
DETREX CORPORATION, a Michigan corporation with its principal place of business
at Southfield, Michigan (the "Employer"), its successors and assigns, and
WILLIAM C. KING of 26281 Siena Drive, Bonita Springs, Florida 33923 (the
"Employee").
WHEREAS, Employer wishes to insure to itself the availability of
Employee's services for a period of time as set forth herein; and
WHEREAS, Employee is willing to be employed by Employer in accordance
with the terms and conditions set forth herein.
NOW, THEREFORE, Employer hereby employs and Employee hereby accepts
employment as President of Employer upon the following terms and conditions:
1. Term. The term of employment under this Agreement (the
"Employment Term") shall commence on the date first set forth above ("Employment
Date") and shall continue until terminated by either party in accordance with
paragraph 6 hereof.
2. Compensation. For services rendered hereunder, Employer shall
pay Employee during the Employment Term a salary equal to One Thousand Three
Hundred Fifty Dollars ($1,350.00) for each business day or part thereof in which
Employee performs services hereunder. Employee shall submit time records
showing days worked on a weekly basis. Employee shall be paid on the fifth day
of each month for days worked during the immediately preceding month. Employer
shall withhold income taxes, unemployment taxes and such other taxes as may be
required by applicable federal and/or state laws. For services performed on
weekends, holidays recognized by Employer and business days that Employee takes
as personal days, Employee shall be paid on a pro-rata basis for time spent
performing services on the basis of $1,350.00 per 8-hour day.
3. Benefits. It is understood and acknowledged by both parties that
Employee's employment hereunder is intended to be on a temporary and interim
basis, and that Employer is actively engaged in a search for an individual to
assume the position of President. In recognition of the temporary nature of the
employment hereunder, Employee shall not be eligible for employee benefits
otherwise available to a full-time regular employee of Employer, including but
not limited to paid holidays, paid vacation, health, life or other insurance
plans, retirement plans or bonuses, and Employee hereby waives and releases
Employer from any claims that Employee might otherwise have against Employer
with respect to such benefits.
4. Expenses. Employer shall reimburse Employee for all reasonable
out-of-pocket expenses incurred by Employee in connection with his employment
hereunder. Such expenses shall include, but shall not be limited to, round-trip
travel between Employee's home in Florida and Employer's offices in Michigan at
such times and as often
<PAGE> 2
2
as Employee reasonably may determine, and all lodging and subsistence costs
while Employee is on business trips (it being understood that Employee shall
not be paid lodging and subsistence costs while he is Michigan in view of the
fact that he maintains a residence in Michigan), as well as telex, fax and
telephone calls and other normal and incidental allowable expenses in
accordance with Employer's standard policy. Such expenses shall be paid upon
the periodic submission of invoices and shall be paid within thirty (30) days
after the date of such invoice. If Employer has a policy of making cash
advances of anticipated expenses to employees, Employee shall be entitled to
such advances in accordance with the policies and procedures of Employer as may
be in effect from time to time.
5. Services. Employee shall render to the Employer and Employer
shall be entitled to his full time services in the position of President. As
President, Employee shall administer and supervise the day-to-day operations of
the Employer under the direction and supervision of, and in accordance with the
policies and procedures established from time to time by, the Board of Directors
of Employer. While so acting, Employee shall make full and periodic reports to
the Chairman of the Board of Employer or his designee. He shall perform all
administrative and supervisory duties normally incident to the office of
President. Notwithstanding the generality of the foregoing, Employee shall
assist in identifying and evaluating suitable candidates for the post of
President of the Employer. In performing services hereunder, Employee shall
have such authority to bind, and act on behalf of, Employer as the individual
holding the office of President of Employer is granted or permitted by the
By-laws of Employer, or as otherwise may be specified by resolution of the Board
of Directors of Employer.
6. Termination. Either party may terminate this Agreement, and
Employee's employment hereunder, with or without cause, by giving the other
party hereto not less than five (5) working days' written notice. Upon such
termination, neither party shall have any further liability or duty to the other
except for any obligation to pay money which arises during the Employment Term
and remains unpaid upon termination.
7. Indemnification. Employer agrees to defend, indemnify and hold
harmless the Employee from and against any and all claims of action, lawsuits,
losses and liability brought or asserted by third parties against either
Employer or the Employee arising out of any damage or injury occasioned by or
arising in connection with this Agreement or the performance of services by the
Employee hereunder, and from and against all liability for costs, fees, and
legal expenses in connection therewith, except this indemnification shall not
apply to any such claim, cause of action, lawsuit, loss or liability arising
solely from the Employee's gross negligence or willful misconduct.
8. Notices. All notices under this Agreement shall be in writing
and shall be deemed given if delivered personally, if mailed by certified or
registered mail (return receipt requested), or if sent by telex or fax to the
other party, in the case of the Employee, at the address set forth above and, in
the case of Employer, at 24901 Northwestern Highway, Suite 500, Southfield,
Michigan 48075. Notice shall be deemed given: on the day of receipt
<PAGE> 3
3
if hand delivered; five (5) days after mailing, if mailed; and one (1) day
after sending it by telex or fax.
9. Confidentiality. Employee agrees to keep confidential all
information concerning Employer's business, to use it only for the performance
of this Agreement, and not to disclose it to any third person without Employer's
prior written consent. This obligation shall survive for a period of five (5)
years following termination of this Agreement. The foregoing obligations of
confidentiality, non-use and non-disclosure shall not apply to information that
(i) was in the possession of or known to the Employee prior to Employer's
disclosure, (ii) is available to the public at the time of disclosure hereunder,
(iii) becomes available to the public except through a breach of Employee's
obligations hereunder or (iv) is disclosed to Employee by a third party who
Employee reasonably believes is not under a duty of confidentiality with respect
to such information.
10. Miscellaneous Provisions. This Agreement contains the entire and
only agreement between Employee and the Employer respecting the subject matter
hereof. No modification shall be binding upon Employee or the Employer unless
made in writing and signed by an authorized officer of the Employer and by the
Employee.
Employee's obligations of confidentiality, and Employer's obligation
of indemnification, under this Agreement shall survive the termination of this
Agreement regardless of the manner of or reasons for such termination, and
regardless of whether such termination constitutes a breach of this Agreement or
of any other agreement Employee may have with the Employer. If any provisions
of this Agreement are unenforceable for any reason, the validity of any other
provision hereof shall not be affected thereby.
This Agreement shall be governed and construed according to the laws
of the State of Michigan, and shall be deemed to be effective as of the day and
date first set forth above. This Agreement is executed under seal.
<PAGE> 4
4
BY SIGNING THIS AGREEMENT, EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS READ ALL OF
ITS PROVISIONS, THAT EMPLOYEE AGREES TO ALL SUCH TERMS AND THAT THE TERMS AND
CONDITIONS OF THIS AGREEMENT WILL NOT VIOLATE OR BREACH THE TERMS AND
PROVISIONS OF ANY OTHER AGREEMENT OR UNDERSTANDING TO WHICH THE EMPLOYEE IS A
PARTY.
Employee: William C. King (L.S.)
----------------------
DETREX CORPORATION
By: Arbie R. Thalacker
----------------------------
Chairman of the Board
<PAGE> 1
EXHIBIT 10 (j)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of this first day of October, 1995 (the "Effective
Date"), by and between DETREX CORPORATION, a Michigan corporation (the
"Company"),and WILLIAM C. KING, an individual residing at 26281 Siena Drive,
Bonita Springs, Florida, 33923 ("Executive").
WITNESSETH:
WHEREAS, the Company and Executive are parties to a Temporary
Employment Agreement, dated April 11, 1995 (the "Temporary Agreement"); and
WHEREAS, the Company and Executive now desire to supersede the
Temporary Agreement with this Agreement and to have the terms and conditions of
Executive's employment with the Company governed by the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Employment and Duties.
(a) General. The Company hereby employs Executive, effective as of
the Effective Date, and Executive agrees upon the terms and conditions herein
set forth to serve, effective as of the Effective Date, as President and Chief
Executive Officer of the Company. In such capacities, Executive shall report
directly to the Board of Directors of the Company (the "Board"). Executive
shall perform all of the duties accorded to the positions of President and Chief
Executive Officer as provided in the bylaws of the Company. The parties
acknowledge that the Company is in the process of searching for a Chief
Operating Officer of the Company. The parties further acknowledge that, in the
event that a Chief Operating Officer is hired, Executive will continue as Chief
Executive Officer and may become Chairman of the Board or such other position as
is indicative of Executive's status as the Chief Executive Officer of the
Company. Regardless of whether a Chief Operating Officer is hired, Executive
will remain during the Term the Chief Executive Officer of the Company and
retain the corresponding responsibilities of general oversight and control as
provided in the Company's bylaws.
(b) Services. For so long as Executive is employed by the Company,
Executive shall, except as may from time to time be otherwise agreed to in
writing by the Company, devote his best efforts and attention to his duties
hereunder; shall faithfully serve the Company; shall in all respects conform to
and comply with the lawful and good faith directions and instructions given to
him by the Board; and shall use his best efforts to promote and serve the
interests of the Company.
<PAGE> 2
2
(c) No Other Employment. For so long as Executive is employed by
the Company, Executive shall not, directly or indirectly, render services to any
other person or organization for which he receives compensation without the
prior approval of the Board, except that, without the prior approval of the
Board, he may serve on the boards of directors of and perform consulting
services for other corporations during the Term, provided that such services do
not conflict with the execution of his duties as Chief Executive Officer or the
provisions of Section 5 below. In addition, no such approval will be required
if Executive seeks to perform inconsequential services without direct
compensation therefor in connection with the management of personal investments
or in connection with the performance of charitable and civic activities,
provided that such activities do not contravene the provisions of Section 5
hereof.
(d) Temporary Agreement Superseded. As of the Effective Date, the
Temporary Agreement is hereby superseded and replaced by this Agreement.
2. Term of Employment. The term of Executive's employment under
this Agreement (the "Term") shall commence on the Effective Date and continue
until September 30, 2000.
3. Compensation and Other Benefits. Subject to the provisions of
this Agreement, the Company shall pay and provide the following compensation and
other benefits to Executive during the Term as compensation for all services
rendered hereunder:
(a) Salary. The Company shall pay to Executive a salary (the
"Salary") at the initial rate of $100,000 per annum, payable to Executive in
accordance with the normal payroll practices of the Company for its executive
officers as are in effect from time to time, which Salary shall be in
consideration for Executive's services for a period of five full business days
every month while executing his duties hereunder, it being understood that
Executive will spend a reasonable amount of time on Company premises or in
personal contact with the Company's customers, suppliers or employees. The
amount of Executive's Salary will be reviewed not less often than annually by
the Board and may be increased, but not decreased below such amount, on the
basis of such review.
(b) Per Diem and Hourly Compensation. In the case that Executive
spends more than five full business days during any month performing his duties
hereunder, the Company shall pay to Executive a per diem amount of $1,350 for
each additional full business day that Executive performs such duties. In
addition, the Company shall pay to Executive $200 per hour, up to a maximum of
$1,350 per day, for partial days worked in addition to the required five full
days per month or additional days for which a full per diem is paid. Executive
shall submit such time records showing days worked as shall be reasonably
necessary to document the hours and days actually worked. Executive shall be
paid such per diem and hourly compensation following submission of such
documentation in a manner consistent with the Company's normal payroll cycle.
The Company shall withhold
<PAGE> 3
3
income taxes, unemployment taxes and such other taxes as may be required by
applicable federal and state laws.
(c) Annual Bonus. Subject to such terms as the Compensation
Committee of the Board (the "Compensation Committee") shall specify, Executive
shall be eligible to participate in an annual incentive bonus program applicable
to the Company's senior executives, as in effect from time to time, in
accordance with the terms and conditions thereof. If Executive's employment
should end for any reason during a given bonus period, any unpaid but earned
bonus for any prior bonus period shall be paid to Executive in accordance with
the terms of the applicable bonus plan.
(d) Stock Options. Commencing as of the Effective Date, Executive
shall be eligible for option grants under the Company's 1993 Stock Option Plan
(the "Option Plan") for the Company's executive officers, as in effect from time
to time, in accordance with the terms and conditions thereof. Any options
granted to Executive under the Option Plan shall be subject to the terms and
conditions specified by the Compensation Committee. Subject to Section 6(f)
below, in the event of a Change in Control of the Company (as defined in Section
6(f)below), Executive shall become fully vested in accordance with the terms of
the Option Plan in any stock options at the time previously granted to Executive
thereunder.
(e) Expenses. The Company shall pay or reimburse Executive for all
reasonable out-of-pocket expenses incurred by Executive in connection with his
employment hereunder. Such expenses shall include, but shall not be limited to,
round-trip travel between Executive's home in Florida and the Company's offices
in Michigan at such times and as often as Executive reasonably may determine,
and all lodging and subsistence costs while Executive is on business trips, as
well as telex, telecopier and telephone calls and other normal and incidental
allowable expenses in accordance with the Company's standard policy. Such
expenses shall be paid upon the periodic submission of invoices and shall be
paid within thirty days after the date of such invoice. The reimbursement of
expenses under this Section 3(e) shall be subject to Executive's providing the
Company with such documentation of the expenses as the Company may from time to
time reasonably request. No expense payment or reimbursement under this Section
3(e) shall be "grossed up" or increased to take into account any tax liability
incurred by Executive as a result of such payment or reimbursement.
(f) Pension, Welfare and Fringe Benefits. During the Term,
Executive shall be eligible to participate in the Company's Executive Disability
Plan and in the Company's pension, medical and life insurance plans applicable
to senior officers of the Company in accordance with the terms of such plans as
in effect from time to time; provided, however, that, for eligibility purposes
under the Company's medical and life insurance plans, Executive shall be
considered a full-time employee. If Executive's employment terminates at the
end of the Term or prior to the end of the Term as a result of his termination
without Cause, resignation for Good Reason, or Disability (as such terms are
hereinafter defined), such termination of employment shall be treated as
retirement for
<PAGE> 4
4
purposes of the Company's post-retirement medical program and Executive will be
eligible to enroll immediately in such post-retirement medical program subject
to the terms and provisions of such program as in effect from time to time;
provided, however, such eligibility will be subject to his immediate and
continuous enrollment in the program as of the later to occur of the (i) the
end of the Continuation Period (as hereinafter defined) and (ii) the date of
Executive's termination of employment. The parties understand that Executive
shall be entitled only to such benefits as may be provided under a Company
postretirement medical program as in effect from time to time and that the
Company may change, modify, amend or terminate such program at any time;
provided, however, that no such change, modification, amendment or termination
shall be designed to affect solely the rights of Executive thereunder.
(g) Supplemental Pension. (i) Subject to the provisions of this
Section 3(g), Executive shall earn during the Term a supplemental monthly
pension for life (the "Pension") payable in the form of a straight life annuity
commencing with the month following the month in which Executive attains age 65.
The amount of the Pension shall be determined in accordance with the benefit
formula and actuarial factors and assumptions set forth in the Detrex
Corporation Employees Retirement Plan (the "Retirement Plan"), as in effect on
the Effective Date, except that, for purposes of calculating the amount of the
Pension, the following shall apply: (A) Executive shall be entitled to receive
the Pension even if, at the time of his termination of employment, he is not
entitled to receive a pension under the Retirement Plan; (B) for purposes of
determining eligibility for benefits and calculating the amount of the Pension,
Executive shall be credited with years of vesting and accrual service equal to
the sum of (I) the number of whole months elapsed from April 1, 1995 to the date
of Executive's termination of employment hereunder divided by six plus (II)
five; (C) subject to Section 3(g)(ii) below, Executive shall be fully vested in
the Pension as of the Effective Date; (D) the amount of the Pension shall be
paid in the form of a 50% qualified joint and survivor annuity, unless Executive
shall elect in writing prior to his termination of employment to have the
Pension paid in another form of payment that may be elected under the Retirement
Plan; provided, however, that the Company shall have the right at any time
following Executive's termination of employment to pay the entire amount of the
remaining Pension to Executive (or his surviving spouse, if applicable) in a
lump sum (regardless of the amount of such lump sum) calculated in accordance
with the actuarial factors specified in the Retirement Plan applicable to
involuntary cashouts; (E) the amount of the Pension shall be reduced by the
amount of the retirement benefits payable to Executive (or his spouse) under the
Retirement Plan; (F) the monthly payments of the Pension shall not commence
until the latest to occur of (I) the date Executive attains the earliest
retirement age under the Retirement Plan, (II) the date Executive is no longer
entitled to receive payments of the Severance Amount and (III) the date of
Executive's termination of employment. If Executive should die prior to the
commencement of the Pension, his surviving spouse, if any, shall be entitled to
a death benefit for life equal the amount that would otherwise have been payable
to her if Executive had died immediately after Pension payments to him had
commenced on the latest date specified in clause (F) above (the "Reference
Date") of the previous sentence in the form of a 50% joint and survivor annuity
prior to the date of his
<PAGE> 5
5
death; provided, however, that the death benefit payable to Executive's
surviving spouse shall not commence until the Reference Date and (G) in
calculating the amount of the Pension, all applicable limits under the Internal
Revenue Code of 1986, as amended (the "Code"), shall apply (including, without
limitation, those under Section 401(a)(17) and Section 415). If the payment of
the Pension should commence prior to the time that Executive attains age 65,
the amount of the Pension shall be reduced in accordance with the reduction
factors set forth in the Retirement Plan. The Pension to Executive shall
terminate in the month in which Executive dies, and the death benefit, if any,
payable to his surviving spouse shall terminate with the month of her death.
No beneficiary may be elected to receive the death benefit other than
Executive's spouse.
(ii) Executive shall forfeit all right to the Pension if his
employment with the Company ends as a result of his resignation of employment
other than for Good Reason (as hereinafter defined) prior to the fifth
anniversary of the Effective Date.
4. Termination of Employment. Subject to the notice and other
provisions of this Section 4, the Company shall have the right to terminate
Executive's employment hereunder, and Executive shall have the right to resign,
at any time for any reason or for no stated reason.
(a) Termination for Cause; Resignation Without Good Reason. (i) If,
prior to the expiration of the Term, Executive's employment is terminated by the
Company for Cause or if Executive resigns from his employment hereunder other
than for Good Reason, Executive shall be entitled to payment of the pro rata
portion of Executive's Salary through and including the date of termination or
resignation as well as any unpaid per diem and hourly amounts and unreimbursed
expenses. Except to the extent required by the terms of Section 3(b), any
applicable grant to Executive in accordance with Section 3(d) above, Section
3(f), Section 3(g) or applicable law, Executive shall have no right under this
Agreement or otherwise to receive any other compensation or to participate in
any other plan, program or arrangement after such termination or resignation of
employment with respect to the year of such termination or resignation and later
years.
(ii) Termination for "Cause" shall mean termination of Executive's
employment with the Company because of (A) his refusal (other than by reason of
the incapacity of Executive due to physical or mental illness) to perform his
duties hereunder, (B) the commission by Executive of a felony, or the
perpetration by Executive of a dishonest act or fraud against the Company or any
affiliate or subsidiary thereof, (C) any act or omission by Executive which is
the result of Executive's willful misconduct or gross negligence and which, in
the good faith opinion of the Board, is injurious in any material respect to the
financial condition, business or reputation of the Company or any of its
affiliates or subsidiaries or (D) a material breach by Executive of this
Agreement.
(iii) Termination of Executive's employment for Cause shall be
communicated by delivery to Executive of a written notice from the Company
stating that
<PAGE> 6
6
Executive has been terminated for Cause, specifying the particulars thereof and
the effective date of such termination. The date of a resignation by Executive
without Good Reason shall be the date specified in a written notice of
resignation from Executive to the Company. Executive shall provide at least
180 days' advance written notice of resignation without Good Reason.
(b) Involuntary Termination. (i) If prior to the expiration of the
Term, the Company terminates Executive's employment for any reason other than
Disability (as defined in Section 4(c) below) or Cause or Executive resigns from
his employment hereunder for Good Reason (such a resignation or termination
being hereinafter referred to as an "Involuntary Termination"), the Company
shall pay to Executive his Salary accrued up to and including the date of such
Involuntary Termination as well as any unpaid per diem and hourly amounts and
any unreimbursed expenses. In addition, in the event of Executive's Involuntary
Termination, the Company shall pay to Executive as severance (the "Severance
Amount") his Salary, at the annual rate in effect immediately prior to such
Involuntary Termination, for the two-year period beginning on the day
immediately following the date of such Involuntary Termination. The Severance
Amount shall be paid in payroll installments in accordance with the Company's
payroll practices in effect from time to time; provided, however, that the
Company, in its sole discretion, may at any time pay to Executive the then
remaining portion of the Severance Amount in a cash lump sum. Anything in this
Agreement to the contrary notwithstanding, no amounts shall be payable under
this Section 4(b) if Executive's employment with the Company ends at the
expiration of the Term in accordance with Section 2.
(ii) In the event of Executive's Involuntary Termination, Executive
shall continue to participate on the same terms and conditions as are in effect
immediately prior to such termination or resignation in the Company's health and
medical plans provided to Executive pursuant to Section 3(f) above at the time
of such Involuntary Termination until the earlier to occur of (A) the last day
in respect of which the Company is obligated to pay Executive a Severance Amount
in accordance with Section 4(b)(i) above and (B) the second anniversary of the
date of such Involuntary Termination (the "Continuation Period"). Anything
herein to the contrary notwithstanding, the Company shall have no obligation to
continue to maintain during the Continuation Period any plan or program solely
as a result of the provisions of this Agreement. If, during the Continuation
Period, Executive is precluded from participating in a plan or program by its
terms or applicable law or if the Company for any reason ceases to maintain such
plan or program, the Company shall provide Executive with compensation or
benefits the aggregate value of which, in the reasonable judgment of the
Company, is no less than the aggregate value of the compensation or benefits
that Executive would have received under such plan or program had he been
eligible to participate therein or had such plan or program continued to be
maintained by the Company. In addition, in the event of an Involuntary
Termination, Executive shall be credited with an additional 2 years of vesting
and accrual service for purposes of clause (B) of Section 3(g)(i) above.
<PAGE> 7
7
(iii) In the event of Executive's death prior to the payment of the
full Severance Amount, the balance of the Severance Amount shall continue to be
paid in periodic installments to Executive's Beneficiary; provided, however,
that the Company, in its sole discretion, may at any time pay such Beneficiary
the then remaining portion of the Severance Amount in a cash lump sum.
(iv) If, following an Involuntary Termination, Executive materially
breaches the provisions of Section 5 hereof, Executive shall not be eligible, as
of the date of such breach, for the payments and benefits described in this
Section 4(b), and any and all obligations and agreements of the Company with
respect to such payments and benefits shall thereupon cease.
(v) Resignation for "Good Reason" shall mean resignation by
Executive because of a material breach by the Company of its obligations to
Executive under this Agreement. Unless Executive provides written notification
of his intention to resign within 90 business days after Executive knows or has
reason to know of the occurrence of any such material breach, Executive shall be
deemed to have consented thereto and such material breach shall no longer
constitute Good Reason for purposes of this Agreement. If Executive provides
such written notice to the Company, the Company shall have 30 business days from
the date of receipt of such notice to effect a cure of the material breach
described therein (which cure shall be retroactive with respect to any monetary
matter) and, upon cure thereof by the Company to the reasonable satisfaction of
Executive, such material breach shall no longer constitute Good Reason for
purposes of this Agreement.
(vi) The date of termination of employment without Cause shall be
the date specified in a written notice of termination to Executive. The date of
resignation for Good Reason shall be the date specified in a written notice of
resignation from Executive to the Company; provided, however, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(v) above has expired without the Company having corrected, to the
reasonable satisfaction of Executive, the event or events subject to cure.
(c) Termination Due to Disability. In the event of Executive's
Disability (as hereinafter defined), the Company shall be entitled to terminate
his employment. In the case that the Company terminates Executive's employment
due to disability, Executive shall be entitled to payment of the pro rata
portion of Executive's Salary through and including the date of termination as
well as any unpaid per diem and hourly amounts earned and unreimbursed expenses.
Notwithstanding anything contained in this Agreement to the contrary, if
Executive's employment should terminate due to Disability, the Company shall
continue to pay Executive his annual salary until the earliest to occur of (i)
the end of the six-month period following the date of such termination, (ii) the
date of Executive's death, (iii) the date Executive's Pension payments commence
and (iv) the first day on which Executive is entitled to benefits under the
Company's Executive Disability Plan. As used in this Section 4(c), the term
"Disability" shall mean a physical or mental incapacity that substantially
prevents him from performing his duties hereunder and that has continued for at
<PAGE> 8
8
least 60 days and that can reasonably be expected to continue indefinitely.
Any dispute as to whether or not Executive is disabled within the meaning of
the preceding sentence shall be resolved by a physician reasonably satisfactory
to Executive and the Company, and the determination of such physician shall be
final and binding upon both Executive and the Company.
(d) Death. Except as provided in Sections 3(g), 4(b)(iii) and this
Section 4(d), no Salary or benefits shall be payable under this Agreement
following the date of Executive's death. In the event of Executive's death, any
Salary earned by Executive up to the date of death, as well as any unpaid per
diem and hourly amounts earned and any unreimbursed expenses, plus any amount
earned and unpaid under Section 3(c) shall be paid to Executive's Beneficiary
within 30 days of such termination. Executive's Beneficiary shall also be
entitled to any death benefits which are provided under the terms of any plan,
program or arrangement referred to in Section 3(f) applicable to Executive at
the time of death.
(e) Beneficiary. For purposes of this Agreement, except as provided
in Section 3(g)(i), "Beneficiary" shall mean the person or persons designated in
writing by Executive to receive benefits under a plan, program or arrangement or
to receive the balance of the Severance Amount, if any, in the event of
Executive's death, or, if no such person or persons are designated by Executive,
Executive's estate. No Beneficiary designation shall be effective unless it is
in writing and received by the Company prior to the date of Executive's death.
5. Protection of the Company's Interests.
(a) No Competing Employment. For so long as Executive is employed
by the Company and continuing for two years after the termination of such
employment or resignation therefrom (such period being referred to hereinafter
as the "Restricted Period"), Executive shall not, unless he receives after the
Effective Date the prior written consent of the Board, directly or indirectly,
own an interest in, manage, operate, join, control, lend money or render
financial or other assistance to or participate in or be connected with, as an
officer, employee, partner, stockholder, consultant or otherwise, any
individual, partnership, firm, corporation or other business organization or
entity that competes with the Company; provided, however, that this Section 5(a)
shall not proscribe Executive's ownership, either directly or indirectly, of
less than five percent of any class of securities which are listed on a national
securities exchange or quoted on the automated quotation system of the National
Association of Securities Dealers, Inc.
(b) No Interference. During the Restricted Period, Executive shall
not, whether for his own account or for the account of any other individual,
partnership, firm, corporation or other business organization (other than the
Company), intentionally solicit, endeavor to entice away from the Company, or
otherwise interfere with the relationship of the Company with, any person who is
employed by or otherwise engaged to perform services
<PAGE> 9
9
for the Company or any person or entity who is, or was within the then most
recent twelve-month period, a customer, client or supplier of the Company.
(c) Secrecy. Executive recognizes that the services to be performed
by him hereunder are special, unique and extraordinary in that, by reason of his
employment hereunder, he may acquire confidential information and trade secrets
concerning the operation of the Company or its affiliates or subsidiaries, the
use or disclosure of which could cause the Company or its affiliates or
subsidiaries substantial losses and damages which could not be readily
calculated and for which no remedy at law would be adequate. Accordingly,
Executive covenants and agrees with the Company that he will not at any time,
except in performance of Executive's obligations to the Company hereunder or
with the prior written consent of the Board, directly or indirectly disclose to
any person any secret or confidential information that he may learn or has
learned by reason of his association with the Company, or any of its
subsidiaries and affiliates. The term "confidential information" means any
information not previously disclosed to the public or to the trade by the
Company's management with respect to the Company's, or any of its affiliates' or
subsidiaries', products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, customer lists, financial information (including the
revenues, costs or profits associated with any of the Company's products),
business plans, prospects or opportunities.
(d) Exclusive Property. Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Executive relating to the
business of the Company, its affiliates and subsidiaries shall be and remain the
property of the Company. Upon the termination of his employment with the
Company or upon the request of the Company at any time, Executive shall
promptly deliver to the Company, and shall not without the consent of the Board
retain copies of, any written materials not previously made available to the
public, or records and documents made by Executive or coming into his possession
concerning the business or affairs of the Company or any of its affiliates or
subsidiaries; provided, however, that subsequent to any such termination, the
Company shall provide Executive with copies (the cost of which shall be borne by
Executive) of any documents which are requested by Executive and which Executive
has determined in good faith are (i) required to establish a defense to a claim
that Executive has not complied with his duties hereunder or (ii) necessary to
Executive in order to comply with applicable law.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Company, Executive acknowledges that a breach of any of the
covenants contained in this Section 5 may result in material irreparable injury
to the Company or its affiliates or subsidiaries for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the Company
shall be entitled to obtain a temporary restraining order and/or a preliminary
or permanent injunction restraining Executive from engaging in activities
prohibited by this Section 5 or such other relief as may be required to
specifically enforce
<PAGE> 10
10
any of the covenants in this Section 5. Without intending to limit the remedies
available to Executive, Executive shall be entitled to seek specific
performance of the Company's obligations under this Agreement.
6. General Provisions.
(a) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a plan which provides otherwise, shall be
paid in cash from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure
payment. Executive shall have no right, title or interest whatever in or to any
investments which the Company may make to aid the Company in meeting its
obligations hereunder. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no greater than
the right of an unsecured creditor of the Company; provided, however, that this
provision shall not be deemed to waive or abrogate any preferential or other
rights to payment accruing to Executive under applicable bankruptcy laws by
virtue of Executive's status as an employee of the Company.
(b) No Other Severance Benefits. Except as specifically set forth
in this Agreement, Executive covenants and agrees that he shall not be entitled
to any other form of severance benefits from the Company, including, without
limitation, benefits otherwise payable under any of the Company's regular
severance policies, in the event his employment hereunder ends for any reason
and, except with respect to obligations of the Company expressly provided for
herein, Executive unconditionally releases the Company and its subsidiaries and
affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its subsidiaries or affiliates for
compensation or benefits in connection with his employment or the termination
thereof.
(c) Tax Withholding. Payments to Executive of all compensation
contemplated under this Agreement shall be subject to all applicable tax
withholding.
(d) Notices. Any notice hereunder by either party to the other shall
be given in writing by personal delivery, or certified mail, return receipt
requested, or (if to the Company) by telex or facsimile, in any case delivered
to the applicable address set forth below:
(i) To the Company: Detrex Corporation
24901 Northwestern Highway
Suite 500
Southfield, Michigan 48075
Attention: Secretary
<PAGE> 11
11
With a copy to:
Arbie R. Thalacker, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
(ii) To Executive: William C. King
26281 Siena Drive
Bonita Springs, Florida 33923
or to such other persons or other addresses as either party may specify to the
other in writing.
(e) Representation by Executive. Executive represents and warrants
that his entering into this Agreement does not, and that his performance under
this Agreement and consummation of the transactions contemplated hereby will
not, violate the provisions of any agreement or instrument to which Executive is
a party, or any decree, judgment or order to which Executive is subject, and
that this Agreement constitutes a valid and binding obligation of Executive in
accordance with its terms. Breach of this representation will render all of the
Company's obligations under this Agreement void ab initio.
(f) Change in Control Defined. For purposes of Section 3(d) above, a
"Change in Control of the Company" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule l3d-3 under the Exchange Act) of 50 percent or more of
either (A) the then outstanding shares of Common Stock (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute a
Change of Control: (1) any acquisition directly from the Company (excluding
an acquisition by virtue of the exercise of a conversion privilege), (2)
any acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (4) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation which
would not be a Change of Control under Section 6(f)(iii) below; or
(ii) Individuals who, as of the effective date of the Option Plan,
constitute the Board (the "Incumbent Board") ceasing for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director
<PAGE> 12
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subsequent to the Effective Date whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board will be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board; or
(iii) The approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless following
such reorganization, merger or consolidation, (A) more than 50
percent of the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidated and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, and (B) at least a majority of the members of the board
of directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such reorganization,
merger or consolidation, or
(iv) The approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or
other disposition, (1) more than 50 percent of the then outstanding shares
of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, and (2) at least a majority of the members
of the board of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or action of
the Board providing for such sale or other disposition of assets of the
Company.
<PAGE> 13
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(g) Limited Waiver. The waiver by the Company or Executive of a
violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
(h) Assignment; Assumption of Agreement. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by Executive in respect of any claim, debt, obligation
or similar process. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place.
(i) Amendment; Actions by the Company. This Agreement may not be
amended, modified or cancelled except by written agreement of Executive and the
Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if undertaken
by the Company pursuant to authority granted by a resolution duly adopted by the
Board; provided, however, that by resolution duly adopted in accordance with
this Section 6(i), the Board may delegate its responsibilities hereunder to one
or more of its members other than Executive.
(j) Severability. If any term or provision hereof is determined to
be invalid or unenforceable in a final court or arbitration proceeding, (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the invalid
or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(k) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan (determined
without regard to the choice of law provisions thereof).
(l) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof, including the Temporary
Agreement.
(m) Headings. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not control
the meaning or interpretation of any provisions of this Agreement.
<PAGE> 14
14
(n) Counterparts. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both such
counterparts shall together constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first written above.
DETREX CORPORATION
By: Arbie R. Thalacker
----------------------------
Title: Chairman of the Board
William C. King
----------------------------
William C. King
<PAGE> 1
EXHIBIT 10(k)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of this 22nd day of January, 1996 (the
"Effective Date"), by and between DETREX CORPORATION, a Michigan corporation
(the "Company"), and THOMAS MARK, an individual residing at 22146 Metamora,
Beverly Hills, Michigan, 48025 ("Executive").
W I T N E S S E T H:
WHEREAS, the Company seeks to employ Executive and Executive
seeks to become employed by the Company;
WHEREAS, both parties desire that the terms and conditions of
Executive's employment with the Company be governed by the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Employment and Duties.
(a) General. The Company hereby employs Executive,
effective as of the Effective Date, and Executive agrees upon the terms and
conditions herein set forth to serve, effective as of the Effective Date, as
President and Chief Operating Officer of the Company. In such capacities,
Executive shall report directly to the Chief Executive Officer of the Company
(the "CEO") and to the Board of Directors of the Company (the "Board").
Executive shall perform all of the duties accorded to the positions of
President and Chief Operating Officer as provided in the bylaws of the Company.
(b) Services. For so long as Executive is employed by the
Company, Executive shall devote his full business time to the performance of
his duties hereunder; shall faithfully serve the Company; shall in all respects
conform to and comply with the lawful and good faith directions and
instructions given to him by the CEO and the Board; and shall use his best
efforts to promote and serve the interests of the Company.
(c) No Other Employment. For so long as Executive is
employed by the Company, Executive shall not, directly or indirectly, render
services to any other person or organization for which he receives compensation
without the prior approval of the Board. No such approval will be required if
Executive seeks to perform inconsequential services without direct compensation
therefor in connection with the management of personal investments or in
connection with the performance of charitable and civic activities, provided
that such activities do not contravene the provisions of Section 5 hereof.
<PAGE> 2
2
2. Term of Employment. The term of Executive's employment
under this Agreement (the "Term") shall commence on the Effective Date and
continue until the day before the third anniversary date of the Effective Date.
On the first anniversary of the Effective Date (and on each subsequent
anniversary date thereafter), the Term shall automatically renew for an
additional year unless prior to the applicable anniversary date either party
shall have given the other party hereto written notice of the intention not to
so extend the Term; provided, however, that the Term shall not extend beyond
the last day of the month in which Executive attains age 65.
3. Compensation and Other Benefits. Subject to the
provisions of this Agreement, the Company shall pay and provide the following
compensation and other benefits to Executive during the Term as compensation
for all services rendered hereunder:
(a) Salary. The Company shall pay to Executive a salary
(the "Salary") at the initial rate of $238,000 per annum, payable to Executive
in accordance with the normal payroll practices of the Company for its
executive officers as are in effect from time to time. The amount of
Executive's Salary will be reviewed not less often than annually by the Board
and may be increased, but not decreased below such amount, on the basis of such
review.
(b) Signing Bonus. The Company shall pay Executive a
signing bonus of $40,000, less applicable withholding taxes, on or before June
30, 1996.
(c) Annual Bonus. During the Term, Executive shall be
eligible for each calendar year that begins within the Term to participate in
an annual incentive bonus program established by the Company in accordance with
terms and conditions as may be approved annually by the Compensation Committee
of the Board (the "Compensation Committee"). Under the terms of the annual
incentive bonus program, Executive will be afforded the opportunity to earn
from forty to sixty percent of his annual rate of Salary in effect for the
applicable calendar year if the Company achieves the performance targets
established by the Compensation Committee for that year. A minimum bonus amount
determined by the Compensation Committee for each year will be payable if 90%
of the targets established for that year have been achieved for that year 90%
of the target for a given year is achieved, (it being understood that if 90% of
the target for a given year is achieved, Executive will receive 40% of his
annual rate of Salary as an annual bonus for that year).
(d) Stock Options. Effective as of the Effective Date, the
Company shall grant Executive an option (the "Option") to purchase 75,000
shares of the common stock of the Company pursuant to the terms of the
Company's 1993 Stock Option Plan (the "Option Plan"). The per share exercise
price of the Option shall equal the fair market value of a share of Common
Stock on the Effective Date, as determined in accordance with the terms of the
Option Plan. The Option shall vest and become exercisable with respect to
twenty-five percent of the shares of common stock subject thereto on the
Effective Date and on each of
<PAGE> 3
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the first through third anniversaries of the Effective Date, provided that
Executive has remained in the continuous full-time employment of the Company
through the applicable anniversary date. The Option shall become fully vested
and exercisable in the event of a Change in Control of the Company (as defined
in the Option Plan). The Option will be subject to the terms of the Option Plan
and to such other terms and conditions as may be specified by the Compensation
Committee in the form of an option agreement between the Company and Executive,
which is attached hereto as Exhibit A.
(e) Company Automobile. During the Term, the Company will provide
Executive with the use of a leased automobile and will reimburse Executive for
the business-related costs and expenses incurred by Executive in connection
with the use of that vehicle in accordance with the Company's policies and
practices in effect from time to time.
(f) Financial Planning Assistance. During the Term, the Company will
make available to Executive financial planning services; provided, however,
that the cost of providing such services to the Company shall not exceed $5,000
per annum.
(g) Expenses. The Company shall pay or reimburse Executive for all
reasonable out-of-pocket expenses incurred by Executive in connection with his
employment hereunder. Such expenses shall be paid upon the periodic submission
of invoices and shall be paid reasonably promptly after the date of such
invoice. The reimbursement of expenses under this Section 3(g) shall be subject
to Executive's providing the Company with such documentation of the expenses as
the Company may from time to time reasonably request. No expense payment or
reimbursement under this Section 3(g) shall be "grossed up" or increased to
take into account any tax liability incurred by Executive as a result of such
payment or reimbursement.
(h) Pension and Medical Benefits. During the Term, Executive shall be
eligible to participate in the Company's pension, medical, disability and life
insurance plans applicable to senior officers of the Company in accordance with
the terms of such plans as in effect from time to time.
(i) Supplemental Pension. Subject to the vesting and forfeiture
provisions set forth herein. Executive shall be entitled to receive a
supplemental monthly pension for life (the "Pension"). The amount of the
Pension shall be determined as follows:
(I) Termination Prior to the Fifth Anniversary of the Effective Date.
If Executive's employment with the Company ends prior to the fifth
anniversary of the Effective Date, the amount of the Pension payable in the
form of a straight life annuity commencing with the month following the
month in which Executive attains age 65 and shall be determined in
accordance with the benefit formula and actuarial factors and assumptions
set forth in the Detrex Corporation Employees Retirement
<PAGE> 4
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Plan (the "Retirement Plan"), as in effect on the Effective Date, except
that, for purposes of calculating the amount of the Pension, the following
shall apply: (A) Executive shall be entitled to receive the Pension even
if, at the time of his termination of employment, he is not entitled to
receive a pension under the Retirement Plan; (B) for purposes of
determining eligibility for benefits and calculating the amount of the
Pension, Executive shall be credited with years of vesting and accrual
service equal to the sum of (x) the number of whole months elapsed from the
Effective Date to the date of Executive's termination of employment
hereunder divided by twelve plus (y) five; (C) the Pension shall be reduced
by (x) the amount of the pension payable to Executive at age 65 in the form
of a straight life annuity under the Retirement Plan or any successor plan
thereto and (y) the amount payable to Executive from any other qualified or
nonqualified retirement plan (other than a tax qualified defined
contribution plan subject to Section 401(k) of the Code) that the Company
may adopt (the "Reduction Amounts").
(II) Termination On or After the Fifth Anniversary of the Effective
Date. If the Executive's employment with the Company ends on or after the
fifth anniversary of the Effective Date, the provisions of Section 3(i)(I)
above shall not apply and no benefits will be payable thereunder. In
lieu of Section 3(i)(I) above, the amount of the Pension payable in the
form of a straight life annuity commencing with the month following the
month in which Executive attains age 65 and shall be fifty percent of
Executive's Final Average Salary (as hereinafter defined) reduced by the
Reduction Amounts. For purposes hereof. "Final Average Salary" means the
highest aggregate amount of Salary paid to Executive for any thirty-six
consecutive-month period during the Term divided by three.
(III) General Provisions Applicable to the Pension. The Pension shall
be paid in the form of a 50% qualified joint and survivor annuity, unless
Executive shall elect in writing prior to his termination of employment to
have the Pension paid in another form of payment that he may elect under
the Retirement Plan: provided, however, that the Company shall have the
right at any time following Executive's termination of employment to pay
the entire amount of the remaining Pension to Executive (or his surviving
spouse, if applicable) in a lump sum (regardless of the amount of such lump
sum) calculated in accordance with the actuarial factors specified in the
Retirement Plan applicable to involuntary cashouts; and provided further,
that the Pension shall be converted from a single life annuity to a
qualified joint and survivor annuity (or other form elected by Executive)
in accordance with the actuarial factors and assumptions in the Retirement
Plan. The monthly payments of the pension shall not commence until the
latest to occur of (A) the date Executive attains the earliest retirement
age under the Retirement Plan, (B) the date Executive is no longer entitled
to receive Severance Payments (as hereinafter defined), (C) the date of
Executive's termination of employment and (D) the date benefits commence
under
<PAGE> 5
5
the Retirement Plan (if Executive is eligible for benefits thereunder). If
Executive should die prior to the commencement of the Pension, his
surviving spouse, if any, shall be entitled to a death benefit for life
equal the amount that would otherwise have been payable to her if Executive
had died immediately after Pension payments to him had commenced on the
latest date specified in the previous sentence (the "Reference Date") in
the form of a 50% joint and survivor annuity prior to the date of his
death; provided however, that the death benefit payable to Executive's
surviving spouse shall not commence until the Reference Date. If the
payment of the Pension should commence prior to the time that Executive
attains age 65, the amount of the Pension shall be reduced in accordance
with the reduction factors set forth in the Retirement Plan. The Pension
payments to Executive shall terminate in the month in which Executive dies,
and the death benefit, if any, payable to his surviving spouse shall
terminate at the month of her death. No beneficiary may be elected to
receive the death benefit other than Executive's spouse.
(IV) Forfeiture. Executive shall forfeit all rights to the Pension
if (A) his employment is terminated at any time for Cause (as hereinafter
defined) or (B) he resigns his employment from the Company for any reason
other than Good Reason (as hereinafter defined) prior to the third
anniversary of the Effective Date.
4. Termination of Employment. Subject to the notice and other
provisions of this Section 4, the Company shall have the right to terminate
Executive's employment hereunder, and Executive shall have the right to resign,
at any time for any reason or for no stated reason.
(a) Termination for Cause; Resignation Without Good Reason. (i) If,
prior to the expiration of the Term, Executive's employment is terminated by
the Company for Cause or if Executive resigns from his employment hereunder
other than for Good Reason, Executive shall be entitled to payment of the pro
rata portion of Executive's Salary through and including the date of
termination or resignation as well as any unreimbursed expenses. Except to the
extent required by the terms of any applicable grant to Executive in accordance
with Section 3(d) above, by the terms of Section 3(h), Section 3(i) or
applicable law, Executive shall have no right under this Agreement or otherwise
to receive any other compensation or to participate in any other plan, program
or arrangement after such termination or resignation of employment with respect
to the year of such termination or resignation and later years.
(ii) Termination for "Cause" shall mean termination of Executive's
employment with the Company because of (A) his refusal (other than by reason of
the incapacity of Executive due to physical or mental illness) to perform his
duties hereunder, (B) the commission by Executive of a felony, or the
perpetration by Executive of a dishonest act or fraud against the Company or
any affiliate or subsidiary thereof, (C) any act or
<PAGE> 6
6
omission by Executive which is the result of Executive's willful misconduct or
gross negligence and which, in the good faith opinion of the Board, is
injurious in any material respect to the financial condition, business or
reputation of the Company or any of its affiliates or subsidiaries or (D) a
material breach by Executive of this Agreement; provided, however, that upon
written notification by the Company pursuant to Section 4(a)(iii) below of any
proposed termination for Cause under parts (A) and (D) of this Section
4(a)(ii), Executive shall have 15 days to cure the circumstances that
constitute Cause and, upon such cure thereof by Executive to the reasonable
satisfaction of the Company, such circumstances will no longer constitute Cause
for purposes of this Agreement.
(iii) Termination of Executive's employment for Cause shall be
communicated by delivery to Executive of a written notice from the Company
stating that Executive has been terminated for Cause, specifying the
particulars thereof and the effective date of such termination. The date of a
resignation by Executive without Good Reason shall be the date specified in a
written notice of resignation from Executive to the Company. Executive shall
provide at least 90 days' advance written notice of resignation without Good
Reason.
(b) Involuntary Termination. (i) If, prior to the expiration of
the Term, the Company terminates Executive's employment for any reason other
than Disability or Cause or Executive resigns from his employment hereunder for
Good Reason (such a resignation or termination being hereinafter referred to as
an "Involuntary Termination"), the Company shall pay to Executive his Salary
accrued up to and including the date of such Involuntary Termination as well as
any unreimbursed expenses. In addition, in the event of Executive's Involuntary
Termination, the Company shall pay to Executive as severance (the "Severance
Payments") his Salary prorated on a monthly basis, at the rate in effect
immediately prior to such Involuntary Termination, for the six-month period
beginning immediately following the date of such Involuntary Termination (the
"Initial Severance Period"). If, after the expiration of the Initial Severance
Period, Executive is not employed or otherwise engaged to perform professional
services for a third-party ("Other Employment"), the Company shall continue to
pay Severance Payments to Executive on a month-by-month basis for up to an
additional eighteen months, but in no event beyond the last day of the month in
which Executive obtains Other Employment. The Severance Payments shall be paid
in payroll installments in accordance with the Company's payroll practices in
effect from time to time; provided, however, that the Company, in its sole
discretion, may at any time during the Initial Severance Period pay to
Executive the then remaining portion of Severance Payments due during the
Initial Severance Period in a cash lump sum. Anything in this Agreement to the
contrary notwithstanding, no amounts shall be payable under this Section 4(b)
if Executive's employment with the Company ends at the expiration of the Term
in accordance with Section 2.
<PAGE> 7
7
(ii) In the event of Executive's Involuntary Termination, Executive shall
continue to participate on the same terms and conditions as are in effect
immediately prior to such termination or resignation in the Company's health
and medical plans provided to Executive pursuant to Section 3(h) above at the
time of such Involuntary Termination until the last day in respect of which the
Company is obligated to make Severance Payments in accordance with Section
4(b)(i) above (the "Continuation Period"). Anything herein to the contrary
notwithstanding, the Company shall have no obligation to continue to maintain
during the Continuation Period any plan or program solely as a result of the
provisions of this Agreement.
(iii) In the event of Executive's death prior to the end of the Initial
Severance Period, the balance of the Severance Payments for such Initial
Severance Period, shall continue to be paid in periodic installments to
Executive's Beneficiary (as hereinafter defined) for the balance of the Initial
Severance Period; provided, however, that the Company, in its sole discretion,
may at any time pay such Beneficiary the then remaining Severance Payments in a
cash lump sum.
(iv) If, following an Involuntary Termination, Executive materially
breaches the provisions of Section 5 hereof, Executive shall not be eligible,
as of the date of such breach, for the payments and benefits described in this
Section 4(b), and any and all obligations and agreements of the Company with
respect to such payments and benefits shall thereupon cease.
(v) Resignation for "Good Reason" shall mean resignation by Executive
because of a material breach by the Company of its obligations to Executive
under this Agreement. Unless Executive provides written notification of his
intention to resign within 90 business days after Executive knows or has reason
to know of the occurrence of any such material breach, Executive shall be
deemed to have consented thereto and such material breach shall no longer
constitute Good Reason for purposes of this Agreement. If Executive provides
such written notice to the Company, the Company shall have 30 business days
from the date of receipt of such notice to effect a cure of the material breach
described therein (which cure shall be retroactive with respect to any monetary
matter) and, upon cure thereof by the Company to the reasonable satisfaction of
Executive, such material breach shall no longer constitute Good Reason for
purposes of this Agreement.
(vi) The date of termination of employment without Cause shall be the date
specified in a written notice of termination to Executive. The date of
resignation for Good Reason shall be the date specified in a written notice of
resignation from Executive to the Company; provided, however, that no such
written notice shall be effective unless the cure period specified in Section
4(b)(v) above has expired without the Company having corrected, to the
reasonable satisfaction of Executive, the event or events subject to cure.
<PAGE> 8
8
(c) Termination Due to Disability. In the event of Executive's
Disability (as hereinafter defined), the Company shall be entitled to terminate
his employment. In the case that the Company terminates Executive's employment
due to Disability, Executive shall be entitled to payment of the pro rata
portion of Executive's Salary through and including the date of termination as
well as any unpaid expense reimbursements. Notwithstanding anything contained
in this Agreement to the contrary, if Executive's employment should terminate
due to Disability, the Company shall continue to pay Executive his annual
salary until the earliest to occur of (i) the end of the six-month period
following the date of such termination, (ii) the date of Executive's death,
(iii) the date Executive's Pension payments commence and (iv) the first day on
which Executive is entitled to benefits under the Company's long-term
disability plan. For purposes of this Agreement, the term "Disability" shall
mean a physical or mental incapacity that substantially prevents him from
performing his duties hereunder and that has continued for at least 60 days and
that can reasonably be expected to continue indefinitely. Any dispute as to
whether or not Executive is disabled within the meaning of the preceding
sentence shall be resolved by a physician reasonably satisfactory to Executive
and the Company, and the determination of such physician shall be final and
binding upon both Executive and the Company.
(d) Death. Except as provided in Sections 3(i), 4(b)(iii) and this
Section 4(d), no Salary or benefits shall be payable under this Agreement
following the date of Executive's death. In the event of Executive's death, any
Salary earned by Executive up to the date of death, as well as any unreimbursed
expenses, plus any amount earned and unpaid under Section 3(c) shall be paid to
Executive's Beneficiary within 30 days of such termination. Executive's
Beneficiary shall also be entitled to any death benefits which are provided
under the terms of any plan, program or arrangement referred to in Section 3(h)
applicable to Executive at the time of death.
(e) Beneficiary. For purposes of this Agreement, except as provided in
section 3(i), "Beneficiary" shall mean the person or persons designated in
writing by Executive to receive benefits under a plan, program or arrangement
or to receive the balance of the Severance Payments, if any, in the event of
Executive's death, or, if no such person or persons are designated by
Executive, Executive's estate. No Beneficiary designation shall be effective
unless it is in writing and received by the Company prior to the date of
Executive's death.
5. Protection of the Company's Interests.
(a) No Competing Employment. For so long as Executive is employed by the
Company and continuing for one year after the termination of such employment
or resignation therefrom (such period being referred to hereinafter as the
"Restricted Period"), Executive shall not, unless he receives after the
Effective Date the prior written consent of the Board, directly or indirectly,
own an interest in, manage, operate, join, control, lend
<PAGE> 9
9
money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any individual, partnership, firm, corporation or other business
organization or entity that competes with the Company; provided, however, that
this Section 5(a) shall not proscribe Executive's ownership, either directly or
indirectly, of less than five percent of any class of securities which are
listed on a national securities exchange or quoted on the automated quotation
system of the National Association of Securities Dealers, Inc.
(b) No Interference. During the Restricted Period, Executive shall not,
whether for his own account or for the account of any other individual,
partnership, firm, corporation or other business organization (other than the
Company), intentionally solicit, endeavor to entice away from the Company, or
otherwise interfere with the relationship of the Company with, any person who
is employed by or otherwise engaged to perform services for the Company or any
person or entity who is, or was within the then most recent twelve-month
period, a customer, client or supplier of the Company.
(c) Secrecy. Executive recognizes that the services to be performed by
him hereunder are special, unique and extraordinary in that, by reason of his
employment hereunder, he may acquire confidential information and trade secrets
concerning the operation of the Company or its affiliates or subsidiaries, the
use or disclosure of which could cause the Company or its affiliates or
subsidiaries substantial losses and damages which could not be readily
calculated and for which no remedy at law would be adequate. Accordingly,
Executive covenants and agrees with the Company that he will not at any time,
except in performance of Executive's obligations to the Company hereunder or
with the prior written consent of the Board, directly or indirectly disclose to
any person any secret or confidential information that he may learn or has
learned by reason of his association with the Company, or any of its
subsidiaries and affiliates. The term "confidential information" means any
information not previously disclosed to the public or to the trade by the
Company's management with respect to the Company's, or any of its affiliates' or
subsidiaries', products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, customer lists, financial information (including the
revenues, costs or profits associated with any of the Company's products),
business plans, prospects or opportunities.
(d) Exclusive Property. Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Executive relating to
the business of the Company, its affiliates and subsidiaries shall be and
remain the property of the Company. Upon the termination of his employment with
the Company or upon the request of the Company at any time, Executive shall
promptly deliver to the Company, and shall not without the consent of the Board
retain copies of, any written materials not previously made available to the
public, or records and documents made by Executive or coming into his
<PAGE> 10
10
possession concerning the business or affairs of the Company or any of its
affiliates or subsidiaries; provided, however, that subsequent to any such
termination, the Company shall provide Executive with copies (the cost of which
shall be borne by Executive) of any documents which are requested by Executive
and which Executive has determined in good faith are (i) required to establish
a defense to a claim that Executive has not complied with his duties hereunder
or (ii) necessary to Executive in order to comply with applicable law.
(e) Injunctive Relief. Without intending to limit the remedies
available to the Company, Executive acknowledges that a breach of any of the
covenants contained in this Section 5 may result in material irreparable injury
to the Company or its affiliates or subsidiaries for which there is no adequate
remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of such a breach or threat thereof,
the Company shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining Executive from engaging in
activities prohibited by this Section 5 or such other relief as may be required
to specifically enforce any of the covenants in this Section 5. Without
intending to limit the remedies available to Executive, Executive shall be
entitled to seek specific performance of the Company's obligations under this
Agreement.
6. General Provisions.
(a) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a plan which provides otherwise, shall be
paid in cash from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure
payment. Executive shall have no right, title or interest whatever in or to any
investments which the Company may make to aid the Company in meeting its
obligations hereunder. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no greater
than the right of an unsecured creditor of the Company; provided, however, that
this provision shall not be deemed to waive or abrogate any preferential or
other rights to payment accruing to Executive under applicable bankruptcy laws
by virtue of Executive's status as an employee of the Company.
(b) No Other Severance Benefits. Except as specifically set forth in
this Agreement, Executive covenants and agrees that he shall not be entitled to
any other form of severance benefits from the Company, including, without
limitation, benefits otherwise payable under any of the Company's regular
severance policies, in the event his employment hereunder ends for any reason
and, except with respect to obligations of the Company expressly provided for
herein, Executive unconditionally releases the Company and its subsidiaries and
affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under this Agreement or under any severance or termination
arrangements of the Company or any of its
<PAGE> 11
11
subsidiaries or affiliates for compensation or benefits in connection with his
employment or the termination thereof.
(c) Tax Withholding. Payments to Executive of all compensation
contemplated under this Agreement shall be subject to all applicable tax
withholding.
(d) Notices. Any notice hereunder by either party to the other shall
be given in writing by personal delivery, or certified mail, return receipt
requested, or (if to the Company) by telex or facsimile, in any case delivered
to the applicable address set forth below:
(i) To the Company: Detrex Corporation
24901 Northwestern Highway
Suite 500
Southfield, Michigan 48075
Attention: Secretary
With a copy to:
William C. King
26281 Siena Drive
Bonita Springs, Florida 33923
(ii) To Executive: Thomas Mark
22146 Metamora
Beverly Hills, Michigan 48025
or to such other persons or other addresses as either party may specify to the
other in writing.
(e) Representation by Executive. Executive represents and warrants
that his entering into this Agreement does not, and that his performance under
this Agreement and consummation of the transactions contemplated hereby will
not, violate the provisions of any agreement or instrument to which Executive
is a party, or any decree, judgment or order to which Executive is subject, and
that this Agreement constitutes a valid and binding obligation of Executive in
accordance with its terms. Breach of this representation will render all of the
Company's obligations under this Agreement void ab initio.
(f) Limited Waiver. The waiver by the Company or Executive of a
violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent
violation of any such provision.
<PAGE> 12
12
(g) Assignment; Assumption of Agreement. No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by Executive in respect of any claim, debt, obligation
or similar process. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume expressly
and to agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
(h) Amendment; Actions by the Company. This Agreement may not be
amended, modified or cancelled except by written agreement of Executive and the
Company. Any and all determinations, judgments, reviews, verifications,
adjustments, approvals, consents, waivers or other actions of the Company
required or permitted under this Agreement shall be effective only if
undertaken by the Company pursuant to authority granted by a resolution duly
adopted by the Board; provided, however, that by resolution duly adopted in
accordance with this Section 6(h), the Board may delegate its responsibilities
hereunder to one or more of its members other than Executive.
(i) Severability. If any term or provision hereof is determined to be
invalid or unenforceable in a final court or arbitration proceeding, (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the invalid
or unenforceable term or provision shall be deemed replaced by a term or
provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision.
(j) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan (determined without regard
to the choice of law provisions thereof).
(k) Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby and supersedes all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(l) Headings. The headings and captions of the sections of this
Agreement are included solely for convenience of reference and shall not
control the meaning or interpretation of any provisions of this Agreement.
<PAGE> 13
13
(m) Counterparts. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both
such counterparts shall together constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first written above.
DETREX CORPORATION
By: William C. King
------------------------------
Name: William C. King
Title: Chairman
EXECUTIVE
Thomas Mark
------------------------------
Thomas Mark
<PAGE> 14
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated January 22, 1996, by and between DETREX
CORPORATION, a Michigan corporation (the "Company"), and Thomas Mark
("Participant").
W I T N E S S E T H:
WHEREAS, the Company has adopted the 1993 Stock Option Plan of Detrex
Corporation (the "Plan") for the purpose of providing an incentive to certain
officers, senior management and key employees of the Company to remain in the
employ of the Company; and
WHEREAS, the Employment Agreement, dated as of January 22, 1996,
between the Participant and the Company (the "Employment Agreement")
contemplates that the Company will award Participant a non-qualified stock
option to purchase up to an aggregate of 75,000 shares of the common stock, par
value $2.00 per share, of the Company (the "Common Stock"); and
WHEREAS, Participant is eligible for awards of stock options under the
Plan; and
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors of the Company has determined to award Participant, under the terms
and provisions of the Plan, the stock option contemplated under the Employment
Agreement, and Participant desires to accept such award in accordance with the
terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the covenants herein contained and
for other good and valuable consideration, the parties hereto hereby agree
as follows:
1. Grant of Option.
(a) The Award. Pursuant to the terms of the Plan, which are
incorporated herein by reference, the Company hereby confirms its grant to
Participant, effective as of January 22, 1996 (the "Date of Grant"), an option
(the "Option") to purchase all or any portion of 75,000 shares of Common Stock
at a per share exercise price of $5.75 (the "Option Price"). The grant of the
Option is subject to the terms and provisions of this Agreement and the terms
and provisions of the Plan which shall constitute a part of this
<PAGE> 15
2
Agreement. In the event of any conflict between the terms and provisions of the
Plan and the other terms and provisions of this Agreement, the terms and
provisions of the Plan shall govern.
(b) Acknowledgments Related to the Option Award. The parties
acknowledge and agree that the Option is the stock option contemplated by the
Employment Agreement. The Option is not intended to qualify, and shall not be
treated, as an "incentive stock option" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Vesting; Exercise.
(a) Service Vesting. The Option shall vest and become
exercisable with respect to 18,750 shares of Common Stock on the Date of Grant
and with respect to 18,750 shares of Common Stock on each of the first through
third anniversaries of the Date of Grant, provided that Participant has
remained in the Full-Time Employment (as hereinafter defined) of the Company on
such date.
(b) Change in Control Vesting. In the event of a Change in
Control of the Company (as such term is defined in the Plan), the Option shall
vest and become immediately exercisable in full as of the date of such Change
in Control of the Company.
(c) Vesting Following Termination of Full-Time Employment. No
portion of the Option shall vest following Participant's termination of
Full-Time Employment with the Company. For purposes of this Agreement, the
portion of the Option which has vested as of a given date in accordance with
this Section 2 is hereinafter referred to as the "Vested Portion of the Option".
3. Option Exercise Period. The Option shall not be exercisable,
and shall expire and be of no further force and effect, immediately following
the tenth anniversary of the Date of Grant. In the event of Participant's
termination of Full-Time Employment with the Company, the Vested Portion of the
Option (determined as of the date of such termination) shall be exercisable
following such termination of Full-Time Employment as follows:
(i) If Participant's Full-Time Employment terminates by reason of
Retirement or Disability (as such terms are hereinafter defined), the Vested
Portion of the Option shall be exercisable by Participant for one year
following the date of such termination;
(ii) If Participant's Full-Time Employment terminates by reason of
Participant's death, the Vested Portion of the Option shall be exercisable
by
<PAGE> 16
3
Participant's Beneficiary (as hereinafter defined) for one year
following the date of death;
(iii) If Participant's Full-Time Employment is terminated by
the Company for cause (as hereinafter defined), the Option (including,
without limitation, the Vested Portion of the Option) shall immediately
terminate and cease to be exercisable as of the date of such
termination; and
(iv) If Participant's Full-Time Employment terminates for any
other reason not specified above in this Section 3, the Vested Portion
of the Option shall be exercisable by Participant for ninety days
following the date of such termination.
The Committee may, in its sole discretion, provide for a longer
post-termination exercise period than the applicable period specified above.
The portion of the Option which does not constitute the Vested Portion of the
Option as of the date of Participant's termination of Full-Time Employment with
the Company shall terminate and be of no further force and effect as of the
date of such termination. Following the expiration of the applicable
post-termination exercise period set forth above, the Vested Portion of the
Option, to the extent not previously exercised, shall terminate and be of no
further force and effect.
For purposes of this Section 3, the following terms shall
have the meanings set forth below:
"Beneficiary" means the person designated by Participant in
writing to the Company as having the right to exercise the Vested
Portion of the Option in the event of Participant's death or, if no such
person is designated, Participant's estate; provided, however, that no
such written designation shall be effective unless it is received by the
Company prior to the date of death of Participant.
"Cause" means, subject to the cure provisions in the Employment
Agreement, termination of Participant's Full-Time Employment because of
(A) his refusal (other than by reason of the incapacity of Participant
due to physical or mental illness) to perform the duties incident to the
offices of President and Chief Operating Officer of the Company, (B) the
commission by Participant of a felony, or the perpetration by
Participant of a dishonest act or fraud against the Company or any
affiliate or subsidiary thereof, (C) any act or omission by Participant
which is the result of Participant's willful misconduct or gross
negligence and which, in the good faith opinion of the Board, is
injurious in any material respect to the financial condition, business
or reputation of the Company or any of its affiliates or subsidiaries or
(D) a material breach by Participant of the Employment Agreement.
<PAGE> 17
4
"Disability" means permanent disability, as such term or a
similar term is defined in the long-term disability policy of the
Company applicable to Participant at the time of termination of
Full-Time Employment.
"Full-Time Employment" with the Company means regular and
continuing full-time employment as an salaried employee of the Company
or a subsidiary (as defined in the Plan) of the Company for at least
forty hours per week.
"Retirement" means termination of Full-Time Employment with the
Company under circumstances under which Executive is entitled to an
immediate pension benefit under the terms and provisions of the Detrex
Corporation Employees Retirement Plan (or any successor thereto).
4. Method of Exercise.
(a) General Method of Exercise. Subject to Sections 3
and 6 hereof, Participant may exercise the Vested Portion of the Option by
notifying the Company in writing of the number of shares of Common Stock in
respect of which the Option has been exercised and by tendering to the Company
the aggregate Option Price for such shares of Common Stock, together with an
amount determined by the Company to be necessary to satisfy any applicable
federal, state or local tax or other withholding in connection with such
exercise. The Option Price may be paid (i) in cash (including a certified
check, teller's check or wire transfer of funds), (ii) with shares of Common
Stock previously owned by the Participant for at least six months prior to
exercise having a fair market value equal to the aggregate Option Price on the
date of exercise of the Option or (iii) in any combination thereof. The date of
exercise of the Option shall be the date the written notice of exercise from
Participant is received by the Company. As soon as practicable following
receipt of the written notice of exercise and payment of the aggregate Option
Price (together with the amount required to be withheld for tax or other
purposes), the Company will issue share certificates for the number of shares
for which the Option has been duly exercised in the name of Participant, unless
Participant has specified in the written notice of exercise that such share
certificates should be issued in some other name.
(b) Additional Method of Exercise. Subject to the prior
written approval of the Committee, the Vested Portion of the Option may be
exercised by Participant in a "cashless exercise" in accordance with Section
5(e)(ii) of the Plan.
5. Nontransferable. The Option shall be
nontransferable other than by will or the laws of descent and distribution and,
during the life of Participant, shall be exercisable only by Participant;
provided, however, that this Section 5 shall not preclude Participant from
designating in writing to the Company a Beneficiary who shall be entitled to
exercise the Vested Portion of the Option in the event of Participant's death.
<PAGE> 18
5
6. Securities Act Registration or Exemption. Anything in this
Agreement to the contrary notwithstanding, the Option shall not be exercisable
and no transfer of the shares of Common Stock underlying the Option (the
"Underlying Shares") may be made to Participant, and any attempt to exercise
the Option or to transfer the underlying Shares to Participant shall be void
and of no effect, unless and until (i) a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), has been duly filed
and declared effective pertaining to the Underlying Shares and the Underlying
Shares have been duly qualified under applicable state securities or blue sky
laws or (ii) the Committee, in its sole discretion after securing the advice of
counsel, determines, or Participant provides an opinion of counsel satisfactory
to the Committee, that such registration or qualification is not required as a
result of the availability of an exemption from registration or qualification
under such laws.
7. Miscellaneous
(a) No Right to Continued Employment. Neither the Plan, the grant of
the Option or this Agreement shall be construed as giving Participant any right
to be retained in the employ of the Company or any of its Subsidiaries.
(b) No Stockholder Rights. Participant shall have no rights as a
stockholder with respect to the Underlying Shares until a certificate or
certificates evidencing such shares have been issued to Participant, and no
adjustment shall be made for dividends or distributions or other rights in
respect of any share for which the record date is prior to the date upon which
Participant shall become the holder of record thereof.
(c) Titles. The titles of the sections and subsections hereof are
included solely for convenience of reference and shall not affect the meaning
or interpretation of any such section or subsection.
(d) Governing Law. This Agreement and the grant of the Option shall
be governed by, and construed in accordance with, the laws of the State of
Michigan.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first set forth above.
DETREX CORPORATION
By: William C. King
--------------------------------
Thomas Mark
-----------------------------------
Thomas Mark
<PAGE> 1
EXHIBIT 10(n)
[COMERICA BANK LETTERHEAD]
March 22, 1996
Detrex Corporation
24901 Northwestern Highway, Suite 500
Southfield, Michigan 48075
The Elco Corporation
1000 Belt Line Street
Cleveland, Ohio 44109
Harvel Plastics, Inc.
P.O. Box 757
Easton, Pennsylvania 18042
Seibert-Oxidermo, Inc.
16255 Wahrman
Romulus, Michigan 48174
Attn: Mr. Gerald J. Israel
RE: FINANCING ARRANGEMENTS AMONG COMERICA BANK AND NBD BANK (COLLECTIVELY,
THE "BANKS"), COMERICA BANK AS AGENT FOR THE BANKS ("AGENT"), AND
DETREX CORPORATION, THE ELCO CORPORATION, HARVEL PLASTICS, INC. AND
SEIBERT-OXIDERMO INC. (COLLECTIVELY, "COMPANIES")
Dear Mr. Israel:
Please refer to the Credit Agreement dated as of March 11, 1994, the First
Amendment to Credit Agreement and Waiver dated as of December 31, 1994 both
among Agent, the Banks and the Companies (collectively, the "Credit Agreement")
and any and all documents, instruments and agreements executed in connection
with the financing arrangements from Agent and the Banks or any of them to the
Companies (collectively with the Credit Agreement, the "Loan Documents"). All
amounts due from the Companies to Agent and the Banks, whether now or in the
future, contingent, fixed, primary and/or secondary, including, but not limited
to, principal, interest, inside and outside counsel fees, audit fees, costs,
expenses and any and all other charges provided for in the Loan Documents shall
be known, in the aggregate, as the "Liabilities." All capitalized terms not
defined in this agreement ("Agreement") shall have the meanings described in
the Loan Documents.
<PAGE> 2
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 2
As of March 7, 1996 the Liabilities were as follows:
Loans (note amount and date) Principal
- ---------------------------- ----------
Comerica Revolving Credit Loan $5,666,695
NBD Revolving Credit Loan 2,833,305
Letter of Credit Reimbursement 611,221
Obligations
The amounts set forth above are exclusive of interest and costs and expenses
(including, but not limited to, inside and outside counsel fees), which amounts
shall be immediately due and payable from the Companies to Agent and/or the
Banks when accrued or incurred.
Without limitation, the Companies are in default of Section 12.1(a) of the
Credit Agreement on account of its failure to bring Formula Debt into compliance
with Lending Availability (as defined in Section 1.60 of the Credit Agreement).
This out-of-formula condition was: $2,597,364 as reported on Agent's collateral
audit report dated November 20, 1995, $1,296,000 as reported on the Companies'
Borrowing Base Report dated November 30, 1995, $2,306,421 on the Companies'
Borrowing Base Report dated December 31, 1995, $4,160,095 based on the
Companies' Borrowing Base Report dated January 26, 1996, $1,714,076 based on the
Companies' Borrowing Base Report dated January 31, 1996, $1,643,051 based on the
Companies' Borrowing Base Report dated February 10, 1996, $2,574,531 based on
the Companies' Borrowing Base Report dated February 17, 1996 and $2,717,466
based on the Companies' Borrowing Base Report dated February 24, 1996.
The Companies represent to Agent and the Banks that they know of no other
defaults under the Loan Documents, except that the Companies anticipate that
their financial statements for the period ended December 31, 1995 will show a
violation of Sections 11.1, 11.2 and 11.4 of the Credit Agreement (the
"Financial Covenant Defaults").
As a result of the Events of Default identified above, the Agent and the Banks
have the right to accelerate the Liabilities and demand payment in full of the
Liabilities.
The Companies have requested that Agent and the Banks forbear from accelerating
and demanding payment of the Liabilities in order to permit the Companies until
April 15, 1996 to arrange for new financing by a lending institution to pay in
full the Liabilities.
In response to the Companies' request and provided as to the Financial Covenant
Defaults that the audited financial statements for the fiscal year ended
December 31, 1995 indicate a Net Loss after taxes of $1,969,303 or less, a
Tangible Net Worth of $15,834,200 or more and a Leverage Ratio of 2.6 to 1 or
less, and
<PAGE> 3
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 3
subject to the Companies' written acceptance of the following conditions, Agent
and the Banks are willing to forbear until April 15, 1996 (as such date may be
extended under paragraph 12 below), from accelerating and demanding payment of
the Liabilities:
1. The Companies acknowledge the Liabilities as set out in the Loan
Documents, the amount of the Liabilities and the existence of the
defaults. The Companies acknowledge that a demand for payment by the
Agent and the Banks would be timely, proper and within their rights under
the Loan Documents and that there is no setoff, defense or counterclaim,
in law or in equity, of any kind or nature, to the Liabilities.
2. Future administration of the Liabilities and the financing arrangements
among Agent, the Banks and the Companies shall continue to be governed by
the covenants, terms and conditions of the Loan Documents, executed prior
to the date of this Agreement, which are incorporated in this Agreement,
except to the extent that the Loan Documents are superseded, amended,
modified or supplemented by this Agreement or are inconsistent with this
Agreement, then this Agreement shall govern. The Companies reaffirm,
ratify and confirm the Loan Documents and the liens, assignments and
security interests granted to Agent and the Banks under the Loan Documents
which shall continue to secure the Liabilities.
3. The Companies acknowledge and agree that the several commitments of the
Banks set forth in Section 2.1 of the Credit Agreement are terminated and
that the Banks are under no obligation to advance funds or extend credit
to the Companies under the Loan Documents, or otherwise.
4, Additional advances under the Credit Agreement are subject to maintaining
Formula Debt within the Lending Availability and are to be at the
discretion of Agent and the Banks and in such manner and amount as Agent
and the Banks deem appropriate.
5. In addition to the reporting requirements set forth in the Loan
Documents, effective February 1, 1996, the Companies shall provide to
Agent the following: (i) detailed monthly account payable reports to be
received by Agent within 20 days of month end; (ii) detailed monthly
accounts receivable agings and the Agent's standard month-end reports all
certified by a Responsible Officer to be received by Agent within 20 days
of month end; (iii) weekly reports of accounts receivable on Agent's
standard forms certified by a Responsible Officer
<PAGE> 4
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 4
to be received by Agent the following Thursday of each week; (iv) monthly
inventory report of raw material and finished goods on Agent's standard
form to be received by Agent within 20 days of month end for The Elco
Corporation, Harvel Plastics, Inc., and Seibert-Oxidermo, Inc.; (v)
monthly internal results by business unit to be received by Agent within
30 days of month end; (vii) quarterly balance sheets for The Elco
Corporation, Harvel Plastics, Inc. and Seibert-Oxidermo, Inc. to be
received by Agent within 30 days of quarter end; (viii) annual financial
statements for Harvel Plastics, Inc. within 90 days of year end prepared
by Detrex Corporation's auditor; and (ix) a report of current accounts
receivable and customer lists with current addresses to be received by
Agent within 5 days of the date of this Agreement and weekly thereafter.
6. The Companies agree:
(i) Equipment and Fixtures. Each of the Companies agree to grant a
first, perfected security interest in its equipment and fixtures
to Agent to secure the Liabilities. Concurrently with their
execution of this Agreement, each of the Companies shall deliver
a Security Agreement (Equipment) in the form attached as Exhibit
A and will do all acts and things and will execute all writings
(including financing statements) requested by Agent to establish,
maintain and continue a first, perfected security interest in
the equipment and fixtures.
(ii) Stock in Subsidiaries. Detrex Corporation agrees to grant a
first, perfected security interest in 100% of the outstanding
capital stock of each of its Subsidiaries, including The Elco
Corporation, Detrex Industrial Water Treatment, Inc., Wayne
Chemical Products Company and Seibert-Oxidermo, Inc. The Elco
Corporation agrees to grant a first, perfected security interest
in 100% of the outstanding capital stock of its Subsidiary,
ELDISC Export Co., and all of its capital stock (representing 85%
of the outstanding capital stock) of its Subsidiary, Harvel
Plastics, Inc. Concurrently with their execution of this
Agreement, Detrex Corporation and The Elco
<PAGE> 5
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 5
Corporation shall each deliver a Security Agreement in the form
attached as Exhibit B and will do all acts and things and will
execute all writings (including delivery of the certificates
evidencing the capital stock and assignments separate from
certificate) requested by Agent to establish, maintain and
continue a first, perfected security interest in the stock of
such Subsidiaries.
(iii) Real Estate. The Companies agree to grant a first priority
mortgage on four real estate parcels commonly known as 325 Emmett
Avenue, Bowling Green, Kentucky 42101, 401 Emmett Avenue, Bowling
Green, Kentucky 42101, 26000 Capitol Avenue, Redford, Michigan
48239 and 300 Kuebler Rd., Easton, Pennsylvania. Concurrently
with their execution of this Agreement, the Companies will cause
the owners of such real estate parcels to deliver a Mortgage to
Agent in the form attached as Exhibit C and will do all acts and
things and will execute all writings requested by Agent to
establish, maintain and continue a first, perfected mortgage lien
in such real estate.
(iv) Acknowledgement regarding Tax Refunds. The Companies acknowledge
that they previously granted a first perfected security interest
in their general intangibles, including tax refunds, to Agent for
the benefit of the Banks,
(v) Consent of Minority Shareholders of Harvel Plastics, Inc. By
April 1, 1996, the Elco Corporation shall obtain the consent of
the minority shareholders of Harvel Plastics, Inc. to this
Agreement, including the pledge of the stock of Harvel Plastics,
Inc., and shall waive or amend the by-laws of Harvel Plastics,
Inc to permit the pledge of such stock to Agent, and Agent's
subsequent exercise of its power of sale as secured party. The
minority shareholders of Harvel Plastics, Inc. may retain their
right of first refusal with regard to the sale of the pledged
stock.
<PAGE> 6
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 6
(vi) NBD Equipment Finance, Inc./Comerica Leasing Corporation. The
Companies agree that all of the security (whether personal
property or real estate) granted to Agent to secure the
Liabilities shall also secure all amounts due from the Companies
to either of NBD Equipment Finance, Inc. and Comerica Leasing
Corporation, whether now or in the future, contingent,
fixed, primary and/or secondary, including but not limited to,
principal, interest, inside and outside counsel fees, costs,
expenses and any and all other charges, subject only to the
execution by NBD Equipment Finance, Inc. and Comerica Leasing
Corporation of an intercreditor agreement in form and substance
satisfactory to Agent and the Banks (the requirement of an
intercreditor agreement is for the benefit of the Banks and may
be waived by them).
7. The definition of "Lending Availability" in the Credit Agreement is amended
to mean as of any date of determination thereof, the sum of (a) eighty
percent (80%) of Eligible Accounts, and (b) Four Million Four Hundred Fifty
Thousand Dollars ($4,450,000); provided, however, effective upon receipt by
the Companies of each of their federal tax refund on account of the tax
year ended December 31, 1995 (estimated by Companies at $1,887,741), their
federal tax refund or account of the tax year ended December 31, 1992
(estimated by Companies at $1,261,949 plus interest) and the proceeds of
the sale of any real estate, the $4,450,000 overformula amount shall reduce
permanently by an amount equal to such receipt. Notwithstanding the
provisions of paragraphs 6 (iv) and 11, provided that there is no default
under this Agreement or the Loan Documents, the Companies shall apply to
the Revolving Credit Loan not less than $1,000,000 of the 1995 tax refund
and may retain and use up to $887,741 of the 1995 tax refund for ordinary
working capital purposes.
8. All future Advances, if any, under the Credit Agreement and the Loan
Documents, including the continuation of any outstanding Eurodollar-based
Advance, shall be Prime-based Advances and not the Eurodollar-based
Advances. Effective as of January 1, 1996, all Advances shall bear interest
at the default rates specified in Section 5.1 of the Credit Agreement until
execution of this Agreement by the Companies by the deadline set forth in
paragraph 22
<PAGE> 7
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 7
below. Effective as of the date of the execution and delivery by
Companies of this Agreement and the other documents required to be
delivered concurrently therewith all by the deadline set forth in
paragraph 22 below: (a) the Agent and Banks shall withdraw the imposition
of the default rate; (b) the definition of if Prime-based Rate" in the
Credit Agreement shall be amended to mean that per annum rate of
interest which is one percent (1%) plus the Prime Rate; and (c) the
definition of "Applicable Eurodollar Margin" in the Credit Agreement,
which shall be effective for all outstanding Eurodollar-based Advances,
shall be amended to mean three and one quarter percent (3-1/4%).
9. Certain covenants set forth in the Credit Agreement are amended as
follows:
(i) Section 11.8(c). Section 11.8(c) is amended to change
"Five Hundred Thousand Dollars ($500,000)" to "One Hundred
Thousand Dollars ($100,000).
(ii) Section 11.8(d), Section 11.8(d) is deleted.
(iii) Section 12.1(f). Clause (i) of Section 12.1(f) is amended
to change "Two Hundred Fifty Thousand Dollars ($250,000)" to
"Fifty Thousand Dollars ($50,000)."
(iv) Section 12.1(i), Section 12.1(i) is amended to change "Five
Hundred Thousand Dollars ($500,000)" to "One Hundred
Thousand Dollars ($100,000)."
10. The Companies acknowledge and agree the Loan Documents require them to
reimburse Agent and Banks for any and all costs and expenses of Agent and
Banks, including, but not limited to, all inside and outside counsel fees
of Agent and Banks whether in relation to drafting, negotiating or
enforcement or defense of the Loan Documents or this Agreement, including
any preference or disgorgement actions as defined in this Agreement, any
fee for cancellation of pending appraisals of the Companies' real estate,
any fees for real estate title searches (but not mortgage title insurance
policies) and all of the audit
<PAGE> 8
[COMERICA BANK LETTERHEAD]
Mr, Gerald J. Israel
March 22, 1996
Page 8
fees of Agent or the Banks, incurred by them in connection with the
Liabilities, administration of the Liabilities and/or any efforts of Agent
and Banks to collect or satisfy all or any part of the Liabilities. The
Companies shall immediately reimburse Agent and Banks for all of their
costs and expenses upon demand. The Companies shall also defend and hold
harmless the Banks and the Agent from any claim or damages of the
Companies, or any of them, or any third party against Bank arising from or
relating to the Liabilities, the Loan Documents, this Agreement or the
business relationship among the Banks, the Agent and the Companies.
11. The Companies, except for Harvel Plastics, Inc., acknowledge and agree
that they shall hereafter be on a remittance basis (as described in the
security agreements) except the Companies shall not be required to have
account debtors send payments directly to the lock box at Agent unless the
Companies have failed to deliver to Agent and the Banks by April 15, 1996
a written, commitment from a lending institution to make a loan that will
pay in full the Liabilities; each of the Companies, except for Harvel
Plastics, Inc., shall immediately surrender all of their cash inflows to
Commercial Lending Services, Comerica Bank, P.O. Box 75000, Detroit,
Michigan 48275-3212, or such other person and/or entity as Bank may
designate, in the form of and as and when received by them. If the
Companies have failed to deliver to Agent and the Banks by April 1, 1996 a
written, commitment from a lending institution to make a loan that will
pay in full the Liabilities, then, in order to insure the integrity of the
remittance basis procedure, each Company, except for Harvel Plastics,
Inc., must maintain all of its bank accounts at Comerica (except for
payroll and petty cash accounts).
12. Agent and the Banks agree that if on or before April 15, 1996 the
Companies deliver to them a written, commitment from a lending institution
to make a loan that will pay in full the Liabilities and such commitment
is satisfactory in form and substance to Agent and the Banks in their sole
discretion and if no default under this Agreement or further default under
the Loan Documents has occurred, then in that event Agent and the Banks
will extend the forbearance period for up to sixty days (but not to a date
beyond the expiration date of the commitment) at the request of the
Companies. If the forbearance period is so extended, any default by the
Companies under the commitment or its expiration or cancellation would be
a default under this Agreement.
<PAGE> 9
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 9
13. The Companies authorize Agent to charge interest, costs and expenses and
other payments required of the Companies under this Agreement or the Loan
Documents directly to their checking accounts maintained at Agent.
14. To the extent any payment received by Agent or the Banks is deemed a
preference, fraudulent transfer or otherwise by a court of competent
jurisdiction which requires the transferee to disgorge such payment, then
the Liabilities shall be reinstated to the extent of any such
disgorgement.
15. The Companies agree to execute any and all additional or supplemental
documentation, and provide such further assistance and assurances as Agent
or the Banks may require, in the sole and absolute discretion of Agent and
the Banks, to give full effect of the terms, conditions and intentions of
this Agreement.
16. This Agreement shall be governed and controlled in all respects by the
laws of the State of Michigan, including interpretation, enforceability,
validity and construction,
17. Agent and the Banks expressly reserve the right to exercise any or all
rights and remedies provided under the Loan Documents and applicable law
except as modified by this letter agreement. Any failure to immediately
exercise such rights and remedies shall not be construed as a waiver or
modification of those rights or an offer of forbearance.
18. Each of the Companies represents and warrants to the Agent and the Banks
that they have received direct and substantial economic benefit from all of
the Liabilities and that they will continue to receive direct and
substantial economic benefit from such loans, and from any other loans made
or which may be made in the future to the Companies.
19. This Agreement will inure to the benefit of the Agent and each of the
Banks and all of their respective past, present and future parents,
subsidiaries, affiliates, predecessors and successor corporations and all
of their subsidiaries and affiliates.
20. EACH OF THE COMPANIES, THE BANKS AND THE AGENT ACKNOWLEDGE AND AGREE THAT
THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
<PAGE> 10
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 10
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR
THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY
RELATED TO, THE LOAN DOCUMENTS, THIS AGREEMENT OR THE LIABILITIES.
21. EACH OF THE COMPANIES, IN EVERY CAPACITY, INCLUDING, BUT NOT LIMITED TO,
AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS AND/OR
CREDITORS OF THE COMPANIES, OR ANY ONE OR MORE OF THEM, HEREBY WAIVE,
DISCHARGE AND FOREVER RELEASE AGENT, THE BANKS AND THEIR EMPLOYEES,
OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS,
FROM AND OF ANY AND ALL CLAIMS, CAUSES OF ACTION, DEFENSES, COUNTERCLAIMS
OR OFFSETS AND/OR ALLEGATIONS THE COMPANIES OR ANY OF THEM MAY HAVE OR MAY
HAVE MADE AT ANY TIME UP THROUGH AND INCLUDING THE DATE OF THIS AGREEMENT,
AGAINST ANY OR ALL OF AGENT, THE BANKS AND THEIR EMPLOYEES, OFFICERS,
DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
22. The Companies shall properly execute and deliver this Agreement to the
undersigned by no later than 5:00 p.m. on March 22, 1996.
Agent and the Banks reserve the right to terminate the forbearance provided for
in this Agreement prior to April 15, 1996 (or any extended date as provided
under paragraph 12 above), in the event of any new defaults or aggravation of
existing defaults under the Loan Documents, defaults under this Agreement, in
the event of further deterioration in the financial condition of the Companies,
or any of them, or deterioration in the Collateral, and/or in the sole and
absolute discretion of Agent and the Banks at any time and for any reason.
COMERICA BANK, Agent
By: Mark A. Reifel
-------------------------
Mark A. Reifel
Its: Assistant Vice President
cc: NBD Bank
<PAGE> 11
[COMERICA BANK LETTERHEAD]
Mr. Gerald J. Israel
March 22, 1996
Page 11
ACKNOWLEDGED AND AGREED:
DETREX CORPORATION
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ----------------------
Its: V.P. - FINANCE
-------------------------
THE ELCO CORPORATION
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ----------------------
Its: TREASURER
-------------------------
HARVEL PLASTICS, INC,
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ----------------------
Its: DIRECTOR
-------------------------
SEIBERT-OXIDERMO, INC,
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ----------------------
Its: TREASURER
-------------------------
<PAGE> 1
EXHIBIT 10(o)
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
REVOLVING CREDIT AGREEMENT APPROVED BY COMERICA BANK
Borrowers:
Detrex Corporation, The Elco Corporation, Harvel Plastics, Inc., and
Seibert-Oxidermo, Inc. as joint and several obligors.
Facility:
$12,000,000 Revolving Credit with a $1,250,000 sublimit for standby letters of
credit. Total Revolving Credit debt and outstanding letters of credit are not
to exceed the lesser of the Revolving Credit amount or the Borrowing Formula.
Purpose
To pick up the outstanding loan balance on the existing revolving credit
agreement dated 3/11/94 and amended by the first amendment dated 12/31/94.
Maturity Date:
April 1, 1997.
LENDER:
Comerica Bank.
Borrowing Formula:
- - 80% of eligible Accounts Receivable
- - Up to $2,000,000 of inventory advances based on 25% of eligible Raw
Material and Finished Goods at Harvel Plastics, Inc., Seibert-Oxidermo,
Inc. and The Elco Corporation.
-and-
- - a $2,400,000 over advance without regard to formula. Over advance to
reduce by all of the proceeds of any tax refund and/or the sale of
commercial property.
Collateral:
- - First security interest in Borrowers' ASSETS, INCLUDING
accounts receivable, GENERAL INTANGIBLES, inventory, machinery, and
equipment.
- - A first mortgage on commercial properties located at: 401 Emmett Ave.,
Bowling Green, KY; 325 Emmett Ave., Bowling Green, KY; and 26000 Capitol
Ave., Redford, MI; and 300 Kuebler Rd., Easton, PA. Surveys and title
commitments to be ordered by Comerica Bank.
<PAGE> 2
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
Support
- - Pledge and first perfected security interest in the stock of Harvel
Plastics, Inc., Seibert-Oxidermo, Inc., and The Elco Corp.
Interest Rate:
Prime + 1.0.
Commitment Fee:
75 basis points on the unused portion, MONTHLY IN ARREARS.
Other Fees:
- - Letter of credit fees of 2.50% per annum, PAYABLE ANNUALLY IN ADVANCE.
- - A $50,000 loan closing fee.
- - A monthly fee of 10 basis points to be assessed on the gross over advance
amount available to the Borrowers the previous month end.
- - All costs, including but not limited to legal, audit, title commitment and
appraisal fees, shall be for the account of Borrowers.
Negative Covenants:
- - Consolidated Cash Flow Coverage
Borrowers shall maintain a Consolidated Cash Flow Coverage ratio of not less
than:
Calculation Date Measuring Period Ratio
---------------- ---------------- -----
3/31/96 1/1/96 - 3/31/96 0.55
6/30/96 1/1/96 - 6/30/96 0.55
9/30/96 1/1/96 - 9/30/96 0.55
12/31/96 1/1/96 - 12/31/96 0.60
3/31/97 4/1/96 - 3/31/97 0.85
Where "Consolidated Cash Flow Coverage" is equal to Adjusted Net Income +
Depreciation + Amortization DIVIDED by Capital Expenditures + Current
Maturities of LTD (excluding balloon payments) + Payment on Capital Leases
during the specified period + Dividends + the amount of cash expenditures
which are deductions from environmental reserves.
"Adjusted Net Income" is defined as GAAP Net Income from continuing
operations after taxes less the amount of any recoveries in environmental
reserves (net of taxes) and plus the amount of any deductions related to
increases in environmental reserves (net of taxes).
-2-
<PAGE> 3
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
- Consolidated Current Ratio
Borrowers shall maintain a Consolidated Current Ratio of at least:
Period Ratio
------------------------ -----------
12/31/95 - 6/29/96 1.150 to 1.0
6/30/96 - 12/30/96 1.175 to 1.0
12/31/96 - and thereafter 1.250 to 1.0
Where "Consolidated Current Ratio" is equal to Current Assets other than
Deferred Income Taxes divided by Current Liabilities. All other Current
Assets and Current Liabilities are defined according to GAAP. Revolving
credit debt shall be classified as current for compliance purposes.
- Consolidated Tangible Net Worth
Borrowers shall maintain a minimum Consolidated tangible Net Worth of
$15,200,000 to increase by 100% of quarterly net income after taxes with no
reductions for losses beginning 3/31/96.
"Consolidated Tangible Net Worth" is defined as the excess of the net book
value of all assets (other than Patents, Patent Rights, Trademarks, Trade
Names, Franchises, Copy Rights, Licenses, Goodwill, and similar intangible
assets) after all appropriate deductions in accordance with GAAP (including,
without limitation, reserves for doubtful receivables, obsolescence,
depreciation, and amortization), over all Debt and Minority Interests.
- - Consolidated Leverage Ratio
Borrowers shall maintain a "Consolidated Leverage Ratio" of Total
Liabilities divided by Tangible Net Worth of not more than:
Period Ratio
----------------------- -----------
12/31/95 - 12/30/96 3.25 to 1.0
12/31/96 and thereafter 3.00 to 1.0
Where "Total Liabilities" are defined according to GAAP.
-3-
<PAGE> 4
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
Ongoing Reporting Requirements:
- - Weekly Report of Accounts Receivable the following Thursday of each week.
- - Monthly Detailed Accounts Receivable Aging within 20 days of month end.
- - Monthly Detailed Report of Eligible Inventory within 20 days of month end.
- - Monthly Detailed Accounts Payable Report within 20 days of month end.
- - Monthly Consolidated Financial Statements for Detrex Corporation within 30
days of month end including a Statement of Income and Earnings and Balance
Sheets.
- - Monthly Financial Statements for The Elco Corporation, Harvel Plastics, Inc.,
and Seibert-Oxidermo, Inc. including a Statement of Income and Earnings and
Balance Sheets within 30 days of month end.
- - Monthly internal results by business unit within 30 days of month end.
- - Monthly Covenant Compliance Certificates within 30 days of month end.
- - Annual Audited Consolidated Financial Statements within 90 days of year end.
- - ANNUAL FINANCIAL STATEMENTS FOR HARVEL PLASTICS, INC. WITHIN 90 DAYS OF YEAR
END PREPARED BY DETREX CORPORATIONS'S AUDITOR.
- - Annual Projections within 30 days of year end, Quarterly updates for the
current fiscal year within 45 days of quarter end.
- - Other information provided to shareholders and the SEC within five days of
delivery.
- - Asset Based Bank Audits as scheduled.
- - Lockbox with Dominion of Funds for all Borrowers.
Conditions of Closing
- - Appraisals satisfactory to the Bank which are not less than 30 days old
to be received no latter than 4/30/96 for machinery and equipment located at:
- Detrex Chemicals Division - Ashtabula, OH
- Seibert-Oxidermo, Inc. - Detroit and Romulus, MI
- The Elco Corp. - Cleveland, OH
- Harvel Plastics, Inc. - Easton, PA and Bakersfield, CA
- - See the attached list of qualified machinery and equipment appraisers
acceptable to the Bank.
- - Appraisal and environmental reports satisfactory to the Bank which are not
less than 30 days old to be received no later than 4/30/96 for the following
real estate locations:
- 401 Emmett Ave., Bowling Green, KY
- 300 Kuebler Rd., Easton, PA
- - See attached list of qualified environmental consultants acceptable to the
Bank. Real estate appraisals are to be ordered by the Bank as required per
current banking regulations.
- - The Borrowers are to provide the following information with respect to 325
Emmett Ave., Bowling Green, KY: signed purchase agreement, existing
environmental audits, approved remedial work plan, itemization of year-to-date
expenditures on the remedial work plan, and revised estimate of the cost to
complete the remedial work plan. IF THIS PROPERTY IS NOT SOLD WITHIN 90 DAYS
OF CLOSING THIS CREDIT ARRANGEMENT, AN APPRAISAL IS REQUIRED ON THIS PROPERTY
WITHIN 120 DAYS OF CLOSING THIS CREDIT ARRANGEMENT.
-4-
<PAGE> 5
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
Conditions of Closing Continued
- - The Elco Corporation shall obtain the consent of the minority shareholders of
Harvel Plastics, Inc. to the terms and conditions outlined in this letter,
including the pledge of the stock of Harvel Plastics, Inc., and shall modify
or amend the by-laws of Harvel Plastics, Inc. to permit the pledge of such
stock to Comerica, and Comerica's subsequent exercise of its power of sale as
secured party, free and clear of the restrictions contained in its by-laws.
- - The Borrowers agree that all of the security granted to Comerica shall also
secure all amounts due from the Borrowers to Comerica Leasing Corporation.
Other Provisions
- - The occurrence of a Materially Adverse Event shall be an Event of Default.
- - Limits on the following:
- outside debt including capital leases
- acquisition of businesses
- asset sales and/or sale/leasebacks
- judgments or decrees
- - Bank will continue to monitor the progress against the 1996 projections and
the related impact on Borrowers' ability to meet the financial covenants in
the Agreement. The effectiveness of the Agreement will also be evaluated on
this criteria.
- - The Borrowers shall acknowledge and agree to the terms of this proposal to the
undersigned by no latter than 6:00 p.m. on March 22, 1996.
- - This loan arrangement must be closed no latter than April 30, 1996. As a
condition of closing this credit facility, Comerica must be provided with all
documents required by Comerica in form and substance satisfactory to
Comerica. A further condition of funding this credit facility is Comerica's
continued satisfaction with Borrowers' consolidated financial condition,
operations, and economic environment which may be reviewed by Comerica at any
time.
- - THE LOANS SHALL BE EVIDENCED AND SECURED BY LOAN DOCUMENTS CONSISTENT WITH
THIS COMMITMENT AND OTHERWISE IN FORM SATISFACTORY TO THE BANK AND ITS
COUNSEL. THE LOAN DOCUMENTS SHALL INCLUDE WARRANTIES, REPRESENTATIONS AND
AGREEMENTS TO INDEMNIFY BANK FROM ANY COST ASSOCIATED WITH ANY VIOLATIONS OF
ENVIRONMENTAL LAWS AND REGULATIONS.
- - THIS COMMITMENT SHALL BE TERMINATED AT THE BANK'S OPTION, AND IN ANY MANNER AS
THE BANK MAY DETERMINE IF:
(i) ANY BORROWER SHALL FAIL TO COMPLY WITH ANY OF THE TERMS AND
CONDITIONS HEREOF; OR
-5-
<PAGE> 6
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
(II) IN THE EVENT OF THE FILING BY OR AGAINST ANY BORROWER OF A PETITION IN
BANKRUPTCY OR INSOLVENCY OR FOR REORGANIZATION, OR FOR THE APPOINTMENT
OF A RECEIVER OF TRUSTEE OR THE MAKING BY ANY BORROWER AN ASSIGNMENT
FOR THE BENEFIT OF CREDITORS OR THE FILING OF A PETITION FOR
ARRANGEMENT BY ANY BORROWER WHICH MAY EXIST AT THE TIME NOW OR
HEREAFTER ESTABLISHED FOR THE CLOSING OF THE LOAN FACILITIES
CONTEMPLATED HEREUNDER; OR
(III) ANY MATERIAL ADVERSE CHANGES IN THE FINANCIAL CONDITION, PROPERTIES,
OR BUSINESS PROSPECTS OF ANY BORROWER SHALL OCCUR.
- - THE COMMITMENTS SET FORTH HEREIN SHALL NOT BE ASSIGNABLE BY THE BORROWERS BY
OPERATION OF LAW, OR OTHERWISE, ARE NOT INTENDED TO CREATE ANY RIGHTS IN
FAVOR OF AND MAY NOT BE RELIED UPON BY ANY THIRD PARTY.
- - THIS COMMITMENT LETTER CONTAINS THE ENTIRE AGREEMENT OF THE BORROWERS AND
THE BANK AS OF THE DATE HEREOF AND IS NOT SUBJECT TO OR SUPPLEMENTED BY ANY
PREVIOUS CORRESPONDENCE OR DISCUSSIONS BETWEEN THE BORROWERS AND THE BANK OR
ANY OTHER DOCUMENT NOT EXPRESSLY REFERENCED HEREIN. NO CHANGE IN THIS
COMMITMENT LETTER SHALL BE BINDING UPON THE BANK UNLESS EXPRESSED IN WRITING
AND SIGNED BY THE BANK.
Please contact me if you have any questions.
Very truly yours,
Mark A. Reifel
Mark A. Reifel
Assistant Vice President
ACKNOWLEDGED AND AGREED:
DETREX CORPORATION
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: V.P. - FINANCE
-------------------------
-6-
<PAGE> 7
[COMERICA LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
THE ELCO CORPORATION
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: TREASURER
-------------------------
HARVEL PLASTICS, INC.
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: DIRECTOR
-------------------------
SEIBERT-OXIDERMO, INC.
By: G.J. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: TREASURER
-------------------------
-7-
<PAGE> 1
EXHIBIT 13
DETREX CORPORATION AND SUBSIDIARIES
1995
ANNUAL REPORT
<PAGE> 2
------------------------------------------
DETREX
CORPORATION
1995 ANNUAL REPORT
------------------------------------------
<PAGE> 3
HIGHLIGHTS(1)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Net sales................................... $93,596,000 $100,096,000 $105,578,000
Net loss.................................... (1,869,000) (5,639,000) (1,570,000)
Loss per common share....................... (1.18) (3.56) (.99)
Stockholders' equity per common share....... 10.67 11.85 15.42
Additions to land, buildings and equipment
(including capital leases)................ 2,662,000 2,860,000 2,434,000
Current ratio............................... 1.3 to 1 1.3 to 1 1.5 to 1
Number of stockholders...................... 425 477 544
Number of employees......................... 347 367 388(2)
</TABLE>
(1) This information should be considered in conjunction with
the Consolidated Financial Statements and Management's
Discussion and Analysis.
(2) Represents number of employees at January 1, 1994.
DETREX CORPORATE
MISSION STATEMENT
Detrex Corporation is a producer and supplier of industrial and specialty
chemicals, services and supply processes to the industrial market place,
including lubricant additives, coatings, process equipment, high quality plastic
pipe, and environmental and analytical laboratory services.
Our core business is in the specialty chemical field, providing process
design and equipment, plus chemical products and services. Our services and
products are designed to fulfill our customers' requirements in lubricating,
cleaning and surface finishing, and the handling of waste generated in the
production process.
Our mission is to meet or exceed our customers' needs by providing cost
effective and technically superior products, systems, and services in an
environmentally sound manner.
We will continue to be responsible to our customers, employees, suppliers,
communities and the environment while providing long term growth and a superior
return to our shareholders.
<PAGE> 4
TO OUR SHAREHOLDERS:
1995 was a year of mixed results for Detrex. While the lack of earnings was
a disappointment, we invested significant expense and effort in positioning the
organization for profitability in the years to come.
During 1995 the Company took significant actions to position Detrex for a
return to profitability in 1996. We developed new marketing strategies,
strengthened the sales organization, improved our quality and cost structure,
streamlined our organization and implemented a new top management team.
Non-recurring costs of approximately $1.0 million were incurred which included
costs related to disbanding corporate functions in marketing and sales,
commercial development, operations and engineering. This reorganization will
shift the management focus of the company to the individual business units close
to our customers, employees and suppliers. I feel we now have a strong
management team which will lead Detrex into the next century.
Detrex incurred a net loss of $1,869,000 for the year ended December 31,
1995 compared to a net loss of $5,639,000 for the year ended December 31, 1994.
Changing environmental laws reduced the market for some of our solvent-based
products and equipment which resulted in losses for both the equipment division
and the solvent and environmental services division. We have taken steps to
compensate for adverse market developments and expect significantly improved
performance from these units during the coming year. In 1995, we achieved
operating profitability in our five other business units. Our plastic pipe
subsidiary, our lubricant additive subsidiary, our industrial furnace division,
our paint subsidiary and our analytical laboratory all made a positive profit
contribution and I expect continued growth and performance from these units in
the future.
During the year we improved cash management through working capital
management techniques and tight capital expenditure control. As a result, we
paid off $3.5 million in long term debt and environmental obligations and re-
invested $3.9 million in the business through R&D and capital expenditures while
keeping the increase in short term borrowing to $3.0 million. Actions were taken
to improve the cash position by filing for tax refunds which will result in
additional cash of $3.0 million in 1996.
During the past year we positioned Detrex for a return to profitability. I
thank all of our employees for their support and dedication to making this a
successful company. While many challenges remain ahead, I believe we have the
right team to return Detrex to the position it once held in the market place.
William C. King
Chairman and Chief Executive Officer
1
<PAGE> 5
--------------- INDEPENDENT AUDITORS' REPORT ---------------
------------------------------------
Suite 900
600 Renaissance Center
Deloitte & Touche LLP Letterhead Detroit, Michigan 48243-1704
To the Board of Directors and Stockholders of
Detrex Corporation
We have audited the accompanying consolidated balance sheets of Detrex
Corporation and its subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of operations and retained earnings and of cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Detrex Corporation and its
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
February 21, 1996
(March 22, 1996 as to Note 5)
Deloitte & Touche Logo
2
<PAGE> 6
DETREX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
NET SALES.................................... $93,595,645 $100,096,443 $105,578,469
Cost of sales................................ 72,373,603 77,640,002 80,461,988
Selling, general and administrative
expenses................................... 20,010,203 18,404,812 22,625,345
Provision for depreciation and
amortization............................... 3,393,721 3,405,273 4,241,314
Provision for plant closing and
restructuring.............................. -- -- 4,158,794
Provision for environmental reserve.......... 100,039 8,500,000 4,230,007
Other (income) expense -- net................ (689,350) (494,384) (46,079)
Minority interest............................ 242,110 262,488 164,456
Interest expense............................. 886,106 681,920 979,938
Gain on sale of Industrial Chemical
Specialties Division....................... -- -- (9,123,114)
----------- ------------ ------------
LOSS BEFORE INCOME TAXES..................... (2,720,787) (8,303,668) (2,114,180)
Credit for income taxes...................... (851,484) (2,664,788) (544,501)
----------- ------------ ------------
NET LOSS..................................... (1,869,303) (5,638,880) (1,569,679)
RETAINED EARNINGS AT BEGINNING OF YEAR....... 15,573,757 21,212,637 22,782,316
----------- ------------ ------------
RETAINED EARNINGS AT END OF YEAR............. $13,704,454 $ 15,573,757 $ 21,212,637
=========== ============ ============
PER COMMON SHARE:
NET LOSS..................................... $(1.18) $(3.56) $(0.99)
====== ====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 7
DETREX CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 2,764,360 $ 2,015,962
Accounts receivable (less allowance for uncollectible accounts
of $459,000 in 1995 and $330,000 in 1994)................... 13,956,017 18,059,177
Refundable U.S. income taxes.................................. 3,040,772 --
Inventories................................................... 8,437,505 8,977,084
Prepaid expenses and other.................................... 978,819 835,256
Deferred income taxes......................................... 1,991,087 1,945,401
----------- -----------
TOTAL CURRENT ASSETS................................... 31,168,560 31,832,880
LAND, BUILDINGS AND EQUIPMENT:
Land.......................................................... 993,602 1,032,102
Buildings and improvements.................................... 15,914,676 18,668,472
Machinery and equipment....................................... 28,668,642 31,768,126
Construction in progress...................................... 762,885 242,708
----------- -----------
46,339,805 51,711,408
Less allowance for depreciation and amortization.............. 26,203,114 29,258,155
----------- -----------
LAND, BUILDINGS AND EQUIPMENT -- NET................... 20,136,691 22,453,253
LAND, BUILDINGS AND EQUIPMENT HELD FOR SALE OR LEASE.......... 2,664,773 1,187,889
PREPAID PENSIONS.............................................. 1,226,348 1,121,169
DEFERRED INCOME TAXES......................................... 1,412,973 4,179,815
OTHER ASSETS.................................................. 1,049,376 999,840
----------- -----------
$57,658,721 $61,774,846
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 8
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Loans payable -- short-term................................... $ 8,500,000 $ 5,500,000
Current maturities of long-term debt and capital leases....... 606,779 1,848,080
Accounts payable.............................................. 9,007,603 11,765,191
Environmental reserve......................................... 1,527,000 1,548,000
Accrued compensation.......................................... 643,089 822,650
Accrued expenses -- non active locations...................... 558,319 736,446
Other accruals................................................ 4,008,678 2,644,769
----------- -----------
TOTAL CURRENT LIABILITIES.............................. 24,851,468 24,865,136
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS................ 518,258 701,505
ACCRUED POSTRETIREMENT BENEFITS............................... 3,985,885 3,636,316
ENVIRONMENTAL RESERVE......................................... 8,681,199 11,042,937
MINORITY INTEREST............................................. 1,586,221 1,554,112
ACCRUED PENSION............................................... 1,142,388 1,212,235
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............................................. 13,704,454 15,573,757
----------- -----------
TOTAL STOCKHOLDERS' EQUITY............................. 16,893,302 18,762,605
----------- -----------
$57,658,721 $61,774,846
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 9
DETREX CORPORATION
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss............................................ $(1,869,303) $(5,638,880) $(1,569,679)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Gain on sale of Industrial Chemical Specialties
Division................................... -- -- (9,123,114)
Depreciation and amortization.................. 3,393,721 3,405,273 4,241,314
(Gain) Loss on sale or write-off of buildings,
machinery and equipment.................... (189,066) (209,102) 1,487,718
Deferred income taxes.......................... 2,721,155 (3,067,559) (908,595)
Changes to operating assets and liabilities
that provided (used) cash:
Accounts receivable.......................... 4,103,160 (1,329,201) (2,653,599)
Refundable U.S. income taxes................. (3,040,772) -- --
Inventories.................................. 509,579 (1,508,571) 1,961,297
Prepaid expenses and other................... (248,742) 12,685 165,504
Other assets................................. (133,535) (52,426) 99,137
Accounts payable............................. (2,757,588) 1,552,158 2,194,204
Environmental reserve........................ (2,382,738) 7,590,937 2,813,484
Accrued compensation......................... (179,561) (162,265) (13,296)
Postretirement benefits...................... 349,569 322,034 293,447
Accrued expenses -- non active locations..... (178,127) (1,893,697) 2,230,143
Net assets and liabilities of Industrial
Chemical Specialties Division............ -- -- (876,886)
Other accruals............................... 1,326,172 (270,543) 571,071
----------- ----------- -----------
TOTAL ADJUSTMENTS.......................... 3,293,227 4,389,723 2,481,829
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................ 1,423,924 (1,249,157) 912,150
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................ (2,095,379) (2,200,669) (1,463,843)
Proceeds from disposal of machinery and
equipment...................................... 235,321 309,036 --
Proceeds from sale of Industrial Chemical
Specialties Division........................... -- 1,650,000 10,000,000
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES............................ (1,860,058) (241,633) 8,536,157
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings..................................... 3,000,000 3,500,000 --
Repayment of long-term debt......................... (1,000,000) (2,001,361) (1,008,128)
Repayment of short-term debt........................ -- -- (6,400,000)
Principal payments under capital lease
obligations.................................... (815,468) (872,011) (905,053)
Common stock issued................................. -- 28,020 --
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES............................ 1,184,532 654,648 (8,313,181)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents.... 748,398 (836,142) 1,135,126
Cash and cash equivalents at beginning of year.......... 2,015,962 2,852,104 1,716,978
----------- ----------- -----------
Cash and cash equivalents at end of year................ $ 2,764,360 $ 2,015,962 $ 2,852,104
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest....................................... $ 771,564 $ 633,767 $ 1,031,948
Income taxes................................... $ 284,579 $ 261,825 $ 228,298
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred in connection
with the acquisition of equipment................. $ 566,628 $ 658,967 $ 970,265
Capital lease terminations.......................... $ 175,708 $ 90,220 $ 808,587
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 10
DETREX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND CUSTOMER CONCENTRATION
Detrex Corporation and its subsidiaries operate predominantly in a single
industry: chemicals and allied products, services, and processes for use by
manufacturing and service industries. The principal products include specialty
chemicals, industrial cleaners, process equipment, coatings, lubricant
additives, chlorinated solvents, hydrochloric acid, PVC plastic pipe, industrial
finishing materials and paints, industrial furnaces, degreasing equipment, and
environmental and analytical laboratory services. The products are primarily
sold by sales-service engineers and most sales are direct to industrial users.
All of the Company's business units operate in highly competitive markets
which are mainly national in scope, although some business is done
internationally by its lubricants subsidiary and its plastic pipe subsidiary.
Generally, for all products there are numerous competitors with no one company
or a small number of companies being dominant. The Company operates in niche
markets and its principal methods of competition in various markets include
service, price and quality, depending on the market serviced. No material part
of the business is dependent upon a single customer or a few customers and
therefore vulnerability from this aspect is not a factor. However, certain of
the Company's business units sell primarily to automotive or automotive related
companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statements
The consolidated financial statements comprise those of the Company and its
subsidiaries. All balances and transactions between the companies have been
eliminated. Certain amounts for 1993 and 1994 have been reclassified to conform
with 1995 classifications.
Inventories and Accounts Receivable
Inventories are stated at lower of cost or market. Cost of raw materials,
including raw materials in work in process and finished goods inventories,
generally is determined by using the last-in, first-out method. Labor and burden
in inventory are determined by using the average cost method. Inventories
relating to fixed-price contracts are stated at the accumulated cost of
material, labor and burden less related progress billings. The completed
contract method is used to recognize revenue.
Contract retentions of $984,000 in 1995 and $671,000 in 1994 are included
in accounts receivable.
Land, Buildings and Equipment
Land, buildings and equipment are stated at cost. Depreciation and
amortization are provided over the estimated useful lives of the assets using
the straight-line method for financial reporting purposes. Leased equipment is
amortized over the lease term or estimated useful life of the asset.
Annual depreciation rates are as follows:
<TABLE>
<S> <C>
Buildings................................ 2.5-20%
Leasehold improvements................... 2.5-20%
Yard facilities.......................... 5-6 2/3%
Machinery and equipment.................. 6 2/3-33 1/3%
Office furniture and fixtures............ 10-25%
</TABLE>
Research and Development
Research and development costs are charged to operations as incurred.
Research and development costs for 1995, 1994 and 1993 were approximately
$1,272,000, $1,784,000, and $2,532,000, respectively.
Loss Per Common Share
Loss per common share is based upon the average number of common shares
outstanding during the year. Shares subject to stock options are not considered
in per share calculations since the Company is in a loss position and the effect
would be antidilutive.
Cash Flows
For purposes of the consolidated statements of cash flows, cash equivalents
are defined as short-term highly-liquid investments with a maturity of three
months or less at date of purchase.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable, and debt under the Revolving Credit Agreement approximated
fair values.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the balance sheet date and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7
<PAGE> 11
3. INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Raw materials............... $ 2,861,900 $2,279,750
Work in progress............ 1,989,115 1,971,608
Finished goods.............. 4,897,266 4,914,802
Less: Progress billings on
work in progress.......... (1,310,776) (189,076)
----------- ----------
$ 8,437,505 $8,977,084
=========== ==========
</TABLE>
The excess of current cost over the stated last-in, first-out value is
approximately $1,855,000 and $2,280,000 at December 31, 1995 and 1994. As a
result of liquidating inventories carried at costs incurred in prior years, the
Company's 1995 net loss before income taxes was decreased by $502,000.
4. CAPITAL AND OPERATING LEASES
Capitalized lease assets (primarily automobiles, trucks and lab equipment)
included in machinery and equipment at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Machinery and equipment...... $3,081,776 $3,930,407
Accumulated amortization..... 1,654,301 2,067,052
---------- ----------
Leased assets -- net......... $1,427,475 $1,863,355
========== ==========
</TABLE>
Rent expense applicable to operating leases for 1995, 1994 and 1993 was
$569,000, $925,000 and $974,000, respectively.
Minimum annual lease payments for leases in effect at December 31, 1995 are
as follows:
<TABLE>
Minimum Lease Payments: Capital Operating
---------- ----------
<S> <C> <C>
1996.................... $ 707,157 $ 495,536
1997.................... 382,131 419,674
1998.................... 148,422 392,305
1999.................... 56,181 297,096
2000.................... 18,168 99,565
2001 and thereafter..... -- 195,000
---------- ----------
Total minimum lease
payments................... 1,312,059 $1,899,176
==========
Less amount representing
estimated executory costs
(such as taxes, maintenance
and insurance) and profit
thereon included in total
minimum lease payments..... 79,343
----------
Net minimum lease payments... 1,232,716
Less amount representing
interest................... 107,679
----------
Present value of net minimum
lease payments............. 1,125,037
Less current portion......... 606,779
----------
Non-current portion.......... $ 518,258
==========
</TABLE>
5. REVOLVING CREDIT AGREEMENT
On March 11, 1994, the Company entered into a three year Revolving Credit
Agreement (the Agreement). The Agreement provides for a credit facility of up to
$12.0 million collateralized by the Company's inventory and accounts receivable.
The terms of the Agreement contain, among other provisions, requirements for
maintaining defined levels of tangible net worth and various financial statement
ratios, including working capital and debt to equity ratios, and a cash flow
ratio.
At December 31, 1995, the Company was not in compliance with certain
provisions contained in the Agreement. However, the Company has received a
commitment letter which will amend the existing Agreement. The amendment to the
Agreement will contain revised covenants which the Company expects to be in
compliance with during 1996. It is anticipated that the amendment will be
finalized by April 30, 1996.
The weighted average interest rate for short term borrowings for the year
ended December 31, 1995 was 8.10% compared to 7.94% for the year ended December
31, 1994 and 5.66% for the year ended December 31, 1993.
6. INCOME TAXES
The net credit for income taxes, calculated in accordance with SFAS No. 109
for 1995, 1994 and 1993, included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ---------
<S> <C> <C> <C>
Current for tax
purposes:
Federal............ $(3,851,066) $ -- $ 41,658
State and local.... 278,427 336,199 322,871
----------- ----------- ---------
Total Current.... (3,572,639) 336,199 364,529
----------- ----------- ---------
Deferred income
taxes:
Federal............ 2,609,310 (2,647,688) (732,912)
State and local.... 111,845 (353,299) (176,118)
----------- ----------- ---------
Total Deferred... 2,721,155 (3,000,987) (909,030)
----------- ----------- ---------
Credit for income
taxes.............. $ (851,484) $(2,664,788) $(544,501)
=========== =========== =========
</TABLE>
8
<PAGE> 12
Deferred tax assets (liabilities) at December 31, 1995 and 1994 relate to
the following temporary differences and carryforwards:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Net operating loss carryforward........ $ 1,077,543 $ 2,119,710
Alternative minimum tax credit
carryforward......................... 383,144 383,144
Accruals for:
Postretirement benefits.............. 1,526,195 1,392,345
Environmental........................ 3,908,719 4,821,070
Restructuring........................ 213,780 281,985
Self insurance reserve............... 414,681 171,539
Inventory related...................... 556,773 671,402
Other.................................. 221,165 253,156
----------- -----------
Gross deferred tax assets.......... 8,302,000 10,094,351
----------- -----------
Valuation allowance.................... (467,000) --
----------- -----------
Depreciation........................... (2,788,135) (2,749,520)
Undistributed earnings of the Company's
DISC................................. (1,234,345) (1,050,586)
Pension................................ (130,911) --
Other.................................. (277,549) (169,029)
----------- -----------
Gross deferred tax liabilities..... (4,430,940) (3,969,135)
----------- -----------
Net deferred tax assets............ $ 3,404,060 $ 6,125,216
=========== ===========
</TABLE>
The Company has net operating loss carryforwards of $511,131, $1,669,081
and $989,032 that expire in 2006, 2007 and 2010, respectively.
The reasons for the difference between the income tax provision and income
taxes computed at 34% for 1995, 1994 and 1993 are summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ----------- ---------
<S> <C> <C> <C>
Computed 'expected' tax
provision................... $(925,068) $(2,823,247) $(718,821)
State and local income taxes,
net of federal tax
benefit..................... 257,580 (14,193) 96,857
Nondeductible meal and
entertainment expense....... 57,324 48,098 34,058
1992, 94 and 95 tax refund
carryback tax rate
differential................ (791,805)
Deferred tax asset valuation
allowance................... 467,000
Other -- net.................. 83,485 124,554 43,405
--------- ----------- ---------
$(851,484) $(2,664,788) $(544,501)
========= =========== =========
</TABLE>
Since the Company has experienced pretax losses in recent years, the
Company is not able to conclude that realization of all its deferred tax assets
is more likely than not. Accordingly, the Company has provided a valuation
allowance of $467,000. The valuation allowance will be adjusted when, in the
opinion of management, significant positive evidence exists which indicates it
is more likely than not that the Company will be able to realize the deferred
tax assets. Such reduction in the valuation allowance, if any, will be reflected
as a component of income tax expense in future years.
7. PENSION AND POSTRETIREMENT COSTS
The Company and its subsidiaries have several non-contributory, defined
benefit pension plans which cover substantially all employees. Benefits for
salaried employees are based on years of service and the employee's average
monthly compensation using the highest five consecutive years preceding
retirement. Benefits for hourly employees are generally based on a specified
payment per month for each year of service. The Company's funding policy is to
contribute amounts sufficient to provide for benefits earned to date and those
expected to be earned in the future.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligations
were 7.25% and 4.0%, respectively, at December 31, 1995 and 8.5% and 4.0%,
respectively, at December 31, 1994. The expected long-term rate of return on
assets was 8.5% in both years. The following table sets forth the plans' funded
status and amounts recognized in the Company's balance sheet at December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligations:
Vested benefits.................... $22,094,843 $18,836,805
Non-vested benefits................ 1,042,117 659,032
----------- -----------
Total............................ $23,136,960 $19,495,837
=========== ===========
Projected benefit obligations for
service rendered to date............. $25,360,581 $21,464,248
Plan assets at fair value -- primarily
equity and fixed income bond funds... 27,923,010 25,204,658
----------- -----------
Excess of plan assets over projected
benefit obligations.................. 2,562,429 3,740,410
Unrecognized net asset at January 1,
1986 being recognized principally
over 15 years........................ (1,246,551) (1,405,334)
Unrecognized net gain from past
experience different from that
assumed.............................. (1,102,264) (2,316,447)
Additional minimum liability........... (129,654) (109,695)
----------- -----------
Net pension asset (liability).......... $ 83,960 $ (91,066)
=========== ===========
</TABLE>
Net pension credit included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost-benefits
earned during the year... $ 467,594 $ 556,058 $ 650,412
Interest cost on projected
benefit obligations...... 1,755,902 1,671,239 1,864,318
Actual return on plan
assets................... (4,310,407) 885,828 (2,962,981)
Net amortization and
deferral................. 1,956,305 (3,366,137) 379,464
----------- ----------- -----------
Net pension credit......... $ (130,606) $ (253,012) $ (68,787)
=========== =========== ===========
</TABLE>
The Company has a 401(k) plan covering its salaried employees. Employees
can contribute up to 15% of their salaries. The Company makes no contribution to
this plan.
9
<PAGE> 13
Certain divisions and subsidiaries of the Company provide contributory
defined benefit health care plans for retirees, subject to various conditions
and limitations.
Net periodic postretirement benefit costs included the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits attributed
to service during the period... $161,389 $156,144 $115,576
Interest cost on accumulated
postretirement benefit
obligation..................... 290,573 264,224 292,903
Amortization..................... -- -- 2,840
-------- -------- --------
Net periodic postretirement
benefit cost................... $451,962 $420,368 $411,319
======== ======== ========
</TABLE>
The Company's postretirement plans are not funded. The status of the plans
at December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees................................. $1,866,703 $1,874,226
Fully eligible active plan
participants........................... 273,351 231,079
Other active plan participants........... 1,596,113 1,545,580
Unrecognized net loss.................... 249,718 (14,569)
---------- ----------
Total accrued postretirement
benefits............................. $3,985,885 $3,636,316
========== ==========
</TABLE>
For measurement purposes, a 9.4% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1995. The rate is assumed
to decrease gradually over the next 8 years to 5.3% in 2002 and thereafter. The
assumption for the health care cost trend rate has a significant effect on the
amount of the obligation and periodic cost reported. An increase in the assumed
health care cost trend rates by 1.0% in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by approximately
$630,200 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by approximately
$86,300.
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 31, 1995, 8.5% at
December 31, 1994 and 7.5% at December 31, 1993.
8. SALE OF INDUSTRIAL CHEMICAL SPECIALTIES DIVISION
Effective September 30, 1993, the Company sold its Industrial Chemical
Specialties Division to Novamax Technologies Corporation for $11,650,000 of
which $10.0 million was received on October 1, 1993 and $1,650,000 was received
on June 30, 1994. The Company reported a pre-tax gain of $9,123,000, including
the gain on curtailment of pensions of $279,000, on the sale of this Division.
For the nine months of 1993 prior to the sale, this Division reported Sales of
$10,340,000 and Income Before Tax of $460,000.
9. PROVISION FOR PLANT CLOSINGS AND RESTRUCTURING
In 1993, the Company phased out manufacturing of chemical equipment at its
Bowling Green, Kentucky plant. This operation had a total before tax loss of
approximately $6.1 million in 1993. The provision for plant closing and
restructuring of $4.2 million reflects the amounts attributable to asset
write-downs, termination pay, and the costs associated with the winding down of
production.
10. OTHER INCOME -- NET
Other income includes interest income of approximately $272,000, $46,000
and $42,000 for 1995, 1994 and 1993, respectively.
11. CONTINGENCIES
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 environmental
contamination at several sites, including properties 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 December 31, 1995 and 1994 is $10.2 and $12.6 million, respectively,
which amounts were calculated without taking into consideration any possible
insurance recoveries.
The reserve described above 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.
10
<PAGE> 14
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.
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.
12. PREFERRED STOCK
The Company has authorized 1,000,000 shares of $2 par value preferred
stock, issuable in series. No shares were issued or outstanding as of December
31, 1995, 1994 and 1993.
13. STOCK PURCHASE RIGHTS
The Company has in place a Shareholder Rights Plan, under which preferred
stock purchase rights were distributed to shareholders as a dividend of one
Right for each outstanding share of Common Stock. Each Right will entitle
shareholders to buy one one-hundredth of a newly issued share of Series A
Preferred Stock of the Company at an exercise price of $80, subject to
adjustment. The Rights will be exercisable only if a person or group acquires
beneficial ownership of 15% or more of the Company's outstanding Common Stock or
commences a tender or exchange offer upon consummation of which a person or
group would beneficially own 30% or more of the Company's outstanding Common
Stock. Until they become exercisable, the Rights will be evidenced by the Common
Stock certificates and will be transferred only with such certificates.
If any person becomes the beneficial owner of 15% or more of the Company's
outstanding Common Stock, or if a holder of 15% or more of the Company's Common
Stock engages in certain self-dealing transactions or a merger transaction in
which the Company is the surviving corporation and its Common Stock remains
outstanding, then each Right not owned by such person or certain related parties
will entitle its holder to purchase, at the Right's then-current exercise price,
shares of the Company's Common Stock (or, in certain circumstances, units of the
Company's Series A Preferred Stock, cash, property or other securities of the
Company) having a market value equal to twice the then-current exercise price.
In addition, if the Company is involved in a merger or other business
combination transaction with another person after which its Common Stock does
not remain outstanding, or sells 50% or more of its assets or earning power to
another person, each Right will entitle its holder to purchase, at the Right's
then-current exercise price, shares of common stock of such other person having
a market value equal to twice the then-current exercise price. The Company will
generally be entitled to redeem the Rights at $.01 per Right at any time until
the tenth business day following public announcement that a person or group has
acquired 15% or more of the Company's Common Stock. The Plan will expire on May
4, 2000 unless the Rights are earlier redeemed by the Company.
14. STOCK OPTIONS
On April 22, 1993, the shareholders of the Company approved the
Corporation's 1993 Stock Option Plan (the Management Plan) and the Corporation's
1993 Stock Option Plan for Outside Directors (the Directors' Plan). Pursuant to
the Management Plan and employment agreements, key executives have options
outstanding totaling 23,000 shares, at December 31, 1995 and 106,000 shares at
January 31, 1996. The 106,000 shares have exercise prices ranging from $5.00 to
$9.50. Pursuant to the Directors' Plan, options for 21,000 shares in 1993 and
6,000 shares in both 1994 and 1995 have been granted at exercise prices ranging
from $8.25 to $13.20. Options for 3,000 of these shares were exercised in 1994
at $9.34 a share.
The total number of shares reserved for issuance upon exercise of options
under the Management Plan is 150,000 shares and under the Directors' Plan is
50,000 shares. No options have expired under the Directors' Plan. Options for
75,000 shares were forfeited in 1995 under the Management Plan.
11
<PAGE> 15
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Detrex Corporation and its consolidated subsidiaries (the Company) incurred
a net loss of $1,869,000 for the year ended December 31, 1995, compared to a net
loss of $5,639,000 for the year ended December 31, 1994 and a net loss of
$1,570,000 for the year ended December 31, 1993. A tabular breakdown of results
for the last three years reflects the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ------------------ ------------------
Income Income Income
(Loss) (Loss) (Loss)
Before Net Before Net Before Net
Income Income Income Income Income Income
Taxes (Loss) Taxes (Loss) Taxes (Loss)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Gain on sale of ICSD............................. $ -- $ -- $ -- $ -- $ 9,123 $ 6,021
Provision for plant closing and restructuring.... -- -- -- -- (4,159) (2,745)
Additions to environmental reserve............... (100) (66) (8,500) (5,600) (4,230) (2,790)
Operations (excluding the above)................. (2,621) (1,803) 196 (39) (2,848) (2,056)
------- ------- ------- ------- ------- -------
Total.......................................... $(2,721) $(1,869) $(8,304) $(5,639) $(2,114) $(1,570)
======= ======= ======= ======= ======= =======
</TABLE>
Footnotes 8 and 9 to the Consolidated Financial Statements explain the
actions in 1993 to sell the Industrial Chemical Specialties Division (ICSD) and
to phase out manufacturing of chemical equipment at the Company's Bowling Green,
Kentucky plant.
In 1995, the Company incurred a significant loss in its solvents and
environmental services division, partially due to changing environmental laws.
Also included in the 1995 loss are provisions for termination pay, legal claims
and worker's compensation which totaled approximately $1.0 million dollars.
In 1993, the Company began a review of its liabilities for environmental
matters. Based on that review, the Company added $4.2 million to its
environmental reserve. The Company indicated that certain remediation studies
would become available in 1994 and as they became available, the Company would
have a more complete basis for estimating anticipated remediation costs. Some of
this information became available in the latter part of 1994 and served as a
basis for a comprehensive review of environmental matters, including its own
properties, in the fourth quarter of 1994. The result of that review was the
$8.5 million addition to the environmental reserve referred to above. A minor
adjustment of $0.1 million was made to the reserve in 1995. The Company will
continue to analyze this reserve and make adjustments to reflect changes from
updated or new studies and any other significant developments. For a more
detailed explanation of the Company's liabilities for environmental matters,
refer to Footnote 11 of the Consolidated Financial Statements.
COMPARATIVE OPERATING DATA (IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ---------------- ----------------
$ % $ % $ %
------ ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales............................................... 93,596 100.0 100,096 100.0 105,578 100.0
Gross margin............................................ 21,222 22.7 22,456 22.4 25,116 23.8
Selling, general and administrative expenses............ 20,010 21.4 18,405 18.4 22,625 21.4
Depreciation and amortization........................... 3,394 3.6 3,405 3.4 4,241 4.0
Provision for plant closing and restructuring........... -- -- 4,159 3.9
Gain on sale of ICSD.................................... -- -- 9,123 8.6
Net loss................................................ (1,869) (2.0) (5,639) (5.6) (1,570) (1.5)
</TABLE>
1995 COMPARED TO 1994 -- In 1995, net sales decreased $6.5 million. The
major reason for the decrease was a significant reduction in revenue at the
Company's solvents and environmental services division, along with smaller
decreases at the Company's industrial furnace division, its equipment division,
and its paint subsidiary. The Company's plastic pipe and lubricant additives
subsidiaries both had increases in revenue.
12
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
Gross margin in 1995 was approximately the same as in 1994. The small
increase in the gross margin percentage was primarily attributable to margin
improvements at the Company's lubricant additives subsidiary.
The increase in selling, general and administrative expenses reflects a
$500,000 provision for termination pay, increases in the provision for bad debts
and increases in selling expenses at most of the Company's business units.
The provision for depreciation and amortization is approximately the same
as the prior year for all of the Company's major business units.
Interest expense for 1995 was higher than in 1994 due to increased
borrowings in 1995 and higher interest rates.
The income tax credit for both 1995 and 1994 reflects a credit for federal
income taxes, partially offset by state and local income tax expense. In
addition, during 1995 a credit of $792,000 was recorded to reflect 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%.
Since the Company has experienced pretax losses in recent years, the
Company is not able to conclude that realization of all its deferred tax assets
is more likely than not. Accordingly, the Company has provided a valuation
allowance of $467,000. The valuation allowance will be adjusted when, in the
opinion of management, significant positive evidence exists which indicates it
is more likely than not that the Company will be able to realize the deferred
tax assets. Such reduction in the valuation allowance, if any, will be reflected
as a component of income tax expense in future years.
The Company has net operating loss carryforwards of $3,169,244 at December
31, 1995, representing a federal income tax benefit of $1,077,543. The net
operating loss carryforwards expire as follows:
<TABLE>
<S> <C>
2006 $ 511,131
2007 1,669,081
2010 989,032
----------
Total $3,169,244
==========
</TABLE>
1994 COMPARED TO 1993 -- In 1994, Net sales decreased to $100 million, a
5.2% decrease from 1993. However, when 1993 sales were adjusted for the sale of
ICSD, the Company realized a 5.1% increase in sales from its ongoing operations.
The Company had significant sales increases in its industrial furnace division
and in its subsidiary producing plastic pipe and more modest increases in the
sales of its paint subsidiary and its lubricants subsidiary. The increase more
than offset lower sales in the Company's equipment and solvents divisions.
Gross margin in 1994 equaled 22.4% of sales, compared to 23.8% in 1993. The
decline in gross margin is primarily attributable to lower margins within the
Company's solvents division, its general chemicals division and its subsidiary
producing plastic pipe.
The reduction in selling, general and administrative expenses reflects the
inclusion of ICSD for the first nine months of 1993, and reductions in this
category of expenses for 1994 in the Company's equipment division and its
solvents division.
The reduction in depreciation and amortization in 1994 is a result of the
ICSD sale and the discontinuance of manufacturing at the Company's plant in
Bowling Green, Kentucky.
Interest expense in 1994 is lower than in 1993 due to decreased average
borrowings in 1994. The reduction due to lower borrowings was partially offset
by increases in interest rates during the second half of the year.
The Company recorded income tax benefits in both years due to the
significant before tax losses.
LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES
During 1995, the Company financed its operations by utilizing a combination
of internally generated funds and net additional bank borrowings of $2.0
million. The Company paid the remaining $1.0 million due under its 9.04% term
loan but increased borrowings under its Revolving Credit Agreement by $3.0
million. At December 31, 1995, the Company was not in compliance with certain
provisions contained in its Revolving Credit Agreement.
13
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
The Company has received a commitment letter from its lead bank which, once
formalized, will amend the existing Revolving Credit Agreement. It is expected
that this amendment will be finalized by April 30th and will contain revised
covenants which the Company expects to be in compliance with during 1996. With
the amendment to the Revolving Credit Agreement in place, the Company intends to
finance its operations by utilizing a combination of internally generated funds
and borrowings under its Revolving Credit Agreement. The interest rate outlined
in the commitment letter is prime rate plus one percent.
Working capital was $6,317,000 at December 31, 1995, compared to $6,968,000
at December 31, 1994.
The Company's capital expenditures (including capital leases) totaled
$2,662,000 in 1995. This compares to $2,860,000 in 1994 and $2,434,000 in 1993.
The Company made cash payments of $2.5 million that were charged to its
Environmental Reserve in 1995. It is anticipated that cash expenditures for
environmental matters will be reduced to approximately $1.5 million in 1996.
The Company has paid no dividends since the second quarter of 1991 and
cannot forecast when the dividend will be restored.
OTHER
The Company will adopt Statement of Financial Accounting Standard (SFAS)
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and SFAS No. 123, Accounting for Stock-Based
Compensation, in 1996. It is not expected that adoption of these Statements will
have a significant impact on the Company's consolidated financial position or
the results of operations.
14
<PAGE> 18
SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales................................................. $93,596 $100,096 $105,578 $96,754 $81,398
Income (loss) before accounting change.................... (1,869) (5,639) (1,570) (2,981) (7,018)
Cumulative effect of accounting change.................... -- -- -- (1,813) --
Net income (loss)......................................... (1,869) (5,639) (1,570) (4,794)(1) (7,018)
Earnings (loss) per common share before accounting
change.................................................. (1.18) (3.56) (.99) (1.88) (4.44)
Cumulative effect of accounting change per common share... -- -- -- (1.15) --
Earnings (loss) per common share.......................... (1.18) (3.56) (.99) (3.03)(1) (4.44)
Dividends per common share................................ -- -- -- -- .30
Total assets.............................................. 57,659 61,775 59,052 59,662 58,113
Net working capital....................................... 6,317 6,968 10,721 8,164 11,260
Capital expenditures...................................... 2,095 2,201 1,464 2,166 3,956
Long-term debt............................................ 518 702 3,030 4,602 5,360
Stockholders' equity...................................... 16,893 18,763 24,373 25,943 30,737
Stockholders' equity per common share..................... 10.67 11.85 15.42 16.42 19.45
Number of employees....................................... 347 367 388(2) 495 447
Percentages to net sales:
Gross margin......................................... 22.7 22.4 23.8 23.7 23.3
Net income (loss).................................... (2.0) (5.6) (1.5) (5.0)(1) (8.6)
Net income (loss) as a percent of:
Average total assets................................. (3.1) (9.3) (2.6) (8.1)(1) (11.7)
First of year stockholders' equity................... (10.0) (23.1) (6.1) (15.6)(1) (18.4)
Current ratio............................................. 1.3 1.3 1.5 1.4 1.7
</TABLE>
NOTES FOR SELECTED FINANCIAL DATA
(1) Includes a one time charge of $1,812,600 reflecting the adoption of
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, effective January 1, 1992.
(2) At January 1, 1994.
15
<PAGE> 19
PRODUCTS OF DETREX AND DETREX SUBSIDIARIES
<TABLE>
<S> <C> <C>
CHEMICALS DIVISION EQUIPMENT DIVISION HARVEL PLASTICS, INC.
P.O. BOX 1398, 325 EMMETT AVENUE, P.O. BOX 757,
ASHTABULA, OHIO 44004 BOWLING GREEN, EASTON, PENNSYLVANIA 18042
C.U. GUY, General Manager KENTUCKY 42101 E. E. WISMER, President
N-Methyl Pyrrole and Pyrrole B. B. RUSSELL, Business Rigid PVC Plastic Pipe
Semi-conductor Grade Manager (Normal Impact)
Hydrochloric Acid Aqueous and Semi-Aqueous (High Impact)
Pharmaceutical Intermediates Equipment Solid Bar, Heavy Wall Tubular Stock,
Electronic Component Cleaning Angle Stock, Custom Extrusions
SOLVENTS AND and Defluxing Machines
ENVIRONMENTAL SERVICES SEIBERT-OXIDERMO, INC.
DIVISION PACIFIC INDUSTRIAL 16255 WAHRMAN,
24901 NORTHWESTERN HWY, FURNACE DIVISION ROMULUS, MICHIGAN
SUITE 512 26000 CAPITOL AVENUE, 48174
SOUTHFIELD, MICHIGAN REDFORD TWP., D.A. CHURCH, President
48075 MICHIGAN 48239 Industrial and Automotive Coatings
D.R. CRANDELL, Division President J.T. O'NEAL, General Manager Conductive Primers for Rigid and
Virgin or Recycled Solvents Industrial Furnaces Flexible Plastics
Solvent Reclamation and Automation Equipment Adhesion Promoters for Plastics
Waste Management Automotive Parts Enamels
Solvent and Water-Borne Coatings
RTI LABORATORIES DIVISION
31628 GLENDALE, THE ELCO CORPORATION
LIVONIA, MICHIGAN 1000 BELT LINE ST.,
48050 CLEVELAND, OHIO 44109
J. G. SINGH, General Manager R.D. WYVILL, President
Analytical Laboratory Services Petroleum Additives for
Hydraulic Fluids, Industrial
Gear Oils, Greases and
Metalworking Fluids
</TABLE>
SUPPLEMENTARY INFORMATION (Unaudited)
Selected Quarterly Data (Thousands of dollars except per share amounts)
<TABLE>
<CAPTION>
1995 Quarters 1994 Quarters
---------------------------------------- ----------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $21,341 $25,172 $22,480 $24,603 $25,566 $25,017 $26,142 $23,371
Gross margin on sales........... 4,918 5,439 5,262 5,603 5,510 5,533 6,181 5,232
Net income (loss)............... (970) (192) (339) (368) (5,894) 46 323 (114)
Common share.................... (.62) (.12) (.21) (.23) (3.72) .03 .20 (.07)
Stock price range(1)
High.......................... 6 3/4 7 1/2 9 1/2 10 1/2 13 13 3/8 11 7/8 12 1/4
Low........................... 3 1/2 5 3/4 6 3/4 7 1/2 10 1/4 11 1/8 11 10 1/4
</TABLE>
(1) Stock price range was obtained from NASDAQ quotations.
16
<PAGE> 20
DIRECTORS OFFICERS
BRUCE W. COX W. C. KING
President, B. W. Cox Company, Chairman and Chief Executive
Manufacturers Representative Officer
T. E. MARK
ROBERT A. EMMETT, III President and Chief Operating
Partner, Reed Smith Shaw & McClay, Officer
Attorneys, Washington, D.C.
G. J. ISRAEL
WILLIAM C. KING Vice President-Finance,
Chairman and Chief Executive Officer Treasurer and Chief Financial
Officer
JOHN F. MANGOLD
Manufacturing Consultant J. F. SCHATT
Vice President-Administration
THOMAS E. MARK
President and Chief Operating Officer R. M. CURRIE
Secretary and General Counsel
BENJAMIN W. McCLEARY
Partner, McFarland Dewey & Co., E. R. RONDEAU
Investment Bankers, New York City Controller
ARBIE R. THALACKER
Partner, Shearman & Sterling,
Attorneys, New York City
JOHN D. WITHROW
Retired President and Chief Operating Officer,
Lectron Products Inc.
AUDIT COMMITTEE
JOHN F. MANGOLD, Chairman
ARBIE R. THALACKER
JOHN D. WITHROW
TRANSFER AGENT AND
REGISTRAR
STATE STREET BANK AND TRUST COMPANY
AUDITORS
DELOITTE & TOUCHE LLP
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE YEAR 1995 WILL BE FURNISHED WITHOUT CHARGE TO
SHAREHOLDERS UPON WRITTEN REQUEST. REQUESTS ARE TO BE SENT TO VICE
PRESIDENT-FINANCE, DETREX CORPORATION, 24901 NORTHWESTERN HWY., SUITE 500,
SOUTHFIELD, MICHIGAN 48075.
<PAGE> 21
DETREX CORPORATION
GENERAL OFFICES -- 24901 NORTHWESTERN HWY., SUITE 500,
SOUTHFIELD, MICHIGAN 48075
- --------------------------------------------------------------------------------
MAILING ADDRESS -- P.O. BOX 5111, SOUTHFIELD, MI 48086-5111
Telephone: (810) 358-5800
<PAGE> 1
FORM 10-K
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
State or Other
Jurisdiction of
Incorporation
Name of Subsidiary or Organization
- ------------------------- ---------------
The Elco Corporation Ohio (1)
Seibert-Oxidermo Michigan (1)
Detrex Industrial Water Treatment Michigan (1)
Wayne Chemical Products Company Michigan (1)
Subsidiaries of The Elco Corporation:
ELDISC Export Co. (100% owned) Delaware (1)
Harvel Plastics, Inc. (85% owned) Pennsylvania (1)
(1) Financial statements of subsidiary company included in the Consolidated
financial statements.
<PAGE> 1
EXHIBIT 23
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Number
33-80818 and 33-80820 of Detrex Corporation on Form S-8 of our report dated
February 21, 1996 (March 22, 1996 as to Note 5), incorporated by reference in
and our report dated February 21, 1996 appearing in this Annual Report on Form
10-K of Detrex Corporation for the year ended December 31, 1995.
Deloitte & Touche LLP
March 25, 1996
<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> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,764
<SECURITIES> 0
<RECEIVABLES> 14,415
<ALLOWANCES> 459
<INVENTORY> 8,438
<CURRENT-ASSETS> 31,169
<PP&E> 46,340
<DEPRECIATION> 26,203
<TOTAL-ASSETS> 57,659
<CURRENT-LIABILITIES> 24,851
<BONDS> 518
0
0
<COMMON> 3,167
<OTHER-SE> 13,726
<TOTAL-LIABILITY-AND-EQUITY> 57,659
<SALES> 93,596
<TOTAL-REVENUES> 93,596
<CGS> 72,374
<TOTAL-COSTS> 72,374
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 886
<INCOME-PRETAX> (2,782)
<INCOME-TAX> (851)
<INCOME-CONTINUING> (1,869)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,869)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> (1.18)
</TABLE>
