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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 1996 0-325
THE DURIRON COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 31-0267900
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3100 Research Boulevard 45420
Dayton, Ohio (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (513) 476-6100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.25 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
(Continued)
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
[ X ]
<TABLE>
<CAPTION>
<S> <C>
At close of business on February 15, 1997:
Number of Shares of Common Stock,
$1.25 par value, outstanding ................. 23,489,819
Aggregate market value of shares of Common
Stock, $1.25 par value, held by
nonaffiliates of the Company ................. $539,889,865
</TABLE>
--------------------
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
1. The Duriron Company, Inc. Proxy Statement for its 1997 Annual Meeting
of Shareholders to be held on April 24, 1997 (the "Proxy Statement").
Definitive copies of the Proxy Statement will be filed with the
Commission within 120 days of the end of the Company's most recently
completed fiscal year. Only such portions of the Proxy Statement as
are specifically incorporated by reference under Part III of this
Report shall be deemed filed as part of this Report.
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PART I
------
ITEM 1. BUSINESS
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The Duriron Company, Inc. was incorporated under the laws of the State
of New York on May 1, 1912. All references herein to the "Company" or "Duriron"
refer collectively to The Duriron Company, Inc. and its subsidiaries, unless
otherwise indicated by the context.
Duriron is principally engaged in the design, manufacture and
marketing of fluid handling equipment, primarily pumps and valves and mechanical
seals, for industries that utilize difficult to handle and often corrosive
fluids in manufacturing processes. The Company specializes in the development of
precision-engineered equipment that is capable of withstanding the severely
deteriorating effects associated with the flow of acids, chemical solutions,
slurries and gases.
Based upon its analysis of trade association data and other market
information, the Company considers itself a leading supplier of corrosion
resistant fluid movement and control equipment to the basic chemical industry.
The Company's materials expertise, design, engineering capabilities and
applications know-how have enabled it to develop product lines that are
responsive to the chemical process industries' desire to achieve manufacturing
efficiencies, avoid premature equipment failure and reduce maintenance cost.
The Company operates primarily in one business segment, fluid movement
and control equipment (primarily pumps, valves, mechanical seals and related
equipment). Included in Note 19 of the Financial Statements provided as part of
Item 8 of this Report and incorporated herein by this reference, is information
concerning the Company's revenues, operating profit and identifiable assets by
geographic area for each year in the three-year period ended December 31, 1996.
With respect to a majority of its products, the Company's domestic operations
supply each other and the Company's foreign manufacturing subsidiaries with
components and subassemblies.
PRODUCTS
--------
The Company's principal fluid movement and control equipment products
are pumps, valves, mechanical seals and related equipment, marketed primarily
under the trademarks "Durco," "Atomac," "Valtek," "Automax," "Accord," "Kammer,"
"Sereg," "Durametallic," "Dura Seal," "Pac-Seal" and "Metal Fab." In many
manufacturing processes, fluids must be moved by pumps, and flow must be
controlled by valves. The Company's pumps, valves and mechanical seals are
designed to withstand the corrosive nature of the fluids and the varying
temperatures and pressures under which manufacturing processes occur.
The Company manufactures, under the Durco trade name, several lines of
centrifugal pumps, including metallic and non-metallic pumps, varying in size,
capacity, material components and sealant specifications. Durco pumps are used
primarily to move liquids during processing activities as well as in auxiliary
services such as waste removal, water treatment and pollution control. Critical
elements in pump selection include the nature and volume of the fluids to be
handled, the height and distance the fluids are to be moved, the temperature and
pressure at which they are to flow, the presence of stray elements or particles,
and the toxicity of the fluids.
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The Company also manufactures several lines of metering pumps under the Durco
trade name which are generally used to inject measured quantities of additives
or catalysts into a process stream.
The Company's valves are used to control the flow of liquids and gases
in industrial processing systems. The Company manufactures product lines of plug
and butterfly valves under the Durco trademark which are made of various metals,
alloys and plastics. The Company also produces a lined ball valve under the
Atomac trade name. Actuators and other control accessories manufactured by the
Company under the Automax and Accord trade names are either sold independently
or mounted on these valves to move them from open to closed positions and to
various specified positions in between.
The Company manufactures, under the Valtek, Kammer and Sereg trade
names, automatic control valves, valve actuators and related components.
Automatic control valves are important components in the automation of
manufacturing and processing systems since they are capable of modulating (that
is, automatically adjusting) the rate and amount of fluids moving in a
manufacturing production system. The Valtek product line includes high-pressure
valves, rotary valves, and anti-noise and anti-cavitation valves. Substantially
all of the Valtek valves are sold with an actuator. The Company also developed
and manufactures a Valtek automatic control valve (under the "StarPac" trade
name) with "on-board" sensor and microprocessor capabilities. The Kammer
automated control valves are primarily sold with actuators to chemical process
applications requiring alloy steel control valves of a smaller size than most of
the Valtek products. The Company sells control valves under the Valtek Sereg
trade name primarily in France and other European countries.
The Company's mechanical seals and sealing systems are used to prevent
the leakage of process fluids along the rotating shaft of industrial pumps,
mixing equipment and miscellaneous other rotating equipment used in moving and
otherwise handling process fluids during manufacturing operations. Certain types
of these mechanical seals and sealing systems, which are marketed under the
"Durametallic" and "Dura Seal" trade names, are used within the centrifugal
pumps manufactured by the Company. Durametallic mechanical seals include a
spring loaded design and a welded metal bellows design which both offer fluid
sealing protection while rotating with the shaft of pumps, mixers and similar
equipment in industrial operations. Mechanical seals sold under the "Pac-Seal"
trademark are primarily used in water pumps and other non-corrosive
applications.
Finally, the Company also manufactures filtration products under the
Durco trade name and specialty welded metal bellows products under the "Metal
Fab" trade name.
MARKETING AND DISTRIBUTION
--------------------------
The Company's Durco pump and Durco quarter-turn valve products are
primarily marketed to end-users and engineering contractors through the
Company's own sales forces, regional service centers, a national parts
distribution center and independent distributors and representatives. The
Company sales personnel are divided, for the Durco pump and Durco valve
products, into separate organizations which specialize in the respective product
lines. The specialization of these two sales forces helps enable them to
maintain a high level of technical
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knowledge about their applicable products, customer applications, in-plant
installation and maintenance services. Both the pump and quarter-turn valve
sales organizations have field sales offices located in principal industrial
markets and resident sales personnel at additional locations.
The Company also maintains regional service centers in the
greater Houston, Salt Lake City and metropolitan Philadelphia areas. These
centers stock a full array of critical pump parts and have machining and product
modification capabilities. A national pump parts distribution and service
center, located in Birmingham, Alabama, provides 24-hour assistance to customers
and ships critical replacement parts on an immediate need basis. The Company
also has licensed certain independent valve distributors located throughout the
United States to service and remanufacture its quarter-turn valve products.
Automax and Atomac products are distributed with Durco manual
valves by Company sales personnel and through a network of independent stocking
distributors. The Company's valve sales force provides training and technical
assistance to the Company's independent distributors, who also participate in
periodic training programs relating to Company products and customer
applications.
Durametallic and Pac-Seal products are sold through a
combination of direct sales personnel who specialize only in these products and
by independent sales representatives or distributors. The Company maintains
branch and service center facilities in the U.S. at the following locations
which specialize in Durametallic and Pac-Seal products: Baton Rouge, Louisiana,
Carson, California; Posen, Illinois; Bridgeport, New Jersey; Matthews, North
Carolina; Cincinnati, Ohio; Houston, Texas; and Vancouver, Washington.
Durametallic products are also marketed internationally through sales offices in
almost sixty (60) countries. The Company also markets Durametallic products
through foreign subsidiaries including operations established in Argentina,
Canada, Belgium, Mexico, Brazil, Australia, New Zealand and Singapore. The
Company maintains joint ventures in India, Korea, Saudi Arabia and Malaysia to
manufacture and sell mechanical seals utilizing Durametallic product technology
within those countries.
Valtek products are marketed through specialized sales offices
with sales engineers and service centers in Springville (Utah), Houston,
Philadelphia, Beaumont (Texas), Corpus Christi and Baton Rouge. In other
territories, Valtek products are sold on a commission basis through independent
manufacturers' representatives located in principal marketing centers in the
United States. The Company provides extensive training in the sophisticated
Valtek products and customer applications for its sales representatives.
Kammer products are primarily marketed through a direct sales
force in Germany and through independent distribution in other countries. Kammer
products are marketed with Valtek products in certain U.S. locations, with a
Kammer product sales office located in Pittsburgh, Pennsylvania, supporting U.S.
marketing. Valtek Sereg products are generally sold through employees in France
and combined with other Valtek products for sale in the U.S. and elsewhere.
The Company maintains a subsidiary, Davco Equipment Inc., to
market its Durco pumps, Durco quarter-turn valves, Automax actuators and Valtek
control valves directly and on a consolidated basis through employees of this
subsidiary to customers in the Freeport, Texas, area.
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Formerly, the Company had marketed these varying product lines through a variety
of specialized independent distributors and employees.
The Company's international sales include domestic export
sales and sales by the Company's foreign subsidiaries. Duriron Canada Inc.,
headquartered in Woodbridge, Ontario, manufactures and sells Durco pumps and
valves throughout eastern Canada. S.A. Durco Europe N.V. is headquartered in
Brussels, Belgium. This subsidiary manufactures pumps, mechanical seals and
valves in its Petit Rechain, Belgium, facility and maintains selling
organizations in Europe and sales representatives in the Middle East. Atomac, of
Ahaus, Germany, and a division of Durco GmbH, engages in the manufacture and
sale of lined ball valves and associated equipment. The Company further
maintains subsidiaries in the United Kingdom, Italy, Spain, The Netherlands and
France to provide sales and service of Durco products in these countries.
A Singapore subsidiary, Durco Valtek (Asia Pacific) Pte. Ltd.,
services and prepares pumps, quarter-turn valves and control valves for sale in
the Asian market in a recently expanded facility.
An Italian subsidiary of the Company manufactures actuators
sold in the U.S. under the Automax trade name.
The Company has manufacturing and marketing operations for
Valtek products in Australia and Canada. Valtek products are also manufactured
and marketed by licensees in the United Kingdom and Brazil under long-term
license arrangements. The Company has additionally entered into a joint venture
with Yokogawa Electric Corporation and Kitz Corporation, both of which are
Japanese companies, to manufacture and sell certain Valtek products within
Japan.
The Company has entered into licenses with local manufacturers
in Mexico, South Korea and India to permit them to manufacture and market pumps
and valves under the Durco trade name and pursuant to Company specifications in
those respective countries.
Finally, the Company has formed majority owned joint ventures in India
to manufacture Durco pumps, Durco valves and Valtek control valves for export to
the American, Asian and European markets.
BACKLOG
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The Company's backlog of orders was approximately $111.9
million, $101.4 million and $78.2 million at December 31, 1996, 1995 and 1994,
respectively. Nearly all current backlog is expected to be shipped within the
next 12 months. Sales of the Company's products are not normally subject to
material seasonal fluctuations. Almost all of the Company's customers are in the
private sector, and the Company's backlog is thus not exposed to renegotiation
in any significant way at the election of a government customer.
COMPETITION AND CUSTOMERS
-------------------------
Based upon its analysis of trade association data and other
marketing data, the Company considers itself a leading supplier of
corrosion-resistant pumps, mechanical seals,
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valves, valve actuators and control valves to the basic U.S. chemical industry,
with generally a lesser market share in other countries. No significant
competitor of the Company manufactures pumps, valves and mechanical seals or has
as its single primary market the basic chemical industry. However, the Company
competes with companies which manufacture either pumps, valves or mechanical
seals, portions of whose product lines are sold to the chemical process
industries. The Company competes in general on the basis of product design and
quality, materials expertise, delivery capability, price, application know-how,
parts support and similar factors. The Company believes that it is, in the
aggregate, strong in these areas. During 1996, no single customer or group of
related customers accounted for more than 10% of sales.
MANUFACTURING AND RAW MATERIALS
-------------------------------
The Company is a vertically-integrated manufacturer of certain
product lines. Certain of the corrosion-resistant castings for the Company's
pumps and quarter turn valves are manufactured at its Dayton, Ohio, foundries,
which include a highly automated precision foundry, plus resin shell, no bake
and centrifugal foundries. Ductile iron, gray iron, steel and large alloy metal
castings are purchased from outside sources. Other Company manufacturing
locations machine castings to precise specifications and assemble Company
products. The Company's commitment to Total Quality control procedures and
cellular manufacturing technologies is key to the efficient and successful
manufacture of its products.
The Company also produces most of its highly engineered
corrosion resistant plastic parts for its pump and valve product lines. This
includes rotomolding as well as injection and compression molding of a variety
of fluorocarbon and other plastic materials.
Basic manufacturing raw materials are purchased from various
foreign and domestic vendors. These materials include Teflon, nickel, chrome,
molybdenum, high silicon pig iron, ferro silicon, fused silica, epoxy resins and
fluorocarbon resins, tungsten carbide, silicon carbides and high grade tubing.
In addition, bar stock, tubing, motors and other necessary equipment for
inclusion in the Company's finished products are purchased from various
suppliers. The supply of raw materials and components has been, in general,
sufficient and available without significant delivery delays.
RESEARCH AND DEVELOPMENT
------------------------
The Company's research and development laboratories in Dayton,
Ohio, Cookeville, Tennessee, Ahaus, Germany, Springville, Utah, and Kalamazoo,
Michigan support the Company's manufacturing efforts by providing hydraulic test
facilities for the Company's fluid movement and control products as well as
facilities for the development of corrosion-resistant alloys and plastics.
The Company spent approximately $7.9 million, $7.0 million and
$8.6 million on Company sponsored research and development activities in 1996,
1995 and 1994, respectively. The expenditures were primarily for new product
development.
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PATENTS, TRADEMARKS AND LICENSES
--------------------------------
The Company owns a number of trademarks, patents and patent
applications relating to the name and design of its products. While the Company
considers that, in the aggregate, its trademarks and patents are useful to its
operations, the Company believes that the successful manufacture and sale of its
products generally depend more upon its specialized materials, designs and
manufacturing methods developed over a period of time. The Company, in general,
is the owner of the rights to the products which it manufactures and sells, and
the Company is not dependent in any material way upon any licenses or franchises
in order to so operate.
PERSONNEL
---------
At December 31, 1996, the Company employed approximately 3,900
persons, of whom about 2,680 were employed in the United States. Approximately
375 of the Company's employees, who are primarily located in the Company's pump,
foundry and filtration operations, are represented by either the United Steel
Workers of America or the International Union of Electronic, Electrical,
Technical Salaried & Machine Workers. The Company believes, in general, that it
has good relations with these unions and its nonunion employees. The Company
entered into a new three year collective bargaining agreement with the United
Steel Workers representing production workers at its pump and foundry operations
in Dayton, Ohio in October, 1996.
Information with regard to the directors and executive
officers of the Company is incorporated herein by reference to Item 10 of this
Report and the Proxy Statement.
ENVIRONMENTAL MATTERS
---------------------
The Company completed projects in prior years relating to
compliance with federal, state and local environmental protection regulations.
At present, the Company has no plans for material capital expenditures for
environmental control facilities. However, the Company has experienced and
continues to experience substantial operating costs relating to environmental
matters, although certain costs have been offset in part by the Company's
successful waste minimization programs.
FOREIGN OPERATIONS
------------------
The Company's foreign operations are affected by various
factors and subject to risks which may be different from or in addition to those
present in domestic operations. These may include currency exchange rate
fluctuations, restrictions on the Company's ability to repatriate funds to the
United States, and potential political and economic instability. As the Company
expands its international business, the factors and risks associated with
international operations will likely have a more significant impact on the
Company's results. However, the Company believes that, in general, the
geographical diversification of its business operations is of benefit in
expanding the size of its markets and in helping to partially offset the full
impact of normal business cycles in the U.S. market.
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ITEM 2. PROPERTIES
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The Company's headquarters and executive offices are located
in Dayton, Ohio, at a leased site in the Miami Valley Research Park. This site
encompasses approximately 40,000 square feet.
The location, size and products manufactured of the Company's
principal manufacturing facilities are as follows:
<TABLE>
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Square Products
Location Footage Manufactured
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Domestic:
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<S> <C> <C>
Dayton, Ohio 600,000 Castings and Durco pumps
Cookeville, Tennessee 190,000 Durco valves
Springville, Utah 140,000 Valtek valves and actuators
Angola, New York 96,000 Durco filters, filtration systems
and metering pumps
Springboro, Ohio 50,000 Plastic components for pumps and
valves
Cincinnati, Ohio 35,000 Automax actuators
Provo, Utah 30,000 Valtek product components
Kalamazoo, Michigan 137,000 Durametallic mechanical seals
Burr Ridge, Illinois 25,000 Pac-Seal mechanical seals
Ormond Beach, Florida 40,000 Metal Fab specialty welded metal
bellows
International:
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Woodbridge, Ontario, Canada 32,000 Durco pumps and valves
Petit Rechain, Belgium 65,000 Durco pumps and valves
St. Thomas, Ontario, Canada 13,000 Durametallic mechanical seals
Edmonton, Alberta, Canada 35,000 Valtek valves and actuators
Melbourne, Australia 32,000 Valtek valves and actuators
Ahaus, Germany 68,000 Atomac valves
Essen, Germany 50,000 Kammer valves and actuators
Cormano, Italy 35,000 Automax actuators
Nova, Italy 44,000 Automax actuators
Thiers, France 33,000 Valtek Sereg valves and actuators
Tlaxcala, Mexico 18,000 Durametallic mechanical seals
Sao Paulo, Brazil 12,000 Durametallic mechanical seals
Auckland, New Zealand 19,000 Durametallic mechanical seals
Singapore 12,000 Durametallic mechanical seals
</TABLE>
All manufacturing facilities are owned with the exception of
the Cookeville, Tennessee, facility, the Cincinnati, Ohio, facility, the
Springboro facility, the Burr Ridge, Illinois facility, the Melbourne,
Australia, facility, the Italian facilities and portions of the Brazilian site
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and the Angola, New York, facility. The Company also leases space for district
sales offices and service centers throughout the United States, Canada, Europe,
and Asia.
On the average, the Company utilizes roughly 85% of its
manufacturing capacity, although there is a variation in usage rate among the
facilities. The Company could, in general, increase its capacity through the
purchase of new or additional manufacturing equipment without obtaining
additional facilities.
ITEM 3. LEGAL PROCEEDINGS
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Although the Company is involved in litigation arising from
its business operations, there are no legal proceedings involving the Company
which management believes are likely to have a material adverse impact on the
Company. For further information about such litigation, please see Footnote #12,
entitled "Contingencies," in the Company's "Financial Statements and
Supplementary Data" set forth in Item 8. Such footnote is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
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RELATED STOCKHOLDER MATTERS
---------------------------
MARKET INFORMATION
The common stock of the Company (DURI) is traded in the
Over-the-Counter market and quotations are supplied by the National Association
of Securities Dealers through NASDAQ's National Market System.
In January 1997, Transfer Agent records showed 2,259 shareholders of
record. Based on these records plus requests from brokers and nominees listed as
shareholders of record, the Company estimates there are approximately 7,200
beneficial owners of its common stock. During 1996, the Company paid a dividend
of thirteen cents per share each calendar quarter, and in 1995, a dividend of
eleven and one-half cents per share was paid each calendar quarter.
On February 18, 1997, a 7.7% dividend increase was declared which
raised the quarterly dividend to 14 cents per share.
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PRICE RANGE OF DURIRON COMMON STOCK
(HIGH/LOW CLOSING PRICES)
1996 1995
---- ----
1st Quarter $29.00/$20.75 $20.50/$17.25
2nd Quarter $29.00/$23.00 $23.50/$20.63
3rd Quarter $27.38/$19.25 $29.88/$22.38
4th Quarter $28.06/$25.88 $29.25/$22.88
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<TABLE>
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Item 6.
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
RESULTS OF OPERATIONS 1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
Net sales $ 605,454 $ 532,726 $ 460,507 $ 421,838 $ 403,984
Cost of sales $ 361,354 $ 317,306 $ 275,077 $ 249,779 $ 240,414
Gross profit margin $ 244,100 $ 215,420 $ 185,430 $ 172,059 $ 163,570
Selling and administrative expense $ 147,223 $ 137,346 $ 125,081 $ 114,679 $ 107,611
Research, engineering and
development expense $ 15,482 $ 14,972 $ 14,913 $ 13,872 $ 13,396
Interest expense $ 4,921 $ 5,179 $ 4,901 $ 4,552 $ 3,981
Other expense, net $ 6,545 $ 2,759 $ 1,964 $ 2,887 $ 623
Restructuring expense $ 5,778 -- -- -- $ 5,965
Merger transaction expenses -- $ 5,042 -- -- --
Earnings before income taxes $ 64,151 $ 50,122 $ 38,571 $ 36,069 $ 31,994
Provision for income taxes $ 20,900 $ 19,450 $ 14,175 $ 14,378 $ 12,201
Earnings from continuing operation $ 43,251 $ 30,672 $ 24,396 $ 21,691 $ 19,793
Loss on discontinued operation -- -- -- $ (2,938) $ (259)
Cumulative effect of change in
accounting principle -- -- -- $ (945) (26,899)
Net earnings (loss) $ 43,251 $ 30,672 $ 24,396 $ 17,808 $ (7,365)
Average shares outstanding 24,448 24,737 24,711 24,709 24,698
(thousands)
Net earnings (loss) per share $ 1.77 $ 1.24 $ 0.99 $ 0.72 $ (0.30)
Dividends paid $ 0.52 $ 0.44 $ 0.41 $ 0.38 $ 0.37
(on shares outstanding)
Incoming business $ 616,599 $ 555,241 $ 466,398 $ 420,548 $ 415,164
Ending backlog $ 111,873 $ 101,407 $ 78,169 $ 69,723 $ 73,612
- -------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS (AS A PERCENT OF NET SALES)
- -------------------------------------------------------------------------------------------------------
Cost of sales 59.7% 59.6% 59.7% 59.2% 59.5%
Gross profit margin 40.3% 40.4% 40.3% 40.8% 40.5%
Selling and administrative 24.3% 25.8% 27.2% 27.2% 26.6%
Research, engineering and
development 2.6% 2.8% 3.2% 3.3% 3.3%
Earnings before income taxes 10.6% 9.4% 8.4% 8.6% 7.9%
Net earnings (loss) 7.1% 5.8% 5.3% 4.2% -1.8%
- -------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 29,474 $ 19,434 $ 19,625 $ 26,253 $ 20,521
Working capital $ 154,020 $ 135,000 $ 114,417 $ 108,801 $ 97,528
Net property, plant and equipment $ 99,912 $ 103,723 $ 102,935 $ 93,732 $ 97,667
Intangibles and other assets $ 73,160 $ 66,928 $ 54,382 $ 46,112 $ 50,877
Total assets $ 425,490 $ 395,373 $ 344,266 $ 314,508 $ 319,251
Capital expenditures $ 16,852 $ 13,317 $ 14,363 $ 12,096 $ 18,140
Depreciation and amortization $ 20,089 $ 19,093 $ 18,313 $ 16,926 $ 15,123
Long-term debt $ 63,239 $ 51,756 $ 42,998 $ 35,285 $ 42,482
Postretirement benefits and other
deferred items $ 64,074 $ 58,123 $ 54,383 $ 51,508 $ 50,183
Shareholders' equity $ 199,779 $ 195,772 $ 174,353 $ 161,852 $ 153,407
- -------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
- -------------------------------------------------------------------------------------------------------
Return on average
shareholders' equity 21.7% 16.6% 14.5% 11.3% -4.5%
Return on average net assets 14.3% 11.5% 10.4% 8.1% -2.1%
Debt ratio 19.3% 16.9% 15.8% 14.2% 17.3%
Current ratio 2.6 2.5 2.6 2.7 2.3
Interest coverage ratio 14.0 10.7 8.9 8.9 9.0
Cash dividends as a percent of
beginning shareholders' equity 6.4% 6.2% 6.1% 6.1% 5.4%
Book value (on shares outstanding) $ 8.51 $ 8.02 $ 7.16 $ 6.55 $ 6.26
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales were at a record level for the tenth consecutive year. Net
sales for 1996 of $605.5 million were up 13.7% over $532.7 million in 1995 and
31.5% over $460.5 million in 1994. The increase in net sales reflects strong
global shipments from all business units and across all geographic regions as
high levels of capital spending by the Company's major customers continued. In
addition, moderate price increases and the acquisition of Pac-Seal in August of
1995 (through the Company's merger with Durametallic) favorably impacted
reported sales growth in 1996. The sales growth in 1995 compared with 1994
reflected strong global capital spending, strengthening of the European
currencies against the U.S. dollar, moderate price increases and the
acquisitions of Pac-Seal and Sereg Vannes.
Incoming business for 1996 of $616.6 million was at a record level, up
11.1% over the previous year's record of $555.2 million in 1995 and up 32.2%
over $466.4 million in 1994. The increase in incoming business over the past two
years reflected aggressive capital spending by the worldwide process industries
and moderate price increases. Incoming business in the international markets was
particularly strong during 1996 and 1995. Strong incoming business in 1996
resulted in an ending backlog of $111.9 million at December 31, 1996, an
increase of $10.5 million over the 1995 ending backlog of $101.4 million. The
Company remains committed to its program of reducing throughput time and meeting
customer request dates for deliveries.
International subsidiary contributions to consolidated net sales were a
record of 33.7% in 1996, compared to 33.4% and 30.5% in 1995 and 1994,
respectively. The majority of international sales are distributed through the
Company's international subsidiaries. Export sales from the United States
increased significantly in 1996 to $49.8 million, compared with $27.1 million in
both 1995 and 1994. Export sales to customers in the Asia-Pacific and Latin
American regions were particularly high in 1996. Total net sales to
international customers, as a percentage of net sales, were an historic high of
42.0% in 1996, compared to 38.5% in 1995 and 36.4% in 1994. The improvement in
international sales over the three years reflects the increase in export sales,
strength in the Asia-Pacific and European markets, and the acquisitions of Sereg
Vannes and Mecair. The Company expects the percent of international sales
contributions to consolidated net sales to increase in future years as
management continues its strategic emphasis on international sales and market.
Gross profit margins were 40.3% in 1996, compared with 40.4% and 40.3%
in 1995 and 1994, respectively. The gross profit margin in 1996 was negatively
impacted by a less favorable product mix in the fourth quarter of 1996. The
gross profit margin was favorably impacted in 1996 by moderate price increases,
improvements in burden absorption related to higher levels of plant utilization
and the continuing positive effects of cost reduction and productivity
improvement programs throughout the Company. Pricing throughout the three year
periods has been competitive and is expected to remain competitive. The Company
believes its emphasis on becoming the low total cost producer and continued
emphasis on improving customer service will have a favorable impact on the gross
profit margin in the future.
<PAGE> 14
Selling and administrative expenses as a percent of net sales were
24.3% in 1996, compared to 25.8% and 27.2% in 1995 and 1994, respectively. As
planned, the Company continues to leverage selling and administrative expense as
a percent of net sales. Selling and administrative expense in dollars during the
three year period increased due to continued development and growth of
international markets, higher commission payments on large project shipments and
general wage increases. The Company continues to invest resources in the
development and growth of international operations. While this has increased
selling and service costs at the expense of short-term profits, these programs
are consistent with the Company's longer-range goals. The Company expects to
further leverage selling and administrative expenses as a percent of net sales
in 1997 through continued emphasis on cost containment.
Research, engineering and development expenses were $15.5 million in
1996, compared to $15.0 million and $14.9 million in 1995 and 1994,
respectively. The spending level during 1996 reflects the Company's continued
investment in new products and production processes. The Company believes that
continued investment in research, engineering and development will provide
important new products and processes that will benefit its customers and
shareholders in future years.
Other expense was $6.5 million in 1996 compared to $2.8 million and
$2.0 million in 1995 and 1994, respectively. The increase in expense includes a
lower level of royalty income in 1996 compared with an unusually high amount of
income in 1995. In addition, expense in 1996 reflects higher levels of long and
short term incentive compensation as the Company achieved record financial
results and exceeded goals.
The Company recognized a restructuring charge of $5.8 million before
income taxes, or $.12 per share, during the second quarter of 1996 to
restructure its recently acquired Durametallic operations in Europe and
Australia. Durametallic operations in Belgium, Germany, Italy, France and
Australia were combined with larger and more efficient Duriron facilities during
the second half of 1996. The restructuring was a part of the plan to obtain
positive synergies between the two companies. The savings associated with the
plan will be immediate since the facilities had been unprofitable for many years
and fixed operating costs will be permanently reduced. Annual savings associated
with the restructuring should amount to approximately $1.5 million. The
restructuring plan is expected to result in the termination of 55 employees at a
cost of $3.2 million. In addition, exit costs associated with the plant closings
are estimated at $2.6 million. The restructuring activities are expected to be
funded with operating cash flows. Additional costs to fully implement the
reorganization plan in continuing processes were recorded as period costs and
categorized into cost of sales and administrative expense in the latter half of
1996. These additional costs related to moving equipment and cross-training
employees to support ongoing operations at the Duriron facilities. Through
December 31, 1996, termination fees for 42 employees of $2.1 million and exit
costs of $1.7 million were paid. The remainder of the termination fees and exit
costs accrued in 1996 are expected to be incurred during the first half of 1997
with minimal changes in estimate from the original accrual.
Merger transaction expenses of $5.0 million pretax were recognized in
1995 as a result of the merger with Durametallic. Approximately $3.3 million of
the expense was non-tax deductible and related to financial advisory, legal,
accounting, printing and other related services associated with the merger. The
remaining expense of $1.7 million was tax deductible and included severance fees
for certain Durametallic management who elected to retire under Executive
Severance Agreements assumed by the Company which became effective after the
change in control.
<PAGE> 15
The effective tax rate was 32.6% in 1996, compared to 38.8% and 36.8%
in 1995 and 1994, respectively. The lower 1996 effective tax rate includes
benefits associated with restructuring the Company's European entities and
significantly higher utilization of tax loss carryforwards in the Company's
Asia-Pacific and European operations than in the prior two years. The
utilization rate was higher due to improved profitability throughout the year
but particularly in the fourth quarter in international operations with tax loss
carryforwards and the merger of fiscal entities. The effective tax rate in
future years is not expected to include significant benefits associated with
utilization of tax loss carryforwards. The 1995 tax rate reflected the
unfavorable impact of the non-tax deductible merger transaction expenses which
had the effect of increasing the tax rate by 2.3% points. The 1995 rate was
favorably impacted by utilization of tax loss carryforwards generated within the
certain of the Company's foreign operations. The 1994 rate included the
favorable impacts of the fourth quarter liquidation of a wholly owned foreign
entity, utilization of foreign tax loss carryforwards and resolution of a
multi-year state tax issue.
Record net earnings in 1996 reflect the fourth consecutive year of
earnings improvement. Excluding restructuring fees of $3.0 million after tax,
net earnings in 1996 improved 50.9% to $46.3 million, or $1.89 per share. This
compares with $30.7 million, or $1.24 per share, and $24.4 million, or $.99 per
share in 1995 and 1994, respectively. Including restructuring expenses, record
net earnings improved 41.0% to $43.3 million, or $1.77 per share. The increase
in earnings resulted from strong business conditions which led to improvements
in global profits, leveraging of selling and administrative expenses and the
lower effective tax rate.
CAPITAL RESOURCES AND LIQUIDITY
The Company's capital structure, consisting of long-term debt, deferred
items and shareholders' equity, continues to enable the Company to finance
short-and long-range business objectives. At December 31, 1996, long-term debt
was 19.3% of the capital structure, compared to 16.9% and 15.8% at December 31,
1995 and 1994, respectively. The increase in long-term debt in 1996 reflected
additional borrowings needed to fund the share repurchase program (see next
paragraph for further information about the repurchase program). The borrowings
were funded from a $100.0 million revolving credit agreement the Company entered
into in 1996 to fund the share repurchase program, provide for future major
capital needs and to allow for the consolidation of existing credit
arrangements. Concurrent with signing the credit agreement, the Company entered
into swap agreements to fix $50.0 million of this debt at an interest rate of
7.04% for a period of ten years. The increase in long-term debt in 1995 from
1994 resulted from the acquisition of Pac-Seal which was partially funded
through external borrowings. In 1996 and 1995, increases in debt were partially
offset by scheduled debt repayments.
In July, 1996, the Company announced that its Board of Directors had
authorized the purchase in the open market and through negotiated transactions
of up to 2.4 million of its shares of Common Stock at an aggregate purchase
price not to exceed $50 million. It is the Company's intent to repurchase shares
up to the maximum number of shares covered by the authorization which represents
almost 10% of the number of outstanding shares. Under the share repurchase
program, the Company repurchased 1.1 million shares at a price of $27.8 million
during 1996. The share repurchase program was funded with the aforementioned new
long-term debt.
<PAGE> 16
The return on average net assets was 14.3% including restructuring
expenses, (or a record 15.2% excluding restructuring expenses). This compares to
11.5% in 1995 and 10.4% in 1994. In 1996, return on average shareholders' equity
was a record 21.7% (or 23.0% excluding restructuring expenses), compared to
16.6% in 1995 and 14.5% in 1994. The change in the returns resulted from the
improvements in profitability over the three year period resulting from strong
business conditions and focus on asset management. Management continues to focus
on improving its performance in these areas as many of the Company's incentive
compensation plans are linked to return on net assets and economic value added
measurements.
Capital expenditures in 1996 were $16.9 million, compared to $13.3
million and $14.4 million in 1995 and 1994, respectively. The 1996 expenditures
were invested in new and replacement products, international market development
and general manufacturing equipment upgrades. Capital spending in 1997 is
expected to be over $20.0 million, largely for low cost manufacturing facilities
in India, new product development and machine replacement and upgrades.
Cash and cash equivalents for 1996 were $29.5 million, compared to
$19.4 million and $19.6 million at December 31, 1995 and 1994, respectively.
Cash flow from operations increased 51.6% in 1996 over 1995 as a result of
continued improvement in profitability and emphasis on asset management. Over
the past three years, cash flow from operations enabled the Company to fully
fund all capital expenditures, debt repayments and dividend payments and to
partially fund acquisitions in 1995 and 1994. Cash in excess of current
requirements was invested in high-grade, short-term securities. Cash and amounts
available under borrowing arrangements will be adequate to fund operating needs
and capital expenditures through the coming year.
The Company's liquidity position is reflected in a current ratio of 2.6
to 1 at December 31, 1996. This compares to 2.5 to 1 and 2.6 to 1 at December
31, 1995 and 1994, respectively. Working capital increased to $154.0 million in
1996, compared to $135.0 million and $114.4 million in 1995 and 1994,
respectively.
<TABLE>
<CAPTION>
Graph 1
Net Sales
$ Millions
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C>
$404.0 $421.8 $460.5 $532.7 $605.5
1996 reflects the tenth consecutive year of record sales.
</TABLE>
<TABLE>
<CAPTION>
Graph 2
Incoming Business
$ Millions
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C>
$415.2 $420.5 $466.4 $555.2 $616.6
Record levels of incoming business continued in 1996.
</TABLE>
<TABLE>
<CAPTION>
Graph 3
Earnings Per Share from Continuing Operations
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C>
$0.80 $0.88 $0.99 $1.24 $1.77
Record 1996 earnings reflect the fourth consecutive year of improvements.
</TABLE>
<TABLE>
<CAPTION>
Graph 4
Capital Structure
$ Millions
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Capital structure $246.1 $248.6 $271.7 $305.7 $327.1
Long-term debt 17.3% 14.2% 15.8% 16.9% 19.3%
Shareholders' equity 62.3% 65.1% 64.2% 64.1% 61.1%
Deferrals 20.4% 20.7% 20.0% 19.0% 19.6%
<FN>
Capital structure provides financial flexibility to finance short and
long-range business objectives.
</TABLE>
<TABLE>
<CAPTION>
Graph 5
Return on Average Net Assets
(based on earnings from continuing operations)
1992 1993 1994 1995 1996
<C> <C> <C> <C> <C>
9.4% 9.6% 10.4% 11.5% 14.3%
Return on net assets reflects focus on asset management and a record level of
profitability.
</TABLE>
<TABLE>
<CAPTION>
Graph 6
Working Capital/Current Ratio
$ Millions
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Working capital $97.5 $108.8 $114.4 $135.0 $154.0
Current ratio 2.3 2.7 2.6 2.5 2.6
Current ratio remains strong as working capital increases.
</TABLE>
<TABLE>
<CAPTION>
Graph 7
Return on Average Shareholders' Equity
(based on earnings from continuing opertions)
<S> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996
12.2% 13.8% 14.5% 16.6% 21.7%
1996 return on average shareholders' equity reflects record earnings.
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands except per share data)
Years ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------
Net sales $ 605,454 $ 532,726 $ 460,507
- --------------------------------------------------------------------------------------
Costs and expenses:
<S> <C> <C> <C>
Cost of sales 361,354 317,306 275,077
Selling and administrative 147,223 137,346 125,081
Research, engineering and development 15,482 14,972 14,913
Interest 4,921 5,179 4,901
Other, net 6,545 2,759 1,964
Restructuring 5,778 -- --
Merger transaction expenses -- 5,042 --
- --------------------------------------------------------------------------------------
541,303 482,604 421,936
- --------------------------------------------------------------------------------------
Earnings before income taxes 64,151 50,122 38,571
Provision for income taxes 20,900 19,450 14,175
- --------------------------------------------------------------------------------------
Net earnings $ 43,251 $ 30,672 $ 24,396
======================================================================================
Earnings per share $ 1.77 $ 1.24 $ 0.99
======================================================================================
Average common and common equivalent shares
outstanding (in thousands of shares) 24,448 24,737 24,711
======================================================================================
(See accompanying notes.)
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(dollars in thousands except share data)
Foreign
currency Total
Capital in and other share-
Common excess of Retained Treasury equity holders'
stock par value earnings stock adjustments equity
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $23,146 $14,253 $127,481 ($161) ($2,867) $161,852
Net earnings -- -- 24,396 -- -- 24,396
Cash dividends ($.41 per share) -- -- (9,895) -- -- (9,895)
Stock retired (441,000) (708) (1,066) (3,145) -- -- (4,919)
Shares issued for three-for-two stock split 7,897 (7,897) -- -- -- --
Stock issued (67,000) under stock plans 92 287 -- -- 149 528
Foreign currency translation adjustment -- -- -- -- 2,026 2,026
Nonqualified pension plan adjustment -- -- -- -- 263 263
Net treasury stock activity (3,600) -- -- -- 102 -- 102
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 30,427 5,577 138,837 (59) (429) 174,353
Net earnings -- -- 30,672 -- -- 30,672
Cash dividends ($.44 per share) -- -- (10,730) -- -- (10,730)
Retirement of common stock (6) (14) (21) -- -- (41)
Stock issued (62,000) under stock plans 85 459 (4) -- 117 657
Foreign currency translation adjustment -- -- -- -- 951 951
Nonqualified pension plan adjustment -- -- -- -- 61 61
Net treasury stock activity (4,700) -- -- -- (151) -- (151)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 30,506 6,022 158,754 (210) 700 195,772
Net earnings -- -- 43,251 -- -- 43,251
Cash dividends ($.52 per share) -- -- (12,615) -- -- (12,615)
Stock issued (163,000) under stock plans 204 2,355 -- -- (590) 1,969
Foreign currency translation adjustment -- -- -- -- (1,124) (1,124)
Nonqualified pension plan adjustment -- -- -- -- (229) (229)
Net treasury stock activity (1,073,000) -- -- -- (27,245) -- (27,245)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $30,710 $8,377 $189,390 ($27,455) ($1,243) $199,779
- ---------------------------------------------------------------------------------------------------------------------------
(See accompanying notes.)
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
<S> <C> <C>
December 31, 1996 1995
- ------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 29,474 $ 19,434
Accounts receivable 112,710 103,963
Inventories 101,070 93,155
Prepaid expenses 9,164 8,170
- ------------------------------------------------------------------------------------------------
Total current assets 252,418 224,722
- ------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 257,680 247,975
Less accumulated depreciation and amortization 157,768 144,252
- ------------------------------------------------------------------------------------------------
Net property, plant and equipment 99,912 103,723
- ------------------------------------------------------------------------------------------------
Intangibles and other assets 73,160 66,928
- ------------------------------------------------------------------------------------------------
$ 425,490 $ 395,373
- ------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 31,256 $ 31,499
Notes payable 5,784 3,723
Income taxes 3,298 3,448
Accrued liabilities 50,535 44,455
Long-term debt due within one year 7,525 6,597
- ------------------------------------------------------------------------------------------------
Total current liabilities 98,398 89,722
- ------------------------------------------------------------------------------------------------
Long-term debt due after one year 63,239 51,756
- ------------------------------------------------------------------------------------------------
Postretirement benefits and other deferred items 64,074 58,123
- ------------------------------------------------------------------------------------------------
Shareholders' equity:
Serial preferred stock, $1.00 par value,
no shares issued --
Common stock, $1.25 par value, 24,568,000
shares issued (24,405,000 in 1995) 30,710 30,506
Capital in excess of par value 8,377 6,022
Retained earnings 189,390 158,754
- ------------------------------------------------------------------------------------------------
228,477 195,282
Treasury stock, 1,081,000 shares at cost (8,200 in 1995) (27,455) (210)
Foreign currency and other equity
adjustments (1,243) 700
- ------------------------------------------------------------------------------------------------
Total shareholders' equity 199,779 195,772
- ------------------------------------------------------------------------------------------------
$ 425,490 $ 395,373
================================================================================================
(See accompanying notes.)
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
Years ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 43,251 $ 30,672 $ 24,396
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 20,089 19,093 18,313
Loss (gain) on the sale of fixed assets 551 193 (345)
Change in assets and liabilities net of
effects of acquisitions:
Accounts receivable (10,794) (14,123) (4,841)
Inventories (8,799) (15,989) 2,908
Prepaid expenses (1,014) (2,184) 1,163
Accounts payable and accrued liabilities 7,112 13,968 (706)
Income taxes 147 2,031 (1,756)
Postretirement benefits and other deferred items 5,855 (200) (391)
Net deferred taxes (1,659) 657 (26)
Other (6,480) (2,280) (16)
- --------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 48,259 31,838 38,699
- --------------------------------------------------------------------------------------------------------
Investing activities:
Capital expenditures (16,852) (13,317) (14,363)
Payment for acquisitions, net of cash acquired 0 (12,217) (14,900)
- --------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (16,852) (25,534) (29,263)
- --------------------------------------------------------------------------------------------------------
Financing activities:
Net withdrawals (repayments) under lines-of-credit 2,280 (2,723) (4,873)
Payments on long-term debt (21,738) (6,188) (6,774)
Proceeds from long-term debt 36,296 12,061 10,056
Repurchase of common stock (27,838) (41) (4,919)
Proceeds from issuance of common stock 2,333 567 893
Dividends paid (12,615) (10,730) (9,895)
- --------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (21,282) (7,054) (15,512)
- --------------------------------------------------------------------------------------------------------
Effect of exchange rate changes (85) 559 (552)
- --------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 10,040 (191) (6,628)
Cash and cash equivalents at beginning of year 19,434 19,625 26,253
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 29,474 $ 19,434 $ 19,625
========================================================================================================
(See accompanying notes.)
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
UNAUDITED QUARTERLY FINANCIAL DATA
(dollars in thousands except per share data)
Net Cost Net Earnings
sales of sales earnings per share
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Quarter ended:
March 31, 1996 $ 149,193 $ 89,279 $ 10,114 $ 0.41
June 30, 1996 151,071 88,463 8,915 (a) 0.36 (a)
September 30, 1996 150,170 88,964 11,554 0.47
December 31, 1996 155,020 94,648 12,668 0.53
- -----------------------------------------------------------------------------------------
$ 605,454 $ 361,354 $ 43,251 (a) 1.77 (a)
=========================================================================================
Quarter ended:
March 31, 1995 $ 122,664 $ 72,456 $ 7,658 $ 0.31
June 30, 1995 131,096 78,522 8,022 0.32
September 30, 1995 132,913 80,657 9,046 0.37
December 31, 1995 146,053 85,671 5,946 (b) 0.24 (b)
- -----------------------------------------------------------------------------------------
$ 532,726 $ 317,306 $ 30,672 (b) 1.24 (b)
=========================================================================================
<FN>
(a) Net earnings in the second quarter of 1996 include restructuring
expenses of $3.0 million, or $.12 per share, related to consolidating
operations in Europe and Australia. Excluding restructuring expenses,
second quarter net earnings were $11.9 million, or $.48 per share, and
net earnings for the year ended December 31, 1996 were $46.3 million,
or $1.89 per share.
See Note 4 to Consolidated Financial Statements.
(b) Net earnings in the fourth quarter of 1995 include transaction
expenses of $4.4 million after tax, or $.18 per share, related to the
merger with Durametallic. Excluding transaction expenses, fourth
quarter net earnings were $10.3 million, or $.42 per share, and net
earnings for the year ended December 31, 1995 were $35.1 million, or
$1.42 per share. See Note 3 to Consolidated Financial Statements.
</TABLE>
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars presented in tables in thousands except per share data)
- ----------------------------------------------------------------
1. ORGANIZATION
The Duriron Company, Inc. ( the "Company") was incorporated under the
laws of the State of New York on May 1, 1912. The Company, headquartered in
Dayton, Ohio, is principally engaged in the design, manufacture and
marketing of fluid handling equipment, primarily pumps, valves and
mechanical seals, for industries that utilize difficult to handle and often
corrosive fluids in manufacturing processes. Based upon its analysis of
trade association data and other market information, the Company considers
itself a leading supplier of corrosion resistant fluid movement and control
equipment to the basic chemical industry. The Company markets its products
on a global basis. With respect to a majority of its products, the
Company's domestic operations supply each other and the company's foreign
manufacturing subsidiaries with components and subassemblies.
<PAGE> 23
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of the Company and its wholly and
majority-owned subsidiaries. All significant intercompany transactions
have been eliminated. Investments in unconsolidated affiliated
companies, which represent all non-majority ownership interests, are
carried on the equity basis, which approximates the Company's equity in
their underlying net book value.
BUSINESS COMBINATIONS - Business combinations which have been
accounted for under the pooling of interests method of accounting
combine the assets, liabilities, and stockholders' equity of the
acquired entity with the Company's respective accounts at recorded
values. Prior period financial statements have been restated to give
effect to the merger.
Business combinations which have been accounted for under the
purchase method of accounting include the results of operations of the
acquired business from the date of acquisition. Net assets of the
companies acquired are recorded at their fair value to the Company at
the date of acquisition.
CASH EQUIVALENTS - Cash equivalents represent short-term
investments with an original maturity of three months or less when
purchased which are highly liquid with principal values that are not
subject to significant risk of change due to interest rate
fluctuations.
ACCOUNTS RECEIVABLE - Accounts receivable are stated net of the
allowance for doubtful accounts of $1,547,000 and $1,408,000 at
December 31, 1996 and 1995, respectively.
INVENTORIES - Inventories are stated at the lower-of-cost or
market. Cost is determined for all domestic inventories by the last-in,
first-out (LIFO) method and for foreign inventories by the first-in,
first-out (FIFO) method.
FINANCIAL INSTRUMENTS - Gains and losses on hedges of existing
assets or liabilities are included in the carrying amounts of those
assets or liabilities and are ultimately recognized in income as part
of those carrying amounts. Gains and losses related to hedges of
anticipated transactions are recognized in income as the transactions
occur.
The carrying amounts of the Company's financial instruments
approximate fair value as defined under Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of
Financial Instruments." Fair value is estimated by reference to quoted
prices by financial institutions, as well as through other valuation
techniques.
RETIREMENT BENEFIT COSTS - Defined benefit pension expense and
postretirement benefit expense are based on independent actuarial
valuations assuming current and prior service costs are recognized over
employees' expected service periods.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Property, plant
and equipment is stated on the basis of cost. Depreciation is computed
by the straight-line method based on the estimated useful lives of the
depreciable assets for cost and by accelerated methods for income tax
purposes.
INTANGIBLES AND OTHER ASSETS - Excess cost over the fair
value of net assets acquired (or goodwill) generally is amortized on a
straight-line basis over 15-40 years. The carrying value of goodwill
will be reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the
entity acquired over the remaining amortization period, the
<PAGE> 24
Company's carrying value of the goodwill will be reduced by the estimated
shortfall of cash flows.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the
Company's foreign affiliates, other than those located in highly
inflationary countries, are translated at current exchange rates, while
income and expenses are translated at average rates for the period. For
entities in highly inflationary countries, a combination of current and
historical rates is used to determine currency gains and losses
resulting from financial statement translation and those resulting from
transactions. Translation gains and losses are reported as a component
of stockholders' equity, except for those associated with highly
inflationary countries which are reported directly in the consolidated
statements of income.
STOCK-BASED COMPENSATION - The Company elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related interpretations in accounting for its
employee stock options because the alternative fair value accounting
provided for under SFAS No. 123, "Accounting for Stock-Based Compensation,"
required use of option valuation models that were not developed for use in
valuing employee stock options. Under APB No. 25, no compensation expense
is recorded because the exercise price of the Company's stock options
equals the market price of the underlying stock on the date of grant.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
BASIS OF COMPARISON - Certain amounts in 1995 and 1994 financial
statements and footnotes have been reclassified to permit comparison with the
1996 presentation.
<PAGE> 25
3. MERGERS AND ACQUISITIONS
POOLING TRANSACTION - On November 30, 1995, Durametallic Corporation
was merged with and into a subsidiary of the Company. Durametallic, a privately
held corporation headquartered in Kalamazo, Michigan prior to the merger, is a
leading manufacturer of mechanical seals and sealing systems. The Company
exchanged 5,344,868 shares of common stock for all outstanding shares of
Durametallic. Additionally, 125,283 shares of the Company's common stock were
reserved for outstanding stock options issued by Durametallic and assumed by the
Company. The merger was accounted for under the pooling of interests method of
accounting, and accordingly, the accompanying consolidated financial statements
have been restated for all periods prior to the acquisition to include the
financial position, results of operations and cash flows of Durametallic. Net
sales and net earnings for the individual entities are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1995 1994
------------------------------
<S> <C> <C>
Total sales
Duriron $ 398,994 $ 345,388
Durametallic 135,999 116,557
Less intercompany sales (2,267) (1,438)
============ ------------
$ 532,726 $ 460,507
============ ============
Net earnings
Duriron $ 26,410 $ 17,158
Durametallic 8,661 7,238
Merger expenses (4,399) --
------------ ------------
$ 30,672 $ 24,396
============ ============
</TABLE>
In connection with the merger of the Company and Durametallic, merger
transaction expenses of $4,399,000 after tax, or $.18 per share, were recognized
in 1995.
PURCHASE TRANSACTIONS - On August 31, 1995, Durametallic purchased
Pac-Seal and two affiliated companies. Pac-Seal, located in Burr Ridge,
Illinois, is a manufacturer of mechanical seals used primarily in water pump
applications. The acquisition was funded through the combination of internal
cash and long-term borrowings.
On April 28, 1994, the Company purchased Sereg Vannes S.A., an
automatic control valve company headquartered in Thiers, France. The acquisition
was funded with the combination of internal cash and long-term borrowings.
<PAGE> 26
On January 5, 1994, the Company purchased the valve actuator business
of Mecair SpA in Milan, Italy, and its associated companies in Limburg, Germany;
Alton Hampshire, England; and Gennevilliers, France. The acquisition was funded
through the utilization of internal cash.
The aforementioned 1995 and 1994 purchase transactions were not
material, either individually or in the aggregate by year, therefore, no pro
forma information is presented for these acquisitions.
<PAGE> 27
4. RESTRUCTURING
The Company recognized a restructuring charge of $5,778,000 before
income taxes, or $.12 per share after tax, during the second quarter of 1996 to
restructure its recently acquired Durametallic operations in Europe and
Australia. Durametallic operations in Belgium, Germany, Italy, France and
Australia were combined with larger and more efficient Duriron facilities during
the second half of 1996. The restructuring was a part of the plan to obtain
positive synergies between the two companies. The savings associated with the
plan will be immediate since the facilities had been unprofitable for many years
and fixed operating costs will be permanently reduced. Annual savings associated
with the restructuring will amount to approximately $1.5 million. The
restructuring plan is expected to result in the termination of 55 employees at a
cost of $3.2 million. In addition, exit costs associated with the plant closings
are estimated at $2.6 million. The restructuring activities are expected to be
funded with operating cash flows. Additional costs to fully implement the
reorganization plan in continuing processes were recorded as period costs and
categorized into cost of sales and administrative expense in the latter half of
1996. These additional costs related to moving equipment and cross-training
employees to support ongoing operations at the Duriron facilities. Through
December 31, 1996, termination fees for 42 employees of $2.1 million and exit
costs of $1.7 million were paid. The remainder of the termination fees and exit
costs accrued in 1996 are expected to be incurred during the first half of 1997
with minimal changes in estimate from the original accrual.
<PAGE> 28
5 INVENTORIES
Inventories at December 31, 1996 and 1995 and the method of determining
cost were as follows:
<TABLE>
<CAPTION>
Domestic Foreign
inventories inventories Total
(LIFO) (FIFO) inventories
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1996:
Raw materials $ 2,285 $ 3,339 $ 5,624
Work in process
and finished goods 52,613 42,833 95,446
- --------------------------------------------------------------------------------
$ 54,898 $ 46,172 $ 101,070
================================================================================
December 31, 1995:
Raw materials $ 2,642 $ 2,476 $ 5,118
Work in process
and finished goods 48,857 39,180 88,037
- --------------------------------------------------------------------------------
$ 51,499 $ 41,656 $ 93,155
================================================================================
</TABLE>
LIFO inventories at current cost were $38,039,000 and $36,127,000
higher than reported at December 31, 1996 and 1995, respectively.
<PAGE> 29
<TABLE>
<CAPTION>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1996 and 1995 were as
follows:
<S> <C> <C> <C>
1996 1995
- -------------------------------------------------------------------------------
Land $ 4,457 $ 4,559
Buildings 57,127 56,945
Machinery and equipment 152,782 148,795
Furniture and fixtures 43,314 37,676
- -------------------------------------------------------------------------------
$ 257,680 $ 247,975
===============================================================================
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
7. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets at December 31, 1996 and 1995 were as
follows:
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Cost in excess of fair value of
tangible net assets acquired $ 37,440 $ 38,810
Amortization of intangibles (5,079) (4,253)
Pension assets 7,832 7,885
Deferred tax assets 9,408 5,969
Deferred compensation funding 6,999 4,634
Investments in unconsolidated affiliates 5,100 4,582
Patents 4,623 4,704
Other 6,837 4,597
- -----------------------------------------------------------------------------
$ 73,160 $ 66,928
==============================================================================
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
8. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1996 and 1995 were as follows:
1996 1995
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Wages and other compensation $ 28,393 $ 26,397
Other 22,142 18,058
- --------------------------------------------------------------------------------
$ 50,535 $ 44,455
===============================================================================
</TABLE>
<PAGE> 32
9. Debt and dividend restrictions
Long-term debt, including capital lease obligations, at December 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
7.04% loan due 2006 $36,000 $ -
8.94% loan due annually
through 2001 19,836 24,529
Floating rate revolving notes 5,900 20,820
7.45% loan due quarterly
through 1999 5,722 6,743
Capital lease obligations 1,236 1,941
Other, various maturities
and rates 2,070 4,320
------ ------
70,764 58,353
Less amounts due within one year 7,525 6,597
------ ------
$63,239 $51,756
======= =======
</TABLE>
Interest paid amounted to $4,840,000, $4,957,000 and $4,418,000 in
1996, 1995 and 1994, respectively.
Maturities of long-term debt, including capital lease obligations for
each of the four years subsequent to 1997, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 $6,781
1999 $7,968
2000 $4,739
2001 $3,022
</TABLE>
In 1996, the Company entered into a $100,000,000 revolving credit
agreement. This facility will be used to fund the stock repurchase program, to
provide for future capital needs and to allow for the consolidation of existing
bilateral credit arrangements. Concurrent with the signing of the credit
agreement, the Company entered into swap agreements totaling $50,000,000 to fix
an interest rate of 7.04% for a period of 10 years.
The 8.94% loan is a U.S. dollar private placement which was effectively
converted to a deutsche mark obligation through a currency swap agreement. The
currency swap is a hedge of the net investment in a German subsidiary.
Unrealized gains and losses on the hedge are not recognized in income, but are
shown in the cumulative translation adjustment account included in shareholders'
equity with the related amounts due to and from the counterparty included in
long-term debt. The maturity and repayment terms of the swap match precisely the
maturity and repayment term of the underlying debt.
Long-term debt agreements require the company to maintain specified
levels of tangible net worth and restrict the payment of cash dividends.
Approximately, $30,281,000 and $28,543,000 of consolidated retained earnings
were unrestricted for the payment of dividends at December 31, 1996, and 1995,
respectively. Under current covenants, dividends are limited to $27,000,000 plus
common stock issued and 50% of defined net earnings subsequent to September 30,
1996.
<PAGE> 33
At December 31, 1996 and 1995, the Company had short term credit
facilities available from banks under which it could borrow, at local market
rates up to $30,941,000 and $32,830,000, respectively. Under these facilities,
the Company had $5,784,000 and $3,723,000 in borrowings outstanding at December
31, 1996 and 1995, respectively. The weighted average interest rate on these
borrowings at December 31, 1996 and 1995, was 4.3% and 5.3%, respectively. In
both years, these borrowings were used primarily to support the operations of
foreign subsidiaries. Additionally, at December 31, 1996, the Company had
$64,000,000 available under the revolving credit agreement.
<PAGE> 34
<TABLE>
<CAPTION>
10. POSTRETIREMENT BENEFITS AND OTHER DEFERRED ITEMS
Deferred postretirement benefits and other deferred items at December
31, 1996 and 1995 were as follows:
1996 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Postretirement benefits $ 47,577 $ 47,185
Deferred compensation 6,999 4,634
Other 9,498 6,304
- -------------------------------------------------------------------------
$ 64,074 $ 58,123
=========================================================================
</TABLE>
<PAGE> 35
11. LEASES AND RENTALS
Assets subject to capitalized leases and included in property, plant
and equipment at cost amounted to $7,056,000 in 1996 and $7,320,000 in 1995.
Accumulated amortization for the capitalized leases amounted to $5,915,000
in 1996 and $6,019,000 in 1995.
The minimum rental commitments as of December 31, 1996 for all
noncancelable leases were as follows:
<TABLE>
<CAPTION>
Operating Capital
leases leases
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $ 6,894 $ 794
1998 4,441 531
1999 2,950 53
2000 1,303 1
2001 898 --
2002 and subsequent 1,691 --
- ---------------------------------------------------------------------------
Total minimum lease payments $ 18,177 1,379
===========================================================================
Less amount representing interest on capital leases 143
- ---------------------------------------------------------------------------
Present value of minimum capital lease payments $ 1,236
============================================================================
</TABLE>
Total rental expense amounted to $9,499,000 , $8,490,000 and $8,065,000
in 1996, 1995 and 1994, respectively.
<PAGE> 36
12. CONTINGENCIES
The Company is involved as a "potentially responsible party"at five
former public waste disposal sites which may be subject to remediation under
pending government procedures. The sites are in various stages of evaluation by
federal and state environmental authorities. The projected cost of remediating
these sites, as well as the Company's alleged "fair share" allocation, is
uncertain and speculative until all studies have been completed and the parties
have either negotiated an amicable resolution or the matter has been judicially
resolved. At each site, there are many other parties who have similarly been
identified, and the identification and location of additional parties is
continuing under applicable federal or state law. Many of the other parties
identified are financially strong and solvent companies which appear able to pay
their share of the remediation costs. Based on the Company's preliminary
information about the waste disposal practices at these sites and the
environmental regulatory process in general, the Company believes that it is
likely that ultimate remediation liability costs for each site will be
apportioned among all liable parties, including site owners and waste
transporters, according to the volumes and/or toxicity of the wastes shown to
have been disposed of at the sites.
The Company is a defendant in numerous pending lawsuits (which include,
in many cases, multiple claimants) which seek to recover damages for alleged
personal injury allegedly resulting from exposure to asbestos containing
products formerly manufactured and distributed by the Company. All such products
were used within self-contained process equipment, and management does not
believe that there was any emission of ambient asbestos fiber during the use of
this equipment. The Company has resolved numerous claims at an average of about
$106 per claim, the cost of which was fully paid by insurance. The Company
continues to have a substantial amount of available insurance from financially
solvent carriers to cover the cost of both defending and resolving the claims.
The Company is also a defendant in several other products liability
lawsuits which are insured, subject to the applicable deductibles, and certain
other non-insured lawsuits received in the ordinary course of business. The
Company has fully accrued the estimated loss reserve for each such lawsuit. No
insurance recovery has been projected for any of the insured claims because
management currently believes that all will be resolved within applicable
deductibles.
Although none of the aforementioned gives rise to any additional
liability that can now be reasonably estimated, it is possible that the Company
could incur additional costs in the range of $250,000 to $1,000,000 over the
upcoming five years to fully resolve these matters. Although the Company has
accrued the minimum end of this range as a precaution, management has no current
reason to believe that any such additional costs are probable or quantifiable.
The Company will continue to evaluate these contingent loss exposures and, if
they develop, recognize expense as soon as such losses can be reasonably
estimated.
<PAGE> 37
13. SHAREHOLDERS' EQUITY
At December 31, 1996 and 1995, the Company had 60,000,000 shares of
common stock, $1.25 par value, and 1,000,000 shares of $1.00 preferred stock
authorized.
In July of 1996 the Company updated and extended the expiration of the
shareholder rights plan. Each share of the Company's common stock contains a
preferred stock purchase right. These rights are not currently exercisable and
trade in tandem with the common stock. The rights, in general, become
exercisable and trade separately in the event of certain significant changes in
common stock ownership or on the commencement of certain tender offers which in
either case, may lead to a change of control of the Company. Upon becoming
exercisable, the rights provide shareholders the opportunity to acquire a new
series of Company preferred stock to be then automatically issued at a
pre-established price. In the event of certain forms of acquisition of the
Company, the rights also provide Company shareholders the opportunity to
purchase shares of the acquiring company's common stock from the acquirer at a
50% discount from the current market value. The rights are redeemable for $.022
per right by the Company at any time prior to becoming exercisable and will
expire in August, 2006.
At December 31, 1996, approximately 1,196,000 shares of common stock
were reserved for exercise of stock options and for grants of restricted stock.
<PAGE> 38
14. STOCK PLANS
The Company maintains a shareholder approved stock option plan which
provided for the grant of 1,125,000 options to purchase shares of the Company's
common stock. At December 31, 1996, approximately 88,000 options remain
available for grant. Options have been granted to officers and employees to
purchase shares of common at a price not less that the fair market value of the
date of grant. Generally, these options become exercisable over staggered
periods, but may not be exercised after 10 years from the date of the grant. The
plan provides that any option may include a stock appreciation right, however,
none have been granted since 1989.
The aggregate number of shares exercisable were 547,683, 570,601 and
455,139 at December 31, 1996, 1995 and 1994, respectively.
<TABLE>
<CAPTION>
Average
Stock option price
options per share
- -----------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
December 31, 1993 805,592 $ 11.50
Options granted 172.599 14.81
Options exercised (83,833) 7.18
Options canceled (36,071) 12.03
- ----------------------------------------------
Outstanding at
December 31, 1994 858,287 12.57
Options granted 121,364 27.05
Options exercised (75,976) 8.69
Options canceled (9,676) 11.77
- ----------------------------------------------
Outstanding at
December 31, 1995 893,999 14.87
Options granted 193,000 26.40
Options exercised (149,471) 9.37
- ----------------------------------------------
Outstanding at
December 31, 1996 937,528 $ 18.12
==============================================
</TABLE>
The exercise price of options outstanding at December 31, 1996 ranged from $5.95
to $26.75. The weighted average contractual life of options outstanding is 6.7
years.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company has accounted for its stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Binomial option
pricing model (a modified Black-Scholes model) with the following
weighted-average assumptions for 1995 and 1996. The risk free interest rate was
6.2%, the dividend yield was 2.1%, the expected volatility of the Company's
common stock was 36.6% and the weighted average expected life of the option was
6.75 years. During 1995 and 1996, options were granted which had a weighted
average fair value on date of grant of $10.68 and $10.42, respectively.
<PAGE> 39
Option valuation models were developed for use in estimating the fair
value of traded options which have no vesting restrictions and are freely
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, existing
models do not provide a reliable single measure of the fair value of its
options.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options vesting periods. The Company's
pro forma information follows (in thousands except for per share information):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Pro forma net income $42,680 $30,622
Pro forma earnings per share $1.75 $1.24
</TABLE>
The effects of providing pro forma disclosure are not indicative of future
amounts until the new rules are applied to all outstanding nonvested awards.
The restricted stock plan was shareholder approved and authorized the
grant of up to 337,500 share of the Company's common stock. In general, the
shares cannot be transferred for a period of not less than one nor more than ten
years and are subject to forfeiture during the restriction period. The fair
value of the shares is amortized to compensation expense over the periods in
which the restrictions lapse. Restricted stock grants of 29,900, 4,100 and 2,400
shares were made in 1996, 1995 and 1994, respectively. The weighted average fair
value of the restricted stock grants at date of grant were $25.84, $22.28 and
$16.38 per share, respectively. Total compensation expense recognized in the
income statement for all stock based awards was $584,000 , $193,000 and $177,000
for 1996, 1995 and 1994 respectively.
<PAGE> 40
<TABLE>
<CAPTION>
15. INCOME TAXES
Earnings before income taxes consist of the following components:
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes:
<S> <C> <C> <C>
United States $41,060 $33,394 $31,533
Foreign 23,091 16,728 7,038
- ----------------------------------------------------------------------------------------------------------------------------
$64,151 $50,122 $38,571
============================================================================================================================
</TABLE>
Significant components of the provision for income taxes attributable
to continuing operations are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $13,940 $13,887 $9,900
Foreign 5,396 5,649 2,529
State and local 2,649 1,697 1,041
- ----------------------------------------------------------------------------------------------------------------------------
Total current 21,985 21,233 13,470
- ----------------------------------------------------------------------------------------------------------------------------
Deferred:
United States (1,112) (1,629) 614
Foreign 73 (41) 52
State and local (46) (113) 39
- ----------------------------------------------------------------------------------------------------------------------------
Total deferred (1,085) (1,783) 705
- ----------------------------------------------------------------------------------------------------------------------------
$20,900 $19,450 $14,175
============================================================================================================================
</TABLE>
Income taxes paid amounted to $21,413,000, $19,508,000 and $13,476,000
during 1996, 1995 and 1994, respectively.
The reasons for the differences between the effective tax rate and the
U.S. federal income tax rate were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal income tax rate 35.0% 35.0% 35.0%
Foreign tax rate differential and utilization
of operating loss carryforwards (4.0) (.5) .7
Merger transaction expenses - 2.3 -
State and local income taxes, net
of federal income tax benefit 2.7 2.2 1.8
Other net (none more than 1.75%) (1.1) (.2) (.7)
- ------------------------------------------------------------------------------------------------------------------------------
Effective tax rate 32.6% 38.8% 36.8%
===============================================================================================================================
</TABLE>
<PAGE> 41
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities as of December
31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
Deferred tax assets related to:
<S> <C> <C>
Postretirement benefits $17,603 $17,445
Net operating loss carryforwards 4,398 5,530
Compensation accruals 4,151 3,381
Foreign tax credit carryforwards 949 1,344
Capital loss carryforwards 1,263 1,263
Other 6,070 4,648
- -----------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 34,434 33,611
Less valuation allowances 6,250 7,990
- -----------------------------------------------------------------------------------------------------------------------------
Net deferred tax assets 28,184 25,621
- -----------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities related to:
Depreciation 7,973 8,307
Pension benefits 2,426 2,466
Other 3,904 3,967
- -----------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 14,303 14,740
- -----------------------------------------------------------------------------------------------------------------------------
Deferred tax asset, net of liabilities $13,881 $10,881
==============================================================================================================================
</TABLE>
The Company has recorded valuation allowances to reflect the estimated
amount of deferred tax assets which may not be realized due to the expiration of
net operating loss, foreign tax credit and capital loss carryforwards. The
change in the valuation allowances for the year ended December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Net operating Foreign Capital
losses tax credits losses
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance at December 31, 1995 $ 5,383 $ 1,344 $ 1,263
Utilization of carryforwards (3,014) - -
Increase in expected nonutilization 1,969 123 -
Expiration of carryforwards (300) (518) -
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 4,038 $ 949 $ 1,263
================================================================================================================================
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries amounted
to approximately $44,000,000 at December 31, 1996. These earnings are considered
to be indefinitely reinvested and, accordingly, no additional United States
income taxes or foreign withholding taxes have been provided.
<PAGE> 42
16. RESEARCH AND DEVELOPMENT
Research and development expense amounted to $7,912,000, $7,032,000 and
$8,642,000 in 1996, 1995 and 1994, respectively.
<PAGE> 43
17. RETIREMENT BENEFITS
The Company sponsors several noncontributory defined benefit pension
plans, covering approximately 40% of domestic employees, which provide benefits
based on years of service and compensation. Retirement benefits for all other
employees are provided through defined contribution pension plans and government
sponsored retirement programs. All defined benefit pension plans are funded
based on independent actuarial valuations to provide for current service and an
amount sufficient to amortize unfunded prior service over periods not to exceed
thirty years.
Net defined benefit pension expense (income) for 1996,1995 and 1994
included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 1,727 $ 1,773 $ 1,660
Interest cost on projected
benefit obligations 4,245 4,306 4,157
Actual loss (gain) on plan assets (9,935) (15,164) 405
Net amortization and deferral 4,167 8,635 (6,297)
- -----------------------------------------------------------------------------------------------------------------------------
Net defined benefit pension expense (income) $ 204 $ (450) $ (75)
=============================================================================================================================
</TABLE>
The following table presents defined benefit pension plan funded status
and amounts recognized in the Company's consolidated balance sheet at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefits $45,013 $46,631
Nonvested benefits 6,877 6,509
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations 51,890 53,140
Projected future compensation increases 8,474 7,642
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations 60,364 60,782
Less plan assets, at fair value 82,620 76,727
- -----------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligations 22,256 15,945
Unrecognized net transition asset (2,399) (2,984)
Unrecognized net gain (15,674) (8,553)
Unrecognized prior service cost 2,105 2,198
- -----------------------------------------------------------------------------------------------------------------------------
Net pension asset $ 6,288 $ 6,606
=============================================================================================================================
</TABLE>
The average discount rate and the assumed rate of increase in future
compensation levels used in determining the actuarial present value of benefit
obligations were 7.5% and 5.0%, respectively. The expected long-term rate of
return on plan assets was 8.0%. Plan assets include marketable equity
securities, corporate and government debt securities, insurance company
contracts and real estate.
<PAGE> 44
The Company sponsors several defined contribution pension plans
covering substantially all domestic and Canadian employees and certain other
foreign employees. Employees may contribute to these plans and these
contributions are matched in varying amounts by the Company. The Company may
also make additional contributions to eligible employees. Defined contribution
pension expense for the Company was $5,803,000, $5,966,000 and $4,236,000 for
1996, 1995 and 1994, respectively.
The Company also sponsors several defined benefit postretirement health
care plans covering approximately 65% of future retirees and most current
retirees in the United States. These medical and dental benefits are provided
through insurance companies and health maintenance organizations, include
participant contributions, deductibles, co-insurance provisions and other
limitations, and are integrated with Medicare and other group plans. The plans
are funded as insured benefits and health maintenance organization premiums are
incurred.
Net postretirement benefit expense for 1996, 1995 and 1994 included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 602 $ 651 $ 666
Interest cost on accumulated postretirement
benefit obligations 2,667 2,715 2,625
Net amortization and deferral (741) (678) (679)
- -----------------------------------------------------------------------------------------------------------------------------
Net postretirement benefit expense $ 2,528 $ 2,688 $ 2,612
=============================================================================================================================
</TABLE>
The following table presents postretirement benefit amounts recognized
in the Company's consolidated balance sheet at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligations:
Retirees $19,955 $19,048
Active employees eligible to retire 5,364 4,169
Active employees not eligible to retire 12,446 15,264
- -----------------------------------------------------------------------------------------------------------------------------
Total 37,765 38,481
Unrecognized prior service cost 5,102 5,773
Unrecognized net gain 4,710 2,931
- -----------------------------------------------------------------------------------------------------------------------------
Deferred postretirement benefits $47,577 $47,185
=============================================================================================================================
</TABLE>
The average discount rate used in determining accumulated
postretirement benefit obligations was 7.5%. The assumed annual rates of
increase in per capita costs were, for periods prior to Medicare, 9% for 1996
and 8.5% for 1997 with a gradual decrease to 6% for 2002 and future years and,
for periods after Medicare, 7% for 1996 and 6.5% for 1997 with a gradual
decrease to 5% for 2000 and future years. Increasing the assumed rate of
increase in postretirement benefit costs by 1% in each year would increase net
postretirement benefit expense by approximately $387,000 and accumulated
postretirement benefit obligations by $3,810,000.
<PAGE> 45
18. FOREIGN CURRENCY TRANSLATION
The foreign currency translation equity adjustments consist of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S><C> <C> <C> <C>
Current year translation adjustment $ (1,124) $ 951 $ 2,026
Foreign currency translation
equity adjustment:
Beginning of year 1,283 332 (1,694)
- --------------------------------------------------------------------------------
End of year $ 159 $ 1,283 $ 332
================================================================================
</TABLE>
<PAGE> 46
19. OPERATIONS IDENTIFIED BY GEOGRAPHIC AREA
The Company operates in predominately one business segment, fluid
movement and control equipment (pumps, valves, seals and related equipment).
Transfers between geographic areas are accounted for primarily at cost
plus a profit margin. Operating profit consists of revenues less certain
costs and expenses. In determining operating profit none of the following
items have been added or deducted: unallocated general corporate expense,
interest expense and income taxes. Identifiable assets are those assets of
the Company that are identifiable with the operations in each geographic
area. Unallocated general corporate assets principally reflect future tax
benefits.
No individual country within the below listed geographic segments
represents 10% or more of the consolidated Company's revenues from sales to
unafilliated customers or its identifiable assets. The Other geographic
segment includes Canada, Latin and South America and the Asia Pacific.
Export sales from the United States to foreign unaffiliated customers
were $49,842,000, $27,068,000 and $27,143,000 in 1996, 1995 and 1994,
respectively.
<TABLE>
<CAPTION>
Financial information by geographic area follows:
Years ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------
Revenues:
<S> <C> <C> <C>
United States $ 401,309 $ 354,547 $ 320,086
Europe 119,018 106,997 83,654
Other 85,127 71,182 56,767
- ------------------------------------------------------------------------------------------
Consolidated totals $ 605,454 $ 532,726 $ 460,507
- ------------------------------------------------------------------------------------------
Inter-geographic transfers:
United States $ 39,638 $ 36,276 $ 24,369
Europe 16,016 19,516 11,662
Other 1,431 1,458 996
Eliminations & adjustments (57,085) (57,250) (37,027)
- ------------------------------------------------------------------------------------------
Consolidated totals $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------
Total revenues & transfers:
United States $ 440,947 $ 390,823 $ 344,455
Europe 135,034 126,513 95,316
Other 86,558 72,640 57,763
Eliminations & adjustments (57,085) (57,250) (37,027)
- ------------------------------------------------------------------------------------------
Consolidated totals $ 605,454 $ 532,726 $ 460,507
==========================================================================================
Operating profit:
United States $ 54,721 $ 47,859 $ 37,977
Europe 8,535 10,485 4,857
Other 10,824 7,081 2,654
Eliminations & adjustments (123) (774) 271
- ------------------------------------------------------------------------------------------
Consolidated totals 73,957 64,651 45,759
Corporate expense 4,885 9,350 2,287
Interest expense 4,921 5,179 4,901
- ------------------------------------------------------------------------------------------
Earnings before income taxes $ 64,151 $ 50,122 $ 38,571
==========================================================================================
Identifiable assets:
United States $ 259,267 $ 247,125 $ 212,509
Europe 112,613 101,817 88,405
Other 52,118 50,331 44,060
Eliminations & adjustments (17,080) (18,039) (13,250)
- ------------------------------------------------------------------------------------------
Consolidated totals 406,918 381,234 331,724
General corporate assets 18,572 14,139 12,542
- ------------------------------------------------------------------------------------------
Total assets $ 425,490 $ 395,373 $ 344,266
==========================================================================================
</TABLE>
In 1996, 1995 and 1994 foreign currency transaction gains/(losses) of
approximately $624,000, $217,000 and ($1,150,000), respectively, were
included in earnings before income taxes.
<PAGE> 47
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
The Duriron Company, Inc.
We have audited the accompanying consolidated balance sheet of The
Duriron Company, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
include the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Duriron Company, Inc. at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information set
forth therein.
Ernst & Young LLP
Dayton, Ohio
February 5, 1997
<PAGE> 48
REPORT OF MANAGEMENT
The Company's management has prepared and is responsible for the
consolidated financial statements and information included in this Annual
Report. The financial statements were prepared in accordance with generally
accepted accounting principles and present fairly the Company's financial
position and results of operations. Such statements necessarily include amounts
based on judgments and estimates by management.
Internal accounting control systems have been designed and implemented
over the years and transactions are executed in accordance with management's
authorizations. These internal control systems provide reasonable assurance that
the financial statements and information included in this report properly
reflect transactions of the Company. The Company also maintains an internal
auditing function which evaluates and formally reports on the adequacy and
effectiveness of internal accounting controls, policies and procedures.
The Board of Directors has an Audit/Finance Committee composed of five
members who are non-employee Directors of the Company. The Audit/Finance
Committee met a total of four times during 1996. The Committee regularly meets
(jointly and separately) with representatives of the independent auditors, the
internal auditors and management.
The Company's consolidated financial statements have been audited by
Ernst & Young LLP, who have expressed their opinion with respect to the fairness
of these statements. Their audit included a review of internal controls and
testing of transactions and records that they consider necessary in the
circumstances.
William M. Jordan Bruce E. Hines
Chairman of the Board, Senior Vice President and
President and Chief Administrative Officer
Chief Executive Officer
<PAGE> 49
ITEM 9. NOT APPLICABLE
<PAGE> 50
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
Officers are, in general, appointed annually to their
respective positions at the April meeting of the Board of Directors. The
executive officers and other officers of the Company at March 1, 1997 were as
follows:
William M. Jordan, Chairman, President and Chief Executive Officer, Director
Bruce E. Hines, Senior Vice President and Chief Administrative Officer
Thomas E. Haan, Group Vice President - Fluid Sealing Group
George A. Shedlarski, Group Vice President - Rotating Equipment Group
Mark E. Vernon, Group Vice President - Industrial Products Group
Reid B. Wayman, Group Vice President - Flow Control Group
Ronald F. Shuff, Vice President - Secretary and General Counsel
Cheryl D. McNeal, Vice President - Human Resources
Gregory L. Smith, Treasurer
Kathleen A. Giddings, Controller
WILLIAM M. JORDAN, 53, was elected President and Chief
Executive Officer in 1993 and a Director in 1991. He was additionally elected
Chairman of the Board on April 25, 1996. Mr. Jordan became Executive Vice
President in 1990 and President in 1991. He was Chief Operating Officer from
1990 to 1993. From 1984 until 1991, Mr. Jordan was the Group Vice President of
International Operations, and he was the Assistant Group Vice President
International Operations in 1983. From 1979 to 1983, he was Vice President and
General Manager of Duriron Canada Inc. Mr. Jordan joined the Company in 1972 as
a sales engineer and held various sales positions prior to 1979.
BRUCE E. HINES, 53, who rejoined the Company in 1989, was then
elected Senior Vice President and added the position of Chief Administrative
Officer in 1990. He previously had served as President of Vernay Labs, a
manufacturer of precision rubber components. Prior to joining Vernay Labs, Mr.
Hines had served in a variety of financial positions with the Company for
nineteen years. He also functions as Chief Financial Officer.
THOMAS E. HAAN, 47, was elected a Group Vice President
effective January 1, 1996. He is responsible for the global operations of the
Company's mechanical seal and sealing system products which are marketed under
the "Durametallic" trade name. In 1970, he joined Durametallic. He was elected
to the following Durametallic offices: a Vice President in 1985, Senior Vice
President in 1990 and Executive Vice President - Chief Operating Officer in
1993.
GEORGE A. SHEDLARSKI, 53, was elected a Group Vice President
in 1987 and is responsible for the Company's worldwide pump operations, its
foundry and for certain foreign operations. From 1984 until becoming a Group
Vice President, Mr. Shedlarski was President of the Filtration Systems Division.
From 1983 to 1984, he served as President and General Manager of Duriron Canada
Inc. Mr. Shedlarski joined the Company in 1972 as a filtration product
specialist and held various sales and managerial positions prior to 1983.
48
<PAGE> 51
MARK E. VERNON, 44, was elected a Group Vice President in
1993. He is responsible for the worldwide operations of the Company's quarter
turn valve and valve actuator businesses and certain foreign operations. He was
President of the Company's Valtek Inc. subsidiary from 1991 to 1993 and Senior
Vice President of Valtek from 1988 to 1990. Mr.
Vernon joined Valtek Incorporated in 1978.
REID B. WAYMAN, 44, was elected a Group Vice President
effective March 1, 1997. He is responsible for the Company's global control
valve operations. He served most recently as Vice President of Sales and
European Operations of the Company's Rotating Equipment Group and as Vice
President-European Operations of its Flow Control Group. He joined the Company
in 1975.
RONALD F. SHUFF, 44, was elected Vice President - Secretary
and General Counsel of the Company in 1990. He joined the Company in 1988 as
General Counsel and Assistant Secretary. Mr. Shuff became General Counsel and
Secretary in 1989. He also is responsible for corporate development matters.
CHERYL D. MCNEAL, 46, joined the Company in April, 1996 as
Vice President Human Resources. She had previously served in a series of
progressively more responsible human resources management positions at NCR
Corporation for eighteen years.
GREGORY L. SMITH, 43, was elected Treasurer in 1987. He joined
the Company in 1975. From 1985 until assuming his present position, he was
Assistant Treasurer and, prior to becoming Assistant Treasurer, he was Manager
of Corporate Tax.
KATHLEEN A. GIDDINGS, 34, was elected Controller in 1993. She
joined the Company in 1985. She has served the Company in a number of financial
management positions, including Director of Financial Reporting and Corporate
Controller in 1993, Manager Financial Accounting from 1990 to 1992, Supervisor
Financial Accounting in 1989 and Financial Accountant from 1985 to 1989.
Additional information required by this Item 10 is
incorporated herein by this reference from the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information required by this Item 11 is set forth in the
Proxy Statement and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- -------- ---------------------------------------------------
MANAGEMENT
----------
The information required by this Item 12 is set forth in the
Proxy Statement and is incorporated herein by this reference.
49
<PAGE> 52
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information required by this Item 13 is set forth to the
extent applicable in the Proxy Statement and is incorporated herein by this
reference.
50
<PAGE> 53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
- -------- ----------------------------------------------------
ON FORM 8-K
-----------
(a) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are
incorporated herein by this reference as part of this Report at Item 8 hereof.
Report of Independent Auditors
Consolidated Statement of Income for the years ended December 31, 1996,
1995 and 1994
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Consolidated Balance Sheet at December 31, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
(a) (2) FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
(a) (3) EXHIBITS
See INDEX to EXHIBITS
(b) REPORTS ON FORM 8-K
None
51
<PAGE> 54
<TABLE>
<CAPTION>
THE DURIRON COMPANY, INC.
Schedule II - Valuation and Qualifying Accounts
(dollars in thousands )
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Deductions Balance at
beginning charged to from end of
Description of year earnings reserve year
----------- ------- -------- ------- ----
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts (a): $1,408 $446 $307 $1,547
====== ==== ==== ======
Year ended December 31, 1995:
Allowance for doubtful accounts (a): $1,470 $577 $639 $1,408
====== ==== ==== ======
Year ended December 31, 1994:
Allowance for doubtful accounts (a): $1,282 $665 $477 $1,470
====== ==== ==== ======
Restructuring inventory provision (b) $478 $0 $478 $0
====== ==== ==== ======
Restructuring fixed asset reserve (c) $100 $0 $100 $0
====== ==== ==== ======
(a) Deductions from reserve represent accounts written off, net of recoveries.
(b) Deductions from reserve represent inventory written off.
(c) Deductions from reserve represent fixed assets written off, and amounts reclassified to
the general restructuring reserve.
</TABLE>
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, The Duriron Company, Inc. has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
on this 17th day of February, 1997.
THE DURIRON COMPANY, INC.
BY /s/ WILLIAM M. JORDAN
-----------------------------------
WILLIAM M. JORDAN
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
The Duriron Company, Inc. and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
NAME TITLE DATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
/s/ William M. Jordan Chairman of the Board February 17, 1996
- --------------------- President and Chief
WILLIAM M. JORDAN Executive Officer, Director
/s/ Bruce E. Hines Senior Vice President - February 17, 1996
- -------------------- Chief Administrative Officer
BRUCE E. HINES (Principal Accounting and
Financial Officer)
/s/ R. Elton White Director, Chairman February 17, 1996
- -------------------- of Audit/Finance Committee
R. ELTON WHITE
/s/ Hugh K. Coble Director February 17, 1996
- --------------------
HUGH K. COBLE
/s/ John S. Haddick Director February 17, 1996
- --------------------
JOHN S. HADDICK
/s/ Diane C. Harris Director February 17, 1996
- --------------------
DIANE C. HARRIS
/s/ James S. Ware Director February 17, 1996
- --------------------
JAMES S. WARE
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
FOOTNOTE
REFERENCE
----------
<S> <C> <C>
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 1988 Restated Certificate of Incorporation of The
Duriron Company, Inc. was filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1988...................... *
3.2 1989 Amendment to Certificate of Incorporation
was filed as Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1989.................................... *
3.3 By-Laws of The Duriron Company, Inc.
(as restated) were filed with the Commission as Exhibit
3.2 to The Company's Annual Report on Form 10-K for the
year ended December 31,
1987................................................. *
3.4 1996 Certificate of Amendment of Certificate of
Incorporation was filed as Exhibit 3.4 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995.................................... *
3.5 Amendment No. 1 to Restated Bylaws was filed as
Exhibit 3.5 to the Company's Annual Report on
Form 10-K for the year ended December 31,
1995................................................. *
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.1 Lease agreement, indenture of mortgage and deed of trust, and
guarantee agreement, all executed on June 1, 1978 in
connection with 9-1/8% Industrial Development Revenue Bonds,
Series A, City of Cookeville, Tennessee.............. +
</TABLE>
53
<PAGE> 57
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C> <C> <C>
4.2 Lease agreement, indenture of trust, and guaranty agreement,
all executed on June 1, 1978 in connection with 7-3/8%
Industrial Development Revenue Bonds, Series B, City of
Cookeville, Tennessee........................................ +
4.3 Form of Rights Agreement dated as of August 1,
1986 was filed as an Exhibit to the
Company's Form 8-A dated August 13, 1986..................... *
4.4 Amendment to Rights Agreement dated August 1, 1996
was filed as Exhibit 4.5 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996.............. *
4.5 Interest Rate and Currency Exchange Agreement between the
Company and Barclays Bank dated November 17, 1992 PLC in the
amount of $25,000,000 was filed as Exhibit 4.9 to Company's
Report of Form 10-K for year ended December 31, 1992.......... *
4.6 Loan Agreement in the amount of $25,000,000 between the
Company and Metropolitan Life Insurance Company dated November
12, 1992 was filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 ..... +
4.7 Revolving Credit Agreement between the Company
and First of America Bank - Michigan, N.A. in the
amount of $20,000,000 and dated August 22,
1995.......................................................... +
4.8 Credit Facility between the Company in the amount of
$100,000,000 and National City Bank, as Agent, FILED
dated December 3, 1996........................................ HEREWITH
4.9 Rate Swap Agreement in the amount of $25,000,000
between the Company and National City Bank dated FILED
November 14, 1996............................................. HEREWITH
</TABLE>
54
<PAGE> 58
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C> <C> <C>
4.10 Rate Swap Agreement in the amount of $25,000,000
between the Company and Key Bank National FILED
Association dated October 28, 1996........................ HEREWITH
(10) MATERIAL CONTRACTS: (See Footnote "a")
10.1 The Duriron Company, Inc. Incentive Compensation
Plan (the "Incentive Plan") for Senior Executives,
as amended and restated effective January 1, 1994,
was filed as Exhibit 10.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993............. *
10.2 Amendment No. 1 to the Incentive Plan was filed as
Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995....... *
10.3 The Duriron Company, Inc. Supplemental Pension
Plan for Salaried Employees was filed with the Commission as
Exhibit 10.4 to the Company's Annual Report on Form 10-K for
the year ended
December 31, 1987............................................. *
10.4 The Duriron Company, Inc. amended and
restated Director Deferral Plan was filed as Attachment A to
the Company's definitive 1996 Proxy Statement filed with the
Commission on March 10, 1996.................................. *
10.5 Change in Control Agreement ("CIC") between
The Duriron Company, Inc. and William M. Jordan, FILED
Chairman, President and CEO............................. HEREWITH
10.6 Form of CIC Agreement between all other executive FILED
officers of the Company............................................. HEREWITH
10.7 The Duriron Company, Inc. First Master Benefit
Trust Agreement dated October 1, 1987 was filed
as Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987... *
</TABLE>
55
<PAGE> 59
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C> <C> <C>
10.8 Amendment #1 to the first Master Benefit Trust Agreement dated
October 1, 1987 was filed as Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993........ *
10.9 Amendment #2 to First Master Benefit Trust Agreement was filed
as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993........................................... *
10.10 The Duriron Company, Inc. Second Master Benefit Trust Agreement dated
October 1, 1987 was filed as Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987............... *
10.11 First Amendment to Second Master Benefit Trust Agreement was
filed as Exhibit 10.26 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993.............................. *
10.12 The Duriron Company, Inc. Long-Term Incentive
Plan (the "Long-Term Plan"), as amended and restated effective
November 1, 1993 was filed as Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993........ *
10.13 Amendment No. 1 to the Long-Term Plan was filed
as Exhibit 10.13 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995...................... *
10.14 The Duriron Company, Inc. 1989 Stock Option Plan FILED
as amended and restated effective January 1, 1997...................... HEREWITH
10.15 The Duriron Company, Inc. 1989 Restricted Stock
Plan (the "Restricted Stock Plan") as amended and FILED
restated effective January 1, 1997..................................... HEREWITH
</TABLE>
56
<PAGE> 60
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C> <C> <C>
10.16 The Duriron Company, Inc. Retirement
Compensation Plan for Directors ("Director
Retirement Plan") was filed as Exhibit 10.15 on
the Company's Annual Report to Form 10-K for
the year ended December 31, 1988....................... *
10.17 Amendment No. 1 to Director Retirement Plan
was filed as Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995............................................... *
10.18 The Company's Benefit Equalization Pension
Plan ("Equalization Plan") was filed as Exhibit
10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989....... *
10.19 Amendment #1 dated December 15, 1992 to the Equalization Plan
was filed as Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992.................. *
10.20 The Company's Equity Incentive Plan as amended and restated
effective July 21, 1995 was filed as Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995............................................... *
10.21 Supplemental Pension Agreement between the
Company and William M. Jordan dated
January 18, 1993 was filed as Exhibit 10.15
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992........................... *
10.22 1979 Stock Option Plan, as amended and restated April 23,
1991, and Amendment #1 thereto dated December 15, 1992, was
filed as Exhibit 10.17 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992 ...................... *
</TABLE>
57
<PAGE> 61
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C> <C> <C>
10.23 Deferred Compensation Plan for Executives was filed as Exhibit
10.19 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992 ...................................... *
10.24 Executive Life Insurance Plan of The Duriron
Company, Inc. was filed as Exhibit 10.29 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995............................ *
10.25 Executive Long-Term Disability Plan of The
Duriron Company, Inc. was filed as Exhibit 10.30
to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995........................ *
10.26 Consulting Agreement between James S. Ware and Durametallic
Corporation dated April 21, 1991 was filed as Exhibit 10.31 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995................................................ *
10.27 Senior Executive Death Benefit Agreement
between James S. Ware and Durametallic
dated April 12, 1991 was filed as Exhibit 10.32 to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1995........................ *
10.28 Executive Severance Agreement between
James S. Ware and Durametallic Corporation dated
January 6, 1994 was filed as Exhibit 10.33 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995.............................. *
10.29 Agreement between James S. Ware and the Company
dated September 11, 1995 was filed as Exhibit 10.34 to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1995....................................... *
</TABLE>
58
<PAGE> 62
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE
---------
<S> <C> <C> <C>
10.30 Agreement and Plan of Merger Among The Duriron Company, Inc.,
Wolverine Acquisition Corporation and Durametallic
Corporation, dated as of September 11, 1995 was filed as Annex
A on the Form S-4 Registration Statement filed by the Company
on September 11, 1995....................................................... *
10.31 Split-Dollar Life Insurance Agreement between the
Company and James S. and Sheila D. Ware Irrevocable
Trust II signed March 6, 1996 was filed as Exhibit 10.36 to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1996................................................................. *
10.32 Employee Protection Plan, as revised effective March 1, 1997
(which provides certain severance benefits to employees upon
a change of control of the Company)........................................... FILED HEREWITH
</TABLE>
59
<PAGE> 63
(22) (a) All subsidiaries are wholly owned or controlled except as
otherwise indicated by one of the following footnotes
(b) 40% ownership
(c) 51% ownership
- ----------
(23) CONSENTS OF EXPERTS AND COUNSEL
FILED
23.1 Consent of Ernst & Young LLP .................... HEREWITH
(27) FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule (submitted for the SEC's FILED
information) .................................... HEREWITH
- ----------
"*" Indicates that the exhibit is incorporated by reference into this
Annual Report on Form 10-K from a previous filing with the
Commission. The Company's file number with the Commission is "0-325".
"+" Indicates that the document relates to a class of indebtedness that
does not exceed 10% of the total assets of the Company and subsidiaries
and that the Company will furnish a copy of the document to the
Commission upon request.
"a" The documents identified under Item 10 include all management contracts
and compensatory plans and arrangements required to be filed as
exhibits.
61
<PAGE> 1
Exhibit 4.8
CREDIT AGREEMENT
DATED AS OF DECEMBER 3, 1996
AMONG
THE DURIRON COMPANY, INC.
AS BORROWER,
AND
THE LENDERS IDENTIFIED ON THE SIGNATURE PAGES HERETO,
AS LENDERS,
AND
NATIONAL CITY BANK,
AS AGENT
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
RECITALS ................................................................. 1
ARTICLE I DEFINITIONS .................................................... 1
ARTICLE II THE CREDIT .................................................... 17
2.1 Commitment ..................................................... 17
2.2 Final Principal Payment ........................................ 18
2.3 Ratable Loans .................................................. 18
2.4 Applicable Margins ............................................. 18
2.5 Facility Fee; Closing Fee ...................................... 19
2.6 Swingline Loans ................................................ 19
2.7 Offshore Currency Loans ........................................ 20
(a) The Bid-Option ........................................... 20
(b) Bid-Option Quote Request ................................. 20
(c) Invitation for Bid-Option Quotes ......................... 21
(d) Submission and Contents of Bid-Option Quotes ............. 21
(e) Notice to Borrower ....................................... 22
(f) Acceptance and Notice by Borrower ........................ 22
(g) Allocation by Agent ...................................... 23
2.8 Minimum Amount of Loans ........................................ 23
2.9 Interest Payable on the Loans .................................. 23
(a) .......................................................... 23
(b) Method of Selecting Rate Options and LIBOR Interest Periods 23
(c) Determination of Rate .................................... 24
(d) Monthly Installments ..................................... 24
(e) Interest on Overdue Payments; Default
Interest Rate ............................................ 25
2.10 Repayments and Prepayments of Principal ........................ 26
(a) Optional Prepayments ..................................... 26
(b) Mandatory Prepayments .................................... 26
(c) Application of Prepayments ............................... 26
(d) Maturity ................................................. 27
(e) Notice of Prepayments of Principal ....................... 27
(f) Reduction in Commitment .................................. 27
2.11 Payments and Computations ...................................... 28
(a) Time and Place of Payments ............................... 28
(b) Application of Funds ..................................... 28
(c) Payments on Business Days ................................ 29
(d) Computation of Interest .................................. 29
2.12 Payments to be Free of Deductions .............................. 30
2.13 Use of Proceeds ................................................ 30
2.14 LIBOR Break Funding Cost ....................................... 30
2.15 Additional Costs ............................................... 31
2.16 Indemnification of Losses ...................................... 33
2.17 Statements by Agent or any Lender .............................. 34
2.18 Borrowing Notices; Telephonic Notices .......................... 34
2.19 Notes; Telephonic Notices ...................................... 35
2.20 Lending Installations .......................................... 36
2.21 Non-Receipt of Funds by Agent .................................. 36
<PAGE> 3
2.22 Withholding Tax Exemption ...................................... 36
2.23 The Letters of Credit .......................................... 37
(a) Issuance of Letters of Credit; Conditions and
Limitations" ............................................. 37
(b) Issuance of Letters of Credit: Purchase of
Participations Therein ................................... 38
(c) Payment in Certain Circumstances ......................... 38
(d) Termination of Commitments ............................... 39
(e) Payment of Amounts Drawn Under Letters of
Credit ................................................... 39
(f) Payment by Lenders ....................................... 39
(g) Compensation .............................................. 40
(h) Amendments ................................................ 41
ARTICLE III CONDITIONS PRECEDENT ......................................... 42
3.1 Initial Advance ................................................ 42
3.2 Each Advance ................................................... 43
ARTICLE IV REPRESENTATIONS AND WARRANTIES ................................ 44
4.1 Existence ...................................................... 44
4.2 Authorization and Validity ..................................... 44
4.3 No Conflict, Government Consent ................................ 44
4.4 Financial Statements--Material Adverse Change .................. 45
4.5 Tax ............................................................ 45
4.6 Litigation and Contingent Obligations .......................... 45
4.7 Subsidiaries ................................................... 45
4.8 ERISA .......................................................... 45
4.9 Accuracy of Information ........................................ 46
4.10 Regulation U ................................................... 46
4.11 Material Agreements ............................................ 46
4.12 Compliance with Laws ........................................... 46
4.13 Ownership of Properties ........................................ 46
4.14 Investment Company Act ......................................... 47
4.15 Public Utility Holding Company Act ............................. 47
4.16 Solvency ....................................................... 47
4.17 Insurance ...................................................... 47
4.18 Environmental Matters .......................................... 48
ARTICLE V COVENANTS ....................................................... 49
5.1 Financial Reporting ............................................ 49
5.2 Prohibited Uses of Proceeds .................................... 51
5.3 Notice of Default .............................................. 51
5.4 Conduct of Business ............................................ 51
5.5 Taxes .......................................................... 52
5.6 Insurance ...................................................... 52
5.7 Compliance with Laws ........................................... 52
5.8 Maintenance of Properties ...................................... 52
5.9 Inspection ..................................................... 52
5.10 Maintenance of Status .......................................... 53
5.11 Merger; Sale of Assets ......................................... 53
5.12 Sale and Leaseback ............................................. 53
5.13 Acquisitions and Investments ................................... 53
5.14 Liens .......................................................... 53
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5.15 Affiliates ..................................................... 55
5.16 Reserved ....................................................... 55
5.17 Litigation ..................................................... 55
5.18 Further Assurances ............................................. 55
5.19 Consolidated Tangible Net Worth ................................ 56
5.20 Ratio of Debt to Cash Flow ..................................... 56
5.21 Ratio of EBIT to Interest ...................................... 56
5.22 Debt to Capitalization Ratio ................................... 56
5.23 Acquisition Limit .............................................. 56
5.24 Environmental Matters .......................................... 56
ARTICLE VI DEFAULTS ...................................................... 57
6.1 Nonpayment of Principal ........................................ 57
6.2 Nonpayment of Other Obligations ................................ 57
6.3 Certain Breaches ............................................... 57
6.4 Representations and Warranties ................................. 57
6.5 Other Breaches ................................................. 57
6.6 Defaults on Indebtedness ....................................... 58
6.7 Bankruptcy, etc ................................................ 58
6.8 Appointment of Receiver ........................................ 58
6.9 Condemnation ................................................... 58
6.10 Judgments ...................................................... 59
6.11 ERISA Withdrawal ............................................... 59
6.12 ERISA Reorganization ........................................... 59
6.13 Other Defaults ................................................. 59
ARTICLE VII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES................. 59
7.1 Acceleration ................................................... 59
7.2 Amendments & Waivers ........................................... 60
7.3 Preservation of Rights ......................................... 60
ARTICLE VIII GENERAL PROVISIONS ........................................... 61
8.1 Survival of Representations .................................... 61
8.2 Governmental Regulation ........................................ 61
8.3 Tax ............................................................ 61
8.4 Heading ........................................................ 61
8.5 Entire Agreement ............................................... 61
8.6 Several Obligations Benefits of This Agreement ................. 61
8.7 Expenses; Indemnification ...................................... 61
8.8 Numbers ........................................................ 62
8.9 Accounting ..................................................... 62
8.10 Severability of Provisions ..................................... 62
8.11 Nonliability of Lenders ........................................ 62
8.12 CHOICE OF LAW .................................................. 63
8.13 CONSENT TO JURISDICTION ........................................ 63
8.14 WAIVER OF JURY TRIAL ........................................... 63
ARTICLE IX AGENT ......................................................... 63
9.1 Appointment .................................................... 63
9.2 Powers ......................................................... 63
9.3 General Immunity ............................................... 63
9.4 No Responsibility for Loans, Recitals, etc ..................... 64
9.5 Action on Instructions of Lenders .............................. 64
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9.6 Employment of Agents and Counsel ............................... 64
9.7 Reliance on Documents; Counsel ................................. 64
9.8 Agent's Reimbursement and Indemnification ...................... 65
9.9 Rights as a Lender ............................................. 65
9.10 Lender Credit Decision ......................................... 65
9.11 Successor Agent ................................................ 65
ARTICLE X SETOFF; RATABLE PAYMENTS ........................................ 66
10.1 Setoff ......................................................... 66
10.2 Ratable Payments ............................................... 66
ARTICLE XI BENEFIT OF AGREEMENT; ASSIGNMENT; PARTICIPATION ................ 67
11.1 Successors and Assigns ......................................... 67
11.2 Participation .................................................. 67
11.2.1 Permitted Participants; Effect ......................... 67
11.2.2 Voting Rights .......................................... 67
11.2.3 Benefit of Setoff ...................................... 68
11.3 Assignments .................................................... 68
11.3.1 Permitted Assignments .................................. 68
11.3.2 Prior Consent .......................................... 68
11.3.3 Effective Date ......................................... 69
11.4 Dissemination of Information ................................... 69
11.5 Tax Treatment .................................................. 69
ARTICLE XII NOTICES; NATURE OF OBLIGATIONS ............................... 70
12.1 Giving Notice .................................................. 70
12.2 Change of Address .............................................. 70
12.3 Nature of Borrower's Obligations and Modification
Thereof ........................................................ 70
ARTICLE XIII COUNTERPARTS ................................................ 71
SCHEDULES
Schedule 1 Subsidiaries of Borrower
Schedule 2 Permitted Liens
EXHIBITS
EXHIBIT A Form of Foreign Currency Note
EXHIBIT B Form of Revolving Promissory Note
EXHIBIT C Request for Issuance of Letter of Credit
EXHIBIT D Form of Swingline Note
EXHIBIT E Form of Bid-Option Quote Request
EXHIBIT F Form of Invitation for Bid-Option Quotes
EXHIBIT G Form of Bid-Option Quote
EXHIBIT H Form of Borrowing Notice
EXHIBIT I Form of Borrower's Counsel Opinion
EXHIBIT J Form of Written Money Transfer Instructions
EXHIBIT K Form of Financial Compliance Certificate
EXHIBIT L Form of Notice of Assignment
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<PAGE> 6
CREDIT AGREEMENT
----------------
This Agreement, dated as of December 3, 1996, is among The Duriron
Company, Inc., a New York corporation, and its successors and assigns (the
"Borrower"), National City Bank, a national banking association, and the several
banks, financial institutions and other entities from time to time parties to
this Agreement (sometimes collectively, "Lenders" and sometimes individually, a
"Lender"), and National City Bank, not individually, but as "Agent".
RECITALS
--------
A. Borrower is primarily engaged in the business of manufacturing and
distributing fluid movement and control products to process industries.
B. Borrower is listed on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system.
C. Borrower has requested that Lenders make loans available to Borrower
pursuant to the terms of this Agreement, and that Agent act as administrative
agent for Lenders, and Agent and Lenders have so agreed.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which
Borrower or any of its Subsidiaries (i) acquires any business as a going concern
or all or substantially all of the assets of any firm, corporation or division
thereof, whether through purchase of assets or stock, merger or otherwise or
(ii) directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in number of
votes) of the securities of a corporation which have ordinary voting power for
the election of directors (other than securities having such power only by
reason of the happening of a contingency) or a majority (by percentage or voting
power) of the outstanding partnership interests of a partnership.
"Advance" means a borrowing hereunder consisting of the aggregate amount
of the several Loans made by Lenders to Borrower of the same Type.
<PAGE> 7
"Affected Lender" is defined in SECTION 2.15(d).
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person
whether through ownership of stock, by contract or otherwise.
"Agent" means National City Bank in its capacity as agent for Lenders
pursuant to ARTICLE IX, and not in its individual capacity as a Lender, and any
successor Agent appointed pursuant to ARTICLE IX.
"Aggregate Commitment" means the aggregate of the Commitments
of all Lenders.
"Aggregate Measured Credit Risk" means, as at any time during the
pendency of this Agreement that an interest rate exchange agreement or interest
rate option agreement is in effect, the amount determined by Agent in accordance
with the terms of such interest rate exchange agreement or interest rate option
agreement, including, without limitation, the Hedge Agreements, as being
Borrower's measured credit risk thereunder at such time.
"Agreement" means this Credit Agreement, as it may be amended or
modified and in effect from time to time.
"Alternate Currency" means French Francs or Deutsche Marks.
"Applicable Currency" means, as to any particular payment or Loan,
Dollars, or the Foreign Currency in which it is denominated or payable.
"Applicable Margin" means the applicable margin determined by reference
to the table in SECTION 2.4 used in calculating the interest rate applicable to
the various Types of Advances, which shall vary from time to time in accordance
with SECTION 2.4.
"Applicable Law" means collectively, all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting Borrower or any of its
Subsidiaries, whether now or hereafter enacted and in force.
"Article" means an article of this Agreement unless another document is
specifically referenced.
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<PAGE> 8
"Assets" means, with respect to any Person, as of any date of
determination, the total amount of assets of that Person as shown on the balance
sheet of such Person.
"Authorized Financial Officer" means the Senior Vice
President/CAO, Controller or Treasurer of Borrower, acting singly.
"Authorized Officer" means the Senior Vice President/CAO, Controller or
Treasurer of Borrower, acting singly.
"Base Rate Applicable Margin" means, as of any date, the Applicable
Margin in effect on such date with respect to Base Rate Loans.
"Base Rate" or "Prime Rate" means the fluctuating rate of interest which
is publicly announced from time to time by Agent at its Head Office as being its
"prime rate" or "base rate" thereafter in effect, with each change in the Base
Rate automatically, immediately and without notice being reflected in the
fluctuating interest rate thereafter applicable hereunder, it being specifically
acknowledged that the Base Rate is not necessarily the lowest rate of interest
then available from Agent on fluctuating-rate loans.
"Base Rate Loan" means a Loan which bears interest at the Base Rate.
"Bid-Option Auction" means a solicitation of Bid-Option Quotes setting
forth Bid-Option Rates pursuant to SECTION 2.7(b).
"Bid-Option Quote" means an offer by a Lender to make a Offshore
Currency Loan in an Offshore Currency in accordance with SECTION 2.7(d).
"Bid-Option Quote Request" is defined in SECTION 2.7(b).
"Bid-Option Rate" means, with respect to any Offshore Currency Loan, the
Bid-Option Rate, as defined in SECTION 2.7(d) (ii) (E), that is offered for such
Loan.
"Borrower" means The Duriron Company, Inc., a New York
corporation.
"Borrowing Date" means a date on which an Advance is made
hereunder.
"Borrowing Notice" is defined in SECTION 2.9(b).
"Business Day" means with respect to any borrowing, payment or rate
selection of Advances a day (other than a Saturday or Sunday) on which banks
generally are open in Cleveland, Ohio; provided, with respect to LIBOR Rate
Loans (including Foreign Currency Loans), Banking Days shall not include a day
on which dealings in
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<PAGE> 9
Dollars may not be carried on in the London interbank LIBOR market; and
provided, further that with respect to Foreign Currency Loans, Business Days
shall not include a day on which dealings in the Applicable Currency may not be
carried on in the applicable foreign exchange interbank market.
"Capital Expenditures" means any and all amounts invested, expended or
incurred (including by reason of Capitalized Lease Obligations) incurred by
Borrower or any of its Subsidiaries in respect of the purchase, acquisition,
improvement, renovation or expansion of any properties or assets of Borrower or
any of its Subsidiaries, including, without limitation, expenditures required to
be capitalized in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person which is not a corporation
and any and all warrants or options to purchase any of the foregoing.
"Capitalization" means, as of any date of determination, the sum of
Consolidated Funded Debt plus Stockholder's Equity.
"Capitalized Lease" of a Person means any lease of Property imposing
obligations on such Person, as lessee thereunder, which are required in
accordance with GAAP to be capitalized on a balance sheet of such Person.
"Cash Equivalents" means, as of any date, (i) securities issued or
directly and fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having maturities of not more than one year
from such date, (ii) time deposits and certificates of deposit having maturities
of not more than one year from such date and issued by any domestic commercial
bank having (A) senior long-term unsecured debt rated at least A or the
equivalent thereof by S&P or A2 or the equivalent thereof by Moody's and (B)
capital and surplus in excess of $500,000,000, and (iii) commercial paper rated
at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof
by Moody's and in either case maturing within 90 days from such date.
"Change In Control" means, with respect to any Person, the transfer of
the ownership or control (in one transaction or as the most recent transaction
in a series of transactions) of (i) such number of voting securities (or other
ownership interests) of the controlled Person that possesses, directly or
indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person whether through ownership of stock, by
contract or otherwise a majority, or (ii) with respect to any company whose
stock is publicly traded on a securities exchange, the solicitation for proxies
in connection with the election of the board of directors at a meeting of
shareholders.
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"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or as
set forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to SECTION 11.3.2, as such amount may be modified from time
to time pursuant to the terms hereof.
"Condemnation" is defined in SECTION 6.9.
"Consolidated Funded Debt" means as of any date of determination, all
Indebtedness for Borrowed Money of Borrower and its Subsidiaries outstanding at
such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the amount of
interest expense of Borrower and its Subsidiaries for such period on the
aggregate principal amount of their Indebtedness, determined on a consolidated
basis in accordance with GAAP plus any capitalized interest which accrued during
such period.
"Consolidated Net Income" means, for any period, consolidated net income
(or loss) of Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any other Person accrued prior to the
date it becomes a Subsidiary of Borrower or is merged into or consolidated with
Borrower or any of its Subsidiaries and (b) the undistributed earnings of any
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such Subsidiary.
"Consolidated Outstanding Indebtedness" means, as of any date of
determination, all Indebtedness of Borrower and its Subsidiaries outstanding at
such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Stockholder's Equity" means, as of any date of
determination, an amount equal to the sum of the following amounts appearing on
the consolidated balance sheet of Borrower and its Subsidiaries: (i) all equity
as calculated in accordance with GAAP, and (ii) all indebtedness which is
subordinate (to the satisfaction of Agent) to Indebtedness arising under this
Agreement.
"Consolidated Tangible Net Worth" means, as of any date of
determination, an amount equal to Consolidated Stockholder's Equity minus the
sum of (i) any surplus resulting from any write-up of
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<PAGE> 11
assets subsequent to September 30, 1996, (ii) goodwill, including any amounts,
however designated on a consolidated balance sheet of Borrower and its
Subsidiaries, representing the excess of the purchase price paid for assets or
stock over the value assigned to them on the books of Borrower and its
Subsidiaries, (iii) patents, trademarks, trade names and copyrights, (iv) any
amount at which shares of capital stock of Borrower and any of its Subsidiaries
appear as an asset on Borrower's consolidated balance sheet, and (v) any other
amount in respect of an intangible that should be classified as an asset on
Borrower's consolidated balance sheet in accordance with GAAP.
"Contingent Obligation" means any direct or indirect liability,
contingent or otherwise, with respect to any indebtedness, lease, dividend,
letter of credit, banker's acceptance or other obligation of another Person
incurred to provide assurance to the obligee of such obligation that such
obligation will be paid or discharged, that any agreements relating thereto will
be complied with, or that the holders of such obligation will be protected (in
whole or in part) against loss in respect thereof. Contingent Obligations shall
include, without limitation, (i) the direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by any Person of the
obligation of another Person; (ii) any liability for the obligations of another
Person through any agreement (contingent or otherwise) (A) to purchase,
repurchase, or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions, or otherwise),
(B) to maintain the solvency of any balance sheet item, level of income or
financial condition of another, or (C) to make take-or-pay, pay-or-play, or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement, if in the case of any agreement described under
subclauses (A) , (B) or (C) of this sentence the purpose or intent thereof is to
provide the assurance described above. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Default" means an event of Default described in ARTICLE VI.
"Default Interest Rate" means an annual rate of interest equal to the
lesser of (i) two percent (2.0%) above the Base Rate; or (2) the maximum rate of
interest which may be lawfully charged in respect of the Obligations.
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<PAGE> 12
"Dollar Equivalent" means, at any time, (a) as to any amount denominated
in Dollars, the amount thereof at such time, and (b) as to any amount
denominated in a Foreign Currency, the equivalent amount in Dollars as
determined by Agent at such time on the basis of the Spot Rate for the purchase
of Dollars with such Foreign Currency. For purposes of any calculation or
determination hereunder related to Loans and measured in Dollars (including,
without limitation, calculation of the Outstanding Amount), any Loans in a
Foreign Currency shall be valued at the Dollar Equivalent.
"EBIT" means, for any period, the sum of Borrower's and its
Subsidiaries' Consolidated Net Income, increased by the sum for such period of
interest expense, income and franchise tax expense, and non-recurring
extraordinary expenses (in each case as determined in accordance with GAAP)
which was deducted in determining Consolidated Net Income for such period.
"EBITDA" means, for any period, the sum of Borrower's and its
Subsidiaries' EBIT plus depreciation and amortization expense.
"Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect, in each case to the extent the
foregoing are applicable to Borrower or any of its Subsidiaries or any of their
respective assets or Properties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Existing Facilities" means the $10,000,000 revolving loan facility
provided to Borrower by The Fifth Third Bank.
"Face Amount" means, as to any Letter of Credit, the maximum amount
which is available at such time to be drawn or disbursed under such Letter of
Credit.
"Facility Fee" is defined in SECTION 2.5(a).
"Facility Termination Date" means November 30, 2001; provided, however,
the Facility Termination Date may be extended annually for additional one (1)
year terms upon the prior written consent of Borrower and each Lender.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal, for each day during such period, to the weighted average of the
rates on overnight federal funds
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<PAGE> 13
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of Cleveland,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by Agent
from three federal funds brokers of recognized standing selected by it.
"Foreign Currency" shall mean an Alternate Currency or an Offshore
Currency.
"Foreign Currency Loan" means any Loan denominated in a
Foreign Currency.
"Foreign Currency Note" means a promissory note of Borrower
substantially in the form of EXHIBIT A hereto evidencing the obligation of
Borrower to repay Foreign Currency Loans, as amended or modified from time to
time and together with any promissory note or notes issued in exchange or
replacement thereof.
"FX Trading Office" means the Foreign Exchange Trading Center,
Cleveland, Ohio, of NCB, or such other office as Agent may designate from time
to time.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied in a manner consistent
with that used in preparing the financial statements referred to in SECTION 5.1;
provided, however, that if there shall be any change in accounting principles
from GAAP as in effect at the Closing Date, then the Required Lenders and
Borrower shall make such adjustments to the financial covenants affected thereby
by reference to the official interpretations of GAAP by The Financial Accounting
Standards Board, its predecessors and successors or as are mutually determined
in good faith to be appropriate to reflect such changes so that the criteria for
evaluating the financial condition and operations of Borrower shall be the same
after such changes as if such changes had not been made.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Head Office" means, in relation to Agent, the head office of National
City Bank, located at 1900 East Ninth Street, Cleveland, Ohio, 44114, or such
other office as may be designated as such by written notice to Borrowers and
Lenders by National City Bank or any successor Agent.
"Hedge Agreements" means the interest rate protection agreement or
agreements entered into by and between Borrower and certain Lenders.
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"Indebtedness" means, in relation to any Person, at any time, all of the
obligations of such Person which, in accordance with GAAP, would be classified
as indebtedness upon a balance sheet (including any footnote thereto) of such
Person prepared at such time, and in any event shall include, without
limitation:
(i) all indebtedness of such Person arising or incurred under or in
respect of (A) any guaranties (whether direct or indirect) by such
Person of the indebtedness, obligations or liabilities of any other
Person, or (B) any endorsement by such Person of any of the
indebtedness, obligations or liabilities of any other Person (otherwise
than as an endorser of negotiable instruments received in the ordinary
course of business and presented to commercial banks for collection of
deposit), or (C) the discount by such Person, with recourse to such
Person, of any of the indebtedness, obligations or liabilities of any
other Person;
(ii) all indebtedness of such Person arising or incurred under or in
respect of any agreement, contingent or otherwise made by such Person
(A) to purchase any indebtedness of any other Person or to advance or
supply funds for the payment or purchase of any indebtedness of any
other Person or (B) to purchase, sell or lease (as lessee or lessor)
any property, products, materials or supplies or to purchase or sell
transportation or services, in each such case if primarily for the
purpose of enabling any other Person to make payment of any
indebtedness of such other Person or to assure the owner or holder of
such other Person's indebtedness against loss, regardless of the
delivery or non-delivery of the property, products, materials or
supplies or the furnishing or nonfurnishing of the transportation or
services, or (C) to make any loan, advance, capital contribution or
other investment in any other Person for the purpose of assuring a
minimum equity, asset base, working capital or other balance sheet
condition for or as at any date, or to provide funds for the payment of
any liability, dividend or stock liquidation payment, or otherwise to
supply funds to or in any manner invest in any other Person;
(iii) all indebtedness, obligations and liabilities secured by or
arising under or in respect of any Lien, upon or in Property owned by
such Person, even though such Person has not assumed or become liable
for the payment of such indebtedness, obligations and liabilities;
(iv) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by
such Person, even though the rights and remedies of the seller or
lender (or lessor) under such agreement in the event of default are
limited to repossession or sale of such Property;
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<PAGE> 15
(v) all indebtedness arising or incurred under or in respect of any
Contingent Obligation; and
(vi) the Aggregate Measured Credit Risk of an interest rate exchange
agreement or interest rate option agreement, or any other interest rate
protection device such as, without limitation, caps, collars and swaps.
"Indebtedness for Borrowed Money" means at any time, all Indebtedness
required by GAAP to be reflected as such on Borrower's balance sheet and
including the current portion thereof, and including as appropriate, all
Indebtedness (i) in respect of any money borrowed (including pursuant to this
Agreement); (ii) under or in respect of any Contingent Obligation (whether
direct or indirect) of any money borrowed; (iii) evidenced by any loan or credit
agreement, promissory note, debenture, bond, guaranty or other similar written
obligation to pay money; or (iv) arising under Capitalized Leases.
"Initial Advance" means the first Advance made hereunder.
"Initial Borrowing Date" means the date on which the first Advance is
made hereunder.
"Interest Expense" means, for any period, the amount of interest expense
of Borrower for such period on the aggregate principal amount of its
Indebtedness, plus any capitalized interest which accrued during such period.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade),
contribution of capital by such Person to any other Person or any investment in,
or purchase or other acquisition of, the stock, partnership interests, notes,
debentures, or other securities of any other Person made by such Person.
"Invitation for Bid-Option Quotes" shall mean an invitation for
Bid-Option Quotes in the form referred to in SECTION 2.7.
"Issuance Date" means, in relation to any Letter of Credit, the date on
which such Letter of Credit is issued or is to be issued pursuant to this
Agreement.
"Issuing Bank" means NCB or its successor as the Lender responsible for
the issuance of Letters of Credit in accordance with SECTION 2.23.
"Late Charge" means with respect to any delinquent payment of principal
or interest hereunder, a fee that is equal to the greater of Five Hundred and
00/100 Dollars ($500.00) or three percent (3%)
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<PAGE> 16
of the delinquent payment, charged to Borrower or added to the unpaid balance of
the Notes whenever any payment of principal or interest is not paid when due.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement, their respective successors and assigns and any other lending
institutions that subsequently become parties to this Agreement.
"Lending Installations" means, with respect to a Lender, any office,
branch, subsidiary, or affiliate of such Lender.
"Letter of Credit" means any stand-by letter of credit issued by the
Issuing Bank pursuant to this Agreement.
"Letter of Credit Commission" means a commission, payable annually in
advance to Agent for the ratable benefit of Lenders, in an amount equal to the
greater of (i) the amount determined by multiplying the Face Amount of each
Letter of Credit issued hereunder by 50 basis points, and (ii) $5000. The Letter
of Credit Commission shall be paid annually in respect of each Letter of Credit,
with the first year's payment being due and payable, in advance, on the Issuance
Date therefor and subsequent years' payments being due and payable in advance on
each anniversary thereof so long as such Letter of Credit remains outstanding.
"Letter of Credit Usage" means, as at the date on which the same is
determined, the sum of (x) the aggregate of the Face Amounts of all Letters of
Credit then outstanding, plus (y) the aggregate amount of all drawings under
Letters of Credit honored by the Issuing Bank and not theretofore either
reimbursed by Borrower or converted into Loans as provided in SECTION 2.23(e).
"LIBOR Applicable Margin" means, as of any date with respect to any
LIBOR Interest Period for LIBOR Rate Loans made in Dollars, the Applicable
Margin in effect for such LIBOR Interest Period as determined in accordance with
SECTION 2.4 hereof.
"LIBOR Break Funding Costs" means an amount sufficient to reimburse each
Lender for any and all loss, cost or expense actually incurred by such Lender as
the result of the occurrence of any LIBOR Break Funding Event, determined by
multiplying the amount of the principal prepayment hereunder by the deficiency,
if any, between, (x) LIBOR for a term then available closest to the remaining
duration of the LIBOR Interest Period for the principal sum being prepaid, and
for an amount comparable to such principal sum, in the Applicable Currency, and
(y) the LIBOR Rate or Bid-Option Rate, as the case may be, in effect for the
principal sum being so prepaid, in the Applicable Currency, immediately prior to
the prepayment of such sum, all as determined as of the date of occurrence of
the LIBOR Break Funding Event.
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<PAGE> 17
"LIBOR Break Funding Event" means any of the events or occurrences set
for forth in SECTIONS 2.14(a) or 2.14(b).
"LIBOR Interest Period" means a period of one, two, three or six months
commencing on a Business Day selected by Borrower pursuant to this Agreement.
Such LIBOR Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three or six months thereafter, PROVIDED,
HOWEVER, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such LIBOR Interest Period shall end on
the last Business Day of such next, second, third or sixth succeeding month. If
a LIBOR Interest Period would otherwise end on a day which is not a Business
Day, such LIBOR Interest Period shall end on the next succeeding Business Day;
PROVIDED, HOWEVER, that if said next succeeding Business Day falls in a new
calendar month, such LIBOR Interest Period shall end on the immediately
preceding Business Day.
"LIBOR Rate Loan" means a Loan which bears interest at a LIBOR Rate, and
may be an Alternate Currency Loan or a Loan denominated in Dollars.
"LIBOR Rate" means one, two, three or six-month London InterBank Offered
Rate for the Applicable Currency, adjusted for statutory reserves, if applicable
("LIBOR") PLUS for each fiscal quarter, the LIBOR Applicable Margin.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's portion
of any Advance.
"Loan Documents" means this Agreement, the Notes and any other document
from time to time evidencing or securing indebtedness incurred by Borrower under
this Agreement, as any of the foregoing may be amended or modified from time to
time.
"Material Adverse Change" means a material adverse change with respect
to (i) the business, Property, condition (financial or otherwise), results of
operations, or prospects of Borrower and its Subsidiaries taken as a whole, (ii)
the ability of Borrower to perform its obligations under the Loan Documents, or
(iii) the validity or enforceability of any of the Loan Documents or the rights
or remedies of Agent or Lenders thereunder.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or
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<PAGE> 18
petroleum products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls and ureaformaldehyde
insulation.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which Borrowers or any member
of the Controlled Group is a party to which more than one employer is obligated
to make contributions.
"NCB" means National City Bank, a national banking
association .
"Net Income" means for any period, net income (or loss) of Borrower for
such period determined in accordance with GAAP.
"Notes" means the Revolving Promissory Notes, the Foreign
Currency Notes, and the Swingline Note.
"Notice of Assignment" is defined in SECTION 11.3.3.
"Notice of Offshore Currency Loan" is defined in SECTION 2.7.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of Borrower to Lenders or to
any Lender, Agent or any indemnified party hereunder (i) in respect of the Loans
made or Letters of Credit issued pursuant to this Agreement; or (ii) under or in
respect of any one or more of the Loan Documents. Obligations shall also
include, without limitation, all interest, charges and other fees payable
hereunder (or under any of the Loan Documents) by Borrower, or due hereunder (or
under any of the Loan Documents) from Borrower to Agent or any one or more of
Lenders from time to time, together with all costs and expenses payable
hereunder or under any of the Loan Documents.
"Offshore Currency" means any major non-United States currency other
than an Alternate Currency in which an Offshore Currency Loan is made hereunder.
"Offshore Currency Loan" means any Loan denominated in an Offshore
Currency, bearing interest at the Bid-Option Rate and made pursuant to a
Bid-Option Auction.
"Offshore Currency Loan Percentage" means, with respect to any Lender,
the percentage of the aggregate outstanding principal amount of the Offshore
Currency Loans of all of Lenders represented by the outstanding principal amount
of the Offshore Currency Loans of such Lender.
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<PAGE> 19
"Outstanding Amount" means, at any time, the aggregate of (w) the
principal balance of all Advances in Dollars then outstanding hereunder, PLUS,
(x) the Dollar Equivalent of all Advances in a Foreign Currency then outstanding
hereunder, PLUS (y) the Face Amount of all Letters of Credit then outstanding
hereunder, PLUS (z) the amount of all draws or disbursements made under any
Letter of Credit which Borrower has not converted into a Loan or otherwise
reimbursed to the Issuing Bank in accordance with SECTION 2.23, below.
"Participant" means a participant under SECTION 11.2.1.
"Payment Date" means, with respect to the payment of interest accrued on
any Base Rate Loan, the last day of each calendar month, and, with respect to
the payment of interest accrued on any LIBOR Rate Loan, the last day of the
LIBOR Interest Period, except that for any LIBOR Interest Period in excess of
three months, interim payments shall be made every third month.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Permitted Liens" are defined in SECTION 5.14.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under SECTION 412 of the
Code as to which Borrower or any member of the Controlled Group may have any
liability.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Pro Rata Share" means, in relation to any particular item, the share of
any Lender in such item, which shall be in the same proportion which the
Commitment of a Lender bears to the Aggregate Commitment, except that with
respect to application of payments of principal and interest, Pro Rata Shares
shall be adjusted as determined by Agent in its reasonable discretion to account
for the portion of the Outstanding Amount at such time attributable to each
Lender. Pro Rata Shares shall be net of any and all charges or fees due and
payable to Agent under the Loan Documents.
"Purchasers" is defined in SECTION 11.3.1.
"Purchase Money Security Interest" is defined in SECTION 5.14 (iv).
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<PAGE> 20
"Rate Option" means the Base Rate, the LIBOR Rate or the
Federal Funds Rate.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by banks for the purpose of purchasing or carrying
margin stocks applicable to member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Request for Issuance of a Letter of Credit" means the form,
substantially similar to that which is attached hereto as EXHIBIT C to be
executed by Borrower and delivered to Agent, requesting the issuance of a Letter
of Credit and providing the information required in connection therewith by
SECTION 2.23(a), below.
"Required Lenders" means those Lenders whose aggregate Pro Rata Shares
of the outstanding Advances equal or exceed sixty-six and two-thirds percent (66
2/3%) of the aggregate amount of the outstanding Advances, or, in the event that
there are no Advances outstanding, those Lenders having sixty-six and
two-thirds percent (66 2/3%) of the Aggregate Commitment.
"Reserve Requirement" means, with respect to a LIBOR Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on new
non-personal time deposits of $100,000 or more with a maturity equal to that on
Eurocurrency liabilities.
"Revolving Promissory Note" means a promissory note, in substantially
the form of EXHIBIT B hereto, duly executed by Borrower and payable to the order
of a Lender in the amount of its Commitment, including any amendment,
modification, renewal or replacement of such promissory note. In the case of
delivery of Foreign Currency Notes after the Closing Date, Lenders will deliver,
upon the request of Borrower, substitute Revolving
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<PAGE> 21
Promissory Notes in the amount of such Lender's Commitment less the Dollar
Equivalent at the date of delivery of the principal amount of the Foreign
Currency Notes in favor of such Lender.
"Same Day Funds" means (i) with respect to disbursements and payments in
Dollars, immediately available funds, and (ii) with respect to disbursements
and payments in a Foreign Currency, same day or other funds as may be determined
by Agent to be customary in the place of disbursement or payment for the
settlement of international banking transactions in the relevant Foreign
Currency.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by Borrower or any member
of the Controlled Group for employees of Borrower or any member of the
Controlled Group.
"Spot Rate" for a currency means the rate quoted by Agent as the spot
rate for the purchase by Agent of such currency with another currency through
the FX Trading Office at approximately 10:30 am. local time on the date two (2)
Business Days prior to the date as of which the foreign exchange computation is
made.
"Stockholder's Equity" means, as of any date of determination, an amount
equal to all equity as calculated in accordance with GAAP appearing on the
balance sheet of Borrower or its Subsidiaries (excluding treasury shares).
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of Borrower.
"Substantial Portion" means, with respect to the Property of Borrower
and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of Borrower and its Subsidiaries as would be shown in the
consolidated financial statements of Borrower and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made.
"Swingline Loan" means a Loan pursuant to SECTION 2.6.
"Swingline Note" means a promissory note, in substantially the form of
EXHIBIT D hereto, duly executed by Borrower and payable to the order of NCB in
the amount of $10,000,000, including any
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<PAGE> 22
amendment, modification, renewal or replacement of such promissory note.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Transferee" is defined in SECTION 11.4.
"Type" means, with respect to any Loan, its nature as a LIBOR Rate Loan
in Dollars, a Base Rate Loan, a Swingline Loan, an Alternate Currency Loan or an
Offshore Currency Loan.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date, for such
Plans.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, association, joint venture
or similar business organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDIT
----------
2.1 COMMITMENT. From and including the date of this Agreement and prior
to the Facility Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, that Borrower may, subject to the terms
and conditions of this Agreement, borrow on a revolving basis from Lenders on
the Closing Date and from time to time thereafter sums, the outstanding amount
of which shall not when added to the Letter of Credit Usage, exceed the
Aggregate Commitment at any time. Each Loan shall be in an amount equal to or
greater than Five Million Dollars ($5,000,000); PROVIDED, HOWEVER, that (i) with
regard to each Lender individually, the sum of each such Lender's outstanding
Loans shall not exceed such Lender's Credit Commitment; (ii) with regard to
Lenders collectively, the Outstanding Amount shall not exceed the Aggregate
Commitment; (iii) the Dollar Equivalent of
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<PAGE> 23
Foreign Currency Loans shall not exceed Ten Million Dollars ($10,000,000); (iv)
the amount of Swingline Loans shall not exceed Ten Million Dollars
($10,000,000); (v) the Dollar Equivalent of Foreign Currency Loans may be in
amounts less than Five Million Dollars ($5,000,000) but shall not be less than
$3,000,000; and (vi) Lenders shall not be required to make Offshore Currency
Loans except to the extent that they elect to bid therefor pursuant to SECTION
2.7. The Commitments to lend hereunder shall expire on the Facility Termination
Date. The credit facility established hereunder shall be evidenced by Revolving
Promissory Notes delivered by Borrower in favor of each Lender, respectively, a
Swingline Note in favor of NCB, and, concurrently with advances of Foreign
Currency Loans, Foreign Currency Notes in favor of each Lender making such
Foreign Currency Loan. Loans shall be made in the Applicable Currency.
2.2 Final Principal Payment. Any outstanding Loans and
all other unpaid Obligations shall be paid in full by Borrower on
the Facility Termination Date.
2.3 Ratable Loans. (a) Each Advance hereunder shall consist of Loans
made from the several Lenders ratably in accordance with their Pro Rata Share of
the Aggregate Commitment, except for Swingline Loans, which shall be made solely
by NCB, and Offshore Currency Loans, which shall be made by Lenders pursuant to
SECTION 2.7. Each Lender will make the amount of its Pro Rata Share of each
proposed Advance of LIBOR Rate Loans or Base Rate Loans available to Agent for
the account of Borrower in Same Day Funds by 12:00 noon (Cleveland time) on the
day requested except that in the case of a proposed Offshore Currency Loan,
Lenders making an Offshore Currency Loan will make the amount of its share
thereof available to Agent by such time on such day as Agent may specify.
(b) For all purposes of this Agreement (but not for purposes of the
preparation of any financial statements delivered pursuant hereto), the
equivalent in any Foreign Currency of an amount in Dollars, and the equivalent
in Dollars of an amount in any Foreign Currency, shall be determined at the Spot
Rate.
2.4 APPLICABLE MARGINS. On the Closing Date, the Applicable Margin shall
be determined using Tier III of the performance grid below. Thereafter, the Base
Rate Applicable Margin and LIBOR Applicable Margin shall be adjusted on the
first day of each calendar quarter, beginning January 1, 1996, based on the
ratio of Consolidated Funded Debt as of the end of the immediately preceding
quarter, to Capitalization as at the end of such quarter. To the extent that, as
of an adjustment date, information is not yet available to make such calculation
or Borrower has not provided to Agent information necessary to apply the
performance grid, interest shall be payable retroactively upon receipt of such
information and calculation by Agent. In such event, Borrower shall continue to
pay interest at the interest rate
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<PAGE> 24
and on the Payment Dates in effect for the preceding quarter and the parties
shall adjust for the difference between interest payable and interest actually
paid, when information to apply the performance grid is available.
<TABLE>
<CAPTION>
================================================================
Tier Consolidated LIBOR + Prime
Funded Debt/ +
Capitalization
----------------------------------------------------------------
<S> <C> <C> <C>
Tier I greater than 50% 45.0 bps 0 bps
----------------------------------------------------------------
Tier II less than or equal 37.5 bps 0 bps
to 50% but greater
than 40%
----------------------------------------------------------------
Tier III less than or equal 30.0 bps 0 bps
to 40% but greater
than 30%
----------------------------------------------------------------
Tier IV less than or equal 22.5 bps 0 bps
to 30%
================================================================
<FN>
* bps = basis points
</TABLE>
2.5 FACILITY FEE; CLOSING FEE. (a) Borrower agrees to pay to Agent for
the account of each Lender a facility fee (the "FACILITY FEE") on each Lender's
Commitment from the Closing Date to and including the Facility Termination Date,
calculated as follows: (i) 15 bps per annum on such Lender's Commitment in the
event the Applicable Margin is Tier I, (ii) 12.5 bps per annum on such Lender's
Commitment in the event Borrower's Applicable Margin is Tier II, (iii) 10 bps
per annum on Lender's Commitment in the event Borrower's Applicable Margin is
Tier III, and (iv) 7.5 bps per annum on such Lender's Commitment in the event
Borrower's Applicable Margin is Tier IV. The Facility Fee shall be payable
quarterly in arrears on the first day of each calendar quarter hereafter
beginning January 1, 1997, and on the Facility Termination Date.
(b) Borrower further agrees to pay all fees payable to
Agent pursuant to a separate letter agreement.
2.6 SWINGLINE LOANS. Borrower may, subject to the terms and conditions
of this Agreement, borrow on a short-term basis, not to exceed five Business
Days, from NCB, on the Closing Date and from time to time thereafter sums which
shall bear interest at the Federal Funds Rate plus an applicable margin
determined by NCB such that the return to NCB from each such Swingline Loan
approximates the hypothetical return to NCB of a LIBOR Rate Loan of the same
amount made at the same time, for the same number of days (determined pro rata
based on a thirty day LIBOR Interest Period). Each Swingline Loan shall be in
an amount equal to or greater than One Million Dollars ($1,000,000); PROVIDED,
HOWEVER, that, (i)
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<PAGE> 25
notwithstanding anything to the contrary in SECTION 2.1, the sum of NCB's
outstanding Loans of all Types may exceed NCB's Commitment to the extent
attributable to Swingline Loans; (ii) with regard to Lenders collectively
(including for such purpose NCB), the Outstanding Amount shall not exceed the
Aggregate Commitment; and (iii) Borrower may elect not to borrow a Swingline
Loan by Telephonic Notice to NCB within two (2) hours of notice from NCB of the
interest rate to be applicable to such Loan. Any Swingline Loan not repaid in
full, including the principal amount thereof and all accrued interest, within
five Business Days of the borrowing thereof shall automatically convert into a
Base Rate Loan and bear interest at the Base Rate.
2.7 OFFSHORE CURRENCY LOANS.
(a) THE BID-OPTION. From the Closing Date to but excluding the Facility
Termination Date, an Authorized Officer may, as set forth in this SECTION 2.7,
request Lenders to make offers to make Offshore Currency Loans to Borrower in an
Offshore Currency for a LIBOR Interest Period. Each Lender may, but shall have
no obligation to, make such offers and Borrower may, but shall have no
obligation to, accept any such offers, in the manners set forth in this SECTION
2.7; furthermore, each Lender may limit the aggregate amount of Offshore
Currency Loans when quoting rates for more than one LIBOR Interest Period in any
Bid-Option Quote, provided that such limitation shall not be less than the
minimum amounts required hereunder for Offshore Currency Loans and Borrower may
choose among the Offshore Currency Loans if such limitation is imposed.
(b) BID-OPTION QUOTE REQUEST. When an Authorized Officer wishes to
request offers to make Offshore Currency Loans under this SECTION 2.7, it shall
transmit to Agent by telex or telecopy a Bid-Option Quote Request substantially
in the form of EXHIBIT E hereto so as to be received no later than 11:00 a.m.
Cleveland, Ohio, time on the Business Day next preceding the date of the Loan
proposed therein specifying:
(i) the proposed date of the Offshore Currency Loan, which shall
be a Business Day;
(ii) the aggregate amount of such Offshore Currency Loan, which
shall be a minimum of the Dollar Equivalent of $3,000,000 or a larger
multiple Dollar Equivalent of $1,000,000; and
(iii) the duration of the LIBOR Interest Period applicable
thereto.
Borrower may request offers to make Offshore Currency Loans for more than one
LIBOR Interest Period in a single Bid-Option Quote Request.
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<PAGE> 26
(c) INVITATION FOR BID-OPTION QUOTES. Promptly upon receipt of a
Bid-Option Quote Request, Agent shall send to Lenders by telecopy (or telephone
promptly confirmed by telecopy) an Invitation for Bid-Option Quotes
substantially in the form of EXHIBIT F hereto, which shall constitute an
invitation by Borrower to each Lender to submit Bid-Option Quotes offering to
make Offshore Currency Loans to which such Bid-Option Quote Request relates in
accordance with this SECTION 2.7.
(d) SUBMISSION AND CONTENTS OF BID-OPTION QUOTES. (i) Each Lender may
submit a Bid-Option Quote containing an offer or offers to make Offshore
Currency Loans in response to any Invitation for Bid-Option Quotes. Each
Bid-Option Quote must comply with the requirements of this subsection (d) and
must be submitted to Agent by telecopy (or by telephone promptly confirmed by
telecopy) at its Head Office not later than 10:00 a.m. Cleveland time on the
proposed date of the Advance. Any Bid-Option Quote so made shall be irrevocable
except with the written consent of Agent given on the instructions of the
Authorized Officer.
(ii) Each Bid-Option Quote shall be substantially in the form of
EXHIBIT G attached hereto, but may be submitted to Agent by telephone with
prompt confirmation by delivery to Agent of such Bid-Option Quote, and
shall in any case specify:
(A) the proposed date of the Offshore Currency Loan;
(B) the principal amount of the Offshore Currency Loan for which
such offer is being made, which principal amount (x) must be in a
minimum Dollar Equivalent of $3,000,000 or a larger multiple Dollar
Equivalent of $1,000,000, and (y) may not exceed the principal amount
of the Offshore Currency Loans for which offers were requested;
(C) the LIBOR Interest Period(s) for which each such Bid-Option
Rate is offered;
(D) the rate of interest per annum (rounded to the nearest
1/100% (the "Bid-Option Rate") offered for each such Offshore Currency
Loan;
(E) the identity of the quoting Lender.
(iii) Any Bid-Option Quote shall be disregarded if it:
(A) is not substantially in the form of EXHIBIT G hereto (or is
not submitted by telephone to Agent with prompt written confirmation to
follow) or does not specify all of the information required by clause
(ii) of this subsection (d);
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<PAGE> 27
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Bid-Quotes; or
(D) arrives after the time set forth in SECTION 2.7(d) (i);
provided, that a Bid-Option Quote shall not be disregarded pursuant to clause
(B) or (C) above solely because it contains an indication that an allocation
that might otherwise be made to it pursuant to SECTION 2.7(g) would be
unacceptable. Agent shall notify the Authorized Officer of any disregarded
Bid-Option Quote.
(e) NOTICE TO BORROWER. Agent shall promptly notify the Authorized
Officer of the terms of any Bid-Option Quote submitted by a Lender that is
accordance with SECTION 2.7(d). Agent's notice to the Authorized Officer shall
specify (i) the aggregate principal amount of Offshore Currency Loans for which
offers have been received for each LIBOR Interest Period specified in the
related Bid-Option Quote Request, and (ii) the respective principal amounts and
respective Bid-Option Rates so offered.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00 a.m.
Cleveland, Ohio, time on the proposed date of an Offshore Currency Loan, the
Authorized Officer shall notify Agent of Borrower's acceptance or non-acceptance
of any offers so notified to it pursuant to subsection (e) of this SECTION 2.7
and Agent shall, promptly upon receiving notice from the Authorized Officer,
notify each Lender whose Bid-Option Quote has been accepted. In the case of
acceptance, such notice (a "Notice of Offshore Currency Loan") shall specify the
aggregate principal amount of offers for the applicable LIBOR Interest Period(s)
have been accepted. Borrower may accept any Bid-Option Quote in whole or in
part; provided that:
(i) the aggregate principal amount of each Offshore Currency
Loan may not exceed the applicable amount set forth in the related
Bid-Option Quote Request for the applicable LIBOR Interest Period;
(ii) the principal amount of each Offshore Currency Loan must
be the Dollar Equivalent of $3,000,000 or a larger multiple of the
Dollar Equivalent of $1,000,000;
(iii) acceptance of offers may only be made on the
basis of ascending Bid-Option Rates; and
(iv) Borrower may not accept any offer that is described in
SECTION 2.7(d) (iii) or that otherwise fails to comply with the
requirements of this Agreement.
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<PAGE> 28
(g) ALLOCATION BY AGENT. If offers are made by two or more Lenders with
the same Bid-Option Rates for a greater aggregate principal amount that the
amount in respect of which offers are accepted for the related LIBOR Interest
Period, the principal amount of Offshore Currency Loans in respect of which such
offers are accepted shall be allocated by Agent among such Lenders as nearly as
possible (in such multiples, not greater than Dollar Equivalents of $100,000, as
Agent may deem appropriate) in proportion to the aggregate principal amount of
such offers. Determinations by Agent of the amounts of Offshore Currency Loans
shall be conclusive in the absence of manifest error.
2.8 MINIMUM AMOUNT OF LOANS. Base Rate Loans shall be in the minimum
amount of $5,000,000, and in multiples of $1,000,000 if in excess thereof. LIBOR
Rate Loans in Dollars shall be in the minimum amount of $5,000,000, and in
multiples of $1,000,000 if in excess thereof. Foreign Currency Loans shall be in
the minimum Dollar Equivalent amount of $3,000,000, and in multiples of
$1,000,000 in excess thereof.
2.9 INTEREST PAYABLE ON THE LOANS.
(a) INTENTIONALLY OMITTED.
(b) METHOD OF SELECTING RATE OPTIONS AND LIBOR INTEREST PERIODS. (i)
Borrower shall select the Rate Option for each Advance and shall select the
LIBOR Interest Period applicable to each LIBOR Rate Loan from time to time and
whether such Loan shall be in Dollars or an Alternate Currency, by delivery to
Agent of an irrevocable notice in the form of EXHIBIT H hereto (a "BORROWING
NOTICE"), or by telephonic notice to Agent ("TELEPHONIC NOTICE"), followed by a
same day (which shall mean prior to 5:00 p.m. Cleveland, Ohio, time) written
Borrowing Notice delivered to Agent via facsimile. Offshore Currency Loans shall
be made exclusively pursuant to SECTION 2.7.
(ii) Each LIBOR Rate Loan shall bear interest from and including the
first day of the LIBOR Interest Period applicable thereto until (but not
including) the last day of such LIBOR Interest Period at the interest rate
determined as applicable to such Loan. Borrower shall select LIBOR Interest
Periods so that it is not necessary to pay such Loan prior to the last day of
the applicable LIBOR Interest Period in order to repay the Loans on the Facility
Termination Date. Provided that no Default shall have occurred and be
continuing, Borrower may elect to continue a Loan as a LIBOR Rate Loan by giving
irrevocable written, telephonic or telegraphic notice thereof to Agent not more
than ten (10) nor less than three (3) Business Days prior to the last day of the
then-current LIBOR Interest Period for such Loan, specifying the duration of the
succeeding LIBOR Interest Period therefor. If Agent does not receive timely
notice of such election, Borrower shall be deemed to have elected to convert
such Loan to a Base Rate Loan in Dollars at the end of the then-current LIBOR
Interest
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Period. Provided that no Default shall have occurred and be continuing, Borrower
may, on any Business Day, convert any outstanding Base Rate Loan, or portion
thereof, into a LIBOR Rate Loan in the same aggregate principal amount (or
Dollar Equivalent). If Borrower desires to convert a Base Rate Loan, it shall
give Agent prior written or telephonic notice not more than ten (10) nor less
than three (3) Business Days prior to the requested conversion date, which
notice shall specify the duration of the LIBOR Interest Period applicable
thereto.
(c) DETERMINATION OF RATE. Agent shall determine the Base Rate or
Federal Funds Rate, as the case may be, in effect from time to time. Any change
in the Base Rate or Federal Funds Rate shall, for all purposes of this Agreement
and the other Loan Documents, become effective on the effective date announced
by Agent in accordance with Agent's customary practices.
(d) MONTHLY INSTALLMENTS.
(i) Borrower shall pay to Agent, for the account of Lenders in
accordance with their respective Pro Rata Share, monthly in
arrears on the last Business Day of each month beginning with
the month following the month in which the Closing Date occurs,
interest on the outstanding principal amount of the Base Rate
Loans at the annual rate equal to the Base Rate plus the Base
Rate Applicable Margin and on the outstanding principal amount
of Swingline Loans at the annual rate determined pursuant to
SECTION 2.6; provided, however, that if Borrower elects,
pursuant to the final paragraph of SECTION 2.4(a), to convert a
Base Rate Loan, or any portion thereof, to a LIBOR Rate Loan,
Borrower shall pay to Agent, for the account of Lenders in
proportion to their respective Commitments, all accrued but
unpaid interest on such Base Rate Loan, or that portion thereof
which is being so converted, for the period commencing on the
date of the last payment date under this SECTION 2.8(d) (i) and
concluding on the day immediately preceding the first day of
the LIBOR Interest Period for the LIBOR Rate Loan into which
such Base Rate Loan is converted.
(ii) Borrower shall pay to Agent, for the account of Lenders in
accordance with their Pro Rata Share, in arrears, interest on
the outstanding principal amount of the LIBOR Rate Loans in
Dollars at the annual rate equal to the LIBOR Rate. Such
interest shall be due and payable on the last Business Day of
the applicable
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LIBOR Interest Period of three months or less, and for all
other LIBOR Rate Loans in Dollars, interest shall be payable,
in arrears as aforesaid, on (x) that Business Day which is
three months after the beginning of the LIBOR Interest Period
for such Loans; and (y) on the final day of the LIBOR Interest
Period therefor.
(iii) Borrower shall pay to Agent, for the account of Lenders, in
arrears, interest on the outstanding principal amount of each
Offshore Currency Loan at the annual rate equal to the
applicable Bid-Option Rate. Such interest shall be due and
payable on the last Business Day of the applicable LIBOR
Interest Period.
(e) INTEREST ON OVERDUE PAYMENTS; DEFAULT INTEREST RATE. If any payment
of principal or interest is not paid when due, or prior to the expiration of the
applicable period of grace (if any) therefor, Agent may charge and collect from
Borrower, or may add to the unpaid balance of the Notes, a Late Charge. Any Late
Charge charged and collected by Agent shall be distributed to Lenders in
proportion to their respective Commitments or Offshore Currency Loan Percentage,
as the case may be. No failure by Agent to charge or collect any Late Charge in
respect of any delinquent payment shall be considered to be a waiver by Agent or
Lenders of any rights they may have hereunder, including without limitation the
right subsequently to impose a Late Charge for such delinquent payment or to
take such other actions as may then be available to them hereunder or at law or
in equity, including but not limited to the right to terminate the Commitments
and/or to accelerate the Obligations pursuant to the terms hereof. If any Note
has been accelerated pursuant to this Agreement or if a Default hereunder or
under any other Loan Document shall have occurred and be continuing, the
outstanding principal balance of the Indebtedness advanced under this Agreement,
together with all accrued interest thereon and any and all other Obligations,
shall bear interest from the date on which such amount shall have first become
due and payable to the date on which such amount shall be paid (whether before
or after judgment) at the Default Interest Rate. Interest at the Default
Interest Rate will continue to accrue and will (to the extent permitted by
applicable law) be compounded daily until the Obligations in respect of such
payment are discharged (whether before or after judgment).
(f) LIBOR Rate Loans in Dollars not repaid on the last day of the
Interest Rate Period applicable thereto shall be continued as LIBOR Rate Loans
to the extent Borrower provides written notice thereof to Agent and satisfies
the requirements hereof for LIBOR Rate Loans, or, if such requirements are not
satisfied, converted into Base Rate Loans and bear interest as
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provided herein, from and including the last day of such Interest Rate Period.
(g) Foreign Currency Loans not repaid on the last day of the Interest
Rate Period applicable thereto shall be continued as Foreign Currency Loans in
the same Applicable Currency to the extent Borrower provides written notice
thereof to Agent and satisfies the requirements hereof for Foreign Currency
Loans in such Applicable Currency, or, if such requirements are not satisfied,
converted into Base Rate Loans (and redenominated in Dollars at its Dollar
Equivalent) and bear interest as provided herein, from and including the last
day of such Interest Rate Period.
2.10 REPAYMENTS AND PREPAYMENTS OF PRINCIPAL.
(a) OPTIONAL PREPAYMENTS Without derogating from the mandatory
prepayment requirements contained in SECTION 2.10(b) hereof, Borrower may prepay
the principal of the Loans in full or in part at any time and from time to time
upon payment to Agent of all accrued interest to the date of payment; provided,
however, that (i) all partial payments of principal shall be in an amount equal
to or greater than One Hundred Thousand Dollars ($100,000.00); and (ii) all
Loans may be prepaid without penalty or premium. If Borrower shall prepay any
Loan which is a LIBOR Rate Loan on a day other than the final day of the
applicable LIBOR Interest Period therefor, such prepayment must include an
amount equal to all of Lenders' aggregate LIBOR Break Funding Costs, applicable
to or resulting from such prepayment in accordance with SECTION 2.14, below.
(b) MANDATORY PREPAYMENTS
(i) If at any time the Outstanding Amount exceeds the Aggregate
Commitment, Borrower shall immediately prepay an amount equal to such
excess.
(ii) If at any time the Outstanding Amount with respect to any Lender
exceeds such Lender's Commitment, Borrower shall immediately prepay an
amount equal to such excess.
(iii) If (and on each occasion that) a drawing or disbursement is made
under a Letter of Credit and is not reimbursed by Borrower (either by
causing the amount of such drawing or disbursement to be converted into
a Loan or by paying the Issuing Bank the amount of such showing or
disbursement in immediately available funds, in either case as and when
required by SECTION 2.23, below), Borrower shall immediately prepay an
amount equal to such drawing or disbursement, together with interest
thereon.
(c) Application of Prepayments Any prepayment of the Obligations shall
be applied by Agent as set forth in SECTION 2.11
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hereof. To the extent that such payment, repayment or prepayment shall be
applied to LIBOR Rate Loan, Agent shall retain such amount until the expiration
of the LIBOR Interest Period applicable to such Loan, and, shall apply such
payment at such time so as to minimize the LIBOR Break Funding Costs applicable
to such payment, repayment or prepayment, unless otherwise instructed by
Borrower to pay, repay or prepay such Loan and nonetheless incur the applicable
LIBOR Break Funding Cost.
(d) MATURITY. Subject to the terms and conditions of this Agreement,
Borrower will be entitled to reborrow all or any part of the principal of the
Notes repaid or prepaid prior to the termination of the Commitments, PROVIDED
THAT Borrower shall not be permitted to reborrow principal under a Foreign
Currency Note. The Commitments shall terminate, and all of the Indebtedness
evidenced by each Note shall, if not sooner paid, be in any event absolutely and
unconditionally due and payable in full by Borrower, on the Facility Termination
Date.
(e) NOTICE OF PREPAYMENTS OF PRINCIPAL. Unless otherwise specified
herein, Borrower will provide Agent at least (1) one Business Day's advance,
written notice of its intention to make any voluntary prepayment of principal.
Such notice shall be irrevocable and shall specify the date of prepayment and
the aggregate amount to be paid.
(f) REDUCTION IN COMMITMENT. Provided there is not then any Default or
Unmatured Default hereunder or any other Loan Document, Borrower may, upon and
subject to the terms and conditions set forth in this SECTION 2.10(f), elect
permanently to reduce the Aggregate Commitment by providing Agent and each
Lender with not less than thirty (30) days' prior written notice of its election
to do so. Such notice shall specify the date on which such reduction is intended
to become effective and the amount to which Borrower would propose to reduce the
Aggregate Commitment. Provided that Borrower shall, on or prior to the effective
date for such reduction specified in such notice, have made such payments or
prepayments as may be necessary to cause the outstanding balance of all Loans to
Borrower to be reduced to an amount equal to or less than the amount of the
Aggregate Commitment (giving effect to the proposed reduction thereof
contemplated in Borrower's notice), the Aggregate Commitment shall, on the date
specified in Borrower's notice, be reduced to the amount stipulated in
Borrower's notice. In the event that Borrower shall elect to reduce the
Aggregate Commitment as aforesaid, each Lender's Commitment shall be reduced,
pro rata, to reflect any such reduction in the Aggregate Commitment, and the
amount of the Facility Fee payable during the quarter in which such reduction
shall become effective shall be calculated so as to give effect to such
reduction, as of the effective date thereof, on a per diem basis. Each reduction
in the amount of the Aggregate Commitment effected pursuant to this SECTION
2.10(f) shall be in a multiple of Five Million Dollars ($5,000,000), and the
minimum reduction shall be Twenty Million
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Dollars ($20,000,000). Each reduction in the amount of the Aggregate Commitment
shall be permanent. Borrower may exercise their right permanently to reduce the
amount of the Aggregate Commitment not more frequently than twice during any
six-month period. Borrower shall pay all reasonable costs and expenses of Agent
(including, without limitation, reasonable attorney's fees) incurred in
connection with the exercise of Borrower's rights under this SECTION 2.10(f).
2.11 PAYMENTS AND COMPUTATIONS.
(a) TIME AND PLACE OF PAYMENTS. Each payment to be made by Borrower
under this Agreement or any other Loan Documents shall be made directly to Agent
at its Head Office, not later than 12:00 noon Cleveland time, on the due date of
each such payment. Such payments shall be made in Same Day Funds, and (i) in the
case of Foreign Currency payments, no later than such time on the dates
specified herein as may be determined by Agent to be necessary for such payment
to be credited on such date in accordance with normal banking procedures in the
place of payment, and (ii) in the case of any Dollar payments, no later than
12:30 p.m. (Cleveland time) on the date specified herein. Any payment which is
received by Agent later than 12:30 p.m. (Cleveland time), or later than the time
specified by Agent as provided in clause (i), above, (in the case of Foreign
Currency payments), shall be deemed to have been received on the following
Banking Day and any applicable interest or fee shall continue to accrue. Except
as otherwise expressly provided herein, all payments by Borrower shall be made
to Agent for the account of Lenders, and, with respect to principal of, interest
on, and any other amounts relating to, any Foreign Currency Loan, shall be made
in the Foreign Currency in which such Loan is denominated or payable, and, with
respect to all other amounts payable hereunder, shall be made in Dollars. Agent
will, on the same Business Day that it receives (or is deemed to receive, as
aforesaid) each such payment, cause to be distributed to each Lender, in
immediately available and freely transferrable funds, such Lender's Pro Rata
Share of each such payment received by Agent or, in the case of Offshore
Currency payments, distributed to the Lender(s) having Loans in accordance with
their Offshore Currency Loan Percentage.
(b) APPLICATION OF FUNDS. Notwithstanding anything herein to the
contrary, the funds received by Agent with respect to the Obligations shall be
applied as follows:
(i) NO DEFAULT. Provided that the Notes have not been accelerated
pursuant to SECTION 7.1, below, and provided further that no Default
or Unmatured Default hereunder or under any Loan Document shall have
occurred and be continuing at the time that Agent receives such
funds, in the following manner: (a) FIRST, to the payment of all
fees, charges, and other sums (other than principal and interest)
then
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due and payable to Agent or Lenders under the Notes, this Agreement
or the other Loan Documents (including, without limitation, any
LIBOR Break Funding Costs which may then be payable); (b) SECOND, to
the payment of all accrued but unpaid interest at the time of such
payment in accordance with each Lender's share pursuant to SECTION
2.11(a); and (c) THIRD, to the payment of principal of the Notes in
accordance with each Lender's share pursuant to SECTION 2.11(a).
(ii) DEFAULT. If the Notes have been accelerated pursuant to SECTION
7.1, or if a Default hereunder shall have occurred and be continuing
hereunder or under the Notes or any of the other Loan Documents at
the time Agent receives such funds, in the following manner: (a)
FIRST to the payment or reimbursement of Lenders and Agent for all
costs, expenses, disbursements and losses which shall have been
incurred or sustained by Lenders or Agent in or incidental to the
collection of the Obligations owed by Borrower hereunder or the
exercise, protection, or enforcement by Lenders or Agent of all or
any of the rights, remedies, powers and privileges of Lenders and
Agent under this Agreement, the Notes, or any of the other Loan
Documents and in and towards the provision of adequate indemnity to
Agent and any of Lenders against all taxes or Liens which by law
shall or may have priority over the rights of Agent or Lenders in
and to such funds; and (b) SECOND to the payment of all of the
Obligations in accordance with SECTION 2.11(b) (i) above.
(c) PAYMENTS ON BUSINESS DAYS. If any sum would (but for the provisions
of this SECTION 2.11(c)) become due and payable on any day which is not a
Business Day, then such sum shall become due and payable on the next succeeding
Business Day, and interest payable on such sum shall continue to accrue and
shall be adjusted by Agent accordingly.
(d) COMPUTATION OF INTEREST. All computations of interest payable under
this Agreement, the Notes, or any of the other Loan Documents shall be computed
by Agent on the basis of the actual principal amount outstanding on each day
during the payment period, and shall be calculated with reference to the actual
number of days elapsed during such period on the basis of a year consisting of
three hundred and sixty (360) days. The daily interest charge shall be one
three-hundred-sixtieth (1/360th) of the annual interest amount. Each
determination of any interest rate by Agent shall be conclusive and binding on
Borrower in the absence of manifest error. Absent manifest error, a certificate
or statement signed by an authorized officer of Agent shall be
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conclusive evidence of the amount of the Obligations due and unpaid as of the
date of such certificate or statement.
2.12 PAYMENTS TO BE FREE OF DEDUCTIONS. Each payment to be made by
Borrower under this Agreement, any Note, or any of the other Loan Documents
shall be made in accordance with SECTION 2.11 hereof, without set-off, deduction
or counterclaim whatsoever, and free and clear of taxes, levies, imposts,
duties, charges, fees, deduction, withholdings, compulsory loans, restrictions
or conditions of any nature now or hereafter imposed or levied by any
governmental or taxing authority, unless Borrower is compelled by law to make
any such deduction or withholding. In the event that any such obligation to
deduct or withhold is imposed upon Borrower with respect to any such payment:
(a) Borrower shall be permitted to make the deduction or withholding required by
law in respect of the said payment, and (b) there shall become and be absolutely
due and payable by Borrower to Agent or such Lender on the date on which the
said payment shall be due and payable, and Borrower hereby promises to pay to
Agent or such Lender on such date, such additional amount as shall be necessary
to enable Agent or such Lender to receive the same net amount which Agent or
such Lender would have received on such due date had no such obligation been
imposed by law. Notwithstanding any provision of this SECTION 2.12 to the
contrary, the foregoing provisions of this SECTION 2.12 shall not apply in the
case of any deductions or withholding made (y) in respect of taxes charged upon
or by reference to the overall net income, profits or gains of Agent or any
Lender, or (z) failure by a Lender to comply with SECTION 2.22.
2.13 USE OF PROCEEDS. Borrower represents, warrants and covenants to
Agent and to each Lender that all proceeds of the Advances shall be used by
Borrower only for the following purposes: (i) Acquisitions, to the extent
expressly permitted under this Agreement, (ii) Borrower's share repurchase
program, and (iii) except as expressly limited in this Agreement, general
corporate purposes.
2.14 LIBOR BREAK FUNDING COST. Borrower shall pay to Agent, for the
ratable benefit of each Lender, the LIBOR Break Funding Costs that Agent
reasonably determines are attributable to:
(a) any payment (including, without limitation, any payment resulting
from the acceleration of the Loans pursuant to this Agreement or any Loan
Document), repayment, mandatory or optional prepayment, or conversion of a LIBOR
Rate Loan for any reason on a date other than the last day of the LIBOR Interest
Period for such Loan; or
(b) any failure by Borrower for any reason to borrow a LIBOR Rate Loan
on the date for such borrowing specified in the relevant Borrowing Notice, or in
a Bid-Option Quote Request for which Borrower has delivered a Notice of Offshore
Currency Loan pursuant to SECTION 2.7(f) of this Agreement.
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2.15 ADDITIONAL COSTS.
(a) Notwithstanding any conflicting provisions of this Agreement to the
contrary, if any applicable law, rule or regulation not in effect as of the date
hereof shall (i) subject Agent or any Lender to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to any Loan, or
Letter of Credit, this Agreement, any Note, or any of the other Loan Documents
or the payment by Borrower of any amounts payable to Agent or any Lender
hereunder or thereunder (other than taxes charged upon or by reference to the
overall net income, profits or gains of Agent or any Lender or taxes charged
with respect to any Lender's failure to comply with SECTION 2.22 hereof); or
(ii) materially change, in the reasonable opinion of the party so affected, the
basis of taxation (other than changes in tax rates applicable to taxes charged
upon or by reference to the overall net income, profits or gains of Agent or any
Lender or taxes charged with respect to any Lender's failure to comply with
SECTION 2.22 hereof) of payments to Agent or any Lender of the principal of or
the interest on any Note or any other amounts payable to Agent or any Lender
under this Agreement, or any of the other Loan Documents; or (iii) impose or
increase or render applicable any special or supplementary special deposit or
reserve or similar requirements (whether or not having the force of law) against
assets held by, or deposits in or for the account of, or any eligible
liabilities of, or loans by any office or branch of, Agent or any Lender; or
(iv) impose on Agent or any Lender any other condition or requirement with
respect to this Agreement, any Note, or any of the other Loan Documents, and if
the result of any of the foregoing is (A) to increase the cost to Agent or any
Lender of making, funding or maintaining all or any part of the principal of the
Loans or of issuing, maintaining or making draws or disbursements under the
Letters of Credit, or (B) to reduce the amount of principal, interest or any
other sum payable by Borrower to Agent or any Lender under this Agreement, any
Note, or any of the other Loan Documents, or (C) to require Agent or any Lender
to make any payment or to forego any interest or other sum payable by Borrower
to Agent or any Lender under this Agreement, any Note, or any of the other Loan
Documents, the amount of which payment or foregone interest or other sum is
measured by or calculated by reference to the gross amount of any sum receivable
or deemed received by Agent or any Lender from Borrower under this Agreement,
any Note, or any of the other Loans Documents, then, and in each such case,
Borrower will pay to Agent for Agent or the account of a Lender, as the case may
be, within sixty (60) days of written notice by Agent or such Lender, such
additional amounts as will (in the reasonable opinion of Agent or such Lender,
as the case may be) be sufficient to compensate Agent or such Lender for such
sum.
(b) If any present or future applicable law, rule or regulation shall
make it unlawful for Borrower to perform any one or more of its agreements or
Obligations under this Agreement, any Note, or any of the other Loan Documents,
then the obligations of
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Lenders under their respective Commitment shall terminate immediately. If any
present or future applicable law, rule or regulation shall make it unlawful for
Borrower to perform any one or more of its agreements or obligations under this
Agreement, any Note, or any of the other Loan Documents, and Agent, or any
Lender shall at any time determine (which reasonable determination shall be
conclusive and binding on Borrower) (i) that, as a consequence of the effect or
operation (whether direct or indirect) of any such applicable law, rule or
regulation, any one or more of the rights, remedies, powers or privileges of
Agent or any Lender under or in respect of this Agreement, any Note, or any of
the other Loan Documents shall be or become invalid, unenforceable, or
materially restricted; and (ii) that all or any one or more of the rights,
remedies, powers and privileges so affected are of material importance to Agent
or any Lender (as determined by the party so affected), then Agent shall, at the
direction of the Required Lenders, by giving notice to Borrower, declare all of
the Obligations, including, without limitation, the entire unpaid principal of
the Notes, all of the unpaid interest accrued thereon and any and all other sums
due and payable by Borrower to Agent or Lenders under this Agreement, any Note,
and any of the other Loan Documents, to be immediately due and payable, and,
thereupon, such Obligations shall (if not already due and payable) forthwith
become and be due and payable without further notice or other formalities of any
kind, all of which are hereby expressly waived.
(c) If Agent or any Lender shall reasonably determine that any law, rule
or regulation not in effect as of the date hereof regarding capital adequacy, or
in the event of any change in any existing such law, rule or regulation or in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by any Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
such authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on such Lender's capital, as a consequence of its
obligations hereunder, to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by any amount deemed by
such Lender to be material, then Borrower shall pay to such Lender within sixty
(60) days of written notice by such Lender such amount or amounts, in addition
to the amounts payable under the provisions of this Agreement or any other Loan
Document, as will compensate such Lender for such reduction. Determinations by
any Lender of the additional amount or amounts required to compensate such
Lender in respect of the foregoing shall be presumptively correct absent
manifest error. In determining such amount or amounts, each Lender may use in
good faith any reasonable averaging and attribution methods of general
application.
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(d) Each Lender agrees, that upon the occurrence of any event giving
rise to the operation of SECTION 2.12, or (a)-(c) of this SECTION 2.15 with
respect to such Lender, it will, to the extent permitted by Applicable Law or by
the relevant governmental authority, in consultation with Agent, for a period of
thirty (30) days endeavor in good faith to avoid or minimize the increase in
costs or reduction in payments resulting from such event (including, but not
limited to, endeavoring to change its Lending Installation); provided, however,
that such avoidance or minimization can be made in such a manner that such
Lender, in its sole determination, suffers no economic, legal or regulatory
disadvantage. If any Lender (an "Affected Lender") shall make a demand for
payment under any of such Sections, and Borrower shall find a Lender or an
assignee which offers in writing to purchase the Commitments and Advances of
such Affected Lender without recourse at par on a specified date, together with
accrued and unpaid interest and commitment fees thereon to the date of purchase,
and tenders the purchase price of such Commitments and Advances on such
specified date, and if, in the reasonable opinion of such Affected Lender, its
acceptance of such offer would be permitted under Applicable Law and all
relevant governmental authorities and would not result in its suffering any
economic, legal, or other regulatory disadvantage, then Borrower shall be
excused from the payment of the increased costs claimed by such Affected Lender
under any of such sections accruing after the first interest payment date
pursuant to SECTION 2.19 for each Advance of such Affected Lender following such
specified date, if the Affected Lender demanding payment under either such
SECTION declines such purchase offer. If such Affected Lender accepts such
purchase offer, upon consummation of such purchase offer such Affected Lender
shall cease to be a party hereto. Except as provided in the immediately
preceding sentence, nothing in this SECTION 2.15(d) shall affect or postpone the
obligations of Borrower to make payments as provided hereunder: Any reasonable
expenses incurred by such Affected Lender under this SECTION 2.15 (d) shall be
paid by Borrower upon delivery by such Affected Lender to Borrower of a
certificate as to the amount of such expenses, which certificate shall be
conclusive and binding, in absence of manifest error.
(e) For purposes of this SECTION 2.15, "laws, rules and regulations not
in effect on the date hereof" or similar words shall be deemed to include future
interpretations of existing laws, rules and regulations.
2.16 INDEMNIFICATION OF LOSSES. Without derogating from any of the other
provisions of this Agreement or any of the other Loan Documents Borrower hereby
absolutely and unconditionally agrees to indemnify Agent and each Lender, upon
demand at any time and as often as the occasion therefor may require, against
any and all claim, demands, suits, actions, damages, losses, costs, expenses and
all other liabilities whatsoever which Agent or any Lender or any of their
respective directors or officers may sustain or incur as a consequence of, on
account of, in relation to or in
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any way in connection with (a) any failure by Borrower to pay, punctually on the
due date thereof, any amount payable under this agreement, any Note, or any of
the other Loan Documents beyond the expiration of the period of grace (if any)
applicable thereto, or (b) the acceleration of the maturity of any of the
Obligations, or (c) any failure by any Borrower to perform or comply with any of
the terms and provisions of this Agreement, any Note or any of the other Loan
Documents. Such claims, demands, suits, actions, damages, losses, costs,
expenses shall include, without limitation (i) any costs incurred by Agent or
any lender in carrying funds to cover any overdue principal, overdue interest or
any other overdue sums payable by Borrower under this Agreement, any Note or any
of the other Loan Documents; (ii) any interest payable by Agent or any Lender in
order to carry the fund referred to in clause (i) of this SECTION 2.16; and
(iii) any losses (but excluding losses of anticipated profit) incurred or
sustained by Agent or any Lender in liquidating or re-employing funds acquired
from third parties to make, fund or maintain all or any part of the Loans.
Lenders' right to receive payment under this SECTION 2.16 (but not the
underlying right to indemnification) is subject to substantial compliance by
Lenders with the obligation to make Advances hereunder.
2.17 STATEMENTS BY AGENT OR ANY LENDER. A certified statement signed by
an officer of Agent or any Lender setting forth any additional amount required
to be paid by Borrower to Agent or such Lender (together with supporting
documentation setting forth in reasonable detail an explanation of the basis for
requesting payment of such amount), respectively, under SECTION 2.15 and 2.16
hereof shall be submitted by Agent or such Lender to Borrower in connection with
each demand made at any time by Agent (with copies thereof delivered to each
other Lender) or such Lender under either of such sections. A claim by Agent or
any Lender for all or any part of any additional amounts required to be paid by
Borrower under SECTION 2.15 and 2.16 hereof may be made before or after any
payment to which such claim relates. Each such statement shall, in the absence
of manifest error, constitute presumptive evidence of the additional amount
required to be paid to Agent or such Lender.
2.18 BORROWING NOTICES: TELEPHONIC NOTICES. (a) All requests for draws,
advances, or disbursements of Loan proceeds shall be made by and on behalf of
Borrower in writing on a Borrowing Notice, by Telephonic Notice, or pursuant to
SECTION 2.7. All Telephonic Notices, must be followed by same day (which shall
mean prior to 5:00 p.m., Cleveland, Ohio, time) written Borrowing Notice
delivered to Agent via facsimile. Borrowing Notices may be transmitted to Agent
at its Head Office via fax or telecopy, PROVIDED that Borrower immediately
notifies Agent by telephone of such transmission. Each Borrowing Notice for Base
Rate Loans or Swingline Loans shall be transmitted to and received by Agent, or
each Telephonic Notice shall be received by telephone by Agent, not later than
12:00 p.m. Cleveland, Ohio, time not more than ten (10) Business Days nor less
than one (1) Business Day before the
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Borrowing Date of each such loan, and not more than ten (10) Business Days nor
less than three (3) Business Days before the Borrowing Date for each LIBOR Rate
Loan, provided that notices for Offshore Currency Loans shall be governed by
SECTION 2.7. All Borrowing Notices shall be accompanied by such documents,
reports and other materials as may be reasonably necessary to enable Agent (and
each Lender) to confirm that the conditions precedent to the disbursement of
such requested Loan have been satisfied.
(b) Agent shall notify Lenders promptly by telephone of its receipt of
Borrower's Borrowing Notice, but in no event shall Agent notify Lenders later
than 5:00 p.m. Cleveland time, on the day on which Agent actually receives the
applicable Borrowing Notice. In addition, Agent shall provide each Lender with a
copy of each such Borrowing Notice, together with all accompanying materials,
promptly upon Agent's receipt thereof, and shall in addition provide each Lender
with a statement showing Agent's calculation of its respective Pro Rata Share of
the Advance so requested. Each Lender will, upon receiving notice from Agent of
Borrower's Borrowing Notice, become and be obligated to place at the disposal of
Agent, not later than 10:00 a.m., Cleveland time, on the Borrowing Date set
forth on such Borrowing Notice, an aggregate amount in dollars equal to such
Lender's Pro Rata Share multiplied by the amount of the Advance requested. The
payment by each Lender of such aggregate amount shall be made to Agent at
Agent's Head Office in immediately available and freely transferrable funds.
(c) Agent shall disburse the proceeds of each Loan to Borrower, in
immediately available funds not later than noon, Cleveland time, on the
Borrowing Date described therefor, provided that: (x) Borrower shall have
provided Agent with a Borrowing Notice for such Advance as and when provided
above; (y) all of the conditions precedent applicable to such Advance shall be
satisfied as at the Closing Date or such later Borrowing Date as may be
applicable to such Loan; and (z) each Lender shall fund the amount equal to its
Loan as provided in SECTION 2.18(b), above.
2.19 NOTES; TELEPHONIC NOTICES. Each Lender is hereby authorized to
record the principal amount of each of its Loans and each repayment on the
schedule attached to its respective Note or Notes, provided, however, that the
failure to so record shall not affect Borrower's obligations under such Note.
Borrower hereby authorizes Lenders and Agent to extend, convert or continue
Loans, effect selections of Types of Advances and to transfer funds based on
telephonic notices made by any person or persons Agent or any Lender in good
faith believes to be acting on behalf of Borrower. Borrower agrees to deliver
promptly to Agent a written confirmation, if such confirmation is requested
by Agent or any Lender, of each telephonic notice signed by an Authorized
Officer. If the written confirmation differs in any material respect from the
action taken by Agent and Lenders, the records of Agent and Lenders shall govern
absent manifest error.
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2.20 LENDING INSTALLATIONS. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
notice to Agent and Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be made.
2.21 NON-RECEIPT OF FUNDS BY AGENT. Unless Borrower or a Lender, as the
case may be, notifies Agent prior to the date on which it is scheduled to make
payment to Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii)
in the case of Borrower, a payment of principal, interest or fees to Agent for
the account of Lenders, that it does not intend to make such payment, Agent may
assume that such payment has been made. Agent may, but shall not be obligated
to, make the amount of such payment available to the intended recipient in
reliance upon such assumption. If such Lender or Borrower, as the case may be,
has not in fact made such payment to Agent, the recipient of such payment shall,
on demand by Agent, repay to Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the date
such amount was so made available by Agent until the date Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Rate for such day or (ii) in the case of payment by Borrower, the
interest rate applicable to the relevant Loan.
2.22 WITHHOLDING TAX EXEMPTION. At least five Business Days prior to the
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each
Borrower and Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each
Borrower and Agent two additional copies of such form (or a successor form) on
or before the date that such form expires (currently, three successive calendar
years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or
after the occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by Borrower or Agent, in each case certifying
that such Lender is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
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otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises Borrower and Agent that it is not capable
of receiving payments without any deduction or withholding of United States
federal income tax.
2.23 THE LETTERS OF CREDIT.
(a) ISSUANCE OF LETTERS OF CREDIT; CONDITIONS AND LIMITATIONS". Upon the
terms and conditions set forth in this Agreement, Borrower may request, in
accordance with the provisions of this SECTION 2.23, that the Issuing Bank issue
one or more Letters of Credit for its account from time to time prior to the
Termination Date. If Borrower desires the issuance of a Letter of Credit, it
shall deliver to Agent a Request for Issuance of Letter of Credit in form
substantially similar to that which is attached hereto as EXHIBIT C and made a
part hereof by this reference, no later than 11:00 A.M. (Cleveland time) at
least five Business Days before the proposed Issuance Date therefor. The Request
for Issuance of Letter of Credit shall be accompanied by a Letter of Credit
application, on the Issuing Bank's then-customary form, and shall contain, among
other things, the following information with respect to each requested Letter of
Credit: (i) its proposed Issuance Date (which shall be a Business Day), (ii) its
proposed Face Amount, (iii) its proposed expiration date, (iv) the name and
address of its proposed beneficiary, and (v) a summary of its purpose and
contemplated terms. Borrower shall, in addition, furnish a precise description
of any documents to be presented under, and any other terms of, the requested
Letter of Credit, together with the text of any certificate to be presented by
the beneficiary which, if presented by the beneficiary prior to the expiration
date of the Letter of Credit, would require the Issuing Bank to make payment
under the Letter of Credit. No Letter of Credit shall require payment against a
conforming draft to be made thereunder on the same Business Day that such draft
is presented if such presentation is made after 10:00 A.M. (Cleveland time) on
such Business Day. The minimum Face Amount of any Letter of Credit shall be One
Million Dollars ($1,000,000) or the Dollar Equivalent thereof. The issuance of
each Letter of Credit shall be subject to the satisfaction, on the Issuance Date
for each Letter of Credit, of all of the conditions precedent set forth in
SECTION 3.2, below, and to the following additional limitations:
(i) Borrower shall not request the issuance of a Letter of Credit if,
after giving effect to the issuance of such Letter of Credit, the Letter
of Credit Usage would equal or exceed Ten Million Dollars ($10,000,000);
(ii) Borrower shall not request the issuance of a Letter of Credit if,
after giving effect to the issuance of such Letter of Credit, the
Outstanding Amount would exceed the Aggregate Commitment; and
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(iii) In no event shall the Issuing Bank issue any Letter of Credit
having an expiration date later than the first to occur of (x) Facility
Termination Date or (y) one (1) year after the Issuance Date of the
proposed Letter of Credit; provided that, subject to the foregoing
clause (x), this clause (y) shall not prevent the Issuing Bank from
agreeing that a Letter of Credit will automatically be renewed for a
period not to exceed one (1) year after the initial expiry date thereof
if the Issuing Bank does not cancel such renewal, provided that all of
the conditions to the issuance of a Letter of Credit and set forth or
referred to in this SECTION 2.23(a) must be satisfied as at each such
renewal date in respect of such renewal.
(b) ISSUANCE OF LETTERS OF CREDIT: PURCHASE OF PARTICIPATIONS THEREIN.
Upon Agent's receipt of a Request for Issuance of Letter of Credit, Agent shall
promptly so notify each Lender, and shall provide each Lender with a copy of
such Request for Issuance of Letter of Credit. Provided that all of the
conditions precedent to the issuance of the requested Letter of Credit have been
satisfied, the Issuing Bank shall cause each Letter of Credit properly requested
hereunder to be issued in accordance wIth the terms of the respective Request
for Issuance for Letter of Credit therefor. Immediately upon the issuance of
each Letter of Credit, each Lender (other than the Issuing Bank) shall be deemed
to have irrevocably purchased from the Issuing Bank a participation in such
Letter of Credit and any and all drawings and disbursements thereunder, in an
amount equal to such Lender's Pro Rata Share of the initial Face Amount of such
Letter of Credit, and each Lender hereby covenants and agrees to purchase and
pay for such participation on the terms and subject to the conditions set forth
in this SECTION 2.23.
(c) PAYMENT IN CERTAIN CIRCUMSTANCES. Each Letter of Credit shall
provide that the Issuing Bank may (but shall not be required to) pay the
beneficiary thereof upon the occurrence of an Event of Default and the
acceleration of the maturity of the Loans or, if payment is not then due to the
beneficiary under such Letter of Credit, may provide for the deposit of funds in
an account to secure payment to the beneficiary, and that any funds so deposited
shall be paid to such beneficiary (subject to the satisfaction of all conditions
to such payment), or returned to the Issuing Bank for distribution to Lenders
(or, if all obligations then shall have been indefeasibly paid in full, to
Borrower) if no payment to such beneficiary has been made and if the final date
available for drawings under the Letter of Credit has passed. Each payment or
deposit of funds by the Issuing Bank as provided in this paragraph shall be
treated for all purposes of this Agreement as a drawing duly honored by the
Issuing Bank under the related Letter of Credit.
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(d) TERMINATION OF COMMITMENTS. If for any reason the Commitments shall
terminate when any Letter of Credit is outstanding, Borrower shall, on or prior
to the date of such termination: (i) cause each outstanding Letter of Credit to
be cancelled, and an amount equal to all amounts previously drawn under Letters
of Credit and not theretofore reimbursed by Borrower or converted into Loans
pursuant to SECTION 2.23(e) to be paid immediately to or as directed by the
Issuing Bank; or (ii) deposit, with Agent, immediately available funds in an
amount equal to the Letter of Credit Usage to secure all outstanding Letters of
Credit which are not cancelled as described in the preceding clause.
(e) PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. Upon receipt by
the Issuing Bank of any request for drawing under its Letter of Credit by the
beneficiary thereof, the Issuing Bank shall notify Borrower and Agent promptly
after its receipt of notice of any such request, and in any event at least two
(2) Business Days prior to the date on which the Issuing Bank intends to honor
such drawing (unless under the terms of the Letter of Credit the Issuing Bank is
required to honor a drawing prior to the second Business Day after presentation
of a request for drawing, in which case the Issuing Bank shall provide Borrower
and Agent with such notice of such request as may be practicable under the
circumstances). Agent shall provide each Lender with a true and complete copy
of such notice within one (1) Business Day of Agent's receipt of the same.
Borrower shall, and hereby covenants and agrees to, reimburse the Issuing Bank
on the day on which such drawing is honored in an amount, in immediately
available funds, equal to the amount of such drawing; PROVIDED that (i) unless
Borrower shall have notified Agent prior to 11:00 A.M. (Cleveland time) on the
Business Day immediately prior to the date of such drawing that Borrower intends
to reimburse the Issuing Bank for the amount of such drawing with funds other
than the proceeds of Loans, Borrower shall be deemed to have given a Request for
Advance to Agent requesting a Base Rate Loan on the date on which such drawing
is honored, in the amount of such drawing; and (ii) Lenders shall, on the date
of such drawing, make Loans in the amount of such drawing, the proceeds of which
shall be applied directly by Agent to reimburse the Issuing Bank for the amount
of such drawing; and PROVIDED FURTHER, that if for any reason proceeds of such
Loans are not received by the Issuing Bank on such date in an amount equal to
the amount of such drawing, Borrower shall reimburse the Issuing Bank, on the
next Business Day, in an amount equal to the excess of the amount of such
drawing over the amount of such Loans which are actually received, plus accrued
interest on such amount at the Default Interest Rate.
(f) PAYMENT BY LENDERS. If Borrower shall fail to reimburse the Issuing
Bank as and when required above for the amount of any drawing honored by the
Issuing Bank under a Letter of Credit issued by it, the Issuing Bank shall
promptly notify each Lender of the unreimbursed amount of such drawing and of
such Lender's respective Pro Rata Share thereof. Each Lender shall make
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available to the Issuing Bank an amount equal to its respective Pro Rata Share
of such unreimbursed drawing, in immediately available funds, at the office of
the Issuing Bank specified in such notice, not later than 12:00 P.M. (Cleveland
time) on the first Business Day after such Lender's receipt of such notice from
the Issuing Bank. If any Lender fails so to make available to the Issuing Bank
the amount of such Lender's Pro Rata Share of such Letter of Credit, the Issuing
Bank shall be entitled to recover such amount on demand from such Lender,
together with interest at the customary rate set by the Issuing Bank for the
correction of errors among banks. Nothing in this provision shall prejudice the
right of any Lender to recover from the Issuing Bank any amounts made available
by such Lender to the Issuing Bank pursuant to this provision in the event that
it is determined by a court of competent jurisdiction that the payment with
respect to a Letter of Credit by the Issuing Bank in respect of which payment
was made by the Issuing Bank constituted gross negligence or willful misconduct
on the part of the Issuing Bank. The Issuing Bank shall, or shall cause Agent
to, distribute to each other Lender which has paid all amounts payable by it
under this SECTION 2.23(f) with respect to any Letter of Credit issued by the
Issuing Bank such other Lender's Pro Rata Share of all payments received by the
Issuing Bank from Borrower in reimbursement of drawings honored by the Issuing
Bank under such Letter of Credit when such payments are received.
(g) COMPENSATION. Borrower agrees to pay the following amounts with
respect to each Letter of Credit issued pursuant to this Agreement:
(i) a Letter of Credit Commission payable, in advance, to Agent for
the ratable benefit of Lenders, on the Issuance Date of such Letter of
Credit (and, solely in the case of Letters of Credit which are renewed
after the expiration of the initial period thereof, on each renewal date
for so long as such Letters of Credit remain outstanding); and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each drawing made thereunder, documentary and
processing charges in accordance with the Issuing Bank's standard
schedule for such charges in effect at the time of such provided for in
this Agreement, Borrower agrees to protect, indemnify, pay and save the
Issuing Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) which the Issuing Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of
any Letter of Credit, other than as a result of the gross negligence or
willful misconduct of the Issuing Bank as determined by a court of
competent jurisdiction, or (ii) the failure of the Issuing Bank to honor
a drawing under any Letter of Credit as a result of
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any act or omission, whether rightful or wrongful, of any present or
future governmental authority. As between Borrower and the Issuing Bank,
Borrower assumes all risks of the acts and omissions of, or misuse of
the Letters of Credit issued by the Issuing Bank by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank shall not be responsible
for: (i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection
with the application for and issuance of Letters of Credit, even if any
of the foregoing should in fact prove to be invalid, insufficient,
inaccurate, fraudulent or forged in any respect; (ii) the validity or
insufficiency of any instrument transferring or assigning or purporting
to transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) the failure of the
beneficiary of any Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit; (iv) the errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telecopy, telex or otherwise,
whether or not they be in cipher; (v) the errors in interpretation of
technical terms; (vi) any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under any Letter of
Credit or any proceeds thereof; (vii) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under
such Letter of Credit; and (viii) for any consequences arising from
causes beyond the control of the Issuing Bank. None of the above shall
affect, impair, or prevent the vesting of any of the Issuing Bank's
rights or powers hereunder. In determining whether to pay under any
Letter of Credit, the Issuing Bank shall be responsible only to
determine that the documents and certificates required to be delivered
under that Letter of Credit have been delivered and that the same comply
on their face with the requirements of that Letter of Credit. Borrower
shall have no obligation to indemnify the Issuing Bank in respect of any
liability incurred by the Issuing Bank to the extent arising out of
the gross negligence or willful misconduct of the Issuing Bank, as
determined by a court of competent jurisdiction, or out of the wrongful
dishonor by the Issuing Bank of a proper demand for payment made under
the Letters of Credit issued by it.
(h) AMENDMENTS. Borrower may request that the Issuing Bank enter into
one or more amendments of its Letter of Credit by delivering to Agent and the
Issuing Bank a Notice of Issuance of Letter of Credit specifying (i) the Issuing
Bank, (ii) the proposed
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date of the proposed amendment and (iii) the nature of the requested amendment.
The Issuing Bank shall be entitled to enter into amendments with respect to its
Letters of Credit, provided, that any amendment extending the expiry date or
increasing the stated amount of any Letter of Credit shall be permitted only if
the Issuing Bank would, at the time of the proposed be permitted to issue a new
Letter of Credit having such an expiry date or stated amount under this SECTION
2.23 on the date of the amendment.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
3.1 INITIAL ADVANCE. Lenders shall not be required to make the Initial
Advance hereunder unless (a) Borrower has paid all fees due and payable to
Lenders and Agent hereunder, (b) the initial Borrowing Notice is delivered to
Agent on or before December 3, 1996, and (c) Borrower shall have furnished to
Agent, with sufficient copies for Lenders, the following:
(i) The duly executed originals of the Loan Documents, including the
Revolving Promissory Notes, payable to the order of each of Lenders,
and the Swingline Note, payable to the order of NCB;
(ii) A certificate of good standing for Borrower, certified by the
appropriate governmental officer, for the jurisdiction of Borrower's
formation;
(iii) Copies, certified by an officer of Borrower of each of Borrower's
formation documents (including by-laws or code of regulations),
together with all amendments thereto;
(iv) An incumbency certificate, executed by an officer of Borrower,
which shall identify by name and title and bear the signature of the
Persons authorized to sign the Loan Documents, and to make
borrowings hereunder on behalf of Borrower, upon which certificate
Agent and Lenders shall be entitled to rely until informed of any
change in writing by Borrower;
(v) Copies, certified by the Secretary or Assistant Secretary, of
Borrower's Board of Directors' resolutions, which shall provide
either a shareholder or Board of Directors resolution (and
resolutions of other bodies, if any are deemed necessary by counsel
for any Lender) authorizing, as the case may be, the Advances
provided for herein and the execution, delivery and performance of
the Loan Documents;
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(vi) A written opinion of Borrower's counsel, addressed to Lenders in
substantially the form of EXHIBIT I hereto;
(vii) A certificate, signed by an officer of Borrower, stating that on
the initial Borrowing Date no Default or Unmatured Default has
occurred and is continuing and that all representations and
warranties of Borrower are true and correct as of the initial
Borrowing Date;
(viii) The most recent financial statements of Borrower and a
certificate from an officer of Borrower stating that no material
adverse change in Borrower's financial condition has occurred since
September 30, 1996;
(ix) Written money transfer instructions, in substantially the form of
EXHIBIT J hereto, addressed to Agent and signed by an Authorized
Officer, together with such other related money transfer
authorizations as Agent may have reasonably requested;
(x) Such other documents as any Lender or its counsel may have
reasonably requested, the form and substance of which documents
shall be acceptable to the parties and their respective counsel.
3.2 EACH ADVANCE. Lenders shall not be required to make any Advance or
honor any Request for Issuance of such Letter of Credit, as the case may be,
unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default;
(ii) The representations and warranties contained in Article IV are true
and correct in all material respects as of such Borrowing Date,
except to the extent any such representation or warranty is stated
to relate solely to an earlier date, in which case such
representation or warranty shall be true and correct in all material
respects on and as of such earlier date;
(iii) All legal matters incident to the making of such Advance shall be
satisfactory to Lenders and their counsel; and
(iv) Borrower has provided to Lenders, Borrower's latest audited annual
financial statement and unaudited partial year financial statement
(all such
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financial statements to be prepared with the specified detail
required in SECTION 5.1 hereof).
Each Borrowing Notice with respect to each such Advance shall constitute
a representation and warranty by Borrower that the conditions contained in
SECTIONs 3.2(i) and (ii) have been satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Lenders that:
4.1 EXISTENCE. Borrower is a corporation duly organized and validly
existing under the laws of the State of New York, having its principal place of
business in Dayton, Ohio; and Borrower has requisite authority in all material
respects to conduct its business in each jurisdiction in which its business is
conducted.
4.2 AUTHORIZATION AND VALIDITY. Borrower has the power and authority and
legal right to execute and deliver the Loan Documents and to perform its
obligations thereunder. The execution and delivery by Borrower of the Loan
Documents and the performance of its obligations thereunder has been duly
authorized by proper proceedings, and the Loan Documents constitute legal, valid
and binding obligations of Borrower enforceable against Borrower in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally.
4.3 NO CONFLICT, GOVERNMENT CONSENT. Neither the execution and delivery
by Borrower of the Loan Documents, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on Borrower or Borrower's articles of incorporation, by-laws, or the
provisions of any material indenture, material instrument or material agreement
to which Borrower is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in the
creation or imposition of any Lien in, of or on the Property of Borrower
pursuant to the terms of any such indenture, instrument or agreement. No order,
consent, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, any governmental or public body
or authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, any of the Loan
Documents.
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4.4 FINANCIAL STATEMENTS--MATERIAL ADVERSE CHANGE. The September 30,
1996 financial statements of Borrower and its Subsidiaries heretofore delivered
to Lenders were prepared in accordance with GAAP in effect on the date such
statements were prepared and fairly present the financial condition and
operations of Borrower and its Subsidiaries at such date and the consolidated
results of their operations for the period then ended. Since September 30, 1996
there has been no change in the business, Property, prospects, condition
(financial or otherwise) or results of operations of Borrower and its
Subsidiaries which could reasonably be expected to result in a Material Adverse
Change.
4.5 TAX. Borrower and its Subsidiaries have filed all United States
federal tax returns and all other tax returns which are required to be filed and
have paid all taxes due pursuant to said returns or pursuant to any assessment
received by Borrower or any of its Subsidiaries except (a) such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided, and (b) such returns and taxes, for which the failure to file or pay,
as the case may be, could reasonably be expected to result in a Material Adverse
Change. No tax liens have been filed and no claims are being asserted with
respect to any such taxes. The charges, accruals and reserves on the books of
Borrower and its Subsidiaries in respect of any taxes or other governmental
charges are adequate.
4.6 LITIGATION AND CONTINGENT OBLIGATIONS. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry: pending or, to
the knowledge of any of its officers, threatened against or affecting Borrower
or any of its Subsidiaries which could reasonably be expected to result in a
Material Adverse Change. Borrower and its Subsidiaries have no material
Contingent Obligations not provided for or disclosed in the financial statements
referred to in SECTION 5.1 (including reports of the type referred to in SECTION
5.1(ix)).
4.7 SUBSIDIARIES. SCHEDULE l hereto contains an accurate list of all of
the presently existing Subsidiaries of Borrower setting forth their respective
jurisdictions of incorporation or formation, as the case may be, and the
percentage of their respective capital stock or partnership interests, as the
case may be, owned by Borrower or other Subsidiaries. All of the issued and
outstanding shares of capital stock or partnership interests, as the case may
be, of such Subsidiaries have been duly authorized and issued and are fully paid
and nonassessable.
4.8 ERISA The Unfunded Liabilities of all Single Employer Plans do not
in the aggregate exceed $1,000,000. Neither Borrower nor any other member of the
Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans in excess of $250,000 in the
aggregate. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has
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occurred with respect to any Plan, neither Borrower nor any other member of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and no
steps have been taken to reorganize or terminate any Plan.
4.9 ACCURACY OF INFORMATION. All factual information heretofore or
contemporaneously furnished by or on behalf of Borrower to Agent or any Lender
for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all other such factual information hereafter
furnished by or on behalf of Borrower to Agent or any Lender will be, true and
accurate in all material respects (taken as a whole) on the date as of which
such information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information (taken as a whole) not
misleading at such time.
4.10 REGULATION U. Borrower does not hold any margin stock (as defined
in Regulation U).
4.11 MATERIAL AGREEMENTS. Neither Borrower nor any of its Subsidiaries
is a party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to result in a Material
Adverse Change. Neither Borrower nor any of its Subsidiaries is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in (i) any agreement to which it is a party, which
default could reasonably be expected to result in a Material Adverse Change or
(ii) any agreement or instrument evidencing or governing Indebtedness.
4.12 COMPLIANCE WITH LAWS. Borrower and its Subsidiaries have complied
with all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or any instrumentality or agency thereof, having
jurisdiction over the conduct of their respective businesses, and ownership of
their respective Property, the non-compliance with which could reasonably be
expected to result in a Material Adverse Change. Neither Borrower nor any
Subsidiary has received any notice to the effect that its operations are not in
material compliance with any of the material requirements of applicable federal,
state and local environmental, health and safety statutes and regulations or the
subject of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which non-compliance or remedial action could
reasonably be expected to result in a Material Adverse Change.
4.13 OWNERSHIP OF PROPERTIES. Except as set forth on Schedule 2 hereto,
on the date of this Agreement, Borrower and its Subsidiaries will have good
title, free of all Liens other than those permitted by SECTION 5.14, to all of
the Property and assets reflected in the financial statements as owned by it.
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4.14 INVESTMENT COMPANY ACT. Neither Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
4.15 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower nor any of its
Subsidiaries is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.16 SOLVENCY. (i) Immediately after the Closing Date and immediately
following the making of each Loan and after giving effect to the application of
the proceeds of such Loans, (a) the fair value of the assets of Borrower
individually, and Borrower and its Subsidiaries on a consolidated basis, at a
fair valuation, will exceed the debts and liabilities, subordinated, contingent
or otherwise, of Borrower individually, or Borrower and its Subsidiaries on a
consolidated basis, as the case may be; (b) the present fair saleable value of
the Property of Borrower individually, and Borrower and its Subsidiaries on a
consolidated basis, will be greater than the amount that will be required to pay
the probable liability of Borrower individually, or Borrower and its
Subsidiaries on a consolidated basis on their debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) Borrower individually, and Borrower and its
Subsidiaries on a consolidated basis will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) Borrower individually, and
Borrower and its Subsidiaries on a consolidated basis will not have unreasonably
small capital with which to conduct the businesses in which they are engaged as
such businesses are now conducted and are proposed to be conducted after the
date hereof.
(ii) Borrower does not intend to, or to permit any of its Subsidiaries
to, and does not believe that it or any of its Subsidiaries will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by Borrower or any such Subsidiary
and the timing of the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
4.17 INSURANCE. Borrower and its Subsidiaries carry insurance on their
businesses with financially sound and reputable insurance companies, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses in localities where Borrower
and its Subsidiaries operate, including, without limitation:
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(i) Property and casualty insurance (including coverage for flood and
other water damage for any Property located within a 100-year flood
plain) in the amount of the replacement cost of the improvements at
the Property;
(ii) Comprehensive general liability insurance in the amount of
$20,000,000 per occurrence,
4.18 ENVIRONMENTAL MATTERS. Each of the following representations and
warranties is true and correct on and as of the Closing Date except to the
extent that the facts and circumstances giving rise to any such failure to be so
true and correct, in the aggregate, could not reasonably be expected to result
in a Material Adverse Change:
(a) To the best knowledge of Borrower, the Property of Borrower and its
Subsidiaries does not contain any Materials of Environmental
Concern in amounts or concentrations which constitute a violation
of Environmental Laws.
(b) To the best knowledge of Borrower, the Property of Borrower and its
Subsidiaries and all operations of such Property are in substantial
compliance, and have in the last two years been in substantial
compliance, with all applicable Environmental Laws, and there is no
material contamination at, under or about the Property of Borrower
and its Subsidiaries, or violation in any material respect of any
Environmental Law with respect to the Property of Borrower and its
Subsidiaries.
(c) Neither Borrower nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of their
Property, nor does Borrower or its Subsidiaries have knowledge or
reason to believe that any such notice will be received or is being
threatened.
(d) To the best knowledge of Borrower, Materials of Environmental
Concern have not been transported or disposed of from any Property
of Borrower and its Subsidiaries in violation of, or in a manner or
to a location which could reasonably give rise to liability under,
Environmental Laws, nor have any Materials of Environmental Concern
been generated, treated, stored or disposed of at, on or under any
of the Property of Borrower and its Subsidiaries in violation of,
or in a manner that could give rise to liability under, any
applicable Environmental Laws except to the extent that Borrower
adequately reserves against the cost of its potential liability in
its financial statements.
(e) No judicial proceedings or governmental or administrative action is
pending, or, to the knowledge of
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Borrower or its Subsidiaries, threatened, under any Environmental Law to which
Borrower or any of its Subsidiaries is or will be named as a party with respect
to any Property of Borrower and its Subsidiaries nor are there any consent
decrees or other decrees, consent orders, administrative order or other orders,
or other administrative of judicial requirements outstanding under any
Environmental Law with respect to any Property of Borrower and its Subsidiaries,
which, if resolved or interpreted, as the case may be, in an adverse way against
Borrower or a Subsidiary could reasonably be expected to result in a Material
Adverse Change.
(f) To the best knowledge of Borrower, there has been no release
or threat of release of Materials of Environmental Concern at or from any
Property of Borrower or its Subsidiaries, or arising from or related to the
operations of Borrower and its Subsidiaries in connection with any Property in
violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws.
ARTICLE V
COVENANTS
---------
During the term of this Agreement, unless Lenders shall otherwise
consent in writing:
5.1 FINANCIAL REPORTING. Borrower will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with GAAP, and furnish to Lenders:
(i) As soon as available, but in any event not later than 60 days after
the close of each fiscal quarter, for Borrower and its Subsidiaries,
an unaudited consolidated balance sheet as of the close of each such
period and the related unaudited consolidated statements of income
and retained earnings for such period and the portion of the fiscal
year through the end of such period and of year to date cash flows
of Borrower and its Subsidiaries, all certified by an Authorized
Financial Officer; provided, however, that lieu thereof Borrower may
elect to furnish its quarterly report filed on Form 10-Q with the
Securities and Exchange Commission;
(ii) As soon as available, but in any event not later than 60 days after
the close of each fiscal quarter, for Borrower and its Subsidiaries,
related reports in form and substance reasonably satisfactory to
Lenders, all certified by Borrower's Authorized Financial Officer, a
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statement detailing Consolidated Outstanding Indebtedness;
(iii) As soon as available, but in any event not later than 90 days
after the close of each fiscal year, for Borrower and its
Subsidiaries, audited financial statements, including a consolidated
balance sheet as at the end of such year and the related
consolidated statements of income and retained earnings and of cash
flows for such year, setting forth in comparative form the figures
for the previous year, reported on without a "going concern" or like
qualification or exception, by Ernst & Young (or other independent
certified public accountants of nationally recognized standing);
provided, however, that lieu thereof Borrower may elect to furnish
its annual report filed on Form 10-K with the Securities and
Exchange Commission;
(iv) As soon as available, but in any event not later than 90 days after
the close of each fiscal year, for Borrower and its Subsidiaries,
the following related reports in form and substance satisfactory to
Lenders, all certified by the entity's Authorized Financial Officer:
a statement of Consolidated Outstanding Indebtedness;
(v) Together with the quarterly and annual financial statements required
hereunder, a compliance certificate in substantially the form of
EXHIBIT K hereto signed by an Authorized Officer showing the
calculations and computations necessary to determine compliance with
the financial covenants set forth in this Agreement and stating that
no Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status thereof;
(vi) As soon as possible and in any event within 10 days after Borrower
knows that any Reportable Event has occurred with respect to any
Plan, a statement, signed by an Authorized Financial Officer of
Borrower, describing said Reportable Event and the action which
Borrower proposes to take with respect thereto;
(vii) As soon as possible and in any event within 10 days after receipt
by Borrower, a copy of (a) any notice or claim to the effect that
Borrower or any of its Subsidiaries is or may be liable to any
Person as a result of the release by any Borrower, any of its
Subsidiaries, or any other Person of any toxic or
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hazardous waste or substance into the environment, which could reasonably be
expected to result in a Material Adverse Change and (b) any notice alleging any
violation of any federal, state or local environmental, health or safety law or
regulation by Borrower or any of its Subsidiaries, which, in either case, could
reasonably be expected to result in a Material Adverse Change;
(viii) Promptly upon the furnishing thereof to the shareholders of
Borrower, copies of all financial statements, reports and proxy
statements so furnished;
(ix) Within fifteen (15) business days after due to the SEC, copies of
all registration statements and annual, quarterly, monthly or other
reports and any other public information which Borrower or any of
its Subsidiaries files with the Securities Exchange Commission; and
(x) Such other information (including, without limitation, financial
statements for Borrower and nonfinancial information) as Agent may
from time to time reasonably request.
5.2 PROHIBITED USES OF PROCEEDS. Borrower will not nor will it permit
any Subsidiary to, use any of the proceeds of the Advances (i) to purchase or
carry any "margin stock" (as defined in Regulation U), or (ii) for any purpose
that shall be a violation of Regulation U, or regulations G, T and X of the
Board of Governors of the Federal Reserve System or for any other purpose
violative of any rule or regulation of such Board.
5.3 NOTICE OF DEFAULT. Borrower will give, and will cause each of its
Subsidiaries to give, notice in writing to Lenders of the occurrence of any
Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to result in a Material Adverse
Change, promptly upon (but in no event later then ten (10) Business Days after)
such occurrence or development becomes known to Borrower.
5.4 CONDUCT OF BUSINESS. Borrower will do, and will cause its
Subsidiaries to do, all things necessary to remain duly incorporated or duly
qualified, validly existing and in good standing as a corporation, general
partnership, limited partnership or limited liability company, as the case may
be, in its jurisdiction of incorporation/formation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted and to carry on and conduct its business in substantially the same
manner as it is presently conducted and, specifically, neither Borrower nor its
Subsidiaries may undertake any significant business other than the manufacture
or distribution
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of industrial fluid control equipment, related accessories and other products
sold by Borrower as at September 30, 1996, and related services.
5.5 TAXES. Borrower will pay, and will cause its Subsidiaries to pay,
when due all taxes, assessments and governmental charges and levies upon it of
its income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside or those for which the failure to pay could reasonably be
expected to result in a Material Adverse Change.
5.6 INSURANCE. Borrower will, and will cause its Subsidiaries to,
maintain with financially sound and reputable insurance companies, insurance in
such amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses in localities where Borrower
and its Subsidiaries operate, including, without limitation:
(i) Property and casualty insurance (including coverage for flood and
other water damage for any Property located within a 100-year flood
plain) in the amount of the replacement cost of the improvements at
the Property; and
(ii) Comprehensive general liability insurance in the amount of
$20,000,000 per occurrence.
5.7 COMPLIANCE WITH LAWS. Borrower will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, the
non-compliance with which could reasonably be expected to result in a Material
Adverse Change.
5.8 MAINTENANCE OF PROPERTIES. Except as permitted pursuant to SECTION
5.11 and SECTION 5.12 of this Agreement, Borrower will, and will cause its
Subsidiaries to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, ordinary wear and tear
excepted, and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times in all material respects.
5.9 INSPECTION. Borrower will, and will cause its Subsidiaries to,
permit Agent and each Lender, by its respective representatives and agents, to
inspect any Property, corporate books and financial records of Borrower and each
of its Subsidiaries, to examine and make copies of the books of accounts and
other financial records of Borrower and each of its Subsidiaries, and to discuss
the affairs, finances and accounts of
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Borrower and each of its Subsidiaries, and to be advised as to the same by their
respective officers at such reasonable times and intervals as Agent may
designate (provided, however, that any inspection by a Lender shall be arranged
by Agent).
5.10 MAINTENANCE OF STATUS. Borrower shall remain a corporation validly
existing and in good standing in the state of its incorporation and Borrower
shall at all times remain a corporation listed and in good standing on NASDAQ or
other national securities exchange. Borrower shall not permit a Change in
Control of Borrower which could reasonably be expected to result in a Material
Adverse Change.
5.11 MERGER: SALE OF ASSETS. Borrower will not, nor will it permit any
of its Subsidiaries to, enter into any merger, consolidation, reorganization or
liquidation, or into any agreement to transfer or otherwise dispose of any of
its Property or business which, in any transaction or series of related
transactions, would result in a transfer of a Substantial Portion of its
Property or business, unless approved in advance by Lenders.
5.12 SALE AND LEASEBACK. Borrower will not, nor will it permit its
Subsidiaries to, sell or transfer all or a Substantial Portion of its Property
in order to concurrently or subsequently lease as lessee such or similar
Properties.
5.13 ACQUISITIONS AND INVESTMENTS. Borrower will not, nor will it permit
any Subsidiary to, make or suffer to exist any Investments, or commitments
therefor, or create any Subsidiary or become or remain a partner in any
partnership or joint venture, or make any Acquisition of any Person, except:
(i) Cash Equivalents;
(ii) existing Investments in Subsidiaries and joint ventures, and other
Investments in existence on the date hereof and described in
SCHEDULE 1 hereto;
(iii) acquisitions permitted pursuant to SECTION 5.23; and
(iv) investments and loans permitted under SECTION 5.15.
5.14 LIENS. Borrower will not, nor will it permit any of its
Subsidiaries to, create, incur, or suffer to exist any Lien in, of or on any
Property of it or any of its Subsidiaries, except:
(i) with respect to Property consisting of real property under the laws
of the state where such Property is located, any tax lien, or any
lien securing workers' compensation or unemployment insurance
obligations, or any mechanic's, carrier's or landlord's lien, or any
lien arising under
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ERISA, or any security interest arising under article four (bank
deposits and collections) or five (letters or credit) of the Uniform
Commercial Code, or any security interest or other lien similar to
the foregoing, EXCEPT that this clause (i) shall apply only to (A)
the extent that the aggregate of such liens on a consolidated basis
does not exceed $1,000,000, and (B) security interests and other
liens arising by operation of law (whether statutory or common law)
and in the ordinary course of business and shall not apply to any
security interest or other lien that secures any Indebtedness for
Borrowed Money or any Contingent Obligation or any obligation that
is in material default in any manner (other than any default
contested in good faith by timely and appropriate proceedings
effective to stay enforcement of the security interest or other lien
in question);
(ii) zoning or deed restrictions, public utility easements, minor title
irregularities and similar matters having no adverse effect as a
practical matter on the ownership or use of any of the properties or
interfere with use thereof in the business of Borrower or its
Subsidiaries;
(iii) with respect to Property consisting of real property under the
laws of the state where such Property is located, any lien securing
or given in lieu of surety, stay, appeal or performance bonds, or
securing performance of contracts or bids (other than contracts for
the payment of money borrowed), or deposits required by law or
governmental regulations or by any court order, decree, judgment or
rule or as a condition to the transaction of business or the
exercise of any right, privilege or license, EXCEPT that this clause
(iii) shall not apply to (A) the extent that the aggregate of such
liens on a consolidated basis exceeds $1,000,000, and (B) any lien
or deposit securing any obligation that is in material default in
any manner (other than any default contested in good faith by timely
and appropriate proceedings effective to stay enforcement of the
security interest or than lien in question);
(iv) any mortgage, security, interest or other lien (each a "PURCHASE
MONEY SECURITY INTEREST") which is created or assumed in purchasing,
constructing or improving any real property or equipment to which
any property is subject when purchased, PROVIDED, that (A) the
Purchase Money Security
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Interest shall be confined to the aforesaid property, (B) the
indebtedness secured thereby does not exceed the total cost of the
purchase, construction or improvement and (C) any such indebtedness, if
repaid in whole or in part, cannot be reborrowed; (v) any financing
statement perfecting a security interest that would be permissible under
this subsection; and
(vi) liens existing on the date hereof and described on SCHEDULE 2
hereof.
Liens permitted pursuant to this SECTION 5.14 shall be deemed to be "PERMITTED
LIENS".
5.15 AFFILIATES. Except as permitted pursuant to SECTION 5.2, SECTION
5.11 or SECTION 5.12 Borrower will not, nor will it permit any of its
Subsidiaries to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant tc the reasonable requirements of Borrower or such Subsidiary's
business and upon fair and reasonable terms no less favorable to that Borrower
or such Subsidiary than that Borrower or such Subsidiary would obtain in a
comparable arm's-length transaction.
5.16 RESERVED.
5.17 LITIGATION. Borrower shall furnish or cause to be furnished to
Agent, promptly (and, in any event, within five Business Days) after any
Borrower or its Subsidiaries shall have first become aware of the same, a
written notice setting forth full particulars of and what action Borrower or its
Subsidiaries is taking or proposes to take with respect to (a) any final
judgment in an amount exceeding One Million Dollars ($1,000,000) rendered
against Borrower or any Affiliate of Borrower; (b) the commencement or
institution of any legal or administrative action, suit, proceeding or
investigation by or against Borrower in or before any court, governmental or
regulatory body, agency, commission, or official, board of arbitration or
arbitrator, the outcome of which could reasonably be expected to result in a
Material Adverse Change; or (c) the occurrence of any material adverse
development not previously disclosed by Borrower to Agent in writing, in any
such action, suit, proceeding or investigation.
5.18 FURTHER ASSURANCES. Borrower will execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, any and all such further
assurances and other agreements or instruments, and take or cause to be taken
all such other
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action, as shall be reasonably requested by Agent from time to time in order to
give full force and effect to the Loan Documents.
5.19 CONSOLIDATED TANGIBLE NET WORTH. Borrower and its Subsidiaries
shall have a Consolidated Tangible Net Worth of not less than $100,000,000 at
Closing. Thereafter, Borrower and its Subsidiaries shall maintain, at all times,
a Consolidated Tangible Net Worth equal to $100,000,000 plus a cumulative
amount, adjusted at March 31 of each year prior to the Facility Termination
Date, beginning March 31, 1997, equal to 50% of positive Consolidated Net
Income, if any, for the annual period ended the previous December 31; provided,
however, that no adjustments shall be made as a consequence of any loss.
5.20 RATIO OF DEBT TO CASH FLOW. Borrower and its Subsidiaries shall
maintain a ratio of Consolidated Outstanding Indebtedness to EBITDA of no
greater than 3.0 to 1.0 on the Closing Date, and on the last calendar day of
each fiscal quarter thereafter calculated for the previous four quarters, until
the Facility Termination Date.
5.21 RATIO OF EBIT TO INTEREST. Borrower and its Subsidiaries shall
maintain a ratio of EBIT to Consolidated Interest Expense of not less than 3.0
to 1.0 on the Closing Date, and on the last calendar day of each fiscal quarter
thereafter calculated for the previous four quarters, until the Facility
Termination Date.
5.22 DEBT TO CAPITALIZATION RATIO. Borrower and its Subsidiaries shall
maintain a ratio of Indebtedness for Borrowed Money to Capitalization of no
greater than .6 to 1.0 on the Closing Date, and on the last calendar day of each
fiscal quarter thereafter, until the Facility Termination Date.
5.23 ACQUISITION LIMIT. Neither Borrower nor any of its Subsidiaries
shall fund the Acquisitions of Persons, or offer for, any Capital Stock of
Persons, to the extent that, after giving effect to such Acquisition, the ratio
of Indebtedness for Borrowed Money to Capitalization would be greater than .5 to
1.0.
5.24 ENVIRONMENTAL MATTERS. Borrower and its Subsidiaries shall:
(a) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws, except to the extent that (i) the same are being
contested in good faith by appropriate proceedings and the pendency of such
proceedings could not be reasonably expected to result in a Material
Adverse Change, or (ii) that Borrower has determined in good faith that
contesting the same is not in the best
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interests of Borrower and its Subsidiaries and the failure to contest the
same could not be reasonably expected to result in a Material Adverse
Change.
(b) Defend, indemnify and hold harmless Agent and each Lender, and their
respective employees, agents, officers and directors from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Environmental Laws applicable to
the operations of Borrower, its Subsidiaries or its Property, or any
orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing arise
out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. This indemnity shall continue in full force and
effect regardless of the termination of this Agreement.
ARTICLE VI
DEFAULTS
--------
The occurrence of any one or more of the following events shall
constitute a Default:
6.1 NONPAYMENT OF PRINCIPAL. Nonpayment of any principal payment on any
Note when due.
6.2 NONPAYMENT OF OTHER OBLIGATIONS. Nonpayment of interest upon any
Note or of any Facility Fee or other payment Obligations under any of the Loan
Documents within three (3) Business Days after the same becomes due.
6.3 CERTAIN BREACHES. The breach of any of the terms or provisions of
SECTIONS 5.2, 5.6, 5.7 and 5.9 through 5.28.
6.4 REPRESENTATIONS AND WARRANTIES. Any representation or warranty made
or deemed made by or on behalf of Borrower or any of its Subsidiaries to Lenders
or Agent under or in connection with this Agreement, any Loan, or any
certificate or information delivered in connection with this Agreement or any
other Loan Document shall be materially false on the date as of which made.
6.5 OTHER BREACHES. The breach by any Borrower (other than a breach
which constitutes a Default under any other section of this ARTICLE VI) which
constitutes a Default under any of the terms or provisions of this Agreement
which is not remedied within fifteen (15) days after written notice from Agent
or any Lender.
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6.6 DEFAULTS ON INDEBTEDNESS. Failure of Borrower or any of its
Subsidiaries to pay any of its respective Indebtedness when due; or the default
by Borrower or any of its Subsidiaries in the performance of any term, provision
or condition contained in any agreement, or any other event shall occur or
condition exist which causes or permits any Indebtedness of Borrower or any of
its Subsidiaries to be due and payable or required to be prepaid (other than by
a regularly scheduled payment) prior to the stated maturity thereof; provided,
however, that it shall not be a default under this SECTION 6.6 if Borrower shall
be in default with respect to Indebtedness in an aggregate amount not exceeding
One Million Dollars ($1,000,000).
6.7 BANKRUPTCY. ETC. Borrower, or any Subsidiaries owning or
controlling, individually or in the aggregate, a Substantial Portion of the
consolidated assets of Borrower and its Subsidiaries, shall (i) have an order
for relief entered with respect to it under the Federal bankruptcy laws as now
or hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any of its Property, (iv) institute any proceeding for an order for relief under
the Federal bankruptcy laws as now or hereafter in effect or to adjudicate it as
a bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (v) take any corporate
action to authorize or effect any of the foregoing actions set forth in this
SECTION 6.7, (vi) fail to contest in good faith any appointment or proceeding
described in SECTION 6.8 or (vii) not pay, or admit in writing its inability to
pay, its debts generally as they become due.
6.8 APPOINTMENT OF RECEIVER. A receiver, trustee, examiner, liquidator
or similar official shall be appointed for Borrower or any of its Subsidiaries
or any of their respective Property, or a proceeding described in SECTION
6.7(iv) shall be instituted against Borrower or any Subsidiary and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of thirty (30) consecutive days.
6.9 CONDEMNATION. Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control of (each a
"CONDEMNATION"), all or any portion of the Property of Borrower and its
Subsidiaries which, when taken together with all other Property of such Person
so condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such Condemnation occurs,
could reasonably be expected to result in a Material Adverse Change on Borrower
or Subsidiary.
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6.10 JUDGMENTS. Borrower or any of its Subsidiaries shall fail within
sixty (60) days to pay, bond or otherwise discharge any judgments or orders for
the payment of money in an amount which, when added to all other judgments or
orders outstanding against Borrower and any of its Subsidiaries would exceed
$1,000,000 in the aggregate, which have not been stayed on appeal or otherwise
appropriately contested in good faith.
6.11 ERISA WITHDRAWAL. Borrower or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred withdrawal liability to such Multiemployer Plan in an amount which,
when aggregated with all other amounts required to be paid to Multiemployer
Plans by Borrower or any other member of the Controlled Group as withdrawal
liability (determined as of the date of such notification), exceeds $250,000 or
requires payments exceeding $100,000 per annum.
6.12 ERISA REORGANIZATION, Borrower or any other member of the
Controlled Group shall have been notified by the sponsor of a Multiemployer Plan
that such Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of Borrower and the other members
of the Controlled Group (taken as a whole) to all Multiemployer Plans which are
then in reorganization or being terminated have been or will be increased over
the amounts contributed to such Multiemployer Plans for the respective plan
years of each such Multiemployer Plan immediately preceding the plan year in
which the reorganization or termination occurs by an amount exceeding $250,000.
6.13 OTHER DEFAULTS. The occurrence of any default under any Loan
Document or the breach of any of the terms or provisions of any Loan Document,
which default or breach continues beyond any period of grace therein provided.
ARTICLE VII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
----------------------------------------------
7.1 ACCELERATION. If any Default described in SECTION 6.7 or 6.8 occurs
with respect to Borrower, the obligations of Lenders to make Loans hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of Agent or any Lender.
If any other Default occurs, Agent may, with the concurrence of the Required
Lenders, terminate or suspend the obligations of Lenders to make Loans hereunder
and to issue (or to participate as hereinabove provided in the issuance of) any
Letters of Credit hereunder, or declare the Obligations to be due and payable or
both, whereupon the Obligations shall become immediately
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due and payable, without presentment, demand, protest or notice of any kind, all
of which Borrower hereby expressly waives.
If, within ten (10) days after acceleration of the maturity of the
Obligations or termination of the obligations of Lenders to make Loans hereunder
as a result of any Default (other than any Default as described in SECTION 6.7
or 6.8 with respect to any Borrower) and before any judgment or decree for the
payment of the Obligations due shall have been obtained or entered, each Lender
(in their sole discretion) shall so direct, Agent shall, by notice to Borrower,
rescind and annul such acceleration and/or termination.
7.2 AMENDMENTS & WAIVERS. Subject to the provisions of this Article VII,
the Required Lenders (or Agent with the consent in writing of Lenders) and
Borrower may enter into agreements and waivers supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of Lenders or Borrower hereunder or waiving any Default
hereunder; provided, however, that no such supplemental agreement or waiver
shall, without the consent of each Lender affected thereby:
(i) Extend the Facility Termination Date or forgive all or any portion
of the principal amount of any Loan or accrued interest thereon or
the Facility Fee, reduce the Applicable Margins or the underlying
interest rate options or extend the time of payment of such interest
or Facility Fee.
(ii) Increase the amount of the Commitment of any Lender hereunder.
(iii) Permit Borrower to assign its rights under this Agreement.
(iv) Amend this SECTION 7.2.
No amendment of any provision of this Agreement relating to Agent shall be
effective without the written consent of Agent.
7.3 PRESERVATION OF RIGHTS. No delay or omission of Lenders or Agent to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
Borrower to satisfy the conditions precedent to such Loan shall not constitute
any waiver or acquiescence. Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by Lenders required pursuant to SECTION 7.2, and then only
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to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to Agent and Lenders jointly until the Obligations have been paid in
full.
ARTICLE VIII
GENERAL PROVISIONS
------------------
8.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of
Borrower contained in this Agreement shall survive delivery of the Notes and the
making of the Loans herein contemplated.
8.2 GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
8.3 TAX. Any taxes (excluding federal income taxes on the overall net
income of any Lender and taxes resulting from a Lenders failure to comply with
SECTION 2.22) or other similar assessments or charges made by any governmental
or revenue authority in respect of the Loan Documents shall be paid by Borrower,
together with interest and penalties, if any.
8.4 HEADING. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
8.5 ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and
understanding among Borrower, Agent and Lenders and supersede all prior
commitments, agreements and understandings among Borrower, Agent and Lenders
relating to the subject matter thereof.
8.6 SEVERAL OBLIGATIONS BENEFITS OF THIS AGREEMENT. The respective
obligations of Lenders hereunder are several and not joint and no Lender shall
be the partner or agent of any other (except to the extent to which Agent is
authorized to act as such). The failure of any Lender to perform any of its
obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
8.7 EXPENSES; INDEMNIFICATION. (a) Borrower shall reimburse Agent for
any costs, internal charges and out-of-pocket expenses (including, without
limitation, all reasonable expenses of Agent's attorneys) paid or incurred by
Agent in connection with the
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amendment, modification, and administration of the Loan Documents. Borrower also
agrees to reimburse Agent and Lenders for any reasonable costs, internal charges
and out-of-pocket expenses (including, without limitation, all fees and
reasonable expenses for attorneys for Agent and Lenders) paid or incurred by
Agent or any Lender in connection with the collection and enforcement of the
Loan Documents (including, without limitation, any workout).
(b) Borrower further agrees to indemnify Agent and each Lender, its
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses, including, without limitation,
all expenses of litigation or preparation therefor whether or not Agent or any
Lender is a party thereto (collectively, the "Liabilities"), which any of them
may pay or incur arising out of or relating to this Agreement, the other Loan
Documents, any Property, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder except to the extent that such Liabilities arise out of the gross
negligence or wilful misconduct of the party seeking indemnification. The
obligations of Borrower under this SECTION 8.7 shall survive the termination of
this Agreement.
8.8 NUMBERS. All statements, notices, closing documents, and requests
hereunder shall be furnished to Agent with sufficient counterparts so that Agent
may furnish one to each of Lenders.
8.9 ACCOUNTING. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP, except that any
calculation or determination which is to be made on a consolidated basis shall
be made for Borrower and all its Subsidiaries, including those Subsidiaries, if
any, which are unconsolidated on Borrower's official financial statements.
8.10 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
8.11 NONLIABILITY OF LENDERS. The relationship between Borrower, on the
one hand, and Lenders and Agent, on the other, shall be solely that of borrower
and lender. Neither Agent nor any Lender shall have any fiduciary
responsibilities to Borrower. Neither Agent nor any Lender undertakes any
responsibility to Borrower to review or inform Borrower of any matter in
connection with any phase of any Borrower's business or operations.
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8.12 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF OHIO, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
8.13 CONSENT TO JURISDICTION. BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR OHIO STATE COURT
SITTING IN CUYAHOGA COUNTY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IMPAIR THE
RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY BORROWER AGAINST AGENT OR
ANY LENDER OR ANY AFFILIATE OF AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CUYAHOGA COUNTY, OHIO.
8.14 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
ARTICLE IX
AGENT
-----
9.1 APPOINTMENT. National City Bank is hereby appointed Agent hereunder
and under each other Loan Document, and each of Lenders irrevocably authorizes
Agent to act as the agent of such Lender. Agent agrees to act as such upon the
express conditions contained in this Article IX. Agent shall not have a
fiduciary relationship in respect of Borrower or any Lender by reason of this
Agreement.
9.2 POWERS. Agent shall have and may exercise such powers under the Loan
Documents as are specifically delegated to Agent by the terms of each thereof,
together with such powers as are reasonably incidental thereto. Agent shall have
no implied duties to Lenders, or any obligation to Lenders to take any action
thereunder except any action specifically provided by the Loan Documents to be
taken by Agent.
9.3 GENERAL IMMUNITY. Neither Agent nor any of its directors, officers,
agents or employees shall be liable to
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Borrower, Lenders or any Lender for any action taken or omitted to be taken by
it or them hereunder or under any other Loan Document or in connection herewith
or therewith except for its or their own gross negligence or willful misconduct.
9.4 NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (iii) the satisfaction of any condition specified in ARTICLE IV, except
receipt of items required to be delivered to Agent; (iv) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith; or (v) the value, sufficiency,
creation, perfection or priority of any interest in any collateral security.
Agent shall have no duty to disclose to Lenders information that is not required
to be furnished by Borrower to Agent at such time, but is voluntarily furnished
by Borrower to Agent (either in its capacity as Agent or in its individual
capacity).
9.5 ACTION ON INSTRUCTIONS OF LENDERS. Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and under any other
Loan Document in accordance with written instructions signed by the Required
Lenders, and such instructions and any action taken or failure to act pursuant
thereto shall be binding on all of Lenders and on all holders of Notes. Agent
shall be fully justified in failing or refusing to take any action hereunder and
under any other Loan Document unless it shall first be indemnified to its
satisfaction by Lenders pro rata against any and all liability, cost and expense
that it may incur by reason of taking or continuing to take any such action.
9.6 EMPLOYMENT OF AGENTS AND COUNSEL. Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to Lenders,
except as to money or securities received by it or its authorized agents, for
the default or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. Agent shall be entitled to advice of counsel concerning
all matters pertaining to the agency hereby created and its duties hereunder and
under any other Loan Document.
9.7 RELIANCE ON DOCUMENTS; COUNSEL. Agent shall be entitled to rely upon
any Note, notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by Agent, which counsel may be
employees of Agent.
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9.8 AGENT'S REIMBURSEMENT AND INDEMNIFICATION. Lenders agree to
reimburse and indemnify Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by Borrower for which Agent is
entitled to reimbursement by Borrower under the Loan Documents, (ii) for any
other expenses incurred by Agent on behalf of Lenders, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan
Documents and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against Agent in any way relating to or arising out of the Loan Documents or any
other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of any
such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of Agent. The obligations of Lenders under this SECTION 9.8 shall
survive payment of the Obligations and termination of this Agreement.
9.9 RIGHTS AS A LENDER. In the event Agent is a Lender, Agent shall have
the same rights and powers hereunder and under any other Loan Document as any
Lender and may exercise the same as though it were not Agent, and the term
"Lender" or "Lenders" shall, at any time when Agent is a Lender, unless the
context otherwise indicates, include Agent in its individual capacity. Agent may
accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with Borrower or any of its Subsidiaries
in which Borrower or such Subsidiary is not restricted hereby from engaging with
any other Person. Agent, in its individual capacity, is not obligated to remain
a Lender.
9.10 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements prepared by Borrower and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents.
9.11 SUCCESSOR AGENT. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower, such resignation to be effective upon
the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, Lenders shall have the right to
appoint, on behalf of Borrower and Lenders, a successor Agent. If no
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successor Agent shall have been so appointed by Lenders within thirty days after
the resigning Agent's giving notice of its intention to resign, then the
resigning Agent may appoint, on behalf of Borrower and Lenders, a successor
Agent. If Agent has resigned and no successor Agent has been appointed, Lenders
may perform all the duties of Agent hereunder and Borrower shall make all
payments in respect of the Obligations to the applicable Lender and for all
other purposes shall deal directly with Lenders. No successor Agent shall be
deemed to be appointed hereunder until such successor Agent has accepted the
appointment. Any such successor Agent shall be a commercial bank having capital
and retained earnings of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Agent. Upon the effectiveness of the resignation of
Agent, the resigning Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation of an Agent, the provisions of this ARTICLE X shall continue in
effect for the benefit of such Agent in respect of any actions taken or omitted
to be taken by it while it was acting as Agent hereunder and under the other
Loan Documents.
ARTICLE X
SETOFF; RATABLE PAYMENTS
------------------------
10.1 SETOFF. In addition to, and without limitation of, any rights
of Lenders under applicable law, if Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all
account balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender to
or for the credit or account of Borrower may be offset and applied toward the
payment of the Obligations owing to such Lender, whether or not the Obligations,
or any part hereof, shall then be due.
10.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans in a greater proportion than that received
by any other Lender, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
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ARTICLE XI
BENEFIT OF AGREEMENT; ASSIGNMENT; PARTICIPATION
-----------------------------------------------
11.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of Borrower and Lenders
and their respective successors and assigns, except that (i) Borrower shall not
have the right to assign their rights or obligations under the Loan Documents
and (ii) any assignment by any Lender must be made in compliance with SECTION
11.3. Notwithstanding clause (ii) of this SECTION 11.1, any Lender may at any
time, without the consent of Borrower or Agent, assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank; provided,
however, that no such assignment shall release the transferor Lender from its
obligations hereunder. Agent may treat the payee of any Note as the owner
thereof for all purposes hereof unless and until such payee complies with
SECTION 11.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with Agent. Any assignee or
transferee of a Note agrees by acceptance thereof to be bound by all the terms
and provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
11.2 PARTICIPATION.
11.2.1 PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks, financial institutions, pension funds, or any other funds
or entities participating interests in any Loan owing to such Lender, any Note
held by such Lender, any Commitment of such Lender or any other interest of such
Lender under the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of any such Note for all purposes under the
Loan Documents, all amounts payable by Borrower under this Agreement shall be
determined as if such Lender had not sold such participating interests, and
Borrower and Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under the Loan
Documents.
11.2.2 VOTING RIGHTS. Each Lender shall retain the sole right to
approve, without the consent of any Participant,
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any amendment, modification or waiver of any provision of the Loan Documents
other than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives principal,
interest or fees or reduces the interest rate or fees payable with respect to
any such Loan or Commitment or postpones any date fixed for any regularly
scheduled payment of principal of, or interest or fees on, any such Loan or
Commitment.
11.2.3 BENEFIT OF SETOFF. Borrower agrees that each Participant shall be
deemed to have the right of Setoff provided in SECTION 10.1 in respect of its
participating interest in amounts owing under the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, provided that each Lender shall retain the
right of setoff provided in SECTION 10.1 with respect to the amount of
participating interests sold to each Participant. Lenders agree to share with
each Participant, and each Participant, by exercising the right of setoff
provided in SECTION 10.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with SECTION 10.2 as if each Participant were a Lender.
11.3 ASSIGNMENTS.
11.3.1 PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to one or
more banks, financial institutions, pension funds, or any other funds or
entities ("PURCHASERS") all or any portion of its rights and obligations under
the Loan Documents. Such assignment shall be substantially in the form of
EXHIBIT L hereto or in such other form as may be agreed to by the parties
thereto. The consent of Agent shall be required prior to an assignment becoming
effective with respect to a Purchaser which is not a Lender or an Affiliate
thereof. Such consent shall not be unreasonably withheld.
11.3.2 PRIOR CONSENT. Notwithstanding SECTION 11.3.1, Lenders may not
assign rights and obligations under the Loan Documents to a Purchaser without
the prior written consent of Borrower if any of the following would occur: (i)
an assignment of less than five percent (5%) of the Aggregate Commitment as of
the date of such assignment, (ii) the proposed purchaser is a financial
institution not organized under the laws of a state or of the United States
(unless such institution is an affiliate of the transferring Lender), or (iii)
such transfer would result in Borrower incurring increased payments pursuant to
SECTION 2.12; provided, however, that, if at the time of the proposed assignment
Borrower is the subject of a proceeding referenced in SECTION
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6.7 or 6.8, or any Default shall have occurred, Borrower consent shall not be
required and any Lender may consummate an assignment notwithstanding the
requirements of clauses (i), (ii) or (iii) of this SECTION 11.3.2.
11.3.3 EFFECTIVE DATE. Upon (i) delivery to Agent of a notice of
assignment, substantially in the form attached as EXHIBIT l to EXHIBIT L hereto
(a "NOTICE OF ASSIGNMENT"), together with any consents required by SECTION
11.3.2, and (ii) payment of a $2,500 fee to Agent for processing such assignment
(PROVIDED, HOWEVER, that if such assignment shall be made to an Affiliate of
Lender, then Lender shall not be required to pay such fee to Agent), such
assignment shall become effective on the effective date specified in such Notice
of Assignment. The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the purchase
of the Commitment and Loans under the applicable assignment agreement are "plan
assets" as defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan assets" under ERISA.
On and after the effective date of such assignment, such Purchaser shall for
all purposes be a Lender party to this Agreement and any other Loan Document
executed by Lenders and shall have all the rights and obligations of a Lender
under the Loan Documents, to the same extent as if it were an original party
hereto, and no further consent or action by Borrower, Lenders or Agent shall be
required to release the transferor Lender with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser. Upon the consummation
of any assignment to a Purchaser pursuant to this SECTION 11.3.2, the transferor
Lender, Agent and Borrower shall make appropriate arrangements so that
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their Commitment, as adjusted pursuant to such
assignment.
11.4 DISSEMINATION OF INFORMATION. Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of Borrower and its Subsidiaries.
11.5 TAX TREATMENT. If any interest in any Loan Document is transferred
to any Transferee which is organized under the laws ; of any jurisdiction
other-than the United States or any State thereof, the transferor Lender shall
cause such Transferee, concurrently with the effectiveness of such transfer, to
comply with the provisions of SECTION 2.22.
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<PAGE> 75
ARTICLE XII
NOTICES; NATURE OF OBLIGATIONS
------------------------------
12.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.18 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the log of telexes).
12.2 CHANGE OF ADDRESS. Borrower, Agent and any Lender may change the
address for service of notice upon it by a notice in writing to the other
parties hereto.
12.3 NATURE OF BORROWER'S OBLIGATIONS AND MODIFICATION THEREOF. The
obligations of Borrower under this Agreement are absolute and unconditional and
shall be irrevocable. Borrower agrees that its obligations hereunder shall not
be impaired, modified, changed, released or limited in any manner whatsoever by
any impairment, modification, change, release or limitation of the liability of
Borrower by any bankruptcy case or by any stay or other legal impediment in or
arising from the operation of any present or future provision of the Bankruptcy
Code or other similar state or federal statute, or from the decision of any
court. Borrower agrees that Lenders may, in their discretion, (i) release,
discharge, compromise or settle with, or grant indulgences to, refuse to proceed
or take action against, Borrower with respect to its respective obligations
under this Agreement, (ii) release, surrender, modify, impair, exchange,
substitute or extend the period or duration of time for the performance,
discharge or payment of, refuse to enforce, compromise or settle its respective
lien, security interest, pledge or assignment against, any and all deposits or
other property or assets on which Lenders may have a lien, security interest,
pledge or assignment or which secures any of the obligations of Borrower under
this Agreement, and (iii) amend, modify, alter or restate, in accordance with
their respective terms, this Agreement or any of the Loan Documents or
otherwise, accept deposits or other property from, or enter into transactions of
any kind or nature with, Borrower. Borrower confirms that it will be directly or
indirectly benefitted by the Loan and any and all other Advances under this
Agreement or any of the Loan Documents.
-70-
<PAGE> 76
ARTICLE XIII
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by Borrower, each
Subsidiary of Borrower, Agent and Lenders and each party has notified Agent by
telex or telephone, that it has taken such action.
IN WITNESS WHEREOF, Borrower, Subsidiaries, Lenders and Agent have
executed this Agreement as of the date first above written.
BORROWER:
THE DURIRON COMPANY, INC.
By: /s/ Gregory L. Smith
-----------------------
Print Name: Gregory L. Smith
----------------
Title: Treasurer
---------
3100 Research Boulevard
Dayton, Ohio 45420
Telephone: (513) 476-6112
Facsimile: (513) 476 6231
Attention: Gregory L. Smith
LENDERS:
Commitments
$35,000,000 NATIONAL CITY BANK,
Individually and as
Agent
By:
----------------------------
Print Name: Michael P. McCuen
--------------------
Title: Vice President
Via Hand Delivery
National City Bank
-71-
<PAGE> 77
ARTICLE XIII
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by Borrower, each
Subsidiary of Borrower, Agent and Lenders and each party has notified Agent by
telex or telephone, that it has taken such action.
IN WITNESS WHEREOF, Borrower, Subsidiaries, Lenders and Agent have
executed this Agreement as of the date first above written.
BORROWER:
THE DURIRON COMPANY, INC.
By:
------------------------
Print Name: Gregory L. Smith
------------------------
Title: Treasurer
---------------
3100 Research Boulevard
Dayton, Ohio 45420
Telephone: (513) 476-6112
Facsimile: (513) 476 6231
Attention: Gregory L. Smith
LENDERS:
Commitments
$35,000,000 NATIONAL CITY BANK,
Individually and as
Agent
By: Michael P. McCuen
-----------------------------
Print Name Michael P. McCuen
---------------------
Title: Vice President
Via Hand Delivery
National City Bank
-71-
<PAGE> 78
National City Center, 10th
Floor
1900 East Ninth Street
Cleveland, Ohio 44114
Via U.S. Mail
National City Bank
P.O. Box 5756
Cleveland, Ohio 44101-0756
Attention: Michael P. McCuen
Vice President
-72-
<PAGE> 79
$20,000,000 THE FIFTH THIRD BANK
By: /s/ D. Ward Allen
----------------------------
Print Name: D. Ward Allen
--------------------
Title: Vice President
The Fifth Third Bank, N.A.
One Dayton Centre
One South Main Street
Dayton, Ohio 45402
Attention: D. Ward Allen
$15,000,000 KEYBANK NATIONAL ASSOCIATION
By:
----------------------------
Print Name: Susan M. Lipowicz
--------------------
Title:
------------------------
KeyBank National Association
34 North Main Street
Dayton, Ohio 45402
Attention: Susan M. Lipowicz
$15,000,000 BANK ONE, DAYTON, N.A.
By:
----------------------------
Print Name: R. Michael Dunlavey
-------------------
Title:
Bank One, Dayton, N.A.
Kettering Tower
P.O. Box 1103
Dayton, Ohio 45401-1103
Attention: R. Michael Dunlavey
-73-
<PAGE> 80
$20,000,000 THE FIFTH THIRD BANK
By:
-----------------------------
Print Name: D. Ward Allen
---------------------
Title: Vice President
The Fifth Third Bank, N.A.
One Dayton Centre
One South Main Street
Dayton, Ohio 45402
Attention: D. Ward Allen
$15,000,000 KEYBANK NATIONAL ASSOCIATION
By: /s/ Susan M. Lipowicz
-----------------------------
Print Name: Susan M. Lipowicz
---------------------
Susan M. Lipowicz
Title: VICE PRESIDENT
------------------------
KeyBank National Association
34 North Main Street
Dayton, Ohio 45402
Attention: Susan M. Lipowicz
$15,000,000 BANK ONE, DAYTON, N.A.
By:
-----------------------------
Print Name: R. Michael Dunlavey
Title:
Bank One, Dayton, N.A.
Kettering Tower
P.O. Box 1103
Dayton, Ohio 45401-1103
Attention: R. Michael Dunlavey
-73-
<PAGE> 81
$20,000,000 THE FIFTH THIRD BANK
By:
-----------------------------
Print Name: D. Ward Allen
---------------------
Title: Vice President
The Fifth Third Bank, N.A.
One Dayton Centre
One South Main Street
Dayton, Ohio 45402
Attention: D. Ward Allen
$15,000,000 KEYBANK NATIONAL ASSOCIATION
By:
------------------------------
Print Name: Susan M. Lipowicz
---------------------
Title:
-------------------------
KeyBank National Association
34 North Main Street
Dayton, Ohio 45402
Attention: Susan M. Lipowicz
$15,000,000 BANK ONE, DAYTON, N.A.
By: /s/ R. Michael Dunlavey
-----------------------------
Print Name R. Michael Dunlavey
Title: Vice President
Bank One, Dayton, N.A.
Kettering Tower
P.O. Box 1103
Dayton, Ohio 45401-1103
Attention: R. Michael Dunlavey
-73-
<PAGE> 82
$15,000,000 CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Juliet Kanak
------------------------------
Print Name: Julie T. Kanak
Title: Vice President
227 West Monroe Street
Chicago, Illinois 60606
Attention: Eric Tobin
<PAGE> 83
SCHEDULE 1 SUBSIDIARIES OF BORROWER
The Duriron Company, Inc. has direct or indirect subsidiaries all of
which (i) are beneficially owned or controlled; (ii) do business under the name
under which they are organized and (iii) are included in the consolidated
financial statements of the Company. The name and jurisdiction of incorporation
of each such subsidiary is set forth below.
<TABLE>
<CAPTION>
Jurisdiction
Name of Subsidiary (a) In Which Incorporated
---------------------- ---------------------
<S> <C>
Automax Inc. Ohio
Duriron Canada Inc. Canada
S.A. Durco Europe N.V. Belgium
Durco Process Equipment Ltd. United Kingdom
Durco GmbH Germany
Durco France S.A.R.L. France
Duriron Foreign Sales Corporation Virgin Islands
Durco Ireland Limited Ireland
Valtek Incorporated Utah
Valtek Controls Ltd. Canada
Valtek Australia Pty. Ltd. Australia
Durco Valtek (Asia Pacific) Pte. Ltd. Singapore
Durco Europe S.A. - Coordination Centre Belgium
Durco B.V. Holland Holland
Davco Equipment Inc. Ohio
Durco Valtek, S.A. Spain
Durco Italia S.r.l. Italy
Kammer Ventile GmbH Germany
Kammer Vannes S.A. Switzerland
Automax Mecair S.r.l. Italy
Mecair U.K. Ltd. United Kingdom
Mecair S.a.r.l. France
Automax Mecair S.r.l. Italy
Sereg Vannes S.A. France
Durametallic Corporation Michigan
Pac-Seal Inc. International Michigan
Metal Fab Machine Corporation Florida
Durametallic Mexicana S.A. de C.V. Mexico
Durametallic do Brasil Brazil
Durametallic Canada inc. Canada
Durametallic Uruguay Uruguay
Durametallic Pty. Ltd. New Zealand
Durametallic Corporation Australia Pty. Ltd. Australia
Durametallic G.m.b.H. Germany
Durametallic Europe N.V. Belgium
Durametallic Argentina S.A. Argentina
Durametallic Australia Holding Company Michigan
Durametallic Europe Holding Company Michigan
Arabian Seals Company, Ltd. (b) Saudi Arabia
Korea Seal Master Company, Ltd. (b) Korea
</TABLE>
<PAGE> 84
SCHEDULE 1 SUBSIDIARIES OF BORROWER PAGE 2
<TABLE>
<S> <C>
Durametallic (India) Ltd. (b) India
Durametallic Asia Pte. Ltd. (b) Singapore
Durametallic Malaysia Sdn. Bhd. (c) Malaysia
<FN>
(a) All subsidiaries are wholly owned or controlled except as otherwise
indicated by one of the following footnotes
(b) 40% ownership
(c) 51% ownership
</TABLE>
<PAGE> 85
SCHEDULE 2 - PERMITTED LIENS
Lease agreement, indenture of mortgage and deed of trust, and guarantee
agreement, all executed on June 1, 1978 in connection with 9-1/8% Industrial
Development Revenue Bonds, Series A, City of Cookeville, Tennessee
Lease agreement, indenture of trust, and guaranty agreement, all executed on
June 1, 1978 in connection with 7-3/8% Industrial Development Revenue Bonds,
Series B, City of Cookeville, Tennessee
Lease agreement, indenture of mortgage and agreement, lessee guaranty
agreement, and letter of representation and indemnity agreement, all dated as
of December 1, 1983 and executed in connection with the Industrial Development
Revenue Bonds (1983 The Duriron Company, Inc. Project), Erie Company, New York
Industrial Development Agency were filed with the Commission as Exhibit 4.4 to
the Company's Report on Form 10-K for the Year ended December 31, 1983
<PAGE> 86
EXHIBIT A
---------
FORM OF FOREIGN CURRENCY NOTE
_________,1996
Cleveland, Ohio
For value received, The Duriron Company, Inc., a New York corporation
("Borrower"), promises to pay to the order __________________, (the "Lender"),
the unpaid principal amount of each Foreign Currency Loan made by Lender to the
Company pursuant to the Credit Agreement referred to below, on the last day of
the LIBOR Interest Period relating to such Foreign Currency Loan. Borrower
further promises to pay interest on the aggregate unpaid principal amount of
such Foreign Currency Loans on the dates and at the rates negotiated to provided
in the Credit Agreement. All such payments of principal and interest with
respect to Foreign Currency Loans shall be made in the Applicable Currency at
Agent's principal office in Cleveland, Ohio. Borrower shall pay remaining unpaid
principal of and accrued and unpaid interest on the Foreign Currency Loans in
full on the Facility Termination Date (as defined in the Agreement).
Borrower and all endorsers severally waive presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Foreign
Currency Note, and any and all lack of diligence or delays in collection or
enforcement of this Foreign Currency Note, and expressly agree that this Foreign
Currency Note, or any payment hereunder, may be extended from time to time, and
expressly consent to the release of any party liable for the obligation secured
by this Foreign Currency Note, the release of any of the security for this
Foreign Currency Note, the acceptance of any other security therefor, or any
other indulgence or forbearance whatsoever, all without notice to any party and
without affecting the liability of Borrower and any endorsers hereof.
This Foreign Currency Note is one of the Foreign Currency Notes issued
pursuant to, and is entitled to the benefits of, the Credit Agreement, dated as
of December 3, 1996 among Borrower, National City Bank, individually and as
Agent, and the other Lenders named therein, to which Agreement, as it may be
amended from time to time, reference is hereby made for a statement of the terms
and conditions governing this Foreign Currency Note, including the terms and
conditions under which this Foreign Currency Note may be prepaid or its maturity
date accelerated. Capitalized terms used herein and not otherwise defined herein
are used with the meanings attributed to them in the Agreement.
This Note shall be governed and construed under the internal laws of
the State of Ohio.
________________________________________
By:_____________________________________
Its_____________________________________
<PAGE> 87
EXHIBIT B
---------
FORM OF REVOLVING PROMISSORY NOTE
$____________ __________, 1996
The Duriron Company, Inc. ("Duriron"), a corporation organized under
the laws of the State of New York, and its successors and assigns ("Borrower"),
promises to pay to the order of _________________ (the "Lender") the lesser of
the principal sum of ___________________________________ or the aggregate unpaid
principal amount of all Loans other than Foreign Currency Loans made by Lender
to Borrower pursuant to Article II of the Credit Agreement (as the same may be
amended or modified, the "Agreement") hereinafter referred to, in immediately
available funds at the main office of National City Bank, as Agent, together
with interest on the unpaid principal amount hereof at the rates and on the
dates set forth in the Agreement. Borrower shall pay remaining unpaid principal
of and accrued and unpaid interest on the Loans in full on the Facility
Termination Date (as defined in the Agreement).
Lender shall, and is hereby authorized to record in accordance with its
usual practice, the date and amount of each Loan and the date and amount of each
principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Credit Agreement, dated as of December 3, 1996 among
Borrower, National City Bank, individually and as Agent, and the other Lenders
named therein, to which Agreement, as it may be amended from time to time,
reference is hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which this Note may be
prepaid or its maturity date accelerated. Capitalized terms used herein and not
otherwise defined herein are used with the meanings attributed to them in the
Agreement.
If there is a Default under the Agreement or any other Loan Document
and Agent exercises the remedies provided under the Agreement and/or any of the
Loan Documents for Lenders, then in addition to all amounts recoverable by Agent
and Lenders under such documents, Agent and Lenders shall be entitled to receive
reasonable attorneys fees and expenses incurred by Agent and Lenders in
connection with the exercise of such remedies.
Borrower and all endorses severally waive presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Note,
and any and all lack of diligence or delays in collection or enforcement of this
Note, and expressly agree that this Note, or any payment hereunder, may be
extended from time to time, and expressly consent to the release of any party
liable for the obligation secured by this Note, the release of any of the
security
<PAGE> 88
for this Note, the acceptance of any other security therefor, or any
other indulgence or forbearance whatsoever, all without notice to any party and
without affecting the liability of Borrower and any endorses hereof.
This Note shall be governed and construed under the internal laws of
the State of Ohio.
BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHT UNDER THIS PROMISSORY NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO
OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS PROMISSORY
NOTE AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE
AND NOT BEFORE A JURY.
THE DURIRON COMPANY, INC.
By:________________________________
Print Name:
Title:
<PAGE> 89
EXHIBIT C
---------
REQUEST FOR ISSUANCE OF LETTER OF CREDIT
The Duriron Company, Inc. ("Borrower") hereby requests the issuance of
a Letter of Credit in the amount of $_________ pursuant to and in accordance
with the terms and conditions of the Credit Agreement dated as of December 3,
1996 ("Credit Agreement"), by and among Borrower, National City Bank,
individually, and as Agent, and the other Lenders named therein. Capitalized
terms used herein but not defined in this Request for Issuance of Letter of
Credit shall have the respective meanings assigned to them in the Credit
Agreement.
1. This Request for Issuance of Letter of Credit is accompanied by a
Letter of Credit Application, that contains, among other things, the following:
(i) the proposed Issuance Date of the Letter of Credit (which shall be a
Business Day), (ii) the proposed Face Amount of the Letter of Credit, (iii) the
proposed expiration date of the Letter of Credit,* (iv) the name and address of
the proposed beneficiary of the Letter of Credit and (v) a summary of the
purpose and contemplated terms of the Letter of Credit.
2. This Request for Issuance of Letter of Credit is also accompanied by
a precise description of any documents to be presented under, and any other
terms of, the requested Letter of Credit, together with the text of any
certificate to be presented by the beneficiary, which, if presented by the
beneficiary prior to the expiration date of the Letter of Credit, would require
the Issuing Bank to make payment under the Letter of Credit.
3. To induce the Issuing Bank to issue such Letter of Credit, Borrower
hereby represents to Agent and each Lender as follows:
1. The Outstanding Amount shall not, giving effect to the issuance
of the Letter of Credit hereby requested, exceed the Aggregate Commitment.
Giving effect to the issuance of the requested Letter of Credit, the Letter of
Credit Usage does not exceed Ten Million Dollars ($10,000,000).
2. All of the representations and warranties made by Borrower in the
Credit Agreement are true and correct on the date hereof, except for any
representation or warranty limited by its terms to a specific date.
3. No Default or Event of Default exists under the Credit Agreement.
4. The approval of this Request for Issuance of Letter of Credit shall
not be deemed to be a waiver by Agent or any Lender of any Default or Event of
Default by Borrower under the Credit Agreement.
<PAGE> 90
BORROWER:
Date: ___________________ THE DURIRON COMPANY, INC.
By:______________________
Its: ____________________
* Subject to Section 2.22 (a) (iii) of the Credit Agreement
-2-
<PAGE> 91
EXHIBIT D
---------
FORM OF SWINGLINE NOTE
__________, 1996
FOR VALUE RECEIVED, The Duriron Company, Inc., a New York corporation
("Borrower"), promises to pay to the order of National City Bank (the "Lender"),
in lawful money of the United States of America, the principal sum of
___________________________ ($___________)*, together with interest thereon at
the Federal Funds Rate plus an applicable margin determined by Lender such that
the return to Lender from such Swingline Loan approximates the hypothetical
return to Lender of a LIBOR Rate Loan of the same amount made at the same time,
for the same number of days (determined pro rata based on a thirty day LIBOR
Interest Period), due and payable on demand, but in no event later than five (5)
Business Days from the date hereof.
Lender is hereby authorized by Borrower to record on its books and
records, the date, currency, amount and type of each Swingline Loan, the amount
of each payment thereon and other information provided for on such schedule,
which schedule or such books and records, as the case may be, shall constitute
prima facia evidence of the information so recorded, provided, however, that any
failure by Lender to record any such information shall not relieve Borrower of
its obligation to repay the outstanding amount of such Swingline Loans, all
accrued interest thereon and any amount payable with respect thereto in
accordance with terms of this Swingline Note and the Credit Agreement.
Borrower and each endorser or guarantor hereof waives presentment,
protest, diligence, notice of dishonor and any other formality, other than
demand, in connection with this Swingline Note. In the event that Borrower
should fail to pay any portion of the indebtedness evidenced by this Swingline
Note on demand, the unpaid balance thereof shall automatically be converted by
Lender into a Base Rate Loan that shall bear interest at the Base Rate, all in
accordance with the terms and conditions of the Credit Agreement.
This Swingline Note evidences one or more Swingline Loans made under
the Credit Agreement, dated December 3, 1996, (as amended or modified from time
to time, the "Credit Agreement"), by and among Borrower, National City Bank,
individually, and as Agent, and the other Lenders named therein. Capitalized
terms used herein but not defined in this Swingline Note shall have the
respective meanings assigned to them in the Credit Agreement.
-3-
<PAGE> 92
This Swingline Note is made under, and shall be governed by and
construed in accordance with, the laws of the State of Ohio in the same manner
applicable to contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State.
THE DURIRON COMPANY, INC.
By:______________________
Its: ____________________
*Each Swingline Loan shall be in an amount equal to or greater than $1,000,000;
provided, however, that (i) with regard to each Lender individually, the sum of
each such Lender's outstanding Loans of all Types shall not exceed such Lender's
Commitment; and (ii) with regard to Lender's collectively, the Outstanding
Amount shall not exceed the Aggregate Commitment.
-4-
<PAGE> 93
EXHIBIT E
---------
November 27, 1996
FORM OF BID-OPTION QUOTE REQUEST
National City Bank, as Agent for Lenders
P.O. Box 5756
Cleveland, Ohio 44101-0756
Attention: Michael P. McCuen, Vice President, Metro Ohio Division
The Duriron Company, Inc., a New York corporation ("Borrower"), hereby
requests offers to make Offshore Currency Loans described below, pursuant to
Section 2.7(b) of the Credit Agreement, dated as of December 3, 1996, as
amended, supplemented or otherwise modified (the "Credit Agreement"), by and
among Borrower, National City Bank, individually, and as Agent, and the other
Lenders named therein. Capitalized terms used but not defined herein shall have
the respective meanings ascribed thereto in the Credit Agreement.
Date of Offshore Currency Loan(s): ________________, _______
Type of Offshore Currency Loan:
Aggregate Amount of each Offshore Currency Loan:
(a) _____________________________*
(b) _____________________________
(c) _____________________________
LIBOR Interest Period:
(a) ____________________________
(b) ____________________________
(c) ____________________________
Delivery Instructions (where Offshore Currency is delivered):
THE DURIRON COMPANY, INC.
By:______________________
Its: ____________________
* Must be (a) $3,000,000 or a larger multiple of $1,000,000
-5-
<PAGE> 94
EXHIBIT F
---------
FORM OF INVITATION FOR BID-OPTION QUOTES
To: [Name of Lender]
Attention: __________________
Reference is made to the Credit Agreement dated as of December 3, 1996,
as amended, supplemented or otherwise modified (the "Credit Agreement"), by and
among The Duriron Company, Inc., a New York corporation ("Borrower"), National
City Bank, individually, and as Agent, and the other Lenders named therein.
Capitalized terms used but not defined herein shall have the respective meanings
ascribed thereto in the Credit Agreement.
Pursuant to Section 2.7(c) of the Credit Agreement, National City Bank,
as Agent for Lenders, is pleased on behalf of Borrower to invite you to submit
Bid-Option Quotes to Borrower for the Offshore Currency Loan(s) described below:
Date of Offshore Currency Loan(s): ___________________, ______
<TABLE>
<CAPTION>
Aggregate Amount of each
OFFSHORE CURRENCY LOAN: LIBOR INTEREST PERIOD:
----------------------- ----------------------
<S> <C>
(a) ____________________ (a) ___________________
(b) ___________________ (b) __________________
(c) ____________________ (c) ___________________
</TABLE>
Type of Offshore Currency Loan:
Please respond to this invitation by no later than 10:00 a.m.
(Cleveland time) on ____________,______*
NATIONAL CITY BANK, as Agent
By:____________________________
Its: __________________________
*Insert date of Offshore Currency Loan.
-6-
<PAGE> 95
EXHIBIT G
---------
FORM OF BID-OPTION QUOTE
[Date]
National City Bank, as Agent for Lenders
P.O. Box 5756
Cleveland, Ohio 44101-0756
Attention: Michael P. McCuen, Vice President, Metro Ohio Division
Reference is made to the Credit Agreement, dated as of December 3,
1996, as amended, supplemented or otherwise modified (the "Credit Agreement"),
by and among The Duriron Company, Inc., a New York corporation ("Borrower"),
National City Bank, individually, and as Agent, and the other Lenders named
therein. Capitalized terms used herein shall have the meanings ascribed thereto
in the Credit Agreement.
In response to your Invitation for Bid-Option Quote dated __________,
________, __________________________ ("Lender"), hereby makes the following
offer(s) to make [a] Offshore Currency Loan[s].
1. Lender: ___________________________
Contact Person: ___________________
2. Date of Offshore Currency Loan: ____________________*
3. Type of Offshore Currency:
4. Delivery Instructions: (where Offshore Currency is delivered):
5. Quotes:
<TABLE>
<CAPTION>
Principal Amount of Bid-Option Libor Interest
OFFSHORE CURRENCY LOAN RATE* PERIOD****
<S> <C> <C>
(a) _____________________ ___________ _______________
(b) _____________________ ___________ _______________
(c) _____________________ ___________ _______________
</TABLE>
6. The aggregate amount of Offshore Currency Loans which may be
accepted by Borrower pursuant to this Bid-Option Quote shall not
exceed $_________________
-7-
<PAGE> 96
Lender acknowledges and agrees that this Bid-Option Quote (a) is
irrevocable and (b), subject to the terms and conditions of the Credit
Agreement, obligates it to make a Offshore Currency Loan for which any quote is
accepted, in whole or in part.
[Name of Lender]
By:________________________
Its: ______________________
* As specified in the related Invitation for Bid-Option Quotes.
** The principal amount (a) must be $3,000,000 or a larger multiple of
$1,000,000 and (b) may not exceed the aggregate amount of the related Offshore
Currency Loan specified in the related Invitation for Bid-Option Quotes.
*** Specify rate of interest per annum (rounded up to the nearest 1/100 of 1%)
or applicable margin, which may be positive or negative, expressed as a
percentage (rounded up to the nearest 1/100th of 1%), as the case may be.
**** As specified in the related Invitation for Bid-Option Quotes.
-8-
<PAGE> 97
EXHIBIT H
---------
FORM OF BORROWING NOTICE
The Duriron Company, Inc. ("Duriron"), and its successors and assigns
("Borrower"), hereby requests an Advance in the amount of $__________ pursuant
to and in accordance with the terms and conditions of the Credit Agreement dated
as of _____________ 1996 ("Credit Agreement"), among National City Bank,
individually, and as Agent, and the Banks identified therein (the "Lenders").
Capitalized terms used by not defined herein are used as defined in the Credit
Agreement.
Such advance in the amount of $____________ shall be deposited to the account of
Borrower.
[For LIBOR Rate Loans and Base Rate Loans, paragraph 1 below shall be included,
and for a Swingline Loan, paragraph 2 below shall be included]
1. Borrower elects that such advance shall be a [LIBOR Rate Loan] [Base Rate
Loan] bearing interest in accordance with the table set forth in SECTION 2.4 of
the Credit Agreement [, and the LIBOR Interest Period shall be _______________.
The Applicable Currency for such advance shall be _______________.]
2. Borrower elects that such advance shall be a Swingline Loan, bearing interest
at the Money Market Rate in accordance with SECTION 2.6 of the Credit Agreement.
Please notify ___________________ at Borrower to confirm the transmittal of
funds.
To induce Lenders to make such advance, Borrower hereby represents to Agent and
each Lender as follows:
1. The outstanding balance of all Loans made to Borrower shall not,
giving effect to the advance hereby requested, exceed the Aggregate Commitment.
2. All of the representations and warranties made by Borrower in the
Credit Agreement are true and correct on the date hereof, except for any
representation or warranty limited by its terms to a specific date.
3. No Default, whether Matured or Unmatured, exists under the Credit
Agreement.
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4. The approval of this Borrowing Notice shall not be deemed to be a
waiver by Agent or any Lender of any Default by Borrower under the Credit
Agreement.
BORROWER:
THE DURIRON COMPANY, INC.
By:____________________________
Title: ________________________
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EXHIBIT I
---------
FORM OF LEGAL OPINION OF BORROWER
_____________________, 1996
Agent and Lenders who are parties to the
Credit Agreement described below:
Gentlemen/Ladies:
We are counsel for The Duriron Company, Inc., and its respective
successors and assigns ("Borrower"), and have represented Borrower in connection
with its execution and delivery of a Credit Agreement among Borrower, National
City Bank, individually, and as Agent, and the other Lenders named therein,
providing for Loans in an aggregate principal amount not exceeding $100,000,000
at any one time outstanding and dated as of ___________ 1996 (the "Agreement").
All capitalized terms used in this opinion and not otherwise defined shall have
the meanings attributed to them in the Agreement.
We have examined Borrower's articles of incorporation, by-laws,
resolutions, the Loan Documents and such other matters of fact and law which we
deem necessary in order to render this opinion. Based upon the foregoing, it is
our opinion that:
1. Borrower is a corporation duly organized and validly existing under
the laws of the State of New York, having its principal place of business in
_________, Ohio; and Borrower is qualified to conduct its business in each
jurisdiction in which its business is conducted except where such qualification
would not result in a Material Adverse Change.
2. Borrower has the power and authority and legal right to execute and
deliver the Loan Documents and to perform its obligations thereunder. The
execution and delivery by Borrower of the Loan Documents and the performance of
its obligations thereunder have been duly authorized by proper proceedings, and
the Loan Documents constitute legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
3. Neither the execution and delivery by Borrower of the Loan
Documents, nor the consummation of the transactions therein contemplated, nor
compliance with the provisions thereof will violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Borrower or any of
its Subsidiaries or Borrower's articles of incorporation, partnership agreement
or bylaws, or the provisions of any material indenture, material instrument or
material agreement to which Borrower or any of its Subsidiaries is a party or
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<PAGE> 100
is subject, or by which it, or its Property, is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
Lien in, of or on the Property of Borrower or a Subsidiary pursuant to the terms
of any such indenture, instrument or agreement. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with
the execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents.
4. There is no litigation or proceeding against Borrower or any of its
Subsidiaries which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect.
This opinion may be relied upon by Agent, Lenders and their
participants, assignees and other transferees.
Very truly yours,
_______________________
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EXHIBIT J
---------
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To NATIONAL CITY BANK,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Credit Agreement, dated ______________, 1996 (as the same may be amended or
modified, the "Credit Agreement"), among The Duriron Company, Inc., a
corporation organized under the laws of the State of New York, and its
successors and assigns ("Borrower"), Agent, and Lenders named therein.
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Credit Agreement.
Agent is specifically authorized and directed to act upon the following standing
money transfer instructions with respect to the proceeds of Loans or other
extensions of credit from time to time until receipt by Agent of a specific
written revocation of such instructions by Borrower, provided, however, that
Agent may otherwise transfer funds as hereafter directed in writing by Borrower
in accordance with SECTION 12.1 of the Credit Agreement or based on any
telephonic notice made in accordance with SECTION 2.18 of the Credit Agreement.
Facility Identification Number(s) ______________________________________________
Customer/Account Name___________________________________________________________
Transfer Funds To_______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
For Account No. ________________________________________________________________
Reference/Attention To__________________________________________________________
Authorized Officer (Customer Representative) Date_______________________________
________________________________________________________________________________
(Please Print) Signature
Bank Officer Name and Date______________________________________________________
________________________________________________________________________________
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate
Processing)
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EXHIBIT K
---------
FORM OF COMPLIANCE CERTIFICATE
To: The Administrative Agent and
Lenders party to the
Agreement described below
[For the Fiscal Quarter Ending
[For the Fiscal Year Ending
This Compliance Certificate is furnished pursuant to SECTION 5.1 (v) of
the Credit Agreement dated as of ______________, 1996 (the "Agreement"), among
THE DURIRON COMPANY, INC., a New York corporation, and its successors and
assigns ("Borrower"), the several banks, financial institutions and other
entities from time to time parties thereto (collectively, the "Lenders"), and
NATIONAL CITY BANK, not individually, but as Agent (the "Agent"). Unless
otherwise defined herein, the terms used in this Compliance Certificate have the
meanings ascribed thereto in the Agreement.
The undersigned Authorized Officer, on behalf of Borrower and each its
Subsidiaries, and in his capacity as an Authorized Officer of Borrower and each
of its Subsidiaries, hereby certifies as follows:
(1) The financial statements referred to in SECTIONS 5.1(i), 5.1(ii),
5.1(iii) or 5.1(iv), as the case may be, of the Agreement which are delivered
concurrently with the delivery of this Compliance Certificate are complete and
correct in all material respects and have been prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by the accountants performing
the audit in connection therewith or the undersigned, as the case may be, and
disclosed therein).
(2) The covenants listed below are calculated with for the respective
periods as set forth in the Credit Agreement (dollar amounts in thousands).
- --------------------------
1. Consolidated Tangible Net Worth (SECTION 5.21)
(a) Consolidated Stockholder's Equity ___________
(b) any surplus resulting from any write-up
of assets subsequent to September 30, 1996 ___________
(c) any amount in respect of an
intangible that should be classified as
an asset on Borrowers' consolidated
<PAGE> 103
balance sheet in accordance with GAAP ____________
(d) Consolidated Tangible Net Worth equals
(a) minus the sum of (b) and
(c); must be $100,000,000 at Closing Date,
$100,000,000 plus 50% of Consolidated
Net Income at all times thereafter. ____________
2. Ratio of Debt to Cash Flow (SECTION 5.20)
(a) Consolidated Outstanding Indebtedness
(1) (a) means all Indebtedness of Borrower and its
Subsidiaries outstanding at such date, determined on a
consolidated basis in accordance with GAAP ____________
(b) EBITDA
(1) (b) means, for any period, the sum of Borrower's
and its Subsidiaries' EBIT plus depreciation and
amortization expense ____________
(c) ratio of (a) to (b); no greater than
3.0 to 1.0 on the Closing Date, and
on the last day of each calendar
quarter thereafter calculated for the
previous four quarters, until the
Facility Termination Date
3. Ratio of EBIT to Interest (SECTION 5.21)
(a) EBIT
(1) Borrower's and its Subsidiaries'
Consolidated Net Income ____________
(2) interest expense, income and
franchise tax expense, and
non-recurring extraordinary expenses
(in each case determined in
accordance with GAAP) which was
deducted in determining Consolidated
Net Income for such period ____________
(3) (a) means (1) plus (2) ____________
(b) Interest Expense
(1) interest expense of Borrower ____________
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for such period on the aggregate
principal amount of its Indebtedness ____________
(2) capitalized interest which
accrued during such period ____________
(3) (b) means (1) plus (2) ____________
(c) ratio of (a) to (b); not less than 3.0
to 1.0 on the Closing Date, and on the
last calendar day of each fiscal quarter
thereafter calculated for the previous
four fiscal quarters, until the Facility
Termination Date ____________
4. Debt to Capitalization Ratio (SECTION 5.22)
(a) Indebtedness for Borrowed Money ____________
(b) Capitalization ____________
(1) Consolidated Funded Debt ____________
(2) Stockholder's Equity ____________
(3) (b) means (1) plus (2) ____________
(c) ratio of (a) to (b); no greater than .6
to 1.0 on the Closing Date, and on the
last calendar day of each fiscal quarter
thereafter, until the Facility
Termination Date ____________
5. Acquisition Limit (SECTION 5.23)
(a) Total sum of Borrower's Acquisitions of
a Person ____________
(b) after such Acquisitions in (a) the
Debt to Capitalization Ratio would be
greater than .5 to 1.00 ____________
(3) To the best of the undersigned's knowledge, Borrower and its
Subsidiaries have, during the period referred to above, observed or performed
all of the covenants and conditions contained in the Agreement and the other
Loan Documents, and during the period referred to above and as of the end of
such period and as of the date hereof the undersigned have no knowledge of any
Default, whether
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<PAGE> 105
Matured or Unmatured, under the Agreement or the Loan Documents except
as follows: __________________________
IN WITNESS WHEREOF, I have hereto set my name.
_____________________________________________
Title: ______________________________________
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<PAGE> 106
EXHIBIT L
---------
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
___________________ (the "Assignor") and _________________________ (the
"Assignee") is dated as of ______________, 19 . The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item 1 of Schedule I attached
hereto ("Schedule I"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement and the other Loan Documents. The aggregate
Commitment (or Loans, if the applicable Commitment has been terminated)
purchased by the Assignee hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two (2) Business Days (or such shorter period agreed to by Agent) after a
Notice of Assignment substantially in the form of Exhibit "I" attached hereto
has been delivered to Agent. Such Notice of Assignment must include the consent
of Agent required by SECTION 11.3.1. of the Credit Agreement. In no event will
the Effective Date occur if the payments required to be made by the Assignee to
the Assignor on the Effective Date under SECTIONS 4 and 5 hereof are not made on
the proposed Effective Date. The Assignor will notify the Assignee of the
proposed Effective Date no later than the Business Day prior to the proposed
Effective Date. As of the Effective Date, (i) the Assignee shall have the rights
and obligations of a Lender under the Loan Documents with respect to the rights
and obligations assigned to the Assignee hereunder and (ii) the Assignor shall
relinquish its rights and be released from its corresponding obligations under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from Agent all payments of principal, interest and
fees with respect to the interest assigned hereby. The Assignee shall advance
funds directly to Agent with respect to all Loans and reimbursement payments
made on or after the
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<PAGE> 107
Effective Date with respect to the interest assigned hereby. [In consideration
for the sale and assignment of Loans hereunder, (i) the Assignee shall pay the
Assignor, on the Effective Date, an amount equal to the principal amount of the
portion of all _________ Rate Loans assigned to the Assignee hereunder and (ii)
with respect to each _______ Rate Loan made by the Assignor and assigned to the
Assignee hereunder which is outstanding on the Effective Date, (a) on the last
day of the Interest Period therefor or (b) on such earlier date agreed to by
the Assignor and the Assignee or (c) on the date on which any such _________
Rate Loan either becomes due (by acceleration or otherwise) or is prepaid (the
date as described in the foregoing clauses (a), (b) or (c) being hereinafter
referred to as the "__________ Rate Due Date"), the Assignee shall pay the
Assignor an amount equal to the principal amount of the portion of such
________ Rate Loan assigned to the Assignee which is outstanding on the _______
Rate Due Date. If the Assignor and the Assignee agree that the applicable
_______ Rate Due Date for such _______ Rate Loan shall be the Effective Date,
they shall agree, solely for purposes of dividing interest paid by Borrower on
such ______ Rate Loan, to an alternate interest rate applicable to the portion
of such Loan assigned hereunder for the period from the Effective Date to the
end of the related Interest Period (the "Agreed Interest Rate") and any
interest received by the Assignee in excess of the Agreed Interest Rate, with
respect to such _________ Rate Loan for such period, shall be remitted to the
Assignor. [In the event interest for any period from the Effective Date to but
not including the ________ Rate Due Date is not paid when due by Borrower with
respect to any ______ Rate Loan sold by the Assignor to the Assignee hereunder,
the Assignee shall pay to the Assignor interest for such period on the portion
of such ______ Rate Loan sold by the Assignor to the Assignee hereunder at the
applicable rate provided by the Credit Agreement.] In the event a prepayment of
any ______ Rate Loan which is existing on the Effective Date and assigned by
the Assignor to the Assignee hereunder occurs after the Effective Date but
before the applicable _______ Rate Due Date, the Assignee shall remit to the
Assignor any excess of the funding indemnification amount paid by Borrower
under Section _______ of the Credit Agreement an account of such prepayment
with respect to the portion of such _________ Rate Loan assigned to the
Assignee hereunder over the amount which would have been paid if such
prepayment amount were calculated based on the Agreed Interest Rate and only
covered the portion of the Interest Period after the Effective Date. The
Assignee will promptly remit to the Assignor (i) the portion of any principal
payments assigned hereunder and received from Agent with respect to any
___________ Rate Loan prior to its _________ Rate Due Date and (ii) any amounts
of interest on Loans and fees received from Agent which relate to the portion
of the Loans assigned to the Assignee hereunder for periods prior to the
Effective Date, in the case of __________ Rate Loans or fees, or the ________
Rate Due Date, in the case of _________ Rate Loan, and not previously paid by
the Assignee to the Assignor.] In the event that either party hereto receives
any payment to which the other party hereto is entitled under this Assignment
Agreement, then the party receiving such amount shall promptly remit it to the
other party hereto.
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<PAGE> 108
*Each Assignor may insert its standard payment provisions in lieu of
the payment terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor
a fee on each day on which a payment of interest or Commitment Fees is made
under the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or Commitment Fees attributable to
the period prior to the Effective Date or, in the case of ________ Rate Loans,
the Payment Date, which the Assignee is obligated to deliver to the Assignor
pursuant to Section 4 hereof). The amount of such fee shall be the difference
between (i) the interest or fee, as applicable, paid with respect to the amounts
assigned to the Assignee hereunder and (ii) the interest or fee, as applicable,
which would have been paid with respect to the amounts assigned to the Assignee
hereunder if each interest rate was calculated at the rate of -% rather than the
actual percentage used to calculate the interest rate paid by Borrower or if the
Commitment Fee was calculated at the rate of _% rather than the actual
percentage used to calculate the Commitment Fee paid by Borrower, as applicable.
In addition, the Assignee agrees to pay -% of the fee required to be paid to
Agent in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR: LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectibility of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of Borrower or
any guarantor, (iv) the performance of or compliance with any of the terms or
provisions of any of the Loan Documents, (v) inspecting any of Property, books
or records of Borrower, (vi) the validity, enforceability, perfection, priority,
condition, value or sufficiency f of any collateral securing or purporting to
secure the Loans or (vii) any mistake, error of judgment, or action taken or
omitted to be taken in connection with the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this
-8-
<PAGE> 109
Assignment Agreement, (ii) agrees that it will, independently and without
reliance upon Agent, the Assignor or any other Lender and based on such
documents and information at it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, (iii) appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to Agent by the terms thereof, together with such powers as are reasonably
incidental thereto, (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender, (v) agrees that its payment
instructions and notice instructions are as set forth in the attachment to
Schedule 1, (vi) confirm that none of tile funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are "plan
assets" as defined under ERISA and that its rights, benefits and interests in
and under the Loan Documents will not be "plan assets" under ERISA, [and (vii)
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying that the Assignee is entitled to receive payments under the
Loan Documents without deduction or withholding of any United States federal
income taxes] to be inserted if the Assignee is not incorporated under the laws
of the United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys, fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 12.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior
written consent of the Assignor is obtained, the Assignee is not thereby
released from its obligations to the Assignor hereunder, if any remain
unsatisfied, including, without limitation, its obligations under SECTIONS 4.5
and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage interest specified in Item 3 of Schedule I
shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and
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<PAGE> 110
understanding between the parties hereto and supersede all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Ohio.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
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<PAGE> 111
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By: _____________________________________
Title: __________________________________
[NAME OF ASSIGNEE]
By: _____________________________________
Title: __________________________________
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<PAGE> 112
SCHEDULE I
TO ASSIGNMENT AGREEMENT
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: ____________, 19__
3. Amounts (As of Date of Item 2 above):
a. Aggregate Commitment
(Loans) under
Credit Agreement $_________
b. Assignee's Percentage
of the Aggregate Commitment
purchased under this
Assignment Agreement** _________
4. Amount of Assignee's (Loan Amount)**
Commitment Purchased under this
Assignment Agreement: $_________
5. Proposed Effective Date: _________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: ______________________ By:_________________________
Title: ___________________ Title: _____________________
* If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
** Percentage taken to 10 decimal places
Attachment to SCHEDULE I to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
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<PAGE> 113
EXHIBIT "1"
-----------
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
____________, 19__
To: [NAME OF AGENT]
__________________________
__________________________
From: [NAME OF ASSIGNOR) (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement") described
in Item I of Schedule 1 attached hereto ('Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
Agent pursuant to SECTION 11.3.2 of the Credit Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of _____________, 19__ (the "Assignment"), pursuant to
which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule I of all outstandings, rights and obligations under the Credit
Agreement. The Effective Date of the Assignment shall be the later of the date
specified in Item 5 of Schedule I or two (2) Business Days (or such shorter
period as agreed to by Agent) after this Notice of Assignment and any fee
required by SECTION 11.3.2 of the Credit Agreement have been delivered to Agent,
provided that the Effective Date shall not occur if any condition precedent
agreed to by the Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to Agent notice of the
assignment and delegation referred to herein. The Assignor will confer with
Agent before the date specified in Item 5 of Schedule I to determine if the
Assignment Agreement will become effective on such date pursuant to Section 3
hereof, and will confer with Agent to determine the Effective Date pursuant to
SECTION 3 hereof if it occurs thereafter. The Assignor shall notify Agent if the
Assignment Agreement does not become effective on any proposed Effective Date as
a result of the failure to satisfy the conditions precedent agreed to by the
Assignor and the Assignee. At the request of Agent, the Assignor will give Agent
written confirmation of the satisfaction of the conditions precedent.
<PAGE> 114
5. The Assignor or the Assignee shall pay to Agent on or before the
Effective Date the processing fee of $____________ required by SECTION 11.3.2 of
the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that Agent prepare and cause Borrower to execute and
deliver new Notes or, as appropriate, replacements notes, to the Assignor and
the Assignee. The Assignor and, if applicable, the Assignee each agree to
deliver to Agent the original Note received by it from Borrower upon its receipt
of a new Note in the appropriate amount.
7. The Assignee advises Agent that notice and payment instructions are
set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
Agent has no duty to supply information with respect to Borrower or the Loan
Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.
*May be eliminated if Assignee is a party to the Credit Agreement
prior to the Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: _____________________________ By: _______________________________
Title: __________________________ Title: ____________________________
ACKNOWLEDGED AND CONSENTED TO
NATIONAL CITY BANK, as Agent
By: ________________________________
Title: ______________________________
[Attach photocopy of Schedule I to Assignment)
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<PAGE> 1
Exhibit 4.9
National City
Bank
Mr. Greg Smith
Treasurer
The Duriron Company, Inc.
3100 Research Boulevard
Dayton, Ohio 45420-4018
FAX: (513) 476-6231
PHONE: (513) 476-6112
RE: USD 25,000,000.00 INTEREST RATE SWAP #649
- ---------------------------------------------
Dear Mr. Smith:
The Purpose of this letter is to set forth the terms and conditions of the Swap
Transaction entered into between National City Bank ("NCB") and The Duriron
Company, Inc. ("Counterparty") on the Trade Date specified below (the "Swap
Transaction"). This letter agreement constitutes a "Confirmation" as referred to
in the Swap Agreement Specified below.
1. The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap Dealers Association, Inc.)
(the "Definitions") are incorporated into this Confirmation.
If you and we are parties to a Master Agreement and NCB Schedule to the Master
Agreement that sets forth the general terms and conditions applicable to Swap
Transactions between us (a "Swap Agreement"), this confirmation supplements,
forms part of, and is subject to, such Swap Agreement. If you and we are not yet
parties to a Swap Agreement, this Confirmation will supplement, form a part of,
and be subject to, a Swap Agreement upon its execution and delivery by you and
us.
All provisions contained or incorporated by reference in such Swap Agreement
shall govern this Confirmation except as expressly modified below. In the event
of any inconsistency between this Confirmation and the Definitions or Swap
Agreement, this Confirmation will govern. In addition, if a Swap Agreement has
not been executed, this Confirmation will itself evidence a complete binding
agreement between you and us as to the terms and conditions of the Swap
Transaction to which this Confirmation relates.
This Confirmation will be governed by and construed in accordance with the laws
of the State of Ohio, without reference to choice of law doctrine, provided that
this provision will be superseded by any choice of law provision in the Swap
Agreement.
1
<PAGE> 2
2. This Confirmation constitutes a Rate Swap Transaction under the Swap
Agreement and the terms of the Rate Swap Transaction to which this Confirmation
relates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Notional Amount: USD 25,000,000.00
Amortization Schedule: Not Applicable
Trade Date: November 8, 1996
Effective Date: December 2, 1996
Termination Date: December 1, 2006
Fixed Amounts:
- -------------
Fixed Rate Payer: The Duriron Company, Inc.
Fixed Rate: 6.753%
Fixed Rate Day
Count Fraction: Actual/360
Fixed Rate Payer
Payment Dates: Quarterly on the 1st of
March, June, September and
December, commencing with March
1, 1997 through and including
Termination Date. Dates
subject to adjustment in
accordance with the Modified
Following Business Day
Convention.
Floating Amounts:
- -----------------
Floating Rate Payer: NCB
Floating Index Rate: Three (3)
Month LIBOR, as determined two
(2) London Banking Days
preceding the Settlement Dates,
as published on page 3750 on
TELERATE, as of 11:00 a.m.,
London time.
Floating Rate Day
Count Fraction: Actual/360
Floating Rate for
Initial Calculation Period: To be determined
2
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Floating Index Rate Reset
Dates: First day of each
Calculation Period starting
on December 2, 1996. Dates
subject to adjustment in
accordance with the
Modified Following Business
Day Convention.
Floating Rate Payer
Payment Dates: Monthly on the 1st of
March, June, September and
December, commencing with
March 1, 1997 through and
including Termination Date.
Dates subject to adjustment
in accordance with the
Modified Following Business
Day Convention.
Calculation Agent: National City Bank
Business Days: NYC, LON
Payment Instructions: NCB will make payments
to The Duriron Company,
Inc. by transfer to the
account of The Duriron
Company at BankOne Dayton,
(ABA# 042200305, Acct.
#906291278, Attn: The
Duriron Company, Inc.)
The Duriron Company,
Inc. will make payments to
NCB by wire transfer from
the account of The Duriron
Company, Inc. to NCB
according to the following
instructions:
National City Bank ABA
#041000124 Attention:
Investment Operations GL
Acct. #299305
F/F/C-Derivatives Desk
Please confirm your acceptance of the above terms by executing this letter
agreement and sending a return fax to my attention at (216) 566-1887.
FOR: NATIONAL CITY BANK FOR: THE DURIRON COMPANY, INC.
BY: /S/ MARK J. RINGEL (FOR JAD) BY: /S/ G. L. SMITH
---------------------------- ----------------------------
J. ANDREW DUNHAM GREG SMITH
SR. VICE PRESIDENT TREASURER
</TABLE>
Transaction introduced
by NatCity Investment Inc.
3
<PAGE> 1
EXHIBIT 4.10
KEYBANK NATIONAL ASSOCIATION
CONFIRMATION
------------
Date: October 28, 1996
To: The Duriron Company, Inc.
Greg Smith
From: KeyBank National Association
The purpose of this letter agreement is to set forth the terms and conditions of
the Swap Transaction entered into between KeyBank National Association
("KeyBank") and The Duriron Company, Inc. ("Counterparty") on the Trade Date
specified below (the "Swap Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the Swap Agreement Specified below.
1. The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap Dealers Association, Inc.)
(the "Definitions") are incorporated into this Confirmation.
If you and we are parties to a Master Agreement that sets
forth the general terms and conditions applicable to Swap Transactions between
us (a "Swap Agreement"), this confirmation supplements, forms a part of, and is
subject to, such Swap Agreement. If you and we are not yet parties to a Swap
Agreement, this Confirmation will supplement, form a part of, and be subject to,
a Swap Agreement upon its execution and delivery by you and us. All provisions
contained or incorporated by reference in such Swap Agreement shall govern this
Confirmation except as expressly modified below. In the event of any
inconsistency between this Confirmation and the Definitions or the Swap
Agreement, this Confirmation will govern. In addition, if a Swap Agreement has
not been executed, this Confirmation will itself evidence a complete binding
agreement between you and us as to the terms and conditions of the Swap
Transaction to which this Confirmation relates.
This Confirmation will be governed by and construed in
accordance with the laws of the State of Ohio, without reference to choice of
law doctrine, provided that this provision will be superseded by any choice of
law provision in the Swap Agreement.
2.This Confirmation constitutes a Rate Swap Transaction under the Swap
Agreement and the terms of the Rate Swap Transaction to which this Confirmation
relates are as follows:
<TABLE>
<CAPTION>
<S> <C>
Notional Amount: $25,000,000
Trade Date: October 28, 1996
Effective Date: December 2, 1996
</TABLE>
<PAGE> 2
The Duriron Company, Inc.
Confirmation - Page 2
<TABLE>
<CAPTION>
<S> <C>
Termination Date: December 1, 2006
Amortization: None
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Rate Payer
Payment Dates: Each March 1, June 1, September 1, and
December 1 commencing with March 1,
1997 through and including the
Termination Date, subject to adjustment
in accordance with the Modified
Following Business Day Convention.
Fixed Rate: 6.7308%
Fixed Rate Day
Count Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: KeyBank
Floating Rate Payer
Payment Dates: Each March 1, June 1, September 1, and
December 1, commencing with March 1,
1997 through and including the
Termination Date, subject to adjustment
in accordance with the Modified
Following Business Day Convention.
Floating Rate for
initial Calculation
Period: To Be Determined
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3-month
</TABLE>
<PAGE> 3
The Duriron Company, Inc.
Confirmation - Page 3
<TABLE>
<CAPTION>
<S> <C> <C>
Spread: None
Floating Rate Day
Count Fraction: Actual/360
Reset Dates: The first day of each Floating Rate
Payer Calculation Period
Calculation Agent: KeyBank National Association
Payment Instructions: Please Provide
</TABLE>
Please confirm the foregoing correctly sets forth the terms of our Agreement by
executing the copy of this Confirmation enclosed for that purpose and returning
it to us.
Very truly yours,
KEYBANK NATIONAL ASSOCIATION
By: /s/ Gillian M. Doyle
--------------------------
Accepted and Confirmed as
of the Trade Date:
THE DURIRON COMPANY, INC.
By: /s/Gillian M. Doyle
---------------------------
Gillian M. Doyle
Treasurer 10/28/96
<PAGE> 1
Exhibit 10.5
BRUCE E. HINES P.O. Box 8820
Senior Vice President and CAO Dayton, Ohio 45401
Telephone: (937) 476-6101
Fax: (937) 476-6294
January 2, 1997
Mr. William M. Jordan
8237 Rhineway Drive
Dayton, Ohio 45458
Dear Bill:
The Duriron Company, Inc. (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist; and that the
mere possibility of a change in control can raise distracting and disrupting
uncertainties and questions among management personnel, can interfere with their
whole-hearted attention and devotion to the performance of their duties, and can
even lead to their departure, all to the detriment of the best interests of the
Company and its shareholders. Accordingly, the Board of Directors of the Company
(the "Board") has determined that the best interests of the Company and its
shareholders would be served by assuring to certain executives of the Company,
including yourself, the protection provided by an agreement which defines the
respective rights and obligations of the Company and the executive in the event
of termination of employment subsequent to a change in control of the Company.
In order to induce you to remain in the employ of the Company,
this letter agreement sets forth the severance benefits which the Company agrees
will be provided to you in the event your employment with the Company or, in the
case of a transaction described in clause (iii) or (iv) of paragraph 2, with the
successor to the Company (a "Successor") is terminated subsequent to a "change
in control of the Company" (as defined in paragraph 2) under the circumstances
described below. This letter agreement replaces the similar prior agreement
between you and the Company which expired December 31, 1996.
<PAGE> 2
Mr. William M. Jordan
January 2, 1997
Page 2
Except where the context otherwise indicates, the term
"Company" hereinafter includes the Company and any Successor.
1. OPERATION AND TERM OF AGREEMENT. This agreement, although
effective immediately, shall not become operative unless and until there has
been a change in control of the Company. None of the provisions of this
agreement shall be applicable to any termination of your employment, however
occurring, which is effective prior to a change in control of the Company. This
agreement shall continue until December 31, 2001, subject to extension beyond
that date by mutual consent, or until your normal retirement date (your "Normal
Retirement Date") under the Company's Pension Plan for Salaried Employees or a
successor plan, whichever is sooner. If your Normal Retirement Date is after
December 31, 2001, the Company will review this agreement with you before
December 31, 2001, for the purpose of determining whether or not an extension
beyond December 31, 2001 is mutually agreeable and, if so, on what basis and for
how long.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below, and your employment with the Company shall thereafter have been
terminated in accordance with paragraph 3 below. For purposes of this agreement,
a "change in control of the Company" shall mean any change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person" (as such
term is defined in Sections 13(d) and 14(d)(2) of the Exchange Act) other than
the Company or an entity then controlled by the Company is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new Director was
approved by a vote of at least two-thirds of the Directors then still in office
who were Directors at the beginning of the period; (iii) the Company merges or
consolidates with another corporation and the Company or an entity controlled by
the Company immediately prior to the merger or consolidation is not the
surviving entity; or (iv) a sale, lease, exchange, or other disposition of all
or substantially all of the assets of the Company takes place and an entity (or
entities) controlled by the Company is (are) not the transferee(s) of such
assets.
<PAGE> 3
Mr. William M. Jordan
January 2, 1997
Page 3
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the
events described in paragraph 2 constituting a change in control of the Company
shall occur during the term of this agreement, then upon any subsequent
termination of your employment at any time within two years following the
occurrence of such event, regardless of the stipulated expiration date of this
agreement, you shall be entitled to the compensation and benefits provided by
this agreement, as set forth in paragraph 5, unless such termination is because
of your death.
4. NOTICE AND DATE OF TERMINATION. (A) Any termination of your
employment subsequent to a change in control of the Company shall be consummated
by written Notice of Termination given to the other party. For purposes of this
agreement, "Notice of Termination" shall mean a notice which indicates the
specific termination provision or provisions in this agreement relied upon, if
any, and sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment.
(B) "Date of Termination" shall mean (i) if your employment is
terminated by the Company, the effective date specified in the Notice of
Termination; or (ii) if your employment is terminated for any other reason, the
date on which Notice of Termination is given or the effective date specified in
the Notice, whichever is later. For purposes of this agreement, termination of
your employment shall be deemed to have occurred within two years following the
occurrence of a change in control of the Company if the Date of Termination is
within such two year period.
5. COMPENSATION AND BENEFITS TO BE PROVIDED. (A) The
compensation and benefits to be provided to you pursuant to paragraph 3 of this
agreement upon termination of your employment with the Company under specified
circumstances within two years following a change in control of the Company
include the following:
(i) Subject to the provisions of paragraph 9 hereof, the
Company shall pay to you as severance pay in a lump sum in cash on the
fifteenth day following the Date of Termination, the following amounts:
(a) Your full salary (whether deferred or not)
through the Date of Termination at your annual base salary
rate in effect at the time Notice of Termination is given; and
also the amount of the award or awards, if any, with respect
to any completed period or periods which has been earned
(whether
<PAGE> 4
Mr. William M. Jordan
January 2, 1997
Page 4
deferred or not) by or awarded to you pursuant to any
incentive compensation plan or arrangement but which has not
yet been paid to you.
(b) In lieu of any further salary and incentive
compensation payments to you for periods subsequent to the
Date of Termination, an amount (the "Additional Compensation
Payment") equal to 300% of the sum of your annual base salary
at the rate in effect as of the Date of Termination (or, if
higher, at the rate in effect at the time of the change in
control) plus the average annual amount awarded to you under
any incentive compensation plans or arrangements for the two
fiscal years immediately preceding the fiscal year during
which the Date of Termination occurs (whether or not fully
paid).
(c) With respect to each option granted to you under
the Company's 1979 or 1989 Stock Option Plan or any other
stock option plan adopted by the Company (an "Option") which
is then outstanding, whether or not then fully exercisable,
and the exercise price of which is less than the Fair Market
Value of a share of Common Stock of the Company ("Company
Shares") on the Date of Termination, an amount in cash equal
to the excess of such Fair Market Value over the exercise
price. As used in this subparagraph, "Fair Market Value" shall
mean (1) the mean between the representative closing bid and
asked quotations for Company Shares in the over-the-counter
market on the Date of Termination (or last trading date prior
thereto) as reported by the National Association of Securities
Dealers, Inc. through NASDAQ; or (2) in the event the Company
Shares are listed on any exchange or in the NASD National
Market System, the last sale price on such exchange or System
on the Date of Termination (or last trading date prior
thereto) or, if there are no sales on such date, the mean
between the representative bid and asked prices for Company
Shares on such exchange or System at the close of business on
such date; or (3) in the event that there is then no public
market for the Company Shares or that trading in the Company
Shares is sporadic and the mean between any bid and asked
prices is not representative of fair market value, the fair
market value of the Company Shares determined in accordance
with Section 20.2031-2(f) of the Treasury Regulations or any
successor provision thereto. Any Option for which payment is
made as prescribed in this subparagraph (c) shall be canceled
effective upon the making of such payment. Notwithstanding the
foregoing, if you give to the Company, prior to your receipt
of payment pursuant to this subparagraph (c), written
instructions to
<PAGE> 5
Mr. William M. Jordan
January 2, 1997
Page 5
the effect that you do not wish to receive payment for your
Option(s) (or any one or more of them) as provided herein
(because, for example, of the possible triggering of liability
under Section 16 of the Exchange Act), then, to the extent
specified by you, such payment for such Option(s) shall not be
made, and such Option(s) shall remain in effect in accordance
with its (their) terms.
(d) Anything in any incentive compensation plan or
arrangement, or any action taken by the Board or any committee
of the Board pursuant thereto to the contrary notwithstanding,
any awards, whether in cash or Company Shares, made under any
such plan or arrangement prior to the Date of Termination
which have been credited to your account but the payment of
which has been deferred.
(e) All legal fees and expenses reasonably incurred
by you in good faith as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by this
agreement).
(ii) The Company shall, at its expense, maintain in full force
and effect for your continued benefit all life insurance, medical,
health and accident plans, programs and arrangements in which you were
entitled to participate at the time of the change in control, provided
that your continued participation is possible under the terms of such
plans, programs and arrangements. In the event that the terms of any
such plan, program or arrangement do not permit your continued
participation or that any such plan, program or arrangement has been or
is discontinued or the benefits thereunder have been or are materially
reduced, the Company shall arrange to provide, at its expense, benefits
to you which are substantially similar to those which you were entitled
to receive under such plan, program or arrangement at the time of the
change in control. The Company's obligation under this subparagraph
(ii) shall terminate on the earliest of the following dates: (a) the
third anniversary date of the Date of Termination; (b) your Normal
Retirement Date; or (c) the date an essentially equivalent and no less
favorable benefit is made available to you at no cost by a subsequent
employer. At the end of the applicable period of coverage set forth
above, you shall have the option to have assigned to you, at no cost
and with no apportionment of prepaid premiums, any assignable insurance
owned by the Company and relating specifically to you.
<PAGE> 6
Mr. William M. Jordan
January 2, 1997
Page 6
(iii) In the event that because of their relationship to you,
members of your family or other individuals are covered by any plan,
program, or arrangement described in subparagraph (ii) above
immediately prior to the Date of Termination, the provisions set forth
in subparagraph (ii) shall apply equally to require the continued
coverage of such persons; provided, however, that if under the terms of
any such plan, program or arrangement, any such person would have
ceased to be eligible for coverage during the period in which the
Company is obligated to continue coverage for you, nothing set forth
herein shall obligate the Company to continue to provide coverage for
such person beyond the date such coverage would have ceased even if you
had remained an employee of the Company.
(iv) The Company shall pay a supplemental monthly retirement
benefit ("Supplemental Pension Benefit") to you which is equal to the
excess, if any, of (a) the aggregate amount which would have been
payable to you monthly under all noncontributory pension and retirement
plans, agreements, and other arrangements of the Company had you
remained an employee of the Company [at an annual compensation rate
equal to one-third of the Adjusted Additional Compensation Payment
(computed as hereinafter provided) to which you would be entitled under
subparagraph 5(A)(i)(b)] until the earlier of your Normal Retirement
Date or the second anniversary date of the Date of Termination, over
(b) the aggregate amount actually payable to you monthly under such
plans, agreements or arrangements. Calculation of the amounts described
in (a) and (b) above shall be made assuming the same form of payment
and that you have elected the maximum preretirement death benefit
payable under The Duriron Company, Inc. Pension Plan for Salaried
Employees or a successor plan (the "Qualified Plan"). Payment of any
Supplemental Pension Benefit shall be made to you in the same form and
at the same time as payment of benefits under the Qualified Plan.
"Adjusted Additional Compensation Payment" shall be computed in the
same fashion as Additional Compensation Payment except that there shall
be excluded, in such computation, any compensation payable under the
Long Term Incentive Plan.
(v) The Company shall enable you to purchase the automobile,
if any, which the Company was providing for your use at the time Notice
of Termination was given at the wholesale value of such automobile at
such time.
(B) You shall not be required to mitigate the amount of any payment
provided for in subparagraphs 5(A)(i) or 5(A)(iv) by seeking other employment or
otherwise, nor shall the
<PAGE> 7
Mr. William M. Jordan
January 2, 1997
Page 7
amount of any payment provided for in such subparagraphs be reduced by any
compensation earned by you after the Date of Termination as the result of
employment by another employer or otherwise.
6. RIGHTS AS FORMER EMPLOYEE. Nothing contained in this
agreement shall be construed as preventing you, and shall not prevent you,
following any termination of your employment whether pursuant to this agreement
or otherwise, from thereafter participating in any benefit or insurance plans,
programs or arrangements (including without limitation, any retirement plans or
programs) in the same manner and to the same extent that you would have been
entitled to participate as a former employee of the Company had this agreement
not have been executed.
7. SUCCESSORS. The Company shall require any Successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to you, to expressly assume and
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.
This agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amounts would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid to such beneficiary or beneficiaries as you shall have designated by
written notice delivered to the Company prior to your death or, failing such
written notice, to such beneficiary or beneficiaries as you shall have
designated to receive benefits to be distributed under the Qualified Plan.
8. NON-COMPETITION. (A) If you should voluntarily terminate
your employment within two years following a change in control of the Company,
then for a period of two years after the Date of Termination, you shall not on
your own account, or as a shareholder, employee, officer, director, consultant
or otherwise, engage directly or indirectly in any business or enterprise which
is in Competition with the Company.
(B) The provisions of subparagraph (A) above shall not apply
if, in your Notice of Termination, you release the Company from any obligations
under paragraph 5 other than those set forth in subparagraphs 5(A)(i)(a) and
(d).
<PAGE> 8
Mr. William M. Jordan
January 2, 1997
Page 8
(C) For all purposes of this agreement (i) the words
"Competition with the Company" shall be deemed to include competition with the
Company or any subsidiary of the Company, or their respective successors or
assigns, and (ii) a business or enterprise shall be deemed to be in Competition
with the Company only if it is engaged, in any state in the United States in
which the Company's products are then marketed or in any foreign country in
which the Company's products are then marketed, in manufacturing, designing,
engineering, assembling or distributing products for use in the chemical
processing industries which are similar in nature or function to the products of
the Company. Notwithstanding the foregoing, nothing herein contained shall
prevent you from (i) being employed by or serving as an officer of or consultant
to any subsidiary or division of a business or enterprise in Competition with
the Company so long as such subsidiary or division is not itself in Competition
with the Company; or (ii) purchasing and holding for investment less than 10% of
the shares of any corporation the shares of which are regularly traded either on
a national securities exchange or in the over-the-counter market.
9. GROSS-UP OF PAYMENTS DEEMED TO BE EXCESS PARACHUTE
PAYMENTS. (A) The Company and you acknowledge that, following a change in
control of the Company, one or more payments or distributions to be made by the
Company to or for your benefit (whether paid or payable or distributed or
distributable pursuant to the terms of this agreement, under some other plan,
agreement, arrangement or otherwise) (a "Payment") may be determined to be an
"excess parachute payment" that is not deductible by the Company for federal
income tax purposes and with respect to which you will be subject to an excise
tax because of Sections 280G and 4999, respectively, of the Internal Revenue
Code (hereinafter referred to respectively as "Section 280G" and "Section
4999"). It is the Company's intention to fully protect you against and
compensate you for any application of such excise tax by making to you Gross-Up
Payments as provided in this paragraph 9. In furtherance and not in limitation
of the foregoing, the Gross-Up Payments will be sufficient to fully protect and
compensate you even if the amounts determined to constitute excess parachute
payments are increased due to your deferral from time to time of compensation
payable to you by the Company.
(B) If your employment is terminated after a change in control
of the Company occurs, the Company shall make an initial determination whether
any Payment would be an excess parachute payment and shall communicate its
determination, together with detailed supporting calculations, to you within 20
days after the Date of Termination. The Company's determination and calculations
will be final and binding upon you unless you notify the Company within 21 days
after you receive the Company's determination and
<PAGE> 9
Mr. William M. Jordan
January 2, 1997
Page 9
calculations that you dispute the same. If, within 10 days after you so notify
the Company (or within such longer period as you and the Company may agree), the
Company and you are unable to agree upon the determination and calculations,
then the Company and you shall, within 3 days thereafter, choose a nationally
recognized accounting firm (the "Accounting Firm") to deliver its determination
(and supporting calculations) concerning the matter(s) in dispute. The
Accounting Firm's determination shall be delivered to the Company and you within
20 days after such Firm's appointment and shall be final and binding on all
parties. With respect to your costs incurred in contesting the Company's
determination and calculations, if the final determination by the Accounting
Firm is more than 2% different from the determination proposed by the Company,
then the Company shall pay or reimburse all costs incurred by you with respect
to such determination. In all other cases, you shall pay all such costs. All
costs incurred by the Company in connection with such determination and contest,
and the costs of the Accounting Firm's determination, shall be borne by the
Company. The Company and you shall cooperate with each other and the Accounting
Firm, and shall provide necessary information so that the Company, you and the
Accounting Firm may make all appropriate determinations and calculations.
(C) If it is determined (pursuant to subparagraph (B) or
otherwise) that any Payment gives rise, directly or indirectly, to liability on
your part for excise tax under Section 4999 (and/or any penalties and/or
interest with respect to any such excise tax), the Company shall make additional
cash payments (the "Gross-Up Payments") to you, from time to time and at the
same time as any Payment constituting an excess parachute payment is paid or
provided to you (or as promptly thereafter as is possible), in such amounts as
are necessary to put you in the same position, after payment of all federal,
state and local taxes (whether income taxes, excise taxes under Section 4999 or
otherwise, for other taxes, and taking into account all such taxes payable with
respect to the Gross-Up Payments) and any and all penalties and interest with
respect to any such excise tax, as you would have been in after payment of all
federal, state and local income taxes if the Payments had not given rise to an
excise tax under Section 4999 and no such penalties or interest had been
imposed. For purposes of determining the amount of any Gross-Up Payments, you
will be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year that the payment is to be made, and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of your residence, net of the maximum reduction in federal
income taxes that could be obtained by deducting such state and local taxes.
(D) Pending a final determination of the amount of any
Gross-Up Payment payable to you, you shall have the right to require the Company
to pay to you all or any
<PAGE> 10
Mr. William M. Jordan
January 2, 1997
Page 10
portion of such amount as preliminarily determined and calculated by the
Company. Such payment shall be made by the Company within two days after receipt
of notice from you requiring the same.
(E) If the Internal Revenue Service determines that any
payment gives rise, directly or indirectly, to liability on your part for excise
tax under Section 4999 (and/or any penalties and/or interest with respect to any
such excise tax) in excess of the amount, if any, previously determined by the
Company or the Accounting Firm, as the case may be, the Company shall make
further additional cash payments to you not later than the due date of any
payment indicated by the Internal Revenue Service with respect to such matters,
in such amounts as are necessary to put you in the same position, after payment
of all federal, state and local taxes (whether income taxes, excise taxes under
Section 4999 or otherwise, or other taxes, and taking into account all such
taxes payable with respect to the Gross-Up Payments) and any and all penalties
and interest with respect to any such excise tax, as you would have been in
after payment of all federal, state and local income taxes if the Payments had
not given rise to an excise tax under Section 4999 and no such penalties or
interest had been imposed.
(F) If the Company desires to contest any determination by the
Internal Revenue Service with respect to the amount of excise tax under Section
4999, you shall, upon receipt from the Company of an unconditional written
undertaking to indemnify and hold you harmless (on an after-tax basis) from any
and all adverse consequences that might arise from the contesting of that
determination, cooperate with the Company in that contest at the Company's sole
expense. Nothing in this subparagraph (F) shall require you to incur any expense
other than expenses with respect to which the Company has paid you sufficient
sums so that after your payment of the expense and taking into account the
payment by the Company with respect to that expense and any and all taxes that
may be imposed upon you as a result of your receipt of that payment, the net
effect is no cost to you. Nothing in this subparagraph (F) shall require you to
extend the statute of limitations with respect to any item or issue in your tax
returns other than, exclusively, the excise tax under Section 4999. If, as a
result of the contest of any assertion by the Internal Revenue Service with
respect to excise tax under Section 4999, you receive a refund of a Section 4999
excise tax previously paid and/or any interest with respect thereto, you shall
promptly pay to the Company such amount as will leave you, net of the repayment
and all tax effects, in the same position, after all taxes and interest, that
you would have been in if the refunded excise tax had never been paid.
<PAGE> 11
Mr. William M. Jordan
January 2, 1997
Page 11
10. NOTICES. All notices required or permitted to be given
under this agreement shall be in writing and shall be mailed (postage prepaid by
either registered or certified mail) or delivered, if to the Company, addressed
to
The Duriron Company, Inc.
3100 Research Boulevard
P.O. Box 8820
Dayton, Ohio 45401-8820
Attention: Chief Administrative Officer
and if to you, addressed to
Mr. William M. Jordan
8237 Rhineway Drive
Dayton, Ohio 45458
Either party may change the address to which notices to such party are to be
directed by giving written notice of such change to the other party in the
manner specified in this paragraph. All notices, including without limitation,
any Notice of Termination, shall be deemed to have been given upon the date of
actual receipt by the recipient party.
11. ARBITRATION. (A) Any dispute or controversy arising out of
or relating to this agreement shall be settled by arbitration in Dayton, Ohio,
in accordance with the rules then obtaining of the American Arbitration
Association, and judgment may be entered on the arbitrator's award in any court
having jurisdiction.
(B) Anything herein to the contrary notwithstanding, in the
event of your breach or threatened breach of any provision of paragraph 8
hereof, the Company shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction to obtain an
injunction restraining you from the conduct, activities or actions which would
be in violation of such provision.
12. MISCELLANEOUS. No provision of this agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, signed by you and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of compliance by such other
party with, any condition or provision of this agreement
<PAGE> 12
Mr. William M. Jordan
January 2, 1997
Page 12
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this agreement.
13. GOVERNING LAW. The validity, interpretation,
construction and performance of this agreement shall be governed by the laws of
the State of Ohio, without giving effect to the principles of conflicts of law
thereof.
14. VALIDITY. The invalidity or unenforceability of any
provision of this agreement shall not affect the validity or enforceability of
any other provision, which shall remain in full force and effect.
If this letter correctly sets forth our agreement on the
subject matter hereof, please so confirm by signing and returning the enclosed
copy.
Very truly yours,
THE DURIRON COMPANY, INC.
By
----------------------------------
Bruce E. Hines
Senior Vice President and
Chief Administrative Officer
Confirmed and agreed to:
- ---------------------------
WILLIAM M. JORDAN
<PAGE> 1
Exhibit 10.6
W. M. JORDAN P.O. Box 8820
Chairman, President and CEO Dayton, Ohio 45401
Telephone: (937) 476-6182
Fax: (937) 476-6294
January 2, 1997
Dear :
The Duriron Company, Inc. (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist; and that the
mere possibility of a change in control can raise distracting and disrupting
uncertainties and questions among management personnel, can interfere with their
whole-hearted attention and devotion to the performance of their duties, and can
even lead to their departure, all to the detriment of the best interests of the
Company and its shareholders. Accordingly, the Board of Directors of the Company
(the "Board") has determined that the best interests of the Company and its
shareholders would be served by assuring to certain executives of the Company,
including yourself, the protection provided by an agreement which defines the
respective rights and obligations of the Company and the executive in the event
of termination of employment subsequent to a change in control of the Company.
In order to induce you to remain in the employ of the Company, this
letter agreement sets forth the severance benefits which the Company agrees will
be provided to you in the event your employment with the Company or, in the case
of a transaction described in clause (iii) or (iv) of paragraph 2, with the
successor to the Company (a "Successor") is terminated subsequent to a "change
in control of the Company" (as defined in paragraph 2) under the circumstances
described below. This letter agreement replaces the similar prior agreement
between you and the Company which is scheduled to expire December 31, 1996.
Except where the context otherwise indicates, the term "Company"
hereinafter includes the Company and any Successor.
<PAGE> 2
January 2, 1997
Page 2
1. OPERATION AND TERM OF AGREEMENT. This agreement, although
effective immediately, shall not become operative unless and until there has
been a change in control of the Company. None of the provisions of this
agreement shall be applicable to any termination of your employment, however
occurring, which is effective prior to a change in control of the Company. This
agreement shall continue until December 31, 2001, subject to extension beyond
that date by mutual consent, or until your Normal Retirement Date, as defined in
subparagraph 5(A)(i)(b), whichever is sooner. If your Normal Retirement Date is
after December 31, 2001, the Company will review this agreement with you before
December 31, 2001, for the purpose of determining whether or not an extension
beyond December 31, 2001 is mutually agreeable and, if so, on what basis and for
how long.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below,
and your employment with the Company shall thereafter have been terminated in
accordance with paragraph 3 below. For purposes of this agreement, a "change in
control of the Company" shall mean any change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); provided that, without limitation, such a change in
control shall be deemed to have occurred if (i) any "person" (as such term is
defined in Sections 13(d) and 14(d)(2) of the Exchange Act) other than the
Company or an entity then controlled by the Company is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute
at least a majority thereof unless the election, or the nomination for election
by the Company's shareholders, of each new Director was approved by a vote of at
least two-thirds of the Directors then still in office who were Directors at the
beginning of the period; (iii) the Company merges or consolidates with another
corporation and the Company or an entity controlled by the Company immediately
prior to the merger or consolidation is not the surviving entity; or (iv) a
sale, lease, exchange, or other disposition of all or substantially all of the
assets of the Company takes place and an entity (or entities) controlled by the
Company is (are) not the transferee(s) of such assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. (A) If any of the events
described in paragraph 2 constituting a change in control of the Company shall
occur during the term of this agreement, then upon any subsequent termination of
your employment at any time within two years following the occurrence of such
event, regardless of the stipulated expiration date of this agreement, you shall
be entitled to the compensation and benefits provided by this agreement, as set
forth in paragraph 5, unless such termination is (i) by the Company because of
your Disability or for Cause, or (ii) because of your Retirement, or (iii) by
you other than for Good Reason, or (iv) because of your death.
<PAGE> 3
January 2, 1997
Page 3
(B) As used in this agreement, the terms "Disability", "Cause",
"Retirement" and "Good Reason" shall have the meanings set forth below:
(i) DISABILITY. "Disability" shall mean your inability to perform the
duties required of you on a full-time basis for a period of six consecutive
months because of physical or mental illness or other physical or mental
disability or incapacity, followed by the Company giving you thirty days'
written notice of its intention to terminate your employment by reason
thereof, and your failure because of physical or mental illness or other
physical or mental disability or incapacity to resume the full-time
performance of your duties within such period of thirty days and thereafter
perform the same for a period of two consecutive months.
(ii) CAUSE. "Cause" shall mean (a) the willful and continued failure
by you to substantially perform your duties with the Company (other than any
such failure resulting from your physical or mental illness or other physical
or mental incapacity), after a demand for substantial performance is delivered
to you by the Board which specifically identifies the manner in which the
Board believes that you have not substantially performed your duties, or (b)
the willful engaging by you in gross misconduct materially and demonstrably
injurious to the Company. For purposes of this subparagraph, no act, or
failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interests of the Company.
Notwithstanding the foregoing, Cause shall not be deemed to exist unless and
until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-fourths of the number
of Directors then in office at a meeting of the Board called and held for that
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good
faith opinion of the Board you were guilty of conduct set forth above in
clauses (a) or (b) of the first sentence of this subparagraph and specifying
the particulars thereof in detail.
(iii) RETIREMENT. "Retirement" shall mean cessation of your
employment in accordance with the Company's retirement policy (including early
retirement with your written consent) generally applicable to its salaried
employees, or in accordance with any other retirement arrangement with respect
to you established with your written consent.
(iv) GOOD REASON. "Good Reason" shall mean:
(a) The assignment to you, without your written consent, of
any duties inconsistent with your position, duties, responsibilities
and status with the Company immediately prior to a change in control
of the Company, or a change in your responsibilities, as in effect
immediately prior to a change in control of the Company, which
materially diminishes your responsibilities with the Company when
considered as a whole; provided, however, that the foregoing shall not
constitute Good Reason if done in connection with termination of your
<PAGE> 4
January 2, 1997
Page 4
employment because of your Retirement, or by the Company because of
your Disability or for Cause, or by you other than for Good Reason.
(b) A reduction by the Company of your then current annual
base salary or, if higher, your annual base salary as in effect at
the time of the change in control of the Company.
(c) Failure by the Company to continue in effect any
benefit, incentive compensation, pension, employee stock ownership,
stock option, life insurance, medical, health and accident, or
disability plan in which you are participating at the time of a
change in control of the Company or plans providing you with
substantially similar benefits, or the taking of any action by the
Company which would adversely affect your participation in or
materially reduce your benefits under any of such plans or deprive
you of any material fringe benefit enjoyed by you at the time of the
change in control of the Company, or the failure by the Company to
provide you with the number of paid vacation days to which you would
then be entitled in accordance with the Company's vacation policy in
effect at the time of the change in control of the Company.
(d) The relocation of the Company's principal executive
offices to a location outside Montgomery County, Ohio, if at the time
of a change in control of the Company you are based at the Company's
principal executive offices.
(e) The Company's requiring you to be based anywhere other
than the location where you are based at the time of a change in
control of the Company, if the same requires you to relocate your
principal residence; or, in the event you consent to being based
anywhere other than such location, the failure by the Company to pay
(or reimburse you for) all reasonable moving expenses incurred by you
relating to a change of your principal residence in connection with
such relocation and to indemnify you against any loss [defined as the
excess of (A) the higher of (1) your aggregate investment in such
residence or (2) the fair market value of such residence, as
determined by a real estate appraiser designated by you and
reasonably satisfactory to the Company, over (B) the actual sale
price of such residence after the deduction from such sale price of
all real estate brokerage charges and related selling expenses]
realized upon the sale of such residence in connection with any such
change of residence.
(f) The Company's requiring you to perform duties or
services which necessitate absence overnight from your place of
residence, because of travel involving the business or affairs of the
Company, to a degree not substantially consistent with the extent of
such absence necessitated by such travel during the period of twelve
months immediately preceding a change in control of the Company.
<PAGE> 5
January 2, 1997
Page 5
(g) The failure of the Company to obtain the assumption of
this agreement by any Successor as provided in paragraph 7 hereof.
(h) The Company's termination of your employment without
satisfying any applicable requirements of paragraph 4 and
subparagraph (ii) above.
(C) During any period of time within two years following the
occurrence during the term of this agreement of a change in control of the
Company, if you fail to perform your duties as a result of physical or mental
illness or other physical or mental disability or incapacity, you shall continue
to receive, regardless of the stipulated expiration date of this agreement, your
full salary at your annual base salary rate then in effect, together with all
incentive compensation [including, without limitation, awards under the
Company's Annual Incentive Compensation Plan for Senior Executives (the "Annual
Incentive Plan") and Long Term Incentive Plan] paid during or for such period,
until you return to work or your employment with the Company is terminated;
provided, however, that any amount otherwise payable for any period of time
pursuant to this subparagraph (C) shall be reduced by any payment or payments
you receive for such period of time under any employee salary continuation plan
or employee disability insurance plan maintained by the Company no part of the
cost of which was paid or is payable by you.
(D) If subsequent to a change in control of the Company your
employment is terminated by the Company for Cause, the Company shall pay you
your full salary through the Date of Termination at your annual base salary rate
in effect at the time Notice of Termination is given, and you shall also receive
all accrued or vested benefits of any kind to which you are, or would otherwise
have been, entitled through the Date of Termination (as defined in paragraph 4),
and the Company shall thereupon have no further obligation to you under this
agreement.
4. NOTICE AND DATE OF TERMINATION. (A) Any termination of your
employment subsequent to a change in control of the Company, unless by you other
than for Good Reason or because of your Retirement or death, shall be
consummated by written Notice of Termination given to the other party. For
purposes of this agreement, "Notice of Termination" shall mean a notice which
indicates the specific termination provision or provisions in this agreement
relied upon, if any, and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment.
(B) "Date of Termination" shall mean (i) if your employment is
terminated by the Company for Cause, the date specified in the Notice of
Termination or the date on which the meeting of the Board referred to in
subparagraph 3(B)(ii) is concluded, whichever date is the later; or (ii) if your
employment is terminated for any other reason, the date on which Notice of
Termination is given or the effective date specified in the Notice, whichever is
later. For purposes of this agreement, termination of your employment shall be
deemed to have occurred within two years following the
<PAGE> 6
January 2, 1997
Page 6
occurrence of a change in control of the Company if the Date of Termination is
within such two year period.
5. COMPENSATION AND BENEFITS TO BE PROVIDED. (A) The compensation and
benefits to be provided to you pursuant to paragraph 3 of this agreement upon
termination of your employment with the Company under specified circumstances
within two years following a change in control of the Company include the
following:
(i) Subject to the provisions of paragraph 9 hereof, the Company
shall pay to you as severance pay in a lump sum in cash on the fifteenth day
following the Date of Termination, the following amounts:
(a) Your full salary through the Date of Termination at your
annual base salary rate in effect at the time Notice of Termination
is given; and also the amount of the award or awards, if any, with
respect to any completed period or periods which has been earned by
or awarded to you pursuant to any incentive compensation plan or
arrangement but which has not yet been paid to you.
(b) In lieu of any further salary and incentive compensation
payments to you for periods subsequent to the Date of Termination, an
amount (the "Additional Compensation Payment") equal to 300% of the
sum of your annual base salary at the rate in effect as of the Date
of Termination (or, if higher, at the rate in effect at the time of
the change in control) plus the average annual amount awarded to you
under any incentive compensation plans or arrangements for the two
fiscal years immediately preceding the fiscal year during which the
Date of Termination occurs (whether or not fully paid).
(c) With respect to each option granted to you under the
Company's 1979 or 1989 Stock Option Plan or any other stock option
plan adopted by the Company (an "Option") which is then outstanding,
whether or not then fully exercisable, and the exercise price of
which is less than the Fair Market Value of a share of Common Stock
of the Company ("Company Shares") on the Date of Termination, an
amount in cash equal to the excess of such Fair Market Value over the
exercise price. As used in this subparagraph, "Fair Market Value"
shall mean (1) the mean between the representative closing bid and
asked quotations for Company Shares in the over-the-counter market on
the Date of Termination (or last trading date prior thereto) as
reported by the National Association of Securities Dealers, Inc.
through NASDAQ; or (2) in the event the Company Shares are listed on
any exchange or in the NASD National Market System, the last sale
price on such exchange or System on the Date of Termination (or last
trading date prior thereto) or, if there are no sales on such date,
the mean between the representative bid and asked prices for Company
Shares on such exchange or System at the close of business on such
date; or (3) in the event that there
<PAGE> 7
January 2, 1997
Page 7
is then no public market for the Company Shares or that trading
in the Company Shares is sporadic and the mean between any bid
and asked prices is not representative of fair market value, the
fair market value of the Company Shares determined in accordance
with Section 20.2031-2(f) of the Treasury Regulations or any
successor provision thereto. Any Option for which payment is made
as prescribed in this subparagraph (c) shall be canceled
effective upon the making of such payment. Notwithstanding the
foregoing, if you give to the Company, prior to your receipt of
payment pursuant to this subparagraph (c), written instructions
to the effect that you do not wish to receive payment for your
Option(s) (or any one or more of them) as provided herein
(because, for example, of the possible triggering of liability
under Section 16 of the Exchange Act), then, to the extent
specified by you, such payment for such Option(s) shall not be
made, and such Option(s) shall remain in effect in accordance
with its (their) terms.
(d) Anything in any incentive compensation plan or
arrangement, or any action taken by the Board or any committee of
the Board pursuant thereto to the contrary notwithstanding, any
awards, whether in cash or Company Shares, made under any such
plan or arrangement prior to the Date of Termination which have
been credited to your account but the payment of which has been
deferred.
(e) All legal fees and expenses reasonably incurred by you
in good faith as a result of such termination (including all such
fees and expenses, if any, incurred in contesting or disputing
any such termination or in seeking to obtain or enforce any right
or benefit provided by this agreement).
(ii) The Company shall, at its expense, maintain in full force and
effect for your continued benefit all life insurance, medical, health and
accident plans, programs and arrangements in which you were entitled to
participate at the time of the change in control, provided that your continued
participation is possible under the terms of such plans, programs and
arrangements. In the event that the terms of any such plan, program or
arrangement do not permit your continued participation or that any such plan,
program or arrangement has been or is discontinued or the benefits thereunder
have been or are materially reduced, the Company shall arrange to provide, at
its expense, benefits to you which are substantially similar to those which you
were entitled to receive under such plan, program or arrangement at the time of
the change in control. The Company's obligation under this subparagraph (ii)
shall terminate on the earliest of the following dates: (a) the third
anniversary date of the Date of Termination; (b) your Normal Retirement Date; or
(c) the date an essentially equivalent and no less favorable benefit is made
available to you at no cost by a subsequent employer. At the end of the
applicable period of coverage set forth above, you shall have the option to have
assigned to you, at no cost and with no apportionment of prepaid premiums, any
assignable insurance owned by the Company and relating specifically to you.
<PAGE> 8
January 2, 1997
Page 8
(iii) In the event that because of their relationship to you, members
of your family or other individuals are covered by any plan, program, or
arrangement described in subparagraph (ii) above immediately prior to the Date
of Termination, the provisions set forth in subparagraph (ii) shall apply
equally to require the continued coverage of such persons; provided, however,
that if under the terms of any such plan, program or arrangement, any such
person would have ceased to be eligible for coverage during the period in
which the Company is obligated to continue coverage for you, nothing set forth
herein shall obligate the Company to continue to provide coverage for such
person beyond the date such coverage would have ceased even if you had
remained an employee of the Company.
(iv) The Company shall pay a supplemental monthly retirement benefit
("Supplemental Pension Benefit") to you which is equal to the excess, if any,
of (a) the aggregate amount which would have been payable to you monthly under
all noncontributory pension and retirement plans, agreements, and other
arrangements of the Company had you remained an employee of the Company [at an
annual compensation rate equal to one-third of the Adjusted Additional
Compensation Payment (computed as hereinafter provided) to which you would be
entitled under subparagraph 5(A)(i)(b)] until the earlier of your Normal
Retirement Date or the second anniversary date of the Date of Termination,
over (b) the aggregate amount actually payable to you monthly under such
plans, agreements or arrangements. Calculation of the amounts described in (a)
and (b) above shall be made assuming the same form of payment and that you
have elected the maximum preretirement death benefit payable under The Duriron
Company, Inc. Pension Plan for Salaried Employees or a successor plan (the
"Qualified Plan"). Payment of any Supplemental Pension Benefit shall be made
to you in the same form and at the same time as payment of benefits under the
Qualified Plan. "Adjusted Additional Compensation Payment" shall be computed
in the same fashion as Additional Compensation Payment except that there shall
be excluded, in such computation, any compensation payable under the Long Term
Incentive Plan.
(v) The Company shall enable you to purchase the automobile, if any,
which the Company was providing for your use at the time Notice of Termination
was given at the wholesale value of such automobile at such time.
(B) Notwithstanding anything to the contrary set forth in paragraph 3 above,
(i) if an event constituting Good Reason shall occur, you shall be entitled to
the compensation and benefits described in subparagraph 5(A) above only if you
give a Notice of Termination with respect thereto within one year after the
occurrence of such event (and within two years after the change in control of
the Company); and (ii) upon your giving of such Notice of Termination, you shall
be entitled to such compensation and benefits regardless of whether there has
been an intervening termination of your employment by the Company because of
your Disability or for Cause.
<PAGE> 9
January 2, 1997
Page 9
(C) You shall not be required to mitigate the amount of any payment provided
for in subparagraphs 5(A)(i) or 5(A)(iv) by seeking other employment or
otherwise, nor shall the amount of any payment provided for in such
subparagraphs be reduced by any compensation earned by you after the Date of
Termination as the result of employment by another employer or otherwise.
6. RIGHTS AS FORMER EMPLOYEE. Nothing contained in this agreement
shall be construed as preventing you, and shall not prevent you, following any
termination of your employment whether pursuant to this agreement or otherwise,
from thereafter participating in any benefit or insurance plans, programs or
arrangements (including without limitation, any retirement plans or programs) in
the same manner and to the same extent that you would have been entitled to
participate as a former employee of the Company had this agreement not have been
executed.
7. SUCCESSORS. The Company shall require any Successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to expressly assume and 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.
This agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid to such beneficiary or
beneficiaries as you shall have designated by written notice delivered to the
Company prior to your death or, failing such written notice, to such beneficiary
or beneficiaries as you shall have designated to receive benefits to be
distributed under the Qualified Plan.
8. NON-COMPETITION. (A) If you should for Good Reason terminate your
employment within two years following a change in control of the Company, then
for a period of two years after the Date of Termination, you shall not on your
own account, or as a shareholder, employee, officer, director, consultant or
otherwise, engage directly or indirectly in any business or enterprise which is
in Competition with the Company.
(B) The provisions of subparagraph (A) above shall not apply if, in
your Notice of Termination, you release the Company from any obligations under
paragraph 5 other than those set forth in subparagraphs 5(A)(i)(a) and (d).
(C) For all purposes of this agreement (i) the words "Competition
with the Company" shall be deemed to include competition with the Company or any
subsidiary of the Company, or their respective successors or assigns, and (ii) a
business or enterprise shall be deemed to be in Competition with the Company
only if it is engaged, in any state in the United States in which the
<PAGE> 10
January 2, 1997
Page 10
Company's products are then marketed or in any foreign country in which the
Company's products are then marketed, in manufacturing, designing, engineering,
assembling or distributing products for use in the chemical processing
industries which are similar in nature or function to the products of the
Company. Notwithstanding the foregoing, nothing herein contained shall prevent
you from (i) being employed by or serving as an officer of or consultant to any
subsidiary or division of a business or enterprise in Competition with the
Company so long as such subsidiary or division is not itself in Competition with
the Company; or (ii) purchasing and holding for investment less than 10% of the
shares of any corporation the shares of which are regularly traded either on a
national securities exchange or in the over-the-counter market.
9. GROSS-UP OF PAYMENTS DEEMED TO BE EXCESS PARACHUTE
PAYMENTS. (A) The Company and you acknowledge that, following a change in
control of the Company, one or more payments or distributions to be made by the
Company to or for your benefit (whether paid or payable or distributed or
distributable pursuant to the terms of this agreement, under some other plan,
agreement, arrangement or otherwise) (a "Payment") may be determined to be an
"excess parachute payment" that is not deductible by the Company for federal
income tax purposes and with respect to which you will be subject to an excise
tax because of Sections 280G and 4999, respectively, of the Internal Revenue
Code (hereinafter referred to respectively as "Section 280G" and "Section
4999"). It is the Company's intention to fully protect you against and
compensate you for any application of such excise tax by making to you Gross-Up
Payments as provided in this paragraph 9. In furtherance and not in limitation
of the foregoing, the Gross-Up Payments will be sufficient to fully protect and
compensate you even if the amounts determined to constitute excess parachute
payments are increased due to your deferral from time to time of compensation
payable to you by the Company.
(B) If your employment is terminated after a change in control of the
Company occurs, the Company shall make an initial determination whether any
Payment would be an excess parachute payment and shall communicate its
determination, together with detailed supporting calculations, to you within 20
days after the Date of Termination. The Company's determination and calculations
will be final and binding upon you unless you notify the Company within 21 days
after you receive the Company's determination and calculations that you dispute
the same. If, within 10 days after you so notify the Company (or within such
longer period as you and the Company may agree), the Company and you are unable
to agree upon the determination and calculations, then the Company and you
shall, within 3 days thereafter, choose a nationally recognized accounting firm
(the "Accounting Firm") to deliver its determination (and supporting
calculations) concerning the matter(s) in dispute. The Accounting Firm's
determination shall be delivered to the Company and you within 20 days after
such Firm's appointment and shall be final and binding on all parties. With
respect to your costs incurred in contesting the Company's determination and
calculations, if the final determination by the Accounting Firm is more than 2%
different from the determination proposed by the Company, then the Company shall
pay or reimburse all costs incurred by you with respect to such
<PAGE> 11
January 2, 1997
Page 11
determination. In all other cases, you shall pay all such costs. All costs
incurred by the Company in connection with such determination and contest, and
the costs of the Accounting Firm's determination, shall be borne by the Company.
The Company and you shall cooperate with each other and the Accounting Firm, and
shall provide necessary information so that the Company, you and the Accounting
Firm may make all appropriate determinations and calculations.
(C) If it is determined (pursuant to subparagraph (B) or otherwise)
that any Payment gives rise, directly or indirectly, to liability on your part
for excise tax under Section 4999 (and/or any penalties and/or interest with
respect to any such excise tax), the Company shall make additional cash payments
(the "Gross-Up Payments") to you, from time to time and at the same time as any
Payment constituting an excess parachute payment is paid or provided to you (or
as promptly thereafter as is possible), in such amounts as are necessary to put
you in the same position, after payment of all federal, state and local taxes
(whether income taxes, excise taxes under Section 4999 or otherwise, for other
taxes, and taking into account all such taxes payable with respect to the
Gross-Up Payments) and any and all penalties and interest with respect to any
such excise tax, as you would have been in after payment of all federal, state
and local income taxes if the Payments had not given rise to an excise tax under
Section 4999 and no such penalties or interest had been imposed. For purposes of
determining the amount of any Gross-Up Payments, you will be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year that the payment is to be made, and state and local income
taxes at the highest marginal rate of taxation in the state and locality of your
residence, net of the maximum reduction in federal income taxes that could be
obtained by deducting such state and local taxes.
(D) Pending a final determination of the amount of any Gross-Up
Payment payable to you, you shall have the right to require the Company to pay
to you all or any portion of such amount as preliminarily determined and
calculated by the Company. Such payment shall be made by the Company within two
days after receipt of notice from you requiring the same.
(E) If the Internal Revenue Service determines that any payment gives
rise, directly or indirectly, to liability on your part for excise tax under
Section 4999 (and/or any penalties and/or interest with respect to any such
excise tax) in excess of the amount, if any, previously determined by the
Company or the Accounting Firm, as the case may be, the Company shall make
further additional cash payments to you not later than the due date of any
payment indicated by the Internal Revenue Service with respect to such matters,
in such amounts as are necessary to put you in the same position, after payment
of all federal, state and local taxes (whether income taxes, excise taxes under
Section 4999 or otherwise, or other taxes, and taking into account all such
taxes payable with respect to the Gross-Up Payments) and any and all penalties
and interest with respect to any such excise tax, as you would have been in
after payment of all federal, state and local income taxes if the Payments had
not given rise to an excise tax under Section 4999 and no such penalties or
interest had been imposed.
<PAGE> 12
January 2, 1997
Page 12
(F) If the Company desires to contest any determination by the
Internal Revenue Service with respect to the amount of excise tax under Section
4999, you shall, upon receipt from the Company of an unconditional written
undertaking to indemnify and hold you harmless (on an after-tax basis) from any
and all adverse consequences that might arise from the contesting of that
determination, cooperate with the Company in that contest at the Company's sole
expense. Nothing in this subparagraph (F) shall require you to incur any expense
other than expenses with respect to which the Company has paid you sufficient
sums so that after your payment of the expense and taking into account the
payment by the Company with respect to that expense and any and all taxes that
may be imposed upon you as a result of your receipt of that payment, the net
effect is no cost to you. Nothing in this subparagraph (F) shall require you to
extend the statute of limitations with respect to any item or issue in your tax
returns other than, exclusively, the excise tax under Section 4999. If, as a
result of the contest of any assertion by the Internal Revenue Service with
respect to excise tax under Section 4999, you receive a refund of a Section 4999
excise tax previously paid and/or any interest with respect thereto, you shall
promptly pay to the Company such amount as will leave you, net of the repayment
and all tax effects, in the same position, after all taxes and interest, that
you would have been in if the refunded excise tax had never been paid.
10. NOTICES. All notices required or permitted to be given under
this agreement shall be in writing and shall be mailed (postage prepaid by
either registered or certified mail) or delivered, if to the Company, addressed
to
The Duriron Company, Inc.
3100 Research Boulevard
P.O. Box 8820
Dayton, Ohio 45401-8820
Attention: Chief Executive Officer
and if to you, addressed to
Either party may change the address to which notices to such party are to be
directed by giving written notice of such change to the other party in the
manner specified in this paragraph. All notices, including without limitation,
any Notice of Termination, shall be deemed to have been given upon the date of
actual receipt by the recipient party.
<PAGE> 13
January 2, 1997
Page 13
11. ARBITRATION. (A) Any dispute or controversy arising out of or
relating to this agreement shall be settled by arbitration in Dayton, Ohio, in
accordance with the rules then obtaining of the American Arbitration
Association, and judgment may be entered on the arbitrator's award in any court
having jurisdiction.
(B) Anything herein to the contrary notwithstanding, in the event of
your breach or threatened breach of any provision of paragraph 8 hereof, the
Company shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction to obtain an injunction
restraining you from the conduct, activities or actions which would be in
violation of such provision.
12. MISCELLANEOUS. No provision of this agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by you and such officer of the Company as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of compliance by such other party with,
any condition or provision of this agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
agreement.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this agreement shall be governed by the laws of the State of
Ohio, without giving effect to the principles of conflicts of law thereof.
14. VALIDITY. The invalidity or unenforceability of any provision
of this agreement shall not affect the validity or enforceability of any other
provision, which shall remain in full force and effect.
If this letter correctly sets forth our agreement on the subject
matter hereof, please so confirm by signing and returning the enclosed copy.
Very truly yours,
THE DURIRON COMPANY, INC.
By________________________
<PAGE> 14
January 2, 1997
Page 14
William M. Jordan
Chairman, President and
Chief Executive Officer
Confirmed and agreed to:
- ----------------------------
<PAGE> 1
EXHIBIT 10.14
AMENDED TO CONFORM
TO RULE 16b-3
OCTOBER 23, 1996
THE DURIRON COMPANY, INC.
1989 STOCK OPTION PLAN
SECTION 1. PURPOSES.
The purposes of this 1989 Stock Option Plan (the "Plan") are (i) to
provide incentives to directors, officers and other key employees of the Company
upon whose judgment, initiative and efforts the long-term growth and success of
the Company is largely dependent; (ii) to assist the Company in attracting and
retaining directors and key employees of proven ability; and (iii) to increase
the identity of interests of such directors and key employees with those of the
Company's shareholders.
SECTION 2. DEFINITIONS.
For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of the type
described in Section 8(b)(ii).
(b) "Affiliate" means a person controlling, controlled by or under
common control with the Company.
(c) "Board of Directors" means the board of directors of the Company.
(d) "Change in Composition of the Board" means an event of the type
described in Section 8(b)(iv).
(e) "Change in Control" means a transaction of the type described in
Section 8(b)(iii).
(f) "Committee" means the Compensation Committee of the Board of
Directors.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means The Duriron Company, Inc., a New York
corporation, and its successors in interest.
(i) "Current Market Value" means the mean of the representative
closing bid and asked quotations in the over-the-counter market
on the date the value of a Share is to be determined, as reported
by the National Association of Securities Dealers, Inc. through
NASDAQ or, if no quotations are reported for such date, the next
preceding date for which quotations are reported; or in the event
the Shares are listed on any exchange or on the NASDAQ National
Market System, the last sale price on such exchange or in the
over-the-counter market as reported by the National Association
of Securities Dealers, Inc. through NASDAQ on the date the value
of a Share is to be
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<PAGE> 2
determined or, if there are no sales on such date, the next
preceding date for which a sale is reported.
(j) "Director Option" means the type of stock option described in
Section 9.
(k) "Fair Market Value" means the average of the means of the
representative closing bid and asked quotations in the
over-the-counter market during the period beginning twenty-one
days prior to and ending on the date the value of a Share is to
be determined, as reported by the National Association of
Securities Dealers, Inc. through NASDAQ or, in the event the
Shares are listed on any exchange or on the NASDAQ National
Market System, the average of the last sale prices of the Shares
on such exchange or in the over-the-counter market as reported by
the National Association of Securities Dealers, Inc. through
NASDAQ during such period.
(l) "Incentive Stock Option" means an option granted under the Plan
which qualifies as an incentive stock option under Section 422A
of the Code.
(m) "Limited Right" means a right granted under Section 8(a) of the
Plan.
(n) "Nonqualified Option" means an option granted and described under
the Plan which does not qualify as an Incentive Stock Option
under Section 422A of the Code and which is not a Director
Option.
(o) "Qualified Domestic Relations Order" means a qualified domestic
relations order as defined in the Internal Revenue Code or Title
I of the Employee Retirement Income Security Act, or the rules
thereunder.
(p) "Share" or "Shares" means the shares of Common Stock, $1.25 par
value, of the Company.
(q) "Stock Appreciation Right" means a right granted and described
under Section 8(d) of the Plan.
(r) "Subsidiary" means any entity 50% or more of the voting control
of which is owned, directly or indirectly, by the Company.
(s) "Tender Offer" means a tender offer or a request or invitation
for tenders or an exchange offer subject to regulation under
Section 14(d) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, as the same may be
amended, modified or superseded from time to time.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES. Subject to adjustment as provided in Section
11, the maximum number of Shares that may be issued and/or
delivered under the Plan upon the exercise of options is 750,000.
Such Shares may be either authorized and unissued or treasury
Shares, if any. Any Shares subject to an option, which for any
reason has (i) terminated, (ii) expired or (iii) has been
canceled prior to being fully exercised or being canceled through
payment of either a Limited Right or Stock Appreciation Right,
may again be subject to option under the Plan.
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<PAGE> 3
(b) Subject to adjustment as provided in Section 11, the maximum
number of Limited Rights or Stock Appreciation Rights which
may be exercised under the Plan is 750,000. In any case, any
Limited Rights or Stock Appreciation Rights granted under the
Plan which for any reason (i) terminate, (ii) expire or (iii)
have been canceled prior to being fully exercised may again be
granted under the Plan, provided that the option to which
Limited Rights or Stock Appreciation Rights relate has not
been exercised.
(c) The aggregate maximum number of Limited Rights, Stock
Appreciation Rights and options exercised hereunder shall not
exceed 750,000.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by the Committee which shall be
comprised in a manner that satisfies all applicable legal requirements,
including satisfying the Non-Employee Director standard set forth in Rule 16b-3,
if applicable. In addition, as applicable, the Committee will be constituted in
a manner consistent with the "outside director" standard set forth in the
regulations under Section 162(m) of the Code.
The Committee shall have and exercise all the power and authority
granted to it under the Plan. Subject to Section 9 and other applicable
provisions of the Plan, the Committee shall in its sole discretion determine the
persons to whom, and the times at which, Incentive Stock Options, Nonqualified
Options, Stock Appreciation Rights and Limited Rights shall be granted; the
number of Shares to be subject to each option; the option price per Share; and
the term of each option. In making such determinations, the Committee may take
into consideration each employee's present and/or potential contribution to the
success of the Company and its Subsidiaries and any other factors which the
Committee may deem relevant and proper. Subject to the provisions of the Plan,
the Committee shall also interpret the Plan; prescribed, amend and rescind rules
and regulations relating to the Plan; correct defects, supply omissions and
reconcile any inconsistencies in the Plan; and make all other determinations
necessary or advisable for the administration of the Plan. Such determinations
of the Committee shall be conclusive. A majority of the Committee shall
constitute a quorum for meetings of the Committee, and the act of a majority of
the Committee at a meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
SECTION 5. ELIGIBILITY.
From time to time during the term of the Plan, the Committee may grant
one or more Incentive Stock Options and/or Nonqualified Options to any person
who is then an officer or other key employee or director of the Company or a
Subsidiary.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) WRITTEN AGREEMENT. The terms of each option granted under the
Plan shall be set forth in a written agreement, the form of which
shall be approved by the Committee.
(b) TERMS AND CONDITIONS OF GENERAL APPLICATION. The following terms
and provisions shall apply to all options granted under the Plan.
(1) No option may be granted under the Plan at an option price
per Share which, when combined with the value of any
consideration provided by the holder of
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<PAGE> 4
the option, is less than 50% of the Current Market Value of
the underlying Shares on the date of grant.
(2) No option may be exercised more than ten years after the
date of grant.
(3) Except as otherwise provided in the Plan, no option shall be
exercisable within one year after the date of grant. At the
time an option is granted, the Committee may provide that
after such one year period, the option may be exercised with
respect to all Shares thereto, or may be exercised with
respect to only a specified number of Shares over a
specified period or periods.
(4) An option may be exercised only if the holder thereof has
been continuously employed by the Company or a Subsidiary
since the date of grant. Whether authorized leave of absence
or absence for military or governmental service shall
constitute a termination of employment shall be determined
by the Committee, after consideration of the provisions of
Section 1.421-7(h) of the regulations issued under the Code,
if appropriate.
(5) At the time an option is granted, or at such other time as
the Committee may determine, the Committee may provide that,
if the holder of the option ceases to be employed by the
Company or a Subsidiary for any reason (including retirement
or disability) other than death, the option will continue to
be exercisable by the holder (to the extent it was
exercisable on the date the holder ceased to be employed)
for such additional period (not to exceed the remaining term
of such option) after such termination of employment as the
Committee may provide.
(6) At the time an option is granted, the Committee may provide
that, if the holder of the option dies while employed by the
Company or a Subsidiary or while entitled to the benefits of
any additional exercise period established by the Committee
with respect to such option in accordance with Section
6(b)(5), then the option will continue to be exercisable (to
the extent it was exercisable on the date of death) by the
person or persons (including the holder's estate) to whom
the holder's rights with respect to such option shall have
passed by will or by the laws of descent and distribution
for such additional period after death (not to exceed the
remaining term of such option) as the Committee may provide.
(7) At the time an option is granted, the Committee may provide
for any restrictions or limitations on the transferability
of the Shares issuable upon the exercise of such options as
it may deem appropriate.
(c) ADDITIONAL PROVISIONS APPLICABLE TO INCENTIVE STOCK OPTIONS. The
following additional terms and provisions shall apply to Incentive
Stock Options granted under the Plan, notwithstanding any provision of
Section 6(b) to the contrary:
(1) No Incentive Stock Option may be granted at an option price
per Share which is less than the Current Market Value of the
Share on the date of grant.
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<PAGE> 5
(2) No Incentive Stock Option shall be granted to an officer or
other employee who possesses directly or indirectly (within
the meaning of Section 424(d) of the Code) at the time of
grant more than 10% of the voting power of all classes of
Shares of the Company or of any parent corporation or any
Subsidiary of the Company unless (i) the option price is at
least 110% of the Current Market Value of the Shares subject
to the option on the date the option is granted and (ii) the
option is not exercisable after the expiration of five years
from the date of grant.
(3) The aggregate Current Market Value (determined as of the
time an Incentive Stock Option is granted) of Shares with
respect to which Incentive Stock Options are exercisable for
the first time by any individual in any calendar year (under
the Plan and all other plans of the Company and any
Subsidiary) shall not exceed $100,000, or such other maximum
amount permitted by the Code.
(d) WAIVER OF TERMS. Subject to the ten-year limitation in Section
6(b)(2), the Committee may waive or modify at any time, either
before or after the granting of an option, any condition or
restriction with respect to the exercise of such option imposed
by or pursuant to this Section 6 in such circumstances as the
Committee may, in its discretion, deem appropriate (including,
without limitation, in the event the holder retires with the
approval of the Company, or in the event of a proposed
Acquisition Transaction, a Change in Control, Tender Offer for
Shares, or other similar transaction involving the Company).
(e) ACCELERATION UPON CERTAIN EVENTS. In the event of (i) a Tender
Offer (other than an offer by the Company) for Shares, if the
offeror acquires Shares pursuant thereto, (ii) an Acquisition
Transaction, (iii) a Change in Control or (iv) a Change in
Composition of the Board, all outstanding options granted
hereunder shall become exercisable in full (whether or not
otherwise exercisable), effective on the date of the first
purchase of Shares pursuant to the Tender Offer, or the date of
shareholder approval of the Acquisition Transaction, or the date
of filing of the Schedule 13D reflecting the Change in Control
(or, if not made, the date upon which such filing becomes
delinquent), or the date of the Change in Composition of the
Board, as the case may be (the occurrence of any such event is
hereinafter referred to as an "Acceleration").
SECTION 7. EXERCISE OF OPTIONS.
(a) NOTICE OF EXERCISE. The holder of an option granted under the
Plan may exercise all or part of such option by giving written
notice of exercise to the Committee or its designee; provided,
however, that an option may not be exercised for a fraction of a
Share. No holder of an option nor such holder's legal
representatives, legatees or distributees will be, or will be
deemed to be, a holder of any Shares covered by such option
unless and until certificates for such Shares are issued in
accordance with the Plan.
(b) PAYMENT OF OPTION PRICE. The option price for Shares with respect
to which an option is exercised shall be paid in full at the time
such notice is given. An option shall be deemed exercised on the
date the Company's Chief Financial Officer or its Treasurer
receives written notice of exercise, together with full payment
for the Shares
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<PAGE> 6
purchased. The option price shall be paid to the Company either
in cash or by delivery of Shares having a Current Market Value
equal to the option price (or a combination of cash and Shares
such that the sum of the Current Market Value of the Shares plus
the cash equals the option price). Additionally, the Company, at
its discretion, may accept payment for Nonqualified Options by
canceling such partial number of Shares, of the total number of
Shares covered under such exercise, as are necessary to deliver
upon such exercise a net number of Shares which have a Current
Market Value on the date of exercise equal to the excess of the
aggregate Current Market Value of all such Shares (prior to such
partial cancellation) over the aggregate purchase price for all
such Shares (prior to such partial cancellation).
(c) PAYMENT IN CANCELLATION OF OPTION. The Committee shall have the
authority in its sole discretion to authorize the payment to the
holder of an option granted under the Plan (with consent of such
holder or, in the event of an Acceleration of options, without
such consent), in exchange for the cancellation of all or a part
of such holder's option, of cash equal to the excess of the
aggregate Fair Market Value on the date of such cancellation of
the Shares with respect to which the option is being canceled
over the aggregate option price of such Shares; provided,
however, that if an Acceleration of options granted hereunder has
occurred, for purposes of this subparagraph, "Fair Market Value"
on the date of such cancellation shall be calculated in the same
manner as the "exercise value" of a Limited Right would be
calculated under Section 8(c) with respect to such date (whether
or not any Limited Rights are actually outstanding).
Notwithstanding the foregoing, in the case of a Director Option,
such payment in exchange for cancellation of the option shall be
made only in the event of an Acceleration of Options.
(d) SPECIAL PAYMENT PROVISIONS FOR NONQUALIFIED OPTIONS. Upon the
exercise of a Nonqualified Option, the Company, at the discretion
of the Committee, may pay the exercising party a cash lump sum
which is equivalent to the net tax savings to the Company, as
determined by the Committee, arising from the tax deduction
available to the Company through such exercise, where applicable,
under the Code. Additionally, the holder of a Nonqualified Option
may elect to have the Company retain from the Shares to be issued
upon the exercise of such option Shares having a Fair Market
Value on the date of exercise equal to all or any part of the
federal, state and local withholding tax payments (whether
mandatory or permissive) to be made by the holder with respect to
the exercise of the option (up to a maximum amount determined by
the holder's top marginal tax rate) in lieu of making such
payments in cash.
SECTION 8. LIMITED RIGHTS AND STOCK APPRECIATION RIGHTS.
(a) GRANT OF LIMITED RIGHTS. The Committee may grant Limited Rights
with respect to any option granted under the Plan either at the
time the option is granted or at any time thereafter prior to the
exercise, cancellation, termination or expiration of such option.
The number of Limited Rights covered by any such grant shall not
exceed, but may be less than, the number of Shares covered by the
related option. The term of any Limited Right shall be the same
as the term of the option to which it relates. The right of a
holder to exercise a Limited Right shall be canceled if and to
the extent a related option is exercised or canceled, and the
right of a holder to exercise an option shall be canceled if and
to the extent a related Limited Right is exercised.
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(b) EVENTS PERMITTING EXERCISE OF LIMITED RIGHTS. A Limited Right
shall be exercisable only if and to the extent that the
related option is exercisable; provided, however, that
notwithstanding the foregoing, a Limited Right shall not be
exercisable unless the Current Market Value of a Share on the
date of exercise exceeds the exercise price of a Share subject
to the related option. A Limited Right which is otherwise
exercisable may be exercised only during the following
periods:
(i) during a period of 30 days following the date of
expiration of a Tender Offer (other than an offer by
the Company) for Shares, if the offeror acquires
Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of
approval by the shareholders of the Company of a
definitive agreement: (x) for the merger or
consolidation of the Company into or with another
corporation, if the Company will not be the surviving
corporation or will become a subsidiary of another
corporation or (y) for the sale of all or
substantially all of the assets of the Company (each
of the foregoing transactions is hereinafter referred
to as an "Acquisition Transaction");
(iii) during a period of 30 days following the date upon
which the Company is provided a copy of a Schedule
13D (filed pursuant to Section 13(d) of the
Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) indicating that
any "person" or "group" (as such terms are defined in
Section 13(d)(3) of such act) has become the holder
of 20% or more of the outstanding voting Shares of
the Company (the foregoing transaction hereinafter
referred to as a "Change of Control"); and
(iv) during a period of 30 days following a Change in the
Composition of the Board of Directors such that
individuals who were members of the Board of
Directors on the date two years prior to such
change (or who were elected, or were nominated for
election, by the Company's shareholders with the
affirmative vote of at least two-thirds of the
directors then still in office who were directors
at the beginning of such two year period) no
longer constitute a majority of the Board of
Directors (such a change in composition is
hereinafter referred to as a "Change in
Composition of the Board").
(c) EXERCISE OF LIMITED RIGHTS. Upon exercise of a Limited Right,
the holder thereof shall receive from the Company a cash
payment equal to the excess of: (x) the aggregate "exercise
value" on the date of exercise (determined as provided below)
of that number of Shares as is equal to the number of Limited
Rights being exercised over (y) the aggregate exercise price
under the related option of that number of Shares as is equal
to the number of Limited Rights being exercised. A holder
shall exercise a Limited Right by giving written notice of
such exercise to the Committee or its designee. A Limited
Right shall be deemed exercised on the date the Committee or
its designee receives such written notice.
The "exercise value" of a Limited Right on the date of exercise
shall be:
(i) in the case of an exercise during a period described
in Section 8(b)(i), the highest price per Share paid
pursuant to any Tender Offer which is in effect
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any time during the 60-day period prior to the date on which
the Limited Right is exercised;
(ii) in the case of an exercise during a period described in
Section 8(b)(ii), the greater of: (x) the highest sale price
of a Share during the 30-day period prior to the date of
shareholder approval of the Acquisition Transaction, as
reported on the NASDAQ System or any subsequent stock
exchange ("Successor Exchange") where the Shares are traded
in lieu of the NASDAQ System, or (y) the highest fixed or
formula per Share price payable pursuant to the Acquisition
Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during a period described in
Section 8(b)(iii), the greater of: (x) the highest sale
price of a Share during the 30-day period prior to the date
the Company is provided with a copy of the Schedule 13D, as
reported on the NASDAQ System or Successor Exchange, or (y)
the highest acquisition price of a Share shown on such
Schedule 13D; and
(iv) in the case of an exercise during a period described in
Section 8(b)(iv), the highest sale price of a Share during
the 30-day period prior to the date of the Change in
Composition of the Board, as reported on the NASDAQ System
or Successor Exchange.
Notwithstanding the foregoing, in no event shall the exercise
value of a Limited Right issued in connection with an
Incentive Stock Option exceed the maximum permissible exercise
value for such a right under the Code and the regulations and
interpretations issued pursuant thereto. Any securities or
property which form part or all of the consideration paid for
Shares pursuant to a Tender Offer or Acquisition Transaction
shall be valued at the higher of (1) the valuation placed on
such securities or property by the person making such Tender
Offer or the other party to such Acquisition Transaction, or
(2) the value placed on such securities or property by the
Committee.
(d) GRANT OF STOCK APPRECIATION RIGHTS. The Committee may grant Stock
Appreciation Rights with respect to any option granted under the
Plan either at the time the option is granted or at any time
thereafter prior to the exercise, cancellation, termination or
expiration of such option. The aggregate number of Stock
Appreciation Rights covered by any such grant shall not exceed,
but may be less than, the number of Shares covered by the related
option. The term of any Stock Appreciation Right shall be the
same as the term of the option to which it relates. The right of
a holder to exercise a Stock Appreciation Right shall be canceled
if and to the extent a related option is exercised or canceled,
and to the extent a related Limited Right is exercised. In no
event shall both a Stock Appreciation Right and Limited Right be
both paid in connection with an option to which they both relate.
The exercise, cancellation or termination of a Stock Appreciation
Right covering any Shares shall automatically terminate the
Limited Right corresponding to such Shares with the converse
being equally true, and the right of a holder to exercise an
option shall be canceled if and to the extent a related Stock
Appreciation Right is exercised.
(e) EVENTS PERMITTING EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right shall be exercisable only if and to the extent
that the related option is exercisable; provided, however, that
notwithstanding the foregoing, a Stock Appreciation Right
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shall not be exercisable unless the Current Market Value of a
Share on the date of exercise exceeds the exercise price of a
Share subject to the related option.
(f) EXERCISE OF STOCK APPRECIATION RIGHTS. Upon exercise of a Stock
Appreciation Right, the holder thereof shall receive from the
Company a cash payment equal to the excess of (x) the aggregate
Current Market Value on the date of exercise of that number of
Shares as is equal to the number of Stock Appreciation Rights
being exercised over (y) the aggregate exercise price under the
related option of that number of Shares as is equal to the number
of Stock Appreciation Rights being exercised. A holder shall
exercise a Stock Appreciation Right by giving written notice of
such exercise to the Committee or its designee. A Stock
Appreciation Right shall be deemed exercised on the date the
Committee or its designee receives such written notice. If a
Stock Appreciation Right and its corresponding option have not be
exercised, canceled, terminated or expired on the last day of the
term of such Stock Appreciation Right, the holder of such Stock
Appreciation Right will automatically receive a cash payment from
the Company in an amount, if any, that would be payable if the
Stock Appreciation Right is exercised on such date.
Notwithstanding the foregoing, in no event shall the exercise
value of a Stock Appreciation Right issued in connection with an
Incentive Stock Option exceed the maximum permissible exercise
value for such a right under the Code and the regulations and
interpretations issued pursuant thereto.
SECTION 9. DIRECTOR OPTIONS.
(a) At least six months prior to the commencement of each calendar
year during the term of the Plan, the Committee shall cause each
eligible director to be furnished with an appropriate form which
enables the director to elect to receive payment in the form of
stock options under this plan ("Director Options") of a minimum
of 20% and up to a maximum of 100% (in increments of 10%) of the
annual retainer fee to be earned by such director for service on
the Board of Directors during the following calendar year.
(b) If an eligible director has elected to receive all or a portion
of the annual retainer fee as Director Options as provided in
this Section, then, on January 1 of such year in which such fee
would otherwise be earned, the Company shall grant to such
director a Director Option covering that number of Shares
determined by dividing the compensation to be so received by the
difference between the Fair Market Value of a Share on such date
and $1.25 (rounded to the nearest whole Share).
(c) The option price of a Director Option shall be $1.25 per Share.
(d) All directors of the Company shall be eligible to receive
Director Options.
(e) Subject to the limitations hereinafter set forth, a Director
Option granted hereunder shall extend for a term of ten years. A
Director Option shall first become exercisable on January 1 of
the year immediately following the year of grant; provided;
however, that a Director Option shall become exercisable if the
holder ceases to be a director. The exercise of Stock
Appreciation Rights relating to any Director Option is subject to
Section 8(e).
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(f) All rights of a director in any Director Option shall expire upon
the earlier of the end of its normal term or five years after the
date of his termination as a director for any reason including
the removal, resignation or retirement of the director; provided,
however, that in the event of death of the director, the
provisions of the following paragraph shall govern. In the event
a director ceases to be a director for any reason other than the
death of the director or retirement because of disability, all
rights exercisable shall expire to the extent that any portion of
such Director Option is attributable to a portion of the
director's annual retainer which was not earned due to
termination.
(g) Any Director Option granted a director under the Plan and
outstanding on the date of his death may be exercised by the
personal representative of the director's estate or by the person
or persons to whom the Director Option is transferred pursuant to
the director's will, in accordance with the laws of descent and
distribution or pursuant to a Qualified Domestic Relations Order
at any time prior to the specified expiration date of such
Director Option or the first anniversary of the director's death,
whichever is the first to occur. Upon the occurrence of the
earlier event, the Director Option shall then terminate.
(h) No Director Option shall include related Limited Rights and Stock
Appreciation Rights, unless the Company receives a favorable
ruling from the Internal Revenue Service or an opinion from tax
counsel (satisfactory to the Company) that the inclusion of such
Limited Rights or Stock Appreciation Rights with a Director
Option shall not cause the recognition of taxable income by the
director prior to the exercise of the Director Option, Limited
Right, or Stock Appreciation Right. Upon satisfaction of the
foregoing condition, Director Options thereafter issued shall
include Limited Rights and Stock Appreciation Rights. The number
of Limited Rights and Stock Appreciation Rights included in any
such Director Option shall equal the number of Shares covered by
such option at the time the Limited Rights and Stock Appreciation
Rights attach.
(i) Except as specifically provided in this Section 9, Director
Options shall be subject to the terms and conditions of
Nonqualified Options (and Limited Rights and Stock Appreciation
Rights, if applicable) stated in this Plan.
SECTION 10. NON-TRANSFERABILITY.
Options, Stock Appreciation Rights and Limited Rights may not be sold,
pledged, assigned, hypothecated, or transferred other than by will or the laws
of descent and distribution and may be exercised during the lifetime of the
grantee only by such grantee or by his guardian or legal representative unless
approved by the Committee under such terms and conditions as the Committee may
then designate. All grants under the Plan, with the exception of Incentive Stock
Options, may be transferred pursuant to a Qualified Domestic Relations Order.
SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event of a change in outstanding Shares by reason of a Share
dividend, recapitalization, merger, consolidation, split-up, combination or
exchange of Shares, extraordinary dividend paid as part of a restructuring plan,
or the like, the maximum number of Shares subject to option during the existence
of the Plan, the number of Stock Appreciation Rights and Limited Rights
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which may be granted under the Plan, the number of Shares subject to, and the
option price of, each outstanding option, the number of Stock Appreciation
Rights and Limited Rights outstanding, the Current Market Value of a Share on
the date a Stock Appreciation and/or a Limited Right is granted, and the like
shall be appropriately adjusted by the Company (disregarding any fractional
Shares resulting therefrom), whose determination in each case shall be
conclusive.
SECTION 12. CONDITIONS UPON GRANTING AND EXERCISE OF OPTIONS, STOCK
APPRECIATION RIGHTS AND LIMITED RIGHTS AND ISSUANCE OF SHARES.
No option, Stock Appreciation Right or Limited Right shall be granted,
and no option, Stock Appreciation Right or Limited Right shall be exercised and
Shares shall not be issued or delivered upon the exercise of an option unless
the grant and exercise thereof, and the issuance and/or delivery of Shares
pursuant thereto, or the payment therefore, shall comply with all relevant
provisions of state and federal law, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirement
of any stock exchange upon which the Shares then may be listed.
SECTION 13. AMENDMENT AND TERMINATION OF PLAN.
(a) AMENDMENT. The Committee may from time to time amend the Plan,
or any provision thereof, in such respects as the Committee
may deem advisable; provided, however, that any such amendment
shall be approved by the holders of Shares entitling them to
exercise a majority of the voting power of the Company if such
approval is required under applicable law; or:
(i) if such amendment would increase the aggregate number
of Shares which may be issued and/or delivered under
the Plan;
(ii) if such amendment would modify the requirements as to
eligibility for participation in the Plan.
(b) TERMINATION. The Committee may at any time terminate the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall adversely affect any option or
Limited Right or Stock Appreciation Right previously granted
under the Plan without the consent of the holder thereof.
SECTION 14. NOTICES.
Each notice relating to this Plan shall be in writing and delivered in
person or by mail to the proper address. Each notice to the Committee shall be
delivered or sent to the principal business office of the Company and addressed
as follows: "Attention: Compensation Committee." Each notice to the holder of an
option or other person or persons then entitled to exercise an option shall be
addressed to such person or persons at the holder's address as set forth in the
records of the Company. Anyone to whom a notice may be given under this Plan may
designate a new address by written notice to the party to that effect.
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SECTION 15. BENEFIT OF PLAN.
This Plan shall inure to the benefit of and be binding upon each
successor and assign of the Company. All rights and obligations imposed upon the
holder of an option and all rights granted to the Company under this Plan shall
be binding upon such holder's heirs, legal representatives and successors.
SECTION 16. PRONOUNS AND PLURALS.
All pronouns shall be deemed to refer to the masculine, feminine,
singular or plural, as the identity of the person or persons may require.
SECTION 17. SHAREHOLDER APPROVAL AND TERM OF PLAN.
The Plan shall become effective upon its approval by the affirmative
vote (either in person or by proxy) of the holders of a majority of the Shares
at the Company's 1989 Annual Meeting of Shareholders. The Plan shall expire on
December 31, 1998, unless sooner terminated in accordance with Section 13.
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EXHIBIT 10.15
AMENDED AND RESTATED
TO CONFORM TO RULE 16b-3
OCTOBER 23, 1996
THE DURIRON COMPANY, INC.
1989 RESTRICTED STOCK PLAN
ARTICLE 1. GENERAL PROVISIONS
SECTION 1. PURPOSE.
The purpose of The Duriron Company, Inc. 1989 Restricted Stock Plan
(the "Plan") is to provide certain compensation to eligible directors
and employees in the form of Shares which are restricted in accordance
with the terms and conditions set forth below. The Plan is designed to
encourage the continued high level of performance of such directors and
employees by increasing the identity of interest of such directors and
employees with the shareholders of the Company. The Plan is intended to
be an unfunded program established for the purpose of providing
compensation for eligible directors and a select group of management
employees and is exempt from Parts 1 through 4 of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
SECTION 2. DEFINITIONS.
For purposes of the Plan, the following terms shall have the following
meanings:
(a) "Board of Directors" means the board of directors of the Company.
(b) "Change in Control" means the occurrence of any of the following:
(i) any "person" or "group" within the meaning of Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Act"), becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act) of 20% or more of the then outstanding voting
Shares of the Company, or (ii) during any period of two
consecutive years, individuals who at the beginning of such
period constitute the Board of Directors (and any new director
whose election by the Board of Directors or whose nomination for
election by the Company's shareholders was approved by a vote of
at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose
election or nomination for election was previously so approved)
cease for any reason to constitute a majority thereof, or (iii)
any merger or consolidation of the Company into or with another
corporation, if the Company will not be the surviving corporation
or will become a subsidiary of another corporation, or any sale
of all or substantially all the assets of the Company.
(c) "Committee" means the Compensation Committee of the Board of
Directors.
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(d) "Company" means The Duriron Company, Inc., a New York corporation
and its successors in interest. When used with reference to
employment, "Company" also includes any business organization,
50% or more of the voting control of which is owned or controlled
directly or indirectly, by the Company.
(e) "Eligible Director" means any director of the Company on a Grant
Date who is not also an employee of the Company.
(f) "Eligible Employee" means any employee of the Company selected by
the Committee.
(g) "Grant Date" means the date on which Restricted Shares are to be
granted pursuant to Article II, Section 1.
(h) "Market Value" means the average of the means of the
representative closing bid and asked quotations in the over
the-counter market during the period beginning twenty-one days
prior to and ending on the date the value of a Share is to be
determined, as reported by the National Association of Securities
Dealers, Inc. through NASDAQ; or, in the event the Shares are
listed on any exchange or on the NASDAQ National Market System,
the average of the last sale prices of the Shares on such
exchange or in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. through NASDAQ
during such period.
(i) "Meeting" shall mean the Annual Meeting of the Shareholders of
the Company.
(j) "Participant" means any individual who holds Restricted Shares
granted under the Plan.
(k) "Restriction Period" means, (i) in the case of Eligible
Employees, a period of whole years, not less than one (1) nor
more than ten (10), as determined by the Committee at the time of
grant, from the date the Restricted Shares are granted and, (ii)
in the case of Eligible Directors, the period between the Grant
Date (as defined in Article II (1)(a)) and,
(1) in the case of an Eligible Director who receives 600
Restricted Shares at the 1993 meeting and thereafter, (i)
the immeiately following Meeting for 200 Restricted Shares,
(ii) the second immediately following Meeting for 200
Restricted Shares, and (iii) the third immediately following
Meeting for the balance of 200 Restricted Shares;
(2) in the case of an Eligible Director who receives 400
Restricted Shares at the 1993 meeting and thereafter, (i)
the immediately following Meeting for 200 Restricted Shares
and (ii) the second immediately following Meeting for the
balance of 200 Restricted Shares;
(3) in the case of an Eligible Director who receives 200
Restricted Shares at the 1993 meeting and thereafter, the
immediately following Meeting for all such Restricted
Shares;
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(4) in the case of an Eligible Director who received 212
Restricted Shares at the 1993 Meeting, (i) the 1994 Meeting
for 106 of such Restricted Shares and (ii) the 1995 Meeting
for the remaining 106 Restricted Shares; and
(5) in the case of an Eligible Director who received 96
Restricted Shares at the 1993 Meeting, the 1994 Meeting for
all such 96 Restricted Shares.
(6) in the case of an Eligible Director, who received a grant of
Restricted Shares prior to the 1993 Annual Meeting, the date
determined under this Article I, Section 2(k) in its form
prior to this Amendment Number 1 to the Plan, which prior
form is incorporated herein by reference for and as
applicable to such prior grants.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have authority to
construe and interpret the Plan, to prescribe, amend, and rescind
rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable for administering the Plan. The
Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan in the manner and to the extent it shall
deem expedient to carry it into effect. The determination of the
Committee on any matters within the scope of this section shall be
conclusive. A majority of the Committee shall constitute a quorum for
meetings of the Committee, and the act of a majority of the Committee
at a meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
(b) The Committee may waive or lessen at any time any condition or
restriction (including, without limitation, any of the restrictions
set forth in Article I, Section 5) with respect to any Restricted
Shares issued pursuant to the Plan; provided, however, that if such
Restricted Shares are granted to a member of the Committee, such
member shall not participate in the Committee's decision.
SECTION 4. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 1 of Article IV, the maximum
number of Shares which may be granted as Restricted Shares under the
Plan is two hundred twenty-five thousand (225,000). Shares granted as
Restricted Shares under the Plan may be authorized and unissued Shares or
Shares held in the Company's treasury, if any. Any Shares which are granted as
Restricted Shares under the Plan and which are thereafter forfeited by the
Participant may again be granted under the Plan as Restricted Shares.
SECTION 5. TERMS AND CONDITIONS OF RESTRICTED SHARES.
(a) Subject to the other provisions of this Section 5, Restricted
Shares issued pursuant to the Plan shall be subject to the
following restrictions:
(i) the Participant shall not be entitled to receive delivery of
the certificate for such Restricted Shares until the
expiration of the Restriction Period;
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(ii) such Restricted Shares shall not be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of
during the Restriction Period;
(iii) all such Restricted Shares shall be forfeited and all right
of the Participant to such Restricted Shares shall terminate
without further obligations on the part of the Company if
the Participant ceases to be an employee of the Company (in
the case of a Participant who receives Restricted Shares as
an Eligible Employee) or as a director (in the case of a
Participant who receives Shares as an Eligible Director)
prior to the end of the Restriction Period; and
(iv) such other lawful restrictions as the Committee, in its
discretion, imposes at the time of the grant, provided that
the Committee may not place any additional restrictions on
Restricted Shares granted to Eligible Directors under
Article II.
Upon the forfeiture of Restricted Shares, such Shares shall
be returned to the status of authorized and unissued Shares.
(b) Notwithstanding the provisions of paragraph (a) of this Section
5, in the event a Participant ceases to be an employee of the
Company (in the case of a Participant who received Restricted
Shares as an Eligible Employee) or as a director (in the case of
a Participant who received Shares as an Eligible Director) prior
to the end of a Restriction Period as a result of such
Participant's death, disability or normal retirement in
accordance with the Company's policies, then the restrictions set
forth in paragraph (a) of this Section 5 shall immediately cease
to apply.
(c) In the event a Participant who received Restricted Shares as an
Eligible Employee ceases to be an employee prior to the end of a
Restriction Period as a result of such Participant's early
retirement in accordance with the Company's policies, such
Restricted Shares shall not be forfeited, provided the prior
consent of the Committee is obtained; however, the restrictions
set forth in paragraphs (a)(i) and (a)(ii) of this Section 5
shall continue until the earlier of the end of the Restriction
Period or the date of such Participant's attainment of normal
retirement age in accordance with the Company's policies;
provided that, in any event, all such Restricted Shares shall be
forfeited and all rights of the Participant to such Restricted
Shares shall terminate without further obligations on the part of
the Company if the Participant, directly or indirectly,
individually or as an agent, officer, director, employee,
shareholder (excluding being the holder of any stock which
represents less than 1% interest in a corporation), partner or in
any other capacity whatsoever engages, prior to the time such
restrictions cease to apply, in any activity competitive with or
adverse to the Company's business or in the sale, distribution,
production or attempted sale or distribution of any goods,
products or services then sold or being developed by the Company.
(d) Upon the occurrence of a Change in Control, all of the
restrictions set forth in this Section 5 shall immediately cease
to apply to all Restricted Shares issued pursuant to the Plan.
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(e) At the end of the Restriction Period, or at such earlier time
as is provided for in this Section 5, the restrictions
applicable to the Restricted Shares pursuant to this Section 5
shall cease, and a share certificate for the number of
Restricted Shares with respect to which the restrictions have
ceased shall be delivered, free of all such restrictions and
all restrictive legends, to the Participant or the
Participant's beneficiary or estate, as the case may be.
(f) If required by the Committee, each grant of Restricted Shares
shall be evidenced by a written agreement between the Company
and the Participant. In addition, the Committee may, in
connection with and as a condition to a grant of Restricted
Shares, require the Participant to execute and deliver to the
Company share assignment forms, endorsed in favor of the
Company, to be used by the Company in connection with any
forfeiture or other transfer of Restricted Shares to the
Company.
SECTION 6. SHARE CERTIFICATES; RIGHTS AS A SHAREHOLDER.
(a) Upon the grant of Restricted Shares pursuant to Article II or
Article III of the Plan, the Company shall issue a share
certificate registered in the name of the Participant bearing
the following legend and any other legend required by any
federal or state securities laws:
"The transferability of this certificate and the
Common Stock represented hereby are subject to the
restrictions, terms and conditions (including
forfeiture and restrictions against sale, assignment,
transfer, pledge, hypothecation and other
disposition) set forth in The Duriron Company, Inc.
1989 Restricted Stock Plan. Copies of such Plan will
be mailed to any shareholder without charge within
five days after receipt of written request therefore
addressed to Secretary, The Duriron Company, Inc.,
3100 Research Boulevard, Dayton, Ohio, 45420."
Each such Share certificate shall be retained by the Company
until the restrictions set forth in Article I, Section 5(a)
cease to apply to the Shares represented by such certificate.
(b) Upon the issuance of a Share certificate with respect to
Restricted Shares pursuant to paragraph (a) of this Section 6,
the Participant shall, subject to all of the terms, conditions
and restrictions set forth in the Plan, have all of the rights
of a holder of Shares, including the right to vote and to
receive dividends and other distributions with respect
thereto.
ARTICLE II. RESTRICTED SHARES FOR ELIGIBLE DIRECTORS
SECTION 1. GRANT OF RESTRICTED SHARES TO ELIGIBLE DIRECTORS.
(a) The Company has granted Restricted Shares to Eligible
Directors prior to the 1993 Annual Meeting pursuant to the
provisions of this Article II, Section 1 in effect prior to
this Amendment Number 1 to this restated Plan, which
provisions are incorporated
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by reference as applicable to such prior grants. On the date
of the 1993 Meeting and on the date of each Meeting thereafter
during the term of the Plan, (each such date, including 1993
Meeting, is hereinafter referred to as a "Grant Date"), the
Company, in consideration of past and future service by the
Eligible Director, shall grant 600 Restricted Shares to each
then Eligible Director who is elected to a three year term of
the Board of Directors on the Grant Date. Additionally, on the
date of the 1993 Meeting, the Company granted 212 Restricted
Shares to each then Eligible Director who had two years
remaining in his term of office at that time. The Company
similarly granted, on the date of the 1993 Meeting, 96
Restricted Shares to each then Eligible Director who had one
year remaining in his term of office at that time. Finally,
the Company shall, on each Grant Date, grant 400 Restricted
Shares to each then Eligible Director, who is elected to a two
(2) year term at the Meeting held on such Grant Date and 200
Restricted Shares to each then Eligible Director who is then
elected to a one year term at such Meeting.
ARTICLE III. RESTRICTED SHARES FOR ELIGIBLE EMPLOYEES
SECTION 1. GRANT OF RESTRICTED SHARES TO ELIGIBLE EMPLOYEES.
From time to time during the term of the Plan, the Committee may
determine that a portion of the total compensation for prior and future
service to be paid to an Eligible Employee, pursuant to the Company's
incentive compensation programs, shall be paid by granting to such
Eligible Employee, on the approximate date the compensation was to be
awarded, a number of Restricted Shares determined by dividing the
amount of such compensation to be so paid by the Market Value of a
Share on the date the compensation was to be awarded (rounded to the
nearest whole share). The Committee, at its discretion, may authorize
additional grants of Restricted Shares to Eligible Employees for prior
and future service, subject to other applicable provisions of this
Plan. The Committee, also at its discretion, may delegate its authority
to the Company's Chief Executive Officer to so award Restricted Shares
in an amount not to exceed 5,000 shares per calendar year to Eligible
Employees of the Company, provided that any such grant shall be limited
to 1,000 shares per Eligible Employee per calendar year, and further
provided that the Chief Executive Officer shall not be authorized to
award any grants to any officers of the Company. The Chief Executive
Officer shall, on an annual basis, report all such awards to the
Committee, and the Committee's ratification and approval of such awards
shall be presumed in the absence of express action by the Committee to
the contrary.
SECTION 2. RETURN OF RESTRICTED SHARES TO SATISFY WITHHOLDING
OBLIGATIONS.
With the approval of the Committee, an employee of the Company who
holds Restricted Shares may elect to return to the Company a number of
such Restricted Shares with respect to which the restrictions have
lapsed having a Market Value on the Tax Date equal to all or any part
of the federal, state and local withholding tax (whether mandatory or
permissive) applicable to the lapse of restrictions on such employee's
Restricted Shares (up to a maximum amount determined by the employee's
top marginal tax rate) in lieu of the Company withholding such amounts
in cash. The Committee may establish from time to time rules or
limitations with respect to the right of a holder to elect to return
Restricted Shares with respect to which the restrictions have lapsed in
satisfaction of withholding payments.
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ARTICLE IV. MISCELLANEOUS
SECTION 1. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Upon any change in the outstanding Shares by virtue of a share dividend
or split, recapitalization, merger, consolidation, combination or
exchange of Shares or other similar change, the number of Restricted
Shares which may be granted under the Plan (or the class of shares
which may be granted as Restricted Shares) shall be adjusted
appropriately by the Company, whose determination with respect to such
adjustment shall be conclusive, subject to the provisions concerning a
Change of Control stated in Section 5(d). Unless the Committee shall
otherwise determine, any securities and other property received by a
Participant in connection with or as a result of any such change with
respect to Restricted Shares (excluding dividends paid in cash) shall
be deposited promptly with the Company to be held in custody until the
restrictions cease to apply to the Restricted Shares to which such
securities or other property relates. Notwithstanding the foregoing,
however, in the event any rights to purchase Shares are issued pursuant
to the Company's Shareholder Rights Plan (or any successor plan) with
respect to Restricted Shares, such rights shall cease to be subject to
the restrictions applicable to the underlying Restricted Shares at such
time, if any, as such rights become exercisable.
SECTION 2. COMPLIANCE WITH LAWS.
The issuance or delivery of Shares pursuant to the Plan shall be
subject to, and shall comply with, any applicable requirements of
federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder), any securities exchange upon which the Shares
may be listed and any other law or regulation applicable thereto. The
Company shall not be obligated to issue or deliver any Shares pursuant
to the Plan if such issuance or delivery would, in the opinion of the
Committee, violate any such requirements. The foregoing shall not,
however, be deemed to require the Company to effect any registration of
Shares under any such law or regulation, although the Company may elect
to do so.
SECTION 3. AMENDMENT AND TERMINATION.
(a) The Board of Directors may from time to time amend the Plan,
or any provision thereof, in such respects as the Board of
Directors may deem advisable; provided, however, that any such
amendment must be approved by the holders of Shares entitling
them to exercise a majority of the voting power of the Company
if such amendment would:
(i) materially increase the aggregate number of Shares
which may be issued and/or delivered;
(ii) materially modify the requirements as to eligibility
for participation in the Plan.
(b) The Plan shall terminate following, and no additional
Restricted Shares shall be granted under the Plan after, the
date of the 1998 Meeting, provided, however, that the Board of
Directors may earlier terminate the Plan at any time.
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(c) No amendment to or termination or expiration of the Plan shall
adversely affect any Restricted Shares previously granted
under the Plan without the consent of the holder thereof.
SECTION 4. NOTICES.
Each notice relating to the Plan shall be in writing and delivered in
person or by mail to the proper address. Each notice shall be deemed to
have been given on the date it is delivered or mailed. Each notice to
the Committee shall be addressed as follows: The Duriron Company, Inc.,
3100 Research Boulevard, Dayton, Ohio, 45420. Attention: Secretary.
Each notice to a Participant shall be addressed to the Participant's
address as set forth in the records of the Company. Anyone to whom a
notice may be given under this Plan may designate a new address by
written notice to the Company or to the Participants, as the case may
be.
SECTION 5. BENEFITS OF PLAN.
The Plan shall inure to the benefit of, and shall be binding upon, each
successor and assign of the Company. All rights and obligations imposed
upon a Participant and all rights granted to the Company under this
Plan shall be binding upon such Participant's heirs, legal
representatives and successors. Nothing in the Plan shall be deemed to
create any obligation on the part of the Company to nominate any
director for re-election or to continue the employment of any employee,
nor shall anything in the Plan be construed to give any Eligible
Employee any contract or other right to participate in this Plan in any
way which is not approved in advance by the Committee.
SECTION 6. TAXES.
The Company shall have the right to require prior to the issuance or
delivery of any Restricted Shares, payment by the Participant of any
taxes required by law with respect to the issuance or delivery of such
Restricted Shares.
SECTION 7. GOVERNING LAW.
All grants of Restricted Shares shall be made and accepted in the State
of Ohio. The laws of the State of Ohio shall control the interpretation
and performance of the provisions of the Plan; provided, however, that
the laws of the State of New York shall govern the issuance of Shares
pursuant to the Plan.
SECTION 8. EFFECTIVE DATE OF THE PLAN.
The effective date of the Plan was April 1, 1989.
ARTICLE V. PARTICIPANT DEFERRAL OF RESTRICTED SHARES
SECTION 1. FORMS OF DEFERRAL
(a) Participants who are either Eligible Directors of the Company
or who are participants in the Company's Equity Incentive Plan
("Eligible Participants" or "Eligible Participant") shall be
eligible to defer receipt of Restricted Shares received.
Page 8
<PAGE> 9
(b) An Eligible Participant may execute an election with the Company
to defer the receipt of the Restricted Shares granted pursuant to
the Plan through completion of a form (Exhibit "A," Exhibit "B"
or "Exhibit "C" whichever is applicable) or a substantially
similar document to be delivered to and be subject to acceptance
by the Secretary of the Company. An election to defer Restricted
Shares shall be effective upon such acceptance and shall apply
only to Restricted Shares which either have not yet been granted
or which vest in the following calendar year or thereafter,
provided, in the case of previously granted Restricted Shares,
such election is made and accepted prior to August 31 of the year
preceding such vesting. This election to defer to Restricted
Shares (which shall be called "Deferred Shares" hereafter upon
such election) shall remain in effect until terminated or changed
as provided in this Plan.
(c) A Participant may terminate any agreement to accept receipt of
Deferred Shares relating to future grants by giving notice of
termination to the Company. Any such termination shall be
effective only with respect to grants of Restricted Shares which
occur on or after the date of the termination notice.
SECTION 2. ACCOUNTS FOR DEFERRED RESTRICTED SHARES.
(a) The Company will establish a separate account for each
Participant who has Deferred Shares in which the Deferred Shares
will be maintained. The Company will create this account through
a trust (the "Trust") established by the Company, with the
applicable trustee (the "Trustee") maintaining the Deferred
Shares pursuant to the Trust.
(b) Notwithstanding Article I, Section 6(a), which shall not apply
except as follows, the Company shall fund such account, in the
case of Deferred Shares where the deferral election is made prior
to granting of the Deferred Shares, by providing appropriate
instructions and sufficient cash to the Trustee, on or about the
date of the grant, to purchase such Deferred Shares for this
account on the open market. The Company shall reimburse the
Trustee for any associated brokerage or other transaction fees in
making this purchase.
(c) In the case of Deferred Shares in which the deferral election is
properly made after the date of grant but prior to the date of
vesting, the Company shall fund such account by transferring (and
causing the Participant to assign) such Deferred Shares to the
Trustee for holding pursuant to the terms of the Trust, with the
provisions of Article I, Section 6(a) and 6(b) being inapplicable
to these Deferred Shares.
(d) Any dividends paid on the Deferred Shares in this account
("Dividends") will be credited to a deferred cash account to be
established under the Trust in which the amount of the Dividends
will be recorded for the benefit of the Participant, with
interest to be credited to the Dividends in the following manner.
The Company will credit to each such cash account, as of the
first day of each calendar quarter, interest on the amount then
credited to such account, including all previous credits to such
account by operation of this Section, computed at an annual rate
equal to the average composite bond yield for Single A bonds,
rounded to the nearest 1/10 of 1%, as published for the month
last preceding the beginning of such calendar quarter in the
Standard & Poor's Indexes of the Securities Markets.
Page 9
<PAGE> 10
(e) Any Deferred Shares hereunder and any amount credited to either
the cash or Deferred Shares Trust accounts of a Participant, or
as any interest or any Dividends paid on such Deferred Shares,
will represent only an unsecured promise of the Company to pay or
deliver the amount so credited in accordance with the terms of
this Article of the Plan. Neither a Participant nor any
beneficiary of a Participant will acquire any right, title, or
interest in any asset of the Company as a result of any amount of
cash or Deferred Shares credited to a Participant's account or
accounts. At all times, a Participant's rights with respect to
the amount credited to his/her account or accounts will be only
those of an unsecured creditor of the Company. The Company will
not be obligated or required in any manner to restrict the use of
any of its assets as a result of any amount credited to a
Participant's account or accounts. No right or benefit under the
Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, lien, encumbrance or charge, and any attempt
to take any such action shall be void.
(f) The Trustee will have voting rights on all Deferred Shares prior
to their distribution.
SECTION 3. DISTRIBUTION OF DEFERRED SHARES.
(a) Deferred Shares will be distributed only in accordance with the
following sections, pursuant to the election specified by the
Participant. Attached form marked Exhibit A shall be used with
regard to Deferred Shares covering 1993, 1994 and 1995 grants to
Eligible Directors, and the attached form marked Exhibit B (or
any substantially similar documents acceptable to the Committee)
shall be used with regard to Deferred Shares granted to
participants in the Equity Incentive Plan, while Exhibit C shall
be used in all other cases.
(i) In the event a Participant leaves service from the
Company's Board of Directors or employment from the
Company, as the case may be, for any reason, any
Deferred Shares and the interest and Dividends on
these Deferred Shares previously or currently
credited to his/her account will be distributed
commencing within 60 calendar days of his/her
termination in accordance with the method of
distribution elected by the Participant.
(ii) The Participant may elect to receive such
distribution in a lump sum, in equal annual
installments (not exceeding ten), or in some
designated combination thereof.
(iii) If the election is a lump sum, then interest and
Dividends, will be credited to the account through
the date of distribution, and the entire amount of
Dividends, with applicable interest, will be paid,
and the entire Deferred Shares account balance will
be transferred in kind, to the Participant within 60
days of his/her termination.
(iv) If installments have been elected, any Dividends,
with applicable interest, will be calculated through
the date of termination and added to the account. The
resulting deferred cash total shall be divided
equally by the number of installments elected and the
first payment made within 60 days of termination. The
second and all subsequent installment payments shall
be made between January 1 and 30 of each following
year. Interest will continue to accrue to the account
on the balance remaining in the Participant's
Dividend account
Page 10
<PAGE> 11
until all installments have been paid. Interest will be paid
annually with each installment payment. With regard to the
Deferred Shares, the aggregate number of Deferred Shares
held in the separate account for Deferred Shares will be
divided by the number of installments elected and allocated
in equal whole number proportions to be distributed with
each such installment payment (with any remainder after such
equal division to be included in the first installment). All
Deferred Shares so allocated will be distributed in kind
with each applicable installment, which shall be paid
simultaneously with any deferred cash distribution
installments. Certificates representing the applicable
amount of Deferred Shares held for the then longest time in
the Deferred Shares account of the Trust will be delivered
with each installment, where applicable. Dividends from any
undistributed Deferred Shares will continue to accrue to the
Director's Dividend account, receive applicable interest
credit and will be paid with the next applicable installment
payment of deferred cash.
(v) If any portion of a Participant's deferred account remains
unpaid at his/her death, then after his/her death such
amount will be paid (i) to his/her beneficiary(ies) in
accordance with the method of distribution elected by the
Participant (following the procedure for lump sum and
installment payments set forth above), or (ii), if the
Participant has not designated a beneficiary or if the
beneficiary predeceases the Participant, to the
Participant's estate in a lump sum. Should a beneficiary die
after the Participant has terminated service but before the
entire Deferred Shares have been disbursed, the balance of
the cash benefit will be paid to the beneficiary's estate in
a lump sum, and the Deferred Shares benefit will be
transferred to such estate in kind.
(vi) Notwithstanding anything to the contrary above, no Deferred
Shares shall be paid to the Participant until expiration or
termination of the applicable Restriction Period or, if
earlier, until the provisions of Article I, Section 5(a)
cease to apply to such Shares.
Page 11
<PAGE> 1
EXHIBIT 10.32
THE DURIRON EMPLOYEE PROTECTION PLAN
[GRAPHIC OMITTED]
AS UPDATED AND REVISED EFFECTIVE MARCH 1, 1997
<PAGE> 2
THE DURIRON EMPLOYEE PROTECTION PLAN (AS REVISED MARCH 1, 1997)
1. WHAT IS THIS PLAN?
An "Employee Protection Plan" to provide severance benefits to certain
U.S. employees terminated after a "corporate takeover" of the Company. A
"corporate takeover" means a change of control of the Company through a
stock acquisition, a merger or some other method which arises from action
which was not invited in advance by the Company's Board of Directors. The
decision of the Board members (in office prior to the "corporate
takeover") as to whether such action was invited shall be final and govern
whether the following severance benefits apply.
2. DOES THIS MEAN THAT THE COMPANY EXPECTS A CORPORATE TAKEOVER?
No. However, we have all seen unexpected corporate takeovers of numerous
other companies. Many corporate takeovers have resulted in the layoffs of
employees. In order to protect employees in the event of a corporate
takeover, the Company is providing the Employee Protection Plan. In a
sense, the Employee Protection Plan is like fire insurance: you probably
will never need it, but it is very valuable to have "just in case."
3. WHAT EMPLOYEES ARE ELIGIBLE TO PARTICIPATE IN THE EMPLOYEE PROTECTION
PLAN?
All U.S. employees of the Company, except any union employees whose
collective bargaining agreement with the Company does not include the
Plan.
4. ARE ANY BENEFITS PAYABLE UNDER THE EMPLOYEE PROTECTION PLAN PRIOR TO A
CORPORATE TAKEOVER?
No.
5. AFTER A CORPORATE TAKEOVER, WHAT MUST HAPPEN FOR ME TO RECEIVE BENEFITS?
In general, you must either be fired or laid off. Also, you would receive
benefits if you "resign for cause." This would mean that your resignation
was caused by (i) a salary decrease, (ii) an involuntary transfer to
another geographical location or (iii) a significant demotion in your
responsibilities.
6. HOW ARE MY BENEFITS DETERMINED UNDER THE EMPLOYEE PROTECTION PLAN?
Benefits would be computed based upon your base salary, age and length of
service at time of termination or time of the corporate takeover,
whichever is more. The following formula applies:
Page 2
<PAGE> 3
a. 120 hours of salary credit for each full year of service.
b. 20 hours of salary credit per full year of age after age 40.
c. 160 hours of salary credit for each $10,000 increment of annual base
salary or portion thereof.
All hours of salary credit would be added together to calculate your
personal benefit.
An example of a benefit computation is shown at the end of this
announcement.
7. HOW ARE EMPLOYEE PROTECTION PLAN BENEFITS ACTUALLY PAID?
In a cash lump sum after employment termination. Standard payroll
withholding taxes would apply.
8. IS THERE A MAXIMUM BENEFIT PAYABLE?
Yes. The maximum benefit would be 3,120 hours of salary credit. This is
equivalent to about 1.5 years of your salary.
9. CAN THE EMPLOYEE PROTECTION PLAN EVER BE TAKEN AWAY?
The Plan, including benefit amounts, may be amended by the Company at any
time prior to a corporate takeover. In fact, this revision amends the
original version of the Plan which was published in 1989. However, if the
Company ever learns through any public announcement of any corporate
takeover proposal which leads to an actual corporate takeover of the
Company which was not invited in advance by the Board, the Plan becomes
irrevocable. The new owners of the Company would be legally obligated for
a period of two years after the corporate takeover to honor the Plan.
After this two year period, the Plan could be eliminated by the new owner.
10. COULD I BE DISCHARGED DURING THE TWO YEAR PERIOD AFTER A CORPORATE
TAKEOVER AND NOT RECEIVE A PLAN BENEFIT?
Not unless you are discharged for committing a "serious act." "Serious
acts" are intentional actions within your direct control which are
unlawful or endanger employee safety or harm the Company's reputation.
11. DO OTHER COMPANIES PROVIDE BENEFITS LIKE THE EMPLOYEE PROTECTION PLAN?
Yes, but usually it is only for their top level executives through
so-called "golden parachutes." The Company is a leader in providing this
benefit to employees other than executives. The Company believes that,
under Total Quality, each employee makes a significant contribution. Thus,
this Plan provides security to
Page 3
<PAGE> 4
employees after a corporate takeover in the way that many other companies
do only for their top executives.
12. IS THERE ANY COST TO ME FOR THIS BENEFIT?
No. The Company bears all costs. You would only need, prior to receiving
payment, to give the Company a general release of any claims against the
Company, except vested retirement rights.
13. WOULD I RECEIVE ANY PAYMENTS IF I VOLUNTARILY RESIGN OR RETIRE AFTER A
CORPORATE TAKEOVER?
No. But if you are forced to retire, you would receive both retirement
benefits and Employee Protection Plan benefits.
14. HOW CAN I FIND OUT MORE ABOUT THE EMPLOYEE PROTECTION PLAN?
Questions about the Plan may be directed to your local Human Resources
manager.
15. BENEFIT COMPUTATION EXAMPLE:
ASSUME:
- 43 old employee
- 10 years service
- salary of $20,800 ($10.00 per hour)
- laid off after corporate takeover
CALCULATION:
- AGE: 43 - 40 = 3
3 x 20 = 60 credit hours
- SERVICE: 120 x 10 (service years) = 1,200 credit hours
- SALARY: $20,800 means 3 x 160 = 480 credit hours
- TOTAL CREDIT HOURS: (60 + 1,200 + 480) =1,740 credit hours
- TOTAL SEVERANCE BENEFIT: (1,740 x $10.00) = $17,400 (less taxes)
Page 4
<PAGE> 1
SUBSIDIARIES: EXHIBIT (22)
The Duriron Company, Inc. has direct or indirect subsidiaries all of
which (i) are beneficially owned or controlled; (ii) do business under the name
under which they are organized and (iii) are included in the consolidated
financial statements of the Company. The name and jurisdiction of incorporation
of each such subsidiary is set forth below.
<TABLE>
<CAPTION>
Jurisdiction
Name of Subsidiary (a) In Which Incorporated
---------------------- ---------------------
<S> <C> <C>
Automax Inc. Ohio
Duriron Canada Inc. Canada
S.A. Durco Europe N.V. Belgium
Durco Process Equipment Ltd. United Kingdom
Durco GmbH Germany
Durco France S.A.R.L. France
Duriron Foreign Sales Corporation Virgin Islands
Durco Ireland Limited Ireland
Valtek Incorporated Utah
Valtek Controls Ltd. Canada
Valtek Australia Pty. Ltd. Australia
Durco Valtek (Asia Pacific) Pte. Ltd. Singapore
Durco Europe S.A. - Coordination Centre Belgium
Durco B.V. Holland Holland
Davco Equipment Inc. Ohio
Durco Valtek, S.A. Spain
Duriron S.r.l. Italy
Kammer Ventile GmbH Germany
Kammer Vannes S.A. Switzerland
Automax U.K. Ltd. United Kingdom
Automax S.a.r.l. France
Automax S.r.l. Italy
Sereg Vannes S.A. France
Durametallic Corporation Michigan
Pac-Seal Inc. International Michigan
Metal Fab Machine Corporation Florida
Durametallic Mexicana S.A. de C.V. Mexico
Durametallic do Brasil Brazil
Durametallic Canada Inc. Canada
Durametallic Uruguay Uruguay
Durametallic Pty. Ltd. New Zealand
Durametallic Corporation Australia Pty. Ltd. Australia
Durametallic G.m.b.H. Germany
Durametallic Europe N.V. Belgium
Durametallic Argentina S.A. Argentina
Durametallic Australia Holding Company Michigan
Durametallic Europe Holding Company Michigan
Arabian Seals Company, Ltd. (b) Saudi Arabia
Korea Seal Master Company, Ltd. (b) Korea
Durametallic (India) Ltd. (b) India
Durametallic Asia Pte. Ltd. (b) Singapore
Durametallic Malaysia Sdn. Bhd. (c) Malaysia
</TABLE>
60
<PAGE> 1
[ERNST & YOUNG LETTERHEAD]
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
pertaining to the 1979 and 1989 Stock Option Plans (Forms S-8 No. 2-66089 and
No. 33-28497, respectively), The Duriron Company, Inc. Savings and Thrift Plan
and the Valtek Incorporated Retirement Plan and Trust (Form S-8 No. 33-72372),
and the Registration Statement (Form S-4 No.33-62527) of The Duriron Company,
Inc. and in the related prospectuses of our report dated February 5, 1997, with
respect to the consolidated financial statements and schedule of The Duriron
Company, Inc. included in this Annual Report (Form 10-K) for the year ended
December 31, 1996.
/s/ Ernst & Young LLP
Dayton, Ohio
March 7, 1997
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 29,474
<SECURITIES> 0
<RECEIVABLES> 112,710
<ALLOWANCES> 1,547
<INVENTORY> 101,070
<CURRENT-ASSETS> 252,418
<PP&E> 257,680
<DEPRECIATION> 157,768
<TOTAL-ASSETS> 425,490
<CURRENT-LIABILITIES> 98,398
<BONDS> 63,239
<COMMON> 30,710
0
0
<OTHER-SE> 169,069
<TOTAL-LIABILITY-AND-EQUITY> 425,490
<SALES> 605,454
<TOTAL-REVENUES> 605,454
<CGS> 361,354
<TOTAL-COSTS> 524,059
<OTHER-EXPENSES> 12,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,921
<INCOME-PRETAX> 64,151
<INCOME-TAX> 20,900
<INCOME-CONTINUING> 43,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,251
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
</TABLE>
