UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1994, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-5181
ELCO INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
1111 SAMUELSON ROAD, P.O. BOX 7009, ROCKFORD, ILLINOIS
(Address of principal executive offices)
36-1033080
(IRS Employer Identification Number)
61125
(Zip Code)
(815) 397-5151
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
COMMON STOCK, $5 PAR VALUE Nasdaq National Market
Indicate by checkmark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
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 [ ]
State the aggregate market value of the voting stock held by
nonaffiliates of the Registrant. The aggregate market value shall
be computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a
specified date within 60 days prior to the date of filing. For
purpose of this calculation, executive officers and directors were
deemed to be affiliates of the Registrant.
$72,349,420 as of September 1, 1994
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest practicable
date.
4,887,337 Common Shares as of September 1, 1994
Documents Incorporated by Reference:
Annual Report to Stockholders of Elco Industries, Inc. for the year
ended June 30, 1994 is incorporated into Part I and Part II hereof.
Proxy Statement of Elco Industries, Inc. in connection with the
1994 Annual Meeting of Stockholders is incorporated into Part III
hereof.
<PAGE>
PART 1
Item 1 Business
(a) General Development of Business
Registrant was initially organized as an Illinois corporation on
November 28, 1922 under the name of "Elco Tool and Screw Corporation".
The Registrant conducted business as an Illinois corporation under
that name until June 9, 1969, at which time it changed its state of
incorporation from Illinois to Delaware and its name to "Elco
Industries, Inc".
In June 1989, the Company and Nagoya Screw Manufacturing Co., Ltd.
("Nagoya") formed a joint venture known as Rocknel Fastener, Inc.
("Rocknel"). Each company has a 50% interest in the venture. Elco
and Nagoya have equal representation on the Board of Directors of
Rocknel. Rocknel manufactures and sells fasteners to Japanese-owned
manufacturers in North America.
In May 1991, the Registrant purchased the busines and certain assets
of the Bear-Kat Products division of Key Manufacturing Group, Inc.
Bear-Kat Products markets a full line of fasteners and related items
to the consumer/do-it-yourself (DIY) market.
(b) Financial Information about Industry Segments
The information called for by Item 1 (b) is hereby incorporated by
reference to the "Products and Major Customers" footnote of the Notes
to Consolidated Financial Statements (Note 2, pages 30-31) of the
Registrant's Annual Report to Stockholders for the year ended June 30,
1994.
(c) Narrative Description of Business
(i) Principal Products
The Registrant is a leading U.S. designer, manufacturer and supplier
of specialty metal fasteners and custom-engineered metal and plastic
components and products. The Registrant also offers a wide variety of
packaged fasteners, fastening-related products and other hardware
accessories to the do-it-yourself market. The Registrant's products
can be classified in two groups: industrial products and home and
construction products.
Industrial products include engineered specialty fasteners and
application-specific, cold-formed, precision metal stamped and
plastic molded components and assemblies combining the three
manufacturing disciplines, which are supplied to a variety of markets
including the transportation, electrical and electronics, fabricated
metal and other industrial markets. Industrial products are sold
primarily to original equipment manufacturers.
Home and construction products include a full line of fasteners, wire
and fastening-related products packaged and merchandised for consumer
use. This group is also involved in the design, manufacture and
marketing of specialty product lines and fastening systems for the
non-residential construction industry.
The following table sets forth sales of these product groups for the
years indicated:
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------------
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Industrial Products $169,078,000 $145,308,000 $133,259,000
Home and Construction Products 56,823,000 53,871,000 56,078,000
------------ ------------ ------------
Consolidated Sales $225,901,000 $199,179,000 $189,337,000
</TABLE>
Registrant sells a portion of its products through its own employee
sales organization which is paid on a salary plus commission basis.
It also sells a portion of its products through independent
manufacturer's representatives who are paid on a commission basis.
These organizations are granted territories covering the United
States. Each of the Registrant's segments has a separate sales
force. The Registrant's relationships with its independent
representatives are terminable by either party on short notice.
(ii) Status of Product or Segment
The Registrant does not contemplate the introduction of any new
product or industry segment, other than in the ordinary course of
manufacturing custom-designed products primarily to customer
specifications. The manufacturing of custom-designed products will
not require any substantial investment other than those capital
expenditures required for modernization of equipment and for
increased capacity for products.
(iii) Source and Availability of Raw Materials
The Registrant uses a variety of metals in the manufacture of its
products, such as low and medium carbon steel, low alloy steel,
stainless steel, aluminum, brass and commercial bronze. The
Registrant also uses a variety of plastics for injection molding.
The Registrant believes that its sources of supply of these materials
are adequate for its needs and that it is not substantially dependent
upon any one supplier.
The Registrant purchases most products for DIY consumers from foreign
suppliers for resale in the United States. As a manufacturer, the
Registrant would not be competitive with foreign manufacturers of
standard fasteners sold primarily to consumers. A majority of the
imported products are sourced through international vendors and
importing companies. These products are imported from a variety of
countries, including Taiwan, Korea, India, Japan and several European
countries. Taiwan is currently the largest single source country.
There are many standard fastener sources throughout the world, and
thus the loss of a major vendor of imported products would not have a
material, adverse effect on the Registrant.
(iv) Patents, Trademarks, Licenses, Franchises, and Concessions
Registrant owns numerous patents relating to the design and
manufacture of its products. Although the Registrant generally seeks
to obtain patents where appropriate, it does not consider the success
of its business to be dependent on any of its patents or patent
applications.
The Registrant is licensed on a non-exclusive basis to manufacture
and sell a number of products primarily related to fasteners. These
licenses require the payment of royalties based on sales of the
licensed product. Sales of licensed products accounted for
approximately $32.4 million in sales for the fiscal year ended June
30, 1994. The Registrant considers these licenses to be of importance
to its business, and the termination of certain of these licenses
would have a material, adverse effect upon the Registrant. These
licenses are not terminable by the licensor, except by failure of the
Registrant to pay royalties or meet quality standards. The Registrant
does not anticipate that any of the license agreements will be
terminated in the near future.
The Registrant has a number of registered trademarks, but other than
the trademark "Elco", none of these trademarks is considered to be
material to the Registrant's sales or revenues.
(v) Seasonal Variations in Business
Sales and revenues of a material portion of the Registrant's business
are normally stronger in the second half of the Registrant's fiscal
year. Production levels are generally lower during the Registrant's
first half of the fiscal year because of customer plant shutdowns due to
summer vacations and the number of holidays scheduled during the
month of December by both customers and the Registrant.
(vi) Working Capital Practices
The Registrant has not adopted nor does it intend to adopt practices,
credit terms, or methods of doing business which will have a material
effect on changes in working capital during its fiscal year.
The seasonal changes in sales and revenues explained in paragraph (v)
above normally do not place an undue strain on working capital
requirements which would require short-term borrowings.
(vii) Dependence Upon Limited Number of Customers
In the fiscal year ended June 30, 1994, a material portion of the
Registrant's sales were dependent on Ford Motor Company and General
Motors Corp. The Registrant's sales to Ford Motor Company and
General Motors Corp. accounted for 18% and 14%, respectively, of
total consolidated sales during the fiscal year ended June 30, 1994.
To the extent that sales to all or several divisions of Ford or
General Motors would be terminated or materially reduced, there
would be a material, adverse effect on the Registrant.
(viii) Backlog
The Registrant estimates that the total dollar amount of its backlog
of orders believed to be firm as of June 30, 1994, and June 30, 1993,
was approximately $52,100,000 and $40,600,000, respectively. The
Registrant expects that substantially all of the current backlog will
be shipped in the next 12 months. The Registrant does not consider the
size of its backlog as of a given date to be significant relative to
a forecast of annual sales because most orders are for short-term
delivery. Furthermore, orders may be cancelled or delivery delayed
by the customer without significant penalty.
(ix) Government Contracts
The Registrant is not dependent upon government contracts for a
material portion of its business.
(x) Competitive Conditions
Industrial Products Segment
The metal fastener and component business is highly competitive.
Several competitors of the Registrant have greater financial
resources and operate more facilities. However, the Registrant
believes its knowledge and continued refinement of the cold-forming
process, combined with close cooperation with customers' engineers,
quality conformance and the capability to supply a wide range of
fastener products required by its customers, have established Elco as a
leader in the specialized fastener market. The Registrant considers
the Camcar Division of Textron, the Shakeproof Division of Illinois
Tool Works, SPS Technologies and Federal Screw Works to be among the
major competitors of Elco's Industrial Products Group. The metal
stamping and plastics parts businesses in which the Registrant is
engaged are also highly competitive. There are numerous companies
supplying metal stampings and plastic parts to the automotive
industry. The Registrant believes that no one supplier is in a
dominant position. The Registrant also encounters competition from
supplier of fasteners and metal parts made by other processes, such
as screw machines and powdered precision forming, as well as other
fastening methods such as adhesives, epoxies, clips and plastic
parts. Competition in this segment is based on quality, service,
price and engineering capability.
Home and Construction Products Segment
The Registrant considers Hillman Fasteners, Crown Bolt and the
Bulldog Jordan unit of Newell Co. to be the major copetitors of the
home products portion of the Home and Construction Products Group.
Competition is primarily based on service, price and merchandising
capability. The Registrant believes that the major competitors of the
construction products portion of this group include the Buildex and
Ramset Divisions of Illinois Tool Works. Competition is based on
quality, service, price and engineering capability.
While the Registrant faces potential competition from foreign
manufacturers, it does not believe it currently has significant
direct foreign competitors in the markets it serves.
(xi) Research and Development
The Registrant spent approximately $2,900,000, $2,300,000 and
$2,200,000 on new or existing product development projects during the
fiscal years ended June 30, 1994, 1993 and 1992, respectively, none
of which was customer sponsored. The Registrant believes that the
amounts indicated above are not indicative of the total effort spent
on developing new products and production processes, but the
Registrant is not able to quantify all production related costs of
such activities. Products are generally developed or improved as a
result of providing engineering and design services for customer
applications.
(xii) Environmental Disclosures
The Registrant believes that it is in compliance with federal, state
and local laws and regulations. The Registrant believes that
continued compliance will not have a material effect on the
Registrant. For the fiscal year ended June 30, 1994, the Registrant
spent approximately $230,000 on capital expenditures related to
protection of the environment, and anticipates spending a somewhat
higher amount in fiscal 1995 for such purposes.
(xiii) Number of Employees
The average number of persons employed by the Registrant during the
fiscal year ended June 30, 1994, was approximately 1,971.
(d) Foreign Operations and Export Sales
The Registrant is not engaged in any material operations in foreign
countries, nor is any material portion of its sales derived from
foreign countries.
Item 2 Properties
The Registrant's position as a leading manufacturer of fasteners and
other components is due in large part to the efficiency of its
manufacturing facilities. Over the years, the Registrant has expanded
and modernized its manufacturing plants and has invest substantial
sums in order to maintain up-to-date production capacity. The
Registrant believes that its facilities both owned and leased, are in
excellent condition and are suitable and adequate to meet the desired
levels of productive capacity. Although there is minimal idle space,
major expansion is not planned for the near future.
Certain information relating to the principal properties of the Registrant is
set forth below:
Lease Expiration
(including
Approximate options
Primary Area in to renew)
Location Segment Function(s) Square Feet or Ownership
- - -------- ------- ----------- ----------- ------------
Rockford, Illinois Industrial Corporate offices, 589,000 Owned
Products Manufacturing
Rockford, Illinois Industrial Coating, Finishing 125,000 2009
Products and Warehousing
Rockford, Illinois Industrial Manufacturing and 30,000 Owned
Products Warehousing
Logansport, Indiana Industrial Manufacturing and 100,000 Owned
Products Warehousing
Logansport, Indiana Industrial Coating and 24,000 2007
Products Finishing
Logansport, Indiana Industrial Coating and 40,000 Owned
Products Finishing
Mishawaka, Indiana Industrial Manufacturing 132,000 Owned
Products
Rockford, Illinois Home and Manufacturing, 51,000 Owned
Construction Packaging and
Products Warehousing
Rockford, Illinois Home and Packaging and 138,000 2006
Construction Warehousing
Products
Goodlettsville, Home and Manufacturing, 71,000 Owned
Tennessee Construction Packaging and
Products Warehousing
Item 3 Legal Proceedings
The Registrant is not a party to any material pending legal proceedings.
Item 4 Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of the year
ended June 30, 1994, to a vote of security holders, through the
solicitation of proxies or otherwise.
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT
The following named officers' terms of office expire on November 4, 1994:
Name Age Position and Business Experience during past five years
- - ---- --- -------------------------------------------------------
John C. Lutz 55 President and Chief Executive Officer since June 1993;
President, Chief Operating Officer March 1991 -
June 1993; Vice President and Division Manager, Barber
Colman Co., 1985-1989
August F. DeLuca 50 Vice President-Finance and Chief Financial Officer
Derek M. Hasse 63 Vice President-Administration
Kenneth L. Heal 51 Secretary and Treasurer
Robert H. Rothkopf 49 President of Industrial Products Group since June
1993; Vice President-Marketing and Sales from
September 1989 - June 1993; previously served as
President of Camcar Division of Textron
James R. Stenberg 50 President of Home and Construction Products Group
since June 1993; previously was Group Vice President,
Consumer Products Group
There is no family relationship among the above named officers.
<PAGE>
PART II
Item 5 Market for the Registrant's Common Stock and Related Security Holder
Matters*
Item 6 Selected Financial Data*
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations*
*The information called for by Items 5, 6, and 7 is hereby
incorporated by reference to the following captions on the pages
indicated in the Registrant's Annual Report to Stockholders for the
year ended June 30, 1994 and made a part hereof:
Page(s) in
Item Caption in Annual Report Annual Report
---- ------------------------ -------------
5 Stock Prices and Other Market Information 42
Long-Term Debt (Note 7, seventh paragraph) 32
6 Eleven-Year Summary of Selected Financial Data 40-41
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 23-26
Item 8 Financial Statements and Supplementary Data
The information called for by Item 8 is hereby incorporated by
reference to the Registrant's Annual Report to Stockholders for the
year ended June 30, 1994 as set forth in the Index to Consolidated
Financial Statements and Schedules (see item 14) and made a part hereof.
Item 9 Disagreements on Accounting and Financial Disclosure
No Form 8-K was filed within the twenty-four months prior to June 30,
1994, reporting a change of accountants involving a disagreement on
any matter of accounting principles or practices or financial statement
disclosure.
PART III
Item 10 Directors and Executive Officers of the Registrant
Except for the information relating to the executive officers of the
Registrant, set forth in Part I of this report, the information
called for by Item 10 is hereby incorporated by reference to the
captions entitled "Election of Directors" and "Other Information" on
pages 4-6 and caption entitled "Section 16 Compliance" on page 14 of
the Registrant's Proxy Statement in connection with its Annual Meeting
of Stockholders on November 4, 1994, to be filed with the Securities
and Exchange Commission within 120 days following the end of the
Registrant's fiscal year ended June 30, 1994 and made a part hereof.
Item 11 Executive Compensation
The information called for by Item 11 is hereby incorporated by
reference to the captions entitled "Compensation of Executive
Officers" on pages 10-13 of the Registrant's Proxy Statement in
connection with its Annual Meeting of Stockholders on November 4,
1994, to be filed with the Securities and Exchange Commission within
120 days following the end of the Registrant's fical year ended June 30,
1994, and made a part hereof.
Item 12 Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to the caption entitled
"Security Ownership of Certain Beneficial Owners and Management" on
pages 2-4 of the Registrant's Proxy Statement in connection with its
Annual Meeting of Stockholders on November 4, 1994, to be filed with
the Securities and Exchange Commission within 120 days following the
end of the Registrant's fiscal year ended June 30, 1994, and made a
part thereof.
Item 13 Certain Relationships and Related Transactions
The information called for by Item 13 is hereby incorporated by
reference to the captions entitled "Other Information" on pages 6-7 and
"Certain Beneficial Owners" on page 3 of the Registrant's Proxy
Statement in connection with its Annual Meeting of Stockholders on
November 4, 1994, to be filed with the Securities and Exchange
Commission within 120 days following the end of the Registrant's fiscal
year ended June 30, 1994, and made a part thereof.
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
a. Index to Consolidated Financial Statements and Schedules
Reference
-------------------------------
Form 10-K Annual Report
Annual Report to Stockholders
Page Page(s)
------------- --------------
Data incorporated by reference to
Registrant's Annual Report to Stockholders
for the year ended June 30, 1994:
Consolidated Balance Sheets at June 30, 1994
and 1993 27
Statements of Consolidated Income for the
years ended June 30, 1994, 1993 and 1992 28
Statements of Consolidated Stockholders'
Equity for the years ended June 30, 1994,
1993 and 1992 28
Statements of Consolidated Cash Flows for the
years ended June 30, 1994, 1993 and 1992 29
Notes to Consolidated Financial Statements 30-36
Report of Independent Accountants 38
Report of Independent Accountants S-1
Financial Statement Schedules:
V. Property, Plant and Equipment S-2
VI. Accumulated Depreciation and Amortization
of Property, Plant and Equipment S-3
VIII. Reserves S-4
IX. Short-Term Borrowings S-5
X. Supplementary Income Statement Information S-6
Schedules other than those listed above have been omitted either
because the required information is contained in notes to the
consolidated financial statements or because of the absence of the
conditions under which the schedules are required.
b. A report on Form 8-K was filed on June 17, 1994 reporting a share
purchase agreement. The report was dated June 15, 1994.
c. The following exhibits are filed as part of this report:
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession
(2.1) Asset Purchase Agreement--Bear-Kat Products division of
Key Manufacturing Group (filed as Exhibit 2.1 to
Registrant's Form 8-K dated May 22, 1991, and
incorporated herein by reference).
(3) Articles of Incorporation and By-Laws
(3.1) Registrant's Certificate of Incorporation including all
amendments.
(3.2) Registrant's By-Laws (filed as Exhibit 3.2 to
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1993, and incorporated herein by
reference).
(4) Instruments defining the rights of security holders
(4.1) Note Agreement dated August 15, 1986 (filed as Exhibit
4.9 to Registrant's Annual Report on Form 10-K for the
year ended June 30, 1993, and incorporated herein by
reference).
(4.2) Amendments dated September 26, 1988 and November 9,
1988 to Note Agreement dated August 15, 1986 (filed as
Exhibit 4.10 to Registrant's Annual Report on Form 10-K
for the year ended June 30, 1993, and incorporated
herein by reference).
(4.3) Amendment dated December 12, 1989 to Note Agreement dated
August 15, 1986 (filed as Exhibit 4.18 to Registrant's
Annual Report on Form 10-K for the year ended June 30,
1990, and incorporated herein by reference).
(4.4) Amendment dated May 1, 1991 to Note Agreement dated
August 15, 1986 (filed as Exhibit (4.12) to Registrant's
Annual Report on Form 10-K for the year ended June 30,
1991, and incorporated herein by reference).
(4.5) Stockholder Rights Agreement dated January 20, 1988
(filed as Exhibit 4.13 to Registrant's Annual Report on
Form 10-K for the year ended June 30, 1993, and
incorporated herein by reference).
(4.6) Amendment dated June 24, 1988 to Stockholder Rights
Agreement dated January 20, 1988 (filed as Exhibit 4.14 to
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1993, and incorporated herein by
reference).
(4.7) Loan Agreements dated December 1, 1989 (filed as
Exhibit (4.23) to Registrant's Annual Report on Form
10-K for the year ended June 30, 1990, and incorporated
herein by reference).
(4.8) Loan Agreement dated April 16, 1991 (filed as Exhibit
(4.18) to Registrant's Annual Report on Form 10-K for the
year ended June 30, 1991, and incorporated herein by
reference).
(4.9) Amendments dated April 24, 1992 to Loan Agreement dated
April 16, 1991 (filed as Exhibit (4.19) to Registrant's
Annual Report on Form 10-K for the year ended June 30,
1992, and incorporated herein by reference).
(4.10) Amendments dated April 30, 1992 to Note Agreement dated
August 15, 1986 and Loan Agreement dated April 16, 1991
(filed as Exhibit (4.20) to Registrant's Annual Report
on Form 10-K for the year ended June 30, 1992, and
incorporated herein by reference).
(4.11) Loan Agreement dated September 1, 1993.
(4.12) Loan Agreement dated September 1, 1993.
(10) Material Contracts
(10.1) Lease Agreement dated August 2, 1984 with Rowe Development
Company (filed as Exhibit 10.1 to Registrant's Annual
Report on Form 10-K for the year ended June 30, 1993, and
incorporated herein by reference).
(10.2) First Amendment dated April 27, 1992 to Lease Agreement
dated August 2, 1984 (filed as Exhibit 10.2 to
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1993, and incorporated herein by
reference).
(10.3) Second Amendment dated October 22, 1992 to Lease
Agreement dated August 2, 1984 (filed as Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1993, and incorporated herein by
reference).
(10.4) License dated January 14, 1980 with Illinois Tool
Works, Inc. (filed as Exhibit 10.4 to Registrant's
Annual Report on Form 10-K for the year ended June 30,
1993, and incorporated herein by reference).
(10.5) Amendment dated June 3, 1991 to License dated January
14, 1980 (filed as Exhibit 10.5 to Registrant's Annual
Report on Form 10-K for the year ended June 30, 1993,
and incorporated herein by reference).
(10.6) License dated April 6, 1967 with Camcar Division of
Textron, Inc. (filed as Exhibit 10.6 to Registrant's
Annual Report on Form 10-K for the year ended June 30,
1993, and incorporated herein by reference).
(10.7) Amendment dated July 1, 1988 to license dated April 6,
1967 with Camcar Division of Textron, Inc. (filed as
Exhibit 10.7 to Registrant's Annual Report on Form 10-K
for the year ended June 30, 1993, and incorporated
herein by reference).
(10.8) License dated October 11, 1966 with Research
Engineering and Manufacturing, Inc. (filed as Exhibit
10.8 to Registrant's Annual Report on Form 10-K for the
year ended June 30, 1993, and incorporated herein by
reference).
(10.9) Sublease Agreement dated March 14, 1986 with Parkside
Warehouse, Inc. (filed as Exhibit 10.9 to Registrant's
Annual Report on Form 10-K for the year ended June 30,
1993, and incorporated herein by reference).
(10.10) Joint Venture Agreement between Nagoya Screw
Manufacturing Co., Ltd. and Elco Industries, Inc. dated
June 14, 1989 and effective July 1, 1989.
(10.11) Letter Agreements dated June 27, 1989, July 17, 1989
and August 18, 1989 between Elco Industries, Inc. and
Okabe Company Limited.
(10.12) Stock Purchase Agreement dated June 7, 1994 between Elco
Industries, Inc. and Okabe Company Limited (filed as
Exhibit 10 to Registrant's Form 8-K dated June 17,
1994, and incorporated herein by reference).
(10.13) Elco Industries, Inc. Performance Share Plan adopted
October 28, 1988 (filed as Exhibit (10.13) to Registrant's
Annual Report on Form 10-K for the year ended June 30,
1990, and incorporated herein by reference).
(10.14) Elco Industries, Inc. 1991 Stock Option Plan (filed as
Exhibit (10.13) to Registrant's Annual Report on Form
10-K for the year ended June 30, 1992, and incorporated
herein by reference).
(10.15) Elco Industries, Inc. 1992 Stock Option Plan For
Non-Employee Directors (filed as Exhibit 10.14 to
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1993, and incorporated herein by
reference).
(10.16) Stock Compensation Plan for Non-Employee Directors
(filed as Exhibit 10.15 to Registrant's Annual Report
on Form 10-K for the year ended June 30, 1993, and
incorporated herein by reference).
(11) Computation of Per Share Earnings.
(13) Annual Report to Stockholders for the year ended June 30, 1994.
(21) Subsidiaries of Registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule
--------------------------------------------------------------------------
With the exception of the aforementioned information incorporated by
reference in this Annual Report on Form 10-K, the Registrant's Annual
Report to Stockholders for the year ended June 30, 1994 is not to be
deemed "filed" as part of this Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ELCO INDUSTRIES, INC.
September 21, 1994 By: John C. Lutz
John C. Lutz
President
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
Registrant and in the capacities and on the dates indicated:
Date Signature
---- ---------
September 21, 1994 John C. Lutz
John C. Lutz
President
Chief Executive Officer
Director
September 21, 1994 August F. DeLuca
August F. DeLuca
Vice President-Finance
Chief Financial Officer
September 21, 1994 Kenneth L. Heal
Kenneth L. Heal
Secretary/Treasurer
Chief Accounting Officer
September 21, 1994 Robert L. Berner, Jr.
Robert L. Berner, Jr.
Director
September 21, 1994 Milton R. Brown
Milton R. Brown
Director
September 21, 1994 Carl J. Dargene
Carl J. Dargene
Director
September 21, 1994 G. Robert Evans
G. Robert Evans
Director
September 21, 1994 Wayne P. Lockwood
Wayne P. Lockwood
Director
September 21, 1994 Jack W. Packard
Jack W. Packard
Director
September 21, 1994 David D. Peterson
David D. Peterson
Director
September 21, 1994 James H. Rilott
James H. Rilott
Director
<PAGE>
Report of Independent Accountants
Our report on the consolidated financial statements of Elco Industries, Inc. and
Subsidiaries has been incorporated by reference in this Form 10-K from the 1994
Annual Report to Stockholders of Elco Industries, Inc. and appears on page 38
therein. In connection with our audits of such financial statements, we have
also audited the related financial statement schedules listed in the index on
page 9 of this Annual Report on Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Rockford, IL Coopers & Lybrand L.L.P.
August 5, 1994
Page S-1
<PAGE>
<TABLE>
Schedule V
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Property, Plant and Equipment
For the Years Ended June 30, 1994, 1993 and 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Additions Retirements Other Balance at
Classification Beginning At Or Changes End
Of Period Cost Disposals Add (Deduct) Of Period
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994:
Land $ 448,822 $ 448,822
Land and leasehold improvements 3,074,135 $ 186,283 3,260,418
Buildings and building equipment 23,287,277 875,679 $ 888,980 (A) 25,051,936
Machinery and equipment 105,083,640 9,100,703 $2,086,243 2,360,029 (A) 114,458,129
Furniture and office equipment 8,448,227 714,794 686,858 12,789 (A) 8,488,952
Construction in progress 3,261,798 1,510,385 (3,261,798)(A) 1,510,385
------------ ----------- ---------- ---------- ------------
Total $143,603,899 $12,387,844 $2,773,101 $ -0- $153,218,642
============ =========== ========== ========== ============
Year Ended June 30, 1993:
Land $ 416,322 $ 36,000 $ 3,500 $ 448,822
Land and leasehold improvements 3,005,644 92,118 23,627 3,074,135
Buildings and building equipment 22,838,846 395,380 17,838 $ 70,889 (A) 23,287,277
Machinery and equipment 101,184,230 4,878,027 2,316,559 1,337,942 (A) 105,083,640
Furniture and office equipment 7,805,127 656,736 29,377 15,741 (A) 8,448,227
Construction in progress 1,174,954 3,511,416 (1,424,572)(A) 3,261,798
------------ ----------- ---------- ---------- ------------
Total $136,425,123 $ 9,569,677 $2,390,901 $ -0- $143,603,899
============ =========== ========== ========== ============
Year Ended June 30, 1992:
Land $ 416,322 $ 416,322
Land and leasehold improvements 2,580,873 $ 424,771 3,005,644
Buildings and building
equipment 22,135,194 1,053,652 $ 350,000 22,838,846
Machinery and equipment 95,635,122 6,339,644 1,894,934 $1,104,398 (A) 101,184,230
Furniture and office equipment 6,929,713 1,557,352 681,938 7,805,127
Construction in progress 1,104,398 1,174,954 (1,104,398)(A) 1,174,954
------------ ----------- ---------- ---------- ------------
Total $128,801,622 $10,550,373 $2,926,872 $ -0- $136,425,123
============ =========== ========== ========== ============
NOTES:
(A) Reclassification of completed construction.
The principal depreciation lives used are as follows:
Land and leasehold improvements-- 5 - 20 years
Buildings and building equipment-- 5 - 50 years
Machinery and equipment-- 3 - 15 years
Furniture and office equipment-- 3 - 10 years
Property, Plant and Equipment is depreciated or amortized over the estimated service lives or lease period using
the straight-line method.
Page S-2
</TABLE>
<PAGE>
<TABLE>
Schedule VI
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Accumulated Depreciation and Amortization
Of Property, Plant and Equipment
For the Years Ended June 30, 1994, 1993 and 1992
<CAPTION>
Column A Column B Column C Column D Column F
Additions
Balance at Charged to Retirements Balance at
Classification Beginning Costs and Or End
Of Period Expenses Disposals Of Period
<S> <C> <C> <C> <C>
Year Ended June 30, 1994:
Land and leasehold improvements $ 1,738,557 $ 269,225 $ 2,007,782
Buildings and building equipment 9,834,100 801,170 10,635,270
Machinery and equipment 59,538,116 7,675,726 $1,638,573 65,575,269
Furniture and office equipment 5,071,813 1,134,788 523,611 5,582,990
----------- ---------- ---------- -----------
Total $76,182,586 $9,880,909 $2,162,184 $83,901,311
=========== ========== ========== ===========
Year Ended June 30, 1993:
Land and leasehold improvements $ 1,482,644 $ 264,636 $ 8,723 $ 1,738,557
Buildings and building equipment 9,105,148 746,612 17,660 9,834,100
Machinery and equipment 54,309,902 7,129,956 1,901,742 59,538,116
Furniture and office equipment 4,093,593 988,164 9,944 5,071,813
----------- ---------- ---------- -----------
Total $68,991,287 $9,129,368 $1,938,069 $76,182,586
=========== ========== ========== ===========
Year Ended June 30, 1992:
Land and leasehold improvements $ 1,227,654 $ 254,990 $ 1,482,644
Buildings and building equipment 8,732,500 722,648 $ 350,000 9,105,148
Machinery and equipment 48,745,940 6,873,835 1,309,873 54,309,902
Furniture and office equipment 3,863,352 911,304 681,063 4,093,593
----------- ---------- ---------- -----------
Total $62,569,446 $8,762,777 $2,340,936 $68,991,287
=========== ========== ========== ===========
Page S-3
</TABLE>
<PAGE>
<TABLE>
Schedule VIII
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Reserves
For the Years Ended June 30, 1994, 1993 and 1992
<CAPTION>
Column A Column B Column C Column D Column E
Additions
--------------------
Description Charged
Balance at To Costs Charged Deductions Balance
Beginning And To Other From At End
Of Period Expenses Accounts Reserves Of Period
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994:
Valuation account deducted from
assets to which it applies--
Allowance for doubtful accounts $475,000 $30,236 -0- $ 32,236 (B) $473,000
Year Ended June 30, 1993:
Valuation account deducted from
assets to which it applies--
Allowance for doubtful accounts $335,000 $195,178 $27,313 (A) $ 82,491 (B) $475,000
Year Ended June 30, 1992:
Valuation account deducted from
assets to which it applies--
Allowance for doubtful accounts $307,000 $ 88,581 $68,479 (A) $129,060 (B) $335,000
(A) Recoveries on accounts previously written off.
(B) Uncollectible accounts written off.
Page S-4
</TABLE>
<PAGE>
<TABLE>
Schedule IX
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Short-Term Borrowings
For the Years Ended June 30, 1994, 1993 and 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
Category of Weighted Maximum Amount Average Amount Weighted Average
Aggregate Balance Average Outstanding Outstanding Interest Rate
Short-Term At End Interest During the During the During the
Borrowings (A) Of Period Rate Period Period (B) Period (C)
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994:
Bank notes payable -0- -0- -0- -0- -0-
Year Ended June 30, 1993:
Bank notes payable -0- -0- -0- -0- -0-
Year Ended June 30, 1992:
Bank notes payable -0- -0- $5,200,000 $1,852,186 6%
(A) Lines of credit are maintained at various banks for short-term borrowings and amounted to
$18,000,000, $18,000,000 and $20,500,000 at June 30, 1994, 1993 and 1992, respectively.
These lines, generally reviewed annually for renewal, are subject to the usual terms and
conditions applied by banks.
(B) Average amounts outstanding are weighted averages based upon actual days outstanding.
(C) Annual weighted average interest rates are determined based on daily outstanding principal
amounts and exclude costs of maintaining lines of credit.
Page S-5
</TABLE>
<PAGE>
Schedule X
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Supplementary Income Statement Information
For the Years Ended June 30, 1994, 1993 and 1992
Column A Column B
Charged to Costs and Expenses
------------------------------------------
Item 1994 1993 1992
Maintenance and repairs $6,403,946 $5,801,522 $6,047,494
Page S-6
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
ELCO INDUSTRIES, INC.
FIRST. The name of this corporation is ELCO INDUSTRIES, INC.
SECOND. Its registered office in the State of Delaware is to
be located at 900 Market street, in the City of Wilmington, County
of New Castle, and its registered agent is CORPORATION SERVICE
COMPANY, 900 Market Street, Wilmington, Delaware
THIRD. The nature of the business and the objects and
purposes to be transacted, promoted and carried on are to do any or
all of the things herein mentioned as fully and to the same extent
as natural persons might or could do, and in any part of the world,
viz:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware,
including, but not limited to the design, development, manufacture,
sale and distribution of fasteners, cold-headed products and other
components, devices and items formed or otherwise created or
manufactured from metals, plastics or other materials, and to carry
on and engage in any and all lawful activities in any way
associated with the conduct of each business and the objectives and
purposes herein set forth.
FOURTH. The total number of shares of all classes of stock
which the corporation shall have authority to issue is 20,250,000
shares, of which 20,000,000 shares shall be common stock having a
par value of $5.00 per share, and 250,000 shares shall be preferred
stock having a par value of $1.00 per share amounting in the
aggregate to $100,250,000. The preferred stock shall be issued
from time to time in one or more series with such serial
designations and (a) may have such voting powers, full or limited,
or may be without voting powers; (b) may be subject to redemption
at such time or times and at such prices; (c) may be entitled to
receive dividends (which may be cumulative or noncumulative) at
such rate or rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends
payable on any other class or classes of stock; (d) may have such
rights upon the dissolution of, or upon any distribution of the
assets of, the corporation; (e) may be made convertible into, or
exchangeable for, shares of any other class or classes or of any
other series of the same or any other class or classes of stock of
the corporation, at such price or prices or at such rates of
exchange, and with such adjustments; and (f) shall have such other
relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, all as shall
hereafter be stated and expressed in the resolution or resolutions
providing for the issue of such Preferred Stock from time to time
adopted by the board of directors pursuant to authority so to do
which is hereby vested in the board.
Each share of Common Stock shall entitle the holder thereof to
one vote, in person or by proxy, at any and all meetings of the
stockholders of the corporation, on all matters to be voted upon by
the stockholders, including the election of Directors, and there
shall be no cumulative voting.
No stockholder, as such, shall have any preemptive right to
subscribe for or purchase any additional shares of stock or
securities convertible into or carrying warrants or options to
acquire shares of stock in the corporation.
Any and all right, title, interest and claim in or to any
dividends declared by the corporation, whether in cash, stock or
otherwise, which are unclaimed by the stockholder entitled thereto
for a period of six years after the close of business on the
payment date, shall be and be deemed to be extinguished and
abandoned; and such unclaimed dividends in the possession of the
corporation, its transfer agents or other agents or depositaries,
shall at such time become the absolute property of the corporation,
free and clear of any and all claims of any persons whatsoever.
FIFTH. The name and mailing address of each of the
incorporator or incorporators is as follows:
NAME MAILING ADDRESS
L. W. PHILLIPS 900 Market Street
Wilmington, Delaware
A. F. TIMER 900 Market Street
Wilmington, Delaware
L. PANARIELLO 900 Market Street
Wilmington, Delaware
SIXTH. In furtherance and not in limitation of the powers
conferred by statute, the board of directors is expressly
authorized:
To make, alter or repeal the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper
purpose and to abolish any such reserve in the manner in which was
created.
By a majority of the whole board, to designate one or more
committees, each committee to consist of two or more of the
directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting the committee.
Any such committee, to the extent provided in the resolution or in
the by-laws of the corporation, shall have and may exercise the
power of the board of directors in the management of the business
and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it;
provided, however, the by-laws may provide that in the absence of
disqualifications of any member of such committee or committees,
the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of
directors to act at the meeting the place of any such absent or
disqualified member.
When and as authorized by the affirmative vote of the holders
of no less than 66 2/3% of the stock issued and outstanding having
voting power at a stockholders' meeting duly called upon such
notice as is required by statute, or when authorized by the written
consent of the holders of no less than 66 2/3% of the voting stock
issued and outstanding, to sell, lease or exchange all or
substantially all of the property and assets of the corporation,
including its good will and its corporate franchises, or to merge
or consolidate with another corporation or corporations upon such
terms and conditions and for such consideration, which may consist
in whole or in part of money or property including shares of stock
in, and or other securities of, any other corporation or
corporations, as its board of directors shall deem expedient and
for the best interests the corporation.
SEVENTH. Meetings of stockholders may be held within or
without the State of Delaware, as the by-laws may provide. The
books of the corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the board
of directors or in the by-laws of the corporation. Elections of
directors need not be by written ballot unless the by-laws of the
corporation shall so provide.
EIGHTH. The corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of
incorporation, in the manner now or hereafter prescribed by statue,
and all rights conferred upon stockholders herein are granted
subject to this reservation.
NINTH. (a) The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of
the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in
good faith and in a manner, he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not of
itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporations a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys fees) actually and reasonably
incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made
in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable (for negligence or misconduct
in the performance of his duty) to the corporation unless and only
to the extent that the Court of Chancery or the Court in which such
action or suit was brought shall determine upon application that
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
paragraphs (a) and (b), or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including
attorneys fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (5) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporations authorized in this Article.
(f) The indemnification and advancement of expenses provided
by or granted pursuant to the other sections of this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may bet entitled under
any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify
him against such liability under the provisions of this Article.
(h) The indemnification and advancement of expenses provided
by, or granted pursuant to this Article shall, unless otherwise
provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
TENTH (a) In addition to any affirmative vote required by law
or this Certificate of Incorporation except as otherwise expressly
provided in paragraph (b) of this Article Tenth any Business
Combination shall require the affirmative vote of the holders of at
least 80% of the combined voting power of the Voting Shares, voting
together as a single class (it being understood that for the
purposes of this Article Tenth each Voting Share shall have the
number of votes granted to it pursuant to Article Fourth of this
Certificate of Incorporation).
(b) The provisions of this Article Tenth shall not be
applicable to any particular Business Combination and such Business
Combination shall require only such affirmative vote as is required
by law and any other provision of this Certificate of Incorporation
if all of the conditions specified in either of the following
subparagraphs (1) and (2) of this paragraph b are met.
(1) The Business Combination shall have been approved by
two-thirds of the Disinterested Directors.
(2) All of the following conditions shall have been met:
(A) The Business Combination shall provide for consideration
to be received by all holders of common shares in exchange for all
their shares and the aggregate amount of the cash and the Fair
Market Value as of the date of consummation of the Business
Combination of consideration other than cash to be received per
share by holders of common shares in such Business Combination
shall be at least equal to the higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder or any Affiliate or Associate of
the Interested Stockholder to acquire any common shares
beneficially owned by the Interested Stockholder which were
acquired (a) within the two year period immediately prior to the
first public announcement of the proposal of the Business
Combination (the "Announcement Date") or (b) in the transaction in
which it became an Interested Stockholder whichever is higher; and
(ii) The Fair Market Value per common share on the first
trading date after the Announcement Date or on the first trading
date after the date of the first public announcement that the
Interested Stockholder became an Interested Stockholder (the
"Determination Date"), whichever is higher.
(B) The Business Combination shall provide for consideration
to be received by all holders of outstanding shares other than
common shares in exchange for all such shares and the aggregate
amount of the cash and the Fair Market Value as of the date of the
consummation of the Business Combination of consideration other
than cash to be received per share by holders of outstanding shares
other than common shares shall be at least equal to the highest of
the following (it being intended that the requirements of this
subparagraph (2)(b) shall be required to be met with respect to
every class and series of outstanding shares other than common
shares whether or not the Interested Stockholder or any Affiliate
or Associates of the Interested Stockholder has previously acquired
any shares of a particular class or series):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers fees)
paid by the Interested Stockholder or any Affiliate or Associate of
the Interested Stockholder to acquire any shares of such class or
series beneficially owned by the Interested Stockholder which were
acquired (a) within the 2-year period immediately prior to the
Announcement Date or (b) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(ii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class or series are entitled
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation;
(iii) the Fair Market Value per share of such class or series
on the first trading date after the Announcement Date or on the
Determination Date, whichever is higher; and
(iv) an amount equal to the Fair Market Value per share of
such class or series determined pursuant to clause (iii) times the
highest value obtained in calculating the following quotient for
each class or series of which the Interested Stockholder has
acquired shares within the 2-year period ending on the Announcement
Date: (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder or any Affiliate or Associate of the
Interested Stockholder for any shares of such class or series
acquired within such 2-year period divided by (y) the market value
per share of such class or series on the first day in such 2-year
period on which the Interested Stockholder or any Affiliate or
Associate of the Interested Stockholder acquired any shares of such
class or series.
(C) The consideration to be received by holders of a
particular class or series of outstanding shares shall be in cash
or in the same form as the Interested Stockholder or any Affiliate
or Associate of the Interested Stockholder has previously paid to
acquire shares of such class or series beneficially owned by the
Interested Stockholder. If the Interested Stockholder and any
Affiliates or Associates of the Interested Stockholder have paid
for shares of any class or series with varying forms of
consideration, the form of consideration for such class or series
shall be either cash or the form used to acquire the largest number
of shares of such class or series beneficially owned by the
Interested Stockholder.
(D) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (i) except as approved by two-thirds of the
Disinterested Directors, there shall have been no failure to
declare and pay at the regular date therefor any full periodic
dividends (whether or not cumulative) of any outstanding shares of
the corporation other than the common shares; (ii) there shall have
been (a) no reduction in the annual rate of dividends paid on the
common shares (except as necessary to reflect any subdivision of
the common shares), except as approved by two-thirds of the
Disinterested Directors, and (b) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in the event
of any reclassification (including any reverse share split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding common
shares; and (iii) such Interested Stockholder shall not have become
the beneficial owner of any additional Voting Shares except as part
of the transaction which results in such Interested Stockholder
becoming an Interested Stockholder.
(E) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received
the benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the corporation or any Subsidiary whether in
anticipation of or in connection with such Business Combination or
otherwise.
(F) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations (or
any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to public stockholders of the corporation at least
30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions).
(c) For purposes of this Article Tenth:
(1) "Business Combination" shall mean any of the following:
(A) any merger, consolidation or share exchange of the
corporation or any Subsidiary with or involving (1) any Interested
Stockholder or (2) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger,
consolidation, or share exchange would be, an Affiliate or an
Associate of an Interested Stockholder;
(B) any sale, lease, exchange: mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions)
to or with any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder (other than the corporation or any
Subsidiary) of any assets of the corporation or any Subsidiary
having an aggregate Fair Market Value (as hereinafter defined)
equal to 10% or more of the corporation s consolidated net worth as
of its then most recent fiscal year end;
(C) the issuance or transfer by the corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the corporation or any Subsidiary to any Interested
Stockholder or any Affiliate or Associate of any Interested
Stockholder;
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the corporation proposed by, or in which anything
other than cash will be received by, an Interested Stockholder or
any Affiliate or Associate of an Interested Stockholder; or
(E) any reclassification of securities (including any reverse
share split), or recapitalization of the corporation, or any
merger, consolidation or share exchange of the corporation with or
involving any of its Subsidiaries which has the effect, directly or
indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder;
(2) "Voting Shares" shall mean the then outstanding shares of
all classes and series of the corporation entitled to vote
generally at the election of directors.
(3) "Person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(4) "Interested Stockholder" shall mean any person (other than
(i) the corporation, (ii) any Subsidiary, or (iii) any
profit-sharing, employee stock ownership or other employee benefit
plan or trust of the corporation or any trustee or fiduciary
thereof acting in such capacity) who which is the beneficial owner,
directly or indirectly, of Voting Shares conveying 10% or more of
the combined voting power of the outstanding Voting Shares.
(5) A person shall be a "beneficial owner" of any Voting
Shares:
(A) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly;
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire(whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote or direct the vote pursuant to
any agreement, arrangement or understanding; or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Voting
Shares.
(6) For the purposes of determining whether a person is an
Interested Stockholder pursuant to subparagraph (4) of this
paragraph c, the number of Voting Shares deemed to be outstanding
shall include shares deemed owned by such person through
application of subparagraph (5) of this paragraph c but shall not
include any other Voting Shares which maybe issuable to other
persons pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, exchange rights, warrants or
options, or otherwise.
(7) "Affiliate" and "Associates" shall have the respective
meanings ascribed to such terms in Rule 12b-2 or the General Rules
and Regulations under the Securities Exchange Act of 1934, as
amended from time to time, or any successor provision (or the
respective meanings last ascribed thereto if there are no amended,
or successor provisions).
(8) "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by
the corporation: provided, however, that for the purposes of the
definition of Interested Stockholder set forth in subparagraph (4)
of this paragraph c, the term "Subsidiary" shall mean only a
corporation of which a majority of each class or equity security is
owned, directly or indirectly, by the corporation.
(9) "Disinterested Director" means any member of the board of
directors of the corporation who: (A) is neither the Interested
Stockholder nor an Affiliate or Associate of the Interested
Stockholder; (B) was a member of the board of directors prior to
the time that the Interested Stockholder became an Interested
Stockholder, or was recommended to succeed a Disinterested Director
by a majority of the Disinterested Directors then in office; and
(C) was not nominated for election as a director by the Interested
Stockholder or any Affiliate or Associate of the Interested
Stockholder.
(10) "Fair Market Value" means (a) in the case of shares, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share on the New York Stock
Exchange Composite Tape, or, if such shares are not quoted on the
Composite Tape, on the New York Stock Exchange, or if such shares
are not listed on such Exchange, on the principal United States
Securities exchange registered under the Securities Exchange Act of
1934 on which such shares are listed, or, if such shares are not
listed on any such exchange, the highest closing sale price or bid
quotation with respect to a share during the 30-day period
preceding the date in question on the National Association of
Securities Dealers, Inc., Automated Quotations System or any system
then in use, or if no such quotations are available, the fair
market value on the date in question of a share as determined by a
majority of the Disinterested Directors in good faith; and (b) in
the case of property other than cash or shares, the fair market
value of such property on the date in question as determined by a
majority of the Disinterested Directors in good faith.
(11) In the event of any Business Combination in which the
corporation survives, the phrase consideration other than cash to
be received as used in subparagraphs (2)(A) and (B)of paragraph b
of this Article Tenth shall include the common shares and the
shares of any other class or series retained by the holders of such
shares.
(d) A majority of the Disinterested Directors shall have the
power to determine, for the purposes of this Article Tenth (1)
whether a person is an Interested Stockholder, (2) the number of
Voting Shares beneficially owned by any person, (3) whether a
person is an Affiliate or Associate of another, and (4) whether the
assets which are the subject of any Business Combination have an
aggregate Fair Market Value equal to 10% or more of the
corporation's consolidated net worth as of its then most recent
fiscal year end. Such determination shall be conclusive and binding
for all purposes of this Article Tenth.
(e) Nothing contained in this Article Tenth shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
(f) Notwithstanding any other provisions of this Certificate
of Incorporation or the By-laws of the corporation (and
notwithstanding the fact that a lesser percentage may be specified
by law, this Certificate of Incorporation or the By-laws of the
corporation), the affirmative vote of the holders of 80% or more of
the combined voting power of the then outstanding Voting Shares
voting together as a single class, shall be required to amend, or
repeal, or to adopt any provision inconsistent with, any provision
in this Article Tenth.
ELEVENTH. No director of the Corporation shall be personally
liable to the corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director, except for
liability (i) for any breach of the directors duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
TWELFTH. (a) Number of Directors. The number of directors of
the Corporation shall be fixed and may from time to time be
increased or decreased by the board of directors, but in no event
shall the number of directors be less than six or more than twelve.
(b) Classified Directors. Directors shall be elected at the
annual meetings or special meetings of the stockholders.
Notwithstanding anything to the contrary in the By-laws, effective
as of the annual meeting of the stockholders in 1988, the board of
directors shall be divided into three classes, designated as Class
1, Class 2 and Class 3, as nearly equal in number as possible. The
term of office of one class shall expire at each annual meeting of
stockholders, and in all cases as to each director until his
successor shall be elected and shall qualify, or until his earlier
resignation, removal from office, death or incapacity. The initial
term of office of directors of Class 1 shall expire at the annual
meeting of stockholders in 1989, that of Class 2 at the annual
meeting of stockholders in 1990, that of Class 3 at the annual
meeting; of stockholders in 1991, and in all cases as to each
director until his successor shall be elected and shall qualify, or
until his earlier resignation, removal from office, death or
incapacity. After 1988 at each annual meeting of stockholders that
number of directors equal to the number of directors of the class
whose term expires at the time of such meeting (or, if less, that
number of directors properly nominated and qualified for election)
shall be elected to hold office until the third succeeding annual
meeting of stockholders after their election.
(c) Vacancies; New Directorships. Vacancies on the board of
directors shall be filled as provided in the By-laws. Any director
chosen to fill such a vacancy shall hold office until the next
election the class for which such director shall have been chosen
and until his successor shall have been elected and qualified. or
until his earlier resignation, removal from office, death or
incapacity.
Additional directorships resulting from an increase in the
number of directors shall be apportioned among the classes as
equally as possible. When the number of directors is increased by
the board and newly created directorships are filled by the board,
there shall be no classification of the additional directors until
the next annual meeting of stockholders. No decrease in the number
of directors shall have the effect of shortening the term of any
incumbent director.
(d) Required Vote. Notwithstanding anything contained in the
certificate to the contrary, the affirmative vote of at least 75%
of the shares entitled to vote shall be required to alter, amend or
repeal, or adopt any provisions inconsistent with, this Article
Twelfth, or to fix (including by increase or decrease)the number of
directors of the Corporation by vote of the Corporation's
stockholders.
Exhibit 4.11
LOAN AGREEMENT
THERMOPLASTICS, INC.
AND
CITY OF MISHAWAKA, INDIANA
DATED AS OF SEPTEMBER 1, 1993
The rights of the City of Mishawaka, Indiana, under this Agreement (except
the right to receive payment for its expenses, the right to receive
indemnities, and rights relating to any amendments to this Agreement) have
been assigned to INB National Bank, as Trustee, under a Mortgage and Trust
Indenture dated as of the date of this Agreement among Thermoplastics,
Inc., the Municipality, and the Trustee.
<PAGE>
TABLE OF CONTENTS
Section Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions and Exhibits
Section 1.1. Terms Defined . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Rules of Interpretation . . . . . . . . . . . . . . . 3
Section 1.3. Exhibits. . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
The Loan and The Project
Section 2.1. Municipality's Representations, Warranties, and
Covenants . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2. Company's Representations, Warranties, and Covenants. 5
Section 2.3. The Project . . . . . . . . . . . . . . . . . . . . . 7
Section 2.4. Mortgage and Title Insurance. . . . . . . . . . . . . 7
Section 2.5. Granting of Easements . . . . . . . . . . . . . . . . 8
Section 2.6. Release of Liens. . . . . . . . . . . . . . . . . . . 8
ARTICLE III
The Bonds, Use of Proceeds, The Note
Section 3.1. Agreement to Issue Bonds. . . . . . . . . . . . . . . 10
Section 3.2. Disbursements From Redemption Fund. . . . . . . . . . 10
Section 3.3. Company is Required to Pay in the Event Redemption Fund
is Insufficient . . . . . . . . . . . . . . . . . . . 10
Section 3.4. Investment of Redemption Fund and Bond Fund Moneys. . 10
Section 3.5. Covenants With Respect to Arbitrage . . . . . . . . . 10
Section 3.6. Loan Payments and Other Amounts Payable . . . . . . . 11
Section 3.7. Obligation of Company Unconditional . . . . . . . . . 12
ARTICLE IV
Particular Covenants of the Company
Section 4.1. Consent to Assignment to Trustee. . . . . . . . . . . 14
Section 4.2. Payment of Expenses of Issuance of Bonds. . . . . . . 14
Section 4.3. Company to Maintain its Existence; Conditions Under
Which Exceptions Permitted. . . . . . . . . . . . . . 14
Section 4.4. Further Assurances and Corrective Instruments . . . . 14
Section 4.5. Covenants of Company With Respect to Use of Bond
Proceeds. . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6. Indemnification of Municipality and Trustee . . . . . 15
Section 4.7. Right of Access to Project. . . . . . . . . . . . . . 15
Section 4.8. Insurance . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.9. Taxes and Liabilities . . . . . . . . . . . . . . . . 15
ARTICLE V
Maintenance, Taxes, and Insurance
Section 5.1. Maintenance and Modifications of Project by Company . 16
Section 5.2. Taxes, Other Governmental Charges, and Utility Charges 16
Section 5.3. Insurance Required. . . . . . . . . . . . . . . . . . 17
Section 5.4. Application of Net Proceeds of Insurance. . . . . . . 17
Section 5.5. Additional Provision Respecting Insurance . . . . . . 17
Section 5.6. Advances by Trustee . . . . . . . . . . . . . . . . . 18
ARTICLE VI
Damage, Destruction, and Condemnation
Section 6.1. Damage and Destruction. . . . . . . . . . . . . . . . 19
Section 6.2. Condemnation. . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII
Prepayment of Note
Section 7.1. Optional Prepayment of Note . . . . . . . . . . . . . 21
Section 7.2. Mandatory Prepayment of Note. . . . . . . . . . . . . 21
Section 7.3. Extraordinary Event Prepayment of the Note. . . . . . 21
Section 7.4. Notice of Prepayment. . . . . . . . . . . . . . . . . 21
ARTICLE VIII
Events of Default and Remedies
Section 8.1. Events of Default . . . . . . . . . . . . . . . . . . 22
Section 8.2. Remedies on Default . . . . . . . . . . . . . . . . . 23
Section 8.3. Application of Moneys . . . . . . . . . . . . . . . . 23
Section 8.4. Remedies Cumulative . . . . . . . . . . . . . . . . . 23
Section 8.5. Delay or Omission Not a Waiver. . . . . . . . . . . . 23
Section 8.6. Remedies Subject to Provisions of Law . . . . . . . . 24
ARTICLE IX
Supplements and Amendments to This Agreement
Section 9.1. Supplements and Amendments to This Agreement. . . . . 25
<PAGE>
ARTICLE X
Miscellaneous
Section 10.1. Binding Effect. . . . . . . . . . . . . . . . . 26
Section 10.2. Severability. . . . . . . . . . . . . . . . . . 26
Section 10.3. Amounts Remaining in Bond Fund. . . . . . . . . 26
Section 10.4. Amendments, Changes, and Modifications. . . . . 26
Section 10.5. Execution in Counterparts . . . . . . . . . . . 26
Section 10.6. Notices . . . . . . . . . . . . . . . . . . . . 26
Section 10.7. References to Bonds Ineffective After Bonds Are
Paid. . . . . . . . . . . . . . . . . . . . . . 26
Section 10.8. Agreement for Benefit of Parties Hereto . . . . 26
Section 10.9. Waiver. . . . . . . . . . . . . . . . . . . . . 26
Section 10.10. Captions and Table of Contents. . . . . . . . . 27
Section 10.11. Survival of Covenants, Representations, and
Warranties. . . . . . . . . . . . . . . . . . . 27
Section 10.12. Applicable Law. . . . . . . . . . . . . . . . . 27
Section 10.13. Holidays. . . . . . . . . . . . . . . . . . . . 27
EXHIBIT A--Description of the Project and Project Site
EXHIBIT B--Form of Promissory Note
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT has been executed as of September 1, 1993, by
and between THERMOPLASTICS, INC., an Indiana corporation (the "Company"),
and the CITY OF MISHAWAKA, INDIANA (the "Municipality").
RECITALS
1. Definitions of certain of the terms used in these Recitals
are set out in Article I hereof and Article I of the Indenture (as defined
in Article I hereof).
2. The Municipality previously issued its $3,500,000 principal
amount of City of Mishawaka, Indiana, Economic Development Mortgage
Revenue Bonds, Series 1988 (Elco Industries, Inc./Thermoplastics, Inc.
Project) (the "1988 Bonds"), the proceeds of which were used to assist the
Company with the acquisition, construction, installation, and equipping of
the Project which is located on the Project Site in the Municipality.
3. The Company has determined that it can achieve a
significant cost savings through the refunding and refinancing of the 1988
Bonds. To assist the Company in achieving and effecting such savings, the
Municipality, pursuant to IC 5-1-5, IC 36-7-11.9, and IC 36-7-12, will
issue $3,500,000 aggregate principal amount of City of Mishawaka, Indiana,
Economic Development Refunding Revenue Bonds, Series 1993 (Elco
Industries, Inc./Thermoplastics, Inc. Project) (the "Bonds"), and will
loan the proceeds thereof to the Company, which will use such proceeds for
the purpose of retiring and redeeming the 1988 Bonds, all as described
herein and in the Indenture.
4. As evidence of its obligation to repay the funds loaned to
it under this Loan Agreement, the Company is issuing to the Municipality
its Note.
5. Pursuant to a Mortgage and Trust Indenture dated as of the
date of this Agreement, among the Company, the Municipality, and INB
National Bank, as Trustee, the Municipality will issue the Bonds and, as
security for the payment of the Bonds and the performance of the
obligations of the Municipality and the Company under the Indenture and
the Note, the Municipality will assign the Note and its rights under this
Agreement (except the right to receive payment for its expenses, the right
to receive indemnities and rights relating to any amendments to this
Agreement) to the Trustee and the Company will grant to the Trustee a
mortgage on the Project Site. In addition, the principal of, premium, if
any, and interest on the Bonds will be guaranteed by Elco Industries,
Inc., a Delaware corporation, pursuant to a Guaranty Agreement dated as of
September 1, 1993. The Bonds will be payable solely out of the revenues
and other amounts derived from the Note and under this Agreement and shall
not in any respect be a general obligation of, an indebtedness of, or
constitute a charge against the general credit of the Municipality, the
State of Indiana, or any political subdivision thereof.
AGREEMENT
In consideration of the premises and the mutual covenants
contained herein, the Company and the Municipality agree as follows:
ARTICLE I
Definitions and Exhibits
Section 1.1. Terms Defined. As used in this Agreement, the
following terms shall have the following meanings unless the context
otherwise requires:
"Act" means IC 5-1-5, IC 36-7-11.9, and IC 36-7-12, as from time
to time amended.
"Agreement" means this Loan Agreement and any amendment and
supplement thereto.
"Agreement Term" means the period commencing on the date of this
Agreement and, subject to the provisions of this Agreement, ending on such
date as the Bonds have been fully paid and retired or provision for such
payment made as provided in the Indenture.
"Authorized Company Representative" means a person designated to
act on behalf of the Company by written certificate furnished to the
Municipality and the Trustee containing the specimen signature of the
person and signed on behalf of the Company by its President, any of its
Vice-Presidents, its Chief Financial Officer, its Secretary, or any of its
Assistant Secretaries. The certificate may designate an alternate or
alternates. The Authorized Company Representative may be an employee of
the Company.
"Bonds" means the $3,500,000 aggregate principal amount of the
City of Mishawaka, Indiana, Economic Development Refunding Revenue Bonds,
Series 1993 (Elco Industries, Inc./Thermoplastics, Inc. Project).
"Bond Fund" means the fund created in Section 402 of the
Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Thermoplastics, Inc., an Indiana corporation, and
its successors and assigns.
"Counsel" means an attorney-at-law (who may be counsel to the
Trustee, the Municipality, or the Company).
"Guarantor" means Elco Industries, Inc., a Delaware corporation.
"Guaranty" means the Guaranty Agreement dated as of September 1,
1993, executed by the Guarantor under which the Guarantor guarantees the
payment of principal of, premium, if any, and interest on the Bonds.
"Indenture" means the Mortgage and Trust Indenture, dated as of
the date of this Agreement, among the Company, the Municipality, and the
Trustee, relating to the Bonds, and any indenture supplemental thereto.
"Loan" means the $3,500,000 loan by the Municipality to the
Company of the proceeds of the Bonds.
"Municipality" means the City of Mishawaka, Indiana, and any
successor.
"Net Proceeds" means, when used with respect to any insurance
proceeds or any condemnation award, the amount remaining after deducting
all expenses (including attorneys' fees) incurred in the collection of
such proceeds or award from the gross proceeds thereof.
"1988 Bonds" means the City of Mishawaka, Indiana, Economic
Development Mortgage Revenue Bonds, Series 1988 (Elco Industries, Inc./
Thermoplastics, Inc. Project).
"Note" means the Note of the Company in substantially the form of
Exhibit B hereto and any Note issued in exchange therefor.
"Project" means the facilities described in Part I of Exhibit A
hereto.
"Project Cost" means and includes all those costs related to the
Project which are permitted to be financed under the Code, the Act, this
Agreement, and the Indenture and which do not result in a loss of the
exclusion from gross income for federal income tax purposes of the
interest on the Bonds under the Code.
"Project Site" means the real estate described in Part II of
Exhibit A hereto on which the Project is located.
"Purchaser" means Robert W. Baird & Co. Incorporated.
"Redemption Fund" means the fund created in Section 302 of the
Indenture.
"Trustee" means INB National Bank, and any successor trustee or
co-trustee serving under the Indenture.
Section 1.2. Rules of Interpretation. For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) "This Agreement" means this instrument as originally
executed and as it may from time to time be supplemented or amended.
(b) The words "herein," "hereof," and "hereunder," and other
words of similar import, refer to this Agreement as a whole and not
to any particular Article, Section, or other subdivision.
(c) The terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as
the singular.
(d) All accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles.
(e) Any terms not defined herein but defined in the
Indenture shall have the same meaning herein.
(f) The terms defined elsewhere in this Agreement shall have
the meanings therein prescribed for them.
Section 1.3. Exhibits. The following Exhibits are a part of
this Agreement:
Exhibit A: Description of the Project (Part I) and the
Project Site (Part II)
Exhibit B: Form of Note, form of Note Registrar's
Certificate of Validation, and form of Assignment
<PAGE>
ARTICLE II
The Loan and The Project
Section 2.1. Municipality's Representations, Warranties, and
Covenants.
(a) The Municipality represents and warrants that:
(i) The Municipality is a duly organized and existing
municipal corporation and political subdivision of the State of
Indiana, with full power and authority under the Act to enter into
the transactions contemplated by this Agreement and to carry out its
obligations hereunder.
(ii) The Municipality has duly authorized the issuance,
execution, and delivery of the Bonds and the execution and delivery
of this Agreement.
(b) The Municipality covenants that:
(i) The Municipality shall not take any action to interfere
with any obligation it may have with respect to the Bonds, the
proceedings authorizing the Bonds or this Agreement.
(ii) The Municipality shall provide funds from the proceeds
from the sale of the Bonds for the redemption and retirement of the
1988 Bonds, and shall secure the payment of the Bonds by assigning
this Agreement (except the right to receive payment for its
expenses, the right to receive indemnities, and rights relating to
any amendment of this Agreement) and the Note to the Trustee
pursuant to the Indenture.
Section 2.2. Company's Representations, Warranties, and
Covenants. The Company makes the following representations and warranties
(all as of the date on which this Agreement has been executed) and in
addition, makes the following covenants:
(a) It is a duly organized and validly existing corporation
in good standing under the laws of the State of Indiana, has the
power and authority to own its properties and assets and to carry on
its business as now being conducted and as now contemplated, and has
full power and authority to issue the Note and to execute and
deliver this Agreement and the Indenture; all actions necessary for
the execution and delivery of the Note, this Agreement, and the
Indenture have been taken; and the Note will be a valid and binding
obligation of the Company.
(b) The execution, delivery, and performance of this
Agreement, the Note, and the Indenture will not conflict with or
result in a breach of, or a default under, the Company's Articles of
Incorporation, By-Laws, or any material agreement or instrument to
which the Company is a party or by which it is bound (excepting,
however, such agreements or instruments with respect to which the
Company has been required to and has obtained waivers or consents)
or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Company,
except for the lien of the Indenture.
(c) The 1988 Bonds were, to the best knowledge and belief of
the Company, exempt from federal and State of Indiana income
taxation when issued, as described in and subject to the limitations
contained in the offering circular for the 1988 Bonds, the Company
has no knowledge of any event occurring since the date of issuance
of the 1988 Bonds that adversely affects that tax exempt status of
the 1988 Bonds and the Company has received no notification of any
such event from the Municipality, the trustee for the 1988 Bonds, a
holder of a 1988 Bond, the Internal Revenue Service or the State of
Indiana.
(d) The "average maturity" of the Bonds (taking into account
their issue prices) does not exceed 120% of the remaining "average
reasonably expected economic life" of the facilities originally
financed with the proceeds of the 1988 Bonds (taking into account
the respective cost of such facilities), all as determined in
accordance with the provisions of Section 147(b) of the Code.
(e) No portion of the proceeds of the Bonds will be used to
provide any facility the primary purpose of which is retail food and
beverage service, automobile sales or services, or the provision of
recreation or entertainment, any private or commercial golf course,
country club, massage parlor, tennis club, skating facility
(including roller skating, skateboard, and ice skating), racquet
sports facility (including any handball or racquetball court), hot
tub facility, suntan facility, racetrack, airplane, sky box or other
private luxury box, health club facility, facility used for
gambling, or facility used for the sale of alcoholic beverages.
(f) The Bonds are not and shall not be "federally
guaranteed" as defined in Section 149(b) of the Code.
(g) The proceeds of the Bonds that will be used to acquire
land (or any interest therein) will not exceed 24.9% of the net
proceeds of the Bonds. No portion of the proceeds other than those
used to acquire land (or an interest therein) will be used to
acquire any property (or an interest therein) where the first use of
such property is not pursuant to such acquisition.
(h) The aggregate authorized face amount of the Bonds
allocated to any "test period beneficiary," as such term is defined
in Section 144 of the Code, when increased by the outstanding tax-
exempt industrial development bonds of such beneficiary, does not
and shall not exceed $40,000,000.
(i) The Company represents and warrants that it is the
lawful owner of the Mortgaged Property, free and clear of all liens,
security interests, charges, or encumbrances whatever except
Permitted Encumbrances, and that the Company has full power and
lawful authority to mortgage the Mortgaged Property and the real
property improvements thereon to the Trustee; and that the Company
has good and marketable title to the Mortgaged Property except
Permitted Encumbrances and will preserve, warrant, and defend the
same unto the Trustee against the claims of all persons and parties.
(j) The execution, delivery, and performance by the Company
of this Loan Agreement and the Note do not require the consent or
approval of, the giving of notice of, the registration with, or the
taking of any other action in respect of, any federal, state or
other governmental authority or agency, not previously obtained or
performed.
(k) No litigation, environmental investigations, arbitration
proceedings, or governmental proceedings are pending or threatened
against the Company which would, if adversely determined, materially
and adversely affect the financial condition or continued operations
or properties of the Company and which the Company believes, after
consulting with its counsel, are reasonably likely to be adversely
determined.
(l) The Company will take no action which would (and will
omit no action reasonably within its power, the omission of which
would) cause the interest on the Bonds to become includable for
Federal income tax purposes in the gross income of any Bondholder,
other than a Bondholder who is a "substantial user" of the Project
or a "related person" within the meaning and for the purpose of
Section 147 of the Code.
Section 2.3. The Project. The Company shall cause the Project
to continue to be used, throughout the term of this Agreement as an
"economic development facility" within the meaning of the Act. The
failure or inability of the Company to use the Project, or to cause it to
be used, for the intended purposes shall not affect in any way the
Company's obligations under this Agreement or the Note and shall not be
deemed a breach or default under this Agreement as long as the use does
not affect the validity of the Bonds or result in the interest on the
Bonds becoming includable for federal income tax purposes in the gross
income of a Bondholder.
Section 2.4. Mortgage and Title Insurance. As security for the
payment of the Bonds and the performance of its obligations under the
Indenture and the Note, the Company shall mortgage the Mortgaged Property.
The Company shall provide an ALTA mortgagee's policy of title insurance
issued by a title insurance company reasonably satisfactory to the Trustee
in an amount not less than $3,500,000, which policy shall be free and
clear of all exceptions except Permitted Encumbrances. Any Net Proceeds
payable under such policy shall, at the Trustee's option, be either
(a) used to acquire and construct replacement or substitute property for
that to which title has been lost and such property shall be subject to
the lien of the Indenture, or (b) used to redeem the Bonds or portions
thereof on the earliest possible redemption date.
Section 2.5. Granting of Easements. If no Event of Default
shall have happened and be continuing, the Company may at any time or
times, grant easements, licenses, rights-of-way (including the dedication
of public highways), and other rights or privileges in the nature of the
easements with respect to any property subject to the lien of the
Indenture, free from the lien of the Indenture, or release existing
easements, licenses, rights-of-way, and other rights or privileges, with
or without consideration, and the Municipality and the Trustee shall
execute and deliver any instrument necessary or appropriate to confirm and
grant or release any such easement, license, right-of-way, or other right
or privilege upon receipt of: (a) a copy of the instrument of grant or
release, (b) a written application signed by the Authorized Company
Representative requesting such instrument, (c) a certificate executed by
the Authorized Company Representative stating (i) that such grant or
release is not detrimental to the proper conduct of the business of the
Company, and (ii) that such grant or release will not impair the effective
use or interfere with the operation of the Mortgaged Property and will not
materially weaken, diminish or impair the security intended to be given by
or under the Indenture accompanied by a Certificate of an independent
architect or other expert reasonably acceptable to the Trustee to the
effect that such grant or release will not materially and adversely affect
the operability of the Mortgaged Property.
Section 2.6. Release of Liens. The Trustee shall, at the joint
written request of the Company and the Holders of a majority in aggregate
principal amount of the Bonds then outstanding (and without the necessity
of obtaining the consent of the Municipality), release any item of
collateral specified or referred to in the First or Second Granting Clause
of the Indenture from the lien of the Indenture. The Municipality and the
Trustee shall execute and deliver any instrument necessary or appropriate
to confirm and grant any such disposition or release.
In addition to the foregoing, the Trustee shall, without the
necessity for obtaining the consent of the Municipality or the
Bondholders, release from the lien of the Indenture the Mortgaged Property
or any portion thereof at any time and from time to time provided that the
Company first furnishes the Trustee with, in the event that a portion of
the Mortgaged Property is to be released, the items set forth in
paragraphs 1 and 2 below and, in the event that the entire Mortgaged
Property is to be released, the items set forth in paragraphs (1)(iii)
and (2) below:
(1) A certificate of the Company containing or stating, as
the case may be (i) an adequate legal description of the portion of
the Mortgaged Property to be released, (ii) an "as-built" survey of
the portion of the Mortgaged Property to be released, (iii) that the
Company intends to exercise its privilege of having such Mortgaged
Property released, (iv) that the portion of the Mortgaged Property
with respect to which the release is requested is not needed to
operate the Project, or that the Company has reserved sufficient
right, title, and interest to fulfill such needs, and (v) that the
release will not materially impair ingress and egress to and from or
the operating unity of the Mortgaged Property; and
(2) Either: (i) cash equal to the current fair market value
of the Mortgaged Property or portion thereof to be released (which
value shall be determined by an independent appraisal), which cash
shall be deposited in the Bond Fund under the Indenture and used for
the purposes for which the Bond Fund exists as set forth in the
Indenture including, to the extent possible, the redemption of Bonds
prior to maturity, or (ii) a first mortgage lien in favor of the
Trustee (which lien may be subject to Permitted Encumbrances) on
real property owned and used in the operations of the Company or the
Guarantor the value of which property (determined as of the date on
which such property becomes subject to the mortgage lien described
herein (the "Substitution Date")) is, in the reasonable opinion of
the Trustee, who may rely on the opinion of an expert independent
appraiser selected by the Trustee, at least equal in value to the
value (determined as of the Substitution Date) of the Mortgaged
Property or portion thereof to be released. If the Company
determines to provide the Trustee the mortgage lien described
herein, the mortgage instrument shall be in a form reasonably
acceptable to the Trustee and shall be accompanied by (i) a policy
of title insurance in the full amount of the value of the property
to be subject to the mortgage lien described herein, issued by a
title insurance company that is both authorized to do business in
Indiana and in all other respects reasonably acceptable to the
Trustee, and providing coverage substantially similar to the
coverage provided by the policy of title insurance issued with
respect to the Mortgaged Property, and (ii) an opinion of counsel as
to the validity and enforceability of the mortgage.
<PAGE>
ARTICLE III
The Bonds, Use of Proceeds, The Note
Section 3.1. Agreement to Issue Bonds. In order to provide
funds to make the Loan, the Municipality shall issue the Bonds and sell
them to the Purchaser and deposit the proceeds with the Trustee as
follows:
(a) Into the Bond Fund, the accrued interest, if any, paid
by the Purchaser; and
(b) Into the Redemption Fund, the balance of the proceeds.
Section 3.2. Disbursements From Redemption Fund. The Indenture
authorizes the Trustee to make payments from the Redemption Fund to INB
National Bank (f/k/a The Indiana National Bank) in its capacity as trustee
with respect to the 1988 Bonds and solely for the purpose of discharging,
redeeming and retiring the 1988 Bonds, provided, however, that any moneys
remaining in the Redemption Fund after such discharge, retirement,
redemption, and termination shall be promptly deposited in the Bond Fund.
Payment as aforesaid shall be made upon receipt by the Trustee of all
materials and documents necessary to evidence to the satisfaction of the
Trustee that the funds being disbursed hereunder are sufficient to
discharge fully all obligations of the Company created and existing in
connection with the 1988 Bonds, together with all instruments and
documents necessary to evidence to the satisfaction of the Trustee the
discharge of all liens and encumbrances arising and existing by reason of
the 1988 Bonds.
Section 3.3. Company is Required to Pay in the Event Redemption
Fund is Insufficient. In the event the moneys in the Redemption Fund
should not be sufficient to pay the costs of retiring, redeeming, and
discharging the 1988 Bonds in full, the Company shall pay that portion of
the costs in excess of the moneys available in the Redemption Fund.
Section 3.4. Investment of Redemption Fund and Bond Fund Moneys.
Any moneys held as part of the Redemption Fund and the Bond Fund shall be
invested by the Trustee at the direction of the Company in Qualified
Investments which shall be direct obligations of the United States of
America or in other obligations backed by the full faith and credit of the
United States of America.
Section 3.5. Covenants With Respect to Arbitrage. The Company
and the Municipality covenant to each other and to and for the benefit of
the holders of the Bonds that no use will be made of the proceeds from the
issue and sale of the Bonds which, if such use could have been reasonably
expected on the date of issue of the Bonds, would have caused the Bonds to
be classified as arbitrage bonds under Section 103(b)(2) of the Code
(within the meaning of Section 148 of the Code). As long as any Bonds are
outstanding, the Municipality and the Company shall not violate the
requirements of the Code relating to arbitrage bonds, and any regulations
thereunder, including the requirement of Section 148 of the Code relating
to the rebate of certain amounts to the United States government. The
Company will provide to the Trustee instructions relating to the
permissible investment of Bond proceeds and instructions and computations
(using investment information provided by the Trustee) relating to the
amount required to be rebated to the United States, all in conformity with
Section 148 of the Code. The Company reserves the right, however, to make
any investment of proceeds permitted under the laws of the State of
Indiana, if the sections of the Code relating to arbitrage bonds or the
regulations thereunder are repealed or relaxed or are held void by final
judgment of a court of competent jurisdiction, so long as the investment
would not result in making the interest on the Bonds includable in the
gross income of the holders thereof for purposes of Federal income
taxation. In making investments, the Company may rely on an opinion of
counsel of recognized competence in such matters. The Trustee may make
any and all such investments through its own bond department.
Section 3.6. Loan Payments and Other Amounts Payable.
(a) Concurrently with the sale of the Bonds, the Company shall
execute and deliver the Note to the Municipality, pursuant to which the
Company shall make payments sufficient to pay when due (whether at
maturity, upon call for redemption, by acceleration or otherwise) the
principal of, premium, if any, and interest on the Bonds. The Note shall
be issued as a fully registered note substantially in the form attached
hereto as Exhibit B. The Trustee shall act as Note Registrar and shall
cause books for the registration and for the transfer of the Note to be
kept at its principal office. Upon surrender for transfer of the Note at
the principal office of the Trustee, endorsed for transfer by the
registered owner or accompanied by an assignment executed by the
registered owner or his authorized attorney, the Trustee shall validate
and deliver in the name of the transferee a new Note which shall have been
executed by the Company. The person in whose name the Note is registered
shall be deemed the absolute owner thereof for all purposes, and
references to the holder of the Note shall mean the registered owner
thereof.
(b) The Company shall also pay when due (i) the reasonable and
necessary fees and expenses of the Trustee (including any reasonable and
necessary fees and expenses in its capacity as Note Registrar) and any
paying agent for services in connection with the Bonds as specified in
Section 903 of the Indenture, and (ii) the reasonable and necessary fees
and expenses of the Municipality, including reasonable attorneys' fees, in
connection with any default of the Company under this Agreement, the Note
or the Indenture.
(c) If the Company fails to make any of the payments required
in this Section 3.6 or in the Note, all unpaid items or installments shall
continue as an obligation of the Company until fully paid, and the Company
shall pay the same with interest thereon (to the extent permitted by law)
until paid at a per annum rate of interest equal to the per annum rate
then in effect on the Bonds plus two percent (2%), or at the maximum rate
permitted by law, whichever is lesser.
(d) All payments under this Section 3.6 shall be made by the
Company directly to the Trustee in immediately available funds and the
Trustee shall deposit all such payments into the Bond Fund provided that
payments under Section 3.6(b) shall be made by the Company directly to the
person entitled thereto. The amount of any money in the Bond Fund which
is either proceeds from the sale of any Bonds or earnings on investments
made pursuant to the provisions of the Indenture which has been set aside
by the Trustee, at the request of the Company, for payments of principal,
whether at maturity or upon redemption, of the Bonds shall be credited
against the obligation of the Company to pay the principal of the Note.
The amount of any money in the Bond Fund which is either proceeds from the
sale of any Bonds or earnings on investments made pursuant to the
provisions of the Indenture which has been set aside by the Trustee for
payments of interest on the Bonds shall be credited against the obligation
of the Company to pay interest on the Note. The principal amount of any
Bonds purchased by the Company and delivered to the Trustee, or purchased
by the Trustee and cancelled, shall be credited against the obligation of
the Company to pay the principal of the Note.
(e) If on any principal or interest payment date the balance in
the Bond Fund is insufficient to make the required payments of principal
of and premium, if any, and interest on the Bonds on that date, the
Company upon notice shall pay forthwith any deficiency to the Trustee.
(f) The Company shall not be obligated to make any further
payments under this Section 3.6, and the Company's liability to make
payments under this Section 3.6 shall cease, at any time that the entire
principal of and premium, if any, and interest on the Bonds shall have
been fully paid in accordance with their terms and the provisions of
Section 1201 of the Indenture (including, without limitation, principal,
interest to maturity or earliest redemption date, as the case may be,
expenses of redemption, redemption premiums, and fees and expenses of the
Municipality, the Trustee and any paying agent and any other costs and
fees required to be paid by the Company pursuant to this Agreement), or at
any time that there shall be in the Bond Fund an amount sufficient to pay
or redeem the Bonds in accordance with the provisions of Section 1201 the
Indenture (including, without limitation, principal, interest to maturity
or earliest redemption date, as the case may be, expenses of redemption
and redemption premiums, and fees and expenses of the Municipality, the
Trustee and any paying agent and any other costs and fees required to be
paid by the Company pursuant to this Agreement) and all other requirements
of Section 1201 of the Indenture have been satisfied in full.
Section 3.7. Obligation of Company Unconditional. The
obligation of the Company to make the payments and to perform and observe
its other agreements pursuant to this Agreement and the Note shall be
absolute and unconditional and shall not be subject to reduction or delay
by set-off, counterclaim, abatement or otherwise. Until such time as the
principal of and premium, if any, and interest on the Bonds shall have
been fully paid or provision for the payment thereof shall have been made
in accordance with Section 1201 of the Indenture (including, without
limitation, principal, interest to maturity or earliest redemption date,
as the case may be, expenses of redemption, redemption premiums, and fees
and expenses of the Municipality, the Trustee and any paying agent and any
other costs and fees required to be paid by the Company pursuant to this
Agreement), and all other requirements of Section 1201 of the Indenture
have been satisfied in full, the Company (a) shall not suspend or
discontinue any payments pursuant to this Agreement or the Note, (b) shall
perform and observe all its other agreements contained in this Agreement
and the Note, and (c) except as provided in Article VII hereof, shall not
terminate this Agreement or the Note for any cause. Nothing contained in
this Agreement shall be construed to release the Municipality from the
performance of any of its obligations; and in the event the Municipality
shall fail to perform any such agreement on its part, the Company may
institute such action against the Municipality as the Company may deem
necessary to compel performance, provided that no such action shall
(i) violate the agreements on the part of the Company contained in the
first sentence of this Section 3.7 or (ii) diminish the amounts required
to be paid by the Company pursuant to Section 3.6 hereof.
<PAGE>
ARTICLE IV
Particular Covenants of the Company
Section 4.1. Consent to Assignment to Trustee. The Company
acknowledges and consents to the assignment of the Note and of the
Municipality's rights hereunder (except the right to receive payment for
its expenses, the right to receive indemnities and rights relating to any
amendments to this Agreement) to the Trustee pursuant to the Indenture.
Except as otherwise provided herein, the Company shall pay to the Trustee
all amounts payable under this Agreement and the Note, and the Company
acknowledges that the Trustee may enforce the rights, remedies and
privileges granted to the Municipality hereunder.
Section 4.2. Payment of Expenses of Issuance of Bonds. In
addition to its payment obligations under Section 3.6 of this Agreement,
the Company shall pay for all the reasonable costs and shall be liable and
pay for any recording expenses, legal fees, printing expenses and other
fees and expenses reasonably incurred or to be incurred by or on behalf of
the Municipality and the Trustee in connection with or as an incident to
the issuance and sale of the Bonds or any amendment or supplement to this
Agreement or the Indenture.
Section 4.3. Company to Maintain its Existence; Conditions Under
Which Exceptions Permitted. The Company shall during the term of this
Agreement maintain its corporate existence and will be duly qualified to
transact business in the State of Indiana and shall not voluntarily take,
or omit to take, any action that would cause the Company to be dissolved,
nor shall the Company sell, lease transfer or otherwise dispose of all or
substantially all of its assets or consolidate with or merge into another
corporation or permit one or more other corporations to consolidate with
or merge into it; except that the Company may consolidate with or merge
into another corporation incorporated and existing under the laws of the
United States of America or one of the states of the United States of
America or permit one or more other corporations to consolidate with or
merge into it or sell or otherwise transfer to another such corporation
all or substantially all of its assets as an entirety and may thereafter
dissolve, provided, that immediately after such action there is no default
under the Note, this Agreement or the Indenture, and further provided that
if the Company is not the surviving, resulting or transferee corporation
(the "Survivor"), the Survivor is (a) qualified to do business in the
State of Indiana and (b) shall expressly assume and agree to perform all
of the Company's obligations under this Agreement, the Note and the
Indenture.
Section 4.4. Further Assurances and Corrective Instruments. The
Municipality and the Company shall execute and deliver, or cause to be
executed and delivered, such supplements hereto and further instruments as
may reasonably be required for carrying out the intention of or
facilitating the performance of this Agreement.
Section 4.5. Covenants of Company With Respect to Use of Bond
Proceeds. The Municipality is issuing the Bonds pursuant to an exemption
contained in the Code. It is the intention of the parties that the
interest on the Bonds remain excludable from gross income for purposes of
federal income taxation and to that end the Company covenants with the
Municipality and with the Trustee for the benefit of the future holders of
the Bonds, that it will never, insofar as it is able, permit Bond proceeds
to be expended or utilized in such a manner as to cause the loss of the
exclusion claimed other than as a result of previously unanticipated
capital expenditures.
Section 4.6. Indemnification of Municipality and Trustee. The
Company shall indemnify and hold the Municipality and the Trustee harmless
against any claim, loss, liability or expense incurred without negligence
or bad faith or willful misconduct on the part of the Municipality or the
Trustee arising out of or in connection with this Agreement, the Note, the
Indenture or the Project or Project Site, including reasonable attorneys'
fees and the costs and expense of defense against any such claim or
liability.
Section 4.7. Right of Access to Project. The Municipality, the
Trustee, and any of their duly authorized agents shall have the right at
all reasonable times during normal business hours after reasonable prior
notice, subject to the Company's safety and security requirements, to
enter upon the Project Site and to examine and inspect the Project without
interference or prejudice to the Company's operation. The Municipality
and its duly authorized agents shall have such right of access to the
Project as may be reasonably necessary for the proper maintenance of the
Project in the event of failure by the Company to perform its obligations
under Section 5.1 hereof.
The Municipality and the Trustee shall not disclose to any other
person any trade secrets or other information designated by the Company as
confidential and obtained by the Municipality or Trustee from the above
mentioned inspection and examination.
Section 4.8. Insurance. Subject to Article V of this Agreement,
the Company shall maintain such insurance as may be required by law and
such other insurance, to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly situated.
Section 4.9. Taxes and Liabilities. Subject to Article V of
this Agreement, the Company shall pay when due all taxes, assessments and
other liabilities including trade accounts, except such as are being
contested in good faith and by appropriate proceedings and for which
appropriate reserves have been established and, as to trade accounts,
subject to industry practices.
<PAGE>
ARTICLE V
Maintenance, Taxes, and Insurance
Section 5.1. Maintenance and Modifications of Project by
Company. The Company shall, during the Agreement Term and at its own
expense (a) keep the Project and the Project Site in as reasonably safe
condition as its operations shall permit, and (b) keep the Project in good
repair and in good operating condition, making from time to time all
necessary repairs thereto (including external and structural repairs) and
renewals and replacements thereof. Subject to the provisions of this
Agreement and the Indenture, the Company may, also at its own expense,
make from time to time any additions, modifications or improvements to the
Project, including specifically additions and expansions to the Project,
as it may deem desirable for its business purposes that do not materially
adversely affect the structural integrity of the Project or substantially
reduce its value; provided, that all such additions, modifications and
improvements to the Project shall be located wholly within the boundary
lines of the Project Site or any other real property owned by the Company
and made subject to the mortgage created by the Indenture and that is
subject to no liens, restrictions or encumbrances of any kind excepting
Permitted Encumbrances.
The Company shall not permit any mechanic's lien, security
interest or other encumbrance to remain against the Project or the Project
Site for labor or materials furnished in connection with any additions,
modifications, improvements, repairs, renewals or replacements so made by
it; provided, that if the Company shall first notify the Trustee of its
intention so to do, the Company may in good faith contest any such
mechanic's or similar lien filed or established against the Project or the
Project Site and in such event may permit the items so contested to remain
undischarged and unsatisfied during the period of such contest and any
appeal therefrom unless the Municipality or the Trustee shall notify the
Company that, by non-payment of any such items, the lien of the Indenture
as to any part of the Project or the Project Site will be materially
endangered or the Project or the Project Site or any part thereof will be
subject to loss or forfeiture, in which event the Company shall promptly
pay and cause to be satisfied and discharged all such unpaid items or
shall promptly provide the Municipality and the Trustee with a bond or
other security, reasonably acceptable to the Trustee.
Section 5.2. Taxes, Other Governmental Charges, and Utility
Charges. The Company shall promptly pay, as the same become due, all
taxes and governmental charges of any kind whatsoever that may at any time
be lawfully assessed or levied against or with respect to the Project or
the Project Site, or any interest therein or any machinery, equipment or
other property installed or bought by the Company therein or thereon
(including, without limiting the generality of the foregoing, any taxes
levied upon or with respect to the revenues, income or profits of the
Company from the Project which if not paid, will become a lien on the
Project or the Project Site prior to or on a parity with the lien of the
Indenture and including all ad valorem taxes lawfully assessed upon the
Project or the Project Site), all utility and other charges incurred in
the operation, maintenance, use, occupancy and upkeep of the Project or
the Project Site and all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by lien on
the Project or the Project Site.
The Company may, at its expense and in its own name and behalf,
in good faith contest by appropriate proceedings any such taxes,
assessments and other charges and, in the event of any such contest, may
permit the taxes, assessments or other charges so contested to remain
unpaid during the period of such contest and any appeal therefrom,
provided during such period enforcement of any such contested item shall
be effectively stayed and appropriate reserves shall be established.
Section 5.3. Insurance Required. The Company shall insure or
cause to be insured during the Agreement Term the Project and the Project
Site, against such risks as are customarily insured against by businesses
of like size and type, paying as the same become due all premiums in
respect thereto, including but not necessarily limited to:
(a) Insurance upon the repair or replacement basis if
available, and otherwise to the full insurable value of the Project
(with deductible provisions not to exceed $100,000 in any one
casualty), against loss or damage by fire, lightning, windstorm,
hail, explosion and similar risks and perils with uniform standard
extended coverage endorsement limited only as may be provided in the
standard form of extended coverage endorsement at the time in use in
Indiana.
(b) Boiler explosion insurance on any steam boilers,
pressure vessels and pressure piping in an amount not less than the
full replacement cost of the Project (with deductible provisions not
to exceed $100,000), provided that such insurance need not be taken
out unless and until steam boilers, pressure vessels and pressure
piping have been installed in the Project.
(c) Comprehensive general public liability insurance to the
extent of $1,000,000 per occurrence against liability for bodily
injury, including death resulting therefrom, and damage to property
including loss of use thereof occurring on or in any way related to
the Project or the Project Site or any part thereof.
(d) Worker's compensation and occupational disease coverage
as required by the laws of the State of Indiana.
Section 5.4. Application of Net Proceeds of Insurance. The Net
Proceeds of the insurance carried pursuant to the provisions of
Section 5.3(a) and (b) hereof shall be paid and applied as provided
in Section 6.1 hereof, and the Net Proceeds of insurance carried pursuant
to the provisions of Section 5.3(c) and (d) hereof shall be applied toward
extinguishment or satisfaction of the liability with respect to which such
insurance proceeds have been paid.
Section 5.5. Additional Provision Respecting Insurance. All
insurance required in Section 5.3 hereof shall be taken out and maintained
in generally recognized responsible insurance companies selected by the
Company and qualified to do business in the State of Indiana. All
policies evidencing such insurance shall provide for payment to the
Company and the Trustee, as their respective interest may appear, and
shall not be cancelled or modified without at least ten days' prior
written notice to the Trustee. The policies required by Section 5.3(a)
and 5.3(b) shall contain standard mortgagee clauses requiring that all Net
Proceeds of insurance resulting from any claim in excess of $250,000 for
loss or damage covered thereby be paid to the Trustee; provided, however,
that all claims, regardless of amount, may be adjusted by the Company with
the insurers, subject to approval of the Trustee to the extent that its
interests may appear as to any settlement of any claim in excess of
$250,000.
A certificate, or certificates, of the insurers that such
insurance is in force and effect, together with copies of the insurance
policies, shall be deposited promptly with the Trustee and, prior to the
expiration of any such policy, the Company shall furnish the Trustee with
evidence satisfactory to the Trustee that the policy has been renewed or
replaced, or is no longer required by this Agreement. The insurance
herein required may be contained in blanket policies now or hereafter
maintained by the Company.
Section 5.6. Advances by Trustee. In the event the Company
shall fail, as required herein, (a) to maintain the full insurance
coverage, (b) to keep the Project and the Project Site in a reasonably
safe condition as its operating condition will permit, (c) to keep the
Project in good repair and good operating condition, (d) to discharge any
mechanic's lien, security interest or other encumbrance, or (e) to pay all
taxes, other governmental charges and utility charges, the Trustee may
(but shall be under no obligation to) take out the required policies of
insurance and pay the premiums on the same, make the required repairs,
renewals and replacements, discharge the lien or other encumbrance or pay
all taxes, other governmental charges and utility charges; and all amounts
so advanced therefor by the Trustee shall become an additional obligation
of the Company to the Trustee, which amounts, together with interest
thereon (to the extent permitted by law) until paid until repaid at the
rate of one percent (1%) per annum over the prime rate (which prime rate
shall be the rate from time to time announced by the commercial banking
department of the Trustee or any of its affiliates to be its prime rate on
90-day commercial loans), or at the maximum rate permitted by law,
whichever is lesser, the Company shall pay.
<PAGE>
ARTICLE VI
Damage, Destruction, and Condemnation
Section 6.1. Damage and Destruction. Unless the Company shall
have exercised its option to prepay the Note in full pursuant to the
provisions of Section 7.1 hereof, if prior to full payment of the Bonds
(or provision for payment thereof having been made in accordance with the
provisions of the Indenture) the Project is destroyed (in whole or in
part) or is damaged by fire or other casualty to such extent that the
claim for loss under the insurance policies required to be carried
pursuant to Section 5.3(a) and (b) hereof resulting from such destruction
or damage is not greater than $250,000, the Company (a) shall promptly
repair, rebuild or restore the property damaged or destroyed to
substantially the same condition as it existed prior to the event causing
such damage or destruction, with such changes, alterations and
modifications (including the substitution and addition of other property)
as may be desired by the Company and as will not impair operating unity or
productive capacity or the character of the Project, and (b) shall apply
for such purpose so much as may be necessary of any Net Proceeds of
insurance resulting from such claims for losses, as well as any additional
moneys of the Company necessary therefor. All Net Proceeds of insurance
resulting from such claims for losses not in excess of $250,000 shall be
paid to the Company.
Unless the Company shall have exercised its option to prepay the
Note in full pursuant to the provisions of Section 7.1 hereof, if prior to
full payment of the Bonds (or provision for payment thereof having been
made in accordance with the provisions of the Indenture) the Project is
destroyed (in whole or in part) or is damaged by fire or other casualty to
such extent that the claim for loss under the insurance policies required
to be carried pursuant to Section 5.3(a) and (b) hereof resulting from
such destruction or damage is in excess of $250,000, the Company shall
promptly give written notice thereof to the Trustee. All Net Proceeds of
insurance resulting from such claims for losses shall be paid to and held
by the Trustee in a separate trust account, whereupon (i) the Company
shall proceed promptly to repair, rebuild or restore the property damaged
or destroyed to substantially the same condition as it existed prior to
the event causing such damage or destruction, with such changes,
alterations and modifications (including the substitution and addition of
other property) as may be desired by the Company and as will not impair
operating unity or productive capacity or the character of the Project,
and (ii) the Trustee shall apply so much as may be necessary of the Net
Proceeds of such insurance to payment of the costs of such repair,
rebuilding or restoration, either on completion thereof or as the work
progresses as directed by the Company. In the event said Net Proceeds are
not sufficient to pay in full the costs of such repair, rebuilding or
restoration, the Company shall, nonetheless, complete the work thereof and
shall pay that portion of the costs thereof in excess of the amount of
said Net Proceeds. The Company shall not, by reason of the payment of such
excess costs (whether by direct payment thereof or advances to the Trustee
therefor), be entitled to any reimbursement from the Trustee, or the
holders or owners of the Bonds, or any abatement or diminution of the
amount payable under this Agreement. Any balance of such Net Proceeds
remaining after payment of all the costs of such repair, rebuilding or
restoration shall be deposited into the Bond Fund. If the Bonds have been
fully paid (or provision for payment thereof has been made in accordance
with the Indenture), any balance of such Net Proceeds shall be paid to the
Company.
Any moneys held by the Trustee in the separate trust account
under the provisions of the preceding paragraph shall, at the written
request of the Authorized Company Representative, be invested or
reinvested by the Trustee as provided in Section 3.4 hereof. The Company
shall forthwith pay to the Trustee the amount of any losses with respect
to principal on such investments.
Section 6.2. Condemnation. Unless the Company shall have
exercised its option to prepay the Note in full pursuant to the provisions
of Section 7.1 hereof, in the event that title to, or the temporary use
of, the Project or the Project Site or any part thereof shall be taken
under the exercise of the power of eminent domain by any governmental body
or by any person, firm or corporation acting under governmental authority,
the Company shall be obligated to continue to make payments on the Note
and all other payments specified herein. The Company and the Trustee
shall cause the Net Proceeds received by them or either of them from any
award made in such eminent domain proceedings to be paid to and held by
the Trustee in a separate trust account, and to be applied in one or more
of the following ways as shall be directed in writing by the Company:
(a) The prompt repair, restoration, relocation, modification
or improvement of the Project and the Project Site, to substantially
the same condition as existed prior to the exercise of said power of
eminent domain.
(b) Redemption of the Bonds pursuant to Section 7.1 hereof;
provided, that no part of any such condemnation award may be applied
for such redemption, unless the Company shall furnish to the Trustee
a certificate of the Authorized Company Representative stating
(i) that the property forming a part of the Project or the Project
Site that was taken by such condemnation proceedings is not
essential to the Company's use or occupancy of the Project or the
Project Site, or (ii) that the Project or the Project Site has been
repaired, restored, relocated, modified or improved to a condition
substantially equivalent to its condition prior to the taking by
such condemnation proceedings.
Unless the Company shall have exercised its option to prepay the
Note in full pursuant to the provisions of Section 7.1 hereof within
ninety days from the date of entry of a final order in any eminent domain
proceedings granting condemnation, the Company shall direct the Trustee in
writing as to which of the ways specified in this Section 6.2 the Company
elects to have the condemnation award applied. Any balance of the Net
Proceeds of the award in such eminent domain proceedings shall be paid
into the Bond Fund. If the Bonds have been fully paid (or provision for
payment thereof has been made in accordance with the provisions of the
Indenture), all Net Proceeds shall be paid to the Company.
Any moneys held by the Trustee under the provisions of this
Section 6.2 shall, at the written request of the Authorized Company
Representative, be invested or reinvested by the Trustee in accord with
Section 3.4 hereof. The Company shall forthwith pay to the Trustee the
amounts of any losses with respect to principal on such investments.
<PAGE>
ARTICLE VII
Prepayment of Note
Section 7.1. Optional Prepayment of Note. The Company may, at
its option, prepay the Note in whole or in part on or after October 1,
1997, (and if in part, in whole multiples of $5,000), on any date by
paying to the Trustee a sum sufficient, together with other funds in the
Bond Fund and available for that purpose, to pay (a) the principal of,
premium (as specified in the Indenture) and interest on that portion of
the Bonds then outstanding to be redeemed, and (b) all reasonable and
necessary fees and expenses of the Trustee and any paying agent accrued
and to accrue through the redemption date.
Section 7.2. Mandatory Prepayment of Note. The Company shall
prepay the amounts due under this Agreement and the Note in whole prior to
the expiration of this Agreement and prior to the full payment (or
provision for full payment) of the Bonds on the earliest practicable date
(selected by the Trustee) within ninety (90) days following a
Determination of Taxability (as defined in the Indenture).
In the event of an obligation to prepay under this Section 7.2,
the Company shall pay to the Trustee a sum sufficient, together with other
funds deposited into the Bond Fund and available for the purpose, to pay
the principal, premium (as specified in the Indenture) and interest on the
principal of all the Bonds then outstanding and all reasonable and
necessary fees and expenses of the Trustee and any paying agent accrued
and to accrue through final payment of the Bonds.
Section 7.3. Extraordinary Event Prepayment of the Note. The
Company may, at its option, prepay the Note in whole but not in part,
without redemption premium, within one year following the occurrence of
any of the events specified in Section 502 of the Indenture by paying the
Trustee a sum sufficient, together with other funds in the Bond Fund and
available for that purpose, to pay (a) the principal of and interest upon
all of the Bonds then outstanding, and (b) all reasonable and necessary
fees and expenses of the Trustee and the paying agent accrued and to
accrue through the redemption date.
Section 7.4. Notice of Prepayment. To exercise prepayment under
Section 7.1 or 7.3 hereof, the Company shall give written notice to the
Trustee at least forty-five (45) days but not more than seventy-five
(75) days prior to a specified date of the prepayment. To prepay under
Section 7.2 hereof, the Company shall give written notice to the Trustee
within thirty (30) days after the event requiring the prepayment
specifying the date of the prepayment, which shall be not less than forty-
five (45) days nor more than ninety (90) days from the date the notice is
mailed. If the Company fails to give timely notice of a prepayment under
Section 7.2 hereof, the Trustee shall give written notice to the Company
specifying a date of prepayment not less than fifteen (15) days nor more
than sixty (60) days from the date that notice is mailed.
<PAGE>
ARTICLE VIII
Events of Default and Remedies
Section 8.1. Events of Default. The occurrence and continuance
of any of the following events shall constitute an "Event of Default"
hereunder:
(a) Default in the due and punctual payment of any
installment of principal of (whether at stated maturity, upon
required prepayment, acceleration or otherwise) or any payment of
interest or redemption premium on the Note;
(b) The dissolution or liquidation of the Company unless
such dissolution or liquidation is permitted by this Agreement;
(c) Failure by the Company to observe and perform any
covenant, condition or agreement in this Agreement on its part to be
observed or performed other than those referred to in Section 8.1(a)
or (b) for a period of thirty (30) days after written notice,
specifying the failure and requesting that it be remedied, given to
the Company by the Trustee, unless the Trustee agrees in writing to
an extension of the time prior to its expiration; provided, however,
that with respect to this clause (c), if such failure of performance
shall be such that it cannot be corrected within such period, it
shall not constitute an Event of Default if such failure of
performance, in the reasonable opinion of the Trustee, is
correctable without material adverse effect on the Bonds and if
corrective action is instituted by or on behalf of the Company
within such period and diligently pursued until such failure of
performance is corrected.
(d) A decree or order shall have been entered by a court of
competent jurisdiction constituting an order for relief under the
Bankruptcy Code or adjudging the Company insolvent or approving as
properly filed a petition seeking reorganization of the Company
under the Bankruptcy Code or any other federal or state law relating
to bankruptcy or insolvency or appointing a receiver or decreeing or
ordering the winding up or liquidation of the affairs of the Company
or the sequestration of a substantial part of the property of the
Company, and any such decree or order shall remain in force
undischarged and unstayed for a period of ninety days.
(e) The Company shall file a petition seeking relief under
the Bankruptcy Code or shall suffer the imposition of an order
thereunder or shall institute or consent to the institution of
bankruptcy or insolvency proceedings against it or shall file a
petition or answer or consent seeking reorganization or relief
(other than as a creditor) under the Bankruptcy Code or any other
federal or state law relating to bankruptcy or insolvency or shall
consent to the filing of any such petition or shall consent to the
appointment of a receiver or shall make an assignment for the
benefit of creditors or shall admit in writing its inability to pay
its debts generally as they become due or shall fail to pay its
debts generally as they become due, or action shall be taken by the
Company in furtherance of any of the aforesaid purposes.
(f) An Event of Default as defined in Section 801 of the
Indenture shall have occurred.
(g) An Event of Default as defined in Section 4.1 of the
Guaranty shall have occurred.
Section 8.2. Remedies on Default. Whenever any Event of Default
referred to in Section 8.1 shall have happened and be continuing, the
Trustee:
(a) May, and upon the written request of the owners of not
less than 25% of the aggregate principal amount of the Bonds then
outstanding shall, declare the Note and all amounts payable
thereunder, whether by acceleration of maturity or otherwise, to be
immediately due and payable.
(b) The Trustee may take whatever action may appear
necessary or desirable to collect the amounts due and to become due
under this Agreement and the Note, or to enforce performance and
observance of any obligation, agreement or covenant of the Company
under this Agreement and the Note.
Section 8.3. Application of Moneys. All moneys collected by the
Trustee under Section 8.2 hereof shall be applied as follows:
FIRST: To pay any sums required to be paid by the Company
pursuant to this Agreement, the Note, the Indenture or the Bonds
other than principal, premium, if any, and interest on the Note
or the Bonds.
SECOND: To pay the whole amount then due, owing and unpaid
upon the Note for principal, premium, if any, and interest in
accordance with Section 807 of the Indenture. Payment shall be
made upon presentation of the Note and the notation on the Note
of the payment, if partially paid, or the surrender and
cancellation of the Note, if fully paid.
THIRD: To pay the Company, its successors or assigns, upon
the written request of the Company or to whosoever may be
lawfully entitled to receive the same upon its written request,
or as any court of competent jurisdiction may direct.
Section 8.4. Remedies Cumulative. No remedy granted by this
Agreement is intended to be exclusive of any other remedy. All available
remedies shall be cumulative.
Section 8.5. Delay or Omission Not a Waiver. No delay or
omission of the Trustee to exercise any right or power accruing upon any
Event of Default shall impair the right or power, or shall be construed to
be a waiver of the Event of Default or an acquiescence therein. Every
power and remedy may be exercised as often as the Trustee deems expedient.
Section 8.6. Remedies Subject to Provisions of Law. All rights,
remedies and powers provided by this Article may be exercised only to the
extent that their exercise does not violate any applicable provision of
law. All the provisions of this Article are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this
Agreement invalid or unenforceable under the provisions of any applicable
law.
<PAGE>
ARTICLE IX
Supplements and Amendments to This Agreement
Section 9.1. Supplements and Amendments to This Agreement.
Reference is made to Article XI of the Indenture.
<PAGE>
ARTICLE X
Miscellaneous
Section 10.1. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the Municipality, the Company and
their respective successors and assigns, subject to the limitations in
Sections 4.3 and 10.4 hereof.
Section 10.2. Severability. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, that holding shall not invalidate or render unenforceable
any other provisions hereof.
Section 10.3. Amounts Remaining in Bond Fund. Any amounts
remaining in the Bond Fund upon expiration or termination of this
Agreement in accordance with the Indenture shall belong to and be paid to
the Company by the Trustee.
Section 10.4. Amendments, Changes, and Modifications. After the
Bonds are issued and before they are paid in full (or provision for
payment in full is made), this Agreement may not be amended, assigned or
terminated without the written consent of the Trustee.
Section 10.5. Execution in Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an original.
Section 10.6. Notices. All notices, certificates, payments or
other communications hereunder shall be sufficiently given and shall be
deemed given when delivered or mailed by registered or certified mail,
postage prepaid, or overnight express mail addressed as follows: if to
the Municipality, at the City Hall, 600 East Third Street, Mishawaka,
Indiana 46544, Attention of its City Clerk; if to the Company, at
1400 South Industrial Drive, Mishawaka, Indiana 46544, Attention of its
President; if to the Guarantor, at 1111 Samuelson Road, P.0. Box 7009,
Rockford, Illinois 61125, Attention of its Vice President-Finance with a
copy to the attention of its President; or to such other address as may
hereafter be furnished by notice.
Section 10.7. References to Bonds Ineffective After Bonds Are
Paid. Upon payment in full of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture) and
payment of all fees and charges of the Municipality, Trustee and any
paying agent, all references in this Agreement to the Bonds and the
Trustee shall be ineffective and neither the Trustee nor the holders of
the Bonds shall thereafter have any rights hereunder, except those that
shall have theretofore vested.
Section 10.8. Agreement for Benefit of Parties Hereto. Nothing
in this Agreement, express or implied, is Intended to give to any person
other than the parties hereto and the holder of the Note, any right,
remedy or claim under or by reason of this Agreement.
Section 10.9. Waiver. No waiver of any of the provisions of
this Agreement shall be effective and binding unless set forth in a
written notice and no waiver of one provision shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver or a waiver of such
provision in any other instance.
Section 10.10. Captions and Table of Contents. The captions
herein and the Table of Contents are inserted only as a matter of
convenience and do not in any way define, limit, construe or describe the
scope or intent of this Agreement or any section thereof or in any other
way affect this Agreement.
Section 10.11. Survival of Covenants, Representations, and
Warranties. All covenants, representations and warranties made by the
Company and the Municipality contained herein or in any other document,
certificate or instrument delivered in connection with the sale of any of
the Bonds shall be continuing and shall survive delivery of the Bonds and
the other transactions contemplated by this Agreement and the Indenture.
Section 10.12. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Indiana.
Section 10.13. Holidays. Where a date of payment on the Note is
not a Business Day, then payment may be made on the first Business Day
thereafter.
<PAGE>
IN WITNESS WHEREOF, the Municipality and the Company have caused
this Agreement to be executed all as of the date first above written.
CITY OF MISHAWAKA, INDIANA
By:____________________________________
(SEAL) Robert C. Beutter, Mayor
ATTEST:
_____________________________
Deborah S. Block, Clerk
THERMOPLASTICS, INC.
By:_________________________________
August F. DeLuca, Vice President
ATTEST:
____________________________________
Kenneth L. Heal, Secretary/Treasurer
<PAGE>
EXHIBIT A
(Description of the Project)
Part I The Project
The Project is an approximately 13,000 square foot single story
building addition to an existing building of approximately 57,000 square
feet, which existing facility and addition are located on the Project Site
(as described in Part II) and various equipment and machinery, some of
which is housed in the facility and some of which is housed in other
facilities of the Company.
Part II The Project Site
The Project Site consists of a certain parcel of land located in
Mishawaka, St. Joseph County, Indiana and more particularly described as
follows:
PARCEL I: A parcel of land being a part of the North Half of the
Northeast Quarter of Section 22, Township 37 North, Range 3 East, City of
Mishawaka, Penn Township, St. Joseph County, Indiana and being more
particularly described as follows: Commencing at the Northwest corner of
said Northeast Quarter of Section 22; thence North 89 57'07" East, a
distance of 909.45 feet to a point; thence South 0 01'35" East, deed
bearing, (South 0 02'19" East, measured bearing) a distance of 835 feet to
an iron pipe and the place of beginning for this description; thence South
0 01'35" East, deed bearing, (South 0 02'19" East, measured bearing), a
distance of 487.40 feet to the South line of said Half Quarter Section;
thence South 89 53'08" East, along said South line, a distance of
14.05 feet to an iron pipe set in a fence line; thence North 0 11'26"
East, along said fence line and its Northerly projection, a distance of
487.40 feet to an iron pipe; thence North 89 53'08" West, a distance of
16.00 feet to the place of beginning.
PARCEL II: Part of the North Half of the Northeast Quarter of Section 22,
Township 37 North, Range 3 East, situated in Penn Township, St. Joseph
County, State of Indiana, and being more particularly described as
follows: Commencing at the Northwest corner of the Northeast Quarter of
said Section 22; thence North 89 57'7" East along the North line of the
Northeast Quarter of said Section 22 a distance of 660.45 feet to a point;
thence South 0 1'35" East a distance of 990.06 feet to a point, said point
being the true place of beginning of this description; thence continuing
South 0 1'35" East a distance of 331.81 feet to a point on the South line
of the North Half of the Northeast Quarter of said Section 22; thence
North 89 55'32" West along the South line of the North Half of the
Northeast Quarter of said Section 22 a distance of 330 feet to a point;
thence North 0 1'35" West a distance of 331.1 feet to a point; thence
North 89 57'7" East a distance of 330 feet to the place of beginning of
this description.
<PAGE>
PARCEL III: Part of the North Half of the Northeast Quarter of
Section 22, Township 37 North, Range 3 East, situate in Penn Township,
St. Joseph County, State of Indiana, and being more particularly described
as follows: Commencing at the Northwest corner of the Northeast Quarter
of said Section 22; thence North 89 57'11" East a distance of 909.45 feet
to a point; thence South 0 1'35" East a distance of 835 feet to a point,
said point being the true place of beginning of this description; thence
continuing South 0 1'35" East a distance of 487.4 feet to a point; thence
South 89 57'7" West a distance of 249 feet to a point; thence North
0 1'35" West a distance of 487.4 feet to a point; thence North 89 57'7"
East a distance of 249 feet to the place of beginning of this description.
PARCEL IV: A parcel of land being a part of the Northeast Quarter of
Section 22, Township 37 North, Range 3 East, Penn Township, St. Joseph
County, Indiana and being more particularly described as follows:
Commencing at the North Quarter corner of said Section 22, thence North
89 58'40" East along the North line of said Section 22, a distance of
1188.71 feet; thence South 0 00'19" East, a distance of 835.67 feet to the
place of beginning; thence continuing South 0 00'19" East, a distance of
487.37 feet; thence North 89 53'08" West, a distance of 264.87 feet;
thence North 0 11'26" East, a distance of 487.40 feet; thence South
89 53'08" East, a distance of 263.20 feet to the place of beginning.
PARCEL V: A parcel of land being a part of the Northeast Quarter of
Section 22, Township 37 North, Range 3 East, Penn Township, St. Joseph
County, Indiana and being more particularly described as follows:
Commencing at the North Quarter corner of said Section 22; thence North
89 58'40" East, along the North line of said Section 22, a distance of
1188.71 feet; thence South 0 00'19" East, a distance of 835.67 feet to the
place of beginning for this description; thence South 89 53'09" East, a
distance of 268.13 feet; thence South 0 00'19" East, a distance of
487.37 feet; thence North 89 53'08" West, a distance of 268.13 feet;
thence North 0 00'19" West, a distance of 487.37 feet to the place of
beginning.
<PAGE>
EXHIBIT B
(Form of Note)
Thermoplastics, INC.
PROMISSORY NOTE
FOR VALUE RECEIVED, Thermoplastics, Inc., (the "Company"), an
Indiana corporation, promises to pay to The City of Mishawaka, Indiana, or
registered assigns, on or before 2 o'clock p.m. (Mishawaka time) (a) on
the first day of each October commencing October 1, 1998, and continuing
through October 1, 2000, a sum which, together with other moneys available
therefor in the Bond Fund under the Mortgage and Trust Indenture (the
"Indenture") dated as of September 1, 1993, among the Company, the City of
Mishawaka, Indiana (the "Municipality"), and INB National Bank, as trustee
(the "Trustee"), will equal the principal amount of the Bonds (defined
below) which becomes due on that date; (b) on the first day of each April
and the first day of each October commencing April 1, 1994, and continuing
through October 1, 2000, a sum which, together with other moneys available
therefor in the Bond Fund under the Indenture, will equal the interest
which becomes due on the Bonds outstanding on that date; (c) on the dates
fixed for redemption of the Bonds in whole or in part, the principal of,
premium, if any, and interest on the Bonds to be redeemed to the date
fixed for redemption; and (d) immediately upon a declaration of
acceleration of the maturity of the Bonds by the Trustee, the principal,
interest, and premium, if any, to the date of declaration of acceleration.
All payments of principal, premium, if any, and interest are to
be made directly to the Trustee (or subsequent registered owner) for the
account of the Municipality in immediately available funds. This Note is
security for the payment of the Municipality's Economic Development
Refunding Revenue Bonds, Series 1993 (Elco Industries, Inc./
Thermoplastics, Inc. Project) issued pursuant to the Indenture (the
"Bonds"). All of the terms, conditions, and provisions of the Indenture
are incorporated into this Note by reference.
This Note is issued pursuant to the Loan Agreement (the
"Agreement") dated as of September 1, 1993, between the Municipality and
the Company and is entitled to the benefits, and is subject to the
conditions, thereof. The obligation of the Company to make the payments
required under this Note is absolute and unconditional without any defense
or right of setoff, counterclaim or recoupment by reason of any default by
the Municipality under the Agreement or under any other agreement between
the Company and the Municipality or out of any indebtedness or liability
at any time owing to the Company by the Municipality or for any other
reason.
This Note is subject to prepayment under the terms and
conditions, and in the amounts, provided in Article VII of the Agreement.
This Note is transferable only upon the books of the Trustee kept
for that purpose at its principal office in its capacity as Note
Registrar, upon surrender for transfer of this Note at the principal
office of the Trustee, endorsed for transfer by the registered owner or
accompanied by an assignment executed by the registered owner or his
authorized attorney. Upon such surrender for transfer, the Trustee shall
validate and deliver in the name of the transferee a new Note which shall
have been executed by the Company. If the Company fails to make any of
the payments under this Note, the amount unpaid shall continue as an
obligation of the Company until fully paid and shall bear interest (to the
extent permitted by law) until paid at a per annum rate of interest equal
to the per annum rate then in effect on the Bonds plus two percent (2%) or
at the maximum rate permitted by law, whichever is
lesser. If an "Event of Default" occurs under Section 8.1 of the
Agreement, the principal of this Note may be declared due and payable as
provided in Article VIII of the Agreement.
Where a date of payment is not a business day in the City of
Indianapolis, Indiana, Rockford, Illinois, or Chicago, Illinois, then
payment may be made on the first business day thereafter.
All amounts payable under the terms of this Note are payable
without relief from valuation and appraisement laws and with attorneys'
fees. The maker and any endorsers waive demand, presentment for payment,
protest, notice of protest and notice of non.payment or dishonor and
consent to any and all extensions of time for payment without notice.
All terms used in this Note which are defined in the Agreement
and not in this Note shall have the meanings assigned to them in the
Agreement.
IN WITNESS WHEREOF, the Company has caused this Note to be
executed and delivered this _____ day of September, 1993.
THERMOPLASTICS, INC.
By:____________________________________
August F. DeLuca, Vice President
ATTEST:
____________________________________
Kenneth L. Heal, Secretary/Treasurer
<PAGE>
(Form of Note Registrar's Certificate of Validation)
NOTE REGISTRAR'S CERTIFICATE OF VALIDATION
It is hereby certified that this Note has been duly validated by
the Note Registrar.
INB NATIONAL BANK
as Trustee
By:_______________________________
Authorized Representative
(Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
_______________________________ ________________________________________
(Please print or typewrite name (Social security or federal employer and
address including postal zip identification number of assignee)
code of transferee)
the within Note, together with accrued interest thereon and all right,
title and interest thereto, and hereby irrevocably authorize(s) and
appoint(s) any authorized officer of the Trustee under the Indenture, as
such term is defined in said Note, attorney to transfer said Note on the
books of the within named Note Registrar, with full power of substitution
in the premises.
Dated:___________________________
__________________________________________
In the presence of:
____________________________
NOTICE--The signatures to this assignment must correspond with the name
as it appears upon the face of the within Note in every particular,
without alteration or enlargement or any change whatever.
Exhibit 4.12
LOAN AGREEMENT
ELCO INDUSTRIES, INC.
AND
CITY OF LOGANSPORT, INDIANA
DATED AS OF SEPTEMBER 1, 1993
The rights of the City of Logansport, Indiana, under this Agreement
(except the right to receive payment for its expenses and the right to
receive indemnities) have been assigned to INB National Bank, as Trustee
under a Mortgage and Trust Indenture dated as of the date of this
Agreement, among Elco Industries, Inc., the Municipality and the Trustee.
<PAGE>
TABLE OF CONTENTS
Section Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions and Exhibits
Section 1.1. Terms Defined . . . . . . . . . . . . . . . 2
Section 1.2. Rules of Interpretation . . . . . . . . . . 4
Section 1.3. Exhibits. . . . . . . . . . . . . . . . . . 5
ARTICLE II
The Loan and The Project
Section 2.1. Municipality's Representations, Warranties,
and Covenants . . . . . . . . . . . . . . . 6
Section 2.2. Company's Representations, Warranties, and
Covenants . . . . . . . . . . . . . . . . . 6
Section 2.3. The Project . . . . . . . . . . . . . . . . 8
Section 2.4. Mortgage, Security Agreement, and Title
Insurance . . . . . . . . . . . . . . . . . 8
Section 2.5. Granting of Easements . . . . . . . . . . . 9
Section 2.6. Release of Liens. . . . . . . . . . . . . . 9
ARTICLE III
The Bonds, Use of Proceeds, The Note
Section 3.1. Agreement to Issue Bonds. . . . . . . . . . 11
Section 3.2. Disbursements From Redemption Fund. . . . . 11
Section 3.3. The Company is Required to Pay in the Event
Redemption Fund is Insufficient.. . . . . . 11
Section 3.4. Investment of Redemption Fund and Bond Fund
Moneys. . . . . . . . . . . . . . . . . . . 11
Section 3.5. Covenants With Respect to Arbitrage . . . . 11
Section 3.6. Loan Payments and Other Amounts Payable . . 12
Section 3.7. Obligation of Company Unconditional . . . . 13
ARTICLE IV
Particular Covenants of the Company
Section 4.1. Consent to Assignment to Trustee. . . . . . 15
Section 4.2. Payment of Expenses of Issuance of Bonds. . 15
Section 4.3. Company to Maintain its Existence; Conditions
Under Which Exceptions Permitted. . . . . . 15
Section 4.4. Further Assurances and Corrective
Instruments. . . . . . . . . . . . . . . . 15
Section 4.5. Covenants of Company With Respect to Use of
Bond Proceeds.. . . . . . . . . . . . . . . 15
Section 4.6. Indemnification of Municipality and Trustee 16
Section 4.7. Right of Access to Project. . . . . . . . . 16
Section 4.8. Reports, Certificates, and Other Information 16
Section 4.9. Consolidated Tangible Net Worth . . . . . . 17
Section 4.10.Insurance . . . . . . . . . . . . . . . . . 17
Section 4.11.Taxes and Liabilities . . . . . . . . . . . 17
ARTICLE V
Maintenance, Taxes, and Insurance
Section 5.1. Maintenance and Modifications of Project
by Company . . . . . . . . . . . . . . . . 18
Section 5.2. Taxes, Other Governmental Charges, and
Utility Charges . . . . . . . . . . . . . . 18
Section 5.3. Insurance Required. . . . . . . . . . . . . 19
Section 5.4. Application of Net Proceeds of Insurance. . 19
Section 5.5. Additional Provision Respecting Insurance . 19
Section 5.6. Advances by Trustee . . . . . . . . . . . . 20
ARTICLE VI
Damage, Destruction, and Condemnation
Section 6.1. Damage and Destruction. . . . . . . . . . . 21
Section 6.2. Condemnation. . . . . . . . . . . . . . . . 22
ARTICLE VII
Prepayment of Note
Section 7.1. Optional Prepayment of Note . . . . . . . . 23
Section 7.2. Mandatory Prepayment of Note. . . . . . . . 23
Section 7.3. Extraordinary Event Prepayment of the Note. 23
Section 7.4. Notice of Prepayment. . . . . . . . . . . . 23
ARTICLE VIII
Events of Default and Remedies
Section 8.1. Events of Default . . . . . . . . . . . . . 24
Section 8.2. Remedies on Default . . . . . . . . . . . . 25
Section 8.3. Application of Moneys . . . . . . . . . . . 25
Section 8.4. Remedies Cumulative . . . . . . . . . . . . 26
Section 8.5. Delay or Omission Not a Waiver. . . . . . . 26
Section 8.6. Remedies Subject to Provisions of Law . . . 26
ARTICLE IX
Supplements and Amendments to This Agreement
Section 9.1. Supplements and Amendments to This
Agreement . . . . . . . . . . . . . . . . . 27
ARTICLE X
Miscellaneous
Section 10.1.Binding Effect. . . . . . . . . . . . . . . 28
Section 10.2.Severability. . . . . . . . . . . . . . . . 28
Section 10.3.Amounts Remaining in Bond Fund. . . . . . . 28
Section 10.4.Amendments, Changes, and Modifications. . . 28
Section 10.5.Execution in Counterparts . . . . . . . . . 28
Section 10.6.Notices . . . . . . . . . . . . . . . . . . 28
Section 10.7.References to Bonds Ineffective After
Bonds are Paid. . . . . . . . . . . . . . . 28
Section 10.8.Agreement for Benefit of Parties Hereto . . 28
Section 10.9.Waiver. . . . . . . . . . . . . . . . . . . 28
Section 10.10.Captions and Table of Contents . . . . . . 29
Section 10.11.Survival of Covenants, Representations, and
Warranties . . . . . . . . . . . . . . . . 29
Section 10.12.Applicable Law . . . . . . . . . . . . . . 29
Section 10.13.Holidays . . . . . . . . . . . . . . . . . 29
Exhibit A--Description of Project, Project Site, and Project Equipment
Exhibit B--Form of Promissory Note
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT has been executed as of September 1, 1993, by
and between ELCO INDUSTRIES, INC., a Delaware corporation (the "Company"),
and the CITY OF LOGANSPORT, INDIANA (the "Municipality").
RECITALS
1. Definitions of certain of the terms used in these Recitals
are set out in Article I hereof and Article I of the Indenture (as defined
in Article I hereof).
2. The Municipality previously issued its $3,500,000 principal
amount City of Logansport, Indiana, Economic Development Mortgage Revenue
Bonds, Series 1988 (Elco Industries, Inc. Project) (the "1988 Bonds"), the
proceeds of which were used to assist the Company with the acquisition,
construction, installation, and equipping of the Project which is located
on the Project Site near the Municipality.
3. The Company has determined that it can achieve a
significant cost savings through the refunding and refinancing of the 1988
Bonds. To assist the Company in achieving and effecting such savings, the
Municipality, pursuant to IC 5-1-5, IC 36-7-11.9, and IC 36-7-12, will
issue $3,500,000 aggregate principal amount of City of Logansport,
Indiana, Economic Development Refunding Revenue Bonds, Series 1993 (Elco
Industries, Inc. Project) (the "Bonds"), and will loan the proceeds
thereof to the Company, which will use such proceeds for the purpose of
retiring and redeeming the 1988 Bonds, all as described herein and in the
Indenture.
4. As evidence of its obligation to repay the funds loaned to
it under this Loan Agreement, the Company is issuing to the Municipality
its Note.
5. Pursuant to a Mortgage and Trust Indenture dated as of the
date of this Agreement, among the Company, the Municipality, and INB
National Bank, as Trustee, the Municipality will issue the Bonds and, as
security for the payment of the Bonds and the performance of the
obligations of the Municipality and the Company under the Indenture and
the Note, the Municipality will assign the Note and its rights under this
Agreement (except the right to receive payment for its expenses, the right
to receive indemnities, and rights relating to any amendments to this
Agreement) to the Trustee and the Company will grant to the Trustee a
mortgage on the Project Site and a security interest in the Project
Equipment. The Bonds will be payable solely out of the revenues and other
amounts derived from the Note and under this Agreement and shall not in
any respect be a general obligation of, an indebtedness of, or constitute
a charge against the general credit of the Municipality, the State of
Indiana, or any political subdivision thereof.
AGREEMENT
In consideration of the premises and the mutual covenants
contained herein, the Company and the Municipality agree as follows:
ARTICLE I
Definitions and Exhibits
Section 1.1. Terms Defined. As used in this Agreement, the
following terms shall have the following meanings unless the context
otherwise requires:
"Act" means IC 5-1-5, IC 36-7-11.9, and IC 36-7-12, as from time
to time amended.
"Agreement" means this Loan Agreement and any amendment and
supplement thereto.
"Agreement Term" means the period commencing on the date of this
Agreement and, subject to the provisions of this Agreement, ending on such
date as the Bonds have been fully paid and retired or provision for such
payment made as provided in the Indenture.
"Authorized Company Representative" means a person designated to
act on behalf of the Company by written certificate furnished to the
Municipality and the Trustee containing the specimen signature of the
person and signed on behalf of the Company by its President, any of its
Vice-Presidents, its Chief Financial Officer, its Secretary, or any of its
Assistant Secretaries. The certificate may designate an alternate or
alternates. The Authorized Company Representative may be an employee of
the Company.
"Bonds" means the $3,500,000 aggregate principal amount of the
City of Logansport, Indiana, Economic Development Refunding Revenue Bonds,
Series 1993 (Elco Industries, Inc. Project).
"Bond Fund" means the fund created in Section 402 of the
Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Elco Industries, Inc., a Delaware corporation,
and its successors and assigns.
"Consolidated Current Assets" and "Consolidated Current
Liabilities" means such assets and liabilities of the Company and its
subsidiaries on a consolidated basis as shall be determined in accordance
with generally accepted accounting principles to constitute current assets
and current liabilities, respectively; provided, however, that current
assets shall be determined after deduction of all applicable reserves and
deferred charges and current liabilities shall include the proper accruals
for taxes, bonuses, and other expenses resulting from the operations of
the Company and its subsidiaries to the date of such computation and all
Indebtedness payable on demand or within 12 months from the date of such
computation, including all serial maturity and sinking fund or other
payments or prepayments required to be made on Indebtedness (including the
Note) within 12 months after such date.
"Consolidated Net Tangible Assets" means the total amount of all
assets of the Company and its subsidiaries (less depreciation, depletion,
and other properly deductible valuation reserves) after deducting (i) all
items which in accordance with generally accepted accounting principles
would be included in the liability side of a consolidated balance sheet,
including deferred income taxes, deferred investment tax credits, and
Minority Interests, but excluding capital stock of any class, surplus, and
Funded Debt, and (ii) goodwill, patents, trade names, trademarks,
unamortized debt discount and expense, prepaid advertising, deferred
research and development expense, organization expense, and such other
assets as are properly classified as "intangible assets" in accordance
with generally accepted accounting principles. In determining the value
of assets hereunder, investments in and advances to persons other than
subsidiaries shall be taken at cost or book value, whichever is less.
"Consolidated Tangible Net Worth" means Consolidated Net Tangible
Assets, less all outstanding Funded Debt, all determined in accordance
with generally accepted accounting principles consolidating the Company
and its subsidiaries.
"Counsel" means an attorney-at-law (who may be counsel to the
Trustee, the Municipality, or the Company).
"Funded Debt" means (i) all capitalized obligations with respect
to leases required by generally accepted accounting principles to be
capitalized on a balance sheet of the lessee and (ii) all Indebtedness for
borrowed money or incurred in connection with the acquisition of assets
which has a final maturity of more than one year from the date of creation
thereof (or which is renewable or extendable at the option of the obligor
for a period or periods more than one year from the date of creation)
notwithstanding the fact that payments in respect thereof are required to
be made less than one year after the date thereof and notwithstanding that
any amount thereof is, at the time of any determination of Funded Debt,
also included in Consolidated Current Liabilities.
"Indebtedness" means (i) all items which in accordance with
generally accepted accounting principles would be included in determining
total liabilities as shown on the liability side of the balance sheet as
of the date at which Indebtedness is to be determined, other than capital
stock, capital surplus, earned surplus, retained earnings, and reserves
for deferred income taxes; (ii) Indebtedness secured by any mortgage,
pledge, or lien existing on property owned subject to such mortgage,
pledge, or lien, whether or not the Indebtedness secured thereby shall
have been assumed; and (iii) guarantees, endorsements, and other
contingent obligations and respective indebtedness of others.
"Indenture" means the Mortgage and Trust Indenture, dated as of
the date of this Agreement, among the Company, the Municipality, and the
Trustee, relating to the Bonds, and any indenture supplemental thereto.
"Loan" means the $3,500,000 loan by the Municipality to the
Company of the proceeds from the sale of the Bonds.
"Minority Interest" shall mean any shares of stock of any class
of a subsidiary (other than directors qualifying shares as required by
law) that are not owned by the Company and/or one or more of its
subsidiaries. Minority Interest shall be valued by valuing Minority
Interest constituting preferred stock at the voluntary or involuntary
liquidating value of such preferred stock, whichever is greater, and by
valuing Minority Interest constituting common stock at the book value of
capital and surplus applicable thereto adjusted, if necessary, to reflect
any changes from the book value of such common stock required by the
foregoing method of valuing Minority Interest and preferred stock.
"Municipality" means the City of Logansport, Indiana, and any
successor.
"Net Proceeds" means, when used with respect to any insurance
proceeds or any condemnation award, the amount remaining after deducting
all expenses (including attorneys' fees) incurred in the collection of
such proceeds or award from the gross proceeds thereof.
"1988 Bonds" means the City of Logansport, Indiana, Economic
Development Mortgage Revenue Bonds, Series 1988 (Elco Industries, Inc.
Project).
"Note" means the Note of the Company in substantially the form of
Exhibit B hereto and any Note issued in exchange therefor.
"Project" means the Project Site and the facilities described in
Part I of Exhibit A hereto.
"Project Equipment" means the equipment, machinery, and fixtures
listed and described in Part II of Exhibit A hereto.
"Project Cost" means and includes all those costs related to the
Project which are permitted to be financed under the Code, the Act, this
Agreement, and the Indenture and which do not result in a loss of the
exclusion from gross income for federal income tax purposes of the
interest on the Bonds under the Code.
"Project Site" means the real estate described in Part III of
Exhibit A on which the Project is located.
"Purchaser" means Robert W. Baird & Co. Incorporated.
"Redemption Fund" means the fund created in Section 302 of the
Indenture.
"Trustee" means INB National Bank, and any successor trustee or
co-trustee serving under the Indenture.
Section 1.2. Rules of Interpretation. For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) "This Agreement" means this instrument as originally
executed and as it may from time to time be supplemented or amended.
(b) The words "herein," "hereof," and "hereunder" and other
words of similar import refer to this Agreement as a whole and not
to any particular Article, Section, or other subdivision.
(c) The terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as
the singular.
(d) All accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles.
(e) Any terms not defined herein but defined in the
Indenture shall have the same meaning herein.
(f) The terms defined elsewhere in this Agreement shall have
the meanings therein prescribed for them.
Section 1.3. Exhibits. The following Exhibits are a part of
this Agreement:
Exhibit A:Description of the Project (Part I), the Project
Equipment (Part II), and the Project Site (Part III)
Exhibit B:Form of Note, form of Note Registrar's Certificate of
Validation, and form of Assignment
<PAGE>
ARTICLE II
The Loan and The Project
Section 2.1. Municipality's Representations, Warranties, and
Covenants.
(a) The Municipality represents and warrants that:
(i) The Municipality is a duly organized and existing
municipal corporation and political subdivision of the State of
Indiana, with full power and authority under the Act to enter into
the transactions contemplated by this Agreement and to carry out its
obligations hereunder.
(ii) The Municipality has duly authorized the issuance,
execution, and delivery of the Bonds and the execution and delivery
of this Agreement.
(b) The Municipality covenants that:
(i) The Municipality shall not take any action to interfere
with any obligation it may have with respect to the Bonds, the
proceedings authorizing the Bonds, or this Agreement.
(ii) The Municipality shall provide funds from the proceeds
from the sale of the Bonds for the redemption and retirement of the
1988 Bonds, and shall secure the payment of the Bonds by assigning
this Agreement (except the right to receive payment for its
expenses, the right to receive indemnities, and rights relating to
any amendment of this Agreement) and the Note to the Trustee
pursuant to the Indenture.
Section 2.2. Company's Representations, Warranties, and
Covenants. The Company makes the following representations and warranties
(all as of the date on which this Agreement has been executed) and in
addition, makes the following covenants:
(a) It is a duly organized and validly existing corporation
in good standing under the laws of the State of Delaware, has the
power and authority to own its properties and assets and to carry on
its business as now being conducted and as now contemplated, and has
full power and authority to issue the Note and to execute and
deliver this Agreement and the Indenture; all actions necessary for
the execution and delivery of the Note, this Agreement, and the
Indenture have been taken; and the Note will be a valid and binding
obligation of the Company.
(b) The execution, delivery, and performance of this
Agreement, the Note, and the Indenture will not conflict with or
result in a breach of, or a default under, the Company's Articles of
Incorporation, By-Laws, or any material agreement or instrument to
which the Company is a party or by which it is bound (excepting,
however, such agreements or instruments with respect to which the
Company has been required to and has obtained waivers or consents)
or result in the creation or imposition of any lien, charge, or
encumbrance upon any of the property or assets of the Company,
except for the lien of the Indenture.
(c) The 1988 Bonds were, to the best knowledge and belief of
the Company, exempt from federal and State of Indiana income
taxation when issued, as described in and subject to the limitations
contained in the offering circular for the 1988 Bonds, the Company
has no knowledge of any event occurring since the date of issuance
of the 1988 Bonds that adversely affects that tax-exempt status of
the 1988 Bonds and the Company has received no notification of any
such event from the Municipality, the trustee for the 1988 Bonds, a
holder of a 1988 Bond, the Internal Revenue Service, or the State of
Indiana.
(d) The "average maturity" of the Bonds (taking into account
their issue prices) does not exceed one hundred twenty percent
(120%) of the remaining "average reasonably expected economic life"
of the facilities originally financed with the proceeds of the 1988
Bonds (taking into account the respective cost of such facilities),
all as determined in accordance with the provisions of
Section 147(b) of the Code.
(e) No portion of the proceeds of the Bonds will be used to
provide any facility the primary purpose of which is retail food and
beverage service, automobile sales or services, or the provision of
recreation or entertainment, any private or commercial golf course,
country club, massage parlor, tennis club, skating facility
(including roller skating, skateboard, and ice skating), racquet
sports facility (including any handball or racquetball court), hot
tub facility, suntan facility, race track, airplane, skybox or other
private luxury box, health club facility, facility used for
gambling, or facility used for the sale of alcoholic beverages.
(f) The Bonds are not and shall not be "federally
guaranteed" as defined in Section 149(b) of the Code.
(g) No portion of the proceeds of the Bonds will be used to
acquire land (or an interest therein) or to acquire any property (or
an interest therein) where the first use of such property is not
pursuant to such acquisition.
(h) The aggregate authorized face amount of the Bonds
allocated to any "test period beneficiary," as such term is defined
in Section 144 of the Code, when increased by the outstanding tax-
exempt industrial development bonds of such beneficiary, does not
and shall not exceed $40,000,000.
(i) The Company represents and warrants that it is the
lawful owner of the Project Site, free and clear of all liens,
security interests, charges, or encumbrances whatever except
Permitted Encumbrances, and that the Company has full power and
lawful authority to mortgage the Project Site and the real property
improvements thereon and grant a security interest in the Project
Equipment to the Trustee; and that the Company has good and
marketable title to the Project Site except Permitted Encumbrances
and will preserve, warrant, and defend the same unto the Trustee
against the claims of all persons and parties.
(j) The execution, delivery, and performance by the Company
of this Loan Agreement and the Note do not require the consent or
approval of, the giving of notice of, the registration with, or the
taking of any other action in respect of, any federal, state, or
other governmental authority or agency not previously obtained or
performed.
(k) No litigation, environmental investigations, arbitration
proceedings, or governmental proceedings are pending or threatened
against the Company which would, if adversely determined, materially
and adversely affect the financial condition or continued operations
or properties of the Company and which the Company believes, after
consulting with its counsel, are reasonably likely to be adversely
determined.
(l) The financial statements of the Company as of June 30,
1993, presented to the Purchasers, present fairly the financial
condition of the Company and the results of its operations as of the
date of such statements in accordance with generally accepted
accounting principles and since such date there has been no material
adverse change in the financial condition of the Company.
(m) The Company will take no action which would (and will
omit no action reasonably within its power, the omission of which
would) cause the interest on the Bonds to become includable for
federal income tax purposes in the gross income of any Bondholder,
other than a Bondholder who is a "substantial user" of the Project
or a "related person" within the meaning and for the purpose of
Section 147 of the Code.
Section 2.3. The Project. The Company shall cause the Project
to continue to be used, throughout the term of this Agreement, as an
"economic development facility" within the meaning of the Act. The
failure or inability of the Company to use the Project, or to cause it to
be used, for the intended purposes shall not affect in any way the
Company's obligations under this Agreement or the Note and shall not be
deemed a breach or default under this Agreement as long as the use does
not affect the validity of the Bonds or result in the interest on the
Bonds becoming includable for Federal income tax purposes in the gross
income of a Bondholder.
Section 2.4. Mortgage, Security Agreement, and Title Insurance.
As security for the payment of the Bonds and the performance of its
obligations under the Indenture and the Note, the Company shall mortgage
the Project Site. The Company shall also grant a security interest in the
Project Equipment. The Company shall provide an ALTA mortgagee's policy
of title insurance issued by a title insurance company reasonably
satisfactory to the Purchaser in an amount not less than $3,500,000 which
policy shall be free and clear of all exceptions except Permitted
Encumbrances. Any Net Proceeds payable under such policy shall, at the
Trustee's option, be either (a) used to acquire and construct replacement
or substitute property for that to which title has been lost and such
property shall be subject to the lien of the Indenture, or (b) used to
redeem the Bonds or portions thereof on the earliest possible redemption
date.
Section 2.5. Granting of Easements. If no Event of Default
shall have happened and be continuing, the Company may at any time or
times, grant easements, licenses, rights-of-way (including the dedication
of public highways), and other rights or privileges in the nature of the
easements with respect to any property subject to the lien of the
Indenture, free from the lien of the Indenture, or release existing
easements, licenses, rights-of-way, and other rights or privileges, with
or without consideration, and the Municipality and the Trustee shall
execute and deliver any instrument necessary or appropriate to confirm and
grant or release any such easement, license, right-of-way, or other right
or privilege upon receipt of: (a) a copy of the instrument of grant or
release, (b) a written application signed by the Authorized Company
Representative requesting such instrument, (c) a certificate executed by
the Authorized Company Representative stating (i) that such grant or
release is not detrimental to the proper conduct of the business of the
Company, and (ii) that such grant or release will not impair the effective
use or interfere with the operation of the Project and will not materially
weaken, diminish or impair the security intended to be given by or under
the Indenture accompanied by a Certificate of an independent architect or
other expert reasonably acceptable to the Trustee to the effect that such
grant or release will not materially and adversely affect the operability
of the Project.
Section 2.6. Release of Liens. The Trustee shall, at the joint
written request of the Company and the Holders of a majority in aggregate
principal amount of the Bonds then outstanding (and without the necessity
of obtaining the consent of the Municipality), release any item of
collateral specified or referred to in the First, Second, or Third
Granting Clause of the Indenture from the lien of the Indenture. The
Municipality and the Trustee shall execute and deliver any instrument
necessary or appropriate to confirm and grant any such disposition or
release.
In addition to the foregoing, the Trustee shall, without the
necessity for obtaining the consent of the Municipality or the
Bondholders, release from the lien of the Indenture the Mortgaged Property
or any portion thereof at any time and from time to time provided that the
Company first furnishes the Trustee with, in the event that a portion of
the Mortgaged Property is to be released, the items set forth in
paragraphs 1 and 2 below, and in the event that the entire Mortgaged
Property is to be released, the items set forth in paragraphs (1)(iii)
and (2) below:
(1) A certificate of the Company containing or stating, as
the case may be (i) an adequate legal description of the portion of
the Mortgaged Property to be released, (ii) an "as-built" survey of
the portion of the Mortgaged Property to be released, (iii) that the
Company intends to exercise its privilege of having such Mortgaged
Property released, (iv) that the portion of the Mortgaged Property
with respect to which the release is requested is not needed to
operate the Project, or that the Company has reserved sufficient
right, title, and interest to fulfill such needs, and (v) that the
release will not materially impair ingress and egress to and from or
the operating unity of the Mortgaged Property; and
(2) Either: (i) cash equal to the current fair market value
of the Mortgaged Property or portion thereof to be released (which
value shall be determined by an independent appraisal), which cash
shall be deposited in the Bond Fund under the Indenture and used for
the purposes for which the Bond Fund exists as set forth in the
Indenture, including, to the extent possible, the redemption of
Bonds prior to maturity or (ii) a first mortgage lien in favor of
the Trustee (which lien may be subject to Permitted Encumbrances) on
real property owned and used in the operations of the Company, the
value of which property (determined as of the date on which such
property becomes subject to the mortgage lien described herein (the
"Substitution Date")) is, in the reasonably opinion of the Trustee,
who may rely on the opinion of an expert independent appraiser
selected by the Trustee, at least equal in value to the value
(determined as of the Substitution Date) of the Mortgaged Property
or portion thereof to be released. If the Company determines to
provide the Trustee the mortgaged land described herein, the
mortgage instrument shall be in a form reasonably acceptable to the
Trustee and shall be accompanied by (a) a policy of title insurance
in the full amount of the value of the property to be subject to the
mortgaged land described herein, issued by a title insurance company
that is both authorized to do business in Indiana and in all other
respects reasonably acceptable to the Trustee, and providing
coverage substantially similar to the coverage provided by the
policy of title insurance issued with respect to the Mortgaged
Property, and (b) an opinion of counsel as to the validity and
enforceability of such mortgage.
In addition to the foregoing, the Trustee shall, without the
necessity for obtaining the consent of the Municipality or the
Bondholders, release from the lien of the Indenture the Project Equipment
or any portion thereof at any time and from time to time provided that the
Company first furnishes the Trustee with cash equal to the value of the
portion of the Project Equipment to be released as determined by an
independent appraisal, which cash shall be deposited in the Bond Fund
under the Indenture and used for the purposes for which the Bond Fund
exists as set forth in the Indenture, including, to the extent possible,
the redemption of Bonds prior to maturity.
<PAGE>
ARTICLE III
The Bonds, Use of Proceeds, The Note
Section 3.1. Agreement to Issue Bonds. In order to provide
funds to make the Loan, the Municipality shall issue the Bonds and sell
them to the Purchaser and deposit the proceeds with the Trustee as
follows:
(a) Into the Bond Fund, the accrued interest, if any, paid
by the Purchaser; and
(b) Into the Redemption Fund, the balance of the proceeds.
Section 3.2. Disbursements From Redemption Fund. The Indenture
authorizes the Trustee to make payments from the Redemption Fund to
National City Bank, Indiana (f/k/a Merchants National Bank & Trust Company
of Indianapolis), in its capacity as trustee with respect to the 1988
Bonds and solely for the purpose of discharging, redeeming, and retiring
the 1988 Bonds, provided, however, that any moneys remaining in the
Redemption Fund after such discharge, retirement, redemption, and
termination shall be promptly deposited in the Bond Fund. Payment as
aforesaid shall be made upon receipt by the Trustee of all materials and
documents necessary to evidence to the satisfaction of the Trustee that
the funds being disbursed hereunder are sufficient to discharge fully all
obligations of the Company created and existing in connection with the
1988 Bonds, together with all instruments and documents necessary to
evidence to the satisfaction of the Trustee the discharge of all liens and
encumbrances arising and existing by reason of the 1988 Bonds.
Section 3.3. The Company is Required to Pay in the Event
Redemption Fund is Insufficient. In the event the moneys in the
Redemption Fund should not be sufficient to pay the costs of retiring,
redeeming, and discharging the 1988 Bonds in full, the Company shall pay
that portion of the cost in excess of the moneys available in the
Redemption Fund.
Section 3.4. Investment of Redemption Fund and Bond Fund Moneys.
Any moneys held as part of the Redemption Fund and Bond Fund shall be
invested by the Trustee at the direction of the Company in Qualified
Investments which shall be direct obligations of the United States of
America or in other obligations backed by the full faith and credit of the
United States of America.
Section 3.5. Covenants With Respect to Arbitrage. The Company
and the Municipality covenant to each other and to and for the benefit of
the holders of the Bonds that no use will be made of the proceeds from the
issue and sale of the Bonds which, if such use could have been reasonably
expected on the date of issue of the Bonds, would have caused the Bonds to
be classified as arbitrage bonds within the meaning of Section 103(b)(2)
of the Code. As long as any Bonds are outstanding, the Municipality and
the Company shall not violate the requirements of the Code relating to
arbitrage bonds, and any regulations thereunder, including the requirement
of Section 148 of the Code relating to the rebate of certain amounts to
the United States government. The Company will provide to the Trustee
instructions relating to the permissible investment of Bond proceeds and
instructions and computations (using investment information provided by
the Trustee) relating to the amount required to be rebated to the United
States, all in conformity with Section 148 of the Code. The Company
reserves the right, however, to make any investment of proceeds permitted
under the laws of the State of Indiana, if the sections of the Code
relating to arbitrage bonds or the regulations thereunder are repealed or
relaxed or are held void by final judgment of a court of competent
jurisdiction, so long as the investment would not result in making the
interest on the Bonds includable in the gross income of the holders
thereof for purposes of Federal income taxation. In making investments,
the Company may rely on an opinion of counsel of recognized competence in
such matters. The Trustee may make any and all such investments through
its own bond department.
Section 3.6. Loan Payments and Other Amounts Payable.
(a) Concurrently with the sale of the Bonds, the Company shall
execute and deliver the Note to the Municipality, pursuant to which the
Company shall make payments sufficient to pay when due (whether at
maturity, upon call for redemption, by acceleration or otherwise) the
principal of, premium, if any, and interest on the Bonds. The Note shall
be issued as a fully registered note substantially in the form attached
hereto as Exhibit B. The Trustee shall act as Note Registrar and shall
cause books for the registration and for the transfer of the Note to be
kept at its principal office. Upon surrender for transfer of the Note at
the principal office of the Trustee, endorsed for transfer by the
registered owner or accompanied by an assignment executed by the
registered owner or his authorized attorney, the Trustee shall validate
and deliver in the name of the transferee a new Note which shall have been
executed by the Company. The person in whose name the Note is registered
shall be deemed the absolute owner thereof for all purposes, and
references to the holder of the Note shall mean the registered owner
thereof.
(b) The Company shall also pay when due (i) the reasonable and
necessary fees and expenses of the Trustee (including any reasonable and
necessary fees and expenses in its capacity as Note Registrar) and any
paying agent for services in connection with the Bonds as specified in
Section 903 of the Indenture, and (ii) the reasonable and necessary fees
and expenses of the Municipality, including reasonable attorneys' fees, in
connection with any default of the Company under this Agreement, the Note
or the Indenture.
(c) If the Company fails to make any of the payments required
in this Section 3.6 or in the Note, all unpaid items or installments shall
continue as an obligation of the Company until fully paid, and the Company
shall pay the same with interest thereon (to the extent permitted by law)
until paid at a per annum rate of interest equal to the per annum rate
then in effect on the Bonds plus two percent (2%), or at the maximum rate
permitted by law, whichever is lesser.
(d) All payments under this Section 3.6 shall be made by the
Company directly to the Trustee in immediately available funds and the
Trustee shall deposit all such payments into the Bond Fund provided that
payments under Section 3.6(b) shall be made by the Company directly to the
person entitled thereto. The amount of any money in the Bond Fund which
is either proceeds from the sale of any Bonds or earnings on investments
made pursuant to the provisions of the Indenture which has been set aside
by the Trustee, at the request of the Company, for payments of principal,
whether at maturity or upon redemption, of the Bonds shall be credited
against the obligation of the Company to pay the principal of the Note.
The amount of any money in the Bond Fund which is either proceeds from the
sale of any Bonds or earnings on investments made pursuant to the
provisions of the Indenture which has been set aside by the Trustee for
payments of interest on the Bonds shall be credited against the obligation
of the Company to pay interest on the Note. The principal amount of any
Bonds purchased by the Company and delivered to the Trustee, or purchased
by the Trustee and cancelled, shall be credited against the obligation of
the Company to pay the principal of the Note.
(e) If on any principal or interest payment date the balance in
the Bond Fund is insufficient to make the required payments of principal
of, premium, if any, and interest on the Bonds on that date, the Company
upon notice shall pay forthwith any deficiency to the Trustee.
(f) The Company shall not be obligated to make any further
payments under this Section 3.6, and the Company's liability to make
payments under this Section 3.6 shall cease, at any time that the entire
principal of and premium, if any, and interest on the Bonds shall have
been fully paid in accordance with their terms and the provisions of
Section 1201 of the Indenture (including without limitation, principal,
interest to maturity or earliest redemption date, as the case may be,
expenses of redemption, redemption premiums, and fees and expenses of the
Municipality, the Trustee, and any paying agent and any other costs and
fees required to be paid by the Company pursuant to this Agreement), or at
any time that there shall be in the Bond Fund an amount sufficient to pay
or redeem the Bonds in accordance with the provisions of Section 1201 the
Indenture (including without limitation, principal, interest to maturity
or earliest redemption date, as the case may be, expenses of redemption
and redemption premiums, and fees and expenses of the Municipality, the
Trustee and any paying agent and any other costs and fees required to be
paid by the Company pursuant to this Agreement) and all other requirements
of Section 1201 of the Indenture have been satisfied in full.
Section 3.7. Obligation of Company Unconditional. The
obligation of the Company to make the payments and to perform and observe
its other agreements pursuant to this Agreement and the Note shall be
absolute and unconditional and shall not be subject to reduction or delay
by set-off, counterclaim, abatement, or otherwise. Until such time as the
principal of, premium, if any, and interest on the Bonds shall have been
fully paid or provision for the payment thereof shall have been made in
accordance with Section 1201 of the Indenture (including without
limitation, principal, interest to maturity or earliest redemption date,
as the case may be, expenses of redemption, redemption premiums, and fees
and expenses of the Municipality, the Trustee and any paying agent and any
other costs and fees required to be paid by the Company pursuant to this
Agreement), and all other requirements of Section 1201 of the Indenture
have been satisfied in full, the Company (a) shall not suspend or
discontinue any payments pursuant to this Agreement or the Note, (b) shall
perform and observe all its other agreements contained in this Agreement
and the Note, and (c) except as provided in Article VII hereof, shall not
terminate this Agreement or the Note for any cause. Nothing contained in
this Agreement shall be construed to release the Municipality from the
performance of any of its obligations; and in the event the Municipality
shall fail to perform any such agreement on its part, the Company may
institute such action against the Municipality as the Company may deem
necessary to compel performance, provided that no such action shall
(i) violate the agreements on the part of the Company contained in the
first sentence of this Section 3.7, or (ii) diminish the amounts required
to be paid by the Company pursuant to Section 3.6 hereof.
<PAGE>
ARTICLE IV
Particular Covenants of the Company
Section 4.1. Consent to Assignment to Trustee. The Company
acknowledges and consents to the assignment of the Note and of the
Municipality's rights hereunder (except the right to receive payment for
its expenses, the right to receive indemnities, and rights relating to any
amendments to this Agreement) to the Trustee pursuant to the Indenture.
Except as otherwise provided herein, the Company shall pay to the Trustee
all amounts payable under this Agreement and the Note, and the Company
acknowledges that the Trustee may enforce the rights, remedies, and
privileges granted to the Municipality hereunder.
Section 4.2. Payment of Expenses of Issuance of Bonds. In
addition to its payment obligations under Section 3.5 of this Agreement,
the Company shall pay for all the reasonable costs and shall be liable and
pay for any recording expenses, legal fees, printing expenses, and other
fees and expenses reasonably incurred or to be incurred by or on behalf of
the Municipality and the Trustee in connection with or as an incident to
the issuance and sale of the Bonds or any amendment or supplement to this
Agreement or the Indenture.
Section 4.3. Company to Maintain its Existence; Conditions Under
Which Exceptions Permitted. The Company shall during the term of this
Agreement maintain its corporate existence and will be duly qualified to
transact business in the State of Indiana and shall not voluntarily take,
or omit to take, any action that would cause the Company to be dissolved,
nor shall the Company sell, lease, transfer, or otherwise dispose of all
or substantially all of its assets or consolidate with or merge into
another corporation or permit one or more other corporations to
consolidate with or merge into it; except that the Company may consolidate
with or merge into another corporation incorporated and existing under the
laws of the United States of America or one of the states of the United
States of America or permit one or more other corporations to consolidate
with or merge into it or sell or otherwise transfer to another such
corporation all or substantially all of its assets as an entirety and may
thereafter dissolve, provided, that immediately after such action there is
no default under the Note, this Agreement, or the Indenture, and further
provided that if the Company is not the surviving, resulting or transferee
corporation (the "Survivor"), (a) the Survivor is qualified to do business
in the State of Indiana; (b) the Survivor shall expressly assume and agree
to perform all of the Company's obligations under this Agreement, the
Note, and the Indenture; (c) the Survivor shall be in compliance with the
Consolidated Tangible Net Worth requirements set forth in Section 4.9
hereof; and (d) such action shall have received the approval of the Board
of Directors of the Company acting upon and in response to the advice and
recommendation of senior management of the Company.
Section 4.4. Further Assurances and Corrective Instruments. The
Municipality and the Company shall execute and deliver, or cause to be
executed and delivered, such supplements hereto and further instruments as
may reasonably be required for carrying out the intention of or
facilitating the performance of this Agreement.
Section 4.5. Covenants of Company With Respect to Use of Bond
Proceeds. The Municipality is issuing the Bonds pursuant to an exemption
contained in the Code. It is the intention of the parties that the
interest on the Bonds remain excludable from gross income for purposes of
federal income taxation and, to that end, the Company covenants with the
Municipality and with the Trustee for the benefit of the future holders of
the Bonds, that it will never, insofar as it is able, permit Bond proceeds
to be expended or utilized in such a manner as to cause the loss of the
exclusion claimed.
Section 4.6. Indemnification of Municipality and Trustee. The
Company shall indemnify and hold the Municipality and the Trustee harmless
against any claim, loss, liability, or expense incurred without negligence
or bad faith or willful misconduct on the part of the Municipality or the
Trustee arising out of or in connection with this Agreement, the Note, the
Indenture, or the Project or Project Site, including reasonable attorneys'
fees and the costs and expense of defense against any such claim or
liability.
Section 4.7. Right of Access to Project. The Municipality, the
Trustee, and any of their duly authorized agents shall have the right at
all reasonable times during normal business hours after reasonable prior
notice, subject to the Company's safety and security requirements, to
enter upon the Project Site and to examine and inspect the Project without
interference or prejudice to the Company's operation. The Municipality
and its duly authorized agents shall have such right of access to the
Project as may be reasonably necessary for the proper maintenance of the
Project in the event of failure by the Company to perform its obligations
under Section 5.1 hereof.
The Municipality and the Trustee shall not disclose to any other
person any trade secrets or other information designated by the Company as
confidential and obtained by the Municipality or Trustee from the above
mentioned inspection and examination.
Section 4.8. Reports, Certificates, and Other Information. The
Company shall furnish to the Purchaser and the Trustee:
(a) Annual Statements. As soon as available and in any
event within one hundred twenty (120) days after the close of each
fiscal year of the Company ending after the date of this Agreement,
copies of the consolidated balance sheet of the Company, and a
consolidated statement of income, and a consolidated statement of
cash flow of the Company for such fiscal year, each of which shall
be audited by the Company's independent public accountants.
(b) Quarterly Statements. As soon as available, and in any
event within sixty (60) days after the close of each fiscal quarter
ending after the date of this Agreement (except the last quarter of
each fiscal year), copies of the consolidated balance sheet of the
Company as of the end of such quarter, a consolidated statement of
income and a consolidated statement of cash flow of the Company for
the portion of the fiscal year ended as of the end of such quarter.
All such statements may be prepared internally and shall be
accompanied by a certificate of an appropriate officer of the
Company that such financial statements have been prepared in
material conformity with generally accepted accounting principles
consistently applied (except for changes in which the independent
accountants for the Company concur), and present fairly the
financial position of the Company as of the dates of such
statements.
(c) No Default Certificate. Concurrently with providing
such financial statements, a certificate of the President, a Vice-
President or the Chief Financial Officer of the Company that after
reasonable investigation he has no knowledge of the occurrence of
any Event of Default under this Agreement or the Indenture (or of
any event that with the lapse of time or the giving of notice would
constitute an Event of Default), or if such officer shall have
obtained knowledge of any such Event of Default or default, he shall
disclose the same in such certificate and the nature thereof.
Section 4.9. Consolidated Tangible Net Worth. This Company will
keep and maintain Consolidated Tangible Net Worth at an amount not less
than:
(i) $42,000,000 during the period from the Closing Date to
and including June 30, 1994; or
(ii) $45,000,000 at any time on or after July 1, 1994.
Section 4.10. Insurance. Subject to Article V of this
Agreement, the Company shall maintain such insurance as may be required by
law and such other insurance, to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly situated.
Section 4.11. Taxes and Liabilities. Subject to Article V of
this Agreement, the Company shall pay when due all taxes, assessments, and
other liabilities, including trade accounts, except such as are being
contested in good faith and by appropriate proceedings and for which
appropriate reserves have been established and, as to trade accounts,
subject to industry practices.
<PAGE>
ARTICLE V
Maintenance, Taxes, and Insurance
Section 5.1. Maintenance and Modifications of Project by
Company. The Company shall, during the Agreement Term and at its own
expense (a) keep the Project and the Project Site in as reasonably safe
condition as its operations shall permit, and (b) keep the Project in good
repair and in good operating condition, making from time to time all
necessary repairs thereto (including external and structural repairs) and
renewals and replacements thereof. Subject to the provisions of this
Agreement and the Indenture, the Company may, also at its own expense,
make from time to time any additions, modifications or improvements to the
Project, including specifically additions and expansions to the Project,
as it may deem desirable for its business purposes that do not materially
adversely affect the structural integrity of the Project or substantially
reduce its value; provided, that all such additions, modifications, and
improvements to the Project shall be located wholly within the boundary
lines of the Project Site or any other real property owned by the Company
and made subject to the mortgage created by the Indenture and that is
subject to no liens, restrictions, or encumbrances of any kind excepting
Permitted Encumbrances.
The Company shall not permit any mechanic's lien, security
interest, or other encumbrance to remain against the Project or the
Project Site for labor or materials furnished in connection with any
additions, modifications, improvements, repairs, renewals, or replacements
so made by it; provided, that if the Company shall first notify the
Trustee of its intention so to do, the Company may in good faith contest
any such mechanic's or similar lien filed or established against the
Project or the Project Site and in such event may permit the items so
contested to remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom unless the Municipality or the Trustee
shall notify the Company that, by nonpayment of any such items, the lien
of the Indenture as to any part of the Project or the Project Site will be
materially endangered or the Project or the Project Site or any part
thereof will be subject to loss or forfeiture, in which event the Company
shall promptly pay and cause to be satisfied and discharged all such
unpaid items or shall promptly provide the Municipality and the Trustee
with a bond or other security, reasonably acceptable to the Trustee.
Section 5.2. Taxes, Other Governmental Charges, and Utility
Charges. The Company shall promptly pay, as the same become due, all
taxes and governmental charges of any kind whatsoever that may at any time
be lawfully assessed or levied against or with respect to the Project or
the Project Site, or any interest therein or any machinery, equipment, or
other property installed or bought by the Company therein or thereon
(including without limiting the generality of the foregoing, any taxes
levied upon or with respect to the revenues, income, or profits of the
Company from the Project which, if not paid, will become a lien on the
Project or the Project Site prior to or on a parity with the lien of the
Indenture and including all ad valorem taxes lawfully assessed upon the
Project or the Project Site), all utility and other charges incurred in
the operation, maintenance, use, occupancy, and upkeep of the Project or
the Project Site and all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by lien on
the Project or the Project Site.
The Company may, at its expense and in its own name and behalf,
in good faith contest by appropriate proceedings any such taxes,
assessments, and other charges and, in the event of any such contest, may
permit the taxes, assessments, or other charges so contested to remain
unpaid during the period of such contest and any appeal therefrom,
provided during such period enforcement of any such contested item shall
be effectively stayed and appropriate reserves shall be established.
Section 5.3. Insurance Required. The Company shall insure or
cause to be insured during the Agreement Term the Project and the Project
Site, against such risks as are customarily insured against by businesses
of like size and type, paying as the same become due all premiums in
respect thereto, including but not necessarily limited to:
(a) Insurance upon the repair or replacement basis if
available, and otherwise to the full insurable value of the Project
(with deductible provisions not to exceed $100,000 in any one
casualty), against loss or damage by fire, lightning, windstorm,
hail, explosion, and similar risks and perils with uniform standard
extended coverage endorsement limited only as may be provided in the
standard form of extended coverage endorsement at the time in use in
Indiana.
(b) Boiler explosion insurance on any steam boilers,
pressure vessels, and pressure piping in an amount not less than the
full replacement cost of the Project (with deductible provisions not
to exceed $100,000), provided that such insurance need not be taken
out unless and until steam boilers, pressure vessels and pressure
piping have been installed in the Project.
(c) Comprehensive general public liability insurance to the
extent of $1,000,000 per occurrence against liability for bodily
injury, including death resulting therefrom, and damage to property
including loss of use thereof occurring on or in any way related to
the Project or the Project Site or any part thereof.
(d) Worker's compensation and occupational disease coverage
as required by the laws of the State of Indiana.
Section 5.4. Application of Net Proceeds of Insurance. The Net
Proceeds of the insurance carried pursuant to the provisions of
Section 5.3(a) and (b) hereof shall be paid and applied as provided in
Section 6.1 hereof, and the Net Proceeds of insurance carried pursuant to
the provisions of Section 5.3(c) and (d) hereof shall be applied toward
extinguishment or satisfaction of the liability with respect to which such
insurance proceeds have been paid.
Section 5.5. Additional Provision Respecting Insurance. All
insurance required in Section 5.3 hereof shall be taken out and maintained
in generally recognized responsible insurance companies selected by the
Company and qualified to do business in the State of Indiana. All
policies evidencing such insurance shall provide for payment to the
Company and the Trustee, as their respective interest may appear, and
shall not be cancelled or modified without at least ten (10) days' prior
written notice to the Trustee. The policies required by Section 5.3(a)
and 5.3(b) shall contain standard mortgagee clauses requiring that all Net
Proceeds of insurance resulting from any claim in excess of $250,000 for
loss or damage covered thereby be paid to the Trustee; provided, however,
that all claims, regardless of amount, may be adjusted by the Company with
the insurers, subject to approval of the Trustee to the extent that its
interests may appear as to any settlement of any claim in excess of
$250,000.
A certificate, or certificates, of the insurers that such
insurance is in force and effect, together with copies of the insurance
policies, shall be deposited promptly with the Trustee and, prior to the
expiration of any such policy, the Company shall furnish the Trustee with
evidence satisfactory to the Trustee that the policy has been renewed or
replaced, or is no longer required by this Agreement. The insurance
herein required may be contained in blanket policies now or hereafter
maintained by the Company.
Section 5.6. Advances by Trustee. In the event the Company
shall fail, as required herein, (a) to maintain the full insurance
coverage, (b) to keep the Project and the Project Site in a reasonably
safe condition as its operating condition will permit, (c) to keep the
Project in good repair and good operating condition, (d) to discharge any
mechanic's lien, security interest or other encumbrance, or (e) to pay all
taxes, other governmental charges, and utility charges, the Trustee may
(but shall be under no obligation to) take out the required policies of
insurance and pay the premiums on the same, make the required repairs,
renewals and replacements, discharge the lien or other encumbrance or pay
all taxes, other governmental charges and utility charges; and all amounts
so advanced therefor by the Trustee shall become an additional obligation
of the Company to the Trustee, which amounts, together with interest
thereon (to the extent permitted by law) until paid at the rate of one
percent (1%) per annum over the prime rate (which prime rate shall be the
rate from time to time announced by the commercial banking department of
the Trustee or any of its affiliates to be its prime rate on 90-day
commercial loans), or at the maximum rate permitted by law, whichever is
lesser, the Company shall pay.
<PAGE>
ARTICLE VI
Damage, Destruction, and Condemnation
Section 6.1. Damage and Destruction. Unless the Company shall
have exercised its option to prepay the Note in full pursuant to the
provisions of Section 7.1 hereof, if prior to full payment of the Bonds
(or provision for payment thereof having been made in accordance with the
provisions of the Indenture) the Project is destroyed (in whole or in
part) or is damaged by fire or other casualty to such extent that the
claim for loss under the insurance policies required to be carried
pursuant to Section 5.3(a) and (b) hereof resulting from such destruction
or damage is not greater than $250,000, the Company (a) shall promptly
repair, rebuild, or restore the property damaged or destroyed to
substantially the same condition as it existed prior to the event causing
such damage or destruction, with such changes, alterations, and
modifications (including the substitution and addition of other property)
as may be desired by the Company and as will not impair operating unity or
productive capacity or the character of the Project, and (b) shall apply
for such purpose so much as may be necessary of any Net Proceeds of
insurance resulting from such claims for losses, as well as any additional
moneys of the Company necessary therefor. All Net Proceeds of insurance
resulting from such claims for losses not in excess of $250,000 shall be
paid to the Company.
Unless the Company shall have exercised its option to prepay the
Note in full pursuant to the provisions of Section 7.1 hereof, if prior to
full payment of the Bonds (or provision for payment thereof having been
made in accordance with the provisions of the Indenture) the Project is
destroyed (in whole or in part) or is damaged by fire or other casualty to
such extent that the claim for loss under the insurance policies required
to be carried pursuant to Section 5.3(a) and (b) hereof resulting from
such destruction or damage is in excess of $250,000, the Company shall
promptly give written notice thereof to the Trustee. All Net Proceeds of
insurance resulting from such claims for losses shall be paid to and held
by the Trustee in a separate trust account, whereupon (i) the Company
shall proceed promptly to repair, rebuild, or restore the property damaged
or destroyed to substantially the same condition as it existed prior to
the event causing such damage or destruction, with such changes,
alterations and modifications (including the substitution and addition of
other property) as may be desired by the Company and as will not impair
operating unity or productive capacity or the character of the Project,
and (ii) the Trustee shall apply so much as may be necessary of the Net
Proceeds of such insurance to payment of the costs of such repair,
rebuilding, or restoration, either on completion thereof or as the work
progresses as directed by the Company. In the event said Net Proceeds are
not sufficient to pay in full the costs of such repair, rebuilding, or
restoration, the Company shall, nonetheless, complete the work thereof and
shall pay that portion of the costs thereof in excess of the amount of
said Net Proceeds. The Company shall not, by reason of the payment of
such excess costs (whether by direct payment thereof or advances to the
Trustee therefor), be entitled to any reimbursement from the Trustee, or
the holders or owners of the Bonds, or any abatement or diminution of the
amount payable under this Agreement. Any balance of such Net Proceeds
remaining after payment of all the costs of such repair, rebuilding, or
restoration shall be deposited into the Bond Fund. If the Bonds have been
fully paid (or provision for payment thereof has been made in accordance
with the Indenture), any balance of such Net Proceeds shall be paid to the
Company.
Any moneys held by the Trustee in the separate trust account
under the provisions of the preceding paragraph shall, at the written
request of the Authorized Company Representative, be invested or
reinvested by the Trustee as provided in Section 3.4 hereof. The Company
shall forthwith pay to the Trustee the amount of any losses with respect
to principal on such investments.
Section 6.2. Condemnation. Unless the Company shall have
exercised its option to prepay the Note in full pursuant to the provisions
of Section 7.1 hereof, in the event that title to, or the temporary use
of, the Project or the Project Site or any part thereof shall be taken
under the exercise of the power of eminent domain by any governmental body
or by any person, firm, or corporation acting under governmental
authority, the Company shall be obligated to continue to make payments on
the Note and all other payments specified herein. The Company and the
Trustee shall cause the Net Proceeds received by them or either of them
from any award made in such eminent domain proceedings to be paid to and
held by the Trustee in a separate trust account, and to be applied in one
or more of the following ways as shall be directed in writing by the
Company:
(a) The prompt repair, restoration, relocation,
modification, or improvement of the Project and the Project Site, to
substantially the same condition as existed prior to the exercise of
said power of eminent domain.
(b) Redemption of the Bonds pursuant to Section 7.1 hereof;
provided, that no part of any such condemnation award may be applied
for such redemption, unless the Company shall furnish to the Trustee
a certificate of the Authorized Company Representative stating
(i) that the property forming a part of the Project or the Project
Site that was taken by such condemnation proceedings is not
essential to the Company's use or occupancy of the Project or the
Project Site, or (ii) that the Project or the Project Site has been
repaired, restored, relocated, modified or improved to a condition
substantially equivalent to its condition prior to the taking by
such condemnation proceedings.
Unless the Company shall have exercised its option to prepay the
Note in full pursuant to the provisions of Section 7.1 hereof within
ninety (90) days from the date of entry of a final order in any eminent
domain proceedings granting condemnation, the Company shall direct the
Trustee in writing as to which of the ways specified in this Section 6.2
the Company elects to have the condemnation award applied. Any balance of
the Net Proceeds of the award in such eminent domain proceedings shall be
paid into the Bond Fund. If the Bonds have been fully paid (or provision
for payment thereof has been made in accordance with the provisions of the
Indenture), all Net Proceeds shall be paid to the Company.
Any moneys held by the Trustee under the provisions of this
Section 6.2 shall, at the written request of the Authorized Company
Representative, be invested or reinvested by the Trustee in accord with
Section 3.4 hereof. The Company shall forthwith pay to the Trustee the
amounts of any losses with respect to principal on such investments.
<PAGE>
ARTICLE VII
Prepayment of Note
Section 7.1. Optional Prepayment of Note. The Company may, at
its option, prepay the Note, in whole or in part, on any date on or after
October 1, 1997 (and if in part, in whole multiples of $5,000), by paying
to the Trustee a sum sufficient, together with other funds in the Bond
Fund and available for that purpose, to pay (a) the principal of, premium
(as specified in the Indenture), and interest on that portion of the Bonds
then outstanding to be redeemed, and (b) all reasonable and necessary fees
and expenses of the Trustee and any paying agent accrued and to accrue
through the redemption date.
Section 7.2. Mandatory Prepayment of Note. The Company shall
prepay the amounts due under this Agreement and the Note in whole prior to
the expiration of this Agreement and prior to the full payment (or
provision for full payment) of the Bonds on the earliest practicable date
(selected by the Trustee) within ninety (90) days following a
Determination of Taxability (as defined in the Indenture).
In the event of an obligation to prepay under this Section 7.2,
the Company shall pay to the Trustee a sum sufficient, together with other
funds deposited into the Bond Fund and available for the purpose, to pay
the principal, premium (as specified in the Indenture), and interest on
the principal of all the Bonds then outstanding and all reasonable and
necessary fees and expenses of the Trustee and any paying agent accrued
and to accrue through final payment of the Bonds.
Section 7.3. Extraordinary Event Prepayment of the Note. The
Company may, at its option, prepay the Note, in whole but not in part,
without redemption premium, within one (1) year following the occurrence
of any of the events specified in Section 502 of the Indenture by paying
the Trustee a sum sufficient, together with other funds in the Bond Fund
and available for that purpose, to pay (a) the principal of and interest
upon all of the Bonds then outstanding, and (b) all reasonable and
necessary fees and expenses of the Trustee and the paying agent accrued
and to accrue through the redemption date.
Section 7.4. Notice of Prepayment. To exercise prepayment under
Section 7.1 or 7.3 hereof, the Company shall give written notice to the
Trustee at least forty-five (45) days but not more than seventy-five (75)
days prior to a specified date of the prepayment. To prepay under
Section 7.2 hereof, the Company shall give written notice to the Trustee
within thirty (30) days after the event requiring the prepayment
specifying the date of the prepayment, which shall be not less than forty-
five (45) days nor more than ninety (90) days from the date the notice is
mailed. If the Company fails to give timely notice of a prepayment under
Section 7.2 hereof, the Trustee shall give written notice to the Company
specifying a date of prepayment not less than fifteen (15) days nor more
than sixty (60) days from the date that notice is mailed.
<PAGE>
ARTICLE VIII
Events of Default and Remedies
Section 8.1. Events of Default. The occurrence and continuance
of any of the following events shall constitute an "Event of Default"
hereunder:
(a) Default in the due and punctual payment of any
installment of principal of (whether at stated maturity, upon
required prepayment, acceleration or otherwise) or any payment of
interest or redemption premium on the Note;
(b) The dissolution or liquidation of the Company unless
such dissolution or liquidation is permitted by this Agreement;
(c) Failure by the Company to observe and perform any
covenant, condition, or agreement in this Agreement on its part to
be observed or performed other than those referred to in
Section 8.1(a), (b), or (h) for a period of thirty (30) days after
written notice, specifying the failure and requesting that it be
remedied, given to the Company by the Trustee, unless the Trustee
agrees in writing to an extension of the time prior to its
expiration; provided, however, that with respect to this clause (c),
if such failure of performance shall be such that it cannot be
corrected within such period, it shall not constitute an Event of
Default if such failure of performance, in the reasonable opinion of
the Trustee, is correctable without material adverse effect on the
Bonds and if corrective action is instituted by or on behalf of the
Company within such period and diligently pursued until such failure
of performance is corrected.
(d) A decree or order shall have been entered by a court of
competent jurisdiction constituting an order for relief under the
Bankruptcy Code or adjudging the Company insolvent or approving as
properly filed a petition seeking reorganization of the Company
under the Bankruptcy Code or any other federal or state law relating
to bankruptcy or insolvency or appointing a receiver or decreeing or
ordering the winding up or liquidation of the affairs of the Company
or the sequestration of a substantial part of the property of the
Company, and any such decree or order shall remain in force
undischarged and unstated for a period of ninety (90) days.
(e) The Company shall file a petition seeking relief under
the Bankruptcy Code or shall suffer the imposition of an order
thereunder or shall institute or consent to the institution of
bankruptcy or insolvency proceedings against it or shall file a
petition or answer or consent seeking reorganization or relief
(other than as a creditor) under the Bankruptcy Code or any other
federal or state law relating to bankruptcy or insolvency or shall
consent to the filing of any such petition or shall consent to the
appointment of a receiver or shall make an assignment for the
benefit of creditors or shall admit in writing its inability to pay
its debts generally as they become due or shall fail to pay its
debts generally as they become due, or action shall be taken by the
Company in furtherance of any of the aforesaid purposes.
(f) An Event of Default as defined in Section 801 of the
Indenture shall have occurred.
(g) The acceleration of the maturity of any Funded Debt in
excess of $50,000 as a result of a default thereon or with respect
thereto that has not been waived or cured in accordance with the
terms and provisions thereof.
(h) The failure of the Company to maintain Consolidated
Tangible Net Worth at the levels required by Section 4.9 hereof.
Section 8.2. Remedies on Default. Whenever any Event of Default
referred to in Section 8.1 shall have happened and be continuing, the
Trustee:
(a) May, and upon the written request of the owners of not
less than twenty-five percent (25%) of the aggregate principal
amount of the Bonds then outstanding shall, declare the Note and all
amounts payable thereunder, whether by acceleration of maturity or
otherwise, to be immediately due and payable.
(b) The Trustee may take whatever action may appear
necessary or desirable to collect the amounts due and to become due
under this Agreement and the Note, or to enforce performance and
observance of any obligation, agreement or covenant of the Company
under this Agreement and the Note.
Section 8.3. Application of Moneys. All moneys collected by the
Trustee under Section 8.2 hereof shall be applied as follows:
FIRST: To pay any sums required to be paid by the Company
pursuant to this Agreement, the Note, the Indenture or
the Bonds other than principal, premium, if any, and
interest on the Note or the Bonds.
SECOND: To pay the whole amount then due, owing, and unpaid upon
the Note for principal, premium, if any, and interest in
accordance with Section 807 of the Indenture. Payment
shall be made upon presentation of the Note and the
notation on the Note of the payment, if partially paid,
or the surrender and cancellation of the Note, if fully
paid.
THIRD: To pay the Company, its successors, or assigns, upon the
written request of the Company or to whosoever may be
lawfully entitled to receive the same upon its written
request, or as any court of competent jurisdiction may
direct.
Section 8.4. Remedies Cumulative. No remedy granted by this
Agreement is intended to be exclusive of any other remedy. All available
remedies shall be cumulative.
Section 8.5. Delay or Omission Not a Waiver. No delay or
omission of the Trustee to exercise any right or power accruing upon any
Event of Default shall impair the right or power, or shall be construed to
be a waiver of the Event of Default or an acquiescence therein. Every
power and remedy may be exercised as often as the Trustee deems expedient.
Section 8.6. Remedies Subject to Provisions of Law. All rights,
remedies, and powers provided by this Article may be exercised only to the
extent that their exercise does not violate any applicable provision of
law. All the provisions of this Article are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this
Agreement invalid or unenforceable under the provisions of any applicable
law.
<PAGE>
ARTICLE IX
Supplements and Amendments to This Agreement
Section 9.1. Supplements and Amendments to This Agreement.
Reference is made to Article XI of the Indenture.
<PAGE>
ARTICLE X
Miscellaneous
Section 10.1. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the Municipality, the Company, and
their respective successors and assigns, subject to the limitations in
Sections 4.3 and 10.4 hereof.
Section 10.2. Severability. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, that holding shall not invalidate or render unenforceable
any other provisions hereof.
Section 10.3. Amounts Remaining in Bond Fund. Any amounts
remaining in the Bond Fund upon expiration or termination of this
Agreement in accordance with the Indenture shall belong to and be paid to
the Company by the Trustee.
Section 10.4. Amendments, Changes, and Modifications. After the
Bonds are issued and before they are paid in full (or provision for
payment in full is made), this Agreement may not be amended, assigned or
terminated without the written consent of the Trustee.
Section 10.5. Execution in Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an original.
Section 10.6. Notices. All notices, certificates, payments, or
other communications hereunder shall be sufficiently given and shall be
deemed given when delivered or mailed by registered or certified mail,
postage prepaid, or overnight express mail addressed as follows: if to
the Municipality, at the City Building, Logansport, Indiana 46947,
Attention of its Clerk-Treasurer; if to the Company, at 1111 Samuelson
Road, P.O. Box 7009, Rockford, Illinois 61125, Attention of its Vice
President-Finance with a copy to the attention of its President; or to
such other address as may hereafter be furnished by notice.
Section 10.7. References to Bonds Ineffective After Bonds are
Paid. Upon payment in full of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture) and
payment of all fees and charges of the Municipality, Trustee, and any
paying agent, all references in this Agreement to the Bonds and the
Trustee shall be ineffective and neither the Trustee nor the holders of
the Bonds shall thereafter have any rights hereunder, except those that
shall have theretofore vested.
Section 10.8. Agreement for Benefit of Parties Hereto. Nothing
in this Agreement, express or implied, is intended to give to any person
other than the parties hereto and the holder of the Note, any right,
remedy, or claim under or by reason of this Agreement.
Section 10.9. Waiver. No waiver of any of the provisions of
this Agreement shall be effective and binding unless set forth in a
written notice and no waiver of one provision shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver or a waiver of such
provision in any other instance.
Section 10.10. Captions and Table of Contents. The captions
herein and the Table of Contents are inserted only as a matter of
convenience and do not in any way define, limit, construe or describe the
scope or intent of this Agreement or any section thereof or in any other
way affect this Agreement.
Section 10.11. Survival of Covenants, Representations, and
Warranties. All covenants, representations, and warranties made by the
Company and the Municipality contained herein or in any other document,
certificate, or instrument delivered in connection with the sale of any of
the Bonds shall be continuing and shall survive delivery of the Bonds and
the other transactions contemplated by this Agreement and the Indenture.
Section 10.12. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Indiana.
Section 10.13. Holidays. Where a date of payment on the Note is
not a Business Day, then payment may be made on the first Business Day
thereafter.
<PAGE>
IN WITNESS WHEREOF, the Municipality and the Company have caused
this Agreement to be executed all as of the date first above written.
CITY OF LOGANSPORT, INDIANA
By:____________________________________
William A. Vernon, Mayor
(SEAL)
ATTEST:
__________________________________
Mary Lynn Barnard, Clerk-Treasurer
ELCO INDUSTRIES, INC.
By:____________________________________
August F. DeLuca
Vice President-Finance
ATTEST:
__________________________________
Kenneth L. Heal, Secretary
<PAGE>
EXHIBIT A
(Description of the Project)
Part I. The Project
The Project is an approximately 32,000 square foot single story
building located on the Project Site (as described in Part III), the
Project Equipment (as described in Part II), and various other equipment
and machinery housed in other facilities of the Company.
Part II. The Project Equipment
The Project Equipment is a coating line, which consists of a
Spring Tool Model S24 Product Coater from Spring Tools Co., 15075 South
U.S. 131, and a conveyorized coating cure oven which will be purchased
from Advanced Curing Systems, Inc., and which will be used in the coating
process, which consists of dipping metal stampings in the product coater,
then baking them through the conveyorized oven.
Part III. The Project Site
The Project Site consists of a certain parcel of land together
with all permanent improvements thereon located in Cass County, Indiana,
near Logansport and more particularly described as follows:
PARCEL 1
A fractional part of the Northwest Quarter (1/4) of Section Two (2),
Township Twenty-six (26) North, Range One (1) East, Washington Township,
Cass County, Indiana, more fully described as follows: Commencing at the
Southwest Corner of the Northwest Quarter of said Section Two; thence
North 89 degrees 12 minutes 00 seconds East on and along the South line of
said Northwest Quarter a distance of 465.00 feet; thence North 00 degrees
00 minutes 00 seconds East a distance of 14.50 feet to a Pipe lying on the
North Right-of-way of a Public Highway (Wilson Road); thence North
89 degrees 12 minutes 00 seconds East along said North Right-of-way of
said Public Highway (Wilson Road) a distance of 360.00 feet to a Pipe
being the PLACE OF BEGINNING; thence North 00 degrees 00 minutes
00 seconds West a distance of 435.04 feet; thence North 89 degrees
12 minutes 00 seconds East parallel to said North right-of-way a distance
of 236.27 feet to a point 20.00 feet East of the Center Line of an
Existing Drive; thence South 00 degrees 36 minutes 54 seconds East
parallel to said Center Line of said Drive a distance of 435.00 feet to
said North right-of-way of said Public Highway (Wilson Road); thence South
89 degrees 12 minutes 00 seconds West along said Right-of-way a distance
of 240.49 feet to the PLACE OF BEGINNING, being subject to an Ingress and
Egress Easement 40 foot in Width parallel to and the entire length of the
East Line of the above described Parcel 1, said Easement being 20 feet on
both sides of the Center Line of the existing drive.
PARCEL 2
A fractional part of the Northwest Quarter (1/4) of Section Two (2),
Township Twenty-six (26) North, Range One (1) East, Washington Township,
Cass County, Indiana, more fully described as follows: Commencing at the
Southwest Corner of said Northwest Quarter of said Section Two; thence
North 89 degrees 12 minutes 00 seconds East on and along the South line of
sid Northwest Quarter a distance of 465.00 feet; thence north 00 degrees
00 seconds East a distance of 14.50 feet to a Pipe lying on the North
Right-of-way of a Public Highway (Wilson Road); thence North 89 degrees
12 minutes 00 seconds East along said North Right-of-way of said Public
Highway a distance of 360.00 feet to a Pipe being the PLACE OF BEGINNING;
thence South 89 degrees 12 minutes 00 seconds West along the North Right-
of-way of said Public Highway a distance of 150.03 feet to the Center Line
of an Open Ditch; thence along said Center Line of said Ditch on the
following 4 courses: (1) North 19 degrees 16 minutes 54 seconds West a
distance of 130.00 feet; (2) North 06 degrees 56 minutes 16 seconds West
a distance of 88.02 feet; (3) North 03 degrees 06 minutes 59 seconds East
a distance of 90.28 feet; (4) North 00 degrees 40 minutes 34 seconds West
a distance of 134.13 feet; thence North 89 degrees 12 minutes 00 seconds
East parallel to said North Right-of-Way of said Public Highway a distance
of 200.27 feet; thence South 00 degrees 00 minutes 00 seconds East a
distance of 435.04 feet to the PLACE OF BEGINNING; subject to an Easement
75 feet in width from the top of the bank of the existing open drainage
ditch along the entire west side of the above described Parcel 2.
<PAGE>
EXHIBIT B
(Form of Note)
ELCO INDUSTRIES, INC.
PROMISSORY NOTE
FOR VALUE RECEIVED, Elco Industries, Inc., (the "Company"), a
Delaware corporation, promises to pay to The City of Logansport, Indiana,
or registered assigns, on or before 2 o'clock p.m. (Logansport time)
(a) on the first day of each October commencing October 1, 1998, and
continuing through October 1, 2000, a sum which, together with other
moneys available therefor in the Bond Fund under the Mortgage and Trust
Indenture (the "Indenture") dated as of September 1, 1993, among the
Company, the City of Logansport, Indiana (the "Municipality"), and INB
National Bank, as trustee (the "Trustee"), will equal the principal amount
of the Bonds (defined below) which becomes due on that date; (b) on the
first day of each April and the first day of each October commencing
April 1, 1994, and continuing through October 1, 2000, a sum which,
together with other moneys available therefor in the Bond Fund under the
Indenture, will equal the interest which becomes due on the Bonds
outstanding on that date; (c) on the dates fixed for redemption of the
Bonds in whole or in part, the principal of, premium, if any, and interest
on the Bonds to be redeemed to the date fixed for redemption; and
(d) immediately upon a declaration of acceleration of the maturity of the
Bonds by the Trustee, the principal, interest and premium, if any, to the
date of declaration of acceleration.
All payments of principal, premium, if any, and interest are to
be made directly to the Trustee (or subsequent registered owner) for the
account of the Municipality in immediately available funds. This Note is
security for the payment of the Municipality's Economic Development
Refunding Revenue Bonds, Series 1993 ( Elco Industries, Inc. Project)
issued pursuant to the Indenture (the "Bonds"). All of the terms,
conditions and provisions of the Indenture are incorporated into this Note
by reference.
This Note is issued pursuant to the Loan Agreement (the
"Agreement") dated as of September 1, 1993, between the Municipality and
the Company and is entitled to the benefits, and is subject to the
conditions, thereof. The obligation of the Company to make the payments
required under this Note is absolute and unconditional without any defense
or right of setoff, counterclaim, or recoupment by reason of any default
by the Municipality under the Agreement or under any other agreement
between the Company and the Municipality or out of any indebtedness or
liability at any time owing to the Company by the Municipality or for any
other reason.
This Note is subject to prepayment under the terms and
conditions, and in the amounts, provided in Article VII of the Agreement.
This Note is transferable only upon the books of the Trustee kept
for that purpose at its principal office in its capacity as Note
Registrar, upon surrender for transfer of this Note at the principal
office of the Trustee, endorsed for transfer by the registered owner or
accompanied by an assignment executed by the registered owner or his
authorized attorney. Upon such surrender for transfer, the Trustee shall
validate and deliver in the name of the transferee a new Note which shall
have been executed by the Company. If the Company fails to make any of
the payments under this Note, the amount unpaid shall continue as an
obligation of the Company until fully paid and shall bear interest (to the
extent permitted by law) until paid at a per annum rate of interest equal
to the per annum rate then in effect on the Bonds plus two percent (2%) or
at the maximum rate permitted by law, whichever is lesser. If an "Event
of Default" occurs under Section 8.1 of the Agreement, the principal of
this Note may be declared due and payable as provided in Article VIII of
the Agreement.
Where a date of payment is not a business day in the City of
Indianapolis, Indiana, Rockford, Illinois, or Chicago, Illinois, then
payment may be made on the first business day thereafter.
All amounts payable under the terms of this Note are payable
without relief from valuation and appraisement laws and with attorneys'
fees. The maker and any endorsers waive demand, presentment for payment,
protest, notice of protest and notice of nonpayment or dishonor and
consent to any and all extensions of time for payment without notice.
All terms used in this Note which are defined in the Agreement
and not in this Note shall have the meanings assigned to them in the
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be
executed and delivered this _____ day of September, 1993.
ELCO INDUSTRIES, INC.
By:____________________________________
August F. DeLuca
Vice President-Finance
ATTEST:
_________________________________
Kenneth L. Heal, Secretary
<PAGE>
(Form of Note Registrar's Certificate of Validation)
NOTE REGISTRAR'S CERTIFICATE OF VALIDATION
It is hereby certified that this Note has been duly validated by
the Note Registrar.
INB NATIONAL BANK
as Trustee
By:____________________________________
Authorized Representative
(Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
___________________________________
___________________________________
(Please print or typewrite name (Social security or federal
of employer and address, including identification number of
postal zip code of transferee) assignee)
the within Note, together with accrued interest thereon and all right,
title, and interest thereto, and hereby irrevocably authorize(s) and
appoint(s) any authorized officer of the Trustee under the Indenture, as
such term is defined in said Note, attorney to transfer said Note on the
books of the within named Note Registrar, with full power of substitution
in the premises.
Dated:___________________________
_______________________________________
In the presence of:
_________________________________
NOTICE--The signatures to this assignment must correspond with the name
as it appears upon the face of the within Note in every particular,
without alteration or enlargement or any change whatever.
Exhibit 10.10
JOINT VENTURE AGREEMENT
BETWEEN
NAGOYA SCREW MANUFACTURING CO., LTD.
AND
ELCO INDUSTRIES, INC.
THIS AGREEMENT, made this 14th day of June, 1989, by and
between NAGOYA SCREW MANUFACTURING CO., LTD., a corporation
organized and existing under the laws of Japan, with its principal
place of business at 17-15, Tsubaki-cho, Nakamura-ku Nagoya, Japan
(hereinafter referred to as "Nagoya") and ELCO INDUSTRIES, INC., a
corporation duly organized and existing under the laws of the State
of Delaware, U.S.A., with its principal place of business at 1111
Samuelson Road, Rockford, Illinois 61125-7009, United States of
America (hereinafter referred to as "Elco").
WITNESSETH THAT
WHEREAS, NAGOYA is engaged in the manufacture and sale of
fasteners used in production in Japan, and has-acquired valuable
experience, technical data and know-how as to such manufacture and
sale to Japanese original equipment manufacturers.
WHEREAS, ELCO is engaged in the manufacture and sale of
fasteners used in production in the United States of America, and
has acquired valuable experience, technical data and know-how as to
such manufacture and sale to original equipment manufacturers in
the United States Of America.
WHEREAS, ELCO and NAGOYA wish to establish a joint venture
company under the laws of the State of Delaware to engaging
manufacturing and marketing of fasteners initially to Japanese
original equipment manufacturers in the United States of America.
NOW, THEREFORE, in consideration of the mutual promises and
other covenants contained herein, the parties agree as follows.
DEFINITIONS
1.1. Definitions. For the purpose of this Agreement:
(a) "Company" shall mean the corporation incorporated under
the laws of the State of Delaware by Nagoya and Elco in accordance
with this Agreement.
(b) "Certificate of Incorporation" shall mean the certificate
of incorporation in the form attached as Appendix A and made a part
hereof.
(c) "By-Laws" shall mean the by-laws in the form attached as
Appendix B and made a part hereof.
(d) "Products" shall mean nuts, bolts, screws and similar
fasteners other than those manufactured and intended to be sold to
the aerospace industry.
(e) "Confidential Information" shall mean technical
information relating to the manufacture and sale of the Products,
including but not limited to
(i) the necessary prints and designs for the manufacture
of Products;
(ii) manufacturing and engineering information such as
drawings, material specifications, technical specifications,
manufacturing processes and part lists; and
(iii) technical, commercial and marketing information and
application data on Products.
(f) "Territory" shall mean the United States, Canada and
Mexico.
(g) "Business of the Company" shall mean the business of
manufacturing Products in the Territory initially for sale directly
to original equipment manufacturers in the Territory directly or
indirectly controlled by Japanese entities, for sale to Japanese
controlled suppliers or subcontractors to such manufacturers and
for sale to such other suppliers or subcontractors to such
manufacturers mutually agreed upon by Elco and Nagoya (such other
suppliers or subcontractors hereinafter "Designated Suppliers").
(h) "Stockholders" shall mean Elco and Nagoya.
(i) For purposes of this Agreement, an entity shall be
deemed to be in "control" of another entity (a) when it owns in
excess of 50% of the voting stock or other equity interest in such
other entity, or (b) when it owns in excess of 30% of the voting
stock or other equity interest in such other entity and actually
exercises control over such other entity.
(j.) "Technical Assistance Agreement" shall mean the
agreement entered into March 17, 1988 between Nagoya and Elco
relating to the manufacture and sale of high tensile fasteners.
EFFECTIVE DATE
2.1. Effective Date. The effective date of this Agreement
shall be July 1, 1989.
ORGANIZATION OF COMPANY
3.1. Organization of the Company. Promptly after execution of
this Agreement Elco, for and on behalf of Elco and Nagoya, shall
cause the Company to be incorporated under the Delaware General
Corporation Law for the purpose of conducting the Business of the
Company as provided herein.
The corporate name of the Company shall be Rocknel
Fastener, Inc., or such other name as is agreed to between Elco and
Nagoya.
The Certificate of Incorporation of the company shall be
as stated in the document attached hereto as Appendix A and
entitled "Certificate of Incorporation"of the Company". The
By-Laws of the Company shall be as stated in the document attached
hereto as Appendix B and entitled "By-Laws of the Company."
3.2. Qualification. As soon as practicable after its
incorporation, the Company shall take such action as may be
required to be qualified to conduct the Business of the Company as
a foreign corporation in Illinois and in such other states, if any,
as the Business of the Company may require. The main office of the
Company shall be located in Rockford, Illinois.
3.3. Capital on Organization. At the time of its
incorporation, the Company shall be authorized to issue 500 shares
of Class A Common Stock, no par value, and 500 shares of Class B
Common Stock, no par value.
The total share capital of the Company upon its organization
shall be $3,000,000, with the shares of its common stock being
subscribed for and issued as follows:
To NAGOYA - 100 shares of Class A Common Stock in
consideration of and in exchange for payment in cash by Nagoya to
the Company of US$ 1,500,000 (50% of the total issued shares)
To ELCO - 100 shares of Class B Common Stock in consideration
of and in exchange for payment in cash by Elco to the Company of
US$ 1,500,000 (50% of the total issued shares)
It is the intent of the parties hereto that Elco shall at
all times own and control a 50% equity interest in the Company and
Nagoya shall at all times own and control a 50% equity interest in
the Company.
3.4 Meeting of Stockholders. The annual Stockholders meeting
shall be held at the main office of the Company between May 10 and
May 31 of each year as mutually determined by the Stockholders.
FUTURE FINANCING OF THE COMPANY
4.1. Additional Finance Requirements. Nagoya and Elco
anticipate that the Company may require finance in the future, in
addition to the share capital provided pursuant to Article III
hereof. Upon the mutual written agreement of Elco and Nagoya, any
such additional finance shall be obtained from any of the following
sources:
(a) loans to be obtained by the Company from Elco and Nagoya
equally and upon the same terms and conditions;
(b) loans to be obtained by the Company from banks and other
independent sources; provided that in such event Nagoya and Elco
shall exert their best efforts to assist the Company in obtaining
any such loans without the guarantee of either Nagoya or Elco, but
if guarantees of loans made to the Company are required by
third-party lenders and agreed to by each of the Stockholders, the
guarantees provided by Elco and Nagoya shall obligate them equally
to reflect their equal shareholdings;
(c) retained earnings of the Company; and
(d) increases in the share capital of the Company, which shall
be provided by the Stockholders equally.
MANAGEMENT OF THE COMPANY
5.1. Board of Directors.
(a) The business and affairs of the Company shall be managed
by or under the direction of the Board of Directors of the Company.
The Board of Directors of the Company shall consist of six
directors. The holders of Class A Common Stock shall be entitled
to elect three directors (the "Class A Directors" or "Nagoya
Directors") and the holders of Class B Common Stock shall be
entitled to elect three directors (the "Class B Directors" or "Elco
Directors"). Class A Common Stock and Class B Common Stock shall
have the same rights in all respects except that one of the Nagoya
Directors elected by the holders of Class A Common Stock and
designated as Chairman by such holders shall have the right to two
votes upon all matters coming before the Board of Directors of the
Company, and every reference in this Agreement, in the Certificate
of Incorporation and By-Laws to a majority or other proportion of
directors, other than with respect to or for purposes of
constituting a quorum, shall refer to and mean a majority or other
proportion of the votes of such directors to the same extent and as
if the Chairman were two Directors. In the event a vacancy occurs
among the Class A Directors, the vacancy may be filled only (i) by
a majority vote of the remaining Class A Directors or (ii) by the
holders of all of the Class A Common Stock. In the event a vacancy
occurs among the Class B Directors, the vacancy may be filled only
(i) by a majority vote of the remaining Class B Directors or (ii)
by the holders of all of the Class B Common Stock. A director may
not be removed, either for cause or without cause, except by the
vote of the Stockholder who elected such director. No committees
of the Board of Directors shall be created.
(b) Quorum. No business shall be any meeting of the Board of
Directors unless a quorum is present at such time. A quorum shall
exist only upon the presence of an even number of directors but no
fewer than four directors, no fewer than two of whom shall be
Nagoya Directors and no fewer than two of whom shall be Elco
Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
(c) Issues Reserved to the Board of Directors. In furtherance
of its responsibility to manage the business and affairs of the
Company, the Board of Directors shall reserve for decision by the
Board of Directors the following issues:
(1) entering into any contractual arrangement which may extend
for more than one year or involve more than $ 1,000,000 or is
otherwise of material importance to the Company;
(2) entering into a technical assistance or license agreement
with a third party or otherwise providing a third party with any
material technical assistance or information;
(3) approving a long term business plan;
(4) approving the Company's financial statements;
(5) fixing wage levels;
(6) appointing and removing officers and executing employment
agreements with officers;
(7) the development of new products;
(8) materially expanding a manufacturing capacity;
(9) incurrence of indebtedness for borrowed money;
(10) establishment of a line of credit;
(11) lending any amount or guaranteeing a third party's
obligation (other than by way of endorsement of checks of customers
for deposit in the Company's account);
(12) purchasing any capital asset other than in furtherance of
the annual business plan;
(13) selling assets out of the ordinary course of business and
assigning, leasing or pledging of assets of the Company;
(14) formation or incorporation of subsidiaries;
(15) approval of any act within a state which is sufficient to
require qualification as a foreign corporation in such state;
(16) all issues or matters specified in Section 5.1(d) of this
Agreement.
(d) Voting by the Directors. The vote of a majority of the
directors present at a meeting at which a quorum is present shall
be the act of the Board of Directors unless a unanimous vote of
those directors present is required by the following sentence, the
By-Laws or the Certificate of Incorporation. Board action with
respect to the following issues shall be decided or taken only upon
a unanimous vote of all directors present at a meeting at which a
quorum is present:
(1) increase or decrease of the share capital of the Company;
(2) any change in the equity structure;
(3) the sale, lease, pledge or other disposal of assets in a
transaction or related series of transactions out of the ordinary
course of business (i) the aggregate book value of which assets
exceeds 10% of the book value of all of the assets of the Company,
or (ii) without which the Company would not reasonably be able to
conduct its business substantially as it is being conducted prior
to such disposition;
(4) change in number of directors;
(5) amendment of the Certificate of Incorporation or By-Laws
of the Company;
(6) making investments in others, or merger, consolidation or
amalgamation into or with or acquisition of another company or part
thereof;
(7) dissolution, liquidation and winding up of the Company;
(8) approval of the long term business plans of the Company;
(9) change in the Business of the Company from that set forth
in this Agreement;
(10) approval of the annual operating plans including budgets
for all major sales, income and expense categories and capital
expenditures;
(11) incurrence of indebtedness for borrowed money or
providing a guaranty of an obligation (which shall not include the
execution and delivery of performance bonds, making advance
payments, or other similar trade transactions arising in the
ordinary course of business) which results in an aggregate amount
of indebtedness and guaranties at any one time outstanding in
excess of $2,500,000;
(12) creation of any lien upon the Company's properties other
than in the ordinary course of business;
(13) creation or extension of a loan or other credit not in
the ordinary course of business;
(14) entering into, terminating, extending, amending or
otherwise modifying any agreement between the Company and a
Stockholder;
(15) institution or settlement of any litigation or claim with
a Stockholder and any litigation out of the Company's ordinary
course of business;
(16) declaration of dividends or adoption of a policy
regarding the payment of dividends;
(17) entering into a contractual arrangement which may extend
for more than one year or involve more than $2,000,000 or is
otherwise of material importance to the Company;
(18) employment and discharge of independent certified public
accountants;
(19) election, compensation and removal of the Secretary, the
Treasurer and any Vice-President.
(e) Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board may be taken
without a meeting if all members of the Board consent in writing
thereto.
(f) Remuneration for Directors. The Company shall not pay
salaries or retirement allowances to directors in their capacities
as directors but shall pay traveling and lodging expenses for any
director of the Company for attendance at meetings of the Board of
Directors.
5.2. Meetings of the Board of Directors. Meetings of the
Board of Directors shall be held in Rockford, Illinois at the
offices of the Company, or such other place as the Directors may
determine. A regular meeting shall be held each year immediately
following and at the same place as the annual meeting of
Stockholders. Special meetings may be called as provided in the
By-Laws of the Company. An interpreter invited by Nagoya may
attend each meeting of the Stockholders and the Board of Directors
and the expenses of such interpreter shall be borne by the Company.
5.3. Officers. The Chairman shall be nominated by Nagoya.
The Chairman shall preside over meetings of the Board of Directors
and shall have two votes on all matters coming before the Board.
The President shall be nominated by Elco and shall be the chief
executive officer of the Company. As chief executive officer, the
President shall be responsible for all decisions relating to the
conduct of business by the Company not reserved for decision by the
Stockholders or Board of Directors.
5.4. Fiscal Year. Accounting and Auditing. The fiscal year
of the Company shall end on December 31 in each year. Complete
books of account and records shall be kept by the Company in
English and in accordance with generally accepted accounting
practices in the United States for a manufacturing business similar
to the Company's business. All financial statements shall be
prepared in English and in accordance with generally accepted
accounting principles as applied generally in the United States.
The financial statements of the Company shall be audited at
the Company's expense by an independent certified public accountant
selected by mutual agreement between the Stockholders. The parties
agree that initially the accounting firm shall be Coopers &
Lybrand. Such certified public accountant shall furnish copies of
its report on the financial statements of the Company to the
Stockholders within sixty (60) days after the end of the Company's
fiscal period.
5.5. Properties and Books and Records. Elco and Nagoya or
such person or persons as either may designate may visit and
inspect any of the properties and assets of the Company and examine
the books of account and other records of the Company and make
copies of the extracts therefrom, and the affairs, finances and
accounts of the Company with its officers, employees or with its
independent accountants or legal counsel.
Any such inspection or review shall be at the expense of the
party making the same.
5.6. Reporting. The Company shall submit to Elco and Nagoya
reports in such forms and at such times as either Elco or Nagoya
may reasonably request.
RESTRICTIONS, SALES AND TRANSFERS
6.1 Restrictions on Shares. Elco and Nagoya each agree that
it will not pledge, mortgage, sell, assign, transfer, or otherwise
dispose of all or any part of its shares in the Company (a) in such
manner as to violate the U.S. Securities Act of 1933, as amended
(the "Securities Act"), or any rules and regulations thereunder, or
any similar act of any jurisdiction or (b) other than in accordance
with this Agreement.
6.2 Transfer to Corporate Successor. Each Stockholder shall
have the right to transfer all, but not a part, of the shares of
the Company owned by it to any successor of such Stockholder by
amalgamation, merger or consolidation, or to any person, firm or
corporation to which, at the same time, all or substantially all of
the property, business and assets of such party associated with the
Products subject to this Agreement are transferred (such a
transferee being herein referred to as the "Corporate Successor");
provided, however, no such transfer may be made unless (i) the
transferring Stockholder shall first provide the other Stockholder
thirty days advance notice of its intention to transfer,
identifying the proposed Corporate Successor and the nature of the
transaction in connection with which the proposed transfer will
occur, (ii) no offer to sell has been made by the other Stockholder
pursuant to Section 6.3 hereof, and (iii) the Corporate Successor
agrees to become bound hereby and to succeed to all of the rights
and obligations of the transferor hereunder.
6.3 Mandatory Sell-Buy. At any time beginning three years
after the effective date of this Agreement, and at any time after
the effective date of this Agreement upon notice of a proposed
transfer to a Corporate Successor pursuant to Section 6.2 hereof,
either Stockholder (the "Initiating Stockholder") may at its option
offer to sell all but not part of its shares of stock of the
Company (the "Shares") to the other Stockholder (the "Other
Stockholder") at such price and upon such terms as the Initiating
Stockholder may determine in its sole discretion ("Purchase
Price"). Upon receipt of such offer, the Other Stockholder shall
have the right to purchase the Shares of the Initiating Stockholder
at the Purchase Price or to sell the Shares owned by it to the
Initiating Stockholder at the Purchase Price. If the Other
Stockholder has not advised the Initiating Stockholder of its
election within 90 days following receipt of the offer from the
Initiating Stockholder, it shall be conclusively deemed that the
Other Stockholder has accepted the offer of the Initiating
Stockholder to sell all of the Shares of the Initiating Stockholder
to the Other Stockholder at the Purchase Price. Within 30 days
after the earlier of (i) the expiration of said 90-day period and
(ii) the date on which the Other Stockholder shall advise the
Initiating Stockholder of its election, the purchasing Stockholder
shall pay to the selling Stockholder the Purchase Price and the
selling Stockholder shall deliver to the purchasing Stockholder the
certificates representing the Shares owned by it, duly endorsed for
transfer or accompanied by stock transfer powers duly executed.
OPERATIONS
7.1 Exclusive Manufacturing and Sales. Except for the
provisions of the second paragraph of this Section 7.1, it is the
intent of the Stockholders that the Company shall have the
exclusive right to manufacture Products in the Territory for sale
to original equipment manufacturers in the Territory directly or
indirectly controlled by Japanese entities (such Japanese or
Japanese controlled manufacturers in the Territory hereinafter
"Japanese Manufacturers") and for sale to such Japanese
Manufacturers' Japanese controlled suppliers and subcontractors
("Japanese Suppliers") and Designated Suppliers in the Territory.
Except as permitted in the second paragraph of this Section 7.1,
Nagoya agrees that it shall not sell Products to such Japanese
Manufacturers in the Territory or their Japanese Suppliers or
Designated Suppliers in the Territory and shall not design or
manufacture Products for sale to such Japanese Manufacturers,
Japanese Suppliers or Designated Suppliers by third parties (other
than the Company) and Elco agrees that it shall not sell Products
to such Japanese Manufacturers in the Territory or such Japanese
Suppliers or Designated Suppliers in the Territory and shall not
design or manufacture Products for sale to such Japanese
Manufacturers, Japanese Suppliers or Designated Suppliers by third
parties (other than the Company).
In the event the Company from time to time lacks the design,
manufacturing or production capability or otherwise chooses not to
manufacture Products for which it receives a specific inquiry, an
invitation to bid or an order from, or with respect to which it
understands inquiries, bids or solicitations will be considered by,
Japanese Manufacturers or Japanese Suppliers in the Territory, then
Nagoya or Elco may manufacture or sell such Products in response to
such specific inquiry, bid solicitation or order. In the further
event, should a Japanese Manufacturer, Japanese Supplier or
Designated Supplier in the Territory indicate a preference to
purchase Products other than from the Company (and such preference
has not been solicited by or on behalf of Elco or Nagoya), then the
Company shall permit Elco and Nagoya and Elco and Nagoya shall be
entitled to manufacture and sell such Products to such Japanese
Manufacturer, Japanese Supplier, or Designated Supplier, and should
a non-Japanese controlled supplier or subcontractor to a Japanese
Manufacturer indicate a preference to purchase from the Company
rather than from Elco or any other person (and such preference has
not been solicited by or on behalf of the Company), then the
Company shall be permitted to manufacture and sell such Products to
such supplier and subcontractor.
7.2. Technical Assistance. Nagoya and Elco shall each
contribute to the Company without royalty all of their existing and
future Confidential Information, data and know how relating to the
manufacture and sale of the Products as may be reasonably useful to
the Company in conducting the Business of the Company, except that
the royalty to be paid by Elco as provided in the Technical
Assistance Agreement for products manufactured by Know-how as
defined therein shall continue thereunder until expiration of the
Technical assistance Agreement.
7.3. Confidentiality. Nagoya and Elco to take appropriate
steps to keep, and will cause the Company to enter into an
agreement with them to keep, strictly secret and confidential and
not to disclose to any third party, any of the Confidential
Information, data or know-how acquired from the Company or from
each other, unless disclosure of such information is required by
law or permitted by any subsequent or supplemental agreement of
both of the parties hereto.
7.4. Use of Information. Nagoya and Elco each agree that it
shall not use, and agree that they will cause the Company to agree
not to use, any information described in Section 7.3 and obtained
from the other or from the Company, or in the case of use by the
Company, obtained by the Company from Nagoya or Elco for any
purpose whatsoever except in a manner expressly provided in this
Agreement, the Technical Assistance Agreement or any subsequent or
supplemental agreements.
7.5. Exceptions to Confidentiality and Use Restrictions.
Nothing contained in this Agreement shall be construed to
restrict or limit Elco's, Nagoya's or the Company's right to use,
disclose or otherwise dispose of any information which:
(a) is in the possession of Elco or Nagoya, as the case may
be, prior to the disclosure of information to one of them by the
other after the date hereof, provided that if such possession was
obtained by one of them from the other in accordance with
agreements then or now existing, including the Technical Assistance
Agreement, such right of Nagoya or Elco shall be exercised in
accordance therewith; or
(b) at the time of disclosure is or thereafter becomes,
through no act or failure to act on the part of Elco, Nagoya or the
Company, as the case may be, part of the public domain by
publication or otherwise.
7.6. Office and Plant Site. Elco presently leases property
commonly known as Brearley Plant #2, 5309 Eleventh Street,
Rockford, Illinois (the "Leased Premises') pursuant to an
industrial lease agreement dated August 2, 1984 between Elco, as
lessee, and Rowe Properties-Rockford, a Virginia limited
partnership, as lessor. Subject to such consents of the lessor as
may be required, Nagoya and Elco shall cause the Company to enter
into a sublease with Elco covering approximately 49,600 square feet
of the Leased Premises upon the terms and conditions set out in the
Sub-Lease Agreement attached hereto as Appendix C.
TERMINATION
8.1. Termination. This Agreement shall continue in effect
until terminated by mutual agreement of the parties, or until
either party hereto transfers all of its shares in the Company
pursuant to Section 6.3 hereof; provided, however, that if either
party suspends payment of its debts or enters into or becomes
subject to corporate rehabilitation procedures, liquidation,
dissolution or bankruptcy proceedings, or shall make a composition
with its creditors, or shall make an assignment for the benefit of
its creditors, or shall seek relief under any similar laws for
debtor's relief, then the other party, at its option, may thereupon
immediately terminate this Agreement.
8.2. Discontinuance of Name. In the event of a purchase and
sale provided for in Section 6.3 of this Agreement, the name of the
Company shall be promptly changed so that it does not contain the
word "Elco" if Elco is the selling Stockholder and does not contain
the word "Nagoya" if Nagoya is the selling stockholder.
8.3 Change of Law. In the event there is a new, or a change
in any, law or administrative regulation or ruling or action of any
administrative agency of either Japan or the United States or a
decision of a court having jurisdiction over either of the parties
hereto or a consent decree under the United States or Japanese
antitrust laws binding upon Nagoya or Elco, which requires
modification of this Agreement in a way which would be unacceptable
to either party, then such party may request the other to
renegotiate in good faith the terms of this Agreement so as to
conform to such new or changed law, regulation, ruling or action,
court decision or consent decree in a way which will be acceptable
to both parties.
In the event that an agreement cannot be reached by the
parties within ninety (90) days after such renegotiations have
commenced, either party may, by written notice to the other,
terminate this Agreement.
8.4. Dissolution. Upon termination of this Agreement for any
reason, other than when a party voluntarily ceases to be a
Stockholder through sale of its shares in the Company to the other
party or through transfer to a Corporate Successor pursuant to
Section 6.2, the Company shall, unless the parties hereto otherwise
agree in writing, be dissolved and liquidated and the assets
thereof shall be divided and distributed as promptly as reasonably
possible among its stockholders in proportion to their then
respective stock interests in the Company.
8.5. Force Majeure. Neither of the parties shall be liable on
any account for any failure to fulfill any terms of this Agreement,
if such fulfillment has been delayed, hindered or prevented by
force majeure, including strikes, riots, lockouts, civil commotion
or any other unforeseeable supervening event of whatever nature
beyond the control of the party asserting the provisions of this
Section. If such event of force majeure continues uninterrupted
for a period of six (6) months, either Nagoya or Elco may, at its
option, terminate this Agreement by written notice to the other.
8.6. Survival of Obligations. Termination of this Agreement
and/or the dissolution of the Company for any cause shall not
release either party from any other liability which at the time of
termination and/or dissolution has already occurred to the other
party, nor affect in any way the survival of the rights, duties and
obligations of either party provided for in Sections 7.3, 7.4, 8.2,
9.1 and 9.2.
ARBITRATION
9.1. Arbitration. All disputes, controversies or differences
which may arise between the parties, out of or in relation to or in
connection with this Agreement, or the breach thereof, shall be
finally settled by arbitration pursuant to the Japan-American Trade
Arbitration Agreement of September 16, 1952, by which each party
hereto is bound; provided, however, that neither party shall
initiate arbitration without first having given the other party
sixty (60) days prior notice thereof so as to afford the parties
the opportunity amicably to resolve their differences.
9.2. Place and Conduct of Arbitration. The place of
arbitration shall be a place designated by mutual agreement of the
parties, provided that if the parties fail to agree on a place
within two weeks after the expiration of the sixty (60) day period
provided in Section 9.1 above after arbitration is requested in
writing by a party, then the arbitration will be held in London,
England. Subject to the terms of this Agreement, the arbitration
shall be conducted under the Rules of the London Court of
International Arbitration. The arbitration tribunal shall consist
of three arbitrators, each party to appoint one "neutral"
arbitrator of its choice, and the third arbitrator, who shall not
be a citizen or national of Japan or the United States and shall
act as the chairman of the arbitration tribunal, shall be appointed
by the two arbitrators appointed by the parties. If the parties
hereto shall fail to appoint their respective arbitrators or the
two appointed arbitrators fail to appoint the third arbitrator
within thirty (30) days of the commencement of the arbitration, the
arbitrator or arbitrators shall then be selected by the London
Court of Arbitration in accordance with its rules. The decision
and award rendered by the arbitration tribunal shall be final and
binding upon the parties, who hereby agree that the award shall be
enforceable in both Japan and the United States and any other
country which would recognize the award under its domestic law.
The parties agree that the arbitration tribunal shall award the
costs of arbitration, including the arbitration tribunal fees and
the legal fees of the parties to the loser provided that, in cases
where the award is a compromise of the parties' position, the
arbitration tribunal shall allocate the costs as it deems
appropriate.
INTERPRETATION
10.1. Governing Law. The validity, construction and
performance of this Agreement shall be governed by and interpreted
in accordance with the laws of Illinois.
10.2. Language. This Agreement is in the English language,
executed in duplicate originals by the parties hereto. In the
event that this Agreement is translated into Japanese or any other
language, and any inconsistency or contradiction in meaning or
interpretation results therefrom, the English language version
shall prevail and be controlling.
10.3. Headings. The headings to Articles and Sections of this
Agreement are for convenience only, do not form a part of this
Agreement, and shall not in any way affect the interpretation
hereof.
10.4. Construction and Amendment. No oral explanation of or
oral information relating to this Agreement offered by either party
hereto shall alter the meaning or interpretation of this Agreement.
No change in the terms hereof shall be binding on either party
hereto unless reduced to writing and duly executed by the parties.
10.5. Non Waiver. The failure of a party to give notice of
the breach or nonfulfillment of any terms or conditions of this
Agreement shall not constitute a waiver thereof, nor shall the
waiver of any breach or nonfulfillment of any terms or conditions
of this Agreement constitute a waiver of any other breach or
nonfulfillment of that or any other terms or conditions of this
Agreement.
10.6. Remedies Cumulative. Any remedies herein are in
addition to and not in lieu of any remedies provided by law.
MISCELLANEOUS
11.1. Assignment. This Agreement shall not be assignable by
either party without the written consent of the other party;
provided, however, that either party may assign its rights and
obligations hereunder without the consent of the other party to a
Corporate Successor to which its shares in the company are
transferred pursuant to and in compliance with Section 6.2.
11.2. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the parties and their permitted
successors and assigns.
11.3. Notices. All notices for the purpose of this Agreement
shall be deemed to be properly served when given in writing, or
sent by telex or telecopy and confirmed by first class mail,
postage prepaid, to the other party at the following telex and
telecopy numbers or addresses, telex and telecopy numbers or such
other telex and telecopy numbers of such other persons as the
parties hereto may designated from time to time by notice.
If to Nagoya: Mr. Kan Hayashi
President
Nagoya Screw Manufacturing Co., Ltd.
17-15, Tsubaki-cho
Nakamura-ku Nagoya, Japan
Telecopy No.: 052-451-4587
With a copy to:
Mr. Takehiro Naruse
Project Development and Finance
Division
Mitsubishi Bank
7-1, Marunouchi 2-chome,
Chiyoda-ku
Tokyo 100 Japan
Telecopy No.: (03) 240-3633
If to Elco:
Mr. Frank A. Fiorenza
President
Elco Industries, Inc.
1111 Samuelson Road
Rockford, IL 61125-7009
Telecopy: (815) 395-8270
With a copy to:
Robert L. Berner, Jr., Esq.
Baker & McKenzie
130 East Randolph Drive
Chicago, IL 60601
Telecopy (312) 861-2898
11.4. Stockholders' Pre-Effective Date Expenses. Costs or
expenses incurred or paid by Nagoya or Elco in connection with the
negotiation, development or organization of the joint venture
provided for herein shall be borne, allocated and shared as
provided and described in Sections 5 and 6 of the Memorandum of
Intent dated February 7, 1989 between Nagoya and Elco.
11.5. Stockholders' Post-Effective Date Expenses. Any fees or
expenses incurred after the Effective Date by either Elco or Nagoya
as a Stockholder of the Company, including fees and expenses of
accountants and legal counsel who may be employed by such party,
shall be an expense of the party incurring or authorizing the same
and shall not, without the written consent of the other party, be
paid by or rebilled to the Company.
11.6. Good Faith. In entering into this Agreement, Elco and
Nagoya recognize that it is impossible to make provisions for every
contingency that may arise in the course of the performance hereof.
Accordingly, Elco and Nagoya declare it to be their intention that
this Agreement shall operate between them with fairness and without
detriment to the interest of either of them and if, in the course
of the performance of this Agreement, unfairness to Elco or Nagoya
is disclosed or anticipated, then Elco or Nagoya shall use their
best endeavors to agree upon such action as may be necessary and
equitable to remove the cause or causes of the same. Elco and
Nagoya will require that the persons representing them at the Board
of Directors and stockholders meeting will exercise their rights to
vote in consistency with this Agreement in order to give full
effect to the provisions hereof, and to ensure that no resolution
is passed which is in conflict with such provisions.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives
as of the day and year first set forth above.
ELCO INDUSTRIES, INC.
By: Jack W. Packard
Title: Chairman & CEO
ATTEST:
By: Frank A. Fiorenza
Title: President & COO
NAGOYA SCREW MANUFACTURING CO., LTD.
By: Kan Hayashi
Title: President
ATTEST:
By: Ryozo Ohashi
Title: Executive Director
<PAGE>
EXHIBIT A
Form of Certificate of Incorporation
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ROCKNEL FASTENER, INC.
1. The name of the corporation is: Rocknel Fastener, Inc.
2. The address of its registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is
The Corporation Trust Company.
3. The nature of the business or the objects or purposes to be
conducted or promoted by the corporation are to engage in the
business of manufacturing and sale of fasteners and to engage in
any other lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware as now in force or as hereafter amended and to possess,
exercise and enjoy all the powers, rights and privileges granted by
the General Corporation Law of the State of Delaware, together with
any lawful powers, rights and privileges incidental thereto.
4. The total number of shares of stock which the corporation
shall have authority to issue of all classes of stock is one
thousand (1000) shares of Common Stock, no par value, divided into
two classes: one class designated Class A Common stock, no par
value, and the other class designated Class B Common Stock, no par
value. The number of shares of Class A Common Stock which the
corporation shall have authority to issue is five hundred (500)
shares and the number of shares of Class B Common Stock which the
corporation shall have authority to issue is five hundred (500).
5. The name and mailing address of the incorporators are as
follows:
NAME MAILING ADDRESS
Frank A. Fiorenza Elco Industries, Inc.
1111 Samuelson Road
Rockford, IL 61125
Kan Hayashi Nagoya Screw Manufacturing
Co. Ltd.
17-15, Tsubaki-cho
Nakamura-ku
Nagoya, Japan
6. The corporation shall have perpetual existence.
7. There shall be an even number of directors of the
corporation fixed by the by-laws. The holders of Class A Common
Stock shall have the right to elect one-half of the directors and
the holders of Class B Common Stock shall have the right to elect
one-half of the directors. Each director shall have one vote
except that one of the directors elected and so designated by the
holders of the Class A stock shall have two votes.
8. In furtherance and not in limitation of the powers
conferred by statute, the board of directors by unanimous vote is
expressly authorized to adopt, amend or repeal the by-laws of the
corporation; provided, however, that such authorization shall not
divest the stockholders of the power or limit their power to adopt,
amend or repeal the by-laws of the corporation.
9. Meetings of the stockholders may be held within or without
the State of Delaware as the by-laws may provide. Elections of
directors need not be by written ballot unless the by-laws of the
corporation so provide.
10. The corporation shall have the power to indemnify its
directors, officers, employees or agents to the full extent
permitted by the General Corporation Law of the State of Delaware
as now in force or as hereafter amended.
11. No director shall be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director except as provided for in Section 102(b)(7) of the
General Corporation Law of the State of Delaware as now in force or
as hereafter amended.
12. The books and records of the corporation may be kept
outside the State of Delaware at such place or places as may be
designated from time to time by the board of directors or in the
by-laws of the corporation.
13. Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or
between this corporation and its stockholders or any class of them,
any court of equitable jurisdiction within the State of Delaware
may, on the application in a summary way of this corporation or of
any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for this corporation under the
provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or
receivers appointed for this corporation under the provisions of
section 279 of Title 8 of the Delaware code, order a meeting of the
creditors or class of creditors and/or of the stockholders or class
of stockholders of this corporation, as the case may be, to be
summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or
class of creditors and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall,
if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or
on all the stockholders or class of stockholders, of this
corporation, as the case may be, and also on this corporation.
14. The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by law, and
all rights and powers conferred herein upon stockholders are
granted subject to this reservation.
THE UNDERSIGNED, being the incorporators herein-before named,
for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate,
hereby declaring and certifying that this is their act and deed and
the facts herein stated are true and accordingly have hereunto set
their hands this 29th day of June, 1989.
Frank A. Fiorenza Kan Hayashi
Incorporator Incorporator
<PAGE>
EXHIBIT B
Form of By-Laws of the Company
<PAGE>
BY-LAWS
OF
Rocknel Fastener, Inc., a Delaware Corporation
ARTICLE I
Offices
SECTION 1.1. Registered Office. The registered office of the
corporation in the State of Delaware shall be located at 1209
Orange Street in the City of Wilmington, County of New Castle, and
the name of its registered agent is The Corporation Trust Company.
SECTION 1.2. Other Offices. The corporation may also have
offices at such other places both within or without the State of
Delaware as the Board of Directors may from time to time determine
or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.1. Stockholders. The stockholders of the
corporation shall be Elco Industries, Inc. ("Elco") and Nagoya
Screw Manufacturing Co., Ltd. ("Nagoya") each of which shall own a
50% equity interest in the corporation, subject to the terms of the
Joint Venture Agreement between Nagoya and Elco dated June 14,
1989, as the same may be amended from time to time.
SECTION 2.2. Annual Meeting. The annual meeting of the
stockholders shall be held at the main office of the corporation,
or at such other place as designated by the Board of Directors,
between May 10 and May 31 of each year as mutually determined by
the stockholders.
SECTION 2.3. Special Meetings. Except as otherwise prescribed
by statute, special meetings of the stockholders for any purpose or
purposes may be called and the location thereof designated by the
Board of Directors.
SECTION 2.4. Notice of Meetings. Written or printed notice
stating the place and time of each annual or special meeting of the
stockholders and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given not less
than thirty (30) days nor more than sixty (60) days before the date
of the meeting. (See also Articles IV and XI.)
SECTION 2.5. Quorum. The holders of capital stock of the
corporation having one hundred percent of the voting power thereof,
present in person or represented by proxy, shall be requisite for,
and shall constitute, a quorum at all meetings of the stockholders
of the corporation for the transaction of business, except as
otherwise provided by statute.
SECTION 2.6. Proxies. At every meeting of the stockholders,
each stockholder having the right to vote thereat shall be entitled
to vote in person or by proxy. Such proxy shall be appointed by an
instrument in writing subscribed by such stockholder and bearing a
date not more than three (3) years prior to such meeting, unless
such proxy provides for a longer period; and it shall be filed with
the Secretary of the corporation before, or at the time of, the
meeting.
SECTION 2.7. Voting. At every meeting of stockholders, each
stockholder shall be entitled to one (1) vote for each share of
stock of the corporation entitled to vote thereat and registered in
the name of such stockholder on the books of the corporation on the
pertinent record date. When a quorum is present at any meeting of
the stockholders, the unanimous vote of the holders of the stock
having voting power which is present in person or represented by
proxy shall decide any question brought before such meeting.
SECTION 2.8. Voting of Certain Shares. Shares may be voted by
such officer, agent, or proxy as the by-laws of each stockholder
may prescribe or, in the absence of such provision, as the Board of
Directors of each stockholder may determine.
SECTION 2.9. Action Without Meeting. Whenever the vote of
stockholders at a meeting thereof is required or permitted to be
taken for or in connection with any corporate action, the meeting
and vote of stockholders may be dispensed with if a consent in
writing, setting forth the action so taken, shall be signed by the
holders of all of the outstanding stock. Such consent shall be
filed with the minutes of proceedings of the stockholders and shall
have the same force and effect as a unanimous vote of stockholders.
SECTION 2.10. Translator. Any stockholder may be accompanied
by a translator or interpreter at a meeting of the stockholders,
the cost of which shall be borne by the corporation.
ARTICLE III
Directors
SECTION 3.1. Number and Election. (a) The number of directors
which shall constitute the whole board shall be six. Directors
shall be elected annually by the stockholders as provided in
Section 2.2 or in accordance with Section 3.2 of these by-laws,
subject to the provisions of the certificate of incorporation, and
each director elected shall hold office until his successor is
elected and qualified or until his death or resignation or until he
shall have been removed in the manner hereinafter provided.
Directors need not be residents of the State of Delaware or
stockholders of this corporation.
SECTION 3.2. Resignations and Vacancies. Any director may
resign at any time by giving written notice to the Board of
Directors or to the President. Any such resignation shall take
effect at the date of the receipt of such notice or at any later
time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make
it effective. If, at any other time than the annual meeting of the
stockholders, any vacancy occurs in the Board of Directors caused
by resignation, death, retirement, disqualification or removal from
office of any director or otherwise and said director was elected
by the holders of a particular class of stock, said vacancy shall
be filled only by (i) a majority vote of the remaining directors
elected by the holders of said class of stock or (ii) a majority
vote of the holders of said class of stock.
SECTION 3.3. Removal. A director may not be removed, either
for cause or without cause, except by the vote of the class of
stockholders who elected such director.
SECTION 3.4. Management of Affairs of Corporation. The
property and business of the corporation shall be managed by its
Board of Directors, which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these by-laws
directed or required to be exercised or done by stockholders. In
furtherance of its responsibility to manage the business and
affairs of the corporation, the Board of Directors shall reserve
for decision by the Board of Directors the following issues:
(1) entering into any contractual arrangement which may extend
for more than one year or involve more than $1,000,000 or is
otherwise of material importance to the Company;
(2) entering into a technical assistance or license agreement
with a third party or otherwise providing a third party with any
material technical assistance or information;
(3) approving a long term business plan;
(4) approving the corporation's financial statements;
(5) fixing wage levels;
(6) appointing and removing officers and executing employment
agreements with officers;
(7) the development of new products;
(8) materially expanding a manufacturing capacity;
(9) incurrence of indebtedness for borrowed money;
(10) establishment of a line of credit;
(11) lending any amount or guaranteeing a third party's
obligation (other than by way of endorsement of checks of customers
for deposit in the Company's account);
(12) purchasing any capital asset other than in furtherance of
the annual business plan;
(13) selling assets out of the ordinary course of business and
assigning, leasing or pledging of assets of the Company;
(14) formation or incorporation of subsidiaries;
(15) approval of any act within a state which is sufficient to
require qualification as a foreign corporation in such state;
(16) all issues or matters specified in Section 3.9(b) of
these by-laws.
In case the corporation shall transact any business or enter
into any contract with a director, or with any firm of which one or
more of its directors are members, or with any trust, firm,
corporation or association in which any director is a stockholder,
director or officer or otherwise interested, the officers of the
corporation and directors in question shall be severally under the
duty of disclosing all material facts as to their interest to the
remaining directors promptly if and when such interested officers
or such interested directors in question shall become advised of
the circumstances. In the case of continuing relationships in the
normal course of business such disclosure shall be deemed
effective, when once given, as to all transactions and contracts
subsequently entered into.
SECTION 3.5. Dividends and Reserves. Dividends upon stock of
the corporation may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid
in cash, in property, in shares of stock or otherwise in the form,
and to the extent, permitted by law. The Board of Directors may
set apart, out of any funds of the corporation available for
dividends, a reserve or reserves for working capital, or for any
other lawful purpose, and also may abolish any such reserve in the
manner in which it was created.
SECTION 3.6. Regular Meetings. An annual meeting of the Board
of Directors shall be held, without other notice than this by-law,
immediately after, and at the same place as, the annual meeting of
the stockholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State
of Delaware, for the holding of additional regular meetings without
other notice than such resolution.
SECTION 3.7. Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman of the Board or the
President and shall be called by the Secretary at the request of
any two directors, to be held at such time and place as shall be
designated by the call and specified in the notice of such meeting;
and notice thereof shall be given as provided in Section 3.8 of
these by-laws.
SECTION 3.8. Notice of Special Meetings. Except as otherwise
prescribed by statute, written or actual oral notice of the time
and place of each special meeting of the Board of Directors shall
be given at least thirty (30) days prior to the time of holding the
meeting. (See also Articles IV and XI.)
SECTION 3.9. Quorum and Manner of Action. (a) At each meeting
of the Board of Directors, the presence of an even number of
directors but in no event fewer than four directors, no fewer than
two of whom shall be directors elected by holders of the Class A
Common Stock and two of whom shall be directors elected by holders
of the Class B Common Stock, shall be necessary and sufficient to
constitute a quorum for the transaction of business. Each director
shall have one vote, except that the Chairman of the Board shall
have two votes. Every reference in these by-laws and in the
certificate of incorporation to a majority or other proportion of
directors (except for purposes of establishing a quorum) shall
refer to such majority or other proportion of the votes of such
directors. The act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by
statute or these by-laws. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
(b) Notwithstanding the foregoing, Board action with to the
following issues shall be decided or taken only upon a unanimous
vote of all directors present at a meeting at which a quorum is
present:
(1) increase or decrease of the share capital of the Company;
(2) any change in the equity structure;
(3) the sale, lease, pledge or other disposal of assets in a
transaction or related series of transactions out of the ordinary
course of business (i) the aggregate book value of which assets
exceeds 10% of the book value of all of the assets of the Company,
or (ii) without which the Company would not reasonably be able to
conduct its business substantially as it is being conducted prior
to such disposition;
(4) change in number of directors;
(5) amendment of the certificate of incorporation or bylaws of
the Company;
(6) making investments in others or merger, consolidation or
amalgamation into or with or acquisition of another company or part
thereof:
(7) dissolution, liquidation and winding up of the Company;
(8) approval of the long-term business plans of the Company;
(9) change in the business of the Company from that set forth
in that certain Joint Venture Agreement between Nagoya and Elco;
(10) approval of the annual operating plans, including budgets
for all major sales, income and expense categories and capital
expenditures;
(11) the incurrence of indebtedness for borrowed money or
providing a guaranty of an obligation (which shall not include the
execution and delivery of performance bonds, making advance
payments, or other similar trade transactions arising in the
ordinary course of business) which results in an aggregate amount
of indebtedness and guaranties at any one time outstanding in
excess of $2,500,000,
(12) creation of any lien upon the Company's properties other
than in the ordinary course of business;
(13) creation or extension of a loan or other credit not in
the ordinary course of business;
(14) entering into, terminating, extending, amending or
otherwise modifying any agreement between the Company and a
stockholder;
(15) the institution or settlement of any litigation or claim
with a stockholder and any litigation out of the Company's ordinary
course of business;
(16) declaration of dividends or adoption of a policy
regarding the payment of dividends;
(17) entering into a contractual arrangement which may extend
for more than one year or involve more than $2,000,000 or is
otherwise of material importance to the Company;
(18) employment and discharge of independent certified public
accountants; and
(19) election compensation and removal of the Secretary, the
Treasurer and any Vice-President.
SECTION 3.10. Presumption of Assent. Unless otherwise
provided by statute, a director of the corporation who is present
at a meeting of the Board of Directors at which action is taken on
any corporate matter shall be presumed to have assented to the
action taken unless his dissent shall be entered in the minutes of
the meeting or unless he shall file his written dissent to such
action with the person acting as Secretary of the meeting before
the adjournment thereof or shall forward such dissent by registered
mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply
to a director who voted in favor of such action.
SECTION 3.11. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting, if a written consent thereto is signed
by all members of the Board and such written consent is filed with
the minutes of proceedings of the Board.
SECTION 3.12. Presiding Officer. The presiding officer at any
meeting of the Board of Directors shall be the Chairman of the
Board or, in his absence, as otherwise provided in these bylaws.
SECTION 3.13. Fees and Compensation of Directors. The
corporation shall not pay salaries or retirement allowances to the
directors for their services, but shall pay traveling and lodging
expenses for any director for attendance at meetings of the Board
of Directors. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 3.14. Reliance Upon Records. Every director of the
corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or
reports made to the corporation by any of its officials, or by an
independent certified public accountant, or by an appraiser
selected with reasonable care by the Board of Directors, or in
relying in good faith upon other records of the corporation,
including, without limiting the generality of the foregoing,
records setting forth or relating to the value and amount of
assets, liabilities and profits of the corporation or any other
facts pertinent to the existence and amount of surplus or other
funds from which dividends might properly be declared or paid or
with which stock of the corporation might lawfully be purchased or
redeemed.
SECTION 3.15. Translator. Any director may be accompanied by
a translator or interpreter at any Board of Directors meeting, the
cost of which shall be borne by the corporation.
ARTICLE IV
Notices
SECTION 4.1. Manner of Notice. Whenever under the provisions
of the statutes, the certificate of incorporation or these by-laws
notice is required to be given to any stockholder or director, it
shall not be construed to require personal delivery and such notice
may be given in writing (i) by depositing it, in a sealed envelope,
in the United States mails, air mail or first class, postage
prepaid, addressed to such stockholder or director either at the
address of such stockholder or director as it appears on the books
of the corporation or, in the case of such a director, at his
business address, (ii) by delivering it to a telegraph company,
charges prepaid, for transmission or (iii) by transmitting it to
such person by telex or facsimile machine.
ARTICLE V
Officers
SECTION 5.1. Offices and Official Positions. The officers of
the corporation shall be a Chairman of the Board, a President, one
or more Vice-Presidents, a Secretary, a Treasurer, and other
officers as the Board of Directors shall determine. Any two or
more offices may be held by the same person. None of the officers
need be a director, a stockholder of the corporation or a resident
of the State of Delaware.
SECTION 5.2. Election and Term of Office. Except as otherwise
provided herein, the officers of the corporation shall be elected
annually by the Board of Directors. Each officer shall hold office
until his successor is elected and qualified or until his death or
resignation or until he shall have been removed in the manner
hereinafter provided.
SECTION 5.3. Removal and Resignation. Any officer may be
removed, either with or without cause, by a unanimous vote of the
directors then in office at any regular or special meeting of the
Board; provided, however, that the Chairman of the Board may be
removed only by a unanimous vote of the remaining directors elected
by the holders of the Class A Common Stock and the President may be
removed only by a unanimous vote of the directors elected by the
holders of the Class B Common Stock. Such removal shall be without
prejudice to the contract rights, if any, of such person so
removed. Any officer may resign at any time by giving written
notice to the Board of Directors or to the President of the
corporation, and the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 5.4. Vacancies. A vacancy in any office may be filled
for the unexpired portion of the term by the Board of Directors;
provided, however, that the position of the Chairman of the Board
may be filled only by a vote of the remaining directors elected by
the holders of the Class A Common Stock and the position of the
President may be filled only by a vote of the directors elected by
the holders of the Class B Common Stock.
SECTION 5.5. Chairman of the Board of Directors. The Chairman
of the Board of Directors, who shall be elected by those directors
elected by the holders of the Class A Common Stock, shall supervise
the formation of corporate policies and long range corporate
planning for the corporation; shall preside at all meetings of the
stockholders and the Board of Directors; and shall perform such
other duties as from time to time may be assigned to him or her by
the Board of Directors.
SECTION 5.6 President. The President, who shall be appointed
by those directors elected by the holders of the Class B Common
Stock, shall be the chief executive officer of the corporation, in
the absence of the Chairman of the Board shall preside at all
meetings of the stockholders and the Board of Directors, shall have
general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of
Directors and stockholders are carried into effect. Subject to the
approval of the Board of Directors where such approval is required
by these by-laws, he shall have authority to designate the duties
and powers of other officers and delegate special powers and duties
to specified officers, so long as such designation shall not be
inconsistent with the statutes, these by-laws or action of the
Board of Directors. He shall also have
power to execute, and shall execute, deeds, mortgages, bonds,
contracts or other instruments of the corporation except where
required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by the President
to some other officer or agent of the corporation. The President
may sign with the Secretary or the Treasurer certificates for
shares of stock of the corporation the issuance of which shall have
been duly authorized by the Board of Directors, and shall vote, or
give a proxy to any other person to vote, all shares of the stock
of any other corporation standing in the name of the corporation.
The President in general shall have all other powers and shall
perform all other duties which are incident to the chief executive
office of a corporation or as may be prescribed by the Board of
Directors from time to time.
SECTION 5.7. Vice-Presidents. In the absence of the
President, or in the event of his inability or refusal to act, the
Vice Presidents in order of their rank as fixed by the Board of
Directors or, if not ranked, the Vice President designated by the
Board of Directors or the President, shall perform all duties of
the President and, when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the President. The
Vice Presidents shall have such other powers and perform such other
duties, not inconsistent with the statutes, these by-laws, or
action of the Board of Directors, as from time to time may be
prescribed for them, respectively, by the Board of Directors or the
President. Any Vice President may sign, with the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certificates for shares of stock of the corporation the issuance
of which shall have been duly authorized by the Board of Directors.
SECTION 5.8. Secretary. The Secretary shall: (a) keep the
minutes of the meetings of the stockholders and the Board of
Directors in one or more books provided for that purpose; (b) see
that all notices are duly given in accordance with the provisions
of these by-laws or as required by law; (c) have charge of the
corporate records and of the seal of the corporation; (d) affix the
seal of the corporation or a facsimile thereof, or cause it to be
affixed, to all certificates for shares prior to the issue thereof
and to all documents the execution of which on behalf of the
corporation under its seal is duly authorized by the Board of
Directors or otherwise in accordance with the provisions of these
by-laws; (e) keep a register of the post office address of each
stockholder and director which shall from time to time be furnished
to the Secretary by such stockholder or director; (f) sign with the
President certificates for shares of stock of the corporation, the
issuance of which shall have been duly authorized by resolution of
the Board of Directors; (g) have general charge of the stock
transfer books of the corporation; and (h) in general, perform all
duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the President or by the
Board of Directors. He may delegate such details of the
performance of duties of his office as may be appropriate in the
exercise of reasonable care to one or more persons in his stead,
but shall not thereby be relieved of responsibility for the
performance of such duties.
SECTION 5.9. Treasurer. The Treasurer shall: (a) be
responsible to the Board of Directors for the receipt, custody and
disbursement of all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the
corporation from any source whatsoever and deposit all such moneys
in the name of the corporation in such banks, trust companies or
other depositories as shall from time to time be selected in
accordance with the provisions of Section 7.4 of these by-laws; (c)
disburse the funds of the corporation as ordered by the Board of
Directors or the President or as otherwise required in the conduct
of the business of the corporation; (d) render to the President or
the Board of Directors, upon request, an account of all his
transactions as Treasurer and on the financial condition of the
corporation; and (e) in general, perform all the duties incident to
the office of Treasurer and such other duties as from time to time
may be assigned to him by the President, by the Board of Directors
or these by-laws. He may sign, with the President, certificates
for shares of stock of the corporation, the issuance of which shall
have been duly authorized by resolution of the Board of Directors.
He may delegate such details of the performance of duties of his
office as may be appropriate in the exercise of reasonable care to
one or more persons in his stead, but shall not thereby be relieved
of responsibility for the performance of such duties. If required
by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum, and with such surety
or sureties, as the Board of Directors shall determine.
SECTION 5.10. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors or by such
officer as it shall designate for such purpose or as it shall
otherwise direct. No officer shall be prevented from receiving a
salary or other compensation as officer by reason of the fact that
he is also a director of the corporation.
ARTICLE VI
Divisions
SECTION 6.1. Divisions of the Corporation. The Board of
Directors shall have the power to create and establish such
operating divisions of the corporation as they may from time to
time deem advisable.
SECTION 6.2. Official Positions Within a Division. The
President may appoint individuals, whether or not they are officers
of the corporation, to, and may, with or without cause, remove them
from, official positions established within a division, but not
filled by the Board of Directors. (See also Section 5.1 of these
by-laws.)
ARTICLE VII
Contracts, Loans. Checks and Deposits
SECTION 7.1. Contracts and Other Instruments. The Board of
Directors may authorize any officer or officers, agent or agents,
to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the corporation and such authority may
be general or confined to specific instances.
SECTION 7.2. Loans. No loans shall be contracted on behalf of
the corporation and no evidence of indebtedness shall be issued in
the name of the corporation unless authorized by a resolution of
the Board of Directors. Such authority may be general or confined
to specific instances.
SECTION 7.3. Checks, Drafts, etc. All checks, demands, drafts
or other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall from time to time be
authorized by the Board of Directors.
SECTION 7.4. Deposits. All funds of the corporation shall be
deposited from time to time to the credit of the corporation in
such banks, trust companies or other depositories as the Board of
Directors may select.
ARTICLE VIII
Certificates of Stock and Their Transfer
SECTION 8.1. Certificates of Stock. The certificates of stock
of the corporation shall be in such form as may be determined by
the Board of Directors, shall be numbered and shall be entered in
the books of the corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed
by the President and by the Treasurer or the Secretary.
SECTION 8.2. Lost, Stolen or Destroyed Certificates. The
Board of Directors in individual cases, or by general resolution,
may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed.
SECTION 8.3. Transfers of Stock. Upon surrender to the
corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, and upon payment of applicable taxes with
respect to such transfer, and subject to such rules and regulations
as the Board of Directors may from time to time deem advisable
concerning the transfer and registration of certificates for shares
of capital stock of the corporation, the corporation shall issue a
new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books. Transfers
of shares shall be made only on the books of the corporation by the
registered holder thereof or by his attorney or successor duly
authorized as evidenced by documents filed with the Secretary of
the corporation.
SECTION 8.4. No Fractional Share Certificates. Certificates
shall not be issued representing fractional shares of stock.
SECTION 8.5. Stockholders of Record. The corporation shall be
entitled to treat the holder of record of any share or shares of
stock as the holder in fact thereof and accordingly, shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE IX
Indemnification
SECTION 9.1. In General. Each person who at any time is or
shall have been a director, officer, employee or agent of this
corporation, or is or shall have been serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
and his heirs, executors and administrators, shall be indemnified
by this corporation in accordance with and to the full extent
permitted by the Delaware General Corporation Law as in effect at
the time of adoption of this by-law or as amended from time to
time. No director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. The foregoing right of
indemnification shall not be deemed exclusive of any other rights
to which a person seeking indemnification may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors
or otherwise. If authorized by the Board of Directors, the
corporation may purchase and maintain insurance on behalf of any
person to the full extent permitted by the Delaware General
Corporation Law as in effect at the time of the adoption of this
by-law or as amended from time to time.
ARTICLE X
General Provisions
SECTION 10.1. Fiscal Year. The fiscal year of the corporation
shall begin on January 1 of each year and end on December 31 of
each year.
SECTION 10.2. Seal. The corporate seal shall have inscribed
thereon the name of the corporation, and the words "CORPORATE SEAL"
and "DELAWARE;" and it shall otherwise be in the form approved by
the Board of Directors. Such seal may be used by causing it, or a
facsimile thereof, to be impressed or affixed or otherwise
reproduced.
ARTICLE XI
Amendments
SECTION 11.1. In General. Any provision of these by-laws may
be altered, amended or repealed from time to time by the unanimous
vote of all stock having voting power present in person or by proxy
at any annual meeting of stockholders at which a quorum is present,
or at any special meeting of stockholders at which a quorum is
present, if notice of the proposed alteration, amendment or repeal
be contained in the notice of such special meeting, or by the
unanimous vote of the directors then qualified and acting at any
regular or special meeting of the Board; provided, however, that
the stockholders may provide specifically for limitations on the
power of directors to amend particular by-laws and, in such event,
the directors' power of amendment shall be so limited; and further
provided that no reduction in the number of directors shall have
the effect of removing any director prior to the expiration of his
term of office.
I DO hereby CERTIFY, that I am the duly elected, qualified and
acting Secretary of the corporation and that the foregoing by-laws
were adopted as the by-laws of this corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the corporate seal as of the 1st day of July, 1989.
Kenneth L. Heal
Secretary
<PAGE>
EXHIBIT C
Form of Sublease Agreement
<PAGE>
SUBLEASE AGREEMENT
This Sublease Agreement dated the 25th day of July 1989, is
entered into by and between Elco Industries, Inc., a Delaware
corporation, having an office at 1111 Samuelson Road, Rockford,
Illinois 61125 (hereinafter referred to as "Sublessor") and Rocknel
Fastener, Inc., a Delaware corporation, having an office at 5309
11th Street Rockford, Illinois 61125 (hereinafter referred to as
"Sublessee").
WHEREAS, Sublessor is the tenant of Rowe Properties Rockford,
a Virginia limited partnership, having an office at Suite 920, 1001
East Main Street, Richmond, Virginia 23219 (hereinafter referred to
as "Landlord"), consisting of approximately 174,652 square feet of
office, warehouse and manufacturing space and related parking and
surrounding grounds, located at 5309 11th Street, Rockford,
Illinois 61125 (the "Premises"); and
WHEREAS, Sublessor's leasehold interest is set forth in a
Lease Agreement dated as of August 2, 1984 (which is hereinafter
referred to as the "Lease") and is incorporated herein, and
attached hereto, as Exhibit A; and
WHEREAS, Sublessor desires to sublease the premises outlined
on the floor plan, attached as Exhibit B, consisting of
approximately 49,600 square feet (hereinafter referred to as the
"Demised Premises") to Sublessee; and
WHEREAS, Sublessee desires to sublease the Demised Premises
from Sublessor;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration,
receipt and sufficiency of which is hereby acknowledged, it is
mutually agreed as follows:
1. This Sublease Agreement (hereinafter referred to as
"Sublease"), is made subject and subordinate to the Lease. The
Lease is hereby incorporated into this Sublease by reference with
the effect that whenever the term "Tenant" occurs in the Lease,
said term will mean Sublessee, and whenever in the Lease the term
"Landlord" occurs, said term will mean Sublessor; provided,
however, that such references as far as Sublessee's and Sublessor's
obligations hereunder are concerned shall be limited and pertain
solely to the Demised Premises. Sublessee and Sublessor accept
this Sublease subject to, and hereby assume and agree to perform
and observe, all of the terms, covenants and conditions contained
in the Lease, as if Sublessee originally had been named as the
tenant therein and as if Sublessor originally had been named as the
landlord therein; provided, however, Sublessee shall not be
obligated to pay monetary charges under the Lease unless otherwise
specified herein. All items of the Lease as to the Demised
Premises, shall remain in full force and effect and will inure to
the benefit of Sublessee and Sublessor, except as otherwise
provided herein:
Notwithstanding anything hereunder contained to the contrary,
however, whenever the Sublease shall be in conflict with, the
Sublease shall be deemed superior and prevailing:
(a) Sublessor hereby subleases the Demised Premises to
Sublessee and Sublessee hereby accepts the Demised Premises from
Sublessor.
(b) The term of said Sublease and possession of the Demised
Premises shall commence on April 1, 1989 and shall terminate at
11:59 P.M. on August 31, 1996.
(c) Commencing on April 1, 1989 and on the first day of each
month thereafter, Sublessee shall pay rent to Sublessor, in equal
monthly installments, each equal to one-twelfth of the annual rents
set forth in the table contained in Exhibit C.
A late charge of five percent (5%) of all amounts then due to
Sublessor shall be immediately due and payable to Sublessor as
additional rent for each and every month in which rental payments
are not received by Sublessor on or before the 7th day of the
month. If Sublessor has not received payment of rental by the 5th
day of the month, it will attempt to orally so notify Sublessee.
Failure to so notify Sublessee shall not affect any of Sublessee's
duties or obligations hereunder, in any manner whatsoever.
In addition, Sublessee shall pay to Sublessor with each rental
payment, an amount equal to 1/12 of Sublessee's proportionate share
(based upon the percentage of square footage the Demised Premises
contains relative to the total square footage of the Premises) of
any Taxes attributable to the Premises and of any operating
expenses or costs or charges or insurance premiums attributable to
the Premises, other than costs such as capital improvements to
portions of the Premises which do not in any way affect or benefit
or enhance the value of the Demised Premises, it being understood
that the annual rent shall be absolutely net to Sublessor. All
such costs, expenses, charges and Taxes shall be deemed to be
additional rent due to Sublessor.
(d) Upon termination of the Sublease by lapse of time or
otherwise, Sublessee shall immediately vacate the Demised Premises
and return and surrender same to Sublessor in the same condition as
exists on the date hereof, ordinary wear and tear excepted and at
Sublessor's option, Sublessee shall remove any leasehold
improvements installed by or constructed by Sublessee. Sublessee
shall repair all damage to the Demised Premises except for any
damage caused by (a) fire or other casualty for which the Demised
Premises are fully insured or (b) the Landlord or Sublessor. In
the event the Landlord under the Lease shall require, pursuant to
the applicable provisions of the Lease, the removal from the
Demised
Premises at the termination of this Sublease of any property placed
in or upon the Demised Premises by Sublessee, such removal and the
cost thereof shall be the sole responsibility of the Sublessee. If
Sublessee shall fail to remove said property, if required to do so
aforesaid, then at Sublessor's sole option it may remove the same
at Sublessee's sole cost, or upon Sublessor's election, title to
said property shall pass to Sublessor without any further
consideration therefor.
(e) Sublessee shall obtain comprehensive general liability
insurance in the amount of not less than Five hundred thousand
Dollars ($500,000.00), combined single limit for bodily injury and
property damage liability claims with an insurance carrier
reasonably acceptable to Sublessor. Certificates of Insurance
shall be provided to Sublessor evidencing such coverage on a
continuing basis. Sublessee's personal property and such leasehold
improvements as are made by Sublessee shall be at Sublessee's sole
risk, and Sublessee shall observe and comply with all indemnity
provisions of the Lease only as to the Demised Premises. Sublessor
shall be indemnified and included as an additional insured in the
same manner as the Landlord under the insurance provided hereunder.
(f) Sublessor shall have the same rights and duties under this
Sublease in respect to the Sublessee as the Landlord has under the
Lease in respect to the Tenant, subject, however, to all of the
provisions contained herein.
(g) Sublessee shall have the same rights and duties under this
Sublease in respect to the Sublessor as the Tenant has under the
Lease in respect to the Landlord, subject, however, to all of the
provisions contained herein.
(h) Sublessor agrees that upon receipt from Sublessee of
written notice of any default of any obligation or duty of the
Landlord under the Lease, to notify the Landlord of Sublessee's
notice in order for Landlord to rectify or fulfill any default,
obligation or duty as listed in Sublessee's notice. Sublessor
agrees to use its reasonable best efforts to cause the Landlord to
rectify or fulfill any default, existing obligation or duty under
the Lease.
(i) Sublessee shall pay to Sublessor monthly and be
responsible for any charges for utility and other services (other
than electricity, gas and water metered separately to the Demised
Premises) used by Sublessee at the Demised Premises to the extent
that Sublessee would be required to pay such charges under the
Lease if Sublessee were the Tenant thereunder, unless the Demised
Premises are separately metered for utilities.
(j) Sublessor and Sublessee agree to timely and fully perform
all of their obligations under this Sublease and the Lease.
(k) The Demised Premises are to be used for office, warehouse
and manufacturing operation consisting of the manufacture of nuts,
bolts, screws and similar parts, and uses incidental thereto only.
2. Provided Sublessee is not in default under the terms
hereof, and provided that Sublessor elects to exercise any of the
options contained in paragraph 4 of the Lease, Sublessee may extend
the term of this Sublease for a term equal to (less one day) the
term of any extension in accordance with the provisions of said
paragraph 4. It is expressly agreed that Sublessor shall have no
obligation to exercise any such extension option. The Annual Rent
for any extension term shall be Sublessee's proportionate share of
the Annual Rent described in paragraph 4.
3. Sublessee shall not have the right to contest or review
Taxes as set forth in paragraph 10.4 of the Lease. In the event
that Sublessor elects to contest or review Taxes (it being agreed
that Sublessor is under no obligation to do so), Sublessee shall
pay to Sublessor when billed, its proportionate share of the cost
of any such contest or review and shall share proportionately in
the amount of any reduction or savings attributable to any year of
the term of this Sublease.
4. The provisions of paragraph 11.2 of the Lease shall not
apply to this Sublease.
5. Sublessee shall be entitled to the use by its employees and
invitees of 35 parking spaces in any area or areas to be designated
by Sublessor, subject to such reasonable rules and regulations as
Sublessor may from time to time promulgate.
6. Sublessee shall hold Sublessor harmless from and defend and
indemnify Sublessor against any claims, costs, liabilities or
expenses of any kind (including attorneys' fees) for any injury or
damages to any person or property whatsoever and from any remedial
or preventive action asserted by any governmental agency or
authority related to illegal or unlawful use, accumulation, storage
or discharge, spill or escape or emission of hazardous or toxic
waste or hazardous or toxic material or contamination resulting
therefrom or pollution or any other environmental hazard or
condition (whether or not the same may be lawful on the date
hereof) arising out of, or occurring in or about the Demised
Premises, or the Premises, caused in whole or in party by the act,
negligence, fault or omission by Sublessee, its employees,
customers, invitees or assignees. This indemnity shall survive the
termination or expiration of this Sublease.
7. It is expressly agreed that this Sublease may not be
assigned and that the Demised Premises may not be sublet, in whole
or in part, by Sublessee without the prior written consent of
Sublessor and the Landlord under the Lease. The consent of
Sublessor to any proposed sublease may be withheld in the sole
discretion of Sublessor, or may be granted subject to such
conditions as Sublessor in its sole discretion may require.
8. This Sublease shall be of no force or effect until the
Landlord has given its consent hereto. Sublessee and Sublessor
shall use their reasonable best efforts to secure said consent.
9. The Sublessee agrees to take the Demised Premises in "AS
IS" condition and agrees to install all improvements required by it
at its own expense, in conformance to the Lease and all rules,
regulations and requirements of the Landlord. Sublessee has
examined the Demised Premises prior to the execution and delivery
of this Sublease and has found it to be satisfactory. No
representation, warranty or agreements is made by Sublessor to
Sublessee concerning the condition of the Demised Premises or any
of the equipment, furnishings, or fixtures, if any, installed
therein the taking of possession by Sublessee shall be conclusive
evidence that the Demised Premises were in satisfactory condition.
10. Sublessor hereby represents to the Sublessee that it is
not in default of any provisions under the Lease, that the Lease is
in full force and effect, that it is still the Tenant under the
Lease, that it has the right under the Lease to enter into this
Subleases subject only to obtaining the consent of Landlord, that
a copy of the Lease attached hereto is a true, correct and complete
copy of the document it purports to represent and that it will not
alter, amend, terminate or cancel the Lease as to the Demised
Premises without first obtaining the written consent of Sublessee,
which shall not be unreasonably withheld. Sublessor further
represents to the Sublessee that to the best of its knowledge and
belief, the Landlord is not in default under the Lease and no
conditions exist which, with the passage of time or
the giving of notices or both would render the Landlord in default
under the Lease.
11. All notices provided for hereunder shall be in writing and
personally delivered or sent by registered or certified mail,
return receipt request to the Sublessor at its address first above
written, Attention: President and/or Vice President/Chief Financial
Officer, with a copy to Baker & McKenzie, One Prudential Plaza, 130
E. Randolph Street, Chicago, Illinois 60601, Attention: Robert L.
Berner, Jr./Mary L. Milano and to Sublessee at its address first
above written, Attention: President, with a copy to Vice President.
All notices shall be effective upon the earlier of actual receipt
or the next business day following postmark.
12. Any event of default set forth in paragraph 24 of the
Lease, or elsewhere therein, which is not cured within the time
allowed by the Lease shall be an event of default hereunder, as if
Sublessor were the Landlord and Sublessee were the Tenant
thereunder.
13. In the event Sublessee shall remain in possession of the
Demised Premises after the termination of the Lease, Sublessee
shall be liable for the greater of (a) rental in an amount equal to
twice the monthly rental installments set forth herein for each
month or fraction thereof during which Sublessee remains in
possession of the Demised Premises, or (b) all obligations of
Sublessor, including but not limited to any liability, rent,
damages, costs or penalties relating to the Demised Premises which
may be recovered by the Landlord under the Lease or which are
attributable to the Sublessee's holdover.
14. This Sublease shall automatically terminate on the
termination, cancellation or expiration of the Lease between
Landlord and Sublessor.
15. Sublessor will send a copy of any termination notice
received by it from Landlord and any notice sent by it to the
Landlord regarding voluntary termination, contemporaneously with
same being received from or sent to the Landlord.
16. If Sublessor declines to prosecute any material claim or
material cause of action against Landlord and the same materially
affects the Demised Premises, Sublessor shall assign same to
Sublessee, however, Sublessee shall have no obligations to
prosecute same.
17. Sublessee shall have the right, subject to Sublessor's and
Landlord's prior written consent and approval, first had and
obtained, said consent and approval not to be unreasonably
withheld, to place signage on or about the Demised Premises to
direct invitees to said Demised Premises.
IN WITNESS WHEREOF, Sublessor and Sublessee have caused this
Sublease to be duly executed on the day and year first above
written.
SUBLESSOR
ELCO INDUSTRIES , INC., a Delaware
corporation
By: August F. DeLuca
Its: Vice President-Finance
ATTEST:
By: Michele Johnson
Its:
SUBLESSEE
ROCKNEL FASTENER, INC., a Delaware
corporation
By: E. J. Werlich
Its: President
ATTEST:
By: Masato Nakagowa
Its:
Exhibit 10.11
ELCO INDUSTRIES, INC.
1111 Samuelson Rd.
P.O. Box 7009
Rockford, IL 61125-7009
June 27, 1989
Mr. Akira Okabe, President
Okabe Company Limited
21-15 Mukohjima 4-Chome Sumida-Ku
Tokyo, Japan
Dear Mr. Okabe:
Thank you for your letter of May 30, 1989. Since then Mr. Ohno has
spoken to me about your plans and interests generally with respect
to your investment in Elco. I believe I now have a clearer
understanding of your wishes.
It is now my understanding that, conditioned upon approval by the
Elco board of directors for you to increase your ownership of Elco
stock to no more than 21% of Elco's outstanding shares, you agree
to the following on behalf of yourself and your group:
1. For ten years from the date the board approves your
increase to 21%, you and your group will not directly or indirectly
own or acquire any stock of Elco if the effect of the ownership or
acquisition would be to increase the aggregate voting power of you
and your group to greater than 21% of the total combined voting
power of the Elco stock then outstanding.
2. Any time you or your group wishes to sell any or all of
your stock, you will first offer the stock to Elco at whatever
price a third party in good faith is then offering to purchase the
stock from you or, if there is no pending offer from a third party,
at the closing bid price on NASDAQ the day of your offer to Elco.
We shall have 15 days to tell you whether we, or anyone to whom we
have assigned the right to purchase, wish to buy the stock at the
offered price. We will pay 10% of the price at the time we tell
you we wish to buy and the balance will be paid against delivery of
the stock within 30 days thereafter. Any stock which you offer to
us and we do not purchase may be sold by you for the next 45 days
at the price you offer us or a higher price. Other than as I have
described above, neither you nor your group will sell its Elco
stock.
If this expresses your understanding and is agreeable to you,
please sign and return to me the duplicate copy of this letter and
I will present it to the board at our next meeting presently
scheduled for August 17, at which time I will ask the board to
approve this agreement. I will then promptly notify you.
Elco is a good company with capable and energetic employees. We
are pleased that you agree.
Kindest regards,
Jack W. Packard
Chairman
Chief Executive Officer
SUBMITTED IN DUPLICATE
Agreed:
Akira Okabe July 17, 1989
Akira Okabe Date
cc: Mr. R. Berner, Jr.
Mr. M. Funai
Mr. K. Ohno
<PAGE>
OKABE COMPANY LIMITED
4-21-15. MUKOHJlMA
SUMlDA-KU, TOKYO 131 JAPAN
July 17, 1989
Mr. Jack W. Packard
Chairman & CEO
Elco Industries, Inc.
1111 Samuelson Road, P.O. Box 7009
Rockford, IL 61125-7009 U.S.A.
Dear Mr. Packard,
I am pleased to return to you herewith your letter-agreement dated
June 27, 1989 regarding further purchases of Elco stock by Okabe
Co., Ltd. I have signed the same, as President, and am returning
it to you herewith with our following understanding to your
letter-agreement.
In case Okabe's percentage of ownership of ELco shares increases to
more than 21~ due to decrease in the number of outstanding shares
caused by acquisition of its own shares by Elco, such change in
percentage of Okabe's ownership to more than 21% shall not be
construed to be in violation of paragraph 1 of your
letter-agreement.
We believe that your intention is identical to our above
understanding.
Yours very truly,
Akira Okabe
Akira Okabe
President
cc: Mr. R. Berner, Jr.
Mr. M. Funai
Mr. K. Ohno
<PAGE>
ELCO INDUSTRIES, INC.
1111 Samuelson Rd.
P.O. Box 7009
Rockford, IL 61125-7009
August 18, 1989
Mr. Akira Okabe, President
Okabe Company Limited
21-15 Mukohjima 4-Chome Sumida-Ku
Tokyo, Japan
Dear Mr. Okabe:
I am pleased to report that Elco's board of directors ratified our
letter agreement dated June 27, 1989 at the regular quarterly board
meeting held on August 17, 1989.
They also agreed with your understanding as expressed in your
letter of July 17, 1989 regarding the result of a reduction in the
number of shares outstanding.
Attached is a copy of a press release announcing our agreement.
Should you make any announcement in Japan, I would appreciate
receiving a copy.
Best regards,
Jack W. Packard
Jack W. Packard
Chairman
Chief Executive Officer
Enclosure
cc: Ken Ohno
Exhibit 11
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Computations of Per Share Earnings
For the Three Years Ended June 30, 1994
(Amounts in Thousands, Except Per Share Amounts)
Fiscal year ended June 30
-------------------------------
1994 1993 1992
Net income (loss) $8,229 $4,869 $(2,525)
====== ====== ========
Primary Earnings Per Share
- - --------------------------
Average shares outstanding 4,977 4,956 4,876
Common stock equivalents,
assuming average market price
using treasury share method 41 7 3
----- ----- -----
Average shares outstanding including
common stock equivalents 5,018 4,963 4,879
===== ===== =====
Primary earnings (loss) per share
of common stock $1.65 (1) $.98 (1) $(.52) (1)
===== ==== ======
Fully Diluted Earnings Per Share
- - --------------------------------
Average shares outstanding 4,977 4,956 4,876
Common stock equivalents,
assuming year-end market price
using treasury stock method 41 27 8
----- ----- -----
Average shares outstanding,
including common stock
equivalents assumming full
dilution 5,018 4,983 4,884
===== ===== =====
Fully diluted earning (loss)
per share $1.65 (2) $.98 (2) $(.52) (2)
===== ==== ======
(1) As common stock equivalents had less than 3% dilution, average shares
outstanding is used in the computation of primary earnings (loss) per
share.
(2) As there was less than 3% dilution for purposes of computing fully diluted
earnings per share, average shares outstanding is used the the
computation of diluted earnings (loss) per share.
Exhibit 13
Management's Discussion and Analysis
(Dollars in thousands, except per share amounts)
Elco Industries, Inc.
Results of Operations
Fiscal 1994 Compared to Fiscal 1993
For the year ended June 30, 1994, net sales were a record $225,901, an
increase of 13.4% over the prior year's sales of $199,179. Net income
increased 69.0% to $8,229, or $1.65 per share, from $4,869, or $.98 per share.
Sales in the Industrial Products Group were $169,078, a 16.4% increase
which represented approximately 90% of the total sales increase. Sales to
the automotive market increased 19% on an 11% increase in automotive
production. This resulted in sales per car and light truck produced
increasing to $8.42 per vehicle versus $7.78 the prior year. Sales to the
nonautomotive industrial markets increased 12%, with especially strong
growth to manufacturers of controls and instruments, hand tools and
compressors. Sales in the Home and Construction Group increased 5.5%.
Sales growth in this segment was adversely impacted by the loss of two
significant customers. However, new business gained at two home center
customers more than offset this loss.
Gross profit margin increased to 18.9% from 18.3% in the prior year as
a result of higher capacity utilization and cost containment efforts. Raw
material cost and wages measured as a percentage of sales remained
constant. Benefit costs increased at a higher rate than sales because of
increases in medical costs and employee incentive programs.
Selling and administrative expenses increased at a lower rate than sales.
The majority of the increase was caused by higher benefits costs, higher
professional expenses primarily resulting from expenses associated with an
industrial bond refinancing, additional employees and higher wage rates.
Measured as a percentage of sales, selling and administrative expenses were
11.5%, the lowest level in over 10 years.
Income from operations was $16,569, or 7.3% of sales, versus
$12,427, or 6.2% of sales, in the prior year. This improvement was
primarily due to strong performance from the Industrial Products Group
where greater capacity utilization and a shift in sales to higher margin
products contributed to a 54% increase in operating income. The Home and
Construction Products Group experienced a decrease in operating income
due to an expense of approximately $500 related to the loss of one of the
customers mentioned previously and to initial stocking and product
introduction costs associated with new business gained at two home center
customers.
Page 23
<PAGE>
Interest expense was lower because of lower debt levels and the
refinancing of two industrial revenue bonds at lower interest rates.
Elco's share of profits from Rocknel Fastener, Inc., a joint venture
company, was $189 versus a loss of $258 in the prior year. Greater
capacity utilization and efficiencies contributed to this improvement.
Fiscal 1993 Compared to Fiscal 1992
For the year ended June 30, 1993, net sales were $199,179, up
5.2% from the prior year's sales of $189,337. Net income for the year was
$4,869, or $.98 per share, versus a loss of $2,525, or $(.52) per share. The
prior fiscal year included a pretax, nonoperating charge of $5,091 to reduce
the value of a promissory note receivable and a onetime, noncash charge for
retiree health care costs of $1,355, net of a related deferred tax benefit of
$852. These two charges reduced the prior year's net income by $4,485, or
$.94 per share.
Sales in the Industrial Products Group increased 9.0%, or $12,049.
Approximately $9,000 of this increase resulted from sales to the automotive
industry. Production of cars and light trucks increased 9.0%, while sales to
the automotive industry increased 10.3%, indicating a continuing increase in
market share. Sales to domestic nonassembly automotive plants and
foreign-owned automotive suppliers represented approximately 90% of this
increase. Sales to nonautomotive markets increased modestly because of
stronger economic activity. Sales in the Home and Construction Products
Group decreased $2,207 as a result of warehouse inventory reduction
programs at certain major customers.
Gross profit margin was 18.3% versus 17.1% in the prior year. This
improvement resulted from higher sales, improved operating efficiencies
which lowered manufacturing costs and, to a lesser extent, the introduction
of new products. These positive factors were partially offset by continuing
pricing pressures, primarily in the automotive market. The prior year's gross
profit included costs associated with moving the Bear-Kat operations and
with reorganizing certain operating units in the Industrial Products Group.
Selling and administrative expenses increased 3.6% on a 5.2% sales
increase. The majority of the increase was caused by increases in wages and
benefit costs. Measured as a percentage of sales, selling and administrative
expenses were 12.0% of sales.
Income from operations was $12,427, or 6.2% of sales, versus $9,243,
or 4.9% of sales in the prior year. This increase of 34.4% in operating
income resulted from the
Page 24
<PAGE>
significant improvement in the Industrial Products
Group. The prior year's operating income in this segment included the cost
of reorganizing certain divisions. The benefits of this reorganization are
being realized in improved operating efficiencies and better cost containment
programs. Higher sales and, to a lesser extent, higher average selling prices
of new products also contributed to margin improvement. Operating income
in the Home and Construction Products Group decreased primarily because
of lower sales.
Interest expense was lower primarily because of benefits derived from an
interest rate swap agreement which effectively lowered interest rates on
approximately 60% of total debt.
Elco's share of losses from Rocknel Fastener, Inc., a joint venture
company, was $258 versus $649 the prior year. This reduction in losses
was a result of continual cost containment efforts, productivity
improvements and introduction of new products.
Outlook
Management believes that sales and earnings will increase next year.
This belief is based upon projections of higher automobile production,
continuing growth in market penetration and further economic expansion. It
is assumed that further rises in interest rates will not significantly affect
the economy, especially automotive sales. Operating income should grow faster
than sales because of implementation of profit enhancing strategies.
Sales growth in the Industrial Products Group is expected to result from
higher automotive production, introduction of new products, expansion in
the transplant market and generally higher demand from commercial
markets. Operating income is expected to increase because of higher sales
and improved operating leverage. Growth in sales and earnings might be
affected somewhat by capacity constraints. Also, profit improvement will
not likely equal the improvement experienced in the year ended June 30,
1994.
This segment will continue to be adversely impacted by pricing pressures,
especially in the automotive industry. Recently, prices of various raw
materials have begun to increase. Steel and plastic price increases could
have an impact on profit margins.
Sales in the Home and Construction Products Group are expected to
increase primarily because of growth in the home center market. For the
next two or three quarters, initial stocking and product introduction costs
associated with the new home center business will cause operating margins
to be below historical levels. Management expects margins to improve
toward the end of the fiscal year.
The Company is currently involved in matters of litigation arising from the
normal course of business, including certain environmental and product
liability matters. For a further discussion of these issues, refer to Notes
to Consolidated Financial Statements, Footnote 16, "Contingencies," on page
36.
Balance Sheet Discussion
Total assets increased 3% to $151,465 on a 13% increase in net sales.
Working capital at June 30, 1994 was $33,380, or approximately 15%
of sales, a level the Company considers normal. Both accounts receivable
and inventories increased by approximately the same percentage as sales.
The increases in accounts receivables and inventories, caused by higher
sales, were partially offset by a decrease in cash and an increase in accrued
salaries, wages and commissions.
Total property, plant and equipment at cost increased $9,614 reflecting
capital expenditures of $12,388 which were offset by $2,774 of retirements and
disposals. Approximately 85% of capital expenditures were for the Industrial
Products Group.
Total interest-bearing debt decreased $3,729 from $50,026 to $46,297
as a result of scheduled payments. Scheduled payments are $4,437 for
fiscal year 1995. The weighted average interest rate on the indebtedness
was 6.8% at June 30, 1994 versus 7.4% at June 30, 1993. It is expected
that the weighted average interest rate will increase this year as rising
interest rates decrease the benefit from interest rate swaps.
Liquidity and Capital Resources
Fiscal 1994
For fiscal 1994, operating activities generated $17,090 of cash flow,
a level lower than in 1993. While net income, depreciation and amortization
generated additional cash, other noncash working capital, primarily
inventories, required significant cash to finance the increasing sales base.
Investing activities consisted primarily of $12,388 of additions to
property, plant and equipment, an amount 25% greater than the level of
depreciation. Machinery and equipment represented 73% of the total
expenditures. During the past three years, capital expenditures were
$32,507, compared to $27,773 of depreciation. Capital expenditures for
fiscal 1995 are expected to approximate $14,500.
Page 25
<PAGE>
Financing activities consisted primarily of the refinancing of $7,000 of
industrial development revenue bonds to obtain lower interest rates and the
payment of $3,705 of required principal. While the Company has $18,000
of bank lines of credit, no borrowings were required during the year.
Dividend payments of $.52 per share totaled $2,593. In August 1994, the
Company increased the dividend to an annual rate of $.60 per share, a 15%
increase. In June 1994, the Company purchased 135,000 shares of its
stock for $2,498 from a major stockholder.
Fiscal 1993
For fiscal 1993, cash sources were primarily depreciation and
amortization of intangibles of $9,916 and net income of $4,869. Also,
reduction in noncash working capital and construction funds held in trust
totalling $4,753 contributed to the positive cash flow. The primary use of
cash was the capital expenditure program of $9,569 and, to a lesser extent,
repayment of debt and payment of dividends.
During the year, cash reserves increased $5,451 and total indebtedness
decreased $3,565. Since equity increased $3,036 and debt decreased,
financial leverage decreased producing a debt to total capital ratio of 45.0%.
The Company had $18,000 of bank lines of credit to provide for any
unplanned cash requirements. There were no requirements to use these lines
during the year.
New Accounting Pronouncements
In November 1992, the Financial Accounting Standards Board (FASB)
adopted Statement No. 112, "Employers' Accounting for Postemployment
Benefits," which will be effective for the year ended June 30, 1995, and will
require accrual accounting for the estimated cost of benefits provided to
former or inactive employees after employment but before retirement.
Management has begun evaluating those benefits that may require accrual
accounting and believes that it is not likely to have a material impact on the
Company.
During December 1991, the FASB issued SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments," which will require additional
disclosures regarding long-term debt and other financial instruments. The
Company must adopt SFAS No. 107 no later than June 30, 1996. Adoption
of this statement will not impact the carrying value of the Company's assets
and liabilities.
Page 26
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Elco Industries, Inc.
June 30
1994 1993
ASSETS
Current Assets
Cash and cash equivalents $3,861 $8,013
Accounts receivable-less allowances (June 30, 1994,
$473; June 30, 1993, $475) 32,684 29,282
Inventories 25,652 22,324
Deferred taxes on income 2,055 1,166
Prepaid and other current assets 562 446
-------- -------
Total current assets 64,814 61,231
-------- -------
Property, Plant and Equipment
Land 449 449
Land and leasehold improvements 3,260 3,074
Buildings and building equipment 25,052 23,287
Machinery and equipment 114,458 105,084
Furniture and office equipment 8,489 8,448
Construction in progress 1,510 3,262
-------- --------
Total 153,218 143,604
Less accumulated depreciation and amortization 83,901 76,183
-------- -------
Property, plant and equipment-net 69,317 67,421
-------- -------
Intangibles, Net 10,101 11,201
-------- -------
Investment in and Advances to Unconsolidated Affiliate 1,908 1,628
-------- --------
Other Assets 5,324 5,708
-------- --------
TOTAL $151,464 $147,189
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable-trade creditors $12,845 $13,153
Current maturities of long-term obligations 4,437 3,736
Accrued liabilities:
Salaries, wages and commissions 5,001 3,039
Compensated absences 2,234 2,131
Federal and state taxes on income 736 1,112
Other taxes 1,189 1,074
Retirement plans 961 819
Interest 764 812
Other 3,267 2,853
------ ------
Total current liabilities 31,434 28,729
------ ------
Long-Term Debt 41,860 46,290
------ ------
Long-Term Lease Obligations 7
------
Contingencies
Deferred Taxes On Income 8,117 6,859
------ ------
Other Deferred Liabilities 5,087 4,153
------ ------
Stockholders' Equity
Capital stock:
Preferred-Authorized, 250,000 shares at $1 par value;
issued and outstanding-none
Common-Authorized, $5 par value, June 30, 1994 and 1993,
20,000,000 shares; issued June 30, 1994,
4,987,635 shares and June 30, 1993, 4,984,255 shares 24,938 24,921
Additional paid-in capital 7,872 7,867
Retained earnings 34,048 28,412
------ ------
Total 66,858 61,200
Less common stock in treasury at cost-
June 30, 1994, 103,081 shares; June 30, 1993,
4,081 shares 1,892 49
------ ------
Total stockholders' equity 64,966 61,151
-------- --------
TOTAL $151,464 $147,189
======== ========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 27
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands except per share amounts)
Elco Industries, Inc.
Years Ended June 30,
1994 1993 1992
<S> <C> <C> <C>
Net sales $225,901 $199,179 $189,337
Cost of products sold 183,258 162,768 156,948
-------- -------- --------
Gross profit 42,643 36,411 32,389
Selling and administrative expenses 26,074 23,984 23,146
-------- -------- --------
Income from operations 16,569 12,427 9,243
Interest expense 3,162 3,701 4,688
Interest income 106 113 263
Non-operating expenses 5,091
-------- ------- --------
Income (loss) before provision for taxes, equity in
income (loss) of unconsolidated affiliate and
cumulative effect of change in accounting 13,513 8,839 (273)
Provision for taxes on income: -------- ------- -------
Current:
Federal 3,880 2,709 1,068
State 1,224 829 325
Deferred 369 174 (1,145)
-------- ------- -------
Total provision for taxes on income 5,473 3,712 248
-------- ------- -------
Income (loss) before equity in income (loss) of
unconsolidated affiliate and cumulative effect
of change in accounting 8,040 5,127 (521)
Equity in income (loss) of unconsolidated affiliate 189 (258) (649)
Cumulative effect of change in accounting ($.28 per
common share in 1992) (1,355)
------- ------- --------
Net income (loss) $8,229 $4,869 $(2,525)
======= ======= ========
Net income (loss) per common share $1.65 $.98 $(.52)
===== ===== =======
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(Dollars in thousands except per share amounts)
Elco Industries, Inc.
Common Stock
-----------------------------------------
Issued In Treasury
-------------------- ------------------ Additional
Number Number Paid-In Retained
Of Shares Par Value Of Shares At Cost Capital Earnings
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991 4,857,102 $24,285 6,353 $76 $6,897 $31,181
Net loss (2,525)
Issued pursuant to award plans (1,272) (15) (2)
Issued pursuant to director
compensation plan 16,941 85 95
Issued as contribution to ESOP 55,000 275 422
Cash dividends-
$.52 per common share (2,537)
--------- ------- ----- --- ------ -------
BALANCE, JUNE 30, 1992 4,929,043 $24,645 5,081 $61 $7,412 $26,119
Net income 4,869
Issued pursuant to option (1,000) (12) 2
Issued pursuant to director
compensation plan 10,212 51 69
Issued as contribution to ESOP 45,000 225 384
Cash dividends-
$.52 per common share (2,576)
--------- ------- ----- --- ------ -------
BALANCE, JUNE 30, 1993 4,984,255 $24,921 4,081 $49 $7,867 $28,412
Net income 8,229
Treasury stock purchased 135,000 2,498
Issued pursuant to option plans (1,000) (12) 9
Issued pursuant to director
compensation plan 3,380 17 43
Issued as contribution to ESOP (35,000) (643) (47)
Cash dividends-
$.52 per common share (2,593)
--------- ------- ------- ------ ------ -------
BALANCE, JUNE 30, 1994 4,987,635 $24,938 103,081 $1,892 $7,872 $34,048
========= ======= ======= ====== ====== =======
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
Elco Industries, Inc.
Years Ended June 30,
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating acivities:
Net income (loss) $8,229 $4,869 $(2,525)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of property, plant and equipment 9,881 9,129 8,763
Amortization of intangibles 1,100 787 598
Loss on retirement and disposal of property, plant and equipment 244 39 251
Change in assets and liabilities:
Accounts receivable (3,402) (3,479) (1,746)
Inventories (3,328) 1,233 (741)
Prepaid and other current assets (116) 203 (238)
Accounts payable (308) 2,740 682
Accrued liabilities 2,312 1,830 290
Deferred taxes on income 369 316 (2,008)
Other deferred liabilities 934 122 448
ESOP contribution from common and treasury shares 596 609 697
Equity in loss (income) of unconsolidated affiliate (189) 258 649
Provision for loss on installment notes receivable 5,091
Provision for postretirement benefit obligation 2,207
Other 768 759 23
------ ------ ------
Net cash provided by operating activities 17,090 19,415 12,441
------ ------ ------
Cash flows from investing activities:
Additions to property, plant and equipment (12,388) (9,569) (10,550)
Proceeds from retirement and disposal of
property, plant and equipment 367 414 334
Decrease in construction/project funds held in trust 2,226 2,153
Increase in other assets (303) (637) (672)
Investment in unconsolidated affiliate (250)
Advances to unconsolidated affilite (91) (7) (11)
-------- ------- -------
Net cash required for investing activities (12,415) (7,823) (8,746)
-------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt 7,000
Payments on long-term debt (10,705) (2,980) (2,209)
Payments on long-term lease obligations (31) (585) (409)
Purchase of treasury stock (2,498)
Dividends paid (2,593) (2,576) (2,537)
------- ------- -------
Net cash required for financing activities (8,827) (6,141) (5,155)
------- ------- -------
Net increase (decrease) in cash and cash equivalents (4,152) 5,451 (1,460)
Cash and cash equivalents at beginning of year 8,013 2,562 4,022
------ ------ ------
Cash and cash equivalents at end of year $3,861 $8,013 $2,562
====== ====== ======
Cash paid for:
Interest $3,342 $3,941 $5,000
Income taxes $5,620 $2,873 $1,793
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
Page 29
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
Elco Industries, Inc.
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Elco
Industries, Inc., and its wholly-owned subsidiaries. The Company's
investment in its affiliate is accounted for under the equity method.
Inventories are carried at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) and first-in, first-out (FIFO)
methods.
Property, plant and equipment is carried at cost. Depreciation and
amortization is designed to amortize costs over the estimated service lives
or lease periods using the straight-line method. Maintenance and repairs are
charged to expense.
Deferred taxes on income is recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities
and their financial amounts at each year-end.
Intangibles, net consist of excess of cost over net assets of businesses
acquired of $6,870 and $7,103 and other intangible assets of $3,231 and
$4,098 at June 30, 1994 and 1993, respectively. Intangibles are being
amortized on a straight-line basis over useful lives ranging from 5-39 years,
subject to impairment write-offs determined by underlying cash flow.
Accumulated amortization was $4,690 and $3,591 at June 30, 1994 and 1993,
respectively.
The Company enters into interest rate swap agreements which involve the
exchange of fixed and floating rate interest payments periodically over the
life of the agreements without the exchange of the underlying principal
amounts. The difference to be paid or received is accrued as interest rates
change and is reflected currently as an adjustment to interest expense.
Net income per common share has been computed using the average number
of shares outstanding during each year.
The Company capitalizes interest costs relating to construction of
property, equipment and its investment in unconsolidated affiliate during the
affiliate's start-up period. Interest capitalized was $132, $90 and $99 for
the years ended June 30, 1994, 1993 and 1992, respectively.
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents.
In November 1992, the FASB adopted Statement No. 112, "Employers'
Accounting for Postemployment Benefits," which will be effective for the year
ended June 30, 1995 and will require accrual accounting for the estimated
cost of benefits provided to former or inactive employees after employment but
before retirement. Management has begun evaluating those benefits that may
require accrual accounting and believes that it is not likely to have a
material impact on the Company.
2. PRODUCTS AND MAJOR CUSTOMERS
The Company is a leading domestic manufacturer and supplier of
specialty metal fasteners and custom-engineered metal and plastic components
and products. The Company's operations can be classified into two segments:
A. Industrial Products-the manufacture and sale of custom-engineered and
specialty components sold primarily to original equipment manufacturers
in a variety of markets including the transportation, electrical and
electronics, fabricated metal and other industrial markets.
B. Home and Construction Products-the packaging and merchandising of a full
line of screws, nails, consumer and hobby wire, picture hanging wire
and other standard fasteners and fastening-related products for consumer
use. Also, the design, manufacture and marketing of specialty product
lines and fastening systems for the commercial construction market.
Certain financial information by industry segment follows. Since the
Company does not maintain complete financial information by segment, the
following information includes both items directly traceable to each segment
as well as an allocation to segments (based on reasonable estimates) for items
not directly traceable to a given segment. Intersegment sales are made
primarily at cost plus a markup.
<TABLE>
<CAPTION>
Years Ended June 30,
1994 1993 1992
<S> <C> <C> <C>
Net Sales
Sales to unaffiliated customers:
Industrial Products $169,078 $145,308 $133,259
Home and Construction Products 56,823 53,871 56,078
Intersegment sales:
Industrial Products 23,650 20,384 15,103
Home and Construction Products 2,725 1,957 1,731
Adjustments and eliminations (26,375) (22,341) (16,834)
-------- -------- --------
Consolidated net sales $225,901 $199,179 $189,337
======== ======== ========
Income from Operations
Industrial Products $14,589 $9,444 $5,511
Home and Construction Products 4,323 4,751 5,451
Corporate expenses (2,343) (1,768) (1,719)
------- ------- ------
Total income from operations $16,569 $12,427 $9,243
======= ======= ======
Total Assets
Industrial Products $99,868 $94,500 $91,175
Home and Construction Products 40,291 37,576 40,117
------- ------- -------
Total identifiable assets 140,159 132,076 131,292
Equity and investment in unconsolidated affiliate 1,908 1,628 1,629
Corporate assets 9,397 13,485 9,990
-------- -------- --------
Total assets at June 30 $151,464 $147,189 $142,911
======== ======== ========
Additions to Property, Plant and Equipment
Industrial Products $10,499 $8,209 $7,397
Home and Construction Products 1,889 1,360 3,153
------- ------ -------
Total additions $12,388 $9,569 $10,550
======= ====== =======
Depreciation and Amortization
Industrial Products $8,169 $7,665 $7,441
Home and Construction Products 1,712 1,464 1,322
------ ------ ------
Total $9,881 $9,129 $8,763
====== ====== ======
</TABLE>
Page 30
<PAGE>
Sales to the Company's largest customer are included in the industrial
products segment and totaled approximately $39,723, $33,947 and $31,426 in
1994, 1993 and 1992, respectively. Sales to the Company's second largest
customer, also included in the industrial products segment totaled
approximately $30,733, $26,769 and $28,716 in 1994, 1993 and 1992,
respectively. The Company's accounts receivable from these two customers
were approximately $7,336 and $9,077 at June 30, 1994 and 1993, respectively.
3. INVENTORIES
Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for approximately 46%
and 48% of the Company's inventories at June 30, 1994 and 1993, respectively,
and by the first-in, first-out (FIFO) method for all other inventories. The
inventories are summarized as follows:
June 30,
1994 1993
Raw materials and supplies $13,350 $11,701
Work in process 8,609 7,798
Finished goods 12,288 10,808
------ ------
34,247 30,307
Less LIFO reserve (8,595) (7,983)
------- -------
Total $25,652 $22,324
======= =======
The replacement cost of inventories at June 30, 1994 and 1993
approximates FIFO value.
4. INVESTMENT IN UNCONSOLIDATED AFFILIATE
In June 1989, Elco and Nagoya Screw Manufacturing Co., Ltd.
("Nagoya") formed a joint venture known as Rocknel Fastener, Inc.
("Rocknel"). Each company has a 50% interest in the venture and provided
the initial funding in August 1989. The following represents condensed
financial information of Rocknel as of and for the periods ended June 30,
1994, 1993 and 1992.
June 30,
1994 1993 1992
Current assets $4,585 $3,374 $3,184
Noncurrent assets 6,480 7,083 7,049
------- ------- -------
Total assets $11,065 $10,457 $10,233
======= ======= =======
Current liabilities $10,350 $10,108 $9,850
Noncurrent liabilities 25 36 56
Stockholders' equity 690 313 327
------- ------- -------
Total liabilities and equity $11,065 $10,457 $10,233
======= ======= =======
Net sales $12,198 $9,424 $8,517
Costs and expenses 11,821 9,939 9,815
------- ------ --------
Net income (loss) $377 $(515) $(1,298)
======= ====== ========
Rocknel had $5,000 of unsecured lines of credit, which were
fully utilized at June 30, 1994. The lines require no compensating balances
or commitment fees. Elco and Nagoya are each contingently liable as
guarantors of 50% of amounts used under the line.
5. OTHER ASSETS
Included in other assets is the remaining balance of notes
receivable from Acme Rivet and Machine Corp. ("Acme") of $489 and $1,336 at
June 30, 1994 and 1993, respectively. The notes receivable from Acme, which
are currently not accruing interest, are expected to be repaid from the
proceeds of the sale of its land and buildings which were collateral
associated with the notes. During 1994, the notes increased $303 as a result
of a final loan guarantee payment advanced to Acme. The notes were written
down approximately $1,150 in 1994 as the value of collateral underlying the
notes declined, primarily as a result of higher than anticipated
environmental remediation costs. Environmental cost estimates are based on
information provided by environmental consultants involved in the cleanup
efforts and reflect future cleanup costs.
See Note 15, Non-Operating Expenses, for other transactions related to
the Acme divestiture.
6. SHORT-TERM LINES OF CREDIT
At June 30, 1994, the Company had unused bank lines of credit
permitting borrowing up to an aggregate of $18,000 at the banks' corporate
base rate or at a fixed rate (at the option of the Company) as defined in the
agreements. The lines require no compensating balances or commitment fees.
The lines, generally reviewed annually for renewal, are subject to the usual
terms and conditions applied by the banks.
7. LONG-TERM DEBT
Long-term debt at June 30, 1994 and 1993 (exclusive of current
maturities) consisted of the following:
June 30,
1994 1993
Notes payable to institutional investors:
10.04% due serially 1996-2001 $25,200 $27,600
9.15% due serially 1996-1997 3,000 5,000
Economic development revenue bonds 13,500 13,500
Other 160 190
------- -------
$41,860 $46,290
======= =======
Maturities of long-term debt outstanding at June 30, 1994,
in aggregate amounts, are as follows for years ended June 30: 1995, $4,430;
1996, $4,560; 1997, $4,000; 1998, $4,100; and 1999, $6,900.
At June 30, 1994, the Company had two interest rate swap agreements.
One agreement matures on April 16, 1997 and has a notional amount of $27,600.
The notional amount incrementally decreases to $21,600 by October 16, 1996.
The agreement,
Page 31
<PAGE>
which effectively converts the fixed-rate debt into
variable-rate debt, is indexed to the six-month LIBOR rate. The counterparty
to this aggreement is a major financial institution. The notional amount is
used to measure the volume of this agreement and does not represent exposure
to credit loss. The market risk is that the LIBOR rate, which is reset every
six months, will exceed the fixed rate of 5.93%. Payments due to or from the
counterparty are payable at the end of each six-month period.
The other agreement matures on November 2, 1996 and has a notional
amount of $7,000. The agreement, which effectively converts the fixed-rate
debt into variable-rate debt, is indexed to the six-month LIBOR rate. The
counterparty to this agreement is a major financial institution. The
notional amount is used to measure the volume of this agreement and does not
represent exposure to credit loss. The market risk is that the LIBOR rate,
which is reset every six months, will exceed the fixed rate of 4.28%.
Payments due to or from the counterparty are payable at the end of each
six-month period.
Economic development revenue bonds include four issues by two
municipalities. Two issues have interest rates varying with maturity and
average 5.2%. Those bonds, initially issued in 1988, were refunded in October
1993. The other two issues have variable interest rates which were 2.7% and
3.2% at June 30, 1994. The bonds are collateralized by either certain
property and equipment with a book value of approximately $4,398 at June 30,
1994 or collateralized by a letter of credit.
Interest expense on long-term debt, net of the interest rate swap
benefit, was recorded at a weighted-average rate of approximately 6.8% and
7.4% at June 30, 1994 and 1993, respectively.
The Company must meet certain debt covenants. Under the most
restrictive covenant, $2,657 of retained earnings at June 30, 1994 is not
restricted as to payments of dividends. The agreements include a change in
control provision which may result in a prepayment penalty and all unpaid
principal and interest due immediately.
During December 1991, the Financial Accounting Standards Board issued
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," which
will require additional disclosures regarding long-term debt and other
financial instruments. The Company must adopt SFAS No. 107 no later than
June 30, 1996. Adoption of this statement will not impact the carrying value
of the Company's assets and liabilities.
8. RETIREMENT PLANS AND POSTRETIREMENT HEALTH CARE
The Company and its subsidiaries have defined benefit and defined
contribution pension plans covering substantially all employees. The Company
also has an unfunded retirement plan for certain key employees which is being
provided for by charges to earnings sufficient to meet the benefit obligation.
Charges to consolidated income for retirement plans were as follows:
Years Ended June 30,
1994 1993 1992
Defined benefit plans $306 $177 $352
Profit sharing plans 1,413 737 351
Employee Stock Ownership Plan (ESOP) 1,200 1,300 500
------ ------ ------
$2,919 $2,214 $1,203
====== ====== ======
Actuarially computed information on net defined benefit plan costs
includes the following components:
Years Ended June 30,
1994 1993 1992
Service cost-benefits earned during the period $412 $221 $442
Interest cost on projected benefit obligation 892 975 1,061
Actual return on assets (272) (1,442) (541)
Net amortization and deferral (726) 423 (610)
----- ------ -----
$306 $177 $352
===== ===== =====
Major assumptions:
Discount rate 7.25% 7.75% 7.75%
Rate of increase in future compensation 5.00% 6.00% 6.00%
Expected long-term rate of return 8.00% 8.50% 8.50%
The following table sets forth the plans' funded status:
<TABLE>
<CAPTION>
June 30, June 30,
1994 1993
Status of Plans Status of Plans
------------------ ------------------
Plans Plans Plans Plans
Where Where Where Where
Assets Benefits Assets Benefits
Exceed Exceed Exceed Exceed
Benefits Assets Benefits Assets
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $7,558 $847 $10,122 $915
====== ====== ======= ======
Accumulated benefit obligation $7,585 $1,860 $10,168 $1,739
====== ====== ======= ======
Plan assets at fair value $11,043 $12,550
Projected benefit obligation 8,861 1,860 11,828 1,739
------- ------ ------- ------
Plan assets in excess of (less than) projected
benefit obligation 2,182 (1,860) 722 (1,739)
Unrecognized net loss (gain) due to
changes in assumptions 400 (51) 1,860 53
Unrecognized prior service cost 51 55
Unrecognized net assets being recognized over
approximately 18 years (179) (5) (196) (6)
Minimum liability (47)
------ -------- ------ --------
Pension assets (liabilities) $2,454 $(1,916) $2,441 $(1,739)
====== ======== ====== ========
Page 32
</TABLE>
<PAGE>
The employer contribution to one profit sharing plan is the sum of 10%
of profits (as defined in the plan) and an additional discretionary amount
that the directors may designate. For the years ended June 30, 1994, 1993
and 1992, there was no additional discretionary amount. The employer
contribution to another profit sharing plan is discretionary as determined by
the directors.
The Company has an Employee Stock Ownership Plan (ESOP) covering
substantially all employees. Contributions may be made in cash, newly-issued
stock or treasury stock. Cash contributions may be used to purchase shares
from the Company or on the open market, depending on the Company's financing
needs and the market price of its common shares.
The fiscal 1994 contributions were made using 50% cash and 50% stock.
The fiscal 1993 contributions were made using 53% cash and 47% stock. The
fiscal 1992 contributions were made in stock.
In addition to providing pension and other supplemental benefits,
certain health care benefits are provided for eligible retired employees.
Employees become eligible for these benefits if they meet minimum age and
service requirements, are eligible for retirement benefits and contribute a
portion of the cost.
During 1992, the provisions of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" were adopted. The Statement requires companies to
accrue the expected cost of providing postretirement benefits other than
pensions over the years that employees render the necessary service rather
than the cash basis previously used. The projected benefit obligation of
$1,355 (net of tax of $852) relating to prior service cost was a non-cash
transaction recognized as a cumulative effect of accounting change as of
July 1, 1991. The total cumulative effect of this accounting change was to
decrease net earnings by $.28 per share.
The accounting for the unfunded health care plan incorporates the
pattern of cost-sharing of changes to the existing plan. The plan benefits
are discretionary and are subject to modification or termination.
The following table sets forth the plan's obligation.
June 30,
1994 1993
Accumulated postretirement benefit obligation:
Retirees $1,277 $1,290
Fully eligible active plan participants 31 30
Other active plan participants 1,428 1,138
------ ------
Accumulated postretirement benefit obligation 2,736 2,458
Unrecognized net loss from past
experience different from that assumed (336) (258)
------ ------
Total accumulated postretirement benefit liability $2,400 $2,200
====== ======
The Company has included $1,950 in other deferred liabilities and $450
in current liabilities.
Years Ended June 30,
1994 1993 1992
Service cost-benefits attributed to service
during the period $102 $72 $68
Interest cost on accumulated postretirement
benefit obligation 200 176 193
Other 4
---- ---- ----
Net periodic postretirement benefit cost $306 $248 $261
==== ==== ====
The discount rates used in determining the accumulated postretirement
benefit obligation were 8.0% and 8.5% for fiscal years 1994 and 1993,
respectively. The actuarial calculations for fiscal 1994, 1993 and 1992
assume an increase in the health care cost trend rate of 10%, 11% and 11%,
respectively. The assumed rate decreases gradually to 6% in 2051 and remains
constant beyond that point. A 1% increase in the health care trend rate
would increase the accumulated postretirement benefit obligation by $137 at
year end 1994 and the net periodic cost by $10 for the year.
9. LEASES
A summary of the Company's property under capital leases, which is
classified as property, plant and equipment in the accompanying balance
sheets, follows:
June 30,
1994 1993
Machinery and equipment $351 $410
Less accumulated amortization (337) (371)
---- -----
$14 $39
==== =====
At June 30, 1994, minimum future lease payments on all noncancelable
leases are as follows:
Capital Operating
Years ending June 30: Leases Leases
1995 $8 $2,375
1996 2,047
1997 1,443
1998 640
1999 459
Thereafter 2,349
-- ------
8 $9,313
======
Imputed interest (rates ranging from 11.5% to 15.3%) (1)
--
Present value of net minimum lease payments $7
==
Rental expense on operating leases for the years ended June 30, 1994,
1993 and 1992 approximated $3,328, $3,267 and $2,923, respectively.
Page 33
<PAGE>
Certain leases require payments by the Company, as lessee, for
insurance, maintenance and property taxes.
10. PERFORMANCE AWARD PLAN
The Company has a long-term incentive plan under which key employees
may be granted a monetary target award. The awards are earned only to the
extent that the Company achieves predetermined performance goals during a
three-year performance period. Payment for awards earned is payable in cash
or shares of common stock, or a combination thereof, at the sole discretion of
the Board of Directors.
A maximum of 14,189 awards were earned in 1994 and were paid in
August 1994 by the issuance of 4,062 shares of common stock with the balance
paid in cash, such allocation determined by the Board of Directors.
There were no performance share awards earned in 1993 and 1992.
At June 30, 1994, a maximum of 235,443 shares remained available for
issuance under the 1988 Performance Share Plan.
The Company recognizes compensation costs attributable to the plan on a
basis that spreads estimates of such costs over the performance period. Such
costs totaled $382, $150 and $85 in 1994, 1993 and 1992, respectively.
11. STOCK OPTIONS
Under the 1991 Stock Option Plan, a non-qualified plan, 175,000
shares of the Company's common stock are reserved for issuance upon the
exercise of options granted. Options are not exercisable until five years
after date of grant.
A summary of the option transactions follows:
Number of Shares
Years Ended June 30,
1994 1993 1992
Outstanding, July 1 105,400 76,700 72,550
Granted -0- 31,100 7,900
Exercised -0- -0- -0-
Cancelled (4,700) (2,400) (3,750)
------- ------- -------
Outstanding, June 30 100,700 105,400 76,700
======= ======= =======
Exercisable, June 30 5,500 -0- -0-
======= ======= ======
The outstanding options at June 30, 1994 and 1993 had an average
exercise price of $10.91 per share, or $1,099 and $1,150 in total, respectively.
In October 1992, the Company adopted the 1992 Stock Option Plan for
Non-Employee Directors. Under the plan, 50,000 shares of the Company's
common stock are reserved for issuance to non-employee directors upon the
exercise of options granted. Options are not exercisable until six months
after the grant date.
A summary of the directors' option transactions follows:
Number of Shares
------------------------
Years Ended June 30,
1994 1993
Outstanding, July 1 7,000 -0-
Granted 8,000 8,000
Exercised (1,000) (1,000)
Cancelled -0- -0-
------ -------
Outstanding, June 30 14,000 7,000
====== =======
Exercisable 14,000 7,000
====== =======
The outstanding options at June 30, 1994 and 1993 had an average
exercise price of $15.32 and $11.75 per share, respectively, or $214 and $82
in total, respectively.
12. DIRECTOR COMPENSATION PLAN
The Company has a plan that requires the payment of the annual
retainer for non-employee directors under 60 years of age in common stock of
the Company rather than in cash. This plan also allows non-employee
directors over 60 years of age the option of receiving the annual retainer in
common stock rather than cash. The directors' rights to the shares vest over
five-year periods at the rate of 20% per year. However, each director is
entitled to receive dividends and exercise voting rights with respect to all
shares prior to vesting. Any unvested shares are forfeited if the director
ceases to be a director for any reason other than death or disability.
13. STOCKHOLDER RIGHTS PLAN
During 1988, the Company adopted and amended a Stockholder Rights
Plan and issued common stock purchase rights at the rate of one right for
each outstanding share of common stock.
Each right will entitle stockholders, other than those held by person or
group that has acquired more than 20% of the Company's voting stock without
board approval, to buy one newly-issued share of common stock of the Company
at an exercise price of $40 or, in the alternative, allows the board (by vote
of disinterested directors) to exchange rights for shares of common stock.
The rights may be exercised or exchanged only if a person or group, without
Elco board approval, acquires beneficial ownership of more than 20% of the
Company's voting stock. The Company will generally be entitled to redeem the
rights at $.025 per right at any time until 15 days following a public
announcement that a greater than 20% position has been acquired.
If the Company is involved in a merger or other business combination
transaction, without board approval, with any other person or group in which
the Company's common stock is changed or converted, or sells 50% or more of
the Company's
Page 34
<PAGE>
assets or earning power to any other person or group, each
right entitles its holder to purchase, at the right's exercise price, shares
of common stock of such other person having a value of twice the right's then
current exercise price.
In addition, if without Elco board approval, any person or group becomes
the beneficial owner of more than 20% of the Company's voting stock, then
each right not owned by such other person or related parties entitles its
holder to purchase, at the right's then current exercise price, shares of
common stock of Elco with a market value of twice the right's then current
exercise price.
In August 1989, the Company's Board of Directors approved an agreement
with Okabe Company Limited permitting Okabe to increase its ownership to not
more than 21% of the Company's outstanding shares provided that, for a period
of 10 years, Okabe will limit its ownership to no more than 21%. Because the
Company's board approved this increase, Okabe's cumulative purchases of
amounts of not more than 21% will not trigger the Company's Stockholder
Rights Plan.
On June 15, 1994, the Company purchased 135,000 shares of its common
stock for $2,498 from Okabe Company Limited. The purchase was pursuant
to the terms of a share purchase agreement dated as of June 7, 1994, which,
in addition to such purchase, provided that if requested by Okabe, the
Company would file a registration statement for an underwritten public
offering of Okabe's remaining shares no later than September 1, 1994 (or as
soon thereafter as practicable), Okabe will not solicit offers to buy its
remaining shares of the Company in private transactions until the earlier of
November 15, 1994 or five business days following the effective date of such
registration statement, and Okabe is permitted to sell up to 25,000 of its
remaining shares of the Company per month on NASDAQ without first offering
such shares to the Company as required by a letter agreement dated
June 27, 1989 between the Company and Okabe. Okabe did not request of the
Company by September 1, 1994 that a registration statement be filed.
No other stockholder beneficially owns, to the knowledge of the Company,
more than 5% of the Company's Common Stock.
14. TAXES ON INCOME
Taxes on income differed from calculations at the U.S. Federal
statutory rate as follows:
Years Ended June 30,
1994 1993 1992
Federal income tax at statutory rate $4,630 $3,005 $(93)
Add (deduct):
State income taxes, net of
Federal tax benefit 796 547 171
Amortization of excess of cost over net
assets of businesses acquired 95 105 109
Other items, net (48) 55 61
------ ------ ----
Total provision $5,473 $3,712 $248
====== ====== ====
Included in the cumulative effect of changes in accounting is $852 of
deferred income taxes for 1992. The income tax for the 1992 accounting
change has been provided at a rate higher than the Federal statutory rate to
provide for State income taxes.
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
The primary effect of adoption on the Company is that the balance sheet
classification of deferred taxes now corresponds to the related assets or
liability. Under the previous method, the balance sheet classification of
deferred taxes was based on when the temporary differences between financial
reporting and tax reporting were expected to reverse. The effect of the
change on net income was immaterial to the Company. Accordingly, no
cumulative adjustment for the adoption of SFAS 109 was required.
The components of the Company's net deferred tax liability as of
June 30, 1994 were as follows:
Taxable temporary differences:
Depreciation $(9,185)
Other (1,117)
--------
Total taxable temporary differences (10,302)
Deductible temporary differences 5,335
Valuation allowance (1,095)
--------
Net deferred tax liability $(6,062)
========
For 1993 and 1992, the provision (credit) for taxes payable in
future years, arising from the temporary differences between the financial
statement and tax bases of assets and liabilities, at the tax rates in effect
when these differences are expected to reverse, are as follows:
Years Ended June 30,
1993 1992
Depreciation $(219) $(225)
Retirement and performance award plans (147) (75)
Tax credit usage (carry forwards) 693 (765)
Vacation pay (52) (219)
Inventory reserves (69) 194
Workers compensation/product liability insurance (84) (67)
Accounts receivable reserves (48) (33)
Other items, net 100 45
------ --------
Total $174 $(1,145)
====== ========
15. NONOPERATING EXPENSES
The Company divested Acme Rivet and Machine Corp. ("Acme") in
June 1986 and as partial payment received promissory notes. During 1992, the
Company incurred non-operating expenses of $5,091 to reflect the reduced
value of notes and related collateral for the promissory notes received.
Page 35
<PAGE>
16. CONTINGENCIES
The Company is currently involved in matters of litigation arising
from the normal course of business, including certain environmental and
product liability matters. At June 30, 1994, the Company had accruals of
approximately $1,100 (approximately $900 at June 30, 1993) with respect to
such matters based on the Company's current estimate of the most likely
amount of losses that it believes will be incurred. These amounts, which
are expected to be paid over the next several years, have been included in
current and other deferred liabilities. The most significant portion of this
accrual relates to the following two paragraphs.
The Company, together with other parties, has been designated a
"potentially responsible party" (PRP) by the United States Environmental
Protection Agency (USEPA) with respect to the cost of investigation and
cleanup of a third-party site in Illinois. Certain removal and other interim
remediations have been completed and paid for by the PRPs. The Company's
current accrual for this matter is based on the percentage of costs incurred
to date that have been allocated to the Company and its estimate of the most
likely future investigation and cleanup costs. At June 30, 1994, the Company
has separately recorded a receivable related to this matter of approximately
$300 for the amount it believes is probable of recovery under insurance
contracts.
The Company is also a third-party defendant in a federal enforcement
action brought by the USEPA against several other primary defendants. The
Company's accrual for this matter is based on a settlement offer proposed
in July 1994.
It is the opinion of management, after consultation with counsel, that
additional liabilities, if any, resulting from litigation matters are not
expected to have a material adverse effect on the financial condition of the
Company, although such matters could have a material effect on quarterly or
annual operating results when (or if) resolved in a future period.
In January 1994, the USEPA notified the Company that it is one of over
300 PRPs with respect to the old Southington Landfill Superfund Site in
Southington, Connecticut. Elco was identified as a successor to a company
that allegedly used the site. The USEPA has not yet selected a plan of
remediation for the site. The Company has insufficient information to
determine its potential exposure in connection with the site, when (or if) it
will incur such costs and the ultimate impact of the costs upon the Company's
financial condition and results of operations.
Page 36
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Elco Industries, Inc. is responsible for the preparation
and integrity of the Company's financial statements. These financial
statements have been prepared in accordance with generally accepted
accounting principles and include the use of management's reasonable and
prudent judgments and estimates where necessary. All other financial data in
this report have been presented on a basis consistent with the information
included in the financial statements.
Elco maintains a system of internal accounting controls, policies and
procedures designed to provide reasonable assurance that its financial
records are materially accurate, that the assets of the Company are
protected and that the financial statements present fairly the financial
position and results of operations of the Company. The Company also
maintains an internal auditing function that evaluates the adequacy and
effectiveness of such internal accounting controls, policies and procedures.
Four directors of the Company, not members of management, serve as the
Audit Committee of the Board of Directors and meet periodically with the
independent and internal auditors and with management to review accounting,
auditing and financial reporting matters. The Audit Committee, the
independent auditors and the internal auditors have unrestricted access to
one another.
The Company's independent auditors, Coopers & Lybrand, L.L.P.,
audited the financial statements prepared by the management of Elco
Industries, Inc. Their opinion on these statements is presented on the
following page.
John C. Lutz August F. DeLuca
John C. Lutz August F. DeLuca
President Vice President-Finance
Chief Executive Officer Chief Financial Officer
Page 37
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Elco Industries, Inc.
We have audited the accompanying consolidated balance sheets of Elco
Industries, Inc. and Subsidiaries as of June 30, 1994 and 1993, and the
related statements of consolidated income, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1994. These
financial statements 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 Elco
Industries, Inc. and Subsidiaries as of June 30, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 8 to the financial statements, the Company changed
its method of accounting for postretirement benefits in 1992.
Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Rockford, Illinois
August 5, 1994
Page 38
<PAGE>
QUARTERLY FINANCIAL DATA
(Dollars and shares in thousands except per share amounts)
Elco Industries, Inc.
Selected unaudited quarterly financial information for the years
ended June 30, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
QUARTER QUARTER QUARTER QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
1994:
Net sales $52,877 $53,439 $57,692 $61,893 $225,901
Gross profit 10,813 9,772 10,992 11,066 42,643
Income from operations 4,092 3,588 4,417 4,472 16,569
Income before equity in income (loss) of
unconsolidated affiliate 1,944 1,636 2,145 2,315 8,040
Equity in income (loss) of
unconsolidated affiliate (19) 2 94 112 189
Net income 1,925 1,638 2,239 2,427 8,229
Net income per common share .39 .33 .45 .49 1.65
Dividends per common share .13 .13 .13 .13 .52
Average shares outstanding 4,980 4,983 4,984 4,963 4,977
1993:
Net sales $46,625 $46,928 $50,735 $54,891 $199,179
Gross profit 8,468 8,170 9,631 10,142 36,411
Income from operations 2,660 2,292 3,521 3,954 12,427
Income before equity in loss of
unconsolidated affiliate 950 811 1,542 1,824 5,127
Equity in loss of
unconsolidated affiliate -0- (104) (67) (87) (258)
Net income 950 707 1,475 1,737 4,869
Net income per common share .19 .14 .30 .35 .98
Dividends per common share .13 .13 .13 .13 .52
Average shares outstanding 4,947 4,956 4,959 4,964 4,956
Page 39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(Dollars and shares in thousands except per share amounts)
Elco Industries, Inc.
Compound Growth Rate
Years Ended June 30 5-Year 10-Year 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results:
Net sales 7.8% 8.5% $225,901 $199,179 $189,337 $156,391 $150,706
Income from operations 3.4% 4.5% 16,569 12,427 9,243 6,372 11,144
Net income (loss) 1.0% 5.1% 8,229 4,869 (2,525) 195 4,819
Depreciation and amortization 11.7% 11.5% 9,881 9,129 8,763 7,997 6,586
Additions to property, plant and equipment (1.4%) 5.9% 12,388 9,569 10,550 10,776 15,966
Average number of employees 4.6% 4.7% 1,971 1,833 1,755 1,608 1,585
Per Share of Common Stock:
Net income (loss) -- 2.0% $1.65 $.98 $ (.52) $ .04 $1.01
Dividends 1.6% 4.3% .52 .52 .52 .52 .52
Stockholders' equity .8% 4.1% 13.30 12.28 11.80 12.84 13.32
Average shares outstanding .9% 3.1% 4,977 4,956 4,876 4,850 4,789
Dividends paid 2.5% 7.6% $2,593 $2,576 $2,537 $2,523 $2,488
Balance Sheet:
Current assets 5.4% 7.5% $64,814 $61,231 $53,938 $52,517 $41,450
Current liabilities 10.4% 11.4% 31,434 28,729 23,669 21,723 23,147
Working capital 1.7% 4.8% 33,380 32,502 30,269 30,794 18,303
Property, plant and equipment-net 5.2% 9.8% 69,317 67,421 67,434 66,232 63,025
Total assets 5.4% 9.2% 151,464 147,189 142,911 147,866 127,746
Long-term debt 10.5% 16.2% 41,860 46,290 49,995 52,975 28,184
Long-term lease obligations 7 357 732 1,032
Stockholders' equity 1.5% 7.1% 64,966 61,151 58,115 62,287 64,538
Selected Ratios:
Operating margin 7.3% 6.2% 4.9% 4.1% 7.4%
Return on sales 3.6% 2.4% (1.3%) .1% 3.2%
Current ratio 2.1 to 1 2.1 to 1 2.3 to 1 2.4 to 1 1.8 to 1
Return on beginning equity 13.5% 8.4% (4.1%) .3% 8.0%
Return on beginning assets 5.6% 3.4% (1.7%) .1% 4.1%
Notes to Eleven-Year Summary
Results for the year ended June 30, 1992 include the effects of
adopting Financial Accounting Standards Board Statement No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions."
Results for the year ended June 30, 1990 include the effects of adopting
Financial Accounting Standards Board Statement No. 96, "Accounting for Income
Taxes."
Results of operations, assets and liabilities of Thermoplastics, Inc.,
Anchor Wire Corporation and Bear-Kat Products are included since April 1985,
April 1986 and May 1991, respectively.
Results of operations, assets and liabilities of Acme Rivet and Machine
Corp. are included through divestiture in June 1986.
Page 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
(Dollars and shares in thousands except per share amounts)
Elco Industries, Inc.
Years Ended June 30 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C>
Operating Results:
Net sales $155,390 $140,526 $127,989 $125,668 $108,802 $100,109
Income from operations 14,016 13,795 11,607 10,861 11,151 10,646
Net income (loss) 7,843 7,736 4,010 5,070 5,410 4,982
Depreciation and amortization 5,683 5,152 4,760 4,615 3,741 3,333
Additions to property, plant and equipment 13,302 9,433 8,747 11,048 8,979 6,955
Average number of employees 1,574 1,514 1,558 1,545 1,325 1,243
Per Share of Common Stock:
Net income (loss) $1.65 $1.63 $.85 $1.08 $1.41 $1.36
Dividends .48 .44 .42 .40 .36 .34
Stockholders' equity 12.79 11.64 10.66 10.22 9.54 8.92
Average shares outstanding 4,762 4,753 4,697 4,673 3,845 3,660
Dividends paid $2,289 $2,090 $1,974 $1,870 $1,408 $1,245
Balance Sheet:
Current assets $49,768 $45,668 $40,202 $36,267 $39,554 $31,558
Current liabilities 19,140 16,998 15,032 12,797 12,290 10,649
Working capital 30,628 28,670 25,170 23,470 27,264 20,909
Property, plant and equipment-net 53,765 46,437 42,289 38,607 34,964 27,150
Total assets 116,245 103,348 94,607 89,472 80,880 63,020
Long-term debt 25,390 20,095 20,297 19,998 13,400 9,300
Long-term lease obligations 1,341 1,642 1,945 2,264 5,580 5,891
Stockholders' equity 60,260 55,735 50,136 47,785 44,488 32,668
Selected Ratios:
Operating margin 9.0% 9.8% 9.1% 8.6% 10.2% 10.6%
Return on Sales 5.0% 5.5% 3.1% 4.0% 5.0% 5.0%
Current ratio 2.6 to 1 2.7 to 1 2.7 to 1 2.8 to 1 3.2 to 1 3.0 to 1
Return on beginning equity 14.1% 15.4% 8.4% 11.4% 16.6% 17.2%
Return on beginning assets 7.6% 8.2% 4.5% 6.3% 8.6% 9.1%
Page 41
</TABLE>
<PAGE>
STOCK PRICES AND OTHER MARKET INFORMATION
The common stock of Elco Industries, Inc. is traded in the
Over-The-Counter market. It is included in the NASDAQ National Market System
under the symbol ELCN. The table below sets forth the high and low bid
prices as reported by NASDAQ and sets forth cash dividends paid per share of
common stock.
As of September 6, 1994, Elco Industries, Inc. had approximately 785
record holders of common stock. Included in this number are shares held in
nominee or street name.
Payment of dividends is subject to certain restrictions described in
Note 7 of Notes to Consolidated Financial Statements. At June 30, 1994,
approximately $2,657 million of retained earnings are not subject to
restrictions.
Fiscal 1994 Fiscal 1993
--------------------------- --------------------------
Quarter Ended High Low Dividend High Low Dividend
- - ------------- ------ ------ -------- ------ ------ --------
September 30 16 14 $.13 12-1/2 1 $.13
December 31 20-3/4 15-1/8 .13 12-1/2 9-1/2 .13
March 31 21-1/4 17 .13 13 10 .13
June 30 20 17 .13 15 13-3/4 .13
---- ----
Total Dividend $.52 $.52
==== ====
Such over-the-counter market quotations reflect interdealer prices, without
retail markup, markdown or commission, and may not necessarily represent
actual transactions.
Page 42
Exhibit 21
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Subsidiaries of the Registrant
NAME OF CORPORATION STATE OF INCORPORATION
- - ------------------------------------ ----------------------
Anchor Wire Corporation of Tennessee Tennessee
Elco Consumer Products Corp. Illinois
Thermoplastics, Inc. Indiana
Exhibit 23
ELCO INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
Consent of Independent Accountants
We consent to the incorporation by reference in the Prospectus of Elco
Industries, Inc. on Form S-8 (file number 33-11041) and in the prospectus's
relating to Elco Industries, Inc. 1991 Stock Option Plan Plan and 1992 Stock
Option Plan for Non-Employee Directors and the registration statement on
Form S-8 relating thereto (file number 33-54872) of our report, which
includes an explanatory paragraph on the change in method of accounting for
postretirement benefits, dated August 5, 1994, on our audits of the
consolidated financial statements and the financial statement schedules of
Elco Industries, Inc. and Subsidiaries as of June 30, 1994 and 1993 and for
the years ended June 30, 1994, 1993, and 1992, which report is included in
this Annual Report on Form 10-K.
Rockford, IL Coopers & Lybrand L.L.P.
September , 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<CASH> 3,861
<SECURITIES> 0
<RECEIVABLES> 33,157
<ALLOWANCES> 473
<INVENTORY> 25,652
<CURRENT-ASSETS> 64,814
<PP&E> 153,218
<DEPRECIATION> 83,901
<TOTAL-ASSETS> 151,464
<CURRENT-LIABILITIES> 31,434
<BONDS> 0
<COMMON> 24,938
0
0
<OTHER-SE> 40,028
<TOTAL-LIABILITY-AND-EQUITY> 151,464
<SALES> 225,901
<TOTAL-REVENUES> 225,901
<CGS> 183,258
<TOTAL-COSTS> 183,258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 3,162
<INCOME-PRETAX> 13,513
<INCOME-TAX> 5,473
<INCOME-CONTINUING> 8,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,229
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
</TABLE>
