FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended JUNE 30, 1994
-------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 1-5599
----------------------
INTERNATIONAL CONTROLS CORP.
- - -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 54-0698116
- - -----------------------------------------------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2016 North Pitcher Street, Kalamazoo, Michigan 49007
- - -----------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (616) 343-6121
------------------------
- - -----------------------------------------------------------------------------
Indicate by check mark whether Registrant (1) 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 Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
----- -----
There were 9,036,700 shares of Registrant's only class of common stock out-
standing as of August 12, 1994.
<PAGE>
<PAGE-1>
INDEX
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
Page Number
-----------
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets at June 30, 1994
and December 31, 1993 . . . . . . . . . . . . . . . . . . . . . .2-3
Consolidated Statements of Operations for
the Three Months Ended June 30, 1994 and
June 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Operations for
the Six Months Ended June 30, 1994 and
June 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1994 and
June 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . .6-7
Notes to Consolidated Financial Statements. . . . . . . . . . . 8-10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . .11-13
PART II OTHER INFORMATION
Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 14
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 14
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
<PAGE-2>
<TABLE>
Balance-Sheets
<CAPTION>
CONSOLIDATED BALANCE SHEETS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
June 30,
1994 December 31,
(unaudited) 1993
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 41,696 $ 40,078
Accounts receivable, less allowance for
doubtful accounts of $1,050 (1993--$748) 90,321 75,701
Inventories 84,926 94,112
Other current assets 12,150 11,823
---------- ----------
Total current assets 229,093 221,714
Property, plant and equipment, net 121,815 122,355
Insurance Subsidiary's investments 89,218 90,838
Insurance Subsidiary's reinsurance
receivable 7,623 11,378
Cost in excess of net assets acquired,
net of accumulated amortization of $6,877
(1993--$6,252) 43,118 43,743
Trademark, net of accumulated amortization
of $1,925 (1993--$1,750) 11,521 11,696
Other assets 14,644 15,612
---------- ----------
Total Assets $517,032 $ 517,336
========== ==========
</TABLE>
<PAGE>
<PAGE-3>
<TABLE>
Balance-Sheets--Continued
<CAPTION>
CONSOLIDATED BALANCE SHEETS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
June 30,
1994 December 31,
(unaudited) 1993
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Accounts payable $78,407 $ 77,876
Notes payable 5,000 5,000
Income taxes payable 9,917 7,726
Accrued compensation 18,369 15,838
Accrued interest 12,476 11,746
Other accrued liabilities 40,447 38,071
Current portion of long-term debt 29,309 14,321
---------- ----------
Total current liabilities 193,925 170,578
Long-term debt, excluding current portion:
Shareholders 30,000 30,000
Other 208,099 246,952
---------- ----------
238,099 276,952
Insurance Subsidiary's unpaid losses and
loss adjustment expenses 67,849 71,179
Unearned insurance premiums 15,015 9,547
Deferred income taxes 9,241 9,803
Postretirement benefits other than pensions 50,512 49,609
Other noncurrent liabilities 38,772 39,053
Minority interest 39,863 40,132
---------- ----------
Total liabilities 653,276 666,853
Shareholders' deficit:
Common stock, par value $0.01:
Authorized 15,000,000 shares
Outstanding 9,036,700 shares 90 90
Additional paid-in capital 14,910 14,910
Retained-earnings deficit (21,440) (36,217)
Unrealized appreciation (depreciation) on
Insurance Subsidiary's investments in
certain debt and equity securities--
Note E (1,431) 73
Notes receivable from shareholders (625) (625)
Amount paid in excess of Checker's
net assets (127,748) (127,748)
---------- ----------
Total shareholders' deficit (136,244) (149,517)
---------- ----------
Total Liabilities and
Shareholders' Deficit $ 517,032 $ 517,336
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE-4>
<TABLE>
Statements of Operations--3 Months
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands, except per share amounts)
(unaudited)
Three Months Ended June 30,
1994 1993
---------- ----------
<S> <C> <C>
Revenues $ 277,622 $ 225,407
Cost of revenues (232,653) (191,599)
---------- ----------
Gross profit 44,969 33,808
Selling, general and administrative expense (21,263) (20,326)
Interest expense (10,149) (10,540)
Interest income 1,741 1,859
Other income (expense), net 162 (677)
Special charge--Note F --- (7,500)
---------- ----------
Income (loss) before minority equity
and income taxes 15,460 (3,376)
Minority equity (203) ---
---------- ----------
Income (loss) before income taxes 15,257 (3,376)
Income tax benefit (expense) (6,866) 4,726
---------- ----------
Net income $ 8,391 $ 1,350
========== ==========
Weighted average number of shares used in
per share computations 9,037 9,037
========== ==========
Net income per share $ 0.93 $ 0.15
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE-5>
<TABLE>
Statements of Operations--6 Months
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands, except per share amounts)
(unaudited)
Six Months Ended June 30,
1994 1993
---------- ----------
<S> <C> <C>
Revenues $ 549,302 $ 430,340
Cost of revenues (463,488) (367,230)
---------- ----------
Gross profit 85,814 63,110
Selling, general and administrative expense (42,717) (40,312)
Interest expense (20,193) (21,005)
Interest income 3,401 3,877
Other income, net 766 314
Special charge--Note F --- (7,500)
---------- ----------
Income (loss) before minority equity,
income taxes and accounting change 27,071 (1,516)
Minority equity (203) ---
---------- ----------
Income (loss) before income taxes
and accounting changes 26,868 (1,516)
Income tax benefit (expense) (12,091) 2,122
---------- ----------
Income before accounting changes 14,777 606
Accounting changes, net of income taxes --- (46,626)
---------- ----------
Net income (loss) $ 14,777 $ (46,020)
========== ==========
Weighted average number of shares used in
per share computations 9,037 9,037
========== ==========
Income (loss) per share:
Before accounting changes $ 1.64 $ 0.07
Accounting changes --- (5.16)
---------- ----------
Net income (loss) per share $ 1.64 $ (5.09)
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE-6>
<TABLE>
Statements of Cash Flows
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands)
(unaudited)
Six Months Ended June 30,
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 14,777 $ (46,020)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Accounting changes --- 46,626
Depreciation and amortization 11,319 11,419
Deferred income tax benefit (1,343) (5,007)
Amortization of cost in excess of
net assets acquired 625 625
Amortization of debt discount 768 660
Net (gain) loss on sale of property,
plant and equipment (405) 32
Investment gains (275) (269)
Other noncash charges 4,737 3,250
Changes in operating assets and
liabilities:
Accounts receivable (15,006) (16,947)
Finance lease receivables 1,359 2,354
Inventories 9,186 (10,825)
Insurance Subsidiary's reinsurance
receivable 3,755 8,591
Other assets (623) (1,573)
Accounts payable 531 6,826
Income taxes 3,291 (3,603)
Unpaid losses and loss adjustment
expenses (3,330) (7,411)
Unearned insurance premiums 5,468 447
Postretirement benefits other
than pensions 903 ---
Other liabilities 979 18,442
---------- ----------
Net cash flow provided by operating
activities 36,716 7,617
</TABLE>
<PAGE>
<PAGE-7>
<TABLE>
Statements of Cash Flows--Continued
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands)
(unaudited)
Six Months Ended June 30,
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from investing activities:
Purchases of property, plant and equipment $ (11,573) $ (11,901)
Proceeds from disposal of property, plant
and equipment and other productive assets 1,199 2,098
Purchase of investments available for sale (5,032) ---
Purchases of investments held to maturity (66,395) (24,035)
Proceeds from sale of investments available
for sale 1,983 ---
Proceeds from maturity or redemption of
investments held to maturity 69,682 28,701
Other 143 121
---------- ----------
Net cash flow used in investing activities (9,993) (5,016)
Cash flows from financing activities:
Proceeds from borrowings --- 6,922
Repayments of borrowings (24,633) (9,052)
Return of limited partner's capital (472) (439)
---------- ----------
Net cash flow used in financing activities (25,105) (2,569)
---------- ----------
Increase in cash and cash equivalents 1,618 32
Beginning cash and cash equivalents 40,078 42,199
---------- ----------
Ending cash and cash equivalents $ 41,696 $ 42,231
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE-8>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
JUNE 30, 1994
(unaudited)
NOTE A--BASIS OF PRESENTATION
The accompanying consolidated financial statements of International Controls
Corp. and Subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information,
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In Management's opinion, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 1994, are not necessarily
indicative of the results that may be expected for the year ending December
31, 1994. For further information, refer to the audited consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1993.
NOTE B--PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of International
Controls Corp. and its subsidiaries, including a wholly-owned trailer leasing
company, Checker Motors Co., L.P. ("Partnership") and the Partnership's
wholly-owned subsidiaries, including American Country Insurance Company
("Insurance Subsidiary").
NOTE C--INVENTORIES
Inventories are summarized below (dollars in thousands):
<TABLE>
Inventories
<CAPTION>
June 30, December 31,
1994 1993
-------------- --------------
<S> <C> <C>
Raw materials and supplies $ 50,894 $ 53,105
Work-in-process 15,773 10,956
Finished goods 18,259 30,051
---------- ----------
$ 84,926 $ 94,112
========== ==========
</TABLE>
NOTE D--INCOME TAXES
The Company's estimated effective tax rate differs from the statutory rate
because of state income taxes as well as the impact of the reporting of
certain income and expense items in the financial statements which are not
<PAGE>
<PAGE-9>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(unaudited)
NOTE D--INCOME TAXES--Continued. . .
taxable or deductible for income tax purposes. The values of assets and
liabilities acquired in a transaction accounted for as a purchase are
recorded at estimated fair values which result in an increase in the net
asset value over the tax basis for such net assets.
NOTE E--ACCOUNTING CHANGES
Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." In accordance with this
statement, prior period financial statements have not been restated to
reflect the change in accounting principle. The opening balance of total
shareholders' deficit was decreased by $1.4 million (net of $0.8 million in
deferred income taxes) to reflect the net unrealized holding gains on
securities classified as available-for-sale previously carried at amortized
cost or lower of cost or market.
Effective January 1, 1994, the Company adopted the provisions of SFAS No.
112, "Employers' Accounting for Postemployment Benefits." The adoption of
this SFAS did not affect net income. In accordance with this Statement,
prior period financial statements have not been restated to reflect the
change in accounting method.
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
The Company recorded a charge of $29.7 million (net of taxes of $16.5
million), or $3.29 per share, during the quarter ended March 31, 1993 to
reflect the cumulative effect of this change in accounting principle.
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes." The Company recorded a charge of $16.9
million, or $1.87 per share, during the quarter ended March 31, 1993, to
reflect the cumulative effect of this change in accounting principle.
During the quarter ended March 31, 1993, the Company adopted the provisions
of SFAS No. 113, "Accounting and Reporting for Reinsurance of Short Duration
and Long Duration Contracts". Because of the type of insurance contracts the
Company's Insurance Subsidiary provides, the adoption of this statement had
no impact on earnings; however, it requires the disaggregation of various
balance sheet accounts.
NOTE F--CONTINGENCIES
On February 8, 1989, the Boeing Company ("Boeing") filed a lawsuit naming the
Company, together with three prior subsidiaries of the Company, as defendants
in Case No. CV89-119MA, United States District Court for the District of
Oregon. In that lawsuit, Boeing sought damages and declaratory relief for
past and future costs resulting from alleged groundwater contamination at a
location in Gresham, Oregon, where the three prior subsidiaries of the
<PAGE>
<PAGE-10>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(unaudited)
NOTE F--CONTINGENCIES--Continued. . .
Company formerly conducted business operations. On December 22, 1993, the
Company entered into a settlement with Boeing, settling all claims asserted
by Boeing in the lawsuit. Pursuant to the settlement terms, the Company will
pay Boeing $12.5 million over the course of five years, at least $5 million
of which has been provided by certain insurance companies in the form of cash
or irrevocable letters of credit. In accordance with the settlement
agreement, Boeing's claims against the Company and the three former
subsidiaries have been dismissed with prejudice and Boeing has released and
indemnified the Company with respect to certain claims. The Company recorded
a $7.5 million pre-tax special charge during the quarter ended June 30, 1993.
On March 4, 1992, Checker received notice that the Insurance Commissioner of
the State of California, as Conservator and Rehabilitator of Executive Life
Insurance Company of California ("ELIC"), a limited partner of the
Partnership, had filed an Amendment to the Application for Order of
Conservation filed in Superior Court of the State of California for the
County of Los Angeles (the "Court"). The amendment seeks to add to the
Order, dated April 11, 1991, Checker, the Partnership and Checker Holding
Corp. III ("Holding III"), a limited partner of the Partnership. The
amendment alleges that the action by Checker invoking provisions of the
Partnership Agreement that alter ELIC's rights in the Partnership upon the
occurrence of certain events is improper and constitutes an impermissible
forfeiture of ELIC's interest in the Partnership and a breach of fiduciary
duty to ELIC. The amendment seeks (a) a declaration of the rights of the
parties in the Partnership and (b) damages in an unspecified amount. The
Partnership believes that it has meritorious defenses to the claims of ELIC.
On April 15, 1994, the Company and the Conservator entered into a letter
agreement pursuant to which the Company agreed to purchase ELIC's interest in
the Partnership for $37 million. The letter agreement has been approved by
the Court.
<PAGE>
<PAGE-11>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Available cash and cash equivalents, cash flow generated from operations
and proceeds from disposal of assets have provided sufficient liquidity and
capital resources for the Company to conduct its operations during the first six
months of 1994.
From the time that present management assumed control of the Company in
January 1989, it has been continually reassessing the Company's financial
condition and prospects. The Company was hampered in its efforts to achieve a
refinancing of its debt in recent years, in part because of the Boeing
litigation. That lawsuit has now been settled. The Company has also been
engaged in litigation with the Conservator of ELIC, a limited partner in the
Partnership. A settlement agreement has been entered into with ELIC.
With the settlement of the Boeing litigation and a signed agreement to
settle the ELIC litigation, the ability of the Company to achieve a successful
refinancing was enhanced. Accordingly, the Company filed a Registration
Statement on Form S-1 with the Securities and Exchange Commission in connection
with an overall refinancing of the Company's outstanding indebtedness. On
August 10, 1994, the Company announced that, due to market conditions, it is
postponing the proposed refinancing and will not complete the transaction on the
terms described in its registration statement. The Company determined that
alternate terms offered in the marketplace were unacceptable and intends to
withdraw its registration statement.
Certain costs were incurred in connection with the refinancing efforts
which would have been capitalized and amortized over the life of the new loans.
Because this refinancing was not completed, those costs, which totaled
approximately $5 million (pre-tax), will be charged to income in the quarter
ending September 30, 1994.
The Company is a holding company and is, therefore, dependent on cash flow
from its subsidiaries in order to meet its obligations. The Company's operating
subsidiaries are required, pursuant to financing agreements with third parties,
to meet certain covenants, which may have the effect of limiting cash available
to the Company. The operating subsidiaries' plans indicate that sufficient
funds are anticipated to be available to the Company to meet its short-term
obligations.
The Company's Great Dane Subsidiary's debt agreement with certain banks
matures in March 1995. Accordingly, this debt is classified as a current
liability at June 30, 1994. Refinancing is anticipated to be accomplished prior
to maturity, and, accordingly, it is not anticipated that working capital will
be adversely affected.
During the quarter ended March 31, 1994, the Company adopted the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." While the adoption of this
<PAGE>
<PAGE-12>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
SFAS has a significant effect on the Company's financial position, it does not
adversely affect liquidity and capital resources.
Purchases of property, plant and equipment have averaged approximately
$18.0 million per year over the past three years and have been funded
principally by cash flow generated from operations as well as proceeds from
disposal of assets. Purchases of property, plant and equipment for 1994 are
anticipated to be approximately $26.0 million and are expected to be funded
principally by cash flow generated from operations.
During the fourth quarter of 1993, the Company entered into a settlement
of the Boeing litigation. The settlement ($12.5 million over five years) will
be paid by the Company through recoveries from insurance carriers, the sale of
assets of certain of the subsidiaries, cash currently on hand and cash flow
generated from operations.
General Motors Corporation ("GM"), a major customer of the Company's
automotive products segment, is resorting to many measures, including obtaining
significant price reductions from its suppliers, in an effort to reduce its
operating costs. Automotive products segment management believes that it has
adequately provided in its financial plans for any price reductions which may
result from its current discussions with GM. However, price reductions in
excess of those anticipated could have a material adverse effect on the
automotive products operations.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1994,
Compared to Three Months Ended June 30, 1993
-------------------------------------------------
Revenues increased $52.2 million during the three months ended June 30,
1994, as compared to the same period of 1993. The higher revenues are
principally attributed to higher Trailer Manufacturing revenues ($42.5 million),
primarily associated with a higher volume of sales of trailers. Automotive
Products revenues increased $7.5 million during the three months ended June 30,
1994, as compared to the same period in 1993. General increases in volume to
accommodate automotive customers' demands were the principal reasons for the
revenue increases.
The Company's operating profit (gross profit less selling, general and
administrative expenses) increased $10.2 million in the 1994 period compared to
the 1993 period. This increase is attributed to an increase of Trailer
Manufacturing operating profits ($7.6 million) which is principally due to
higher sales and improved margins and an increase of Automotive Products
operating profits ($1.2 million) principally due to higher sales.
During the quarter ended June 30, 1993, the Company recorded a $7.5 million
pre-tax special charge relating to the Boeing litigation. No similar charge was
incurred in the 1994 period.
<PAGE>
<PAGE-13>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
During the quarter ended June 30, 1994, a $0.2 million charge was recorded
to reflect minority equity in South Charleston Stamping & Manufacturing Company
("SCSM"), a subsidiary of Checker Motors Corporation. No minority equity in
SCSM was previously recorded because of SCSM's equity deficiency.
Income tax expense is higher for financial statement purposes than would
be computed if the statutory rate were used because of state income taxes and
the impact of the reporting of certain income and expense items in the financial
statements which are not taxable or deductible for income tax purposes.
Six Months Ended June 30, 1994
Compared to Six Months Ended June 30, 1993
------------------------------------------
Revenues increased $119 million during the six months ended June 30, 1994,
as compared to the same period of 1993. The higher revenues are principally
attributed to higher Trailer Manufacturing revenues ($104 million), primarily
associated with a higher volume of trailer sales and a higher volume of sales
of containers and chassis which were introduced in late 1992. Automotive
Products revenues increased $11.1 million during the six months ended June 30,
1994, as compared to the same period in 1993. General increases in volumes to
accommodate automotive customers' demands were the principal reason for the
revenue increases.
The Company's operating profit increased $20.3 million in the 1994 period
compared to the 1993 period. This increase is attributed to an increase of
Trailer Manufacturing operating profits ($16.7 million) which is principally due
to improved margins and higher volume of sales and an increase of Automotive
Products operating profits ($2.2 million), which was principally due to higher
volumes of sales.
Income tax expense is higher for financial statement purposes than would
be computed if the statutory rate were used because of state income taxes as
well as the impact of the reporting of certain income and expense items in the
financial statements which are not taxable or deductible for income tax
purposes.
<PAGE>
<PAGE-14>
PART II
OTHER INFORMATION
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
Item 1: Legal Proceedings
The following events have occurred in connection with the Executive Life
Litigation, reported under the caption, "Item 3. Legal Proceedings," in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993,
and the caption, "Item 1. Legal Proceedings" in the Registrant's Report on
Form 10-Q for the quarter ended March 31, 1994.
On May 26, 1994, the Court approved the settlement.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
--------
10.1 Settlement Agreement dated as of June 21, 1994, among John Garamendi,
the Base Assets Trust, Checker Motors Co., L.P., Checker Motors Corporation,
Checker Holding Corp. III, and International Controls Corp.
10.2 Amendment dated April 6, 1994, to the Employment Agreement, effective
July 1, 1992, between International Controls Corp. and Jay H. Harris.
10.3 Twelfth Amendment, dated as of June 7, 1994, to the Loan and Security
Agreement dated as of March 21, 1990, by and among Great Dane, Great Dane
Trailers Nebraska, Inc., Great Dane Trailers Tennessee, Inc., Great Dane Los
Angeles, Inc., certain lending institutions and Security Pacific Business
Credit, Inc., as Agent.
(b) Reports on Form 8-K
-------------------
None
<PAGE>
<PAGE-15>
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL CONTROLS CORP.
------------------------------
(Registrant)
/s/ Marlan R. Smith
----------------------------------------
Marlan R. Smith
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: August 12, 1994
<PAGE-1>
SETTLEMENT AGREEMENT
----------------------
THIS SETTLEMENT AGREEMENT (this "Agreement") is entered into as of June
21, 1994 among JOHN GARAMENDI, as Insurance Commissioner of the State of
California, solely in his capacity as conservator, rehabilitator and
liquidator (the "Rehabilitator") of Executive Life Insurance Company
("ELIC"), and the BASE ASSETS TRUST (the "Trust"), on the one hand, and
CHECKER MOTORS CO., L.P., a Delaware limited partnership (the "Partnership"),
CHECKER MOTORS CORPORATION, a New Jersey corporation and the general partner
of the Partnership ("Motors"), CHECKER HOLDING CORP. III, a Delaware
corporation ("Holding"), and INTERNATIONAL CONTROLS CORP., a Florida
corporation ("ICC"; the Partnership, Motors, Holding and ICC being
hereinafter referred to as the "Checker Entities", jointly, and "Checker
Entity", separately), on the other hand.
RECITALS
---------
WHEREAS, by order of the Superior Court for the County of Los Angeles
County (the "Court") on April 11, 1991, the Rehabilitator was appointed
conservator of ELIC; and
WHEREAS, the Checker Entities and ELIC are parties to an Amended and
Restated Partnership Agreement dated the 5th day of March, 1986, as amended
on July 28, 1989 and purportedly on June 25, 1991 (the "Partnership
Agreement"); and
WHEREAS, the Checker Entities have filed a claim with the Insurance
Commissioner in Michigan, as ancillary receiver of ELIC (the "Ancillary
Receiver"); and
<PAGE>
<PAGE-2>
WHEREAS, the Rehabilitator has filed a lawsuit against the Checker
Entities in the Court, in Case No. BS 006912 in which, among other things,
the Rehabilitator has challenged the enforceability of the purported June 25,
1991 amendment to the Partnership Agreement and the claim filed with the
purported Ancillary Receiver (the "Lawsuit"); and
WHEREAS, certain disputes have arisen as to the relative rights of
certain of the Checker Entities, on the one hand, and the Rehabilitator, ELIC
and the Trust, on the other hand, in the Partnership, certain of which
disputes are being litigated in the Court; and
WHEREAS, the Checker Entities, the Rehabilitator, ELIC and the Trust
desire to end the litigation and settle their disputes on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Checker Entities and the
Rehabilitator and the Trust hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. Capitalized terms used herein without definition
shall have the meanings ascribed thereto in the Partnership Agreement.
ARTICLE II
SALE OF INTERESTS
-----------------
2.1 INTERESTS TO BE SOLD. Subject to the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this Agreement
(the "Closing"), the Rehabilitator and the Trust shall sell, assign, transfer
and deliver to Motors or another Checker Entity designated by Motors, and
<PAGE>
<PAGE-3>
Motors or such designee shall purchase from the Rehabilitator and the Trust,
the entire interest of the Rehabilitator, ELIC and the Trust in the
Partnership (including, without limitation, the Limited Partner's Capital
Account, the Excess Capital Account and their interest, if any, in the
assets, the earnings and the Profits of the Partnership, in each case past,
present or future) (the "Interest"), which shall be delivered by the
Rehabilitator, ELIC and the Trust free and clear of any liens, claims,
charges or encumbrances of any nature whatsoever, for a purchase price of
$37,000,000 (the "Purchase Price").
2.2 CLOSING. The Closing will take place on the date (the "Closing
Date") immediately following, and, unless waived by the Checker Entities, is
expressly conditioned on, the closing of and receipt of the cash proceeds of
(i) the sale by ICC of $165,000,000 principal amount of its Senior Secured
Notes due 2002 and of 100,000 Units, each Unit consisting of $1,000 of ICC's
Senior Subordinated Notes due 2004 and a warrant to purchase [4.25] shares of
ICC's common stock (the "Offerings") and (ii) the initial borrowing by ICC
and its subsidiaries pursuant to a loan agreement between ICC and NBD Bank,
N.A., as Agent for certain lenders (the "Borrowing"), providing for a term
loan in the amount of $50,000,000 and a revolving credit loan in the amount
of $95,000,000. At the Closing:
(a) the Checker Entities shall deliver to the Trust the Purchase
Price by wire transfer of funds;
(b) the Rehabilitator and the Trust shall deliver to Motors an
Assignment of Partnership Interest (the "Assignment") in the form attached
hereto as Exhibit A;
<PAGE>
<PAGE-4>
(c) the Checker Entities and the Rehabilitator shall execute the
Stipulation of Dismissal (the "Stipulation") in the form attached hereto as
Exhibit B, which shall be filed promptly by the Rehabilitator;
(d) the Checker Entities shall execute and deliver to the
Rehabilitator the Withdrawal of Claim (the "Withdrawal of Claim") in the form
attached hereto as Exhibit C (which shall be filed by the Rehabilitator
immediately following the filing of the Stipulation) and, regardless of
whether such Withdrawal of Claim is filed, shall agree to take no further
action to pursue such claim; and
(e) the Checker Entities, on the one hand, and the Rehabilitator
and the Trust, on the other hand, shall each execute and deliver to the other
a Release in the form attached hereto as Exhibit D or E, as appropriate.
2.3 FURTHER COVENANTS AND ASSURANCES. (a) After the Closing, the
Rehabilitator, the Trust and the Checker Entities shall from time to time
execute and deliver such other instruments and documents and take such other
actions as each may reasonably request to evidence and consummate the
transactions contemplated by this Agreement.
(b) At any time after the Closing, Motors may transfer all of the
assets, business and operations of the Partnership, as substantially
constituted on the date of this Agreement and as those assets or proceeds of
those assets may be constituted following replacement, retirement or
substitution in the ordinary course of business ("Partnership Assets"), to
Motors and/or one or more corporations or partnerships entirely owned and
controlled by Motors and/or its whollyowned subsidiaries ("Partnership
Successors"); provided that such corporation(s) or partnership(s) (i) (if
other than Motors) are established solely for the purpose of owning and
operating the Partnership Assets and carrying on the Partnership business,
<PAGE>
<PAGE-5>
(ii) shall not, until the expiration of five years from the Closing Date,
acquire or carry on any business or operations of a type not currently being
carrid on by the Partnership, (iii) shall maintain books and records
reasonably necessary or appropriate to enable Motors to perform its
obligations under this Paragraph 2.3, and (iv) (if other than Motors) shall
assume all obligations of Motors hereunder.
(c) Until the expiration of five years from the Closing Date (i)
without the prior written consent of the Trust, neither any of the Checker
Entities, any Motors designee that acquires all or any portion of the
Interest under this Agreement, nor any Partnership Successor or other
transferee of Partnership Assets (other than transferees in the ordinary
course of business) shall enter into, become a party to, or become liable in
respect of, any contract, agreement or undertaking with any Affiliate except
in the ordinary course of business and on terms not less favorable to such
person than those which could be obtained if such contract, agreement or
undertaking were an arm's length transaction with a person other than an
Affiliate. (The foregoing, however, shall not apply to such contracts,
agreements and undertakings set forth in Schedule I hereto, which are in
effect on the date of this Agreement); and (ii) the Checker Entities shall,
and any Partnership Successor shall be required to covenant and agree to,
operate the businesses of the Partnership in good faith and exercising
reasonable business judgment.
For purposes of this clause (c), the term "Affiliate" shall mean (A) any
person controlling, controlled by or under common control with any other
person, where "control" (including "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such person, whether
through the ownership of voting securities or other wise; or (B) any person
<PAGE>
<PAGE-6>
having beneficial ownership of 5% or more of any of the Checker Entities, any
Motors designee that acquires the Interest under this Agreement, or any
Partnership Successor.
(d) (i) If a Triggering Event (as defined below) occurs within
five years of the Closing Date, Motors, at its own cost, shall promptly
calculate, in accordance with the provisions of and as if the Partnership had
continued operating under the Partnership Agreement (the "Calculation"), the
capital accounts of Motors and ELIC (A) without giving effect to dispositions
of assets contemplated by Section 2.3(b) of this Agreement, (B) as if the
Partnership had continued in accordance with the Partnership Agreement and
ELIC had remained the sole participating Limited Partner in good standing as
a Limited Partner at all relevant times (without regard to any alleged
defaults with respect thereto) and Motors the sole General Partner from the
date of inception of the Partnership until the date of the Triggering Event
and, consistent therewith, by including any and all allocations of Net Income
and Net Loss that would have been allocated to ELIC as a Limited Partner,
pursuant to the Partnership Agreement, from the inception of the Partnership
to the date of the Triggering Event, which allocations shall be added to or
subtracted from ELIC's Capital Account, as appropriate and without
duplication; (C) without increasing or decreasing ELIC's Capital Account or
any distributions as a result of the addition or withdrawal of any Partners
with respect to the Partnership; and (D) without reduction of ELIC's Capital
Account for the Purchase Price. The Rehabilitator and the Trust shall then
be entitled to a payment from the Checker Entities, each being jointly and
severally liable therefor, in addition to the payment of the Purchase Price
received on the Closing Date, equal to the positive difference between (x)
the amount of ELIC's Capital Account (as calculated under the terms of this
Agreement) on the date of the Triggering Event and (y) the future value of
the Purchase Price, calculated at 15% per annum from the Closing Date to the
<PAGE>
<PAGE-7>
date of the Triggering Event. All payments hereunder shall be made in cash
only and shall be payable to the Trust. If the consideration received by the
Checker Entities upon the consummation of a Triggering Event includes
property or securities other than cash, such property or securities shall be
valued in good faith by the board of directors of Motors at their fair market
value for purposes of determining the amount to which the Trust is entitled.
(ii) Motors or the Partnership Successor, as the case may be,
shall deliver the Calculation to the Rehabilitator and the Trust, together
with a report (the "Report") of the independent accountants of the
Partnership confirming that the Calculation complies with the provisions of
the Partnership Agreement as in effect on the date hereof, with such
modification thereto as are set forth in clause (i) above. In the event that
the Rehabilitator or the Trust notifies Motors in writing, within 30 days of
its receipt of the Calculation and the Report, that it does not agree with
the Calculation, then the Rehabilitator and/or the Trust may select an
independent accountant to review the Calculation. ICC and Motors agree to
cooperate fully with the Trust's and the Rehabilitator's independent
accountant by, among other things, making available to such independent
accountant all documents, including books, records, financial statements and
workpapers relating to the Triggering Event, the Calculation, all assumptions
used in making the Calculation and the financial condition of the Partnership
(or its successor) from the Closing Date to the date of the Triggering Event.
In the event that the Trust's and the Rehabilitator's independent
accountant's calculation of the amount due to ELIC differs from the amount
included in the Calculation by more than five percent and the parties cannot
resolve the difference within twentyone days, then the parties agree to
resolve the dispute in the following manner. The respective independent
accountants for the Checker Entities and the Rehabilitator/Trust shall
appoint a mutually acceptable independent accountant ("Umpire"), who shall
<PAGE>
<PAGE-8>
have fortyfive days to resolve the dispute, and whose decision shall be
final, binding and not appealable to any court or other forum. If the
respective independent accountants for the Checker Entities and
Rehabilitator/Trust, however, are unable to agree upon the selection of an
Umpire, then the New York office of the largest firm of independent auditors
which does not provide services to any of the parties to this Agreement shall
serve as the Umpire. If the Umpire is retained pursuant to this section, its
cost shall be borne by the party whose independent accountant was not within
ten percent of the Umpire's calculation. If both parties were within ten
percent of the Umpire's calculation, then each side will bear half of the
Umpire's costs. Nothing contained in the foregoing shall be deemed to
prevent the Checker Entities from consummating the Triggering Event, and the
acceptance by the Trust of any payment upon consummation of a Triggering
Event shall not be deemed a waiver of its right to challenge the Calculation
in the manner set forth herein.
(e) A "Triggering Event" shall refer to any or all of the
following:
(i) at any time prior to the transfer of the Partnership
Assets from the Partnership to one or more Partnership Successors pursuant to
Section 2.3(b) hereof, upon (A) a sale or other transfer of all or
substantially all of the Partnership Assets, whether in a single sale or
transfer or as a result of more than one sale or transfer that results in the
aggregate in the sale or transfer of all or substantially all of the
Partnership Assets, or (B) any transfer by ICC of any immediate or mediate
ownership of any Partner, directly or indirectly, whether as a result of a
change of ownership or control, merger, consolidation, reorganization or
other change of corporate form, sale of all or substantially all of the
assets of such Partner or any other disposition with respect to such Partner,
provided that a Triggering Event shall not occur upon any such transfer under
<PAGE>
<PAGE-9>
(B) above if such transfer would have been permitted by Section 8.2 of the
Partnership Agreement or otherwise under the Partnership Agreement and if the
transferee expressly agrees in writing to be bound by the terms and
conditions of this Agreement; or
(ii) at any time upon or after the transfer of the
Partnership Assets from the Partnership to one or more Partnership
Successors, upon (A) a sale of all or substantially all of the Partnership
Assets by any Partnership Successor, any of the Checker Entities or any
whollyowned subsidiary thereof, whether in a single sale or transfer or as a
result of more than one sale or transfer that results in the aggregate in a
sale or transfer of all or substantially all of the Partnership Assets; or
(B) any transfer of the immediate or mediate ownership of any Partnership
Successor, any of the Checker Entities or any whollyowned subsidiary thereof,
directly or indirectly, whether as a result of a change of ownership or
control, merger, consolidation, reorganization or other change of corporate
form, that removes from ICC's direct or indirect ownership all or
substantially all of the Partnership Assets. Notwithstanding theforegoing,
neither the sale to the public of the securities of ICC, any Checker Entity,
or any Partnership Successor nor the sale or other transfer by any
shareholder of ICC of shares of ICC stock shall constitute a Triggering
Event.
(f) If the Closing shall not have occurred on or before September
30, 1994, then, after such date, the Rehabilitator and the Trust shall have
the right to sell the Interest or any part thereof to any person on such
terms and conditions as the Rehabilitator and the Trust may deem appropriate
in accordance with the provisions hereof. The Rehabilitator and the Trust
shall deliver written notice to Motors not less than fortyfive days prior to
the closing of the proposed sale describing the terms and conditions thereof
<PAGE>
<PAGE-10>
("Notice of Third Party Sale"). Motors shall have the right, by notifying
the Rehabilitator and the Trust in writing within fifteen days from the date
of the Notice of Third Party Sale, to purchase the Interest, or portion so
offered, on the same terms and conditions set forth in the Notice of Third
Party Sale ("Election Notice"), and shall thereby be contractually bound to
purchase the Interest, or portion thereof proposed to be sold, on those terms
and conditions. If Motors does not deliver the Election Notice to the
Rehabilitator and the Trust or if Motors otherwise fails to close the
transactions under the Election Notice within thirty days from the date of
the Election Notice, notwithstanding anything in this Agreement or in the
Partnership Agreement to the contrary, the Rehabilitator and the Trust shall
have the right to dispose of the Interest, or portion thereof proposed to be
sold, substantially on the terms and conditions set forth in the Notice of
Third Party Sale. If for any reason any proposed sale shall not be
completed, this Agreement (including this Section) shall continue to remain
in full force and effect between the parties hereto.
(g) Notwithstanding any transfer of Partnership Assets or any
transfer of the assets, ownership or control of Motors, any Motors designee
that acquires the Interest under this Agreement, or any Partnership
Successor, ICC shall remain jointly and severally obligated under this
Agreement with Motors, any Motors designee that acquires the Interest under
this Agreement, any Partnership Successor, or any of their respective
successors or assigns.
(h) The Checker Entities agree that until the Closing Date they
shall continue to make quarterly payments in the same amount as have been
made since June 1991, which payments shall not reduce the Purchase Price.
<PAGE>
<PAGE-11>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE CHECKER ENTITIES
------------------------------------------------------
Each of the Checker Entities hereby represents and warrants to the
Rehabilitator and the Trust as follows:
3.1 AUTHORITY. Such Checker Entity has the corporate or partnership
power and authority to execute and deliver this Agreement and perform its
obligations hereunder.
3.2 BINDING EFFECT. This Agreement has been duly and validly
authorized, executed and delivered by such Checker Entity and constitutes the
legal, valid and binding obligation of such Checker Entity, enforceable
against such Checker Entity in accordance with its terms. Neither the
execution and delivery of this Agreement by such Checker Entity, nor the
consummation by it of the transactions contemplated hereby, nor compliance by
it with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of such entity's Certificate of Incorporation or
Bylaws or the Partnership Agreement, (ii) conflict with or result in the
breach of any term, condition or provision of, or constitute a default under,
upon the giving of notice or the termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or assets of such Checker Entity pursuant to, or otherwise
require the consent of any Person under, any agreement or obligation to which
such Checker Entity is a party or by which any of its properties or assets
may be bound, or (iii) violate or conflict with (or require any filing,
notification, report, approval or other similar matter under) any laws
applicable to such Checker Entity or any of its properties or assets.
<PAGE>
<PAGE-12>
3.3 NO CONTRAVENTION OF OFFERINGS OR BORROWING. The execution,
delivery and performance by Motors of this Agreement shall not conflict with
or result in a default under, with the passage of time, the giving of notice,
or both, any material agreement, indenture, instrument or other document
pertaining to the Offerings, or the Borrowing to which any of the Checker
Entities is a party or by which any of their properties are bound.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE REHABILITATOR AND THE TRUST
-----------------------------------------------------------------
4.1 The Rehabilitator hereby represents and warrants to the Checker
Entities as follows:
4.1.1 AUTHORITY. The Rehabilitator has full power and authority
to execute and deliver this Agreement and perform his obligations hereunder.
4.1.2 BINDING EFFECT. This Agreement has been duly and validly
authorized by any and all parties whose authorization is required by the laws
of the State of California and by the Court, and has been duly executed and
delivered by the Rehabilitator and constitutes the legal, valid and binding
obligation of the Rehabilitator and ELIC enforceable against the
Rehabilitator and ELIC in accordance with its terms. Neither the execution
and delivery of this Agreement by the Rehabilitator, nor the consummation by
the Rehabilitator of the transactions contemplated hereby, nor compliance by
the Rehabilitator with any of the provisions hereof will (i) conflict with or
result in the breach of any term, condition or provision of, or constitute a
default under, upon the giving of notice or the lapse of time or otherwise,
give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance upon
any property or assets of ELIC pursuant to, or otherwise require the consent
of any Person under, any agreement or obligation to which the Rehabilitator
<PAGE>
<PAGE-13>
or ELIC is a party or by which any of ELIC's properties or assets may be
bound, or (ii) violate or conflict with (or require any filing, notification,
report, approval (including, without limitation, Court consent or approval)
or other similar matter under) any laws applicable to the Rehabilitator or
ELIC or any of ELIC's properties or assets.
4.2 The Trust hereby represents and warrants to the Checker Entities as
follows:
4.2.1 AUTHORITY. The Trust has full power and authority to
execute and deliver this Agreement and perform its obligations hereunder.
4.2.2 BINDING EFFECT. This Agreement has been duly and validly
authorized, executed and delivered by the Trust and constitutes the legal,
valid and binding obligation of the Trust enforceable against the Trust in
accordance with its terms. Neither the execution and delivery of this
Agreement by the Trust, nor the consummation by the Trust of the transactions
contemplated hereby, nor compliance by the Trust with any of the provisions
hereof will (i) conflict with or result in the breach of any term, condition
or provision of, or constitute a default under, upon the giving of notice or
the lapse of time or otherwise, give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of
any lien, charge or encumbrance upon any property or assets of the Trust
pursuant to, or otherwise require the consent of any Person under, any
agreement or obligation to which the Trust is a party or by which any of the
Trust's properties or assets may be bound, or (ii) violate or conflict with
(or require any filing, notification, report, approval (including, without
limitation, Court consent or approval) or other similar matter under) any
laws applicable to the Trust or any of the Trust's properties or assets.
<PAGE>
<PAGE-14>
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE CHECKER ENTITIES
-----------------------------------------------------
The obligation of the Checker Entities to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver on or
before the day of the Closing (the "Closing Date") of each of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Rehabilitator and the Trust contained herein shall be true and
accurate in all material respects at and as of the date when made and at and
as of the Closing Date as though such representations and warranties were
made at and as of such date.
5.2 PERFORMANCE. The Rehabilitator and the Trust shall have performed
and complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
5.3 CERTIFICATES. The Rehabilitator and the Trust shall have furnished
the Checker Entities with such certificates to evidence compliance with the
conditions set forth in this Article V as may be reasonably requested by the
Checker Entities.
5.4 OPINION OF COUNSEL. The Rehabilitator and the Trust shall have
furnished the Checker Entities with an opinion of counsel in form reasonably
acceptable to the Checker Entities covering the matters set forth on Exhibits
F-1 and F-2, respectively, annexed hereto.
<PAGE>
<PAGE-15>
5.5 DELIVERIES COMPLETE. The Rehabilitator and the Trust shall have
delivered the Assignment and the Stipulation.
5.6 TRANSFER TAXES. The Rehabilitator and the Trust shall have
provided the Checker Entities with evidence satisfactory to them of the
payment of, or the nonliability of the Checker Entities for, any transfer,
stamp or other similar taxes payable in connection with the transfer of the
Interest pursuant to this Agreement.
5.7 CLOSING OF THE OFFERINGS. ICC shall have received the proceeds of
the Offering and the Borrowing.
5.8 RELEASE. The Rehabilitator and the Trust shall have executed and
delivered a Release in the form annexed hereto as Exhibit D.
If the Rehabilitator has transferred the Interest to the Trust prior to
the Closing Date, then the Checker Entities shall be deemed to have waived
all of the foregoing conditions (to the extent they apply to the
Rehabilitator) except for the delivery of the Stipulation and the Release.
ARTICLE VI
CONDITIONS TO THE REHABILITATOR'S AND THE TRUST'S OBLIGATIONS
-------------------------------------------------------------
The obligation of the Rehabilitator and the Trust to consummate the
transactions contemplated by this Agreement is subject to the satisfaction or
waiver on or before the Closing Date of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Checker Entities contained herein shall be true and accurate in all
material respects at and as of the date when made and at and as of the
Closing Date as though such representations and warranties were made at and
as of such date.
<PAGE>
<PAGE-16>
6.2 PERFORMANCE. The Checker Entities shall have performed and
complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
6.3 CERTIFICATES. The Checker Entities shall have furnished the
Rehabilitator and the Trust with such certificates of its authorized
representative to evidence compliance with the conditions set forth in this
Article VI as may be reasonably requested by the Rehabilitator.
6.4 OPINION OF COUNSEL. The Checker Entities shall have furnished the
Rehabilitator and the Trust with an opinion of counsel in form reasonably
satisfactory to the Rehabilitator and the Trust covering the matters set
forth in Exhibit G annexed hereto.
6.5 DELIVERIES COMPLETE. The Checker Entities shall have delivered the
Purchase price, the Stipulation and the Withdrawal of Claim.
6.6 RELEASE. Each of the Checker Entities shall have delivered a
Release in the form annexed hereto as Exhibit E.
If the Rehabilitator has transferred the Interest to the Trust prior to
the Closing Date, then the Rehabilitator shall be deemed to have waived all
of the foregoing conditions except those included in Sections 6.5 and 6.6.
ARTICLE VII
EFFECT OF FAILURE OF CONDITIONS TO OCCUR OR BE WAIVED
-----------------------------------------------------
If the Closing shall not have occurred within seven months of the
execution of this Agreement, then the Rehabilitator, ELIC and the Trust, on
the one hand, and/or the Checker Entities, on the other hand, shall be
entitled to terminate this Agreement by giving notice to the other ("Notice
<PAGE>
<PAGE-17>
Party") so long as the Notice Party has not caused through any act within its
control the Agreement not to close. Upon termination of this Agreement, (a)
this Agreement shall be null and void except for the provisions of Section
2.3(f) and this Article VII; (b) the Interest, if not previously assigned to
the Trust, shall be assigned to the Trust and the Trust shall be admitted to
the Partnership as a Limited Partner and shall be treated as a nondefaulting
Partner from the date of the Partnership's formation through the date of its
admission pursuant to this Article VII and thereafter in accordance with the
terms of the Partnership Agreement as in effect on the date hereof, and,
accordingly, the Capital Account of the Limited Partner shall be restated to
an amount equal to the Capital Account the Limited Partner would have had if
it had not been treated as a defaulting Partner for any period; PROVIDED,
HOWEVER, that (i) the Limited Partner's Capital Account shall be reduced
(without duplication with respect to the foregoing) for the principal
component of the distributions by the Partnership to the Limited Partner as
a defaulting Partner and pursuant to Section 2.3(h) of this Agreement; and
(ii) the Limited Partner shall have no right to distributions in excess of
those received by it either as a Partner (including as a defaulting Partner)
or pursuant to the terms of this Agreement; (c) the Stipulation and the
Withdrawal of Claim shall be delivered and filed as set forth in Paragraphs
2.2(c) and (d) and the Releases in the forms attached hereto as Exhibits D
and E shall be delivered; (d) the Trust and Motors shall amend the
Partnership Agreement, to be effective with respect to all distributions
after December 31, 1993, to provide that notwithstanding anything in Section
4.5 thereof to the contrary, distributions to the General Partner may reduce
the General Partner's Capital Account below zero and the General Partner
shall not be required to repay any such excess distribution pursuant to
Section 4.6; PROVIDED, HOWEVER, that the Checker Entities shall jointly and
severally guaranty the obligations of the General Partner pursuant to Section
<PAGE>
<PAGE-18>
2.1.3 of the Partnership Agreement in an amount equal to the cash
distributions to the General Partner after December 31, 1993 pursuant to
Section 4.4.6 of the Partnership Agreement, PROVIDED THAT, for purposes of
determining the amount owed under the guaranty only, the positive balance in
the General Partner's Capital Account shall be increased, or the negative
balance in the General Partner's Capital Account shall be reduced, by the
difference between the value of the Partnership's medallions on the date
hereof (which, based on the good faith determination of ICC, are valued at
$38,000 per medallion) and the value of such medallions (including all
amounts received from sales or other transfers of medallions after the date
hereof) on the date the Partnership is terminated.
ARTICLE VII
MISCELLANEOUS
-------------
8.1 WAIVERS AND AMENDMENTS. This Agreement may not be amended or
terminated except upon the written consent of all parties. By an instrument
in writing, a party may waive compliance by the other party with any term or
provision of this Agreement that such other party was or is obligated to
comply with or perform; PROVIDED, HOWEVER, that such waiver shall not operate
as a waiver of, or estoppel with respect to, any other or subsequent failure.
No failure to exercise and no delay in exercising any right, remedy, or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, or power hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, or power
provided herein or by law or in equity. The waiver by any party of the time
for performance of any act or condition hereunder does not constitute a
waiver of the act or condition itself.
<PAGE>
<PAGE-19>
8.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California as such laws are
applied to agreements between California residents entered into and to be
performed entirely within California.
8.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Each party agrees that it will
not assign, sell, transfer, delegate, or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any right or obligation
under this Agreement except as specifically permitted hereunder. Any
purported assignment, transfer, or delegation in violation of this paragraph
shall be null and void. Subject to the foregoing limits on assignment and
delegation, this Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns.
8.4 ENTIRE AGREEMENT. The parties intend that the terms of this
Agreement (including the Exhibits hereto) shall be the final expression of
their agreement with respect to the subject matter hereof and may not be
contradicted by evidence of any prior contemporaneous agreement. The parties
further intend that this Agreement shall constitute the complete and
exclusive statement of their terms and that no extrinsic evidence whatsoever
may be introduced in any judicial, administrative, or other legal proceeding
involving this Agreement.
8.5 SEVERABILITY OF THIS AGREEMENT. If any provision of this
Agreement, or the application hereof to any person, place or circumstance,
shall be held by a court of competent jurisdiction to be invalid,
unenforceable or void, the remainder of this Agreement and such provisions as
applied to other persons, places and circumstances shall remain in full force
and effect only if, after excluding the portion deemed to be unenforceable,
the remaining terms shall provide for the consummation of the transactions
<PAGE>
<PAGE-20>
contemplated hereby in substantially the same manner as o
at the later of the date this Agreement was executed or last amended.
8.6 GENDER; NUMBER. Whenever the context of this Agreement requires,
the masculine gender shall include the feminine or neuter, and the singular
number shall include the plural.
8.7 CAPTIONS. The section and other headings used in this Agreement
are for reference purposes only and shall not constitute a part hereof or
affect the meaning or interpretation of this Agreement.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same instrument.
8.9 EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, each party shall pay all expenses incurred by it
or on its behalf in connection with the Agreement and the transactions
contemplated hereby.
8.10 NOTICES. Any notice or communication required or permitted
hereunder shall be sufficiently given if in writing and (i) delivered in
person or by overnight delivery or courier service, (ii) sent by facsimile,
or (iii) deposited in the United States mail, by certified mail postage
prepaid and return receipt requested (provided that any notice given pursuant
to clause (ii) is also confirmed by the means described in clause (i) or
(iii)), as follows:
To the Rehabilitator:
To the Trust:
<PAGE>
<PAGE-21>
To the Checker Entities: Checker Motors Corporation
2016 North Pitcher Street
Kalamazoo, Michigan 49007
Attn: David R. Markin
President
Tel. (616) 343-6121
Fax. (616) 343-1660
with a copy to: Hutton Ingram Yuzek Gainen
Carroll & Bertolotti
250 Park Avenue
New York, New York 10177
Attn: Paulette Kendler
Tel. (212) 907-9650
Fax. (212) 907-9682
Such notice or other communication shall be deemed given when so delivered
personally, or sent by facsimile transaction, or, if sent by overnight
delivery or courier service, the business day after being sent from within
the United States, or if mailed, four days after the date of deposit in the
United States mails.
8.11 RECOVERY OF COSTS AND ATTORNEYS' FEES.
(a) Except as provided in Paragraph 2.3(d)(ii), any disputes
arising out of or relating to this Agreement, any document or instrument
delivered pursuant to, in connection with, or simultaneously with this
Agreement, or any breach of this Agreement or any such document or instrument
shall be settled by arbitration to be held in Los Angeles, California, in
accordance with the rules then in effect of the American Arbitration
Association or any successor thereto. The arbitrator ("Arbitrator") shall be
a party mutually acceptable to the Checker Entities, the Rehabilitator and
the Trust; PROVIDED, HOWEVER, that if they cannot agree on an arbitrator, the
Regional Director of the American Arbitration Association shall choose the
Arbitrator. The Arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the Arbitrator shall be final,
<PAGE>
<PAGE-22>
conclusive, and binding on the parties to the arbitration. Judgment may be
entered on the Arbitrator's decision in any court having jurisdiction.
(b) Any prevailing party or parties described in Section 8.11(a)
above shall be entitled to reasonable attorneys' fees and any other costs
incurred in enforcing, or on appeal from, a judgment entered with respect to
any arbitration described in Section 8.11(a), separately from and in addition
to any other amount included in such judgment. This Section 8.11 shall be
severable from the other provisions of this Agreement and shall survive and
not be merged into any such judgment.
8.12 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any Person other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
8.13 SECTION 1654 INTERPRETATION. This Agreement has been negotiated
at arm's length and between persons sophisticated and knowledgeable in the
matters dealt with in this Agreement. Each party has been represented by
experienced and knowledgeable legal counsel. Accordingly, any rule of law
(including California Civil Code Section 1654) or legal decision that would
require interpretation of any ambiguities in this Agreement against the party
that has drafted it is not applicable and is waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect the purpose
of the parties and this Agreement.
8.14 AVAILABILITY OF EQUITABLE REMEDIES. Since a breach of the
provisions of this Agreement could not adequately be compensated by money
damages, any party shall be entitled, either before or after the Closing, in
addition to any other right or remedy available to him, to an injunction
<PAGE>
<PAGE-23>
granted by the Arbitrator restraining such breach or a threatened breach and
to specific performance of any such provision of this Agreement, and in
either case no bond or other security shall be required in connection
therewith, and the parties hereby consent to this issuance of such injunction
and to the ordering of specific performance.
8.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
<PAGE-24>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
CHECKER MOTORS CO., L.P.
By: Checker Motors Corporation
General Partner
By: /s/ David R. Markin
-------------------------------------------
Name: David R. Markin
Title: President
CHECKER MOTORS CORPORATION
By: /s/ David R. Markin
-----------------------------------------
Name: David R. Markin
Title: President
CHECKER HOLDING CORP. III
By: /s/ David R. Markin
-------------------------------------------
Name: David R. Markin
Title: President
INTERNATIONAL CONTROLS CORP.
By: /s/ David R. Markin
-------------------------------------------
Name: David R. Markin
Title: President
/s/ John Garamendi
- - ------------------------------------
JOHN GARAMENDI, in his capacity as
Rehabilitator, but not Individually
BASE ASSETS TRUST
By: /s/ Richard Baum
---------------------------------
Trustee
By: /s/ Thomas Arnold
---------------------------------
Trustee - Thomas Arnold
By: /s/ Anthony Buonaguro
---------------------------------
Trustee - Anthony Buonaguro
<PAGE>
<PAGE-25>
SCHEDULE I
AFFILIATE TRANSACTIONS
As of December 31, 1993, American Country Insurance Company holds $0.9
million principal amount of Enhance Financial Services Group Inc., 7% Notes
due December 1, 1996, of which company Mr. Markin and Mr. Tessler are
directors.
Each of Messrs. Markin, Solomon, Tessler and Thomas provides consulting
services to Yellow Cab Company and each receives for such services
(commencing in January 1988) $10,000 per month. Messrs. Solomon, Tessler and
Thomas also provide consulting services (a) to Motors for which they each
receive monthly fees of $5,000 (commencing in January 1988) and (b) to
Country for which they each receive monthly fees of approximately $18,300.
Mr. Markin serves as a consultant to Chicago AutoWerks, a division of Checker
L.P., for which he receives monthly fees of approximately $1,200 (commencing
in January 1988), and to Country, for which he receives monthly fees of
approximately $4,600.
Frances Tessler, the wife of Allan R. Tessler, is employed by Smith
Barney Shearson which executes trades for Country's investment portfolio.
During 1993 and 1992, Mrs. Tessler received for her services approximately
$78,000 and $69,000, respectively, of the commissions paid to Smith Barney
Shearson.
On September 24, 1992, American Country Financial Services Corp.
("AFSC"), a subsidiary of Country, purchased from The Mid City National Bank
of Chicago the promissory note dated July 30, 1992, made by King Cars, Inc.
("King Cars") in the principal amount of $381,500 plus accrued interest in
the amount of $3,560. The note, which has been renewed several times, has a
current principal amount outstanding of $407,691 and matures in December
1994. King Cars is owned by Messrs. Markin, Tessler, Solomon, Thomas and
Feldman. King Cars is a party to an agreement dated December 15, 1992, with
Yellow Cab pursuant to which Yellow Cab purchases from King Cars display
frames for installation in its taxicabs and King Cars furnishes Yellow Cab
advertising copy for insertion into the frames. King Cars receives such
advertising copy as an agent in Chicago for an unrelated company which is in
the business of selling and arranging for local and national advertising. Of
the revenues generated from such advertising, 30% will be retained by King
Cars and the balance will be delivered to Yellow Cab until such time as
Yellow Cab has recovered costs advanced by it for the installation of
advertising frames in 500 of its taxicabs (approximately $78,000). The terms
to Yellow Cab are the same or more favorable than those offered by King Cars
to unrelated third parties.
EMPLOYMENT AGREEMENTS
Checker L.P., as the assignee of Motors, is party to an Amended and
Restated Employment Agreement dated as of November 1, 1985, as further
amended, with David R. Markin pursuant to which Mr. Markin is to serve as
President, Chief Executive Officer and Chief Operating Officer of Checker
L.P. until April 30, 1996, subject to extension (the "Termination Date"), at
a minimum salary of $600,000 per annum, together with the payment of certain
insurance premiums. The beneficiaries of these insurance policies are
designated by Mr. Markin. Mr. Markin continues to be eligible to participate
in profit sharing, pension or other bonus plans of Checker L.P. Pursuant to
the Amended and Restated Employment Agreement, in the event of Mr. Markin's
<PAGE>
<PAGE-26>
death, Checker L.P. shall pay Mr. Markin's estate the compensation which
would otherwise be payable to him for the period ending on the last day of
the month in which death occurs. In addition, Checker L.P. shall pay to Mr.
Markin's beneficiaries deferred compensation from the date of his death
through the Termination Date in an annual amount equal to onethird of his
base salary at the date of his death. In the event of termination of the
Amended and Restated Employment Agreement for any reason other than cause,
disability or death, Mr. Markin shall continue to serve as a consultant to
Checker L.P. for a period of five years, for which he shall receive
additional compensation in the amount of $50,000 per annum. Checker L.P. has
agreed to indemnify Mr. Markin from certain liabilities arising out of his
service to Checker L.P., except for liabilities resulting from his gross
negligence or willful misconduct.
Checker L.P. is party to an Amended and Restated Employment Agreement
dated as of June 1, 1992, with Jeffrey Feldman pursuant to which Mr. Feldman
serves as President of the vehicular operations segment until February 1,
1996 subject to extension (the "Termination Date"), at a minimum salary of
$200,000 per annum, together with the payment of certain insurance premiums.
The beneficiaries of these insurance policies are designated by Mr. Feldman.
Mr. Feldman is eligible to participate in profit sharing, pension or other
bonus plans implemented by the vehicular operations segment. Pursuant to the
Amended and Restated Employment Agreement, in the event of Mr. Feldman's
death, Checker L.P. shall pay Mr. Feldman's estate the amount of compensation
which would otherwise be payable to him for the period ending on the last day
of the month in which death occurs. In addition, Checker L.P. shall pay to
Mr. Feldman's estate deferred compensation form the date of his death to the
Termination Date in an annual amount equal to onethird of his base salary at
the date of his death. In the event of the termination of the Amended and
Restated Employment for any reason other than cause, disability or death, Mr.
Feldman shall continue to serve as a consultant to Checker L.P. for a period
of five years (if terminated by Mr. Feldman) or seven years (if terminated by
Checker L.P.), for which he shall receive compensation in the amount of
$75,000 per annum. Checker L.P. has agreed to indemnify Mr. Feldman from
certain liabilities, except for those resulting from his gross negligence or
willful misconduct.
Jeffrey M. Feldman is the nephew of David R. Markin.
Motors has guaranteed certain of Checker Taxi Association's obligations.
The outstanding principal balance of these obligations was approximately $0.7
million, as of December 31, 1993.
American Country Insurance Company holds mortgages on certain of Checker
L.P.'s property, securing loans in the amount of approximately $3 million.
<PAGE-1>
International Controls Corp.
2016 North Pitcher Street
Kalamazoo, Michigan 49007
April 6, 1994
Mr. Jay H. Harris
550 South Ocean Boulevard
Apt. 2203
Boca Raton, Florida 33432
Re: Employment Agreement, Effective as of
July 1, 1992 (the "Employment Agreement"),
between International Controls Corp.
and Jay H. Harris
Dear Jay:
This will confirm our waiver of the requirement, set
forth in Section 1.1 of the Employment Agreement, that notice of
termination of the Employment Agreement must be given 60 days
prior to the end of the then current Term (as defined in the
Employment Agreement). We agree that such notice may be given by
either party at any time and the Agreement will terminate 60 days
after the receipt of such notice. This waiver shall not
constitute a waiver of any other rights of either party under the
Employment Agreement and, except as modified by this waiver, the
provisions of the Employment Agreement remain in full force and
effect.
If the foregoing is consistent with your understanding,
please so indicate by signing below.
Very truly yours,
International Controls Corp.
By: /s/ David R. Markin
-------------------------------
Name: David R. Markin
Title: President
AGREED AND ACKNOWLEDGED:
/s/ Jay H. Harris
- - -----------------------------
Jay H. Harris
<PAGE> 1 of 4
EXECUTION COPY
TWELFTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT
This TWELFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated
as of June 7, 1994 (this "Amendment"), amends in certain respects,
the Loan and Security Agreement (the "Loan Agreement") dated as of
March 21, 1990 among Great Dane Trailers, Inc., Great Dane Los
Angeles, Inc., Great Dane Trailers Nebraska, Inc., and Great Dane
Trailers Tennessee, Inc., as Borrowers (the "Borrowers"), the
lenders from time to time party thereto (the "Lenders") and
Security Pacific Business Credit Inc., as Agent (the "Agent"), as
heretofore amended, modified or supplemented.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrowers have requested that the Lenders agree
to modify in certain respects the limit on Intercompany Loans set
forth in Section 10.15A(g)(ii) of the Loan Agreement in order,
among other things, to increase the aggregate amount of
Intercompany Loans allowed in Fiscal Year 1994.
WHEREAS, the Lenders are willing to agree to such modification
on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Amendment, and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the Borrowers, the Agent and the Majority
Lenders hereby agrees as follows:
SECTION 1. DEFINED TERMS. Terms defined in the Loan
Agreement and not otherwise defined herein shall have the meanings
set forth in the Loan Agreement.
SECTION 1. AMENDMENTS. Effective as of the date hereof,
the Loan Agreement shall be amended as follows:
2.1 AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan
Agreement is hereby amended by adding the following new definition
in its appropriate alphabetical order:
"'TWELFTH AMENDMENT' means the amendment of this
Agreement dated as of May 24, 1994."
2.2 AMENDMENT TO SECTION 10.15A(g)(ii). Section
10.15A(g)(ii) of the Loan Agreement is hereby deleted in its
entirety, and the following is substituted therefore:
"(ii) if in Fiscal Year 1994:
(A) (1) the total net income of the Borrowers for
the period from January 1, 1994 through the last
day of the calendar month immediately preceding the
<PAGE>
<PAGE> 2 of 4
calendar month of the Loan Date, as shown on the
exhibit to the Most Recent Monthly Financial
Statements (the 'Statement Exhibit'), which exhibit
shall be prepared on the same basis as Exhibit A to
the Twelfth Amendment, shall be equal to or greater
than 90% of the sum of the amounts shown opposite
the caption 'Net income' on such Exhibit A for each
of the calendar months preceding the calendar month
of the Loan Date and (2) the sum of the amounts
shown opposite the caption 'Net cash flow' on such
Statement Exhibit for each of the calendar months
preceding the calendar month of the Loan Date shall
be greater than zero (-0-); and
(B) the aggregate amount of all Intercompany Loans
made during Fiscal Year 1994 is less than or equal
to the following cumulative amounts on or after the
following dates:
<TABLE>
<CAPTION>
Maximum Aggregate
Intercompany Loans Dates in 1994
------------------ -------------
<C> <C>
$ 2,000,000 January 1
$ 4,000,000 February 1
$ 7,000,000 March 1
$ 9,000,000 April 1
$11,000,000 May 1
$17,000,000 June 1
$19,000,000 July 1
$21,000,000 August 1
$24,000,000 September 1
$26,000,000 October 1
$28,000,000 November 1
$32,000,000 December 1"
</TABLE>
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment
shall be effective as of the date first above written when the
Agent shall have received the following:
(a) counterparts of this Amendment executed by the
Borrowers and the Majority Lenders;
(b) such certificates, representations, instruments and
other documents as the Agent and the Majority Lenders may require,
in form and substance satisfactory to the Agent.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrowers
hereby each represent and warrant to the Lenders and the Agent that
(i) the execution, delivery and performance of this Amendment by
each of the Borrowers are within their respective corporate powers
and have been duly authorized by all necessary corporate action,
(ii) no consent, approval, authorization or, or declaration or
filing with, any Public Authority, and no consent of any other
Person, is required in connection with the execution, delivery and
performance of this Amendment, except for those already duly
<PAGE>
<PAGE> 3 of 4
obtained, (iii) this Amendment has been duly executed by each of
the Borrowers and constitutes the legal, valid and binding
obligation of each of the Borrowers, enforceable against them in
accordance with its terms and (iv) the execution, delivery and
performance by each of the Borrowers of this Amendment does not and
will not conflict with, or constitute a violation or breach of, or
constitute a default under, or result in the creation or imposition
of any Lien upon the property of any Borrower or any of its
Subsidiaries by reason of the terms of (a) any contract, mortgage,
Lien, lease, agreement, indenture, or instrument to which such
Borrower or such Subsidiary is a party or which is binding upon it,
(b) any Requirement of Law applicable to such Borrower or such
Subsidiary, or (c) the Certificate or Articles of Incorporation or
By-Laws of such Borrower or such Subsidiary.
SECTION 5. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS.
5.1 On and after the date hereof, each reference in the
Loan Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import, and each reference in the other Loan
Documents to the Loan Agreement, shall mean and be a reference to
the Loan Agreement as amended hereby.
5.2 Except as specifically amended above, all of the
terms of the Loan Agreement shall remain unchanged and in full
force and effect.
5.3 The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of any Lender or the Agent under the Loan Agreement or any
of the other Loan Documents, nor constitute a waiver of any
provision of the Loan Agreement or any of the other Loan Documents.
SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
SECTION 7. GOVERNING LAW. This Amendment shall be governed
by, and shall be construed and enforced in accordance with, the
laws of the State of New York.
SECTION 8. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment or be given any substantive
effect.
<PAGE>
<PAGE> 4 of 4
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the date first above written.
GREAT DANE TRAILERS, INC.
By: /s/ T. W. Horan
-------------------------------------
Title: Senior VP Finance
----------------------------------
GREAT DANE LOS ANGELES, INC.
By: /s/ T. W. Horan
-------------------------------------
Title: Senior VP Finance
----------------------------------
GREAT DANE TRAILERS NEBRASKA, INC.
By: /s/ T. W. Horan
-------------------------------------
Title: Senior VP Finance
----------------------------------
GREAT DANE TRAILERS TENNESSEE, INC.
By: /s/ T. W. Horan
-------------------------------------
Title: Senior VP Finance
----------------------------------
SECURITY PACIFIC BUSINESS CREDIT INC.,
as Lender and Agent
By: /s/ Ira A. Mermelstein
-------------------------------------
Title: Vice President
----------------------------------
NATIONSBANK OF GEORGIA, N.A.
By: /s/ Robert B. H. Moore
-------------------------------------
Title: Senior Vice President
----------------------------------
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Peter L. Skavla
-------------------------------------
Title: Vice President
----------------------------------
