<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 1994
( ) 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 1-7272
------------
KERR GROUP, INC.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-0898810
- - ---------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East, Los Angeles, CA 90067
- - ----------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (310) 556-2200
-----------------------------
_______________________________________________________________________________
Former name, former address and former fiscal year, if changed since last year.
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 ____
The number of shares of Registrant's Common Stock, $.50 par value, outstanding
as of July 29, 1994 was 3,677,095.
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KERR GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 3 - 4
Condensed Consolidated Statements of Earnings (Loss) -
Three Months and Six Months Ended June 30, 1994 and 1993 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 10
Part II. Other Information 11
</TABLE>
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<PAGE> 3
KERR GROUP, INC.
Consolidated Balance Sheets
As of June 30, 1994 and December 31, 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
Assets 1994 1993
- - ------ --------- --------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,640 $ 11,329
Receivables-primarily trade accounts,
less allowance for doubtful accounts
of $574 at June 30, 1994 and $578
at December 31, 1993 25,498 13,533
Inventories
Raw materials and work in process 10,438 8,906
Finished goods 21,985 19,126
-------- --------
Total inventories 32,423 28,032
Prepaid expenses 1,988 2,527
Deferred income taxes 1,854 0
-------- --------
Total current assets 65,403 55,421
-------- --------
Property, plant and equipment, at cost 94,955 90,652
Accumulated depreciation and amortization (53,507) (50,228)
-------- --------
Net property, plant and equipment 41,448 40,424
-------- --------
Deferred income taxes 3,672 6,629
Goodwill and other intangibles, net of
amortization of $2,302 at
June 30, 1994 and $2,122
at December 31, 1993 6,676 6,645
Other assets 3,984 4,201
Non-current assets related to discontinued operations 4,029 4,029
-------- --------
$125,212 $117,349
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
KERR GROUP, INC.
Consolidated Balance Sheets
As of June 30, 1994 and December 31, 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
Liabilities and Stockholders' Equity 1994 1993
- - ------------------------------------ --------- --------
<S> <C> <C>
Current liabilities
Short-term debt $ 2,000 $ 0
Accounts payable 15,277 9,573
Accrued expenses 8,123 9,089
-------- --------
Total current liabilities 25,400 18,662
-------- --------
Accrued pension liability 18,124 18,321
Other long-term liabilities 1,749 2,302
Senior long-term debt 50,000 50,000
Stockholders' equity
Preferred Stock, 487 shares authorized
and issued, at liquidation value of
$20 per share 9,748 9,748
Common Stock, $.50 par value per share,
20,000 shares authorized, 4,220
shares issued 2,110 2,105
Additional paid-in capital 27,210 27,145
Retained earnings 10,868 9,420
Treasury Stock, 543 shares at cost (12,803) (12,803)
Excess of additional pension liability
over unrecognized prior service
cost, net of tax benefits (6,835) (6,835)
Notes receivable from ESOP Trusts (359) (716)
-------- --------
Total stockholders' equity 29,939 28,064
-------- --------
$125,212 $117,349
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
KERR GROUP, INC.
Condensed Consolidated Statements of Earnings
for the Three Months and Six Months Ended June 30, 1994 and 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $41,004 $38,113 $70,384 $64,787
Cost of sales 28,713 26,742 48,132 45,058
------- ------- ------- -------
Gross profit 12,291 11,371 22,252 19,729
Selling, warehouse, general and
administrative expense 8,380 7,722 16,778 15,321
Interest expense 1,249 1,502 2,464 3,016
Interest and other income (118) (201) (231) (472)
------- ------- ------- -------
Earnings before income taxes 2,780 2,348 3,24 11,864
Provision for income taxes 1,181 950 1,379 761
------- ------- ------- -------
Net earnings $ 1,599 $ 1,398 $ 1,862 $ 1,103
Preferred stock dividends 207 207 414 414
------- ------- ------- -------
Net earnings applicable to
common stockholders $ 1,392 $ 1,191 $ 1,448 $ 689
======= ======= ======= =======
Net earnings per common share:
Primary $ 0.38 $ 0.32 $ 0.39 $ 0.19
======= ======= ======= =======
Fully diluted $ 0.36 $ 0.32 $ 0.39 $ 0.19
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 6
KERR GROUP, INC.
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
June 30,
---------------------------
1994 1993
------------ ----------
<S> <C> <C>
Cash flows provided (used) by operations
- - ----------------------------------------
Net earnings $ 1,862 $ 1,103
Add (deduct) noncash items included in
net earnings
Depreciation and amortization 3,838 3,586
Other, net 973 (693)
Changes in other operating working capital
Receivables (11,965) (7,490)
Inventories (4,391) (2,568)
Prepaid expenses 573 173
Accounts payable and accrued expenses 5,596 5
-------- --------
Cash flows used by operations (3,514) (5,884)
-------- --------
Cash flows provided (used) by investing activities
- - --------------------------------------------------
Capital expenditures (4,715) (3,097)
Collection of accounts receivable, and payment of
accounts payable and accrued and other expenses
related to discontinued operations (933) (2,374)
Other, net (540) (1,386)
-------- --------
Cash flows used by investing activities (6,188) (6,857)
-------- --------
Cash flows provided (used) by financing activities
- - --------------------------------------------------
Net borrowings under lines of credit 2,000 0
Retirement of long-term debt 0 (1,000)
Payments received on ESOP Trusts notes receivable 357 395
Dividends paid (414) (414)
Other 70 0
-------- --------
Cash flows provided (used) by financing activities 2,013 (1,019)
-------- --------
Cash and cash equivalents
- - -------------------------
Decrease during the period (7,689) (13,760)
Balance at beginning of the period 11,329 19,251
-------- --------
Balance at end of the period $ 3,640 $ 5,491
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
- 6 -
<PAGE> 7
KERR GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) General
The condensed consolidated financial statements include the accounts of
Kerr Group, Inc. and its wholly owned subsidiary (collectively referred to
as the Company). In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position of the Company as of June 30, 1994, the results of operations for
the three months and six months ended June 30, 1994 and 1993, and changes
in cash flows for the six months ended June 30, 1994 and 1993.
The results of operations for the first six months of 1994 are not
necessarily indicative of the results to be expected for the full year.
2) Earnings Per Share
Fully diluted earnings per common share reflect when dilutive, 1) the
incremental common shares issuable upon the assumed exercise of outstanding
stock options, and 2) the assumed conversion of the Preferred Stock and the
elimination of the related Preferred Stock dividends. Antidilution
occurred in the six months ended June 30, 1994 and 1993.
3) Debt
On May 2, 1994, the Company replaced its two existing unsecured $6,000,000
short-term lines of credit with two unsecured $10,000,000 short-term lines
of credit. The lines of credit provide for the seasonal working capital
needs of the Company. The $10,000,000 lines of credit are committed
through April 30, 1995. One of the $10,000,000 lines of credit provides
for borrowings to bear interest at either the prime rate of the lender or,
alternatively, Eurodollar rate plus 1.5% and charges a facility fee of 0.5%
per annum on the commitment. The other $10,000,000 line of credit provides
for borrowings to bear interest at the prime rate of the lender and charges
a facility fee of 0.75% per annum on the commitment. The lines of credit
contain covenants identical to the Senior Notes.
- 7 -
<PAGE> 8
KERR GROUP, INC.
Computation of Earnings (Loss) Per Common Share
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1994 1993 1994 1993
-------- ------ ------ ------
<S> <C> <C> <C> <C>
Primary Net Earnings Per Common Share
- - -------------------------------------
Net earnings $1,599 $1,398 $1,862 $1,103
Less Preferred Stock dividends (207) (207) (414) (414)
------ ------ ------ ------
Net earnings applicable to primary earnings
per common share $1,392 $1,191 $1,448 $ 689
====== ====== ====== ======
Weighted average number of common
shares outstanding 3,675 3,668 3,671 3,671
====== ====== ====== ======
Primary net earnings per common share $ 0.38 $ 0.32 $ 0.39 $ 0.19
====== ====== ====== ======
Fully Diluted Net Earnings Per Common Share
- - -------------------------------------------
Net earnings applicable to primary earnings
per common share $1,392 $1,191 $1,448 $ 689
Add Preferred Stock dividends 207 207 414 414
------ ------ ------ ------
Net earnings applicable to fully
diluted earnings per common share $1,599 $1,398 $1,862 $1,103
====== ====== ====== ======
Weighted average number of common
shares outstanding 3,675 3,668 3,671 3,671
Common shares issuable upon assumed
conversion of Preferred Stock 709 709 709 709
Incremental common shares issuable upon
assumed exercise of outstanding stock options 14 9 14 6
------ ------ ------ ------
Adjusted weighted average number of common
shares outstanding 4,398 4,386 4,394 4,386
====== ====== ====== ======
Fully diluted net earnings per common share:
As computed $ 0.36 $ 0.32 $ 0.42 $ 0.25
====== ====== ====== ======
As reported(a) $ 0.36 $ 0.32 $ 0.39 $ 0.19
====== ====== ====== ======
</TABLE>
(a) The calculation of fully diluted net earnings per common share for the six
months ended June 30, 1994 and 1993 was not dilutive.
-8-
<PAGE> 9
KERR GROUP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months and Six Months Ended June 30, 1994 and 1993
Results of Operations
Net sales for the three months ended June 30, 1994 were $41,004,000 as compared
to $38,113,000 for the three months ended June 30, 1993, an increase of
$2,891,000 or 7.6%. The increase in net sales for the three months ended June
30, 1994 over the comparable period in 1993 was due primarily to higher unit
sales in the Plastic Products and Consumer Products Businesses.
Net sales for the six months ended June 30, 1994 were $70,384,000 as compared
to $64,787,000 for the six months ended June 30, 1993, an increase of
$5,597,000 or 8.6%. The increase in net sales for the six months ended June
30, 1994 over the comparable period in 1993 was due primarily to higher unit
sales in the Plastic Products and Consumer Products Businesses.
Cost of sales for the three months ended June 30, 1994 were $28,713,000 as
compared to $26,742,000 for the three months ended June 30, 1993, an increase
of $1,971,000 or 7.4%. Cost of sales for the six months ended June 30, 1994
were $48,132,000 as compared to $45,058,000 for the six months ended June 30,
1993, an increase of $3,074,000 or 6.8%. The increase for both periods in 1994
over comparable periods in 1993 was due primarily to higher unit sales.
Gross profit as a percent of net sales for the three months ended June 30, 1994
increased to 30.0% as compared to 29.8% for the three months ended June 30,
1993. Gross profit as a percent of net sales for the six months ended June 30,
1994 increased to 31.6% as compared to 30.5% for the six months ended June 30,
1993.
Selling, warehouse, general and administrative expenses increased $658,000 or
8.5% during the three months ended June 30, 1994, as compared to the same
period in 1993. The increase for the three months was primarily due to
additional employees, higher bad debt expense and higher sales promotions.
Selling, warehouse, general and administrative expenses increased $1,457,000 or
9.5% during the six months ended June 30, 1994, as compared to the same period
in 1993. The increase for the six months was primarily due to higher bad debt
expense, additional employees and salary and wage increases.
Net interest expense decreased $170,000 and $311,000 during the three month and
six month periods ended June 30, 1994, respectively, as compared to the same
periods in 1993, as a result of the refinancing of the Company's long-term debt
on September 21, 1993.
Earnings before income taxes increased $432,000 during the three months ended
June 30, 1994, as compared to the same period in 1993. Earnings before income
taxes increased $1,377,000 during the six months ended June 30, 1994, as
compared to the same period in 1993. The increase in earnings for both periods
in 1994 over comparable periods in 1993 was due to higher earnings in the
Plastic Products and Consumer Products Businesses and lower interest expense as
a result of the refinancing of the Company's long-term debt on September 21,
1993.
The provision for income taxes increased $231,000 during the three months ended
June 30, 1994, as compared to the same period in 1993. The provision for
income taxes increased $618,000 during the six months ended June 30, 1994, as
compared to the same period in 1993. The increase for both periods in 1994
over comparable periods in 1993 was due primarily to higher pretax earnings.
- 9 -
<PAGE> 10
Financial Condition
Cash flow was used by operations in the six months ended June 30, 1994 in the
amount of $3,514,000 and in the six months ended June 30, 1993 in the amount of
$5,884,000 for increased working capital requirements, primarily related to the
Consumer Products Business.
Cash flow was used by investing activities in the six months ended June 30,
1994 in the amount of $6,188,000 and in the six months ended June 30, 1993 in
the amount of $6,857,000, primarily related to capital expenditures and cash
costs associated with the Company's discontinued operations.
Cash flow was provided by financing activities in the six months ended June 30,
1994 in the amount of $2,013,000 primarily attributable to borrowings under the
Company's working capital lines of credit. Cash flow was used by financing
activities in the six months ended June 30, 1993 in the amount of $1,019,000.
The ratio of current assets to current liabilities at June 30, 1994 and
December 31, 1993 was 2.6 and 3.0, respectively. The decrease in the ratio of
current assets to current liabilities during the first six months of 1994 is
due to higher levels of accounts payable and borrowings under the Company's
working capital lines of credit. The ratio of total debt to total
capitalization decreased to 63.5% at June 30, 1994 from 64.1% at December 31,
1993.
As of June 30, 1994, the Company had two unsecured $10,000,000 lines of credit
with two banks to provide for the seasonal working capital needs of the
Company. The lines of credit are committed through April 30, 1995. The lines
of credit provide the Company with a source of working capital which the
Company believes will be sufficient to meet its anticipated needs.
At June 30, 1994, the Company had unused sources of liquidity consisting of
cash and cash equivalents of $3,640,000, unused committed credit under bank
lines of credit of $18,000,000, of which $12,966,000 could be borrowed under
the terms of the Company's Senior Note Agreement, tax net operating loss
carryforwards of $1,854,000 and certain tax credit carryforwards of $1,975,000.
- 10 -
<PAGE> 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Line of Credit between PNC Bank and Kerr Group, Inc. dated May 2,
1994
10.2 Line of Credit between Bank of Boston and Kerr Group, Inc. dated
May 2, 1994
b. Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended June 30,
1994.
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.
KERR GROUP, INC.
August 9, 1994 By /s/ D. GORDON STRICKLAND
-------------------------------
D. Gordon Strickland
Senior Vice President,
Finance, Chief Financial
Officer
August 9, 1994 By /s/ J. STEPHEN GRASSBAUGH
-------------------------------
J. Stephen Grassbaugh
Vice President, Controller,
Chief Accounting Officer
- 11 -
<PAGE> 1
EXHIBIT 10.1
LETTERHEAD
May 2, 1994
LOGO
Mr. D. Gordon Strickland
Senior Vice President, Finance
Kerr Group, Inc.
1840 Century Park East
Los Angeles, CA 90067
Re: Line of Credit Agreement
Dear Gordon:
I am pleased to inform you that PNC Bank, National Association (PNC Bank) has
approved the establishment of a $10 million line of credit in favor of Kerr
Group, Inc. The terms and conditions of this credit facility are as follows:
BORROWER: Kerr Group, Inc.
AMOUNT: $10,000,000.00
SECURITY: Unsecured; provided, however, that at the
option of PNC Bank following the occurrence
of an event of default, Borrower shall pledge
cash or cash equivalents to PNC Bank as
collateral security an amount equal to the
stated amount of all outstanding letters of
credit, provided that if PNC Bank elects to
require such cash collateralization, then
Borrower shall have the right to cause the
cancellation or replacement of such letters
of credit.
MATURITY: April 30, 1995
LETTERS OF CREDIT: Borrower may request PNC Bank to issue one or
more standby letters of credit for Borrower's
account; provided that the maximum stated
amount of all letters of credit outstanding
hereunder does not exceed $4 million. No
letter of credit issued shall have an
expiration date later than the Maturity Date.
All letters of credit shall be issued in
accordance with PNC Bank's standard policies
and practices and shall be subject to PNC
Bank's
<PAGE> 2
Mr. D. Gordon Strickland
May 2, 1994
Page 2
standard processing and administrative fees
and charges. For each letter of credit
issued, Borrower shall execute and deliver to
PNC Bank a duly completed Application and
Agreement for the Issuance of a Standby
Letter of Credit (an "Application")
substantially in the form attached hereto.
FACILITY FEE: .50% per annum on the total amount of the
Facility payable quarterly, in arrears.
STANDBY LETTER
OF CREDIT FEE: 1.375% per annum on stated amount of
outstanding letters of credit payable
quarterly, in arrears.
INTEREST RATE: At the Borrower's option:
1) The rate in effect from time to
time and announced as PNC Bank's
prime rate;
2) LIBOR + 1.50%;
3) Negotiated Rate.
INTEREST RATE PAYMENT: 1) All prime rate borrowings shall
have interest payable monthly.
2) All LIBOR borrowings shall be for
periods, at the Borrower's option,
of one month, two months or three
months. Interest shall be payable
at the maturity of the interest rate
period.
3) For Negotiated Rate borrowings,
payment will be at the maturity of
the agreed upon interest period, not
to exceed three months.
<PAGE> 3
Mr. D. Gordon Strickland
May 2, 1994
Page 3
EVENTS OF DEFAULT: 1) Any default under i) the terms and
conditions and of the Note Agreement
dated September 15, 1993 between
Kerr Group, Inc. and John Hancock
Mutual Life Insurance Company,
Massachusetts Mutual Life Insurance
Company, Mass Mutual/Carlson CBO,
N.V., New York Life Insurance
Company (the "Note Agreement"), the
provisions of which are incorporated
by reference herein as if fully set
forth herein, without regard to any
subsequent amendment, modification,
renewal, replacement or termination
of such Note Agreement; or ii) any
note, agreement, indenture or other
document evidencing indebtedness
equal to or greater than $5 million.
2) Other events of default, including
non-payment, bankruptcy and material
adverse change in Borrower's
financial condition, failure to
deliver financial statements and
compliance certificates to PNC Bank,
as set forth in the form of Note
attached hereto.
REPRESENTATIONS AND
WARRANTIES: Any drawing under the facility requires the
Borrower to represent and warrant that there
exists no event of default or unmatured event
of default under the Note Agreement.
FORM OF NOTE: See attached.
FORM OF APPLICATION: See attached.
GOVERNING LAW; CONSENT
TO JURISDICTION: Commonwealth of Pennsylvania
<PAGE> 4
Mr. D. Gordon Strickland
May 2, 1994
Page 4
This letter supersedes and replaces my letter to you dated October 28, 1993.
PNC Bank is pleased to provide you additional financing through the increase in
this facility.
Very truly yours,
ANTHONY L. TRUNZO
- - --------------------------
Anthony L. Trunzo
Vice President
Los Angeles Office
National Corporate Banking
Date: May 2, 1994 AGREED TO AND ACCEPTED
KERR GROUP, INC.
By: GEOFFREY A. WHYNOT
-------------------------
Title: Treasurer
<PAGE> 5
NOTE
$10,000,000 May 2, 1994
FOR VALUE RECEIVED, KERR GROUP, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Borrower"), with an
address at 1840 Century Park East, Los Angeles, California 90067 promises to
pay to the order of PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful
money of the United States of America in immediately available funds at Bank's
offices located at One PNC Plaza, Fifth Avenue and Wood Street, Pittsburgh,
Pennsylvania 15265, or at such other location as the Bank may designate from
time to time, the principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000)
(the "Facility") or such lesser amount as may be advanced to or for the benefit
of the Borrower hereunder, together with interest accruing on the outstanding
principal balance from the date hereof, as provided below:
1. ADVANCES. The Borrower may borrow, repay and reborrow hereunder until the
Expiration Date, subject to the terms and conditions of this Note and the Loan
Documents (as defined herein). The "Expiration Date" shall mean April 30,
1995, or such later date as may be designated by the Bank by written notice
from the Bank to the Borrower. The Borrower acknowledges and agrees that in no
event will the Bank be under any obligation to extend or renew the Facility or
this Note beyond the initial Expiration Date. In no event shall the aggregate
unpaid principal amount of advances under this Note exceed the face amount of
this Note.
2. ADVANCE PROCEDURES. A request for advance must be received by the Bank by
telephone prior to 12:00 noon, prevailing Eastern Time, for same day advances,
which telephonic request shall be confirmed in writing as the Bank may require.
The Borrower authorizes the Bank to accept telephonic requests for advances,
and the Bank shall be entitled to rely upon the authority of any person
providing such instructions. The Borrower hereby indemnifies and holds the
Bank harmless from and against any and all damages, losses, liabilities, costs
and expenses (including reasonable attorneys' fees and expenses) which may
arise or be created by the acceptance of such telephone requests or making such
advances. The Bank will enter on its books and records, which entry when made
will be presumed correct, the date and amount of each advance, as well as the
date and amount of each payment made by the Borrower. The Banks's obligation
to make any advance hereunder shall be subject to (i) no Event of Default and
no event which with the passage of time or the giving of notice or both shall
become an Event of Default shall exist hereunder, and (ii) the representations
and warranties set forth herein shall be true and correct as of such date.
3. FACILITY FEE. Beginning on the last day of the calendar quarter after the
date hereof and continuing on the last day of each calendar quarter thereafter
until the Expiration Date, the Borrower
<PAGE> 6
shall pay a commitment fee to the Bank, in arrears, at the rate of one-half of
one percent (.50%) per annum on the total amount of the Facility. The
commitment fee shall be computed on the basis of a year of 360 days and paid
on the actual number of days elapsed.
4. INTEREST RATE OPTIONS. All amounts outstanding under the Facility shall
bear interest at a rate per annum selected by the Borrower from the interest
rate options set forth below; it being understood that the Borrower may select
different options to apply simultaneously to different portions of the Loans
and may select different interest periods to apply simultaneously to different
portions of the Loans bearing interest at the As Offered Rate set forth below.
(i) Prime Rate. A rate per annum (computed on the basis of a year of 365 or
366 days, as the case may be, and the actual number of days elapsed) equal to
the Prime Rate.
(ii) Negotiated Rate. A rate per annum (where not prohibited by law, computed
on the basis of a year of 360 and the actual number of days elapsed),
determined in the Bank's sole discretion, as offered in good faith by the Bank
to the Borrower at which the Bank would advance funds to the Borrower in the
principal amount requested for the interest period requested (the "Negotiated
Rate").
(iii) Euro-Rate Option. A rate of interest per annum (computed on the basis of
a year of 360 days and the actual number of days elapsed) equal to the sum of
(A) the Adjusted Euro-Rate plus (B) one hundred and fifty (150) basis points
(1.5%). The Adjusted Euro-Rate and Loans bearing interest at such Adjusted
Euro-Rate shall be adjusted from time to time in accordance with the provisions
of Paragraph 9.
5. INTEREST PAYMENT DATES. The Borrower shall pay accrued interest on the
unpaid principal balance of the Note in arrears: (i) with respect to each
Prime Rate Portion, at the Prime Rate (A) on the last Business Day of each
month during the term hereof, (B) at maturity, whether by acceleration or
otherwise of the Note, and (C) after maturity, on demand until paid in full;
(ii) with respect to each Negotiated Rate Portion, at the Negotiated Rate (A)
on the last day of each Negotiated Rate Interest Period as provided for in
Paragraph 6 hereof, (B) at maturity, whether by acceleration or otherwise of
the Note, and (C) after maturity, on demand until paid in full; and (iii) with
respect to each Euro-Rate Portion, at the Adjusted Euro-Rate (A) on the last
day of each Euro-Rate Interest Period as provided for in Paragraph 6 hereof,
(B) at maturity, whether by acceleration or otherwise of the Note, and (C)
after maturity, on demand until paid in full.
6. INTEREST PERIODS. (b) At any time when the Borrower shall select, convert
to or renew the Negotiated Rate Option or the Euro-
2
<PAGE> 7
Rate Option to apply to all or any Portion of the outstanding Loans, it shall
fix one or more periods during which such Option shall apply. Each such period
(i) shall not exceed three (3) months as is agreed to by the Bank and the
Borrower, in the case of the Negotiated Rate Option and (ii) shall be one (1),
two (2) or three (3) months commencing on the borrowing, conversion or renewal
date, in the case of the Euro-Rate Option. All of the foregoing, however, is
subject to the following:
(i) any Negotiated Rate Interest Period which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day;
(ii) any Euro-Rate Interest Period which would otherwise end
on a day which is not a Business Day shall be extended to the next
Business Day unless such Business Day falls in the succeeding calendar
month in which case such Euro-Rate Interest Period shall end on the
next preceding Business Day; and
(iii) any Euro-Rate Interest Period which begins on the last
day of a calendar month or on a day for which there is no numerically
corresponding day in the subsequent calendar month during which such
Euro-Rate Interest Period is to end shall end on the last Business Day
of such subsequent month.
Elections by the Borrower of the Negotiated Rate Option or the
Euro-Rate Option shall be subject to the following further limitations:
(i) The Negotiated Rate Portion for each Negotiated Rate
Interest Period and the Euro-Rate Portion for each Euro-Rate Interest
Period shall be in an aggregate principal amount of $250,000 or more;
provided, however, that each incremental unit in excess of $250,000
shall be $50,000 or an integral multiple thereof;
(ii) No Negotiated Rate Interest Period or Euro-Rate Interest
Period may be elected with regard to amounts outstanding hereunder
which Interest Period would end after the Expiration Date; and
(iii) At no time may there be more than five (5) Interest
Periods in effect.
Elections of or conversions to the Prime Rate Option shall continue in effect
until converted as hereinafter provided. Elections of, conversions to or
renewals of the Negotiated Rate Option or the Euro-Rate Option shall expire as
to each Negotiated Rate Portion or Euro-Rate Portion at the expiration of the
applicable Interest Period.
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<PAGE> 8
7. INTEREST RATE CONVERSIONS. At any time with respect to the Prime Rate
Portion or at the expiration of the applicable Interest Period with respect to
any Negotiated Rate Portion or Euro-Rate Portion, the Borrower (subject to
Paragraph 6 hereof) may cause all or any part of the principal amount of such
Portion to be converted to and/or (in the case of a Negotiated Rate Portion or
a Euro-Rate Portion) to be renewed under the Negotiated Rate Option or
Euro-Rate Option by notice to the Bank as hereinafter provided. Such notice
(i) shall be irrevocable, (ii) shall be given not later than 11:00 A.M.
(Pittsburgh, Pennsylvania time) (A) in the case of a conversion to or renewal
of, either in whole or in part, the Negotiated Rate Option on the proposed
effective date for the conversion or renewal or (B) in the case of a conversion
to or renewal of, either in whole or in part, the Euro-Rate Option not less
than three (3) Business Days prior to the proposed effective date for the
conversion or renewal, for such conversion to or renewal of, and (iii) shall
set forth;
(A) the effective date, which shall be a Business Day;
(B) the new Negotiated Rate Interest Period(s) and/or
Euro-Rate Interest Period(s) selected; and
(C) with respect to each such Interest Period, the aggregate
principal amount of the corresponding Negotiated Rate Portion or
Euro-Rate Portion.
At the expiration of each Negotiated Rate Interest Period or
Euro-Rate Interest Period, any part (including the whole) of the principal
amount of the corresponding Negotiated Rate Portion or Euro-Rate Portion, as to
which no notice of conversion or renewal has been received as provided above,
shall automatically be converted to the Prime Rate Option. The Bank shall
promptly notify the Borrower of any such automatic conversion.
8. NOTIFICATION OF ELECTION. The Borrower shall notify the Bank of each
election of an interest rate option, each conversion from one interest rate
option to another, the amount of the Loans then outstanding to be allocated to
each interest option and where relevant the Interest Periods by communication,
as provided for in this Note. Any such communication may be oral or written
and if oral, it shall be followed immediately by written confirmation of such
interest rate option election executed by an authorized officer of the
Borrower.
9. INTEREST AFTER MATURITY. After the principal amount of all or any part of
Prime Rate Portions of the Loans shall have become due and payable, whether by
acceleration or otherwise, all Prime Rate Portions shall bear interest at a
rate per annum which shall be 200 basis points (2%) per annum above the rate
otherwise in effect under the Prime Rate Option, such interest rate to change
automatically from time to time, effective as of the effective date
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<PAGE> 9
of each change in the Prime Rate. After the principal amount of all or any
part of the Negotiated Rate Portions and the Euro-Rate Portions of the Loans,
shall have become due and payable, whether by acceleration or otherwise, all
such Negotiated Rate Portions and Euro-Rates Portions shall bear interest, (i)
until the end of the then current Interest Period, at a rate per annum which
shall be 200 basis points (2%) per annum above the rate otherwise in effect
under the Negotiated Rate Option and/or the Euro-Rate Option, as the case may
be, and (ii) at the end of the then current Interest Period, such part of the
Loans bearing interest at the Negotiated Rate or the Adjusted Euro-Rate shall
automatically be converted to the Prime Rate, and thereafter the interest rate
shall be calculated in accordance with the initial sentence of this Paragraph
9. The contract interest rate(s) herein shall continue to apply whether or not
judgment shall be entered on this Note.
10. YIELD PROTECTION. Notwithstanding the provisions of Paragraph 4 hereof:
(i) If any change subsequent to the date hereof in applicable law,
rule, regulation, treaty or official directive, or in the interpretation or
application thereof by any governmental authority charged with the
administration thereof or the compliance with any guideline or request from any
central bank or other governmental authority, shall make it unlawful for the
Bank to maintain or give effect to its obligations as contemplated under the
Loans, the Bank shall notify the Borrower. Thereafter, the Bank's obligations
to make available any further Loans hereunder shall forthwith be canceled and
the Borrower, within thirty (30) days, or within such longer period as may be
allowed by law, shall repay to the Bank the outstanding principal amount of all
Loans together with interest thereon to the date of repayment and fees, if any,
due as of the date of termination; provided, however, that the Bank's
obligations which are lawful, if severable from those which are unlawful, shall
continue, and with respect to those obligations, this Note shall not terminate.
(ii) If any existing law or regulation (including, without limitation,
Regulation D issued by the Board of Governors of the Federal Reserve System),
or if any change on or after December 31, 1984 in applicable law or regulation,
or in the interpretation thereof by any governmental authority charged with the
administration thereof, shall
(A) subject the Bank to any tax, levy, impost, charge, fee,
duty, deduction or withholding or any kind hereunder (other than any tax
imposed or based upon the income of the Bank and payable to any governmental or
taxing authority in the United States of America or any state thereof); or
(B) change the basis of taxation of the Bank with respect to
payments of principal or interest or other amounts due hereunder
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<PAGE> 10
(other than any change which affects, and only to the extent that it affects,
the taxation by the United States or any state thereof of the total net income
of the Bank); or
(C) impose, modify or deem applicable any reserve, special
deposit or similar requirements against assets held by the Bank (other than
such requirements which are included in the determination of the applicable
rate of interest hereunder); or
(D) impose upon the Bank any other obligation or condition
with respect to this Note,
and the result of any of the foregoing is to increase the cost to the Bank,
reduce the income receivable by the Bank, reduce the rate of return on the
Bank's capital, or impose any expenses upon the Bank with respect to any
Portion of the Loans by an amount which the Bank reasonably deems material,
then and in any such case:
(A) the Bank shall promptly notify the Borrower of the
happening of such event;
(B) the Borrower shall pay to the Bank, on demand, as
additional interest on the Loans, such amount as will compensate the Bank for
such additional cost or reduced amount: and
(C) the Borrower may pay the affected portion of the Bank's
loan in full without the payment of any additional amount other than on account
of the Bank's out-of-pocket losses (including funding loss, if any, as provided
in paragraph 11 below) not otherwise provided for in subparagraph (B)
immediately above.
(iii) A certificate as to the increased cost or reduced amount as a
result of any event mentioned in this Paragraph 10 shall be promptly submitted
by the Bank to the Borrower. Such certificate shall, in the absence of
manifest error, be conclusive and binding as to the amount thereof.
11. FUNDING LOSSES. The Borrower agrees to indemnify the Bank against any
loss or expense which the Bank, as a consequence of either (i) the Borrower's
failure to make a payment on the due date thereof or (ii) the Borrower's
payment, prepayment (including by reason of the acceleration of the Note) or
conversion of any Negotiated Rate Portion or any Euro-Rate Portion of the Loans
on a day other than the last day of the applicable Interest Period, may sustain
or incur in liquidating or employing deposits from third parties acquired to
effect, fund or maintain such Negotiated Rate Portion or Euro-Rate Portion or
any part thereof. The Bank's determination of an amount payable under this
Paragraph 11 shall, in the absence of manifest error, be conclusive and shall
be payable on demand.
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<PAGE> 11
12. EURO-RATE UNASCERTAINABLE. In the event that, on any date on which the
Adjusted Euro-Rate would otherwise be set, the Bank shall have determined
(which determination shall be final and conclusive) that by reason of
circumstances affecting the interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the Euro-Rate, the Bank shall
give prompt notice of such determination to the Borrower and, until the Bank
notifies the Borrower that the circumstances giving rise to such determination
no longer exist, the right of the Borrower to borrow under, convert to or renew
the Euro-Rate Option shall be suspended. Any notice of borrowing under,
conversion to or renewal of the Euro-Rate Option which was to become effective
during the period of such suspension shall be treated as a request to borrow
under, convert to or renew the Prime Rate Option with respect to the principal
amount therein specified.
13. INTEREST RATE OPTIONS UNLAWFUL OR ILLEGAL. If the Bank shall determine in
good faith (which determination shall be final and conclusive) that compliance
by the Bank with any applicable law, treaty or governmental rule, regulation,
guideline, order, request or directive (whether or not having the force of
law), or the interpretation or application thereof by any Governmental
Authority, has made it unlawful or impractical for the Bank to make or maintain
the Loans under the Negotiated Rate Option or the Euro-Rate Option (including
but not limited to acquiring certificates of deposit or Eurodollar liabilities
to fund such Loans), the Bank shall give notice of such determination to the
Borrower. Notwithstanding any provision of this Note to the contrary, unless
and until the Bank shall have given notice that the circumstances giving rise
to such determination no longer apply:
(i) with respect to any Interest Periods thereafter
commencing, interest on the Loans bearing interest at the Negotiated Rate or
the Adjusted Euro-Rate (whichever one or more have been determined by the Bank
to be unlawful or impractical) shall be computed and payable under the Prime
Rate Option; and
(ii) on such date, if any, as shall be required by law, any
Loans bearing interest at the Negotiated Rate or the Adjusted Euro-Rate then
outstanding (whichever one or more have been determined by the Bank to be
unlawful or impractical) shall be automatically converted to the Prime Rate
Option, and the Borrower shall pay to such Bank the accrued and unpaid interest
on such Loans to (but not including) the date of such conversion at the
applicable interest rate or rates in effect for such Loans prior to such
conversion.
The Borrower shall pay the Bank any additional amounts reasonably
necessary to compensate the Bank for any costs incurred by the Bank as a result
of any conversion pursuant to item (ii) above on a day other than the last day
of the relevant Interest Period, including, but not limited to, any interest or
fees payable
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<PAGE> 12
by the Bank to lenders of funds obtained by it to loan or maintain the lending
of the Loans so converted. The Bank shall furnish to the Borrower a
certificate as to the amount necessary to compensate the Bank for such costs
(which certificate, absent error in computation, shall be conclusive), and the
Borrower shall pay such amount to the Bank, as additional consideration
hereunder, within ten (10) days of the Borrower's receipt of such certificate.
14. CAPITAL ADEQUACY PROTECTION. If (i) any adoption of or any change in or
in the interpretation of any Governmental Rule, or (ii) compliance with any
Governmental Rule of any Governmental Authority exercising control over banks
or financial institutions generally or any court (whether or not having the
force of law), or (iii) any change in the force or effectiveness of the
regulations set forth at 12 C.F.R. Part 3 (Appendix A), 12 C.F.R. Part 208
(Appendix A), 12 C.F.R. Part 225 (Appendix A) or 12 C.F.R. Part 325 (Appendix
A) requires that the commitments and obligations hereunder be treated as an
asset or otherwise be included for purposes of calculating the appropriate
amount of capital to be maintained by the Bank or any corporation controlling
the Bank (a "Capital Adequacy Event"), the result of which is to reduce the
rate of return on the Bank's capital as a consequence of such commitments to a
level below that which the Bank could have achieved but for such Capital
Adequacy Event, taking into consideration the Bank's policies with respect to
capital adequacy, by an amount which the Bank deems to be material, the Bank
shall promptly deliver to the Borrower a statement of the amount necessary to
compensate the Bank for the reduction in the rate of return on its capital
attributable to such commitments (the "Capital Compensation Amount"). The Bank
shall determine the Capital Compensation Amount in good faith, using reasonable
attribution and averaging methods. The Bank shall from time to time notify the
Borrower of the amount so determined. Such amount shall be due and payable by
the Borrower to the Bank ten (10) Business Days after such notice is given. As
soon as practicable after any Capital Adequacy Event, the Bank shall submit to
the Borrower estimates of the Capital Compensation Amounts that would be
payable as a function of the Bank's commitments hereunder.
15. CERTAIN DEFINED TERMS. For purposes hereof, the following terms shall have
the meanings ascribed to them herein:
"Adjusted Euro-Rate" means the interest rate relating to the Euro-Rate
Option as described in item (iii) of Paragraph 4(a) hereof.
"Business Day" (i) when used in a context which relates to the Euro-Rate
Option means a day (A) when banks are open for business in Pittsburgh,
Pennsylvania and (B) when dealings in foreign currencies and exchange and
eurodollar funding between banks may be carried on at the location at which the
Bank transacts its Eurodollar funding; and (ii) when used in any other context
in this
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<PAGE> 13
Note means a day on which banks are open for business in Pittsburgh,
Pennsylvania.
"Capital Adequacy Event" shall have the meaning given it in Paragraph 14
hereof.
"Capital Compensation Amount(s)" shall have the meaning given it in
Paragraph 14 hereof.
"Euro-Rate" means for any day, as used herein, for each segment of the
Euro-Rate Portion corresponding to a proposed or existing Euro-Rate Interest
Period, the rate per annum determined by the Bank by dividing (the resulting
quotient to be rounded upward to the nearest 1/100 of 1%) (i) the average of
the rates per annum (which shall be the same for each day in such Euro-Rate
Interest Period) for deposits in Dollars offered in the London interbank market
at approximately 11:00 A.M. (local time in the city in which the Bank conducts
its foreign exchange transactions) determined in good faith by the Bank in
accordance with its usual procedures (which determination shall be conclusive),
two (2) Business Days prior to the first day of such Euro-Rate Interest Period
for delivery on the first day of such Euro-Rate Interest Period in an amount
equal to the Euro-Rate Portion for such Euro-Rate Interest Period and having a
maturity comparable to such Euro-Rate Interest Period by (ii) a number equal to
1.00 minus the Euro-Rate Reserve Percentage.
The "Euro-Rate" may also be expressed by the following formula:
[average of the rates offered ]
[in the London interbank market ]
[determined by the Bank pursuant to item]
Euro-Rate = [(i) of this definition ]
[1.00-Euro-Rate Reserve Percentage ]
The Euro-Rate shall be adjusted automatically with respect to any Euro-Rate
Portion outstanding on the effective date of any change in the Euro-Rate
Reserve Percentage, as of such effective date.
"Euro-Rate Interest Period(s)" means any individual period of one (1), two
(2) or three (3) months selected by the Borrower commencing on the borrowing,
conversion date or renewal date of a Euro-Rate Portion to which such period
shall apply.
"Euro-Rate Option" means the interest rate option described in item (iii) of
Paragraph 4 hereof.
"Euro-Rate Portion(s)" means a Loan, or portion thereof which bears, or is
to bear, interest at the Euro-Rate.
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<PAGE> 14
"Euro-Rate Reserve Percentage" means the maximum effective percentage
(expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as
determined in good faith by the Bank (which determination shall be conclusive),
which is in effect on such day as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency liabilities").
"Governmental Authority" means the government of the United States or the
government of any state or locality therein, any political subdivision or any
governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body or entity, or other regulatory bureau,
authority, body or entity of the United States or any state or locality
therein, including the Federal Deposit Insurance Company, the Comptroller of
the Currency or the Board of Governors of the Federal Reserve System, any
central bank or any comparable authority.
"Governmental Rule" means any law, statute, rule, regulation, ordinance,
order, judgment, guideline or decision of any Governmental Authority.
"Interest Period(s)" means any or all of a Negotiated Rate Interest Period
or a Euro-Rate Interest Period.
"Negotiated Rate" means, as to any agreed upon Negotiated Rate Interest
Period, the rate of interest per annum offered by the Bank and accepted by the
Borrower.
"Negotiated Rate Interest Period" means one or more individual periods of
days or months offered by the Bank with respect to any Negotiated Rate Portion
and selected by the Borrower commencing on the borrowing, conversion date or
renewal date of the Negotiated Rate Portion to which such period shall apply.
"Negotiated Rate Option" means the interest rate option described in item
(ii) of Paragraph 4 hereof.
"Negotiated Rate Portion(s)" means a Loan or portion thereof which bears, or
is to bear interest at a Negotiated Rate.
"Option(s)" means any one or more of the Prime Rate Option, the Negotiated
Rate Option, or the Euro-Rate Option.
"Portion(s)" means either the Prime Rate Portion, the Negotiated Rate
Portion, the Euro-Rate Portion, any or all of the foregoing, as the case may
be.
"Prime Rate" means the interest rate per annum announced from time to time
by the Bank as its prime rate, which rate may not be
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<PAGE> 15
the lowest rate of interest then being charged by the Bank to its commercial
borrowers.
"Prime Rate Option" means the interest rate option described in item (i) of
Paragraph 4 hereof.
"Prime Rate Portion" means a Loan or a portion thereof which bears, or is to
bear, interest at the Prime Rate.
16. PRINCIPAL PAYMENT. The outstanding principal balance and any accrued but
unpaid interest shall be due and payable on the Expiration Date.
17. METHOD OF PAYMENT. Any payment of principal or interest under this Note
must be received by the Bank by 2:00 p.m. prevailing Eastern Time on a Business
Day in order to be credited on such date. If any payment under this Note shall
become due on a Saturday, Sunday or public holiday under the laws of the
Commonwealth of Pennsylvania, such payment shall be made on the next succeeding
business day and such extension of time shall be included in computing interest
in connection with such payment. The Borrower hereby authorizes the Bank to
charge the Borrower's deposit account at the Bank for any payment when due
hereunder. Payments received will be applied to charges, fees and expenses
(including attorneys' fees), accrued interest and principal in any order the
Bank may choose, in its sole discretion.
18. PREPAYMENT. Subject to the provisions of Paragraph 11 hereof, the
indebtedness evidenced by this Note may be prepaid in whole or in part at any
time without penalty.
19. OTHER LOAN DOCUMENTS. This Note is issued pursuant to a letter agreement
dated May 2, 1994, which together with the Note shall be referred to as the
"Loan Documents."
20. LOAN ACCOUNT. The Bank shall open and maintain on its books a loan account
in the name of the Borrower with respect to advances, payments and the
computation and payment of interest hereunder. Such loan account shall be
conclusive and binding on the Borrower as to the amount at any time due to the
Bank from the Borrower except in the case of error in computation.
21. REPRESENTATIONS AND WARRANTIES. The Borrower hereby makes the following
representations and warranties for the benefit of the Bank and covenants with
the Bank as follows:
(a) It is a corporation duly incorporated and validly existing under
the laws of the place of its incorporation and has the corporate power and
authority to own its property and assets and carry on its business as it is now
being conducted.
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<PAGE> 16
(b) It has the power to make and carry out the terms of the Loan
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Loan Documents.
(c) The Loan Documents constitute the legally binding obligation of
the Borrower enforceable in accordance with their respective terms and if
enforced in the courts of and under the laws of the place of its incorporation
would constitute the legally binding obligation of the Borrower enforceable in
accordance with their respective terms.
(d) The making and performance of the Loan Documents does not and will
not violate in any respect any provision of (i) any law or regulation or any
order or decree of any governmental authority or agency or of any court having
jurisdiction over the Borrower, or (ii) the articles of incorporation or
by-laws of the Borrower or of any of its subsidiaries, or (iii) any mortgage,
contract or other undertaking to which the Borrower or any of its subsidiaries
is a party or which is binding upon the Borrower or any of its subsidiaries or
any of their respective assets, and does not and will not result in the
creation or imposition of any security interest, lien, charge or other
encumbrance on any of their respective assets pursuant to the provisions of any
such mortgage, contract or other undertaking.
(e) It has received or obtained every consent of, license from or
exemption by any governmental or administrative body or authority required to
authorize or required in connection with the performance, validity or
enforceability of the Loan Documents and the payments by it in accordance with
the provisions of the Loan Documents and the same are valid and subsisting.
(f) Neither it nor any of its subsidiaries is in default under any
agreement to which it is a party or by which it may be bound, and no litigation
or administrative proceeding is presently pending or, to its knowledge
threatened, which default, litigation or proceeding would have a material
adverse effect on its business, assets or financial condition.
22. DEFAULT AND ACCELERATION OF MATURITY. The occurrence of any of the
following events will be deemed to be an "Event of Default" under the Loan
Documents:
(a) Any failure of the Borrower to make any payment when due of the
principal of this Note, or any failure to pay interest on, fees or other
amounts due with respect to the Loan Documents and such failure shall continue
for a period of five (5) days;
(b) Any failure of the Borrower to comply fully with all of the terms and
conditions of the Loan Documents, and such failure shall continue for a period
of thirty (30) days;
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<PAGE> 17
(c) Any materially adverse change in the financial condition of the
Borrower;
(d) Any assignment for the benefit of creditors of, or the commencement of
any bankruptcy, receivership, insolvency, reorganization or liquidation
proceedings by or against, the Borrower;
(e) The institution of any garnishment proceedings by attachment, levy or
otherwise, against any deposit balance maintained, or any property deposited,
with the Bank by the Borrower;
(f) The occurrence of any default or event which, with the passage of time
or the giving of notice or both would be a default under any note, agreement,
indenture or other document evidencing or relating to indebtedness in an
aggregate principal amount equal to or greater than $5,000,000, including but
not limited to, the Note Agreement dated as of September 15, 1993 by and among
John Hancock Mutual Life Insurance Company, Massachusetts Mutual Life Insurance
Company, Mass Mutual/Carlson CBO, N.V. and New York Life Insurance Company and
the Borrower (the "Note Agreement"), the provisions of which Note Agreement are
incorporated by reference herein as if fully set forth herein, without regard
to any amendment, modification, renewal, replacement or termination of such
Note Agreement on or after the date hereof; or
(g) The failure of the Borrower to submit promptly to the Bank such
financial information as may be reasonably required by the Bank, including,
without limitation, detailed balance sheets, statements of cash flows and any
compliance certificates delivered pursuant to the Note Agreement.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in clause (d) above shall occur, the outstanding principal balance
and accrued interest hereunder together with any additional amounts payable
hereunder shall be immediately due and payable without demand or notice of any
kind; (c) if any other Event of Default shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder, at the option of the Bank and without demand or notice of
any kind, may be accelerated and become immediately due and payable; (d) at the
option of the Bank, this Note will bear interest at the Default Rate from the
date of the occurrence of the Event of Default; and (e) the Bank may exercise
from time to time any of the rights and remedies available to the Bank under
the Loan Documents or under applicable law.
23. FEES AND EXPENSES. The Borrower agree to pay or cause to be paid and to
save the Bank harmless against liability for the payment of all reasonable
out-of-pocket expenses (including but not
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<PAGE> 18
limited to attorney's fees and expenses of the Bank's counsel) incurred by the
Bank in connection with the enforcement of the Loan Documents.
24. WAIVER OF RIGHT OF SETOFF. The Bank hereby agrees to waive any and all
rights of set-off with respect to the obligations evidenced by this Note.
25. MISCELLANEOUS. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered
to be a waiver of any such right or power or any acquiescence therein nor shall
the action or non-action of the Bank impair any right or power resulting
therefrom. The Borrower agrees to pay on demand, to the extent permitted by
law, all costs and expenses incurred by the Bank in the enforcement of its
rights in this Note and any security therefor, including without limitation
reasonable fees and expenses of the Bank's counsel. If any provision of the
Loan Documents is found to be invalid by a court, all the other provisions of
the Loan Documents will remain in full force and effect.
The Borrower hereby forever waives presentment, demand, protest, notice of
dishonor, nonpayment or default and any other notices of any kind.
This Note shall bind the Borrower and the successors and assigns of the
Borrower, and the benefits hereof shall inure to the benefit of Bank and its
successors and assigns. All references herein to the "Borrower" and "Bank"
shall be deemed to apply to the Borrower and Bank and their respective
successors and assigns.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the Commonwealth of Pennsylvania. This Note will be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the laws of the Commonwealth of Pennsylvania. The Borrower hereby agrees to
the jurisdiction of any state or federal court located within the county where
the Bank's office identified above is located, or such other venue as the Bank
chooses, and consents that all service of process be made by certified mail
directed to Borrower at the Borrower's address set forth herein for notices and
service so made will be deemed to be completed five (5) business days after the
same has been deposited in U.S. mails, postage prepaid; provided that nothing
contained herein will prevent the Bank from bringing any action or exercising
any rights against any security or against the Borrower individually, or
against any property of the Borrower within any other state or nation to
enforce any award or judgment obtained in the venue specified above, or such
other venue as the Bank chooses. The Borrower waives any objection to venue
and any objection based on a more convenient forum in any action instituted
hereunder.
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<PAGE> 19
This Note supersedes, amends and restates the Note of Kerr Group, Inc. dated
November 8, 1993 in the principal amount of $6,000,000.00 and issued to the
Bank (the "Prior Note"). This Note is issued in substitution and replacement
of such Prior Note and not in payment thereof, and any and all amounts
outstanding pursuant to such Prior Note, including all accrued and unpaid
interest, shall be evidenced by this Note and shall be paid in accordance with
the terms hereof.
THE BORROWER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE WAIVER OF JURY TRIAL, AND HAS BEEN ADVISED BY COUNSEL
AS NECESSARY OR APPROPRIATE.
12. WAIVER OF JURY TRIAL. THE BORROWER WAIVES ANY AND ALL RIGHTS THE BORROWER
MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE
RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE OR
ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS AND ACKNOWLEDGES THAT THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
WITNESS the due execution and sealing hereof with the intent to be legally
bound hereby.
ATTEST/WITNESS: KERR GROUP, INC. (SEAL)
By GEOFFREY A. WHYNOT
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Print Name: Geoffrey A. Whynot
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Title: Treasurer
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15
<PAGE> 1
EXHIBIT 10.2
[LOGO]
May 1, 1994
Mr. Geoffrey A. Whynot
Treasurer
Kerr Group, Inc.
1840 Century Park East
Los Angeles, CA 90067
Dear Geoff:
This letter will confirm that we hold available for Kerr Group, Inc. a
$10,000,000 line of credit with a $2MM sublimit for standy letters of credit,
to extend through April 30, 1995. Borrowings shall be evidenced by a promissory
note in the form attached hereto. Interest on any borrowings under this
facility will be at our Base Rate, which is the higher of our announced Base
Rate or overnight Federal Funds rate plus 1/2%, and shall be payable in
accordance with the terms of the promissory note. Letters of credit will be 2%
per annum, invoiced quarterly in arrears with a minimum flat fee of $250.00.
You will execute the banks customary documents with respect to letters of
credit, as well as pay all standard fees and other charges as is customary with
respect to the issuance and maintenance of each letter of credit. Letters of
credit shall have such maturity as the bank and company mutually agree upon.
A fee equal to 3/4% per annum, on the total amount of the line will be invoiced
quarterly.
The availability of borrowings and standby letters of credit under this
facility is subject to our usual reservation that we continue to be satisfied
with the affairs of Kerr Group, Inc. and to any changes in government
regulations or monetary policy. As well, that no event of default shall have
occurred with respect to any term or condition of this line or to the $50MM
senior note agreement between Kerr Group, Inc. and its holders dated September
15, 1993.
If the foregoing satisfactorily sets forth the terms and conditions of this
line of credit, please execute and return the enclosed copy of this letter.
If you have any questions concerning this letter, please do not hesitate to
call.
Sincerely yours,
Accepted:
Kerr Group, Inc. KAREN LANGSTAFF
By: GEOFFREY A. WHYNOT
----------------------- S. Karen Langstaff
Title: Treasurer Director
Date: May 2, 1994
----------------------
cc: Mr. D. Gordon Strickland
<PAGE> 2
COMMERCIAL PROMISSORY NOTE
$10,000,000.00 Boston, Massachusetts
May 1, 1994
FOR VALUE RECEIVED, the undersigned promises to pay to the order of THE
FIRST NATIONAL BANK OF BOSTON (together with any successors or assigns, the
"Bank"), a national banking association with its Head Office at 100 Federal
Street, Boston, Massachusetts 02110, the principal amount of ten million
Dollars ($10,000,000.00), on April 30, 1995 or, if less, the aggregate
principal amount advanced to the undersigned by the Bank under this Note and
unpaid on such date, with interest thereon at a floating rate equal to the Base
Rate plus 0%. As used herein, "Base Rate" means the rate per annum equal to the
greater of (i) the rate of interest announced from time to time by the Bank at
its Head Office as its Base Rate, and (ii) the rate equal to the weighted
average of the published rates on overnight Federal Funds transactions with
members of the Federal Reserve System plus 1/2%. The rate shall change as and
when the Base Rate changes and changes in the Base Rate shall take effect on
the day announced, unless otherwise specified in the announcement. Interest
shall be payable in arrears on July 31, 1994 and on the end of each quarter
thereafter. Interest shall be calculated on the basis of a 360-day year for
the actual number of days elapsed including holidays and days on which the Bank
is not open for the conduct of banking business.
SECTION 1. PAYMENT TERMS.
1.1 PAYMENTS; PREPAYMENTS. All payments hereunder shall be made by
the undersigned to the Bank in United States currency at the Bank's address
specified above (or at such other address as the Bank may specify), in
immediately available funds, on or before 2:00 p.m. (Boston, Massachusetts
time) on the due date thereof. Payments received by the Bank prior to the
occurrence of an Event of Default (as defined in Section 2) will be applied
first to fees, expenses and other amounts due hereunder (excluding principal
and interest); second, to accrued interest; and third to outstanding principal;
after the occurrence and during the continuance of an Event of Default,
payments will be applied to the Obligations under this Note as the Bank
determines in its sole discretion. Subject to Section 1.2, the undersigned may
pay all or a portion of the amount owed earlier than it is due without premium
or other charge.
1.2 DEFAULT RATE. To the extent permitted by applicable law, upon and
after the occurrence and during the continuance of an Event of Default (whether
or not the Bank has accelerated payment of this Note), interest on principal
and overdue interest shall, at the option of the Bank, be payable on demand at
a rate per annum equal to 2% above the greater of the rate of interest
otherwise payable hereunder or the Base Rate.
1.3 LATE PAYMENT CHARGE. If a payment of principal or interest
hereunder is not made within five business days of its due date, the
undersigned will pay on demand a late payment charge equal to the Base Rate
plus 2% of the amount of such payment. Nothing in the preceding sentence shall
affect the Bank's right to accelerate the maturity of this Note in the event of
any default in the payment of this Note.
SECTION 2. DEFAULTS AND REMEDIES.
2.1 DEFAULT. The occurrence of any of the following events or
conditions shall constitute an "EVENT OF DEFAULT" hereunder:
(a) (i) default in the payment when due of the principal of or
interest on this Note or (ii) any other default in the payment or
performance of this Note or of any other Obligation or (iii) default in
the payment or performance of any obligation of any Obligor to others for
borrowed money or in respect of any extension of credit or accommodation
or under any lease greater than $1,000,000.00 dollars; including, without
limitation, the occurrence of any event
<PAGE> 3
of default under a senior note agreement dated September 15, 1993 by and
between the undersigned and the holders of its, 9.45% series A senior
note and 8.99% Series B senior note, collectively the "Senior Debt,"
holders.
(b) failure of any representation or warranty herein or in any
agreement, instrument, document or financial statement delivered to the
Bank in connection herewith to be true and correct in any material
respect;
(c) default or breach of any condition under any mortgage,
security agreement, assignment of lease, or other agreement securing,
constituting or otherwise relating to any collateral for the Obligations;
(d) failure to furnish the Bank promptly on request with
financial information about, or to permit inspection by the Bank of any
books, records and properties of, any Obligor;
(e) merger, consolidation, sale of all or substantially all of
the assets or change in control of any Obligor; or
(f) any Obligor generally not paying its debts as they become
due; the death, dissolution, termination of existence or insolvency of
any Obligor; the appointment of a trustee, receiver, custodian,
liquidator or other similar official for such Obligor or any substantial
part of its property or the assignment for the benefit of creditors by
any Obligor; or the commencement of any proceedings under any bankruptcy
or insolvency laws by or against any Obligor.
(g) the failure of the undersigned to comply with any of the
terms, conditions and covenants set forth in the instruments, documents
and agreements evidenced by the Senior Debt, as if each of such terms,
conditions and covenants were set forth herein at length. For purposes of
this paragraph, the terms, conditions and covenants in effect as of the
date hereof shall be applicable to the within Note, notwithstanding any
future amendment, modification or termination of the Senior Debt.
As used herein, "OBLIGATION" means any obligation hereunder or otherwise
of any Obligor to the Bank or to any of its affiliates, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising; and "OBLIGOR" means the undersigned, any guarantor or any
other person primarily or secondarily liable hereunder or in respect hereof,
including any person or entity who has pledged or granted to the Bank a
security interest in, or other lien on, property on behalf of the undersigned
as collateral for the Obligations.
2.2 REMEDIES. Upon an Event of Default described in Section 2.1(f)
immediately and automatically, and upon or after the occurrence of any other
Event of Default at the option of the Bank, all Obligations of the undersigned
shall become immediately due and payable without notice or demand. All rights
and remedies of the Bank are cumulative and are exclusive of any rights or
remedies provided by law or in equity or any other agreement, and may be
exercised separately or concurrently.
<PAGE> 4
SECTION 3. MISCELLANEOUS.
3.1 WAIVER; AMENDMENT. No delay or omission on the part of the Bank
in exercising any right hereunder shall operate as a waiver of such right or of
any other right under this Note. No waiver of any right or any amendment
hereto shall be effective unless in writing and signed by the Bank, nor shall a
waiver on one occasion bar or waive the exercise of any such right on any
future occasion. Without limiting the generality of the foregoing, the
acceptance by the Bank of any late payment shall not be deemed to be a waiver
of the Event of Default arising as a consequence thereof. Each Obligor waives
presentment, demand, notice, protest, and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
of this Note or of any collateral for the Obligations, and assents to any
extensions or postponements of the time of payment and to any other indulgences
under this Note or with respect to any such collateral, to any substitutions,
exchanges or releases of any such collateral, and to any additions or releases
of any other parties or persons primarily or secondarily liable hereunder, that
from time to time may be granted by the Bank in connection herewith.
3.2 SECURITY; SET-OFF. The undersigned grants to the Bank, as
security for the full and punctual payment and performance of the Obligations,
a continuing lien on and security interest in all securities or other property
belonging to the undersigned now or hereafter held by the Bank and in all
deposits (general or special, time or demand, provisional or final) and other
sums credited by or due from the Bank to the undersigned or subject to
withdrawal by the undersigned; and regardless of the adequacy of any collateral
or other means of obtaining repayment of the Obligations, the Bank is hereby
authorized at any time and from time to time, without notice to the undersigned
(any such notice being expressly waived by the undersigned) and to the fullest
extent permitted by law, to set off and apply such deposits and other sums
against the Obligations of the undersigned, although such Obligations may be
contingent or unmatured; provided however that the bank by accepting this Note
waives any security interest in and right of set off against the deposits of
the undersigned, with respect to funding A/C #54170704, any controlled
disbursement account or any master trust account established in connection with
the defined contribution plan of the undersigned.
3.3 TAXES. The undersigned agrees to indemnify the Bank and hold it
harmless from and against any transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution,
delivery, and performance of this Note or any collateral for the Obligations.
3.4 EXPENSES. The undersigned will pay on demand all expenses of the
Bank in connection with the preparation, administration, default, collection,
waiver or amendment of the Obligations or in connection with the Bank's
exercise, preservation or enforcement of any of its rights, remedies or options
thereunder, including, without limitation, fees of outside legal counsel or the
allocation costs of in-house legal counsel, accounting, consulting, brokerage
or other similar professional fees or expenses, and any fees or expenses
associated with any travel or other costs relating to any appraisals or
examinations conducted in connection with the Obligations and the amount of all
such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an Obligation secured
by any such collateral.
3.5 BANK RECORDS. The entries on the records of the Bank (including
any appearing on this Note) shall be prima facie evidence of the aggregate
principal amount outstanding under this Note and interest accrued thereon.
3.6 INFORMATION. The undersigned shall furnish the Bank from time to
time with such financial statements and other information relating to any
Obligor or any collateral securing this Note as the Bank may require. All such
information shall be true and correct and fairly represent the financial
condition and the operating results of such Obligor as of the date and for the
periods
<PAGE> 5
for which the same are furnished. The undersigned shall permit representatives
of the Bank to inspect its properties and its books and records, and to make
copies or abstracts thereof. Each Obligor authorizes the Bank to release and
disclose to its affiliates, agents and contractors any financial statements and
other information relating to said Obligor provided to or prepared by or for
the Bank in connection with any Obligation. The undersigned will notify the
Bank promptly of the existence or upon the occurrence of any Event of Default
or event which, with the giving of notice or the passage of time or both, would
become an Event of Default.
3.7 GOVERNING LAW; CONSENT TO JURISDICTION. This Note is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its conflicts of law rules. The undersigned agrees that any suit for the
enforcement of this Note may be brought in the courts of such state or any
Federal Court sitting in such state and consents to the non-exclusive
jurisdiction of each such court and to service of process in any such suit
being made upon the undersigned by mail at the address specified below. The
undersigned hereby waives any objection that it may now or hereafter have to
the venue of any such suit or any such court or that such suit was brought in
an inconvenient court.
3.8 SEVERABILITY; AUTHORIZATION TO COMPLETE; PARAGRAPH HEADINGS. If
any provision of this Note shall be invalid, illegal or unenforceable, such
provisions shall be severable from the remainder of this Note and the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. The Bank is hereby authorized, without further
notice, to fill in any blank spaces on this Note, and to date this Note as of
the date funds are first advanced hereunder. Paragraph headings are for the
convenience of reference only and are not a part of this Note and shall not
affect its interpretation.
3.9 JURY WAIVER. THE BANK (BY ITS ACCEPTANCE OF THIS NOTE) AND THE
UNDERSIGNED AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A)
SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER ACTION
BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR
(B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH SHALL
BE SUBJECT TO NO EXCEPTIONS. NEITHER THE BANK NOR THE UNDERSIGNED HAS AGREED
WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT
BE FULLY ENFORCED IN ALL INSTANCES.
Address: KERR GROUP, INC.
1840 Century Park East
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(Number) (Street) By: GEOFFREY A. WHYNOT
---------------------------------
Los Angeles, CA 90067 (Type Name) Geoffrey A. Whynot
- - --------------------------------------- -------------------------
(City, State) (Zip Code) Title: Treasurer
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