<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 September 30, 1995
/ / 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 October 31, 1995 was 3,933,095.
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KERR GROUP, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 3 - 4
Condensed Consolidated Statements of Earnings (Loss) -
Three Months and Nine Months Ended
September 30, 1995 and 1994 5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 6
Notes to Condensed Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 12
Part II. Other Information 13
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<PAGE> 3
KERR GROUP, INC.
Consolidated Balance Sheets
As of September 30, 1995 and December 31, 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
Assets 1995 1994
- ------ ---- ----
<S> <C> <C>
Current assets
Cash and cash equivalents $ 271 $ 2,261
Receivables-primarily trade accounts, less allowance
for doubtful accounts of $125 at September 30, 1995
and $170 at December 31, 1994 14,259 16,312
Inventories
Raw materials and work in process 10,568 11,156
Finished goods 20,145 23,134
--------- ---------
Total inventories 30,713 34,290
Prepaid expenses and other current assets 4,033 4,526
--------- ---------
Total current assets 49,276 57,389
--------- ---------
Property, plant and equipment, at cost 111,114 102,847
Accumulated depreciation and amortization (60,387) (54,506)
--------- ---------
Net property, plant and equipment 50,727 48,341
--------- ---------
Deferred income taxes 2,966 2,192
Goodwill and other intangibles, net of
amortization of $2,137 at September 30, 1995
and $1,812 at December 31, 1994 6,970 6,622
Other assets 8,933 9,156
--------- ---------
$ 118,872 $ 123,700
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Consolidated Balance Sheets
As of September 30, 1995 and December 31, 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
Liabilities and Stockholders' Equity 1995 1994
- ------------------------------------ --------- ---------
<S> <C> <C>
Current liabilities
Short-term debt $ 5,400 $ 5,500
Accounts payable 10,661 13,445
Accrued expenses 5,113 3,862
--------- ---------
Total current liabilities 21,174 22,807
--------- ---------
Accrued pension liability 12,364 15,230
Other long-term liabilities 2,750 2,610
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, 4,226 shares issued at September 30, 1995
and 4,220 shares issued at December 31, 1994 2,113 2,110
Additional paid-in capital 27,239 27,210
Retained earnings 5,604 11,995
Treasury Stock at cost, 293 shares at September 30, 1995
and 543 shares at December 31, 1994 (6,913) (12,803)
Excess of additional pension liability over
unrecognized prior service cost, net of tax benefits (5,207) (5,207)
--------- ---------
Total stockholders' equity 32,584 33,053
--------- ---------
$ 118,872 $ 123,700
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
KERR GROUP, INC.
Condensed Consolidated Statements of Earnings (Loss)
for the Three Months and Nine Months Ended September 30, 1995 and 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 39,021 $ 40,624 $ 111,303 $ 111,008
Cost of sales 30,941 28,617 84,863 76,749
--------- --------- --------- ---------
Gross profit 8,080 12,007 26,440 34,259
Selling, warehouse, general and
administrative expense 8,549 8,559 25,106 25,337
Interest expense 1,434 1,263 4,460 3,727
Interest and other income (53) (66) (138) (297)
--------- --------- --------- ---------
Earnings (loss) before income taxes (1,850) 2,251 (2,988) 5,492
Provision (benefit) for income taxes (751) 941 (1,217) 2,320
--------- --------- --------- ---------
Net earnings (loss) $ (1,099) $ 1,310 $ (1,771) $ 3,172
Preferred stock dividends 207 207 621 621
--------- --------- --------- ---------
Net earnings (loss) applicable to
common stockholders $ (1,306) $ 1,103 $ (2,392) $ 2,551
========= ========= ========= =========
Net earnings (loss) per common share,
primary and fully diluted $ (0.33) $ 0.30 $ (0.63) $ 0.69
========= ========= ========= =========
</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 Nine Months Ended September 30, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30,
--------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows provided (used) by operations
- ----------------------------------------
Net earnings (loss) $ (1,771) $ 3,172
Add (deduct) noncash items included in
net earnings (loss)
Depreciation and amortization 6,571 5,773
Reduction in accrued long-term pension liability (975) (1,576)
Change in deferred income taxes (672) 1,794
Other, net 511 225
Changes in other operating working capital
Receivables 2,053 (8,085)
Inventories 3,577 (1,106)
Prepaid expenses 384 594
Accounts payable and accrued expenses (1,318) 2,518
-------- --------
Cash flows provided by operations 8,360 3,309
-------- --------
Cash flows provided (used) by investing activities
- --------------------------------------------------
Capital expenditures (8,755) (8,178)
Collection of accounts receivable, and payment of accounts
payable and accrued and other expenses related to
discontinued operations (229) (1,802)
Payments associated with relocation of home canning
cap and lid operation (205) (2,440)
Other, net (472) (276)
-------- --------
Cash flows used by investing activities (9,661) (12,696)
-------- --------
Cash flows provided (used) by financing activities
- --------------------------------------------------
Net borrowings (repayments) under lines of credit (100) 1,000
Dividends paid (621) (621)
Other, net 32 605
-------- --------
Cash flows provided (used) by financing activities (689) 984
-------- --------
Cash and cash equivalents
- -------------------------
Decrease during the period (1,990) (8,403)
Balance at beginning of the period 2,261 11,329
-------- --------
Balance at end of the period $ 271 $ 2,926
======== ========
Significant Non-Cash Transactions
- ---------------------------------
Contribution of 250,000 shares of Common Stock to pension plan $ 1,891 $ 0
======== ========
</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 September 30, 1995, and the results of
operations for the three months and nine months ended September 30, 1995 and
1994, and changes in cash flows for the nine months ended September 30, 1995
and 1994.
The results of operations for the first nine months of 1995 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. The calculation of
fully diluted net earnings (loss) per common share for the three months and
nine months ended September 30, 1995 and 1994 was not dilutive.
3) Receivables
Receivables as of September 30, 1995, as shown on the accompanying
Consolidated Balance Sheet, have been reduced by $6,449,000 of net proceeds
from the sale of receivables under the Company's Accounts Receivable
Facility.
4) Financing and Liquidity
As of September 30, 1995, the Company had short-term financing of
$20,000,000 which included (i) an Accounts Receivable Facility maturing on
January 18, 1997 under which the maximum amount that can be advanced to the
Company pursuant to the sale of trade accounts receivable is $10,000,000
(the "Receivables Facility") and (ii) an unsecured $10,000,000 line of
credit committed through April 30, 1996 (the "Line of Credit").
On October 10, 1995, the Company retained Lehman Brothers to review
strategic alternatives to maximize shareholder value, including the sale of
certain assets or all of the Company. The Board of Directors determined to
retain Lehman Brothers because of consolidations occurring in the packaging
industry. Lehman Brothers is currently in the process of disseminating
information about the Company to prospective purchasers who have requested
the information. No assurance can be given that any transaction will be
proposed or, if proposed, that the terms of any such transaction will be
acceptable to the Company or to its stockholders.
- 7 -
<PAGE> 8
On October 24, 1995, the lender under the Line of Credit reduced the Line of
Credit from $10,000,000 to $6,500,000, which was then the approximate
outstanding amount under the Line of Credit. The Company's total short-term
financing was thus reduced from $20,000,000 to approximately $16,500,000.
The Line of Credit was reduced by the lender due to a decline in the
Company's financial performance. The Company is currently in discussions
with prospective lenders, including present lenders to the Company, to
restore the Company's total short-term financing to $20,000,000. The lender
under the Receivables Facility has agreed in principle to provide an
additional $3,500,000 of short-term financing under such facility. Advances
under such amended receivables facility would be subject to certain
limitations.
The Company expects that it will be in violation of certain financial
covenants under its Senior Note Agreement by December 31, 1995. The Company
is currently in discussions with its lenders (collectively, the "Lenders")
under its Senior Note Agreement, Line of Credit and Receivables Facility
(collectively, the "Loan Facilities") concerning waivers to avoid a
prospective default in regard to these financial covenants. Although the
Company has received the approval of the Lenders to amend the Loan
Facilities to eliminate a prospective default with regard to financial
covenants on two other occasions, there can be no assurance that the Lenders
will agree to amend the Loan Facilities or to grant waivers to avoid a
prospective default with regard to these financial covenants at this time.
If the Loan Facilities are in default, the Lenders would be entitled to
exercise certain remedies, including the acceleration of the borrowings
under the Loan Facilities.
Borrowings under the Line of Credit and the Senior Note Agreement are
unsecured.
Based on the Company's past experience in obtaining waivers or amendments of
the Loan Facilities and because the Company has retained Lehman Brothers as
noted above, the Company believes that even if the Lenders do not agree to
amend the Loan Facilities to eliminate the prospective default, or to waive
any defaults thereunder, the Lenders will not accelerate the Loan Facilities
or otherwise exercise remedies thereunder.
Since the Line of Credit expires on April 30, 1996, the Company will need to
extend the maturity of the Line of Credit or refinance it on or before such
date. Whether such financing can be obtained will depend upon the financial
condition of the Company at that time. However, there is no assurance that
the Lender under the Line of Credit will agree to an extension of the
maturity date or that other sources of financing will be available on terms
acceptable to the Company.
5) Common Stock
During July 1995, the Company adopted a shareholders rights plan (Rights
Plan), pursuant to which a dividend distribution of one Right was made for
each outstanding share of Kerr Common Stock. Each Right entitles the holder
to purchase a unit consisting of one one-thousandth of a share of a new
issue of preferred stock, or, upon the occurrence of certain events, to
purchase Kerr Common Stock at a 50% discount to the then current market
price of the stock. The Rights Plan is intended to protect the interests of
the Company's stockholders in the event the Company is confronted with
coercive or unfair takeover tactics.
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<PAGE> 9
KERR GROUP, INC.
Computation of Earnings (Loss) Per Common Share
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary Net Earnings (Loss) Per Common Share
- --------------------------------------------
Net earnings (loss) $(1,099) $ 1,310 $ (1,771) $ 3,172
Less Preferred Stock dividends (207) (207) (621) (621)
------- ------- ---------- -------
Net earnings (loss) applicable to primary earnings
per common share $(1,306) $ 1,103 $ (2,392) $ 2,551
======= ======= ========== =======
Weighted average number of common
shares outstanding 3,933 3,677 3,812 3,673
======= ======= ========== =======
Primary net earnings (loss) per common share $ (0.33) $ 0.30 $ (0.63) $ 0.69
======= ======= ========== =======
Fully Diluted Net Earnings (Loss) Per Common Share
- --------------------------------------------------
Net earnings (loss) applicable to primary earnings
per common share $(1,306) $ 1,103 $ (2,392) $ 2,551
Add Preferred Stock dividends 207 207 621 621
------- ------- ---------- -------
Net earnings (loss) applicable to fully
diluted earnings per common share $(1,099) $ 1,310 $ (1,771) $ 3,172
======= ======= ========== =======
Weighted average number of common
shares outstanding 3,933 3,677 3,812 3,673
Common shares issuable upon assumed
conversion of Preferred Stock 709 709 709 709
Incremental common shares issuable upon
assumed exercise of outstanding stock options 17 22 20 22
------- ------- ---------- -------
Adjusted weighted average number of common
shares outstanding 4,659 4,408 4,541 4,404
======= ======= ========== =======
Fully diluted net earnings (loss) per common share:
As computed $ (0.24) $ 0.30 $ (0.39) $ 0.72
======= ======= ========== =======
As reported(a) $ (0.33) $ 0.30 $ (0.63) $ 0.69
======= ======= ========== =======
</TABLE>
(a) The calculation of fully diluted net earnings (loss) per common share for
the three months and nine months ended September 30, 1995 and 1994 was not
dilutive.
-9-
<PAGE> 10
KERR GROUP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
Three Months and Nine Months Ended September 30, 1995 and 1994
Results of Operations
Net sales for the three months ended September 30, 1995 were $39,021,000 as
compared to $40,624,000 for the three months ended September 30, 1994, a
decrease of $1,603,000 or 4%. The decrease in net sales for the three months
ended September 30, 1995 over the comparable period in 1994 was due to lower
sales of home canning supplies because of adverse growing conditions.
Net sales for the nine months ended September 30, 1995 were $111,303,000 as
compared to $111,008,000 for the nine months ended September 30, 1994, an
increase of $295,000 or less than 1%. The increase in net sales for the nine
months ended September 30, 1995 over the comparable period in 1994 was due to
higher sales in the Plastic Products Business.
Cost of sales for the three months ended September 30, 1995 were $30,941,000 as
compared to $28,617,000 for the three months ended September 30, 1994, an
increase of $2,324,000 or 8%. The increase in the 1995 period over the
comparable period in 1994 was due primarily to higher resin and other raw
material costs in the Plastic Products Business.
Cost of sales for the nine months ended September 30, 1995 were $84,863,000
as compared to $76,479,000 for the nine months ended September 30, 1994, an
increase of $8,114,000 or 11%. The increase in the 1995 period over the
comparable period in 1994 was due primarily to higher resin and other raw
material costs in the Plastic Products Business, and higher raw material costs
and the sale of higher cost inventory produced during 1994 in the Consumer
Products Business.
Gross profit as a percent of net sales for the three months ended September 30,
1995 decreased to 21% as compared to 30% for the three months ended September
30, 1994. Gross profit as a percent of net sales for the nine months ended
September 30, 1995 decreased to 24% as compared to 31% for the nine months ended
September 30, 1994. The decrease in gross profit as a percent of net sales for
both periods in 1995 over the comparable periods in 1994 was attributable
primarily to cost-price pressures, including substantially higher resin costs,
in the Plastic Products Business and the sale of higher cost inventory produced
in 1994 in the Consumer Products Business.
Selling, warehouse, general and administrative expenses decreased $10,000 or
less than 1% during the three months ended September 30, 1995, as compared to
the same period in 1994. Selling, warehouse, general and administrative expenses
decreased $231,000 or 1% during the nine months ended September 30, 1995, as
compared to the same period in 1994.
Net interest expense increased $184,000 and $892,000 during the three month and
nine month periods ended September 30, 1995, as compared to the same periods in
1994, respectively, primarily as a result of higher levels of short-term
financing and higher interest rates.
Earnings before income taxes decreased $4,101,000 and $8,480,000 during the
three month and nine month periods ended September 30, 1995 as compared to the
same periods in 1994, respectively, due primarily to lower earnings in the
Plastic Products and Consumer Products Businesses and higher interest expense.
Earnings in the Plastic Products Business were adversely impacted by continued
cost-price pressures, including substantially higher resin costs. Earnings in
the Consumer Products Business declined due primarily to lower sales volume and
the sale of higher cost inventory produced during 1994.
The provision for income taxes decreased $1,692,000 and $3,537,000 during the
three month and nine month periods ended September 30, 1995 as compared to the
same periods in 1994, respectively, due to lower pretax earnings.
- 10 -
<PAGE> 11
Sales and earnings of the home canning supplies business are higher in the
second and third quarters and lower in the first and fourth quarters because of
the seasonal nature of the business.
Financial Condition
During the first nine months of 1995, cash flow of $8,360,000 was provided by
operations, which includes cash flow of $6,449,000 related to net proceeds from
the sale of receivables under the Company's Accounts Receivable Facility. The
principal use of cash flow was to fund investing activities, primarily capital
expenditures of $8,755,000.
During the first nine months of 1994 cash flow of $3,309,000 was provided by
operations. The principal use of cash flow was to fund investing activities,
primarily capital expenditures of $8,178,000. Cash flow was also provided
through the reduction of the Company's cash balances of $8,403,000 and net
borrowings under lines of credit of $1,000,000.
On May 10, 1995, the Company contributed 250,000 shares of its Common Stock, at
a price of $7.56 per share, to the Kerr Group, Inc. Retirement Income Plan. The
contribution reduced Kerr's pension liability by $1,891,000.
Since the third quarter of 1990, the Company has not declared any dividends on
its Common Stock. The Company's Senior Note Agreement, Accounts Receivable
Facility and line of credit limit the payment of dividends on Common Stock.
Under the most restrictive covenant of such agreements, the payment of dividends
on Common Stock is not permitted as of September 30, 1995.
The ratio of current assets to current liabilities decreased to 2.3 at September
30, 1995 from 2.5 at December 31, 1994. The ratio of total debt to total
capitalization was 63% at September 30, 1995 and December 31, 1994.
As of September 30, 1995, the Company had short-term financing of $20,000,000
which included (i) an Accounts Receivable Facility maturing on January 18, 1997
under which the maximum amount that can be advanced to the Company pursuant to
the sale of trade accounts receivable is $10,000,000 (the "Receivables
Facility") and (ii) an unsecured $10,000,000 line of credit committed through
April 30, 1996 (the "Line of Credit"). At September 30,1995, the Company had
unused sources of liquidity consisting of cash and cash equivalents of $271,000,
unused committed credit under the Line of Credit of $4,600,000, of which
$3,122,000 could be borrowed under the terms of the Company's Senior Note
Agreement, and additional advances under the Receivables Facility of $3,551,000
of which $2,240,000 was available. In addition, the Company has tax net
operating loss carryforwards of $4,686,000, and certain tax credit carryforwards
of $1,137,000.
On October 10, 1995, the Company retained Lehman Brothers to review strategic
alternatives to maximize shareholder value, including the sale of certain assets
or all of the Company. The Board of Directors determined to retain Lehman
Brothers because of consolidations occurring in the packaging industry. Lehman
Brothers is currently in the process of disseminating information about the
Company to prospective purchasers who have requested the information. No
assurance can be given that any transaction will be proposed or, if proposed,
that the terms of any such transaction will be acceptable to the Company or to
its stockholders.
On October 24, 1995, the lender under the Line of Credit reduced the Line of
Credit from $10,000,000 to $6,500,000, which was then the approximate
outstanding amount under the Line of Credit. The Company's total short-term
financing was thus reduced from $20,000,000 to approximately $16,500,000. The
Line of Credit was reduced by the lender due to a decline in the Company's
financial performance. The Company is currently in discussions with prospective
lenders, including present lenders to the Company, to restore the Company's
total short-term financing to $20,000,000. The lender under the Receivables
Facility has agreed in principle to provide an additional $3,500,000 of
short-term financing under such facility. Advances under such amended
receivables facility would be subject to certain limitations.
- 11 -
<PAGE> 12
The Company expects that it will be in violation of certain financial covenants
under its Senior Note Agreement by December 31, 1995. The Company is currently
in discussions with its lenders (collectively, the "Lenders") under its Senior
Note Agreement, Line of Credit and Receivables Facility (collectively, the "Loan
Facilities") concerning waivers to avoid a prospective default in regard to
these financial covenants. Although the Company has received the approval of the
Lenders to amend the Loan Facilities to eliminate a prospective default with
regard to financial covenants on two other occasions, there can be no assurance
that the Lenders will agree to amend the Loan Facilities or to grant waivers to
avoid a prospective default with regard to these financial covenants at this
time.
If the Loan Facilities are in default, the Lenders would be entitled to exercise
certain remedies, including the acceleration of the borrowings under the Loan
Facilities.
Borrowings under the Line of Credit and the Senior Note Agreement are unsecured.
Based on the Company's past experience in obtaining waivers or amendments of the
Loan Facilities and because the Company has retained Lehman Brothers as noted
above, the Company believes that even if the Lenders do not agree to amend the
Loan Facilities to eliminate the prospective default, or to waive any defaults
thereunder, the Lenders will not accelerate the Loan Facilities or otherwise
exercise remedies thereunder.
Since the Line of Credit expires on April 30, 1996, the Company will need to
extend the maturity of the Line of Credit or refinance it on or before such
date. Whether such financing can be obtained will depend upon the financial
condition of the Company at that time. However, there is no assurance that the
Lender under the Line of Credit will agree to an extension of the maturity date
or that other sources of financing will be available on terms acceptable to the
Company.
Assuming the maturity date of the Line of Credit is extended or the Line of
Credit is refinanced, the Company believes that its financial resources,
including internally generated funds and amounts available under its
Receivables Facility, are adequate to meet its needs for the foreseeable future.
- 12 -
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In October 1995, Canadian regulatory authorities determined that Kerr had
been dumping home canning products in Canada, and that such dumping had
caused injury to Canadian producers. As a result of this determination, Kerr
expects that it will be required to increase its prices for home canning
products in Canada in 1996. The determination by the Canadian regulatory
authorities will have no impact on previous sales by Kerr into Canada.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.5 Amendment dated September 25, 1995 of the Note Agreement dated as of
September 15, 1993 between Kerr Group, Inc. and the Purchasers identified
therein.
10.6 Consent to amendment dated September 25, 1995 pursuant to the
Receivables Purchase Agreement dated as of January 19, 1995 between Kerr
Group, Inc., as the seller, and PNC Bank, N.A., as the purchaser.
10.7 Consent to amendment dated September 29, 1995 pursuant to Line of
Credit between Bank of Boston and Kerr Group, Inc.
b. Reports on Form 8-K
On July 24, 1995, the Company filed a Form 8-K Current Report with respect
to the Company's shareholder rights plan.
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.
November 13, 1995 By /s/ D.Gordon Strickland
-----------------------------------
D. Gordon Strickland
Senior Vice President, Finance,
Chief Financial Officer
November 13, 1995 By /s/ J. Stephen Grassbaugh
-----------------------------------
J. Stephen Grassbaugh
Vice President, Controller,
Chief Accounting Officer
- 13 -
<PAGE> 1
EXHIBIT 10.5
[KERR LOGO]
To: Each Holder of 9.45% Series A Senior Notes due
September 15, 2003 and Each Holder of 8.99% Series B
Senior Notes due September 15, 1999 of Kerr Group, Inc.
Date: September 25, 1995
Reference is hereby made to the several Note Agreements, dated as of
September 15, 1993 (the "Note Agreements"), between Kerr Group, Inc. (the
"Company") and each of the purchasers listed on the Schedule of Purchasers
attached to said Note Agreements (the "Purchasers"), relating to the issue and
sale by the Company of its 9.45% Series A Senior Notes due September 15, 2003
and its 8.99% Series B Senior Notes due September 15, 1999 (collectively, the
"Notes"). Capitalized terms used herein and not otherwise defined have the
meanings ascribed thereto in the Note Agreements.
I. Amendment
Subject to the conditions set forth herein, the Note Agreements
are hereby amended as follows:
A. Section 10.1 of the Note Agreements is hereby amended and
restated in its entirety to read as follows:
10.1 Fixed Charge Coverage Ratio. The Company will not at
any time on or after December 31, 1993, permit the Fixed
Charge Coverage Ratio for the four consecutive fiscal
quarters most recently ended (i.e., a "rolling" four
quarters) to be less than the ratios indicated below for
the periods indicated:
<TABLE>
<CAPTION>
Minimum Fixed Charge
Periods Coverage Ratio
------------------------------------- --------------
<S> <C> <C> <C>
Dec. 31, 1993 - June 30, 1994 1.20 to 1
July 1, 1994 - June 30, 1995 1.30 to 1
July 1, 1995 - June 30, 1996 1.00 to 1
July 1, 1996 - Sept. 30, 1996 1.40 to 1
Oct. 1, 1996 - Dec. 31, 1996 1.50 to 1
Jan. 1, 1997 - June 30, 1997 1.60 to 1
July 1, 1997 - June 30, 2003 1.75 to 1
</TABLE>
<PAGE> 2
B. Section 10.9 of the Note Agreements is hereby amended and
restated in its entirety to read as follows:
10.9 Ratio of Debt to Adjusted Tangible Net Worth. The
Company will not at any time permit the ratio of the
total Debt of the Company to Adjusted Tangible Net Worth
to exceed the following ratios for the indicated
periods:
<TABLE>
<CAPTION>
Periods Maximum Ratio
---------------------------------- -------------
<S> <C>
Sept. 15, 1993 - Nov. 30, 1993 1.85 to 1
Dec. 1, 1993 - Feb. 28, 1994 1.95 to 1
Mar. 1, 1994 - Aug. 31, 1994 2.00 to 1
Sept. 1, 1994 - Nov. 30, 1994 1.85 to 1
Dec. 1, 1994 - June 30, 1995 1.95 to 1
July 1, 1995 - Nov. 30, 1995 1.80 to 1
Dec. 1, 1995 - Aug. 31, 1996 1.95 to 1
Sept. 1, 1996 - Dec. 31, 1996 1.70 to 1
Jan. 1, 1997 - June 30, 1997 1.85 to 1
July 1, 1997 - Nov. 30, 1997 1.50 to 1
Dec. 1, 1997 - June 30, 1998 1.80 to 1
during each year thereafter
July 1 - Nov. 30 1.50 to 1
Dec. 1 - June 30 1.80 to 1
</TABLE>
II. Miscellaneous
A. Limited Nature of Agreement. The amendments and modifications
to the Note Agreements set forth above do not and shall not,
now or in the future, either implicitly or explicitly (a)
alter, waive or amend, except as expressly provided herein,
any provision of the Note Agreements, or (b) impair any right
or remedy of any purchaser under the Note Agreements with
respect to any violation of any provision of the Note
Agreements. The provisions hereof do not waive, now or in the
future, compliance with any covenant, term or condition to be
performed or complied with nor do they impair any rights or
remedies of any Purchaser under the Note Agreements, as
amended hereby, with respect to any such violation.
B. Note Agreements Remain in Effect. Except as expressly
provided herein, all provisions, terms and conditions of the
Note Agreements shall remain in full force and effect. As
amended hereby, the Note Agreements are ratified and confirmed
in all respects.
- 2 -
<PAGE> 3
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 4
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
--------------------------------------
BARNETT & CO.
By: /s/ Richard McCormick
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 5
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Gianfranco Capasso
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 6
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard C. Morrison
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By: /s/ Richard C. Morrison
--------------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.6
PNC BANK, N.A.
National Corporate Banking
55 S. Lake Avenue, Suite 650
Pasadena, CA 91101
September 25, 1995
KERR GROUP, INC.
1840 Century Park East
Los Angeles, California 90067
Ladies and Gentlemen:
Reference is hereby made to (i) that certain Receivables Purchase
Agreement, dated as of January 19, 1995 (the "Receivables Purchase Agreement"),
between the Bank and the Company, (ii) the several Note Agreements, dated as of
September 15, 1993 (the "Note Agreements"), between the Company and each of the
purchasers listed on the Schedule of Purchasers attached to such Note Agreements
(the "Purchasers"), relating to the sale by the Company of its 9.45% Series A
Senior Notes due September 15, 2003 and its 8.99% Series B Notes due September
15, 1999, and (iii) that certain letter agreement, dated September 25, 1995, in
the form attached hereto as Exhibit A (the "Letter Agreement"), between the
Company and the Purchasers.
The Bank hereby acknowledges receipt of the Letter Agreement, and
hereby consents to the amendments to the Note Agreements set forth in the
Letter Agreement. Notwithstanding any provision in the Note or the Receivables
Purchase Agreement to the contrary, any reference to the Note Agreements
contained in the Note and the Receivables Purchase Agreement shall mean the
Note Agreements as amended thereby.
This consent shall not alter, waive or amend, except as expressly
provided herein, any provision of the Note or the Receivables Purchase
Agreement or impair any right or remedy of the Bank with respect to any
violation of any provision thereunder, and shall not constitute a waiver of
compliance with any covenant, term or condition to be performed or complied
with thereunder. Except as expressly provided herein, all provision, terms and
condition of each of the Note and the Receivables Purchase Agreement shall
remain in full force and effect, and each of the Note and the Receivables
Purchase Agreement is ratified and confirmed in all respects.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Cynthia G. Osofsky
------------------------
Cynthia G. Osofsky
Senior Vice President
and Regional Manager
ACKNOWLEDGED AND AGREED:
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
-----------------------------------
Name: Geoffrey A. Whynot
Title: Treasurer
<PAGE> 2
[KERR LETTERHEAD]
To: Each Holder of 9.45% Series A Senior Notes due
September 15, 2003 and Each Holder of 8.99% Series B
Senior Notes due September 15, 1999 of Kerr Group, Inc.
Date: September 25, 1995
Reference is hereby made to the several Note Agreements, dated as of
September 15, 1993 (the "Note Agreements"), between Kerr Group, Inc. (the
"Company") and each of the purchasers listed on the Schedule of Purchasers
attached to said Note Agreements (the "Purchasers"), relating to the issue and
sale by the Company of its 9.45% Series A Senior Notes due September 15, 2003
and its 8.99% Series B Senior Notes due September 15, 1999 (collectively, the
"Notes"). Capitalized terms used herein and not otherwise defined have the
meanings ascribed thereto in the Note Agreements.
I. Amendment
Subject to the conditions set forth herein, the Note Agreements
are hereby amended as follows:
A. Section 10.1 of the Note Agreements is hereby amended and
restated in its entirety to read as follows:
10.1 Fixed Charge Coverage Ratio. The Company will not at
any time on or after December 31, 1993, permit the Fixed
Charge Coverage Ratio for the four consecutive fiscal
quarters most recently ended (i.e., a "rolling" four
quarters) to be less than the ratios indicated below for
the periods indicated:
<TABLE>
<CAPTION>
Minimum Fixed Charge
Periods Coverage Ratio
------------------------------------- --------------
<S> <C> <C> <C>
Dec. 31, 1993 - June 30, 1994 1.20 to 1
July 1, 1994 - June 30, 1995 1.30 to 1
July 1, 1995 - June 30, 1996 1.00 to 1
July 1, 1996 - Sept. 30, 1996 1.40 to 1
Oct. 1, 1996 - Dec. 31, 1996 1.50 to 1
Jan. 1, 1997 - June 30, 1997 1.60 to 1
July 1, 1997 - June 30, 2003 1.75 to 1
</TABLE>
<PAGE> 3
B. Section 10.9 of the Note Agreements is hereby amended and
restated in its entirety to read as follows:
10.9 Ratio of Debt to Adjusted Tangible Net Worth. The
Company will not at any time permit the ratio of the
total Debt of the Company to Adjusted Tangible Net Worth
to exceed the following ratios for the indicated
periods:
<TABLE>
<CAPTION>
Periods Maximum Ratio
----------------------------------- -------------
<S> <C>
Sept. 15, 1993 - Nov. 30, 1993 1.85 to 1
Dec. 1, 1993 - Feb. 28, 1994 1.95 to 1
Mar. 1, 1994 - Aug. 31, 1994 2.00 to 1
Sept. 1, 1994 - Nov. 30, 1994 1.85 to 1
Dec. 1, 1994 - June 30, 1995 1.95 to 1
July 1, 1995 - Nov. 30, 1995 1.80 to 1
Dec. 1, 1995 - Aug. 31, 1996 1.95 to 1
Sept. 1, 1996 - Dec. 31, 1996 1.70 to 1
Jan. 1, 1997 - June 30, 1997 1.85 to 1
July 1, 1997 - Nov. 30, 1997 1.50 to 1
Dec. 1, 1997 - June 30, 1998 1.80 to 1
during each year thereafter
July 1 - Nov. 30 1.50 to 1
Dec. 1 - June 30 1.80 to 1
</TABLE>
II. Miscellaneous
A. Limited Nature of Agreement. The amendments and modifications
to the Note Agreements set forth above do not and shall not,
now or in the future, either implicitly or explicitly (a)
alter, waive or amend, except as expressly provided herein,
any provision of the Note Agreements, or (b) impair any right
or remedy of any purchaser under the Note Agreements with
respect to any violation of any provision of the Note
Agreements. The provisions hereof do not waive, now or in the
future, compliance with any covenant, term or condition to be
performed or complied with nor do they impair any rights or
remedies of any Purchaser under the Note Agreements, as
amended hereby, with respect to any such violation.
B. Note Agreements Remain in Effect. Except as expressly
provided herein, all provisions, terms and conditions of the
Note Agreements shall remain in full force and effect. As
amended hereby, the Note Agreements are ratified and confirmed
in all respects.
- 2 -
<PAGE> 4
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 5
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
--------------------------------------
BARNETT & CO.
By: /s/ Richard McCormick
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: --------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 6
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Gianfranco Capasso
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 7
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard C. Morrison
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By: /s/ Richard C. Morrison
--------------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.7
BANK OF BOSTON
September 29, 1995
KERR GROUP, INC.
1840 Century Park East
Los Angeles, California 90067
Ladies and Gentlemen:
Reference is hereby made to (i) that certain letter dated February 9,
1995, between The First National Bank of Boston (the "Bank") and Kerr Group,
Inc., a Delaware corporation (the "Company"), (ii) that certain Commercial
Promissory Note, dated February 1, 1995, in the principal amount of $10,000,000
(the "Note"), executed by the Company in favor of the Bank, (iii) the several
Note Agreements, dated as of September 15, 1993 (the "Note Agreements"),
between the Company and each of the purchasers listed on the Schedule of
Purchasers attached to such Note Agreements (the "Purchasers"), relating to the
sale by the Company of its 9.45% Series A Senior Notes due September 15, 2003
and its 8.99% Series B Notes due September 15, 1999, and (iv) that certain
letter agreement, dated September 25, 1995, in the form attached hereto as
Exhibit A (the "Letter Agreement"), between the Company and the Purchasers.
The Bank hereby acknowledges receipt of the Letter Agreement, and
hereby consents to the amendments to the Note Agreements set forth in the
Letter Agreement. Notwithstanding any provision in the Note or the Receivables
Purchase Agreement to the contrary, any reference to the Note Agreements
contained in the Note and the Receivables Purchase Agreement shall mean the
Note Agreements as amended thereby.
This consent shall not alter, waive or amend, except as expressly
provided herein, any provision of the Note or impair any right or remedy of the
Bank with respect to any violation of any provision of the Note, and shall not
constitute a waiver of compliance with any covenant, term or condition to be
performed or complied with under the Note. Except as expressly provided
herein, all provisions, terms and conditions of each of the Note shall remain
in full force and effect, and the Note is ratified and confirmed in all
respects.
Very truly yours,
FIRST NATIONAL BANK OF BOSTON
By: /s/ S. Karen Langstaff
-----------------------
Name: S. Karen Langstaff
Title: Director
ACKNOWLEDGED AND AGREED:
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
-----------------------------------
Name: Geoffrey A. Whynot
Title: Treasurer
<PAGE> 2
[KERR LETTERHEAD]
To: Each Holder of 9.45% Series A Senior Notes due
September 15, 2003 and Each Holder of 8.99% Series B
Senior Notes due September 15, 1999 of Kerr Group, Inc.
Date: September 25, 1995
Reference is hereby made to the several Note Agreements, dated as of
September 15, 1993 (the "Note Agreements"), between Kerr Group, Inc. (the
"Company") and each of the purchasers listed on the Schedule of Purchasers
attached to said Note Agreements (the "Purchasers"), relating to the issue and
sale by the Company of its 9.45% Series A Senior Notes due September 15, 2003
and its 8.99% Series B Senior Notes due September 15, 1999 (collectively, the
"Notes"). Capitalized terms used herein and not otherwise defined have the
meanings ascribed thereto in the Note Agreements.
I. Amendment
Subject to the conditions set forth herein, the Note Agreements
are hereby amended as follows:
A. Section 10.1 of the Note Agreements is hereby amended and
restated in its entirety to read as follows:
10.1 Fixed Charge Coverage Ratio. The Company will not at
any time on or after December 31, 1993, permit the Fixed
Charge Coverage Ratio for the four consecutive fiscal
quarters most recently ended (i.e., a "rolling" four
quarters) to be less than the ratios indicated below for
the periods indicated:
<TABLE>
<CAPTION>
Minimum Fixed Charge
Periods Coverage Ratio
------------------------------------- --------------
<S> <C> <C> <C>
Dec. 31, 1993 - June 30, 1994 1.20 to 1
July 1, 1994 - June 30, 1995 1.30 to 1
July 1, 1995 - June 30, 1996 1.00 to 1
July 1, 1996 - Sept. 30, 1996 1.40 to 1
Oct. 1, 1996 - Dec. 31, 1996 1.50 to 1
Jan. 1, 1997 - June 30, 1997 1.60 to 1
July 1, 1997 - June 30, 2003 1.75 to 1
</TABLE>
<PAGE> 3
B. Section 10.9 of the Note Agreements is hereby amended and
restated in its entirety to read as follows:
10.9 Ratio of Debt to Adjusted Tangible Net Worth. The
Company will not at any time permit the ratio of the
total Debt of the Company to Adjusted Tangible Net Worth
to exceed the following ratios for the indicated
periods:
<TABLE>
<CAPTION>
Periods Maximum Ratio
----------------------------------- ------------
<S> <C>
Sept. 15, 1993 - Nov. 30, 1993 1.85 to 1
Dec. 1, 1993 - Feb. 28, 1994 1.95 to 1
Mar. 1, 1994 - Aug. 31, 1994 2.00 to 1
Sept. 1, 1994 - Nov. 30, 1994 1.85 to 1
Dec. 1, 1994 - June 30, 1995 1.95 to 1
July 1, 1995 - Nov. 30, 1995 1.80 to 1
Dec. 1, 1995 - Aug. 31, 1996 1.95 to 1
Sept. 1, 1996 - Dec. 31, 1996 1.70 to 1
Jan. 1, 1997 - June 30, 1997 1.85 to 1
July 1, 1997 - Nov. 30, 1997 1.50 to 1
Dec. 1, 1997 - June 30, 1998 1.80 to 1
during each year thereafter
July 1 - Nov. 30 1.50 to 1
Dec. 1 - June 30 1.80 to 1
</TABLE>
II. Miscellaneous
A. Limited Nature of Agreement. The amendments and modifications
to the Note Agreements set forth above do not and shall not,
now or in the future, either implicitly or explicitly (a)
alter, waive or amend, except as expressly provided herein,
any provision of the Note Agreements, or (b) impair any right
or remedy of any purchaser under the Note Agreements with
respect to any violation of any provision of the Note
Agreements. The provisions hereof do not waive, now or in the
future, compliance with any covenant, term or condition to be
performed or complied with nor do they impair any rights or
remedies of any Purchaser under the Note Agreements, as
amended hereby, with respect to any such violation.
B. Note Agreements Remain in Effect. Except as expressly
provided herein, all provisions, terms and conditions of the
Note Agreements shall remain in full force and effect. As
amended hereby, the Note Agreements are ratified and confirmed
in all respects.
- 2 -
<PAGE> 4
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 5
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
--------------------------------------
BARNETT & CO.
By: /s/ Richard McCormick
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 6
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Gianfranco Capasso
---------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------
- 3 -
<PAGE> 7
C. Counterparts. This letter may be executed in any number of
counterparts, each of which when executed and delivered shall
be an original, but all of which together shall constitute one
and the same instrument.
D. Governing Law. This letter shall in all respects be governed
by, and construed and enforced in accordance with, the laws of
the State of New York, including all matters of construction,
validity and performance.
In consideration of your execution and delivery of this letter, the
Company agrees to pay to you, upon such execution and delivery by all of the
Purchasers, a fee in aggregate sum of $150,000 allocated in proportion to each
Purchaser's respective principle amount.
If you are in agreement with the foregoing, please sign the
accompanying counterparts of this letter and return one of the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
------------------------------
Title: Vice President, Treasurer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------
BARNETT & CO.
By:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard C. Morrison
--------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By: /s/ Richard C. Morrison
--------------------------------------
- 3 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND CONSOLIDATED BALANCE
SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 271
<SECURITIES> 0
<RECEIVABLES> 14,259
<ALLOWANCES> 125
<INVENTORY> 30,713
<CURRENT-ASSETS> 49,276
<PP&E> 111,114
<DEPRECIATION> 60,387
<TOTAL-ASSETS> 118,872
<CURRENT-LIABILITIES> 21,174
<BONDS> 50,000
<COMMON> 2,113
0
9,748
<OTHER-SE> 20,723
<TOTAL-LIABILITY-AND-EQUITY> 118,872
<SALES> 111,303
<TOTAL-REVENUES> 111,441
<CGS> 84,863
<TOTAL-COSTS> 84,863
<OTHER-EXPENSES> 25,106
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,460
<INCOME-PRETAX> (2,988)
<INCOME-TAX> (1,217)
<INCOME-CONTINUING> (1,771)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,771)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
