<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 March 31, 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 April 28, 1995 was 3,683,095.
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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 -
March 31, 1995 and December 31, 1994 3 - 4
Condensed Consolidated Statements of Earnings (Loss) -
Three Months Ended March 31, 1995 and 1994 5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 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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KERR GROUP, INC.
Consolidated Balance Sheets
As of March 31, 1995 and December 31, 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
Assets 1995 1994
- ------ ----------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 171 $ 2,261
Receivables-primarily trade accounts,
less allowance for doubtful accounts
of $121 at March 31, 1995 and $170
at December 31, 1994 17,833 16,312
Inventories
Raw materials and work in process 12,054 11,156
Finished goods 23,532 23,134
-------- --------
Total inventories 35,586 34,290
Prepaid expenses and other current assets 4,471 4,526
-------- --------
Total current assets 58,061 57,389
-------- --------
Property, plant and equipment, at cost 103,832 102,847
Accumulated depreciation and amortization (56,415) (54,506)
-------- --------
Net property, plant and equipment 47,417 48,341
-------- --------
Deferred income taxes 1,994 2,192
Goodwill and other intangibles, net of
amortization of $1,910 at
March 31, 1995 and $1,812
at December 31, 1994 6,816 6,622
Other assets 8,529 9,156
-------- --------
$122,817 $123,700
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Consolidated Balance Sheets
As of March 31, 1995 and December 31, 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, December 31,
Liabilities and Stockholders' Equity 1995 1994
- ------------------------------------ ----------- ------------
<S> <C> <C>
Current liabilities
Short-term debt $ 9,300 $ 5,500
Accounts payable 11,164 13,445
Accrued expenses 2,587 3,862
-------- --------
Total current liabilities 23,051 22,807
-------- --------
Accrued pension liability 14,705 15,230
Other long-term liabilities 2,570 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 March 31, 1995 and 4,220
shares issued at December 31, 1994 2,113 2,110
Additional paid-in capital 27,239 27,210
Retained earnings 11,401 11,995
Treasury Stock, 543 shares at cost (12,803) (12,803)
Excess of additional pension liability
over unrecognized prior service
cost, net of tax benefits (5,207) (5,207)
--------- --------
Total stockholders' equity 32,491 33,053
-------- --------
$122,817 $123,700
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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KERR GROUP, INC.
Condensed Consolidated Statements of
Earnings (Loss) for the Three Months
Ended March 31, 1995 and 1994
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
--------------------------
1995 1994
------- -------
<S> <C> <C>
Net sales $30,390 $29,380
Cost of sales 21,813 19,419
------- -------
Gross profit 8,577 9,961
Selling, warehouse, general and
administrative expenses 7,833 8,398
Interest expense 1,446 1,215
Interest and other income (46) (113)
------- -------
Earnings (loss) before income taxes (656) 461
Provision (benefit) for income taxes (269) 198
------- -------
Net earnings (loss) (387) 263
Preferred stock dividends 207 207
------- -------
Net earnings (loss) applicable to
common stockholders $ (594) $ 56
======= =======
Net earnings (loss) per common share,
primary and fully diluted $ (0.16) $ 0.02
======= =======
</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 Three Months Ended March 31, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
---------------------------
1995 1994
--------- -----------
<S> <C> <C>
Cash flows provided (used) by operations
Net earnings (loss) $ (387) $ 263
Add (deduct) noncash items included in
net earnings (loss)
Depreciation and amortization 2,092 1,911
Other, net 198 204
Changes in other operating working capital
Receivables (1,521) (4,595)
Inventories (1,296) (2,994)
Prepaid expenses (54) 541
Accounts payable and accrued expenses (3,341) (1,148)
---------- ----------
Cash flows used by operations (4,309) (5,818)
---------- ----------
Cash flows provided (used) by investing activities
Capital expenditures (1,097) (1,020)
Collection of accounts receivable, and payment of accounts
payable and accrued and other expenses related to
discontinued operations (116) (556)
Other, net (193) (225)
---------- ----------
Cash flows used by investing activities (1,406) (1,801)
---------- ----------
Cash flows provided (used) by financing activities
Net borrowings under lines of credit 3,800 0
Dividends paid (207) (207)
Other, net 32 178
---------- ----------
Cash flows provided (used) by financing activities 3,625 (29)
---------- ----------
Cash and cash equivalents
Decrease during the period (2,090) (7,648)
Balance at beginning of the period 2,261 11,329
---------- ----------
Balance at end of the period $ 171 $ 3,681
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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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 March 31, 1995, and the results of operations
for the three months ended March 31, 1995 and 1994, and changes in cash
flows for the three months ended March 31, 1995 and 1994.
The results of operations for the first three 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 ended March 31, 1995 and 1994 was not dilutive.
3) Receivables
Receivables as of March 31, 1995, as shown on the accompanying Consolidated
Balance Sheet, have been reduced by $4,478,000 of net proceeds from the
sale of receivables under the Company's Accounts Receivable Facility.
4) Debt and Accounts Receivable Facility
Effective April 18, 1995, the Company increased its existing short-term
financing from a total of $20,000,000 to a total of $25,000,000, which
includes: 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, ii) a
$10,000,000 line of credit committed through April 30, 1996 and iii) a
$5,000,000 line of credit committed through June 30, 1995.
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<PAGE> 8
KERR GROUP, INC.
Computation of Net Earnings (Loss) Per Common Share
(in thousands except per share data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
-----------------------------
1995 1994
--------- --------
<S> <C> <C>
Primary Net Earnings (Loss) Per Common Share
Net earnings (loss) $ (387) $ 263
Less Preferred Stock dividends (207) (207)
--------- ---------
Net earnings (loss) applicable to primary earnings per
common share $ (594) $ 56
========= =========
Weighted average number of common
shares outstanding 3,678 3,667
========= =========
Primary net earnings (loss) per common share $ (.16) $ .02
========= =========
Fully Diluted Net Earnings (Loss) Per Common Share
Net earnings (loss) applicable to primary earnings
per common share $ (594) $ 56
Add Preferred Stock dividends 207 207
--------- ---------
Net earnings (loss) applicable to fully
diluted earnings per common share $ (387) $ 263
========= =========
Weighted average number of common
shares outstanding 3,678 3,667
Common shares issuable from assumed
conversion of Preferred Stock 709 709
Incremental common shares issuable upon
assumed exercise of outstanding stock options 17 5
--------- ---------
Adjusted weighted average number of common
shares outstanding 4,404 4,381
========= =========
Fully diluted net earnings (loss) per common share:
As computed $ (.09) $ .06
========= =========
As reported (a) $ (.16) $ .02
========= =========
</TABLE>
(a) The calculation of fully diluted net earnings (loss) per common share for
the three months ended March 31, 1995 and 1994 was not dilutive.
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<PAGE> 9
KERR GROUP, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
Three Months Ended March 31, 1995 and 1994
Results of Operations
Net sales for the three months ended March 31, 1995 were $30,390,000 as
compared to $29,380,000 for the three months ended March 31, 1994, an increase
of $1,010,000 or 3%. The increase in net sales for the three months ended
March 31, 1995 over the comparable period in 1994 was due primarily to higher
unit sales in the Consumer Products Business and the pass-through of resin cost
increases in the Plastic Products Business.
Cost of sales for the three months ended March 31, 1995 were $21,813,000 as
compared to $19,419,000 for the three months ended March 31, 1994, an increase
of $2,394,000 or 12%. The increase in cost of sales for the three months ended
March 31, 1995 over the comparable period in 1994 was due primarily to higher
resin costs in the Plastic Products Business and higher unit sales in the
Consumer Products Business.
Gross profit as a percent of net sales for the three months ended March 31,
1995 decreased to 28% as compared to 34% for the three months ended March 31,
1994. The decrease in gross profit as a percent of net sales for the three
months ended March 31, 1995 over the comparable period in 1994 was attributed
to the Plastic Products Business, primarily as a result of i) the impact of the
mild flu season, which resulted in lower sales of plastic closures, vials and
bottles to pharmaceutical customers, ii) higher resin costs which could not be
passed-through to customers, primarily in the prescription packaging product
line, and iii) competition-driven price reductions for plastic jars.
Selling, warehouse, general and administrative expenses decreased $565,000 or
7% during the three months ended March 31, 1995, as compared to the same period
in 1994, due primarily to lower general and administrative employment costs.
Net interest expense increased $298,000 during the three months ended March 31,
1995, as compared to the same period in 1994, primarily as a result of higher
levels of short-term debt and higher interest rates on short-term debt.
Earnings before income taxes decreased $1,117,000 during the three months ended
March 31, 1995 as compared to the same period in 1994 due primarily to lower
earnings in the Plastic Products Business and higher interest expense.
Earnings in the Plastic Products Business in the first quarter of 1995 were
adversely impacted by the mild flu season, higher resin costs and
competition-driven price reductions for plastic jars.
The provision for income taxes decreased $467,000 during the three months ended
March 31, 1995 as compared to the same period in 1994 due to lower pretax
earnings.
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.
- 9 -
<PAGE> 10
Financial Condition
During the first quarter of 1995, the principal use of cash flow was to fund
increased operating working capital requirements of $6,212,000, primarily
related to the lower levels of payables in the Plastic Products Business and
the seasonal increase in inventories and receivables related to the Consumer
Products Business. During the first quarter of 1995, operating working capital
requirements were reduced by $4,478,000 of net proceeds from related to the
sale of receivables under the Company's Accounts Receivable Facility. Cash
flow was also used to fund investing activities, primarily capital expenditures
of $1,097,000. Cash flow was provided from financing activities consisting of
an increase in short-term debt of $3,800,000. Cash flow was also provided
through the reduction of the Company's cash balances of $2,090,000.
During the first quarter of 1994, the principal use of cash flow was to fund
increased operating working capital requirements of $8,196,000, primarily
related to the seasonal increase in receivables and inventories related to the
Consumer Products Business. Cash flow was also used to fund investing
activities, primarily capital expenditures of $1,020,000. Cash flow was
provided through the reduction of the Company's cash balances of $7,648,000.
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 lines of credit limit the payment of dividends on Common Stock.
Under the most restrictive covenant of such agreements, $500,000 was available
for the payment of dividends on Common Stock as of March 31, 1995.
The ratio of current assets to current liabilities at both March 31, 1995 and
December 31, 1994 was 2.5. The ratio of total debt to total capitalization
increased to 64.6% at March 31, 1995 from 62.7% at December 31, 1994 due
primarily to higher levels of short-term debt.
At March 31, 1995, the Company had unused sources of liquidity consisting of
cash and cash equivalents of $171,000, unused committed credit under bank lines
of credit of $5,700,000, of which $4,563,000 could be borrowed under the terms
of the Company's Senior Note Agreement, tax net operating loss carryforwards of
$4,524,000 and certain tax credit carryforwards of $1,830,000.
Effective April 18, 1995, the Company increased its existing short-term
financing from a total of $20,000,000 to a total of $25,000,000, which
includes: 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, ii) a $10,000,000 line of
credit committed through April 30, 1996 and iii) a $5,000,000 line of credit
committed through June 30, 1995.
The Company believes that its financial resources, including internally
generated funds and amounts available under its Accounts Receivable Facility
and lines of credit, are adequate to meet its foreseeable needs.
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 approximately $1,900,000.
- 10 -
<PAGE> 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a. The Annual Meeting of Stockholders of the Company was held on April 25,
1995 in Los Angeles, California.
b. In addition to the election of Directors, the stockholders approved the
adoption of the Amended and Restated 1993 Employee Stock Option Plan. The
holders of 2,491,345 shares of Common Stock voted affirmatively for this
proposal, holders of 229,218 shares of Common Stock voted against this
proposal and holders of 575,691 shares of Common Stock withheld.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Amendment dated March 24, 1995 of the Note Agreement dated as of
September 15, 1993 between Kerr Group, Inc. and the Purchasers identified
therein.
10.2 Extension dated April 18, 1995 of Line of Credit between PNC Bank,
N.A. and Kerr Group, Inc.
10.3 Amendment dated April 18, 1995 of 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.
10.4 Third amendment of lease dated March 11, 1986 between Northrop
Corporation, predecessor in interest to State Teachers Retirement System,
and Kerr Group, Inc.
b. Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended March
31, 1995.
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.
May 12, 1995 By /s/ D. Gordon Strickland
-----------------------------
D. Gordon Strickland
Senior Vice President, Finance,
Chief Financial Officer
May 12, 1995 By /s/ J. Stephen Grassbaugh
-----------------------------
J. Stephen Grassbaugh
Vice President, Controller,
Chief Accounting Officer
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<PAGE> 1
Exhibit 10.1
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: March 24, 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>
Dec. 31, 1993 - June 30, 1994 1.20 to 1
July 1, 1994 - Sept. 30, 1995 1.30 to 1
Oct. 1, 1995 - Dec. 31, 1995 1.40 to 1
Jan. 1, 1996 - June 30, 1996 1.50 to 1
July 1, 1996 - 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 - June 30, 1996 1.90 to 1
July 1, 1996 - Nov. 30, 1996 1.60 to 1
Dec. 1, 1996 - June 30, 1997 1.85 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.
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/ D.G. Strickland
-------------------------------------
Title: Senior Vice President, Finance
Chief Financial Officer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
----------------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------------
BARNETT & CO.
By:
--------------------------------------------
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<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.
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/ D.G. Strickland
-------------------------------------
Title: Senior Vice President, Finance
Chief Financial Officer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Gianfranco Capasso
--------------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------------
BARNETT & CO.
By:
--------------------------------------------
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<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.
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/ D.G. Strickland
-------------------------------------
Title: Senior Vice President, Finance
Chief Financial Officer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
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
--------------------------------------------
BARNETT & CO.
By:
--------------------------------------------
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<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.
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/ D.G. Strickland
-------------------------------------
Title: Senior Vice President, Finance
Chief Financial Officer
The foregoing Agreement is hereby agreed to as of the date thereof.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
--------------------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
--------------------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
--------------------------------------------
BARNETT & CO.
By: /s/ Richard McCormick
--------------------------------------------
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<PAGE> 1
Exhibit 10.2
April 18, 1995
Kerr Group, Inc.
1840 Century Park East
Los Angeles, CA 90067
Attention: Geoffrey A. Whynot
Treasurer
Re: Extension of $5,000,000 Committed Line of Credit
Gentlemen:
We are pleased to inform you that the Maturity Date, as set forth in
that certain Line of Credit Letter Agreement dated May 2, 1994, as amended,
pursuant to which PNC Bank, National Association makes available to Kerr Group,
Inc. a $5,000,000 committed line of credit (the "Line of Credit Agreement") and
the Expiration Date, as set forth in the Note dated May 2, 1994 executed and
delivered pursuant to that Line of Credit Agreement, have been extended from
April 30, 1995 to June 30, 1995. All other terms and conditions of the Note
and the Line of Credit Agreement remain in full force and effect.
It has been a pleasure working with you and I look forward to a
continued successful relationship. Thank you again for your business.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
/s/ Anthony Trunzo
Anthony Trunzo
Vice President
<PAGE> 1
Exhibit 10.3
April 18, 1995
Kerr Group, Inc.
1840 Century Park East
Los Angeles, CA 90067
Attention: Geoffrey A. Whynot
Treasurer
Re: Amendment of certain provisions of
the Receivables Purchase Agreement
Gentlemen:
Reference is hereby made to that certain Receivables Purchase
Agreement dated as of January 19, 1995 by and between Kerr Group, Inc. (the
"Seller") and PNC Bank, National Association (the "Purchaser"), as amended by
that certain letter agreement dated February 24, 1995 by and between the Seller
and the Purchaser (the Purchase Agreement, as it has been and may be from time
to time amended, modified, or replaced, the "Purchase Agreement"). All
capitalized terms used herein but not defined herein shall have the meanings
ascribed thereto in the Purchase Agreement.
The Seller has requested that the Purchaser agree to modify the
definition of Maximum Purchaser's Net Investment to increase the amount of the
net investment to $10,000,000, effective as of April 19, 1995. Subject to the
terms and conditions of this letter, the Purchaser is willing to amend the
Purchase Agreement as set forth below.
1. The definition of the term, "Maximum Purchaser's Net Investment"
contained in Section 1.1 of the Purchase Agreement is hereby amended
and restated to read in its entirety as follows:
"Maximum Purchaser's Net Investment" means: (i) for the period from
January 19, 1995 up to and including April 18, 1995, Five Million
Dollars ($5,000,000); and (ii) thereafter, Ten Million Dollars
($10,000,000).
2. Section 8.1 of the Purchase Agreement is hereby amended by the
deletion of clause (n) in its entirety therefrom.
<PAGE> 2
Kerr Group, Inc. Exhibit 10.3
April 18, 1995
Page 2
Except as specifically amended hereby, all other terms and conditions
of the Purchase Agreement remain in full force and effect.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
/s/ Anthony Trunzo
Anthony Trunzo
Vice President
Consented and agreed to this 18 day of April, 1995
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
-------------------------
Title: Treasurer
-----------------------
<PAGE> 1
Exhibit 10.4
THIRD AMENDMENT TO LEASE
STATE TEACHERS' RETIREMENT SYSTEM
1840 Century Park East
Los Angeles, California 90067
Date: As of January 1, 1995
KERR GROUP, INC.
1840 Century Park East
Los Angeles, California 90067
Attn: Mr. Larry Knipple
Re: Amendment of that certain Lease dated March 11, 1986
(the "OFFICE LEASE"), between Northrop Corporation,
predecessor-in-interest to State Teachers' Retirement
System, a retirement system created pursuant to the
laws of the State of California ("LANDLORD") and Kerr
Glass Manufacturing Corporation, predecessor-in-
interest to Kerr Group, Inc., a Delaware corporation
("TENANT"), as amended by that certain Amendment to
Lease dated September 30, 1986 between Landlord and
Tenant (the "FIRST AMENDMENT"), and that certain
Amendment to Lease #2 dated August 17, 1989 between
Landlord and Tenant (the "SECOND AMENDMENT")
concerning approximately 40,215 rentable square feet
of space located on the fourth (4th), fifth (5th) and
sixth (6th) floors and commonly known as Suites 400,
450, 500, 640, 650 and 660 (collectively the
"EXISTING PREMISES") in the building located at 1840
Century Park East (the "BUILDING"). The Office
Lease, First Amendment and Second Amendment are
referred to herein collectively as the "LEASE."
Ladies and Gentlemen:
In consideration of the mutual promises contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Landlord and Tenant hereby agree to and do hereby amend
the Lease in the following respects.
1. Premises. As of January 1, 1995 (the "NEW PREMISES
COMMENCEMENT DATE"), the "PREMISES" shall consist of the "New Premises" and the
"Subleased Premises," as those terms are defined in this Section 1 and Section
6.1, below, respectively. The "NEW PREMISES" shall contain approximately
23,166 rentable (21,148 usable) square feet of space in the Building,
consisting of, collectively, Suite 450, containing approximately 3,803 rentable
(3,311 usable) square feet, Suite 500, containing approximately 16,678 rentable
(15,616 usable) square feet,
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and Suite 650, containing approximately 2,685 rentable (2,221 usable) square
feet of space. The New Premises are further described on Exhibit "A", attached
hereto.
2. Term. The Termination Date of the New Premises is hereby
extended to midnight on December 31, 2004. The termination date of the
Subleased Premises shall remain October 31, 1996, as set forth in Section 6.1,
below.
3. Base Rent.
3.1 Base Rent. Notwithstanding anything to the contrary
contained in the Lease, Landlord and Tenant hereby agree that as of the New
Premises Commencement Date, Base Rent for the New Premises shall be as set
forth below.
<TABLE>
<CAPTION>
Annual Base Rent
New Premises - Total Annual Total Monthly (per rentable
Months of Lease Term Base Rent Amount of Base Rent square foot)
-------------------- --------- ------------------- ------------
<S> <C> <C> <C>
January, 1995- $544,401.00 $45,366.75 $23.50
December, 1999
January, 2000- $648,648.00 $54,054.00 $28.00
December, 2004
</TABLE>
3.2 Rent Credit Period. Tenant shall not be required to
pay an amount equal to Forty-Five Thousand Three Hundred Sixty-Six and 75/100
Dollars ($45,366.75) per month for the period from January, 1995 through June,
1995, which amount is equal to the monthly Base Rent for the New Premises which
is attributable to the first six (6) months of the Term beginning on the New
Premises Commencement Date.
4. Building Operating Costs.
4.1 Base Year. As of the New Premises Commencement Date,
the Base Year for purposes of determining Tenant's Proportionate Share of the
Building Operating Costs for the New Premises only shall be the calendar year
1995.
4.2 Tenant's Proportionate Share. As of the New Premises
Commencement Date, Tenant's Proportionate Share of Building Operating Costs for
the New Premises only shall be 7.683%.
4.3 Building Operating Expenses.
4.3.1 Capital Improvements. Notwithstanding
anything to the contrary set forth in the Lease, as of the New Premises
Commencement Date, Subsection 4(b)(1)(b) is
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hereby modified such that the following is included in the definition of
"Building Operating Costs":
"The cost of capital improvements or other costs incurred in connection with
the Building (A) which are intended as a labor-saving device or to affect other
economies in the operation or maintenance of the Building, or any portion
thereof, or (B) that are required under any governmental law or regulation but
which were not so required in connection with the Building or Land as of the
New Premises Commencement Date, provided, however, that each such permitted
capital expenditure shall be amortized (including interest on the unamortized
cost) over its useful life as Landlord shall reasonably determine.
Notwithstanding anything in item (B), above, to the contrary, in no event shall
(i) the aggregate cost of items and expenses to be included in Tenant's
Proportionate Share of Building Operating Costs pursuant to the terms of item
(B), above, exceed an amount equal to (a) 60/100 Dollars ($.60) per rentable
square foot of the Premises at any given time during the period from January,
1995 through December, 1999, and (b) 90/100 Dollars ($.90) per rentable square
foot of the Premises at any given time during the period from January, 2000
through December, 2004, and (ii) any capital costs incurred by Landlord as a
result of the January, 1994 Northridge earthquake (including but not limited to
any costs incurred as a result of Los Angeles City Municipal Ordinance No.
170406) be included in Tenant's Proportionate Share of Building Operating
Costs."
4.3.2 As of the New Premises Commencement Date,
Subsection 4(b)(1)(a) is hereby modified such that the following language is
added after the last sentence therein:
"The amount of all taxes payable by Landlord under this Lease for the 1995 Base
Year shall be known as "Base Taxes". If in any comparison year subsequent to
the Base Year, the amount of all taxes payable under this Lease by Landlord
decreases to an amount less than the Base Taxes, then for purposes of all
subsequent comparison years, including the comparison year in which such
decrease in taxes occurred, the Base Year Operating Costs shall be decreased by
an amount equal to the reduction in taxes below the amount of the Base Taxes.
In addition, anything contained in the Lease to the contrary notwithstanding,
Tenant acknowledges and agrees that for so long as the Building and Land is
owned by the State of California or any local public entity of government,
including, without limitation, a state public retirement system, this Lease and
the Tenant's interest hereunder may constitute a possessory interest subject to
the payment of property taxes levied on the "full cash value" of that interest
(the "POSSESSORY INTEREST TAX"). The full cash value, as defined in Sections
110 and 110.1 of the California Revenue and Taxation Code, of the possessory
interest upon which property taxes will be based will equal the greater of (A)
the full cash value of the possessory interest, or (B) if Tenant has leased
less than all of the Building and Land, Tenant's Proportionate Share of the
full cash value of the Building and Land that would have been enrolled if the
Building and Land had been subject to property tax upon acquisition by the
state public retirement system; provided, however, that Landlord
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agrees that during the remainder of the Lease Term commencing on the New
Premises Commencement Date that the Possessory Interest Tax allocable to Tenant
shall not exceed Tenant's Proportionate Share of the ad valorem real property
taxes that would have otherwise been payable by Tenant under this Lease."
5. Rent Reimbursement. Upon the full execution and delivery of
this Third Amendment to Lease, Landlord shall deliver to Tenant a check in the
amount of Two Hundred Ninety-Two Thousand Two Hundred Fifty-Five and 11/100
Dollars ($292,255.11), which amount is equal to the sum of (i) the Base Rent
paid by Tenant under the Lease for the New Premises and the Subleased Premises
in excess of that due under this Third Amendment to Lease for the months of
January through March, 1995, (ii) the Base Rent paid by Tenant under the Lease
for "Suite 660", as that term is defined below, for the months of January
through March, 1995, (iii) all of Tenant's Proportionate Share of Building
Operating Costs for the New Premises and the Subleased Premises paid by Tenant
to Landlord for the months of January through March, 1995, and (iv) any monthly
parking expenses, exclusive of taxes, paid by Tenant under the Lease for the
months of January through March, 1995, for up to sixty-six (66) unreserved
parking passes.
6. Subleased Premises.
6.1 Term. Tenant has sublet a portion of the Existing
Premises (other than the New Premises) which consists of (i) approximately
2,843 rentable square feet commonly known as Suite 640 and located on the sixth
(6th) floor of the Building ("SUITE 640") and (ii) approximately 12,876
rentable square feet commonly known as Suite 400 and located on the fourth
(4th) floor of the Building ("SUITE 400") (collectively, "SUBLEASED PREMISES").
The Subleased Premises are further described on Exhibit "A" attached hereto.
Tenant shall continue to lease the Subleased Premises through October 31, 1996
(the "SUBLEASED PREMISES TERMINATION DATE"), pursuant to the terms and
conditions of the Lease and subject to the terms and conditions set forth in
this Section 6. The period from the New Premises Commencement Date until the
Subleased Premises Termination Date shall be referred to herein as the
"SUBLEASED PREMISES TERM." As of the Subleased Premises Termination Date, the
lease of the Subleased Premises shall terminate and Tenant shall vacate, or
cause any subtenants or occupants thereof to vacate, the Subleased Premises,
and return Subleased Premises to Landlord in the condition as required pursuant
to the terms of the Lease.
6.2 Base Rent and Tenant's Proportionate Share.
Effective as of the New Premises Commencement Date and continuing throughout
the Subleased Premises Term, Tenant shall pay Base Rent for (i) Suite 640 at
the rate of Three Thousand Eight Hundred Twenty-Nine and 50/100 Dollars
($3,829.50) per month, and (ii) the Suite 400 at the rate of Sixteen Thousand
Seven Hundred Nineteen and 00/100 Dollars ($16,719.00) per month.
Notwithstanding anything to the contrary set forth in the Lease, as amended by
this Third Amendment to Lease,
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<PAGE> 5
Tenant shall not be required to pay Tenant's Proportionate Share of Building
Operating Costs for the Subleased Premises during the Subleased Premises Term;
provided, however, that Tenant shall remain liable for Tenant's Proportionate
Share of Building Operating Costs for the Subleased Premises for the period of
time prior to the Subleased Premises Term.
7. Reduction of Existing Premises. The portion of the Existing
Premises other than the New Premises and the Subleased Premises is known as
"SUITE 660" and consists of approximately 1,933 rentable square feet of space
on the sixth floor of the Building and is further described on Exhibit "A"
attached hereto. Effective as of December 31, 1994 (the "SUITE 660 EXPIRATION
DATE") and conditioned upon the performance by the parties of the provisions of
this Third Amendment to Lease, Landlord and Tenant hereby agree that Landlord
and Tenant shall, as of the Suite 660 Expiration Date, be fully and
unconditionally released and discharged from their respective obligations
arising under the Lease after the Suite 660 Expiration Date with respect to
Suite 660 only, provided that Tenant shall remain liable with respect to the
period of its occupancy of Suite 660 following the Suite 660 Expiration Date
for the performance of all its obligations under the Lease. Tenant hereby
agrees to vacate Suite 660 and surrender and deliver exclusive possession
thereof to Landlord on or before March 31, 1995 in accordance with the
provisions of the Lease.
8. Tenant Improvements. Except as specifically set forth in the
Lease, as amended by this Third Amendment to Lease, Landlord shall not be
obligated to provide or pay for any improvement work or services related to the
improvement of the Premises. Tenant acknowledges that as of the date hereof,
Tenant is occupying the Premises and as such agrees to accept the Premises in
its presently existing "as-is" condition. Tenant shall be entitled, however,
to a one-time allowance (the "ALTERATIONS ALLOWANCE") in the amount of
Seventeen and 50/100 Dollars ($17.50) for each of the 23,166 rentable square
feet of the New Premises, or Four Hundred Five Thousand Four Hundred Five and
00/100 Dollars ($405,405.00) for reimbursement to Tenant of the costs relating
to Tenant's construction of improvements to the New Premises (the "NEW
ALTERATIONS"), provided that Tenant's construction of the New Alterations shall
be subject to the terms of Article 10 of the Office Lease. In connection with
Tenant's construction of the New Alterations, Tenant shall not be required to
pay a coordination fee to Landlord. Tenant will competitively bid the New
Alterations to a minimum of three (3) general contractors. The selection of
the bidding general contractors and subcontractors who will perform the New
Alterations shall be subject to the mutual reasonable approval by Landlord and
Tenant. Additionally, the general contractor and subcontractors will not be
charged for parking or elevator usage in the Building during the construction
of the New Alterations. The portion of the Alterations Allowance not paid to
Tenant pursuant to the terms of the following sentence shall be held by
Landlord and may be utilized by Tenant for New Alterations in the New Premises
at any time during the remainder of the Term.
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Within fifteen (15) days after the full execution and delivery
of this Third Amendment to Lease, Landlord shall deliver to Tenant a check in
the amount of Two Hundred Eighty-Nine Thousand Five Hundred Seventy-Five and
No/100 Dollars ($289,575.00), which amount is equal to Twelve and 50/100
Dollars ($12.50) for each of the 23,166 rentable square feet of the New
Premises, and which amount shall be deducted from the Alterations Allowance
upon payment to Tenant.
9. Parking. Notwithstanding anything to the contrary contained
in the Lease, (i) commencing on the New Premises Commencement Date and
continuing throughout the Term and the "Option Period," as that term is defined
in Section 10.1, below, if applicable, Tenant shall have the right to rent
sixty-nine (69) parking passes (which amount includes one pass for valet
parking) with respect to the New Premises (i.e., 3 spaces per 1,000 rentable
square feet of the New Premises times 23,166 rentable square feet) and (ii)
commencing on the New Premises Commencement Date and continuing throughout the
Subleased Premises Term, Tenant shall have the right to rent forty-seven (47)
parking passes with respect to the Subleased Premises (i.e., 3 spaces per 1,000
rentable square feet of the Subleased Premises times 15,719 rentable square
feet), subject to the terms set forth in Exhibit F to the Office Lease, except
as revised pursuant to this Third Amendment to Lease. Tenant shall pay to
Landlord or the parking garage operator the prevailing monthly rate for such
parking passes (provided that the valet parking pass shall be rented by Tenant
at the same rate as an unreserved parking pass) utilized by Tenant.
Notwithstanding anything to the contrary set forth in the preceding sentence,
Tenant shall not be required to pay any charges for sixty-six (66) of such
parking passes during the period from January, 1995, through June, 1995,
provided that Tenant shall be responsible for any taxes imposed by any
governmental authority in connection with the renting of all such parking
passes by Tenant or the use of such parking facility by Tenant.
10. Option Term.
10.1 Option Right. Landlord hereby grants Kerr Group,
Inc. (the "ORIGINAL TENANT") one (1) option to extend the Lease Term for a
period of five (5) years (the "OPTION TERM"), which option shall be exercisable
only by written notice delivered by Tenant to Landlord as provided below,
provided that, as of the date of delivery of such notice, Tenant is not in
default under this Lease and Tenant has not previously been in default under
this Lease more than once. Upon the proper exercise of such option to extend,
and provided that, as of the end of the initial Lease Term, Tenant is not in
default under this Lease and Tenant has not previously been in default under
this Lease more than once, the Lease Term, as it applies to the Premises, shall
be extended for a period of five (5) years. The rights contained in this
Section 10 shall be personal to the Original Tenant and may only be exercised
by the Original Tenant (and not any assignee, sublessee or other transferee of
Tenant's interest in this Lease) if the Original Tenant occupies the entire New
Premises.
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10.2 Option Rent. The Rent payable by Tenant during the
Option Term (the "OPTION RENT") shall be equal to the rent (including
additional rent and considering any "base year" or "expense stop" applicable
thereto), including all escalations, at which tenants, as of the commencement
of the Option Term, are leasing non-sublease, non-encumbered space comparable
in size, location and quality to the New Premises for a term of five (5) years,
which comparable space is located in the Building, taking into consideration
the following concessions: (a) rental abatement concessions, if any, being
granted such tenants in connection with such comparable space and (b) tenant
improvements or allowances provided or to be provided for such comparable
space, taking into account, and deducting the value of, the existing
improvements in the Premises, such value to be based upon the age, quality and
layout of the improvements and the extent to which the same could be utilized
by Tenant based upon the fact that the precise tenant improvements existing in
the Premises are specifically suitable to Tenant.
10.3 Exercise of Options. The option contained in this
Section 10 shall be exercised by Tenant, if at all, and only in the following
manner: (i) Tenant shall deliver written notice to Landlord not more than
twenty-four (24) months nor less than eighteen (18) months prior to the
expiration of the initial Lease Term, stating that Tenant is interested in
exercising its option; (ii) Landlord, after receipt of Tenant's notice, shall
deliver notice (the "OPTION RENT NOTICE") to Tenant not less than sixteen (16)
months prior to the expiration of the initial Lease Term, setting forth the
Option Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall,
on or before the earlier of (A) the date occurring fifteen (15) months prior to
the expiration of the initial Lease Term, and (B) the date occurring thirty
(30) days after Tenant's receipt of the Option Rent Notice, exercise the option
by delivering written notice thereof to Landlord.
11. Broker. Landlord and Tenant hereby warrant to each other that
they have had no dealings with any real estate broker or agent in connection
with the negotiation of this Third Amendment to Lease other than Travers Realty
Corporation (the "BROKER"), and that they know of no other real estate broker
or agent who is entitled to a commission in connection with this Third
Amendment to Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission
or equivalent compensation alleged to be owing on account of any dealings with
any real estate broker or agent, other than the Broker, occurring by, through,
or under the indemnifying party.
12. Landlord Exculpation. It is expressly understood and agreed
that notwithstanding anything in the Lease to the contrary, and notwithstanding
any applicable law to the contrary, the liability of Landlord hereunder
(including any successor landlord) and any recourse by Tenant against Landlord
shall be limited solely and exclusively to the interest of Landlord in and to
the Building and Land, and neither Landlord, nor any of its constituent
partners, shall have any
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<PAGE> 8
personal liability therefor, and Tenant hereby expressly waives and releases
such personal liability on behalf of itself and all persons claiming by,
through or under Tenant.
This Third Amendment to Lease is being executed by Trust Company of
the West on behalf of Landlord. No present or future officer, director,
employee, trustee, member, retirant, beneficiary, internal investment
contractor, investment manager or agent of Landlord shall have any personal
liability, directly or indirectly, and recourse shall not be had against any
such officer, director, employee, trustee, member, retirant, beneficiary,
internal investment contractor, investment manager or agent under or in
connection with the Lease, as amended by this Third Amendment to Lease, or any
other document or instrument heretofore or hereafter executed in connection
with the Lease, as amended by this Third Amendment to Lease. Tenant hereby
waives and releases any and all such personal liability and recourse. The
limitations of liability provided in this Section 12 are in addition to, and
not in limitation of, any limitation on liability applicable to Landlord
provided by law or in any other contract, agreement or instrument.
13. Compliance With Law. As of the New Premises Commencement Date
the last sentence of Paragraph 8(a) shall be deleted in its entirety and
replaced with the following:
"Landlord shall, at Landlord's sole cost and expense, cause the common areas on
the fourth and sixth floors of the Building to comply with any law, statute,
ordinance or other governmental rule, regulation or requirement (collectively,
"LAWS"), which are being enforced as of the New Premises Commencement Date.
Tenant shall, at its sole cost and expense, comply with all such Laws, now in
force or which may hereafter be enacted or promulgated which relate to the
Premises and, to the extent required by Tenant's use of the Premises or
Tenant's alterations of the Premises, which relate to the Building; provided
that Landlord shall comply with all such Laws which relate to the portion of
the Building and the Land outside the Premises (the cost of which compliance
obligations shall be included in Building Operating Expenses to the extent
permitted pursuant to the terms of Section 4 of the Office Lease and Section 4
of this Third Amendment to Lease), unless such compliance obligations are
triggered by Tenant's construction of the New Alterations in the Premises, in
which event such compliance obligations shall be at Tenant's sole cost and
expense."
14. Remedies on Default.
14.1 Event of Default Addition. Section 23 of the Office
Lease is hereby amended to include a new subparagraph 23(h) stating as follows:
"23(h) In the event of any default by Tenant, Landlord shall have the remedy
described in California Civil Code Section 1951.4 (lessor may continue lease in
effect after lessee's breach and abandonment and recover rent as it becomes
due, if lessee has the right to sublet or assign, subject only to reasonable
limitations). Accordingly, if Landlord does not elect to terminate this Lease
on account of any default by Tenant, Landlord may, from time to time, without
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terminating this Lease, enforce all of its rights and remedies under this
Lease, including the right to recover all rent as it becomes due."
14.2 Interest Charged Upon Default by Tenant. Section
23(d) of the Lease is hereby deleted and in its place the following is
inserted:
"The 'worth at the time of award' of the amounts referred to in Section
23(c)(ii) is computed by allowing interest at the legal rate. The worth at the
time of award of the amount referred to in Section 23(c)(iii), above, is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%)."
15. Additions to Office Lease.
15.1 Subparagraph 4(b)(2)(e). Subparagraph 4(b)(2)(e) of
the Office Lease is hereby amended to insert the words "by the parties or, if
the parties are unable to reach a mutual final determination, by a court of
law" in the second sentence after the words "final determination thereof."
15.2 Paragraph 13(a). Paragraph 13(a) of the Office Lease
is hereby amended to insert the words "Presidents' Day, Memorial Day" after the
words "(except on the holidays known as..."
16. Building Services. Notwithstanding anything to the contrary
set forth in the Lease, Subparagraph 13(a)(vi) of the Office Lease is hereby
modified such that if Tenant utilizes central heating, ventilation and
air-conditioning provided by Landlord outside normal hours, Tenant shall pay to
Landlord the sum of $90.00 an hour per floor, which amount may be subsequently
modified by Landlord if Landlord's cost of providing such services to Tenant,
including a reasonable charge for Landlord's administrative expenses, exceeds
such sum.
17. Insurance. Notwithstanding anything to the contrary set forth
in Section 21(b) of the Office Lease, Tenant's insurance policy, as more
particularly described in Section 21(b) of the Office Lease shall name
Landlord, Trust Company of the West, TCW Realty Advisors and CB Commercial Real
Estate Group, Inc., as additional insureds.
18. Acknowledgment, Representation And Warranty Regarding
Prohibited Transactions. Tenant hereby acknowledges that Landlord is a unit of
the California State and Consumer Services Agency established pursuant to Title
I, Division 1, Part 13 of the California Education Code, Sections 22000 et
seq., as amended (the "ED CODE"). As a result, Landlord is prohibited from
engaging in certain transactions with a "school district or other employing
agency" or a "member, retirant or beneficiary" (as those terms are defined in
the Ed Code). In addition, Landlord may be subject to certain restrictions and
requirements under the Internal Revenue Code, 26 U.S.C. Section 1 et seq. (the
"CODE"). Accordingly, Tenant represents and
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<PAGE> 10
warrants to Landlord that (a) Tenant is neither a school district or other
employing agency nor a member, retirant or beneficiary; (b) has not made any
contribution or contributions to Landlord; (c) neither a school district or
other employing agency, nor a member, retirant or beneficiary, nor any person
who has made any contribution to Landlord, nor any combination thereof, is
related to Tenant by any relationship described in Section 267(b) of the Code;
(d) neither Trust Company of the West, its affiliates, related entities,
agents, officers, directors or employees, nor any State Teachers' trustee,
agent, related entity, affiliate, employee or internal investment contractor
(both groups collectively, "LANDLORD AFFILIATES") has received or will receive,
directly or indirectly, any payment, consideration or other benefit from, nor
does any Landlord Affiliate have any agreement or arrangement with Tenant or
any person or entity affiliated with Tenant relating to the transactions
contemplated by this Lease; and (e) no Landlord Affiliate has any direct or
indirect ownership interest in Tenant or any person or entity affiliated with
Tenant.
19. Waiver of Costs Incurred. Notwithstanding anything to the
contrary set forth in the Lease, as a material condition precedent to Landlord
and Tenant entering into this Third Amendment to Lease, the parties hereby
agree that no sums are due and owing from one party to the other party pursuant
to the terms of the Lease for the period of the Lease term prior to the New
Premises Commencement Date. The parties further hereby agree that if any sums
are found to be due and owing pursuant to the terms of the Lease by either
party to the other party for the period prior to the New Premises Commencement
Date, such sum, if any, is hereby deemed waived by the party owed such sum.
20. Waiver of Consequential Damages. Notwithstanding anything to
the contrary contained in the Lease, Landlord shall not be liable to Tenant and
Tenant hereby waives any claim against Landlord for any consequential damages
incurred by Tenant as a result of Landlord's acts or omissions or failure to
provide services or utilities as required by the Lease, as amended by this
Third Amendment to Lease.
21. Fire Or Casualty Damage. Notwithstanding anything to the
contrary contained in Article 19 of the Lease, if the Premises or Building are
damaged by fire or other cause, then, in addition to the grounds for
termination set forth in Sections 19(a) and 19(c) of the Office Lease, Landlord
may elect not to rebuild and/or restore the Premises or Building and may
instead terminate this Lease, whether or not the Premises are affected, if
either: (i) the repairs cannot reasonably be completed within one hundred
eighty (180) days of the date of damage (when such repairs are made without the
payment of overtime or other premiums), or (ii) the cost of such damage which
is not covered, excluding deductible amounts, by Landlord's insurance policies,
is in excess of (a) Two Million Dollars ($2,000,000.00) during the period from
January, 1995 through December, 1999 or (b) One Million Dollars ($1,000,000.00)
during the period from January, 2000 through December, 2004, provided that
Landlord does not commence rebuilding and/or restoring the Premises or Building
for a period equal to at least one (1) year following the date Landlord
notifies Tenant in writing of Landlord's election to terminate the
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[Kerr Group, Inc.]
<PAGE> 11
Lease pursuant to the terms of items (i) or (ii), above. Landlord shall notify
Tenant in writing of Landlord's election to terminate this Lease within sixty
(60) days after the date such damage becomes known to Landlord, such notice to
include a termination date giving Tenant sixty (60) days to vacate the
Premises. If Landlord terminates this Lease, the Rent shall be apportioned and
paid to the date of termination.
22. Deletions from Lease. Effective as of the New Premises
Commencement Date, the parties hereby agree that Articles 28(a), 48 and 49 of
the Office Lease and Section 1 of the Second Amendment shall be deemed deleted
in their entirety and of no force or effect.
23. Landlord Default. In the event that Tenant is prevented from
using, and does not use, the Premises or any portion thereof, as a result of
(i) any repair, maintenance or alteration performed by Landlord, or which
Landlord failed to perform, after the New Premises Commencement Date and
required by the Lease, which substantially interferes with Tenant's use of the
Premises, or (ii) any failure to provide services or access to the Premises as
a result of any cause within Landlord's reasonable control or as a direct
result of Landlord's negligence or willful misconduct or if Landlord is not
proceeding diligently to correct such failure (each such set of circumstances
as set forth in items (i) and (ii), above, to be known as an "ABATEMENT
EVENT"), then Tenant shall give Landlord notice of such Abatement Event, and if
such Abatement Event continues for five (5) consecutive business days after
Landlord's receipt of any such notice (the "ELIGIBILITY PERIOD"), then the Base
Rent and Tenant's Proportionate Share of the Building Operating Costs shall be
abated or reduced, as the case may be, after expiration of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Premises or a portion thereof, in the proportion that the
rentable area of the portion of the Premises that Tenant is prevented from
using, and does not use, bears to the total rentable area of the Premises;
provided, however, in the event that Tenant is prevented from using, and does
not use, a portion of the Premises for a period of time in excess of the
Eligibility Period and the remaining portion of the Premises is not sufficient
to allow Tenant to effectively conduct its business therein, and if Tenant does
not conduct its business from such remaining portion, then for such time after
expiration of the Eligibility Period during which Tenant is so prevented from
effectively conducting its business therein, the Base Rent and Tenant's
Proportionate Share of the Building Operating Costs for the entire Premises
shall be abated for such time as Tenant continues to be so prevented from
using, and does not use, the Premises. If, however, Tenant reoccupies any
portion of the Premises during such period, the Rent allocable to such
reoccupied portion, based on the proportion that the rentable area of such
reoccupied portion of the Premises bears to the total rentable area of the
Premises, shall be payable by Tenant from the date Tenant reoccupies such
portion of the Premises. Such right to abate Base Rent and Tenant's
Proportionate Share of the Building Operating Costs shall be Tenant's sole and
exclusive remedy at law or in equity to abate Base Rent and Tenant's
Proportionate Share of the Building Operating Costs, or, as set forth below, to
terminate this Lease, for an Abatement Event; provided, however, that nothing
in this Section 23 shall be construed to limit Tenant's
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[Kerr Group, Inc.]
<PAGE> 12
legal or equitable rights or remedies to seek damages as a result of an
Abatement Event. In the event that Landlord has not cured such Abatement Event
within one hundred eighty (180) days after receipt of notice from Tenant,
Tenant shall have the right to terminate this Lease during the first five (5)
business days of each calendar month following the end of such 180-day period
until such time as Landlord has cured the Abatement Event, which right may be
exercised only by delivery of notice to Landlord (the "ABATEMENT EVENT
TERMINATION NOTICE") during such five (5) business-day period, and shall be
effective as of a date set forth in the Abatement Event Termination Notice (the
"ABATEMENT EVENT TERMINATION DATE"), which Abatement Event Termination Date
shall not be less than ten (10) business days, and not more than six (6)
months, following the delivery of the Abatement Event Termination Notice.
Except as provided in this Section 22, nothing contained herein shall be
interpreted to mean that Tenant is excused from paying Rent due hereunder.
Except as explicitly set forth in this Third Amendment to Lease, all
defined terms herein shall have their respective meanings as set forth in the
Lease and the terms and provisions of the Lease shall be and remain in full
force and effect. In the event of a conflict between the terms and provisions
of the Lease and this Third Amendment to Lease, the terms and provisions of
this Third Amendment to Lease shall control.
"LANDLORD":
STATE TEACHERS' RETIREMENT SYSTEM, a retirement
system created pursuant to the laws of the
State of California
By: TRUST COMPANY OF THE WEST,
a California corporation, as Investment Manager
By: /s/ Hugh Derstin
----------------------------------
Authorized Signatory
By: /s/ Gary Mears
----------------------------------
Authorized Signatory
THE FOREGOING IS ACCEPTED AND AGREED TO:
"TENANT"
KERR GROUP, INC.
a Delaware corporation
By: /s/ D.G. Strickland
------------------------------------
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[Kerr Group, Inc.]
<PAGE> 13
Its: Senior Vice President
-------------------------------------
By: L.R. Knipple
-----------------------------------------------
Its: Vice President, Secretary
-------------------------------------
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[Kerr Group, Inc.]
<PAGE> 14
EXHIBIT A
NEW PREMISES; SUBLEASED PREMISES; SUITE 660
[Floor plan of 4th floor of premises]
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[Kerr Group, Inc.]
<PAGE> 15
[Floor plan of fifth floor of premises]
EXHIBIT A - Page 2
1840 CENTURY PARK EAST
[Kerr Group, Inc.]
<PAGE> 16
[Floor plan of sixth floor of premises]
EXHIBIT A - Page 3
1840 CENTURY PARK EAST
[Kerr Group, Inc.]
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 171
<SECURITIES> 0
<RECEIVABLES> 17,954
<ALLOWANCES> 121
<INVENTORY> 35,586
<CURRENT-ASSETS> 58,061
<PP&E> 103,832
<DEPRECIATION> 56,415
<TOTAL-ASSETS> 122,817
<CURRENT-LIABILITIES> 23,051
<BONDS> 50,000
<COMMON> 2,113
0
9,748
<OTHER-SE> 20,630
<TOTAL-LIABILITY-AND-EQUITY> 122,817
<SALES> 30,390
<TOTAL-REVENUES> 30,436
<CGS> 21,813
<TOTAL-COSTS> 21,813
<OTHER-EXPENSES> 7,833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,446
<INCOME-PRETAX> (656)
<INCOME-TAX> (269)
<INCOME-CONTINUING> (387)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (387)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
