<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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 Identi-
incorporation or organization) fication Number)
1840 Century Park East, Los Angeles, California 90067
- ----------------------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number,
including area code: (310) 556-2200
--------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
<S> <C>
Common Stock New York Stock Exchange
$1.70 Class B Cumulative Convertible
Preferred Stock, Series D New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
-Continued-
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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. .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / /.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of March 15, 1996, was $25,927,179.
The number of shares of the Registrant's Common Stock, $.50 par value,
outstanding as of March 15, 1996, was 3,933,095.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Part(s) Into
Document Which Incorporated
-------- ------------------
<S> <C>
(1) Proxy Statement to be used in Part III
connection with the Annual
Meeting of Stockholders to be
held on April 30, 1996. With the
exception of the pages of the
Proxy Statement specifically
incorporated by reference herein,
the Proxy Statement is not deemed
to be filed as a part of this
Form 10-K.
</TABLE>
(ii)
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<PAGE> 3
KERR GROUP, INC.
Form 10-K Annual Report
For The Fiscal Year Ended December 31, 1995
PART I
ITEM 1. BUSINESS
1. General
Kerr Group, Inc. (the "Registrant"), a Delaware corporation
which was founded in 1903, operates the Plastic Products Business and, until
March 15, 1996, also operated the Consumer Products Business.
Operations in the Plastic Products Business include the
manufacture and sale of a variety of plastic products, including child-resistant
closures, tamper-evident closures, prescription packaging products, jars, other
closures and containers and the sale of glass prescription products (the
"Plastic Products Business"). Operations in the Consumer Products Business
included the manufacture and sale of caps and lids and the sale of glass jars
and a line of pickling spice and pectin products for home canning which together
with the sale of other related products, including iced tea tumblers and
beverage mugs, constituted the "Consumer Products Business".
On March 15, 1996, the Registrant sold to Alltrista
Corporation (the "Buyer") for approximately $14,500,000 the manufacturing
assets, supplies, work in process inventory and certain trademarks and a
perpetual and exclusive license to use the name "Kerr" in the sale of home
canning supplies. The Registrant also assigned to Buyer the lease on the
Jackson, Tennessee plant where the Registrant manufactured metal caps and lids
for the Consumer Products Business. The Registrant also appointed the Buyer as
sales agent to sell the inventory of home canning supplies produced by the
Registrant before March 15, 1996. The Registrant expects to receive
approximately $16,500,000, primarily during the remainder of 1996, from the sale
to its customers of Consumer Products Business inventory and the collection of
accounts receivable of the Consumer Products Business. The Registrant used a
portion of the proceeds to reduce debt, including $3,500,000 of debt which was
secured by liens on certain equipment, and will use the balance for working
capital and for further reduction of debt.
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<PAGE> 4
On March 15, 1996, the Registrant, in addition to reducing its
indebtedness for borrowed money by $7,500,000, obtained the consent of the
lenders of such indebtedness and the lender under an Accounts Receivable
Agreement to extend, until May 15, 1996, waivers with respect to defaults under
certain financial covenants in loan agreements with the Registrant and to extend
the maturity of a $6,040,000 note, due April 15, 1996, until May 15, 1996. The
Registrant is currently in discussions with the lenders regarding such defaults
and the maturity of such note. After the payment of the $3,500,000 of secured
debt, the indebtedness of the Company was unsecured.
On March 15, 1996, the Registrant also announced a
restructuring which will consolidate certain manufacturing facilities and which
will move the Registrant's principal executive office from Los Angeles,
California to Lancaster, Pennsylvania where the Plastic Products Business is
headquartered. The Registrant expects to realize annualized cost savings from
the restructuring of approximately $6,500,000, which will be substantially
realized in 1997.
In connection with the restructuring, the Registrant said that
Roger W. Norian, who had been President and Chief Executive Officer of the
Registrant since 1980, had elected not to move to Lancaster and that, at the
recommendation of Mr. Norian, he had been replaced as President and Chief
Executive Officer by D. Gordon Strickland, who had been Senior Vice President,
Chief Financial Officer, and General Manager, Consumer Products Business. Mr.
Strickland was also elected as a Director. Mr. Norian has remained as a Director
but has resigned as Chairman.
In connection with the sale of assets of the Consumer Products
Business and the restructuring, the Registrant will report in the first quarter
of 1996 a one-time pretax gain of approximately $2,900,000 on the sale of
certain assets of the Consumer Products Business and a one-time loss on the
restructuring of $7,700,000. In addition to the one-time charge on the
restructuring, the Registrant will incur additional non-recurring pretax charges
of $2,400,000 during 1996 and early 1997 for restructuring related costs that
accounting rules require to be expensed as incurred.
a. Principal Products and Markets; Sales and Customers
The Plastic Products Business accounted for approximately 79%
of the Registrant's total net sales in 1995. The Consumer Products Business
accounted for approximately 21% of the Registrant's total net sales in 1995.
Plastic closures are sold to customers in the pharmaceutical, food, distilled
spirits, toiletries and cosmetics and household chemical industries. Plastic and
glass prescription products are sold to drug wholesalers, drug chains and
independent pharmacists. Plastic bottles and jars are sold to customers in the
pharmaceutical and toiletries and cosmetics industries. Plastic products are
sold nationally, principally by the Registrant's sales force.
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<PAGE> 5
No customer accounted for more than 10% of the Registrant's
net sales in 1995, 1994 or 1993.
b. Competition
Competition in the markets in which the Plastic Products
Business operates is highly fragmented and the Registrant has a number of large
competitors with respect to its Plastic Products Business that compete for sales
on the basis of price, service and quality of product. The Registrant believes
that it is one of the three largest manufacturers of child-resistant plastic
closures. The Registrant has one major competitor in the prescription products
business, who has substantially larger market share than the Registrant. The
Registrant also believes it is the largest domestic manufacturer of plastic
closures incorporating a tamper-evident feature for the liquor market and that
it is one of the leading suppliers of single and double walled jars to the
personal care and cosmetic markets.
c. Backlog
The Registrant does not believe that recorded sales backlog is
a significant factor in its business.
d. Raw Materials and Supplies; Fuel and Energy Matters
The primary raw materials used by the Registrant's Plastic
Products Business are resins. The Registrant has historically been able to
obtain adequate supplies of these items from a number of sources. However, since
resins are derived from petroleum or fossil fuel, shortages of petroleum or
fossil fuel could affect the supply of resins. From time to time, the Registrant
has experienced substantial increases in the cost of resin. To the extent that
the Registrant is unable to pass on resin cost increases, the cost increases
could have a significant impact on the results of operations of the Registrant.
The Plastic Products Business, consistent with industry practice, is generally
able to pass through resin cost increases for all product lines except the
prescription packaging product line. However, in times of rapidly increasing
resin prices, such as experienced in late 1994 and during the first half of
1995, the Registrant's ability to pass through the full impact of resin price
increases on a timely basis is limited.
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<PAGE> 6
e. Product Development, Engineering, Patents and
Licensing
The Registrant carries on a product development and
engineering program with respect to its Plastic Products Business. Expenditures
for such programs during the years ended December 31, 1995, 1994 and 1993 were
approximately $3,300,000, $3,600,000 and $2,000,000, respectively.
Although the Registrant owns a number of United States
patents, including patents for its tamper-evident closures and certain of its
child-resistant closures, it is of the opinion that no one or combination of
these patents is of material importance to its business. The Registrant has
granted licenses on some of its patents, although the income from these sources
is not material.
f. Environmental Matters; Legislation
Several states have enacted recycling laws which require
consumers to recycle certain items including containers, and which require
product, container and resin manufacturers to promote recycling efforts. These
mandatory recycling laws are not expected to have an adverse effect on the
Registrant's business.
The Registrant is subject to laws and regulations governing
the protection of the environment, including, among others, laws and regulations
governing disposal of waste, discharges into water and emissions into the
atmosphere. The Registrant's expenditures for environmental control equipment in
each of the last three years have not been material and the standards required
by such regulations have not significantly affected the Registrant's operations.
Registrant is a party or a potentially responsible party in
several administrative proceedings and lawsuits involving liability for cleanup
of certain offsite disposal facilities under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or "Superfund") and similar
state laws. See "Legal Proceedings".
g. Employees
As of December 31, 1995, the Registrant had approximately
1,000 employees, of which approximately 286 were office, supervisory and sales
personnel.
h. Seasonality
Since the sale of assets of the Consumer Products Business,
seasonality is not material to the operations of the Registrant.
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<PAGE> 7
Prior to 1996, when the Registrant operated the Consumer
Products Business, its sales and earnings were usually higher in the second and
third calendar quarters and lower in the first and fourth calendar quarters,
since most of the sales by the Consumer Products Business occured in the second
and third calendar quarters. In addition, substantially all returns of home
canning supplies occured in the fourth calendar quarter of each year.
i. Working Capital
In general, the working capital practices followed by the
Registrant are typical of the businesses in which it operates. The seasonal
nature of the Registrant's Consumer Products Business required periodic
short-term borrowing by the Registrant.
As of December 31, 1995, the Registrant had an Accounts
Receivable Agreement to meet the seasonal working capital needs of the
Registrant. The agreement permits the Registrant to sell its trade accounts
receivable on a nonrecourse basis. Under the agreement, the maximum amount that
can be advanced to the Registrant pursuant to the sale of trade accounts
receivable at any time is $13,500,000, which amount is reduced on April 15, 1996
to $10,000,000. The reduction occurred because the sale of assets of the
Consumer Products Business reduced the working capital needs of the Registrant.
The Registrant retains collection and service responsibility, as agent for the
purchaser, over any receivables sold.
The proceeds from the sale of assets of the Consumer Products
Business, together with the Accounts Receivable Agreement and internally
generated funds, provide the Registrant with the working capital which the
Registrant believes will be sufficient to meet its anticipated needs subject to
the satisfactory resolution of current discussions with the Registrant's lenders
regarding defaults under its loan agreements and the maturity of a $6,040,000
note.
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<PAGE> 8
ITEM 2. PROPERTIES
The Registrant's manufacturing activities are conducted at the
five facilities described in the following table.
<TABLE>
<CAPTION>
Building Area
Location Purpose of Facility (square feet)
- -------- ------------------- -------------
<S> <C> <C>
Lancaster, Pennsylvania Plastic Closure and 490,000
Container Plant;
Warehouses
Jackson, Tennessee Plastic Closure, Vial and 198,000
Bottle Plant; Warehouse
Santa Fe Springs, Plastic Jar and Closure 170,000
California Plant; Warehouse
Ahoskie, North Carolina Plastic Closure Plant; 153,000
Warehouse
Bowling Green, Kentucky Plastic Closure Plant; 168,000
Warehouse
</TABLE>
The Lancaster, Pennsylvania and Ahoskie, North Carolina
facilities are owned by the Registrant. The Jackson, Tennessee, Santa Fe
Springs, California and Bowling Green, Kentucky facilities are leased by the
Registrant.
The Registrant's principal executive offices are located at
1840 Century Park East, Los Angeles, California 90067, in approximately 23,000
square feet of leased space. In addition, the Registrant rents three area sales
offices.
In the opinion of the Registrant's management, its
manufacturing facilities are suitable and adequate for the purposes for which
they are being used.
The Registrant owns land and buildings in Santa Ana,
California used in connection with a former glass container manufacturing plant
that are being held for sale.
In 1995, the Registrant's plastic products manufacturing
facilities operated at approximately 64% of capacity.
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<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS
As the Registrant reported in its Quarterly Report on Form
10-Q for the quarter ended June 30, 1990, in February 1986, the Registrant was
advised by the United States Environmental Protection Agency ("EPA") that
Phoenix Closures, Inc. ("Phoenix") was one of several companies which disposed
of wastes at the American Chemical Services ("ACS") site located near Griffith,
Indiana. The EPA indicated that the wastes were disposed of by Phoenix's Chicago
plant between 1955 and 1975. The Registrant has advised the EPA that it did not
lease the Chicago plant during the period from 1955 to 1975. The Registrant has
also advised Phoenix of its responsibilities with respect to environmental
matters, including the environmental matters at the ACS site, under the lease
relating to the Chicago plant.
As the Registrant reported in its Quarterly Report on Form
10-Q for the quarter ended June 30, 1990, in March 1986, the Registrant and
other parties were designated by the EPA as potentially responsible parties
("PRPs") responsible for the cleanup of certain hazardous wastes that have been
disposed of at the Wayne Waste Oil ("WWO") site located near Columbia City,
Indiana. In October 1986, the Registrant and other PRPs entered into a Consent
Order with the EPA which allowed the PRPs to complete a Remedial Investigation
and Feasibility Study for the WWO site. In March 1990, the EPA issued a Record
of Decision ("ROD") for the site. The ROD documents the EPA's cleanup plan for
the site, which includes capping the former municipal landfill, groundwater
extraction and treatment, and soil vapor extraction. On July 20, 1992, a Consent
Decree between the EPA and the PRPs at the site was entered in the United States
District Court for the Northern District of Indiana, captioned United States v.
Active Products Corp., No. F91-00247. Based upon the Registrant's percentage
share of the total amount of wastes disposed of at the WWO site, the Registrant
estimates its share of the costs under the Consent Decree will be approximately
$109,000. A reserve has been established for such costs.
As the Registrant reported in its Quarterly Report on Form
10-Q for the quarter ended June 30, 1990, on April 12, 1990, the State of New
Jersey, Department of Environmental Protection and Energy ("NJDEPE"), filed a
lawsuit in the United States District Court for the District of New Jersey
against the Registrant, among others, entitled State of New Jersey, Department
of Environmental Protection v. Gloucester Environmental Management Services,
Inc., et al., No. 84-0152 (D.N.J.). The suit alleges that the Registrant was a
"generator" of hazardous wastes and other hazardous substances which were
disposed of at the Gloucester Environmental Management Services, Inc. ("GEMS")
facility in the Township of Gloucester. The suit seeks cleanup costs,
compensatory and treble damages, and a declaration that the Registrant and
others are responsible for NJDEPE's past and future response costs at the GEMS
site. On March 27, 1990, NJDEPE issued a Directive to the Registrant and other
parties pursuant
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<PAGE> 10
to the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et
seq. Pursuant to the Directive, the Registrant and other parties have been
ordered to undertake the second phase of remedial action at the site, including
the construction and operation of a groundwater treatment system and operation
of the remedial action performed in the first phase, and to reimburse NJDEPE's
alleged past and future response costs. The estimated cost of second phase
remedial action related to the GEMS site is approximately $20 million. The
amount that the NJDEPE is seeking as reimbursement for past costs and damages is
approximately $10 million. In October, 1995 the Registrant entered into a de
minims settlement agreement with the State of New Jersey and the United States
to resolve all outstanding claims. In exchange for a payment of approximately
$205,000, the Registrant will be dismissed from the lawsuit in accordance with
the terms of a Consent Decree which is expected to be entered by the Court later
this year. The Registrant has not admitted any liability for disposal of wastes
at the GEMS site. The Registrant is one of approximately ninety companies
participating in the de minimis settlement. Two of the Registrant's insurance
carriers have agreed to pay the cost of settlement and defense of this matter,
subject to an agreement to arbitrate whether coverage is available for
approximately $75,000 in settlement funds. Thus, the Registrant's maximum
exposure in connection with this site is $75,000.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages, positions and offices
held, and a brief account of the business experience during the past five years
of each executive officer of the Registrant.
<TABLE>
<CAPTION>
Positions Held With
Registrant and Periods
Name and Age During Which Held
------------ -----------------
<S> <C>
D. Gordon Strickland (49) President and Chief Executive
Officer, effective March 15, 1996;
Senior Vice President, Finance and
Chief Financial Officer, since 1986;
Robert S. Reeves (66) Senior Vice President, Sales and Marketing,
Plastic Products Division, since 1992; Senior
Vice President, General Manager, Commercial
Glass Container Division, since 1985
J. Stephen Grassbaugh (42) Vice President, Controller, since 1988
Geoffrey A. Whynot (37) Chief Financial Officer, effective March 15,
1996; Vice President, Treasurer since 1991;
Assistant Vice President, Controller,
External Reporting from 1989 through 1991
Roger W. Norian (52) Chairman, President and Chief
Executive Officer, from 1980 through
March 15, 1996
</TABLE>
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<PAGE> 12
Business Experience
D. Gordon Strickland has served in an executive capacity with
the Registrant for more than the past five years.
Robert S. Reeves has served in an executive capacity with the
Registrant for more than the past five years.
J. Stephen Grassbaugh has served in an executive capacity with
the Registrant for more than the past five years.
Geoffrey A. Whynot has served as Vice President, Treasurer of
Registrant since 1991 and Assistant Vice President, Controller, External
Reporting of Registrant from 1989 through 1991.
Roger W. Norian served in an executive capacity with the
Registrant for more than the past five years
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<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock and Preferred Stock are both listed
on the New York Stock Exchange. As of March 13, 1996, there were approximately
1,214 and 130 holders of record of the Company's Common Stock and Preferred
Stock, respectively. The following table summarizes the prices of the Common
Stock and Preferred Stock on the New York Stock Exchange Composite Tape and
quarterly cash dividends:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Common Stock Preferred Stock
- ---------------------------------------------------------------------------------------------
Cash Cash
Calendar Year High Low Dividends High Low Dividends
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter $ 9 3/8 $6 7/8 $-- $20 5/8 $19 1/8 $.425
Second Quarter 8 3/8 7 1/8 -- 20 1/8 19 1/4 .425
Third Quarter 8 1/2 7 -- 20 1/4 19 .425
Fourth Quarter 10 3/8 6 1/2 -- 20 16 3/8 .425
1994
First Quarter $10 $8 1/8 $-- $21 $19 1/4 $.425
Second Quarter 10 5/8 8 -- 22 19 3/4 .425
Third Quarter 9 1/2 8 1/8 -- 20 3/4 19 7/8 .425
Fourth Quarter 9 1/2 8 1/8 -- 20 1/2 19 1/8 .425
</TABLE>
The cummulative Preferred Stock dividend requirement as of December 31, 1995,
was $829,000. The payment of Common Stock dividends is restricted by the
Company's Senior Note agreement. Under the most restrictive covenant, the
payment of Common Stock dividends is not permitted at December 31, 1995.
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<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA (h)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $ 138,995 $ 139,156 $ 127,372 $ 126,610 $ 125,598
Segment earnings (loss):
Plastic Products $ 4,842 $ 12,055 $ 11,428 $ 9,165 $ 9,077
Consumer Products (a) (1,590) 3,213 (2,707) 4,982 1,804
--------- --------- --------- --------- ---------
Total 3,252 15,268 8,721 14,147 10,881
General corporate expenses 5,258 4,903 4,866 5,212 5,568
Loss on revaluation of land 1,000 -- -- -- --
--------- --------- --------- --------- ---------
Earnings (loss) from continuing operations
before interest and income taxes $ (3,006) $ 10,365 $ 3,855 $ 8,935 $ 5,313
========= ========= ========= ========= =========
Earnings (loss) from continuing
operations before income taxes (b) $ (8,825) $ 5,749 $ (967) $ 4,413 $ 1,094
Provision (benefit) for income taxes (c) (3,518) 2,345 (634) 1,826 700
--------- --------- --------- --------- ---------
Earnings (loss) from continuing operations (5,307) 3,404 (333) 2,587 394
Earnings (loss) from
discontinued operations (d) -- -- -- (5,284) (2,973)
Extraordinary loss on retirement
of debt (e) -- -- (1,300) -- --
--------- --------- --------- --------- ---------
Net earnings (loss) (5,307) 3,404 (1,633) (2,697) (2,579)
Preferred stock dividends 829 829 829 829 829
--------- --------- --------- --------- ---------
Net earnings (loss) applicable to
common stockholders $ (6,136) $ 2,575 $ (2,462) $ (3,526) $ (3,408)
========= ========= ========= ========= =========
Earnings (loss) per common share:
Earnings (loss) per common share
from continuing operations (a) (b) (c) $ (1.60) $ 0.70 $ (0.32) $ 0.48 $ (0.12)
Earnings (loss) per common share
from discontinued operations (d) -- -- -- (1.44) (0.81)
Extraordinary loss per common share
on retirement of debt (e) -- -- (0.35) -- --
--------- --------- --------- --------- ---------
Net earnings (loss) per common share $ (1.60) $ 0.70 $ (0.67) $ (0.96) $ (0.93)
========= ========= ========= ========= =========
Cash dividends per common share $ -- $ -- $ -- $ -- $ --
</TABLE>
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<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA (Continued)(h)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991
(in thousands)
<S> <C> <C> <C> <C> <C>
Net property, plant and equipment $ 51,515 $ 48,341 $ 40,424 $ 36,383 $ 34,395
Depreciation and amortization 9,016 7,731 7,364 6,651 6,209
Capital expenditures (f) 11,840 15,648 11,256 8,359 4,391
Total assets 120,221 123,700 117,349 105,232 165,883
Senior debt (g) 50,000 50,000 50,000 -- 55,647
Subordinated long-term debt -- -- -- 40,000 40,000
Stockholders' equity before
pension adjustment $ 34,047 $ 38,260 $ 34,899 $ 36,464 $ 38,338
Excess of additional pension liability over
unrecognized prior service cost,
net of tax benefits (10,140) (5,207) (6,835) -- --
-------- -------- -------- -------- --------
Stockholders' equity $ 23,907 $ 33,053 $ 28,064 $ 36,464 $ 38,338
======== ======== ======== ======== ========
Weighted average number of
common shares outstanding 3,842 3,674 3,669 3,675 3,675
</TABLE>
(a) The 1993 segment loss for Consumer Products includes a $4,500,000 pre-tax
loss ($2,754,000 after-tax or $0.75 per common share) associated with the
relocation of the Company's home canning cap and lid manufacturing
operations. See Note 11 of notes to consolidated financial statements for
further information.
(b) The loss from continuing operations before income taxes for 1995 includes a
pre-tax loss of $1,000,000 ($0.16 per common share) related to the
write-down in the book value of land formerly used by the Company as a glass
container manufacturing plant.
(c) The benefit for income taxes for 1993 includes a tax benefit of $369,000
($0.10 per common share) related to a reduction in the income tax valuation
reserve. See Note 4 of notes to consolidated financial statements for
further information.
(d) Losses related to discontinued operations for 1992 and 1991 relate to
results of operations and losses on disposal of the Company's former glass
container manufacturing operations and metal crown manufacturing operations.
(e) See Note 7 of notes to consolidated financial statements for information
regarding the extraordinary loss on retirement of debt.
(f) During 1991, in addition to the capital expenditures shown above, the
Company entered into long-term operating leases for manufacturing equipment
costing $1,623,000.
(g) As of December 31, 1995, the Company's $50,000,000 of outstanding senior
debt was classified as a current liability because the Company was in
default of certain financial covenants for which the Company had received
waivers only through May 15, 1996.
(h) The selected financial data does not reflect the discontinuance of the
Consumer Products segment.
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<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- 1995 COMPARED TO 1994
Net sales of the Registrant decreased to $138,995,000 in 1995 from $139,156,000
in 1994.
Net sales of the Plastic Products Business increased 2.2% to $109,187,000 in
1995 from 1994 due primarily to the pass through of resin price increases. The
Registrant's plastic products manufacturing facilities operated at approximately
64% of capacity during 1995.
The Plastic Products Business manufactures a variety of plastic closures,
prescription packaging products, bottles and jars. Although unit sales of these
products have generally increased in recent years, sales and profitability of
these products are affected by the availability and pricing of resin. During the
first half of 1995 and the full year 1994, the average cost per pound of
polypropylene, the primary resin used by the Plastic Products Business,
increased 28% and 31%, respectively. Under industry practice, the Plastic
Products Business is generally able to pass on resin cost increases for all
products except for prescription packaging products. However, since resin costs
increased substantially, the results of the Plastic Products Business were
adversely affected because the Plastic Products Business was not able to obtain
general price increases from customers due to the resin price increases. In
addition, not all resin increases were passed on because of competitive
pricing. Resin prices have declined in the second half of 1995 and early 1996.
Net sales of the Consumer Products Business decreased 7.9% to $29,808,000 in
1995 compared to 1994 due primarily to lower unit sales as a result of adverse
growing conditions in 1995.
During August 1994, the Registrant completed the relocation of its home canning
cap and lid manufacturing operations to Jackson, Tennessee from Chicago,
Illinois. The new facility was expected to generate improved efficiencies and
cost reductions of approximately $3,000,000 pre-tax per year ($1,836,000
after-tax, or 50 cents per common share per year). In anticipation of the
relocation, the Registrant produced home canning caps and lids in excess of
normal requirements. As a result, the Registrant did not expect to realize
significant earnings improvement from the relocation until 1996, when
inventories and production volume would approach normal levels.
During 1995, the Consumer Products Business cap and lid manufacturing facility
operated at approximately 33% of capacity, partially as a result of the
Registrant reducing its cap and lid inventory.
Cost of sales of the Registrant increased to $108,964,000 in 1995 compared to
$96,356,000 in 1994 primarily due to higher resin costs in the Plastic Products
Business and the sale of higher cost inventory in the Consumer Products
Business.
Gross profit as a percent of net sales decreased to 21.6% for 1995 as compared
to 30.8% for 1994 due to substantially higher resin costs and competitive
pricing in the Plastic Products Business, and the sale of higher cost inventory
produced during 1994 and higher customer rebates in the Consumer Products
Business.
Selling, warehouse, general and administrative expenses decreased $398,000 or
1.2% during 1995, as compared to 1994.
-16-
<PAGE> 17
Segment earnings of the Plastic Products Business decreased $7,213,000 to
$4,842,000 in 1995 compared to $12,055,000 in 1994 primarily due to
substantially higher resin costs and competitive pricing. Segment earnings of
the Consumer Products Business decreased to a loss of $1,590,000 in 1995
compared to earnings of $3,213,000 in 1994 primarily due to the sale of higher
cost inventory produced during 1994, higher customer rebates and lower sales
volume due to adverse weather conditions.
In 1995, the Registrant incurred a $1,000,000 unusual loss related to the
write-down in the book value of land formerly used by the Registrant as a glass
container manufacturing plant.
Earnings before interest and income taxes decreased $13,371,000 to a loss of
$3,006,000 in 1995 compared to earnings of $10,365,000 in 1994 due primarily to
lower earnings in both the Consumer Products and Plastic Products Businesses.
Net interest expense increased $1,203,000 during 1995 compared to 1994 due to
higher levels of debt and interest charged on advances under the Accounts
Receivable Agreement.
The decrease in the income tax provision in 1995 compared to 1994 is due to
lower pre-tax earnings.
Due to competitive pressures, there are occasions when the Registrant is unable
to pass on to customers cost increases. Other than the inability on all
occasions to pass on cost increases, inflation and changes in prices did not
have a material effect on the Registrant's results of operations.
SUBSEQUENT EVENT
On March 15, 1996, the Registrant sold certain assets of the Consumer Products
Business for a purchase price of approximately $14,500,000 and announced a
restructuring which will include the relocation of the Registrant's principal
executive office and the consolidation of certain manufacturing facilities. The
Registrant also expects to receive approximately $16,500,000, primarily during
the remainder of 1996, from the Registrant's sale to consumer products customers
of the inventory of the Consumer Products Business and from the collection of
the accounts receivable of the Consumer Products Business. These proceeds will
be utilized for working capital, to reduce debt, including $3,500,000 of debt
secured by liens on certain machinery and equipment of the Registrant, and to
fund costs of the restructuring.
In connection with the sale of Consumer Products Business assets, the Registrant
will report in the first quarter of 1996 a one-time pretax gain of approximately
$2,900,000 ($1,740,000 after-tax or $0.44 per common share). Also during the
first quarter of 1996, the Registrant will report a one-time pretax loss of
approximately $7,700,000 ($4,620,000 after-tax or $1.17 per common share)
associated with the restructuring. The loss on the restructuring includes
provisions for severance costs and related benefits, net loss on subleases,
write-off of fixed assets and certain intangible assets, and legal and
professional fees. In addition to the loss recorded on the restructuring, the
Registrant will incur additional non-recurring pretax losses during 1996 and
early 1997 associated with the restructuring of $2,400,000 ($1,440,000 after-tax
or $0.37 per common share) primarily related to equipment and personnel
relocation costs, inefficiences related to the relocation of operations and
start-up costs which accounting rules require to be expensed as incurred.
The restructuring is expected to result in annualized cost savings of
approximately $6,500,000 primarily from reduced employment costs, lease costs,
offices expenses, manufacturing overhead and freight. These cost savings will be
substantially realized in 1997.
-17-
<PAGE> 18
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During 1995, the Financial Accounting Standards Board issued Statement No. 121,
Accounting for the Impairment of Long-Lived Assets (FASB No. 121), and Statement
No. 123, Accounting for Stock-Based Compensation (FASB No.123).
FASB No.121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill. FASB No. 121 will be
adopted during 1996 and is not expected to have a material effect on the
Registrant's financial position or results of operations.
FASB No.123 establishes a "fair value" method of accounting for the value of
grants under stock-based compensation plans. As permitted under FASB No. 123,
the Registrant will elect to continue to measure compensation expense related to
employee stock option plans utilizing the intrinsic value method as prescribed
by APB Opinion No. 25. However, beginning in 1996, the Registrant will disclose
in the footnotes to its financial statements the proforma effect on net income
and earnings per common share as if the fair value method of measuring
compensation expense related to employee stock option plans was utilized as
described in FASB No.123.
RESULTS OF OPERATIONS -- 1994 COMPARED TO 1993
Net sales of the Registrant increased to $139,156,000 in 1994 from $127,372,000
in 1993.
Net sales of the Plastic Products Business increased 8.4% to $106,792,000 in
1994 from 1993. The Registrant's plastic products manufacturing facilities
operated at approximately 74% of capacity during 1994.
Net sales of the Consumer Products Business increased 12.2% to $32,364,000 in
1994 compared to 1993 due primarily to higher unit sales as a result of
favorable growing conditions in 1994.
During August 1994, the Registrant completed the relocation of its home canning
cap and lid manufacturing operations to Jackson, Tennessee from Chicago,
Illinois. During August through December of 1994, the Registrant's cap and lid
manufacturing facility operated at approximately 26% of capacity. This level of
operations primarily resulted because the new plant was in its start-up phase.
Cost of sales of the Registrant increased to $96,356,000 in 1994 compared to
$88,922,000 in 1993 primarily due to higher unit sales and higher resin costs.
Gross profit as a percent of net sales increased to 30.8% for 1994 as compared
to 30.2% for 1993.
Selling, warehouse, general and administrative expenses increased $2,340,000 or
7.8% during 1994, as compared to 1993, primarily due to higher selling expenses,
additional employees and salary and wage increases.
-18-
<PAGE> 19
The Registrant recorded a pre-tax reserve of $4,500,000 in 1993 for the expected
costs associated with the relocation of the home canning cap and lid
manufacturing operations. The pre-tax loss consisted primarily of accruals for
i) the early recognition of retiree health care and pension expense, severance,
workers' compensation costs and insurance continuation costs of approximately
$2,500,000, ii) asset retirement and related facility closing costs of
approximately $1,000,000 and iii) moving and relocation costs of approximately
$700,000. In 1994, the Registrant made cash payments related to such accruals
for i) the early recognition of retiree health care and pension expense,
severance, workers' compensation costs and insurance continuation costs of
approximately $1,500,000, ii) asset retirement and related facility closing
costs of approximately $600,000, iii) moving and relocation costs of
approximately $600,000 and iv) other costs of approximately $300,000. In
addition, during 1994, approximately $300,000 was charged against such accruals
related to the book value of fixed assets retired. The remaining accruals
primarily relate to retiree health costs and pensions which will be paid over a
number of years.
Segment earnings of the Plastic Products Business, increased $627,000 to
$12,055,000 in 1994 compared to $11,428,000 in 1993 primarily due to higher
sales. Segment earnings of the Consumer Products Business increased to
$3,213,000 in 1994 compared to $1,793,000 in 1993, excluding the loss on plant
relocation in 1993, due primarily to higher sales as a result of favorable
growing conditions.
Earnings before interest and income taxes increased $2,010,000 to $10,365,000 in
1994 compared to $8,355,000 in 1993, excluding the loss on plant relocation in
1993, due primarily to higher earnings in both the Consumer Products and Plastic
Products Businesses.
Net interest expense decreased $206,000 during 1994, as compared to 1993, as a
result of a refinancing in 1993.
The increase in the income tax provision in 1994 compared to 1993 is due to
higher pre-tax earnings and the recognition in 1993 of an income tax benefit of
$369,000 related to a reduction in the income tax valuation reserve.
During 1993, the Registrant incurred an after-tax loss of $1,300,000 in
connection with the refinancing on September 21, 1993 of its 13% Subordinated
Notes and the termination of its revolving credit facility. The extraordinary
loss included interest expense on the 13% Subordinated Notes from September 21,
1993 through December 15, 1993 (the date on which the Subordinated Notes were
redeemed at par) and the write-off of unamortized debt fees and related costs.
LIQUIDITY AND CAPITAL RESOURCES
During 1995, the principal use of cash flow was to fund investing activities,
primarily capital expenditures of $11,840,000. Cash flow was provided primarily
through net advances on accounts receivable sold under the Registrant's Accounts
Receivable Agreement of $7,700,000 and a $3,249,000 reduction in inventory.
-19-
<PAGE> 20
During 1994, the principal use of cash flow was to fund investing activities,
primarily capital expenditures of $15,648,000, payments associated with the
relocation of the home canning operations of $3,005,000 and other payments
related to discontinued operations of $2,598,000. Cash flow was provided through
the reduction of the Registrant's cash balances of $9,068,000, cash from
operations of $6,425,000 and cash from financing activities of $5,457,000.
During 1994 and 1993, inventories increased by $6,258,000 and $5,712,000,
respectively, due primarily to a) increases in inventories of home canning caps
and lids in anticipation of the relocation of the home canning cap and lid plant
and as a result of low sales levels in 1993, and b) increases in inventories of
the Plastic Products Business due to higher quantities and costs of resin, and
higher quantities of finished goods.
During 1995, the Registrant 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 the Registrant's recorded pension liability by $1,891,000.
Capital expenditures of approximately $6,000,000 are planned for 1996.
Since the third quarter of 1990, the Registrant has not declared any dividends
on its Common Stock. The Registrant's Senior Note Agreement limits the payment
of dividends on Common Stock. Under the most restrictive covenant, the payment
of Common Stock dividends is not permitted at December 31, 1995.
The ratio of current assets to current liabilities at December 31, 1995 and 1994
was 0.6 and 2.5, respectively. The decline in the ratio of current assets to
current liabilities at December 31, 1995, compared to December 31, 1994, is due
primarily to i) the classification of the Registrant's $50,000,000 of
outstanding senior debt as short-term because the Registrant was in default of
certain financial covenants and was currently unable to obtain waivers beyond
May 15, 1996 and ii) advances on accounts receivable sold under the Accounts
Receivable Agreement. At December 31, 1995 and 1994, the ratio of total debt to
total capitalization was 70.3% and 62.7%, respectively. The increase in the
ratio of total debt to total capitalization is primarily due to lower
stockholders' equity.
The Registrant has recorded deferred income tax assets of $9,808,000 on its
Consolidated Balance Sheet as of December 31, 1995. In order to fully realize
this deferred income tax asset, the Registrant will need to generate future
taxable income of at least $35,000,000 prior to expiration of net operating loss
carryforwards which will begin to expire in 2006. Based upon the Registrant's
recent pre-tax earnings adjusted for significant nonrecurring items, the sale of
certain assets of the Consumer Products Business and cost savings related to the
restructuring announced March 15, 1996 and projections of future taxable income
over the period in which the deferred income tax assets are deductible,
management believes it is more likely than not that the Registrant will realize
the benefit of the deferred income tax asset. There can be no assurance,
however, that the Registrant will generate any specific level of continuing
earnings.
As of December 31, 1995, the Registrant had an Accounts Receivable Agreement
(Receivable Agreement) maturing on January 18, 1997 to meet the seasonal working
capital needs of the Registrant. The Receivable Agreement permits the Registrant
to sell its trade accounts receivable on a nonrecourse basis. Under the
Receivable Agreement, the maximum amount that can be advanced to the Registrant
pursuant to the sale of trade accounts receivable at any time is $13,500,000,
which amount is reduced on April 15, 1996 to $10,000,000. The reduction occurred
because the sale of assets of the Consumer Products Business reduced the working
capital needs of the Registrant. The Registrant retains collection and service
responsibility, as agent for the purchaser, over any receivables sold. Advances
under such Receivable Agreement
-20-
<PAGE> 21
are subject to certain limitations. As of December 31, 1995, receivables as
shown on the accompanying Consolidated Balance Sheet have been reduced by net
proceeds of $7,700,000 from advances pursuant to the sale of receivables under
the Registrant's Receivable Agreement. The Receivable Agreement contains
covenants identical to the Senior Notes.
In addition, at December 31, 1995, the Registrant owed $6,500,000 under a note
payable to a bank due April 15, 1996 with interest accrued at the prime rate
(Unsecured Note Payable). The Unsecured Note Payable was originally related to a
$10,000,000 bank line of credit, which effective October 24, 1995 was reduced by
the lender to the then outstanding balance of $6,500,000 due to a decline in the
Registrant's financial performance. The line of credit contains covenants
identical to the Senior Notes.
On January 5, 1996, the Registrant borrowed $3,500,000 from the same bank under
a note payable secured by certain machinery and equipment (Secured Note
Payable). On March 15, 1996, the Registrant used a portion of the proceeds from
the sale of certain assets of the Consumer Products Business to pay the
$3,500,000 Secured Note Payable, and to prepay $3,540,000 of Senior Notes and
$460,000 of the Unsecured Note Payable. After the payment of the Secured Note
Payable, the indebtedness of the Registrant was unsecured.
In connection with the sale of certain assets of the Consumer Products Business,
the Registrant obtained waivers of certain financial covenants through May 15,
1996 from the lenders under the Senior Notes, the lender under the Unsecured
Note Payable and the purchaser under the Receivable Agreement (collectively
referred to as "Lenders") and an extension of the maturity date of the Unsecured
Note Payable to May 15, 1996. Discussions between the Lenders and the Registrant
are continuing with respect to the further extension of the maturity of the
Unsecured Note Payable, additional waiver of financial covenants and additional
reduction of indebtedness. Although the Registrant has obtained waivers or
amendments from the Lenders on three previous occasions, there can be no
assurance that the Lenders will agree to further waivers.
If additional waivers of financial covenants or the extension of the maturity
date of the Unsecured Note Payable are not obtained, the Lenders would be
entitled to exercise certain remedies, including the acceleration of the due
date for payment of the Senior Notes or the Unsecured Note Payable, and the
terminination of the Receivable Agreement.
Based upon the past experience of the Registrant in obtaining waivers or
amendments from its Lenders and because the Registrant expects to use a portion
of the proceeds from the sale of inventory and collection of accounts
receivables of the Consumer Products Business to further reduce debt, the
Registrant believes that the Lenders will extend the due date of the Unsecured
Note Payable, will not accelerate the due date for payment of the Senior Notes
and will not terminate the Receivable Agreement. The accompanying consolidated
financial statements have been prepared on the basis of such belief of the
Registrant.
At December 31, 1995, the Registrant had unused sources of liquidity consisting
of cash and cash equivalents of $3,904,000, additional advances under the
Receivable Agreement of $300,000, a tax net operating loss carryforward of
$17,209,000, a minimum tax credit carryforward of $1,083,000 and other tax
credit carryforwards of $75,000. The Registrant believes that its financial
resources, including proceeds from the sale of certain assets of the Consumer
Products Business and other internally generated funds, are adequate to meet its
foreseeable needs, subject to the satisfactory resolution of current discussions
with the Lenders.
-21-
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Independent Auditors' Report 23
Consolidated Balance Sheets - December 31, 1995 and 1994 24-25
Consolidated Statements of Earnings (Loss) - Three Years Ended December 31, 1995 26
Consolidated Statements of Cash Flows - Three Years Ended December 31, 1995 27
Consolidated Statements of Common Stockholders' Equity - Three Years Ended
December 31, 1995 28
Notes to Consolidated Financial Statements 29-50
</TABLE>
-22-
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Kerr Group, Inc.
We have audited the consolidated financial statements of Kerr Group, Inc.
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kerr Group, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1995 in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basis consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Los Angeles, California
March 15, 1996
-23-
<PAGE> 24
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994
- ----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,904 $ 2,261
Receivables - primarily trade accounts, less allowance for doubtful accounts
of $421 in 1995 and $170 in 1994 7,430 16,312
Inventories
Raw materials and work in process 11,245 11,156
Finished goods 19,796 23,134
-------- --------
Total inventories 31,041 34,290
Prepaid expenses and other current assets 3,108 4,526
-------- --------
Total current assets 45,483 57,389
Property, plant and equipment, at cost
Land 427 427
Buildings and improvements 13,589 12,577
Machinery and equipment 93,401 84,462
Furniture and office equipment 6,035 5,381
-------- --------
113,452 102,847
Accumulated depreciation and amortization (61,937) (54,506)
-------- --------
Net property, plant and equipment 51,515 48,341
Deferred income taxes 8,057 2,192
Goodwill and other intangibles, net of amortization of $2,291 in 1995 and
$1,812 in 1994 7,140 6,622
Other assets 8,026 9,156
-------- --------
$120,221 $123,700
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-24-
<PAGE> 25
CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994
- -------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt $ 6,500 $ 5,500
Senior debt due 1997 through 2003 classified as current 50,000 0
Accounts payable 10,488 13,445
Accrued pension liability 3,777 70
Other current liabilities 5,056 3,792
-------- --------
Total current liabilities 75,821 22,807
Pension liability 18,318 15,230
Other long-term liabilities 2,175 2,610
Senior debt due 1997 through 2003 0 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 in 1995 and 4,220 shares issued in 1994 2,113 2,110
Additional paid-in capital 27,239 27,210
Retained earnings 1,860 11,995
Treasury Stock, at cost, 293 shares in 1995 and 543 shares in 1994 (6,913) (12,803)
Excess of additional pension liability over unrecognized
prior service cost, net of tax benefits (10,140) (5,207)
-------- --------
Total stockholders' equity 23,907 33,053
-------- --------
$120,221 $123,700
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-25-
<PAGE> 26
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net sales $138,995 $139,156 $127,372
Cost of sales 108,964 96,356 88,922
-------- -------- --------
Gross profit 30,031 42,800 38,450
Selling, warehouse, general and administrative expenses 32,037 32,435 30,095
Loss on plant relocation -- -- 4,500
Loss on revaluation of land 1,000 -- --
Interest expense 6,047 4,985 5,680
Interest and other income (228) (369) (858)
-------- -------- --------
Earnings (loss) before income taxes (8,825) 5,749 (967)
Provision (benefit) for income taxes (3,518) 2,345 (634)
-------- -------- --------
Earnings (loss) before extraordinary loss (5,307) 3,404 (333)
Extraordinary loss on retirement of debt, after
applicable income tax benefit of $632 -- -- (1,300)
-------- -------- --------
Net earnings (loss) (5,307) 3,404 (1,633)
Preferred stock dividends 829 829 829
-------- -------- --------
Net earnings (loss) applicable to common stockholders $ (6,136) $ 2,575 $ (2,462)
======== ======== ========
Earnings (loss) per common share:
Earnings (loss) per common share before extraordinary loss $ (1.60) $ 0.70 $ (0.32)
Extraordinary loss per common share on retirement of debt -- -- (0.35)
-------- -------- --------
Net earnings (loss) per common share $ (1.60) $ 0.70 $ (0.67)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-26-
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993
(in thousands)
<S> <C> <C> <C>
CASH FLOW PROVIDED (USED) BY OPERATIONS
Earnings (loss) $ (5,307) $ 3,404 $ (333)
Add (deduct) noncash items included in earnings (loss)
Depreciation and amortization 9,016 7,731 7,364
Reserve for loss on plant relocation, net of tax -- -- 2,754
Change in deferred income taxes (2,482) 1,705 159
Reduction in total pension liability, net (1,597) (266) (1,116)
Other, net 1,420 62 (624)
Changes in other operating working capital
Receivables 8,882 (2,779) (2,186)
Inventories 3,249 (6,258) (5,712)
Other current assets 1,304 (133) (885)
Accounts payable (2,957) 3,872 729
Accrued expenses 1,379 (913) (541)
-------- -------- --------
Cash flow provided (used) by operations 12,907 6,425 (391)
CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES
Capital expenditures (11,840) (15,648) (11,256)
Payments associated with relocation of home canning cap and lid
operations (205) (3,005) --
Proceeds from liquidation of long-term certificates of deposit 375 1,000 --
Other, net (982) (699) (1,338)
Collection of accounts receivable, and payment of accounts payable
and accrued and other expenses related to discontinued operations (297) (2,598) (2,500)
-------- -------- --------
Cash flow provided (used) by investing activities (12,949) (20,950) (15,094)
CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES
Net borrowings under lines of credit 1,000 5,500 --
Issuance of senior debt -- -- 50,000
Extinguishment of subordinated debt -- -- (41,131)
Contribution of Common Stock to pension plan 1,891 -- --
Dividends paid (829) (829) (829)
Other, net (377) 786 (477)
-------- -------- --------
Cash flow provided (used) by financing activities 1,685 5,457 7,563
CASH AND CASH EQUIVALENTS
Increase (decrease) during the year 1,643 (9,068) (7,922)
Balance at beginning of the year 2,261 11,329 19,251
-------- -------- --------
Balance at end of the year $ 3,904 $ 2,261 $ 11,329
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-27-
<PAGE> 28
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995, 1994 and 1993
- -----------------------------------------------------------------------------------------------------------------------
Number Of Excess Of
Shares Of Additional Pension Notes
Common Additional Liability Over Receivable
Stock Common Paid-In Retained Treasury Unrecognized From ESOP
Outstanding Stock Capital Earnings Stock Prior Service Cost Trusts
- -----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 3,675 $2,105 $27,113 $11,882 $(12,737) $ -- $(1,647)
Net loss -- -- -- (1,633) -- -- --
Dividends on Preferred Stock -- -- -- (829) -- -- --
Pension adjustment -- -- -- -- -- (6,835) --
Repayments on ESOP Trusts
notes receivable -- -- -- -- -- -- 931
Purchase of common stock (8) -- -- -- (66) -- --
Restricted Stock Plan -- -- 32 -- -- -- --
----- ------ ------- ------- -------- -------- -------
Balance, December 31, 1993 3,667 2,105 27,145 9,420 (12,803) (6,835) (716)
Net earnings -- -- -- 3,404 -- -- --
Dividends on Preferred Stock -- -- -- (829) -- -- --
Pension adjustment -- -- -- -- -- 1,628 --
Repayments on ESOP Trusts
notes receivable -- -- -- -- -- -- 716
Issuance of Common Stock under
stock option plans 10 5 65 -- -- -- --
----- ------ ------- ------- -------- -------- -------
Balance, December 31, 1994 3,677 2,110 27,210 11,995 (12,803) (5,207) --
Net loss -- -- -- (5,307) -- -- --
Dividends on Preferred Stock -- -- -- (829) -- -- --
Pension adjustment -- -- -- -- -- (4,933) --
Contribution of Treasury Stock to
pension fund 250 -- -- (3,999) 5,890 -- --
Issuance of Common Stock under
stock option plans 6 3 29 -- -- -- --
----- ------ ------- ------- -------- -------- -------
Balance, December 31, 1995 3,933 $2,113 $27,239 $ 1,860 $ (6,913) $(10,140) $ --
===== ====== ======= ======= ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-28-
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Kerr Group, Inc.,
and its wholly owned subsidiary, collectively referred to as the Company. All
material intercompany balances and transactions are eliminated in consolidation.
CASH EQUIVALENTS
Cash equivalents consist only of investments that have an original maturity of
three months or less, are readily convertible to known amounts of cash and have
insignificant risk of changes in value because of changes in interest rates.
INVENTORIES
Inventories are valued at the lower of cost or market, determined by the use of
the first-in, first-out method.
DEPRECIATION, MAINTENANCE AND REPAIRS
Depreciation of property, plant and equipment is provided by the use of the
straight-line method over the estimated useful lives of the assets. The
principal estimated useful lives used in computing the depreciation provisions
are as follows:
<TABLE>
<S> <C>
Buildings and improvements 5 to 30 years
Machinery and equipment 3 to 15 years
Furniture and equipment 5 to 10 years
</TABLE>
The policy of the Company is to charge amounts expended for maintenance and
repairs to expense and to capitalize expenditures for major replacements and
betterments.
GOODWILL AND OTHER INTANGIBLES
The excess of cost over net tangible assets of the business acquired during 1987
is amortized on a straight-line basis over 40 years. Other intangible assets are
being amortized by the use of the straight-line method over their respective
initial estimated lives ranging from 2 to 17 years.
The Company periodically evaluates goodwill to assess recoverability based upon
expectations of future nondiscounted operating earnings related to the acquired
business. Based upon the most recent analysis, the Company believes that no
impairment of goodwill exists at December 31, 1995.
REVENUE RECOGNITION
The Company recognizes revenue as product is shipped. A reserve is provided for
estimated end-of-season returns of home canning supplies as sales are recorded.
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Financial Accounting Standards Board Statement No. 87 (FASB No. 87) requires
that a company record an additional minimum pension liability to the extent that
a company's accumulated pension benefit obligation exceeds the fair value of
pension plan assets and accrued pension liabilities. This additional minimum
pension liability is offset by an intangible asset, not to exceed prior service
costs of the pension plan. Amounts in excess of prior service costs are
reflected as a reduction in stockholders' equity, net of related tax benefits.
-29-
<PAGE> 30
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Effective January 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions (FASB No. 106). As more fully described in Note 6, the Company has
elected to amortize the impact of FASB No. 106 ratably over 20 years.
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement No.
109, Accounting for Income Taxes (FASB No. 109). Under the asset and liability
method of FASB No. 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under FASB
No. 109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Effective January 1, 1993, the Company adopted FASB No. 109. The cumulative and
pro forma effect of the change in accounting was not material.
EARNINGS (LOSS) PER COMMON SHARE
Primary net earnings (loss) per common share are based on the weighted average
number of common shares outstanding and are after Preferred Stock dividends.
Fully diluted net earnings (loss) per common share reflect when dilutive 1) the
incremental common shares issuable upon the assumed exercise of outstanding
stock options and 2) the assumed conversion of the Preferred Stock and the
elimination of the related Preferred Stock dividends. Antidilution occurred in
1995, 1994 and 1993.
NATURE OF OPERATIONS - SIGNIFICANT USE OF RESIN
The Company's Plastic Products Business uses a significant amount of resin in
its manufacturing process. From time to time, the Company has experienced
substantial increases in the cost of resin. To the extent that the Company is
unable to pass on resin cost increases, the cost increases could have a
significant impact on the results of operations of the Company.
FINANCIAL STATEMENT PREPARATION AND PRESENTATION
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities as of December 31, 1995 and
1994, and the reported amounts of income and expenses for each of the three
years ended December 31, 1995. Actual results could differ from those estimates.
Included in other assets are certain assets held for sale consisting of real
property and buildings. Management has obtained a recent appraisal to support
the carrying value of such assets, however, the ultimate sales proceeds
received by the Company could differ from the appraisal amount depending on
changes in market conditions.
Certain reclassifications have been made to prior years' financial statements to
conform to the 1995 presentation.
-30-
<PAGE> 31
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During 1995, the Financial Accounting Standards Board issued Statement No. 121,
Accounting for the Impairment of Long-Lived Assets (FASB No. 121), and Statement
No. 123, Accounting for Stock-Based Compensation (FASB No. 123).
FASB No.121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill. FASB No. 121 will be
adopted during 1996 and is not expected to have a material effect on the
Company's financial position or results of operations.
FASB No.123 establishes a "fair value" method of accounting for the value of
grants under stock-based compensation plans. As permitted under FASB No. 123,
the Company will elect to continue to measure compensation expense related to
employee stock option plans utilizing the intrinsic value method as prescribed
by APB Opinion No. 25. However, beginning in 1996, the Company will disclose in
the footnotes to its financial statements the proforma effect on net income and
earnings per common share as if the fair value method of measuring compensation
expense related to employee stock option plans was utilized as described in FASB
No. 123.
NOTE 2 - SUBSEQUENT EVENT - SALE OF ASSETS AND RESTRUCTURING
On March 15, 1996, the Company sold certain assets of the Consumer Products
Business for a purchase price of approximately $14,500,000 and announced a
restructuring program which will include the relocation of the Company's
principal executive office and the consolidation of certain manufacturing
facilities. The Company also expects to receive approximately $16,500,000,
primarily during the remainder of 1996, from the Company's sale to its customers
of the inventory of the Consumer Products Business and from the collection of
the accounts receivable of the Consumer Products Business. These proceeds will
be utilized for working capital, to reduce debt, including $3,500,000 of debt
secured by liens on certain machinery and equipment of the Company, and to fund
costs of the restructuring.
In connection with the sale of Consumer Products Business assets, the Company
will report in the first quarter of 1996 a one-time pretax gain of approximately
$2,900,000 ($1,740,000 after-tax or $0.44 per common share). Also during the
first quarter of 1996, the Company will report a pretax loss of approximately
$7,700,000 ($4,620,000 after-tax or $1.17 per common share) associated with the
restructuring. The loss on the restructuring includes provisions for severance
costs and related benefits, net loss on subleases, write-off of fixed assets and
certain intangible assets, and legal and professional fees. In addition to the
loss recorded on the restructuring, the Company will incur additional
non-recurring pretax losses during 1996 and early 1997 associated with the
restructuring of $2,400,000 ($1,440,000 after-tax or $0.37 per common share)
primarily related to equipment and personnel relocation costs, inefficiencies
related to the relocation of operations and start-up costs which accounting
rules require to be expensed as incurred.
The accompanying financial statements do not reflect the discontinuance of the
Consumer Products segment.
-31-
<PAGE> 32
NOTE 3 - ISSUES AFFECTING LIQUIDITY
On March 15, 1996, the Company used a portion of the proceeds from the sale of
certain assets of the Consumer Products Business to pay the $3,500,000 Secured
Note Payable (which was borrowed on January 5, 1996), and to prepay $3,540,000
of Senior Notes and $460,000 of the Unsecured Note Payable. After the payment of
the Secured Note Payable, the indebtedness of the Company was unsecured.
In connection with the sale of certain assets of the Consumer Products Business,
the Company obtained waivers of certain financial covenants through May 15, 1996
from the lenders under the Senior Notes, the lender under the Unsecured Note
Payable and the purchaser under the Receivable Agreement (collectively referred
to as "Lenders") and an extension of the maturity date of the Unsecured Note
Payable to May 15, 1996. Discussions between the Lenders and the Company are
continuing with respect to the further extension of the maturity of the
Unsecured Note Payable, additional waiver of financial covenants and additional
reduction of indebtedness. Although the Company has obtained waivers or
amendments from the Lenders on three previous occasions, there can be no
assurance that the Lenders will agree to further waivers.
If additional waivers of financial covenants or the extension of the maturity
date of the Unsecured Note Payable are not obtained, the Lenders would be
entitled to exercise certain remedies, including the acceleration of the due
date for payment of the Senior Notes or the Unsecured Note Payable, and the
terminination of the Receivable Agreement.
Based upon the past experience of the Company in obtaining waivers or amendments
from its Lenders and because the Company expects to use a portion of the
proceeds from the sale of inventory and collection of accounts receivables of
the Consumer Products Business to further reduce debt, the Company believes that
the Lenders will extend the due date of the Unsecured Note Payable, will not
accelerate the due date for payment of the Senior Notes and will not terminate
the Receivable Agreement. The accompanying consolidated financial statements
have been prepared on the basis of such belief of the Company.
NOTE 4 - INCOME TAXES
Total income tax provision (benefit) for the years ended December 31, 1995 and
1994 was allocated as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Earnings (loss) $(3,518) $2,345
Stockholders' equity, related to excess of pension liability
over unrecognized prior service costs (3,281) 878
------- ------
$(6,799) $3,223
======= ======
</TABLE>
-32-
<PAGE> 33
NOTE 4 - INCOME TAXES (continued)
The provision (benefit) for income taxes for the years ended December 31, 1995,
1994 and 1993 consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current
U.S. Federal $ -- $ 81 $ 119
State -- -- --
------- ------ -----
Total current -- 81 119
Deferred
U.S. Federal (2,755) 1,814 (637)
State (763) 450 (116)
------- ------ -----
Total deferred (3,518) 2,264 (753)
------- ------ -----
Total provision (benefit) for income taxes $(3,518) $2,345 $(634)
======= ====== =====
</TABLE>
The significant components of deferred income taxes (benefits) for the years
ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Reinstatement (reduction) of deferred income taxes
attributable to recognition of alternative minimum tax
credits and tax net operating loss carryforwards $(5,056) $ (541) $ 52
Temporary differences associated with the sales of
discontinued operations (466) 1,531 1,051
Temporary differences associated with the loss on plant relocation 157 1,429 (1,368)
Additional costs inventoried for tax purposes (44) 64 (245)
Excess (deficit) of pension contributions paid over pension expense 1,513 46 448
Excess (deficit) of tax over book depreciation,
including assets retired or sold 668 (19) (327)
Other, net (290) (246) (364)
------- ------ -------
Total $(3,518) $2,264 $ (753)
======= ====== =======
</TABLE>
-33-
<PAGE> 34
NOTE 4 - INCOME TAXES (continued)
Total provision (benefit) for income taxes for the years ended December 31,
1995, 1994 and 1993 differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% to earnings (loss) before income taxes as a
result of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Computed "expected" tax provision (benefit) $(3,002) $1,954 $(329)
Increase (reduction) in provision resulting from:
State income tax provision (benefit), net of Federal tax effect (524) 231 (47)
Change in the valuation allowance for deferred tax assets -- -- (369)
Other, net 8 160 111
------- ------ -----
Actual tax provision (benefit) $(3,518) $2,345 $(634)
======= ====== =====
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred income tax assets and liabilities at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Deferred income tax assets:
Pension liabilities--
Excess of additional pension liability over unrecognized prior service cost $ 6,743 $ 3,462
Accrued pension liability -- 1,490
Accrued retiree health liability 551 630
Accrued reserves associated with discontinued operations 274 350
Inventory 675 722
Accrued vacation pay 461 383
Tax credit carryforwards 1,158 1,830
Net operating loss carryforwards 6,882 1,962
Other 670 1,120
------- -------
Total gross deferred income tax assets 17,414 11,949
Less valuation allowance -- --
------- -------
Deferred income tax assets, net of valuation allowance 17,414 11,949
Deferred income tax liabilities:
Property, plant and equipment, principally due to differences in depreciation (5,744) (5,146)
Excess of book basis over tax basis of land and buildings formerly
used as a glass container manufacturing plant (1,252) (1,795)
Other (610) (962)
------- -------
Total gross deferred income tax liabilities (7,606) (7,903)
------- -------
Net deferred income tax assets $ 9,808 $ 4,046
======= =======
</TABLE>
-34-
<PAGE> 35
NOTE 4 - INCOME TAXES (continued)
In order to fully realize the deferred income tax asset, the Company will need
to generate future taxable income of at least $35,000,000 prior to expiration of
net operating loss carryforwards which will begin to expire in 2006. Based upon
the Company's recent pre-tax earnings adjusted for significant nonrecurring
items, the sale of certain assets of the Consumer Products Business and cost
savings related to the restructuring announced March 15, 1996 and projections of
future taxable income over the period in which the deferred income tax assets
are deductible, management believes it is more likely than not that the Company
will realize the benefit of the deferred income tax asset. There can be no
assurance, however, that the Company will generate any specific level of
continuing earnings.
At December 31, 1995, the Company had net operating loss carryforwards for
Federal income tax purposes of $17,209,000 which are available to offset future
Federal taxable income, expiring in the years 2006 through 2010.
The Company also has an alternative minimum tax credit carryforward of
$1,083,000 and other tax credit carryforwards (primarily investment tax credits)
of $75,000, expiring in the years 1999 through 2009, which are available to
reduce future Federal income taxes, if any.
The total net cash payments related to income taxes, which primarily represent
Federal alternative minimum taxes and state taxes, were $24,000, $761,000 and
$470,000 for 1995, 1994 and 1993, respectively.
NOTE 5 - OTHER CURRENT LIABILITIES
At December 31, 1995 and 1994, other current liabilities were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Accrued wages and vacation pay $2,143 $1,879
Accrued interest 2,617 240
Other accrued expenses 296 1,673
------ ------
Total accrued expenses $5,056 $3,792
====== ======
</TABLE>
NOTE 6 - RETIREMENT BENEFITS
PENSIONS
The Company has a defined benefit pension plan (the "Retirement Income Plan")
and a defined contribution pension plan, which cover substantially all
employees. The Retirement Income Plan generally provides benefits based on years
of service and average final pay. The defined contribution plan provides
benefits based on a fixed percent of pay for each year of service. The Company's
policy is to fund amounts sufficient to satisfy the funding requirements of the
Employee Retirement Income Security Act of 1974. During 1995 and 1994, the
Company funded the Retirement Income Plan by $1,983,000 more than the accrued
pension expense for the 1994 plan year. During 1994 and 1993, the Company funded
the Retirement Income Plan by $800,000 more than the accrued pension expense for
the 1993 plan year.
-35-
<PAGE> 36
NOTE 6 - RETIREMENT BENEFITS (continued)
During 1995, the Company contributed 250,000 shares of its Common Stock, at a
price of $7.56 per share, to the Retirement Income Plan. The contribution
reduced the Company's recorded pension liability by $1,891,000.
During 1995, the Company adopted a Pension Restoration Plan which is an unfunded
plan providing benefits to participants not payable by the Company's Retirement
Income Plan because of the limitations on benefits imposed by the Internal
Revenue Code of 1986, as amended. The aggregate annual accrued benefit for each
participant under the combination of the Retirement Income Plan and the Pension
Restoration Plan when expressed as a single-life annuity is limited to $200,000.
Net pension expense for the years ended December 31, 1995, 1994 and 1993
included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
(in thousands)
<S> <C> <C> <C>
Defined Benefit Plan:
Service cost (benefit earned during period) $ 498 $ 564 $ 472
Interest cost on projected benefit obligation 7,364 7,018 6,941
Actual loss (return) on assets (16,080) 597 (7,843)
Net amortization and deferral 9,460 (6,552) 1,619
-------- ------- -------
Defined Benefit Plan expense $ 1,242 $ 1,627 $ 1,189
======== ======= =======
Defined Contribution Plan expense $ 15 $ 17 $ 21
======== ======= =======
</TABLE>
-36-
<PAGE> 37
NOTE 6 - RETIREMENT BENEFITS (continued)
The funded status of the defined benefit plans at December 31, 1995 and 1994 was
as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Actuarial present value
Vested benefit obligation $ 99,237 $ 81,605
Nonvested benefit obligation 1,942 2,445
-------- --------
Accumulated benefit obligation 101,179 84,050
Effect of future salary increases 2,812 1,842
-------- --------
Projected benefit obligation 103,991 85,892
Plan assets at fair value (a) 79,084 68,750
-------- --------
Projected benefit obligation in excess of plan assets 24,907 17,142
Unrecognized net transition obligation (474) (553)
Unrecognized prior service costs (936) (663)
Unrecognized net loss (19,660) (10,511)
-------- --------
Accrued pension liability before adjustment 3,837 5,415
Adjustment required to recognize additional minimum pension liability 18,258 9,885
-------- --------
Accrued pension liability related to the defined benefit plan $ 22,095 $ 15,300
======== ========
Accrued pension liability related to the defined contribution plan $ 8 $ 17
======== ========
</TABLE>
(a) Plan assets include 368,200 shares of Company Common Stock at a value of
$3,682,000 at December 31, 1995 and 118,200 shares of Company Common Stock
at a value of $990,000 at December 31, 1994.
In connection with recording the additional minimum pension liability pursuant
to the provisions of FASB No. 87, the Company recorded a reduction in
stockholders' equity of $10,140,000 at December 31, 1995, and $5,207,000 at
December 31, 1994, and an intangible pension asset of $1,376,000 at December 31,
1995, and $1,216,000 at December 31, 1994.
The majority of all pension plan assets are held by a master trust created for
the collective investment of the plan's funds, as well as in private placement
insurance contracts. At December 31, 1995, assets held by the master trust
consisted primarily of cash, U.S. government obligations, corporate bonds and
common stocks.
The defined benefit plan assumptions as of December 31, 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8.75% 7.5%
Increase in compensation rate 5% 5% 5%
Long-term rate of return on assets 9.5% 9.5% 9.5%
</TABLE>
-37-
<PAGE> 38
NOTE 6 - RETIREMENT BENEFITS (continued)
The Company retained the pension benefit obligations for service prior to the
date of the sale and the pension assets related to the Company's discontinued
Commercial Glass Container and Metal Crown Businesses. In connection with the
sale of the two businesses, the Company's pension plans had a combined
curtailment loss of $4,664,000 pursuant to FASB Statement No. 88, Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits. During 1993, the Company recorded a curtailment loss
of $232,000 related to the relocation of the Company's home canning cap and lid
manufacturing operations. Such curtailment losses were included as components of
the respective losses on the sale of the businesses and plant relocation.
RETIREE HEALTH CARE AND LIFE INSURANCE
The Company provides certain health care and life insurance benefits for retired
employees and their spouses. The costs of such benefits are shared by retirees
through one or more of the following: a) deductibles, b) copayments and c)
retiree contributions. Salaried employees hired prior to September 1, 1992, and
certain hourly employees may become eligible for those benefits if they reach
retirement age while working for the Company. The Company will not provide
retiree health care and life insurance benefits for salaried employees hired
after September 1, 1992. Health care and life insurance benefits provided by the
Company are not funded in advance, but rather are paid by the Company as the
costs are actually incurred by the retirees.
As discussed in Note 1, effective January 1, 1993, the Company adopted FASB No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions. FASB
No. 106 requires a company to use an accrual method for recording retiree health
care and life insurance benefits instead of the previously used pay-as-you-go
method. The effect of this accounting change on 1993 results of operations was
to increase retiree health care and life insurance expense by $640,000 from the
amount that would have been recorded in 1993 under the previously used
pay-as-you-go method. The adoption of FASB No. 106 at January 1, 1993, created a
previously unrecognized accumulated postretirement benefit obligation of
$13,195,000. As permitted under FASB No. 106, the Company has elected to
amortize the $13,195,000 accumulated postretirement benefit obligation ratably
over 20 years.
Retiree health care and life insurance expense for the years ended December 31,
1995, 1994 and 1993 included the following components:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Retiree health care and life insurance expense:
Service cost (benefit earned during period) $ 41 $ 54 $ 83
Interest cost on accumulated benefit obligation 855 1,082 1,187
Actual return on assets -- -- --
Net amortization and deferral 544 624 660
------ ------ ------
$1,440 $1,760 $1,930
====== ====== ======
</TABLE>
-38-
<PAGE> 39
NOTE 6 - RETIREMENT BENEFITS (continued)
The funded status of the retiree health care and life insurance plans at
December 31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit obligation:
Retirees $ 9,210 $ 9,083
Fully eligible active participants 735 1,428
Other active participants 1,055 739
-------- --------
Accumulated benefit obligation 11,000 11,250
Plan assets at fair value -- --
-------- --------
Accumulated benefit obligation in excess of plan assets 11,000 11,250
Unrecognized net transition obligation (10,612) (11,237)
Unrecognized prior service costs -- --
Unrecognized net gain (loss) 992 1,563
-------- --------
Accrued postretirement benefit liability $ 1,380 $ 1,576
======== ========
</TABLE>
The retiree health care and life insurance plans assumptions are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
December 31, December 31, December 31,
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8.75% 7.5%
Health care cost trend rates--
Indemnity plans 8.75% trending down 8.75% trending down 9% trending down
to 6% to 6% to 6%
Managed care plans 6.75% trending down 6.75% trending down 7% trending down
to 4% to 4% to 4%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The effect of a one percentage point annual increase in these assumed cost trend
rates at December 31, 1995, would increase the postretirement benefit obligation
by approximately $420,000 and would increase the service and interest cost
components of the annual expense by approximately $40,000.
-39-
<PAGE> 40
NOTE 7 - FINANCING
At December 31, 1995 and 1994, the Company's debt consisted of $50,000,000
principal amount of Senior Notes payable to a group of insurance companies
consisting of John Hancock Mutual Life Insurance Company, New York Life
Insurance Company and Massachusetts Mutual Life Insurance Company and lines of
credit with banks. The Senior Notes were issued on September 21, 1993, and
consist of $41,000,000 of 10-year notes with an interest rate of 9.45% and
$9,000,000 of 6-year notes with an interest rate of 8.99%. Sinking fund payments
begin under the 10-year notes in 1998 and under the 6-year notes in 1997. The
Senior Notes are unsecured.
The Senior Notes contain various covenants including covenants relating to
coverage of fixed charges, minimum level of tangible net worth, limitation on
leverage and limitation on restricted payments, for which payments are defined
to include Common Stock dividends. Under the most restrictive covenant related
to the payment of dividends, the payment of Common Stock dividends is not
permitted at December 31, 1995. As of December 31, 1995, the Company is not in
compliance with certain of the financial covenants and has obtained waivers of
such covenants through May 15, 1996.
As of December 31, 1995, the Company's $50,000,000 of outstanding Senior Notes
is classified as a current liability because the Company was in default of
certain financial covenants for which the Company had received waivers only
through May 15, 1996. See further discussion at Note 3 of notes to consolidated
financial statements. The mandatory scheduled principal payments, as specified
in the loan agreement, for the next five years on the Senior Notes outstanding
at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years Ended December 31,
- --------------------------------------------------------------------------------
(in thousands)
<S> <C>
1996 $ --
1997 3,000
1998 9,833
1999 9,833
2000 6,833
2001 and thereafter 20,501
</TABLE>
A portion of the proceeds from the sale of the Senior Notes was used to redeem
all of the $40,000,000 principal amount of 13% Subordinated Notes on December
15, 1993, at par.
During the third quarter of 1993, the Company incurred an after-tax loss of
$1,300,000, or $0.35 per common share, in connection with the refinancing on
September 21, 1993, of its 13% Subordinated Notes and the termination of its
revolving credit facility. The extraordinary loss included interest expense on
the 13% Subordinated Notes from September 21, 1993 through December 15, 1993
(the date on which the Subordinated Notes were redeemed at par) and the
write-off of unamortized debt fees and related costs.
-40-
<PAGE> 41
NOTE 7 - FINANCING (continued)
As of December 31, 1995, the Company had an Accounts Receivable Agreement
(Receivable Agreement) maturing on January 18, 1997 to meet the seasonal working
capital needs of the Company. The Receivable Agreement permits the Company
to sell its trade accounts receivable on a nonrecourse basis. Under the
Receivable Agreement, the maximum amount that can be advanced to the Company
pursuant to the sale of trade accounts receivable at any time is $13,500,000,
which amount is reduced on April 15, 1996 to $10,000,000. The reduction occurred
because the sale of assets of the Consumer Products Business reduced the working
capital needs of the Company. The Company retains collection and service
responsibility, as agent for the purchaser, over any receivables sold. Advances
under such Receivable Agreement are subject to certain limitations. As of
December 31, 1995, receivables as shown on the accompanying Consolidated
Balance Sheet have been reduced by net proceeds of $7,700,000 from advances
pursuant to the sale of receivables under the Company's Receivable Agreement.
The Receivable Agreement contains covenants identical to the Senior Notes.
In addition, at December 31, 1995, the Company owed $6,500,000 under a note
payable to a bank due April 15, 1996 (which maturity date was extended to
May 15, 1996) with interest accrued at the prime rate (Unsecured Note
Payable). The Unsecured Note Payable was originally related to a $10,000,000
bank line of credit, which effective October 24, 1996 was reduced by the lender
to the then outstanding balance of $6,500,000 due to a decline in the Company's
financial performance. During 1994 and early 1995, the Company had an additional
bank line of credit which was replaced by the Receivable Agreement. The line of
credit contains covenants identical to the Senior Notes.
During 1995 and 1994, the Company had maximum borrowings outstanding under its
lines of credit of $12,000,000 and $5,500,000, respectively. During 1995 and
1994, the weighted average interest rate under its lines of credit was 8.7% and
7.3% and the weighted average borrowings outstanding under its lines of credit
was $7,528,000 and $1,544,000, respectively.
Total cash payments of interest during 1995, 1994 and 1993 were $3,440,000,
$4,743,000 and $6,501,000, respectively.
See discussion of issues affecting liquidity at Note 3 of notes to consolidated
financial statements.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
During 1994, the Financial Accounting Standards Board issued Statement No. 107,
Disclosure about Fair Value of Financial Instruments (FASB No. 107). FASB No.
107 requires the disclosure of the estimated fair values for all financial
instruments for which it is practicable to estimate fair value.
The fair value of cash, accounts receivable and payable, and advances pursuant
to the sale of receivables under the Company's Receivable Agreement approximate
their carrying amount because of their short maturity.
The fair value of the line of credit approximates its carrying amount because
such debt has a floating rate tied to the Prime rate.
-41-
<PAGE> 42
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
The fair value of the Company's $50,000,000 principal amount of Senior Notes
would be expected to be higher than the carrying amount because market interest
rates have declined since such debt was incurred. However, since it is unlikely
the Company could obtain similar unsecured financing at comparable rates today,
determining a fair value of such debt is not appropriate.
NOTE 9 - PREFERRED STOCK
CLASS B PREFERRED STOCK
At December 31, 1995 and 1994, the Company was authorized to issue 1,302,300
shares of Class B Preferred Stock, par value $.50 per share, which may be issued
in series from time to time at the discretion of the Board of Directors. Holders
of all series of Class B Preferred Stock share ratably as to rights to payment
of dividends and to amounts payable in event of liquidation, dissolution or
winding up of the Company. No dividends or payments in liquidation may be made
with respect to Common Stock or any other stock ranking junior as to dividends
or assets to the Class B Preferred Stock unless all accumulated dividends and
sinking fund payments on the Class B Preferred Stock have been paid in full and,
in the event of liquidation, unless the accumulated dividends and the
liquidation preference of the Class B Preferred Stock have been paid.
SERIES D
At December 31, 1995 and 1994, the Company had 487,400 shares of Class B
Cumulative Convertible Preferred Stock, Series D (Preferred Stock), issued and
outstanding. Holders of the Preferred Stock are entitled to a cumulative
dividend, payable quarterly, at the annual rate of 8.5% ($1.70 per share). The
Preferred Stock is redeemable at the option of the Company at any time, in whole
or in part, at a price of $20.00 per share. No purchases or redemptions of or
dividends on Common Stock may occur unless all accumulated dividends have been
paid on the Preferred Stock.
Each share of Preferred Stock has a liquidating value of $20.00 per share and is
convertible into Common Stock at the rate of 1.4545 shares of Common Stock for
each share of Preferred Stock (equivalent to a conversion price of $13.75 per
common share), subject to adjustment under certain conditions. At December 31,
1995, a total of 708,923 shares of Common Stock was reserved for issuance upon
conversion of the Preferred Stock.
If six quarterly dividends on the Preferred Stock are unpaid, the holders of
Preferred Stock shall have the right, voting as a class, to elect two additional
persons to the Board of Directors of the Company until all such dividends have
been paid.
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<PAGE> 43
NOTE 10 - COMMON STOCK
EMPLOYEE STOCK OWNERSHIP PLANS
The Company has two employee stock ownership plans, the Kerr Group, Inc.
Employee Incentive Stock Ownership Plan Trust formed in 1985 (ESOP I) and the
Kerr Group, Inc. 1987 Employee Incentive Stock Ownership Plan Trust formed in
1987 (ESOP II). Both plans are for the benefit of employees of the Company. The
Company borrowed funds from a group of banks, which in turn were loaned to the
plans for the purpose of purchasing shares of the Company's Common Stock. The
bank loans were repaid on February 28, 1992. The related Company loan to ESOP I
was repaid during 1993 and the loan to ESOP II was repaid during 1994.
ESOP I and ESOP II obtained the funds to repay loans primarily through the
receipt of tax deductible contributions made by the Company. The Company funded
such contributions primarily through the reduction of compensation and benefits,
and deferral of salary increases which it would otherwise have provided to its
employees. Total contribution expense for these plans was $472,000 and $633,000
in 1994 and 1993, respectively. For financial statement purposes, the bank loans
were reflected as a liability and the Company's loans to ESOP I and ESOP II were
reflected as a reduction in stockholders' equity.
STOCK OPTIONS
Under the Company's Stock Option Plans for employees, options may be granted at
a price determined by the Stock Option Committee of the Board of Directors,
which may be less than market value. Options may be exercised during periods
established by such Committee; however, in no event may any option be exercised
more than ten years after the date of grant. All of the Company's currently
outstanding options generally vest in cumulative installments of 20% per year
commencing on the date of grant. Such options become exercisable in full upon
the occurrence of certain enumerated events, including certain changes in
control of the Company.
The options granted beginning in 1992 provide that the Company's stock price
must equal or exceed a triggering price per Common Share, which is higher than
the exercise price of the option, for ten consecutive trading days for the
options to be exercisable. The options granted during 1995, 1994 and 1993 had
triggering prices of $12.50 per Common Share. The options granted during 1992
had triggering prices of $10 per Common Share, which requirement was met during
1994, and the options issued during 1992 are now exercisable.
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<PAGE> 44
NOTE 10 - COMMON STOCK (continued)
The following tabulation summarizes changes under the Company's Stock Option
Plans for employees during the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
Number Of Number Of Number Of
Options Price Range Options Price Range Options Price Range
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding:
Beginning of year 252,100 $5 3/8-10 3/8 274,000 $5 3/8-8 5/16 198,850 $5 3/8-11 7/16
Granted 204,000 7 9/16 6,500 9 7/16-10 3/8 157,500 8-8 5/16
Exercised (6,000) 5 3/8 (10,400) 5 3/8-7 1/8 --
Cancelled (23,000) 5 3/8-8 5/16 (18,000) 5 3/8-8 5/16 (36,000) 5 3/8-10 3/4
Expired -- -- (46,350) 5 3/8-11 7/16
------- ------------- ------- ------------- ------- --------------
End of year 427,100 5 3/8-10 3/8 252,100 5 3/8-10 3/8 274,000 5 3/8-8 5/16
Exercisable at end of year:
Currently exercisable 83,200 70,900 56,200
Exercisable if Common
Stock trades at
triggering price of
$ 12.50 277,300 57,501 31,500
------- ------ ------
Total 360,500 128,401 87,700
Available for grant at
end of year 21,497 22,497 20,100
</TABLE>
In addition, the 1988 Stock Option Plan for Non-Employee Directors (the 1988
Plan), consisting of 80,000 shares, and 1993 Stock Option Plan for Non-Employee
Directors (the 1993 Plan), consisting of 60,000 shares, provide for the grant of
options to purchase Common Stock to members of the Board of Directors of the
Company who are not employees of the Company or any of its subsidiaries or
affiliates. The option price of each option granted under these plans is the
fair market value of Common Stock on the date of grant. Options under the 1988
Plan are immediately exercisable upon grant and will expire five years from the
date of grant. Future grants of options under the 1988 Plan can only be made to
Directors other than the Company's current Directors. Options under the 1993
Plan are exercisable six months after date of grant, provided that the Company's
stock price equals or exceeds $12.50 per Common Share for ten consecutive
trading days. Options under the 1993 Plan expire ten years from the date of
grant.
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<PAGE> 45
NOTE 10 - COMMON STOCK (continued)
The following tabulation summarizes changes under the Company's Stock Option
Plans for Non-Employee Directors during the years ended December 31, 1995, 1994
and 1993.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------
Number Of Number Of Number Of
Options Price Range Options Price Range Options Price Range
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding:
Beginning of year 60,000 $8 3/16 60,000 $8 3/16 60,000 $11 5/16
Granted -- -- 60,000 8 3/16
Exercised -- -- --
Expired -- -- (60,000) 11 5/16
------ ------ ------
End of year 60,000 8 3/16 60,000 8 3/16 60,000 8 3/16
Exercisable at end of year:
Currently exercisable -- -- --
Exercisable if Common
Stock trades at $12.50
per share or above 60,000 60,000 60,000
------ ------ ------
Total 60,000 60,000 60,000
Available for grant at
end of year 80,000 80,000 80,000
</TABLE>
The aggregate option price for all outstanding options at December 31, 1995,
1994 and 1993 was $3,698,000, $2,359,000 and $2,508,000, respectively. At the
time options are exercised, the common stock account is credited with the par
value of the shares issued and additional paid-in capital is credited with the
cash proceeds in excess of par value. The Company's Stock Option Plans permit
the grant of both incentive stock options and nonstatutory stock options.
RESTRICTED STOCK PLAN
In 1985 and 1984, the Company sold 65,000 shares and 75,000 shares,
respectively, of Treasury Stock to an officer of the Company at a price of $1.00
per share. The shares were sold subject to forfeiture and restrictions on
disposition under conditions as defined in the Restricted Stock Purchase
Agreements between the Company and the officer. As of December 31, 1994, the
restrictions on all 140,000 shares have been released. Compensation expense was
recorded in the periods benefitted as the difference between the fair market
value on the date of sale and the sale price. During 1993, total shares of
15,000 were released from restriction.
-45-
<PAGE> 46
NOTE 11 - LOSS ON PLANT RELOCATION
During the fourth quarter of 1993, the Company recorded a pre-tax loss of
approximately $4,500,000 ($2,754,000 after-tax or $0.75 per common share)
associated with the relocation of its home canning cap and lid manufacturing
operations from Chicago, Illinois to a new manufacturing facility in Jackson,
Tennessee. The pre-tax loss consisted primarily of accruals for i) the early
recognition of retiree health care and pension expense, severance, workers'
compensation costs and insurance continuation costs of approximately $2,500,000,
ii) asset retirement and related facility closing costs of approximately
$1,000,000, and iii) moving and relocation costs of approximately $700,000. In
1995, the Company made cash payments related to relocation costs of
approximately $200,000. In 1994, the Company made cash payments related to such
accruals for i) the early recognition of retiree health care and pension
expense, severance, workers' compensation costs and insurance continuation costs
of approximately $1,500,000, ii) asset retirement and related facility closing
costs of approximately $600,000, iii) moving and relocation costs of
approximately $600,000 and iv) other costs of approximately $300,000. In
addition, during 1994, approximately $300,000 was charged against such accruals
related to the book value of fixed assets retired. The remaining accruals
primarily relate to retiree health costs and pensions which will be paid over a
number of years.
NOTE 12 - RENTAL EXPENSE AND LEASE COMMITMENTS
The Company occupies certain manufacturing facilities, warehouse facilities and
office space and uses certain automobiles, machinery and equipment under
noncancelable lease arrangements. Rent expense under these agreements was
$3,714,000, $3,085,000 and $3,008,000 in 1995, 1994 and 1993, respectively.
At December 31, 1995, the Company was obligated under various noncancelable
leases. Calendar year minimum rental commitments under the Company's leases are
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total Real Personal
Years Ended December 31, Commitment Property Property
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
1996 $3,644 $3,256 $388
1997 3,517 3,253 264
1998 3,395 3,220 175
1999 3,311 3,200 111
2000 2,607 2,590 17
2001 through 2014 20,276 20,276 --
</TABLE>
Real estate taxes, insurance and maintenance expenses are obligations of the
Company. Generally, in the normal course of business, leases that expire will be
renewed or replaced by leases on other properties.
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<PAGE> 47
NOTE 13 - COMMITMENTS AND CONTINGENCIES
In connection with the Company's Workers' Compensation insurance programs, the
Company has pledged a certificate of deposit in the amount of $500,000 to secure
surety bonds. The Company's estimate of its ultimate liability relating to these
programs has been reflected on the Company's consolidated balance sheet as a
liability.
The Company has been designated by the Environmental Protection Agency as a
potentially responsible party to share in the remediation costs of several waste
disposal sites. Pursuant to the sale of the Metal Crown Business, the Company
has indemnified the buyer for certain environmental remediation costs. In
addition, pursuant to the sale of the Commercial Glass Container Business, the
Company has indemnified the buyer for certain environmental remediation costs
and has retained ownership of certain real property used in the Commercial Glass
Container Business which may require environmental remediation. During 1995, the
Company made cash payments related to environmental remediation of $327,000. As
of December 31, 1995, the Company has accrued a reserve of approximately
$312,000 for the expected remaining costs associated with environmental
remediation described above and in connection with its current manufacturing
plants. The amount of the reserve was based in part on an environmental study
performed by an independent environmental engineering firm. The Company believes
that this reserve is adequate.
NOTE 14 - INDUSTRY SEGMENT INFORMATION
During 1995, the Company operated in two industry segments, Plastic Products and
Consumer Products. The manufacturing assets of the Consumer Products segment
were subsequently sold in 1996. Operations in the Plastic Products segment
involve: 1) the manufacture and sale of a variety of plastic products including
child-resistant closures, tamper-evident closures, prescription packaging
products, jars and other plastic closures and containers; and 2) the sale of
glass prescription products. Operations in the Consumer Products segment
involve: 1) the manufacture and sale of caps and lids for home canning, and 2)
the sale of glass jars and a line of pickling spice and pectin products for home
canning, iced tea tumblers and beverage mugs. Intersegment sales are not
material. No customer accounted for more than 10% of net sales in 1995, 1994 or
1993.
The Company carries on a product development and engineering program with
respect to its Plastic Products Business. Expenditures for such programs during
the years ended December 31, 1995, 1994 and 1993 were approximately $3,300,000,
$3,600,000 and $2,000,000, respectively.
Although the Company owns a number of United States patents, including
patents for its tamper-evident closures and certain of its child-resistant
closures, it is of the opinion that no one or combination of these patents is of
material importance to its business. The Company has granted licenses on some
of its patents, although the income from these sources is not material.
Segment earnings is income before unusual items not attributable to one of the
segments, general corporate expenses, interest expense, interest and other
income and provision (benefit) for income taxes.
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<PAGE> 48
NOTE 14 - INDUSTRY SEGMENT INFORMATION (continued)
Identifiable assets by industry segment are those assets that are used in the
Company's operations in each industry segment. Corporate assets are principally
cash and cash equivalents, the deferred income tax asset, land and buildings
formerly used as a glass container manufacturing plant that is being held for
sale, certificates of deposit and certain intangible assets.
A summary of the Company's operations by industry segment follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Net sales:
Plastic Products $109,187 $106,792 $ 98,533
Consumer Products (b) 29,808 32,364 28,839
-------- -------- --------
Total $138,995 $139,156 $127,372
======== ======== ========
Segment earnings (loss):
Plastic Products $ 4,842 $ 12,055 $ 11,428
Consumer Products (a)(b) (1,590) 3,213 (2,707)
-------- -------- --------
Total 3,252 15,268 8,721
Loss on revaluation of land 1,000 -- --
General corporate expenses 5,258 4,903 4,866
-------- -------- --------
Earnings (loss) before interest and income taxes (3,006) 10,365 3,855
Interest expense 6,047 4,985 5,680
Interest and other income (228) (369) (858)
-------- -------- --------
Earnings (loss) before income taxes $ (8,825) $ 5,749 $ (967)
======== ======== ========
</TABLE>
(a) The 1993 segment loss for Consumer Products includes a $4,500,000 pre-tax
loss associated with the relocation of the Company's home canning cap and
lid manufacturing operations. See Note 11 of notes to consolidated financial
statements for further information.
(b) The manufacturing assets of the Consumer Products segment were sold on
March 15, 1996.
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<PAGE> 49
NOTE 14 - INDUSTRY SEGMENT INFORMATION (continued)
Identifiable assets, depreciation and amortization and capital expenditures for
each segment are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Identifiable Assets:
Plastic Products $ 79,367 $ 84,283 $ 69,834
Consumer Products(a) 18,981 22,782 20,403
Corporate 21,873 16,635 27,112
-------- -------- --------
Total $120,221 $123,700 $117,349
======== ======== ========
Depreciation and amortization:
Plastic Products $ 7,961 $ 6,946 $ 6,600
Consumer Products(a) 343 236 197
Corporate 712 549 567
-------- -------- --------
Total $ 9,016 $ 7,731 $ 7,364
======== ======== ========
Capital expenditures:
Plastic Products $ 10,604 $ 13,906 $ 8,587
Consumer Products(a) 976 1,472 1,920
Corporate 260 270 749
-------- -------- --------
Total $ 11,840 $ 15,648 $ 11,256
======== ======== ========
</TABLE>
- -------------
(a) The manufacturing assets of the Consumer Products segment were sold on
March 15, 1996.
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<PAGE> 50
NOTE 15 - CONDENSED QUARTERLY DATA FOR 1995 AND 1994 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months Ended March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1995
Net sales $30,390 $41,892 $39,021 $27,692
Gross profit 8,577 9,783 8,080 3,591
Net loss (a) (387) (285) (1,099) (3,536)
Preferred stock dividends 207 207 207 208
------- ------- ------- -------
Net loss applicable to common
stockholders (a) $ (594) $ (492) $(1,306) $(3,744)
======= ======= ======= =======
Net loss per common share (primary and
fully diluted) $ (0.16) $ (0.13) $ (0.33) $ (0.95)
</TABLE>
(a) Net for the quarter ended December 31, 1995 includes a pre-tax loss of
$1,000,000 ($0.15 per common share) related to the write-down in the book
value of land formerly used by the Company as a glass container manufacturing
plant.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months Ended March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1994
Net sales $29,380 $41,004 $40,624 $28,148
Gross profit 9,961 12,291 12,007 8,541
Net earnings 263 1,599 1,310 232
Preferred stock dividends 207 207 207 208
------- ------- ------- -------
Net earnings applicable to
common stockholders $ 56 $ 1,392 $ 1,103 $ 24
======= ======= ======= =======
Net earnings per common share:
Primary $ 0.02 $ 0.38 $ 0.30 $ 0.01
Fully diluted $ 0.02 $ 0.36 $ 0.30 $ 0.01
</TABLE>
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<PAGE> 51
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information required by Item 10 of Form 10-K is
included in a separate item captioned "Executive Officers of the Registrant" in
Part I of this Form 10-K.
The Registrant's Proxy Statement to be used in connection with
the Annual Meeting of Stockholders to be held on April 30, 1996 contains on
pages 2 through 6 the remaining information required by Item 10 of Form 10-K and
such information is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant's Proxy Statement to be used in connection with
the Annual Meeting of Stockholders to be held on April 30, 1996 contains on
pages 7 through 12 the information required by Item 11 of Form 10-K, and such
information is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Registrant's Proxy Statement to be used in connection with
the Annual Meeting of Stockholders to be held on April 30, 1996 contains on
pages 2 through 3 the information required by Item 12 of Form 10-K, and such
information is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant's Proxy Statement to be used in connection with
the Annual Meeting of Stockholders to be held on April 30, 1996 contains on page
13 the information required by Item 13 of Form 10-K, and such information is
incorporated herein by this reference.
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<PAGE> 52
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
a. (i) Financial Statements
In addition to the Consolidated Financial Statements and
Independent Auditors' Report included at Item 8, the following
are included herein:
Schedules for the three years ended December 31, 1995:
VIII - Valuation and Qualifying Accounts, page 61.
All other Schedules have been omitted as
inapplicable, or not required, or because the required information is
included in the Consolidated Financial Statements or the notes thereto.
-52-
<PAGE> 53
(ii) Exhibits
3.1 Restated Certificate of Incorporation of the
Registrant is incorporated by reference to
Exhibit 3.1 to Form 10-K for the fiscal year
ended December 31, 1980.
3.2 Certificate of Retirement of Capital Stock of the
Registrant is incorporated by reference to
Exhibit 3.2 to Form 10-K for the fiscal year
ended December 31, 1989.
3.3 Certificate of Amendment to the Restated
Certificate of Incorporation of the Registrant is
incorporated by reference to Exhibit 3.3 to Form
10-K for the fiscal year ended December 31, 1989.
3.4 By-laws of the Registrant, as amended effective
June 15, 1993, is incorporated by reference to
Exhibit 3.1 to Form 10-Q for the quarter ended
June 30, 1993.
10.1 Amended and Restated Employment Agreement between
the Registrant and Roger W. Norian dated as of
December 1, 1994 incorporated by reference to
Exhibit 10.4 to Form 10-K for the fiscal year
ended December 31, 1994.
10.2 Amendment dated as of January 2, 1996 of the
Employment Agreement between Registrant and Roger
W. Norian.
10.3 Employment Agreement between the Registrant and
D. Gordon Strickland dated as of June 16, 1986 is
incorporated by reference to Exhibit 10.5 to Form
10-K for the fiscal year ended December 31, 1986.
10.4 Amendment dated as of January 2, 1996 of the
Employment Agreement between Registrant and D.
Gordon Strickland.
10.5 Employment Agreement between the Registrant and
Robert S. Reeves dated as of February 17, 1983 is
incorporated by reference to Exhibit 10.6 to Form
10-K for the fiscal year ended December 31, 1983.
-53-
<PAGE> 54
10.6 Amendment dated as of January 2, 1996 of the
Employment Agreement between Registrant and
Robert S. Reeves.
10.7 Employment Agreement, as amended, between
Registrant and Geoffrey A. Whynot dated as of
November 1, 1989.
10.8 Employment Agreement between the Registrant and
Norman N. Broadhurst dated as of December 8, 1988
is incorporated by reference to Exhibit 10.9 to
Form 10-K for the fiscal year ended December 31,
1988.
10.9 Employment Agreement between the Registrant and
J. Stephen Grassbaugh dated as of February 24,
1989 is incorporated by reference to Exhibit
10.10 to Form 10-K for the fiscal year ended
December 31, 1988.
10.10 Amendment dated as of January 2, 1996 of the
Employment Agreement between Registrant and J.
Stephen Grassbaugh.
10.11 1984 Stock Option Plan is incorporated by
reference to Exhibit 4.7 to Registration
Statement No. 2-92722.
10.12 1987 Stock Option Plan is incorporated by
reference to Exhibit 10.12 to Form 10-K for the
fiscal year ended December 31, 1986.
10.13 Amended and Restated 1993 Employee Stock Option
Plan incorporated by reference to Exhibit 10.8 to
Form 10-K for the fiscal year ended December 31,
1994.
10.14 1987 Stock Option Plan for Non-Employee Directors
is incorporated by reference to Exhibit 10.17 to
Form 10-K for the fiscal year ended December 31,
1987.
10.15 1993 Stock Option Plan for Non-Employee Directors
is incorporated by reference to Exhibit 10.4 to
Form 10-Q for the fiscal quarter ended June 30,
1993.
10.16 Form of Stock Option Agreement used in connection
with the 1984 Stock Option Plan is incorporated
by reference to Exhibit 4.11 to Registration
Statement No. 2-92722.
-54-
<PAGE> 55
10.17 Form of Stock Option Agreement used in connection
with the 1987 Stock Option Plan is incorporated
by reference to Exhibit 10.17 to Form 10-K for
the fiscal year ended December 31, 1986.
10.18 Form of Stock Option Agreement used in connection
with the 1993 Employee Stock Option Plan is
incorporated by reference to Exhibit 10.17 to
Form 10-K for the fiscal year ended December 31,
1993.
10.19 Form of Stock Option Agreement used in connection
with the 1987 Stock Option Plan for Non-Employee
Directors is incorporated by reference to Exhibit
10.23 to Form 10-K for the fiscal year ended
December 31, 1987.
10.20 Form of Stock Option Agreement used in connection
with the 1993 Stock Option Plan for Non-Employee
Directors is incorporated by reference to Exhibit
10.19 to Form 10-K for the fiscal year ended
December 31, 1993.
10.21 1993 Common Stock Purchase Plan for Non-Employee
Directors is incorporated by reference to Exhibit
10.3 to Form 10-Q for the fiscal quarter ended
June 30, 1993.
10.22 Directors' Retirement Consulting Plan is
incorporated by reference to Exhibit 10.22 to
Form 10-K for the fiscal year ended December 31,
1984.
10.23 Key Executive Bonus Plan is incorporated by
reference to Exhibit 10.2 to Form 10-Q for the
fiscal quarter ended June 30, 1993.
10.24 Pension Restoration Plan is incorporated by
reference to Exhibit 10.19 to Form 10-K for the
fiscal year ended December 31, 1994.
10.25 Asset Purchase Agreement dated as of November 25,
1991 by and between the Registrant and Ball
Corporation is incorporated by reference to
Exhibit 1 to Form 8-K dated November 24, 1991.
-55-
<PAGE> 56
10.26 Asset Purchase Agreement, dated as of December
11, 1992, by and between Crown Cork & Seal
Company, Inc. and Kerr Group, Inc. is
incorporated by reference to Exhibit 1 to Form 8-
K dated December 11, 1992.
10.27 Asset Purchase Agreement, dated as of March 15,
1996 between Registrant and Alltrista Corporation
is incorporated by reference to Exhibit 2.1 to
Form 8-K dated March 29, 1996.
10.28 Sales Agent Agreement, dated as of March 15, 1996
between Registrant and Alltrista Corporation is
incorporated by reference to Exhibit 99.1 to Form
8-K dated March 29, 1996.
10.29 Lease dated as of March 11, 1986 between Northrop
Corporation and Registrant with respect to
Registrant's principal executive offices,
including related amendment to the Lease dated as
of September 30, 1986 is incorporated by
reference to Exhibit 10.24 to Registration
Statement No. 33-08212.
10.30 Third amendment of lease dated March 11, 1986
between Northrop Corporation, predecessor in
interest to State Teachers Retirement System, and
Registrant is incorporated by reference to
Exhibit 10.4 to Form 10-Q for the fiscal quarter
ended March 31, 1995.
10.31 Lease dated August 1, 1988 between KCB
Development, as lessor, and SCP Corporation, as
lessee is incorporated by reference to Exhibit
10.23 to Form 10-K for the fiscal year ended
December 31, 1994..
10.32 Lease dated October 5, 1989 between Century 21
Associates, as lessor, and Santa Fe Plastic
Corporation, as lessee, is incorporated by
reference to Exhibit 10.3 to Form 10-Q for the
fiscal quarter ended September 30, 1994.
10.33 Lease between the Industrial Development Board of
the City of Jackson and Kerr Group, Inc., Dated
as of May 14, 1993 is incorporated by reference
to Exhibit 10.5 to Form 10-Q for the fiscal
quarter ended June 30, 1993.
-56-
<PAGE> 57
10.34 Amended and restated lease dated as of May 16,
1994 between Phoenician Properties, as lessor,
and Kerr Group, Inc., as lessee,is incorporated
by reference to Exhibit 10.4 to Form 10-Q for the
fiscal quarter ended September 30, 1994.
10.35 Amendment dated May 18, 1994 between Century 21
Associates and Kerr Group, Inc. related to lease
dated October 5, 1989 is incorporated by
reference to Exhibit 10.5 to Form 10-Q for the
fiscal quarter ended September 30, 1994.
10.36 Lease agreement dated June 30, 1994 between
Bowling Green- Warren County Industrial Authority
IV, Inc. and Kerr Group, Inc. is incorporated by
reference to Exhibit 10.6 to Form 10-Q for the
fiscal quarter ended September 30, 1994.
10.37 Note Agreement dated as of September 15, 1993
between Kerr Group, Inc. and the Purchasers
identified therein is incorporated by reference
to Exhibit 2 to Form 8-K dated September 21,
1993.
10.38 Line of Credit between PNC Bank and Kerr Group,
Inc. dated May 2, 1994 is incorporated by
reference to Exhibit 10.1 to Form 10-Q for the
fiscal quarter ended June 30, 1994.
10.39 Receivables Purchase Agreement dated as of
January 19, 1995 between Kerr Group, Inc., as the
seller, and PNC Bank, N.A., as the purchaser is
incorporated by reference to Exhibit 10.31 to
Form 10-K for the fiscal year ended December 31,
1994..
10.40 Line of Credit between the Bank of Boston and
Kerr Group, Inc. dated February 9, 1995 is
incorporated by reference to Exhibit 10.32 to
Form 10-K for the fiscal year ended December 31,
1994.
10.41 Amendment dated February 24, 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 is
incorporated by reference to Exhibit 10.33 to
Form 10-K for the fiscal year ended December 31,
1994.
-57-
<PAGE> 58
10.42 Amendment dated March 24, 1995 of the Note
Agreement dated as of September 15, 1993 between
Registrant and the Purchasers identified therein
is incorporated by reference to Exhibit 10.1 to
Form 10-Q for the fiscal quarter ended March 31,
1995.
10.43 Amendment dated April 18, 1995 of the Receivables
Purchase Agreement dated as of January 19, 1995
between Registrant, as the seller, and PNC Bank,
N.A., as the purchaser is incorporated by
reference to Exhibit 10.3 to Form 10-Q for the
fiscal quarter ended March 31, 1995.
10.44 Amendment dated September 25, 1995 of the Note
Agreement dated as of September 15, 1993 between
Registrant and the Purchasers identified therein
is incorporated by reference to Exhibit 10.5 to
Form 10-Q for the fiscal quarter ended September
30, 1995.
10.45 Consent to amendment dated September 25, 1995
pursuant to the Receivables Purchase Agreement
dated as of January 19, 1995 between Registrant,
as the seller, and PNC Bank, N.A., as the
purchaser identified therein is incorporated by
reference to Exhibit 10.6 to Form 10-Q for the
fiscal quarter ended September 30, 1995.
10.46 Consent to amendment dated September 29, 1995
pursuant to Line of Credit between Bank of Boston
and Registrant identified therein is incorporated
by reference to Exhibit 10.7 to Form 10-Q for the
fiscal quarter ended September 30, 1995.
10.47 Amendment Agreement dated November 30, 1995 of
the Receivables Purchase Agreement dated as of
January 19, 1995 between Registrant, as the
seller, and PNC Bank, N.A., as the purchaser.
10.48 Amended and Restated Loan and Security Agreement
dated January 5, 1996 between The First National
Bank of Boston and Registrant
-58-
<PAGE> 59
10.49 Amendment Agreement dated January 5, 1996 of the
Note Agreement dated as of September 15, 1993
between Registrant and the Purchasers identified
therein.
10.50 Intercreditor Agreement dated January 5, 1996
between The First National Bank of Boston and the
Purchasers identified in the Note Agreement dated
as of September 15, 1993.
10.51 Consent, Waiver and Amendment Agreement dated
March 15, 1996 between PNC Bank, N.A, the
Purchasers identified in the Note Agreement dated
as of September 15, 1993, The First National Bank
of Boston and Registrant.
11.1 Statement re: Computation of Per Common Share
Earnings (Loss).
21.1 Subsidiaries.
23.1 Consent of Independent Certified Public
Accountants.
99.1 Undertaking is incorporated by reference to
Exhibit 28.1 to Form 10-K for the year ended
December 31, 1982.
The Registrant has no additional long-term debt instruments in
which the total amount of securities authorized under any instrument exceeds 10%
of total assets of the Registrant and its subsidiaries on a consolidated basis.
The Registrant hereby agrees to furnish a copy of any such long-term debt
instrument upon the request of the Securities and Exchange Commission.
b. Reports on Form 8-K
None filed in the three months ended December 31,
1995
-59-
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant as duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
KERR GROUP, INC.
BY:/s/ D. Gordon Strickland
------------------------
D. Gordon Strickland, President and
Chief Executive Officer
Dated: March 29, 1996
Los Angeles, California
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ Gordon C. Hurlbert March 29, 1996
- ---------------------------------------
Gordon C. Hurlbert, Director
/s/ Michael C. Jackson March 29, 1996
- ---------------------------------------
Michael C. Jackson, Director
/s/ John D. Kyle March 29, 1996
- ---------------------------------------
John D. Kyle, Director
/s/ James R. Mellor March 29, 1996
- ---------------------------------------
James R. Mellor, Director
/s/ D. Gordon Strickland March 29, 1996
- ---------------------------------------
D. Gordon Strickland, Principal
Executive Officer; Director
/s/ Robert M. O'Hara March 29, 1996
- ---------------------------------------
Robert M. O'Hara, Director
/s/ Harvey L. Sperry March 29, 1996
- ---------------------------------------
Harvey L. Sperry, Director
/s/ Geoffrey A. Whynot March 29, 1996
- ---------------------------------------
Geoffrey A. Whynot
Principal Financial Officer
/s/ J. Stephen Grassbaugh March 29, 1996
- ---------------------------------------
J. Stephen Grassbaugh
Principal Accounting Officer
</TABLE>
-60-
<PAGE> 61
SCHEDULE VIII
KERR GROUP, INC.
Valuation and Qualifying Accounts
Three years ended December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------- ------------ ---------------------- ----------- ---------
Additions
----------------------
(1) (2)
Balance Charged Charged Deductions Balance
at Beginning (Credited) to Other From at End
Description of Period to Earnings Account Reserves(a) of Period
- -------------------------------- ------------ ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts,
year ended:
December 31, 1993 $645 ($ 42) $ -- $ 25 $578
==== ==== ====== ==== ====
December 31, 1994 $578 $ 39 $ -- $447 $170
==== ==== ====== ==== ====
December 31, 1995 $170 $272 $ -- $ 21 $421
==== ==== ====== ==== ====
</TABLE>
(a) These deductions represent uncollectible amounts charged against the
reserve.
-61-
<PAGE> 62
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
KERR GROUP, INC.
FORM 10-K
for year ended December 31, 1995
INDEX TO EXHIBITS FILED SEPARATELY WITH FORM 10-K
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- --------
<S> <C>
10.2 Amendment dated as of January 2, 1996 of the Employment
Agreement between Registrant and Roger W. Norian.
10.4 Amendment dated as of January 2, 1996 of the Employment
Agreement between Registrant and D. Gordon Strickland.
10.6 Amendment dated as of January 2, 1996 of the Employment
Agreement between Registrant and Robert S. Reeves.
10.7 Employment Agreement, as amended, between Registrant
and Geoffrey A. Whynot dated as of November 1, 1989.
10.10 Amendment dated as of January 2, 1996 of the Employment
Agreement between Registrant and J. Stephen Grassbaugh.
10.47 Amendment Agreement dated November 30, 1995 of the
Receivables Purchase Agreement dated as of January 19, 1995
between Registrant, as the seller, and PNC Bank, N.A., as
the purchaser.
10.48 Amended and Restated Loan and Security Agreement dated
January 5, 1996 between The First National Bank of Boston
and Registrant
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- --------
<S> <C>
10.49 Amendment Agreement dated January 5, 1996 of the Note
Agreement dated as of September 15, 1993 between Registrant
and the Purchasers identified therein.
10.50 Intercreditor Agreement dated January 5, 1996 between The
First National Bank of Boston and the Purchasers identified
in the Note Agreement dated as of September 15, 1993.
10.51 Consent, Waiver and Amendment Agreement dated March 15,
1996 between PNC Bank, N.A, the Purchasers identified in
the Note Agreement dated as of September 15, 1993, The
First National Bank of Boston and Registrant
11.1 Statement re: Computation of Per Common Share Earnings
(Loss).
21.1 Subsidiaries
23.1 Consent of Independent Certified Public Accountants.
</TABLE>
<PAGE> 1
EXHIBIT 10.2
AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, Kerr Group, Inc. (the "Company") and Roger W. Norian (the
"Employee") have entered into an Employment Agreement, dated as of October 10,
1985, amended as of December 12, 1989 and further amended and restated as of
December 1, 1994 (the "Employment Agreement"); and
WHEREAS, the Company and the Employee have agreed to amend the
Employment Agreement.
NOW, THEREFORE, effective as of the date written below, the Employment
Agreement is amended as follows:
1. Section 2(d) shall be amended by adding the following language after the
words "$1,140,000 by certified or bank check" and prior to the colon:
"and, for a period of 24 months after such
termination, the Company shall provide for the Employee the
same medical and dental benefits which were provided to the
Employee at the date of such termination, provided, however,
that the Company shall not be obligated to provide any such
fringe benefit after the Employee shall receive such fringe
benefit at least as favorable to the Employee from another
employer"
IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of
January, 1996.
KERR GROUP, INC.
By: /s/ D. Gordon Strickland
------------------------
/s/ Roger W. Norian
------------------------
<PAGE> 1
EXHIBIT 10.4
AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, Kerr Group, Inc. (the "Company") and D. Gordon Strickland
(the "Employee") have entered into an Employment Agreement, dated as of June
16, 1986 (the "Employment Agreement"); and
WHEREAS, pursuant to Paragraph 13 of the Employment Agreement, the
Company and the Employee have agreed to amend the Employment Agreement.
NOW, THEREFORE, effective as of the date written below, the Employment
Agreement is amended as follows:
1. The third sentence of Paragraph 2(b)(3) shall be deleted and replaced with:
Notwithstanding anything in this Paragraph 2(b)(3) to the
contrary, the Salary to be paid to Employee upon termination of
employment pursuant hereto shall not be reduced by any amounts paid to
Employee on account of any compensation received by Employee from
other employment. Furthermore, the Company shall not be obligated to
provide any such fringe benefit after Employee shall receive such
fringe benefit at least as favorable to Employee from another
employer.
IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of
January, 1996.
KERR GROUP, INC.
By: /s/ Roger W. Norian
---------------------------
President
/s/ D. Gordon Strickland
---------------------------
<PAGE> 1
EXHIBIT 10.6
AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, Kerr Group, Inc. (the "Company") and Robert S. Reeves, II
(the "Employee") have entered into an Employment Agreement, dated as of
February 17, 1983 (the "Employment Agreement"); and
WHEREAS, pursuant to Paragraph 14 of the Employment Agreement, the
Company and the Employee have agreed to amend the Employment Agreement.
NOW, THEREFORE, effective as of the date written below, the Employment
Agreement is amended as follows:
1. The second sentence of Paragraph 2(b)(3) shall be deleted and replaced
with:
Notwithstanding anything in this Paragraph 2(b)(3) to the
contrary, the Salary to be paid to Employee upon termination of
employment pursuant hereto shall not be reduced by any amounts paid to
Employee on account of any compensation received by Employee from
other employment. Furthermore, the Company shall not be obligated to
provide any such fringe benefit after Employee shall receive such
fringe benefit at least as favorable to Employee from another
employer.
IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of
January, 1996.
KERR GROUP, INC.
By: /s/ Roger W. Norian
----------------------------------
President
/s/ Robert S. Reeves, II
---------------------------------
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 1, 1989, between Kerr Glass
Manufacturing Corporation, a Delaware corporation (the "Company") and Geoffrey
A. Whynot (the "Employee").
1. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment upon the terms and conditions hereinafter
set forth.
2. Term. (a) The Agreement shall commence and take effect on the
date hereof, and end on the date this Agreement is terminated by either the
Company or the Employee as hereinafter provided in this Paragraph 2.
(b) The Company may at its election terminate the obligations of the
Company under this Agreement as follows:
(1) If the Employer becomes ill or is injured so that he is
unable to perform the services required of him hereunder and such inability to
perform continues for a period in excess of 180 consecutive days and such
inability is continuing at the time of such notice, then the Company may
terminate its obligations hereunder on 30 days' notice provided that the
Employee shall receive disability payments to which such Employee is then
entitled under the Company's group disability benefits then in effect during
the period commencing on the date of such termination and ending on the
date such disability ends or age 65, whichever first occurs.
<PAGE> 2
(2) For just cause upon notice of such termination to the
Employee. Termination of the Employee's employment by the Company shall
constitute a termination "for just cause" only if such termination is for one
or more of the following reasons: (i) the failure of the Employee to render
services to the Company in accordance with his obligations under this
Agreement, which failure amounts to an extended and gross neglect of his duties
to the Company; (ii) the continued use of drugs by the Employee to an extent
that he is unable to fulfill his duties under this Agreement; and (iii) the
commission by the Employee of an act of fraud or embezzlement against the
Company or the Employee's having been convicted of a felony involving moral
turpitude.
(3) Without cause upon notice to the Employee provided that for
a period of six months after such termination the Company shall (i) pay to
Employee an amount each month equal to the Salary which Employee is being paid
each month at the date of the notice of termination and (ii) provide for
Employee the same fringe benefits, consisting of medical, dental, life and
disability insurance, which were provided to Employee at the date of the notice
of termination. Notwithstanding anything in this Paragraph 2(b)(3) to the
contrary, the Salary to be paid to Employee shall be reduced by any amounts
paid to Employee for the performance of services for anyone other than the
Company during the period after
- 2 -
<PAGE> 3
termination by the Company and while the Company is required to continue to pay
the Employee as herein provided, but the Employee shall not be obligated to
seek the opportunity to perform such services, and the Company shall not be
obligated to provide any such fringe benefit after Employee shall receive such
fringe benefit at least as favorable to Employee from another employer. If
the Company may elect, in accordance with Paragraph 2(b)(1) hereof, to
terminate this Agreement then such election shall be deemed to have been made
under Paragraph 2(b)(1) and not in accordance with this Paragraph 2(b)(3).
(c) Employee may terminate his obligations under Paragraphs 4
and 5 hereof upon 90 days' prior notice thereof to the Company and, from and
after the delivery of such notice, the Company shall have no further
obligations under this Agreement unless it shall elect, by notice to the
Employee, to continue to pay the Employee as herein provided for the 90-day
period commencing with the date of delivery of the notice and in such event the
Employee shall continue to perform his obligations under Paragraphs 4 and 5
during such period.
3. Compensation. The Company shall pay the Employee a salary
("Salary") at the rate of $7,000.00 per month during each month of the term
hereof, payable in equal semi-monthly installments.
In addition to the foregoing, the Employee shall be eligible for and
participate in such fringe benefits as are
- 3 -
<PAGE> 4
generally available to executives of the Company and shall be entitled to
receive such increases in Salary as the Company may from time to time deem
appropriate.
4. Duties. The Employee shall be an executive of the Company, and
initially shall be Assistant Vice President and Controller, General Accounting
and External Reporting of the Company, and hereby promises to perform and
discharge well and faithfully the duties which may be assigned to him from time
to time by the Company in connection with the conduct of its business.
Election or appointment as a director or officer of the Company or any
subsidiary thereof during the term of this Agreement will not be a basis for
the Employee to receive additional compensation.
5. Extent of Services. The Employer shall devote his entire time,
attention and energies to the business of the Company and shall not during the
term of this Agreement be engaged in any other business activity whether or not
such business activity is pursued for gain, profit or other pecuniary
advantage; but this shall not be construed as preventing the Employee from
investing his personal assets in businesses which do not compete with the
Company in such form or manner as will not require any services on the part of
the Employee in the operation of the affairs of the companies in which such
investments are made and in which his participation is solely that of an
investor, and except that the Employee may
- 4 -
<PAGE> 5
purchase securities in any corporation whose securities are regularly traded
provided that such purchase shall not result in his owning beneficially at any
time one percent (1%) or more of the equity securities of any corporation
engaged in a business competitive with that of the Company.
6. Disclosure of Information. The Employee recognizes and
acknowledges that the Company's trade secrets, know-how and proprietary
processes as they may exist from time to time are valuable, special and unique
assets of the Company's business, access to and knowledge of which are
essential to the performance of the Employee's duties hereunder. The Employee
will not, during or after the term of his employment by the Company, in whole
or in part, disclose such secrets, know-how or processes to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever,
nor shall the Employee make use of any such property for his own purposes or
for the benefit of any person, firm, corporation or other entity (except the
Company) under any circumstances during or after the term of his employment,
provided that after the term of his employment these restrictions shall not
apply to such secrets, know-how and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, know-how or processes entering the public domain without the
Company's consent).
- 5 -
<PAGE> 6
7. Inventions. The Employee hereby sells, transfers and assigns to
the Company or to any person or entity designated by the Company all of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or jointly,
during the term hereof which relate to methods, apparatus, designs, products,
processes or devices, sold, leased, used or under construction or development
by the Company or any subsidiary, or which otherwise relate to or pertain to
the business, functions or operations of the Company or any subsidiary, or
which arise from the efforts of the Employee during the course of his
employment for the Company. The Employee shall communicate promptly and
disclose to the Company, in such form as the Company requests, all information,
details and data pertaining to the aforementioned inventions, ideas,
disclosures and improvements; and the Employee shall execute and deliver to the
Company such formal transfers and assignments and such other papers and
documents as may be required of the Employee to permit the Company or any
person or entity designated by the Company to file and prosecute the patent
applications and, as to copyrightable material, to obtain copyright thereof.
Any invention relating to the business of the Company or any subsidiary and
disclosed by the Employee within one (1) year following the termination of this
- 6 -
<PAGE> 7
Agreement shall be deemed to fall within the provisions of this paragraph
unless proved to have been first conceived and made following such termination.
8. Injunctive Relief. If there is a breach or threatened breach of
the provisions of Paragraphs 6 or 7 of this Agreement, the Company shall be
entitled to an injunction restraining the Employee from such breach. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies for such breach or threatened breach.
9. Insurance. The Company may, at its election and for its benefit,
insure the Employee against accidental loss or death and the Employee shall
submit to such physical examinations and supply such information as may be
required in connection therewith.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
his residence in the case of the Employee or to the Company at 1840 Century
Park East, Los Angeles, California 90067, Attention: President, or to such
officer or address as the Company shall notify Employee.
11. Waiver of Breach. A waiver by the Company or Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
- 7 -
<PAGE> 8
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
13. Entire Agreement. This instrument contains the entire agreement
of the parties. It may be changed only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification,
extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day first hereinabove written.
KERR GLASS MANUFACTURING CORPORATION
By: /s/ D. GORDON STRICKLAND
----------------------------------
President
/s/ GEOFFREY A. WHYNOT
----------------------------------
Geoffrey A. Whynot
- 8 -
<PAGE> 9
AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, Kerr Group, Inc. (the "Company") and Geoffrey A. Whynot (the
"Employee") have entered into an Employment Agreement, dated as of November 1,
1989 and amended as of November 17, 1995 (the "Employment Agreement"); and
WHEREAS, pursuant to Paragraph 13 of the Employment Agreement, the
Company and the Employee have agreed to amend the Employment Agreement.
NOW, THEREFORE, effective as of the date written below, the Employment
Agreement is amended as follows:
1. The second sentence of Paragraph 2(b)(3) shall be deleted and replaced
with:
Notwithstanding anything in this Paragraph 2(b)(3) to the
contrary, the Salary to be paid to Employee upon termination of
employment pursuant hereto shall not be reduced by any amounts
paid to Employee on account of any compensation received by
Employee from other employment. Furthermore, the Company shall
not be obligated to provide any such fringe benefit after Employee
shall receive such fringe benefit at least as favorable to Employee
from another employer.
IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of
January, 1996.
KERR GROUP, INC.
By: /s/ D. GORDON STRICKLAND
------------------------------
President
/s/ GEOFFREY A. WHYNOT
------------------------------
Geoffrey A. Whynot
<PAGE> 1
EXHIBIT 10.10
AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, Kerr Group, Inc. (the "Company") and J. Stephen Grassbaugh
(the "Employee") have entered into an Employment Agreement, dated as of
February 24, 1989 (the "Employment Agreement"); and
WHEREAS, pursuant to Paragraph 13 of the Employment Agreement, the
Company and the Employee have agreed to amend the Employment Agreement.
NOW, THEREFORE, effective as of the date written below, the Employment
Agreement is amended as follows:
1. The second sentence of Paragraph 2(b)(3) shall be deleted and replaced
with:
Notwithstanding anything in this Paragraph 2(b)(3) to the
contrary, the Salary to be paid to Employee upon termination of
employment pursuant hereto shall not be reduced by any amounts paid to
Employee on account of any compensation received by Employee from
other employment. Furthermore, the Company shall not be obligated to
provide any such fringe benefit after Employee shall receive such
fringe benefit at least as favorable to Employee from another
employer.
IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of
January, 1996.
KERR GROUP, INC.
By: /s/ Roger W. Norian
-------------------------------
President
/s/ J. Stephen Grassbaugh
-------------------------------
<PAGE> 1
EXHIBIT 10.47
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMEN
THIS FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT dated
as of November 30, 1995 (this "First Amendment") is made and entered into by
and between KERR GROUP, INC., a Delaware corporation, as seller and initial
servicer (the "Seller"), and PNC BANK, NATIONAL ASSOCIATION, a national banking
association, as purchaser (the "Purchaser"), with respect to that certain
Receivables Purchase Agreement dated as of January 19, 1995, as amended by
those certain letter amendments dated February 24, 1995 and April 18, 1995 (the
"Existing Agreement"), each by and between the Seller and the Purchaser. As
used herein, the term "Agreement" means the Existing Agreement as amended by
this First Amendment; and all other capitalized terms used herein shall have
the respective meanings specified in accordance with Section 4.04 of this First
Amendment.
WITNESSETH:
WHEREAS, the Seller has requested that the Purchaser amend the
Existing Agreement as set forth herein;
WHEREAS, the Purchaser is willing to agree to the Seller's
request to amend the Existing Agreement upon the terms and conditions set forth
in this First Amendment.
NOW THEREFORE, in consideration of the premises (each of which
is incorporated herein by reference), the Seller and the Purchaser, intending
to be legally bound hereby, hereby agree as follows:
ARTICLE I
AMENDMENTS TO EXISTING AGREEMENT
Section 1.01 Amendments to Section 1.1 of the Existing Agreement.
(a) The defined term "Affiliated Obligor" set forth in
Section 1.1 of the Existing Agreement is hereby amended and restated to read as
follows:
"Affiliated Obligor" in relation to any Obligor means an
Obligor which Seller knows, or has reason to believe, to be an
Affiliate of such Obligor.
(b) The defined term "Allocation Minimum" set forth in
Section 1.1 of the Existing Agreement is hereby amended and restated to read as
follows:
<PAGE> 2
"Allocation Minimum" means the greater of (i) 30%, or (ii) the
Minimum Deferred Purchase Price Percentage.
(c) The defined term "Amendment Fee" set forth below is
hereby added to Section 1.1 of the Agreement and shall read as follows:
"Amendment Fee" shall have the meaning ascribed to it in
Section 5.1(d).
(d) The defined term "Designated Purchase Date" set forth
in Section 1.1 of the Existing Agreement is hereby amended and restated to read
as follows:
"Designated Purchase Date" means any Business day during a
Monthly Accounting Period, which is not a Semi-Monthly Reporting Date,
a Semi-Monthly Settlement Date, a Monthly Report Date, a Monthly
Settlement Date or the Business Day following a Semi-Monthly Reporting
Date or a Monthly Reporting Date, and which is designated by Seller on
at least two (2) Business Days prior written notice to Purchaser as a
date on which Seller desires to sell Eligible Receivables to
Purchaser; provided that Seller may designate no more than six (6)
such dates during a Monthly Accounting Period.
(e) The defined term "Fees" set forth in Section 1.1 of
the Existing Agreement is hereby amended and restated to read as follows:
"Fees" shall mean collectively the Structuring Fee, the
Commitment Fee, the Administrative Fee and the Amendment Fee; and the
term "Fee" shall mean any of the Fees.
(f) The defined term "First Amendment" set forth below is
hereby added to Section 1.1 of the Agreement and shall read as follows:
"First Amendment" means that certain First Amendment to
Receivables Purchase Agreement dated as of November 30, 1995 by and
between the Seller and the Purchaser.
(g) The defined term "First Amendment Effective Date" set
forth below is hereby added to Section 1.1 of the Agreement and shall read as
follows:
"First Amendment Effective Date" shall have the meaning
ascribed to it in Section 3.02 of the First Amendment.
-2-
<PAGE> 3
(h) The defined term "Letter Amendment" set forth below
is hereby added to Section 1.1 of the Agreement and shall read as follows:
"Letter Amendment" means that certain letter amendment dated
February 24, 1995 by and between the Seller and the Purchaser.
(i) Clause (ii) of the defined term "Material Adverse
Effect" set forth in Section 1.1 of the Existing Agreement is hereby amended
and restated to read as follows:
(ii) the ability of Seller or, if Seller or an Affiliate
of Seller is acting as Servicer or Sub-Servicer, Servicer or Sub-
Servicer to perform its respective obligations under this Agreement or
an Assignment;
(j) The defined term "Maximum Purchaser's Net Investment"
set forth in Section 1.1 of the Existing Agreement is hereby amended and
restated to read as follows:
"Maximum Purchaser's Net Investment" means Thirteen Million
Five Hundred Thousand Dollars ($13,500,000).
(k) The defined term "Sub-Servicer" set forth below is
hereby added to Section 1.1 of the Agreement and shall read as follows:
"Sub-Servicer" means one or more Persons that are appointed by
Purchaser in accordance with Section 7.1(c) or Section 7.2(j) of this
Agreement, to act on the behalf of the Purchaser in its capacity as
Servicer in the administration, servicing and collection of the Sold
Receivables.
Section 1.02 Amendments to Section 2.5(b) of the Existing
Agreement. The defined term "Current Purchase Price Percentage" set forth in
Section 2.5(b) of the Existing Agreement is hereby amended and restated to read
as follows:
"Current Purchase Price Percentage" equals the lesser of (i)
70%, or (ii) 1.00 - (15 x NCR)
Section 1.03 Deletion of Existing Section 4.21 of the
Existing Agreement and Addition of New Section 4.21. Section 4.21 of the
Existing Agreement is hereby deleted from the Agreement, and the Existing
Agreement is hereby amended to add to the Agreement a new Section 4.21 which
shall read as follows:
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4.21 Use of Proceeds. The Seller shall use the proceeds
of any Current Purchase Price Payment exclusively (i) to pay Earned
Discount, Seller Adjustments, Fees and other costs, and expenses
hereunder and under the other Receivables Documents, and (ii) to fund
working capital purposes of the Seller; but in no event shall the
proceeds of any Current Purchase Price Payment be used to prepay any
indebtedness of Seller for borrowed money except indebtedness for
borrowed money owed to Purchaser.
Section 1.04 Amendments to Section 5.1 of the Existing
Agreement. Subsection 5.1 of the Existing Agreement is hereby amended (i) to
delete from Subsection (c) thereof the reference therein to "$10,000" and to
substitute therefor the amount of $20,000, and (ii) to add thereto a new
Subsection (d) which shall read as follows:
(d) Amendment Fee. In consideration for the amendment of
the receivables purchase facility as set forth in the First Amendment,
Seller shall pay to Purchaser an amendment and restructuring fee (the
Amendment Fee") on the First Amendment Effective Date equal to
$135,000.
Section 1.05 Amendments to Section 6.14 of the Existing
Agreement. Section 6.14 of the Existing Agreement is hereby amended to add new
Subsections (d) and (e) thereto which shall read as follows:
(d) Effective on and as of the First Amendment Effective
Date, Seller hereby agrees that Seller shall maintain Lockboxes and
Lockbox Accounts for the collection of Pool Receivables only with the
Purchaser. To such end Seller agrees (i) to comply with the
provisions of Subsection (e) below, and (ii) to immediately direct all
Obligors to direct the payment of Pool Receivables to one or more
Lockboxes maintained at Purchaser. Notwithstanding any other
provision herein to the contrary, any Lockboxes and related Lockbox
Accounts currently maintained with the Purchaser, and any additional
Lockboxes and related Lockbox Accounts newly established with the
Purchaser in accordance with the directives of this Subsection
6.14(d), shall be titled or retitled, as the case may be,
substantially as "PNC Bank, National Association, Collection Account
re: Kerr Group, Inc., - Sold Receivables", with such additional
identifying information as the Purchaser may deem appropriate. The
Seller hereby agrees that the Purchaser shall have exclusive dominion
and control over, and ownership of, all such Lockboxes and related
Lockbox Accounts and all Collections of Sold Receivables, whether in
the form of checks, monies, instruments and other property
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from time to time in it; without limitation, the Purchaser shall have
the sole right to make withdrawals from all such Lockboxes and related
Lockbox Accounts. Purchaser acknowledges that Collections with
respect to Pool Receivables which are not Sold Receivables may be
delivered to a Lockbox, and that Collections in the form of wire
transfers with respect to Pool Receivables which are not Sold
Receivables may be directed to a Lockbox Account maintained at the
Purchaser. Any such Collections of Pool Receivables which are not
Sold Receivables shall be processed in accordance with the terms of
the applicable Lockbox Agreement, but any such processing shall not be
deemed to diminish or impair the exclusive dominion and control over,
and ownership of, all such Lockboxes and related Lockbox Accounts by
the Purchaser.
(e) Within ten (10) days after the First Amendment
Effective Date, the Seller will obtain an agreement duly executed and
delivered by Harris Trust and Savings Bank ("Harris"), in form and
substance satisfactory to Purchaser, containing the following terms
and conditions: (i) complete dominion and control of Lockboxes No.
71861 and 95321, and a related Lockbox Account No. 3133766 maintained
at Harris, shall be transferred to Purchaser; (ii) Harris shall
establish and maintain a separate demand deposit account (the "Seller
Account") in the name of Seller to receive collections with respect to
Pool Receivables which are not Sold Receivables; (iii) Harris will
identify items for deposit into the Seller Account or into the Lockbox
Account as follows: (x) items which are accompanied by a reference to
invoices which have been identified on an Assignment executed by the
Seller will be segregated for deposit into the Lockbox Account; (y)
items which are accompanied by a reference to invoices which have not
been identified on an Assignment executed by the Seller will be
segregated for deposit into the Seller Account; and (z) items lacking
a reference to an invoice will be held by Harris for further
identification, and the Seller
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shall covenant and agree to assist Harris in any identification
process; (iv) Harris shall process electronic funds transfers received
by Harris with respect to Pool Receivables as follows: (x) electronic
funds transfers which are accompanied by a reference to invoices which
have been identified on an Assignment executed by the Seller will be
re-directed for deposit into the Lockbox Account; (y) electronic funds
transfers which are accompanied by a reference to invoices which have
not been identified on an Assignment executed by the Seller will be
deposited into the Seller Account; and (z) electronic funds transfers
lacking a reference to an invoice will be held by Harris for further
identification, and the Seller shall covenant and agree to assist
Harris in any identification process; (v) Harris and Seller shall
provide to Purchaser such information concerning Collections and
applications as Purchaser may reasonably request; (vi) Seller shall be
solely responsible for any increased costs and expenses resulting from
such agreement; and (vii) Purchaser may deliver to Harris a directive
in the form of Annex A to the Lockbox Letter Agreement among Seller,
Purchaser and Harris, dated January 19, 1995, at any time hereafter
when Purchaser, in the exercise of its sole discretion, determines
that such an action is necessary for the protection of its rights and
interest hereunder. In the event an agreement meeting the foregoing
requirements is not executed and delivered to Purchaser on or before
the tenth (10th) day after the First Amendment Effective Date,
Purchaser shall have the right to deliver to Harris a directive in the
form of Annex A to the Lockbox Letter Agreement.
Section 1.06 Amendment of the Existing Agreement to Add a
New Section 6.19. The Existing Agreement is hereby amended to add to the
Agreement a new Section 6.19 which shall read as follows:
6.19. Use of Proceeds. The Seller will use the proceeds of
a Current Purchase Price Payment only for lawful purposes in
accordance with Section 4.13 and Section 4.21 hereof as applicable and
such uses shall not contravene any applicable Law or any other
provision hereof. The Seller hereby specifically covenants and agrees
that in no event shall the proceeds of any Current Purchase Price
Payment be used to prepay any indebtedness of Seller for borrowed
money except indebtedness for borrowed money owed to Purchaser.
Section 1.07 Amendment of the Existing Agreement to Add a
New Section 6.20. The Existing Agreement is hereby amended to add to the
Agreement a new Section 6.20 which shall read as follows:
6.20. Liens. The Seller shall not at any time create,
incur, assume or suffer to exist any Lien on any of property or
assets, tangible or intangible, now owned or hereafter acquired, or
agree or become liable to do so, except Liens permitted under Section
10.2 of the Note Agreement or otherwise consented to in writing by
Purchaser.
Section 1.08 Amendments to Section 7.1 of the Existing
Agreement. Section 7.1 of the Existing Agreement is hereby amended and
restated to read as follows:
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7.1. Designation of Seller as Initial Servicer; Designation of
Purchaser as Successor Servicer
(a) Designation of Seller as Initial Servicer. Seller
hereby grants to Purchaser an irrevocable power of attorney (coupled
with an interest) to designate a Person for the purpose of servicing,
administering and collecting the Sold Receivables. Purchaser hereby
designates and appoints Seller as the agent of Purchaser and Seller
(Seller in such capacity herein, together with any successor servicer
of the Sold Receivables, referred to as the "Servicer") as the initial
Servicer for the purpose of servicing, administering and collecting
the Sold Receivables.
(b) Designation of Purchaser as a Successor Servicer.
Effective on and as of the First Amendment Effective Date, Purchaser
and Seller hereby agree that Seller is discharged from its duties
under this Article VII as Servicer. Purchaser hereby assumes the role
as Servicer for the purpose of servicing, administering and collecting
the Sold Receivables, and the Seller hereby expressly agrees and
consents to such assumption by the Purchaser of the role of Servicer
for the Sold Receivables.
(c) Designation of Seller as a Sub-Servicer. Effective
on and as of the First Amendment Effective Date, Purchaser hereby
appoints Seller to act as an agent of Purchaser in its capacity as
Servicer to perform such duties with respect to the servicing,
administering and collecting the Sold Receivables as the Purchaser may
direct from time to time (the Seller in such Capacity is herein
referred to as the "Sub-Servicer"). So long as Seller shall act as
Sub-Servicer under this Agreement, Seller shall pay and be responsible
for all costs, expenses and attorneys' fees incurred by Servicer and
the Sub-Servicer in connection with the performance of their
respective obligations under this Article VII. So long as Seller is
Sub-Servicer, Seller hereby acknowledges that the purchase of the Sold
Receivables, the incurrence by Purchaser of the risk of collection
with respect to the Sold Receivables and the payment to Sub-Servicer
of income (if any) on investments from the Servicer Deposit Account
constitutes adequate consideration for the services of Sub-Servicer
hereunder.
Section 1.09 Amendments to Section 7.2 of the Existing
Agreement. Section 7.2 of the Existing Agreement is hereby amended to
add a new Subsection 7.2(j) and such new Subsection shall read as
follows:
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(j) Authority to Appoint Sub-Servicer. At any time that
the Purchaser is the Servicer, the Purchaser is hereby authorized to
appoint one or more Persons, one of which may be the Seller, as the
agent of the Purchaser to perform one or more duties of the Purchaser
as Servicer hereunder. The duties of the Sub-Servicer shall be set
forth from time to time by the Purchaser pursuant to one or more
separate written directives.
Section 1.10 Amendments to Section 7.9 of the Existing
Agreement. Section 7.9 of the Existing Agreement is hereby amended
and restated to read as follows:
7.9. Servicer Deposit Account. On the date hereof
Servicer shall cause to be established, and at all times prior to the
Final Payout Date, Servicer shall cause to be maintained, one or more
segregated trust accounts at Purchaser in the name of Servicer, as
trustee for Purchaser (collectively, the "Servicer Deposit Account").
The Servicer Deposit Account shall be used for the deposit of funds
set aside pursuant to clauses (ii), (iii) and (iv) of Section 2.6(a)
and no other funds. No deposit of funds in the Servicer Deposit
Account shall be deemed to reduce the Purchaser's Net Investment,
unless and until such funds are actually paid to Purchaser in
accordance with Section 2.6 or 2.7. Except during any Liquidation
Period, funds on deposit in the Servicer Deposit Account shall be
invested in overnight deposits, selected by Seller but acceptable to
Purchaser, and the income from such investments shall be added to the
balance in such account. During any Liquidation Period, any moneys
credited to the Servicer Deposit Account will remain uninvested.
Except upon the commencement of, and during the continuance of, any
Liquidation Period, all income on the overnight investments of the
funds on deposit in the Servicer Deposit Account shall be paid to
Servicer, if Seller or an Affiliate of Seller is the Servicer, or to
Sub-Servicer, if Seller or an Affiliate of Seller is the Sub-Servicer,
on the Semi-Monthly Settlement Date following any credit of such
income to the Servicer Deposit Account as consideration for servicing
the Sold Receivables. Upon the commencement of any Liquidation
Period, all accrued and unpaid income on the overnight investments of
the funds on deposit in the Servicer Deposit Account shall be paid to
Purchaser on the Semi-Monthly Settlement Date following any credit of
such accrued income to the Servicer Deposit Account and shall be
applied to reduce the Purchaser's Net Investment. Any losses on the
investment of sums deposited in the Servicer Deposit Account shall be
for the account of Seller. On the Final Payout Date, after payment of
all sums due and owing to Purchaser
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any remaining balance in the Servicer Deposit Account shall be
released to Seller. Notwithstanding any other provision herein to the
contrary, on and as of the First Amendment Effective Date, the
Servicer Deposit Account shall be retitled substantially as "PNC Bank,
National Association, Servicer Deposit Account re: Kerr Group, Inc., -
Sold Receivables", with such additional identifying information as the
Purchaser may deem appropriate. The Seller hereby agrees that the
Purchaser shall have exclusive dominion and control over, and
ownership of, the Servicer Deposit Account and all monies, instruments
and other property from time to time in it; without limitation, the
Purchaser shall have the sole right to make withdrawals from the
Servicer Deposit Account.
Section 1.11 Amendments to Section 8.1 of the Existing
Agreement.
(a) Subsection 8.1(h) of the Existing Agreement is hereby
amended and restated to read as follows:
8.1(h) Current Default Ratio and Net Charge-Off Ratio. The
Current Default Ratio as of any Relevant Month End Date exceeds
[3.00%]; (ii) the average of the Current Default Ratios as of any
three consecutive Month End Dates exceeds [1.75%]; or (iii) the Net
Charge-Off Ratio exceeds [1.20%]; or
(b) Subsection 8.1(k) of the Existing Agreement is hereby
amended and restated to read as follows:
8.1(k) Delinquency Ratio. Either (A) the Delinquency Ratio
at any Relevant Month End Date is greater than [2.60%]; or (B) the
average of the Delinquency Ratios at any three consecutive Month End
Dates is greater than [2.00%];
(c) Subsection 8.1(m) of the Existing Agreement is hereby
amended and restated to read as follows:
8.1(m) Cumulative Dilution. As of any Month End Date, the
aggregate dollar amount of Dilutions accruing in the twelve-month
period ending on such Month End Date equals or exceeds [$20,000,000].
Section 1.12 Amendment to Section 9.1 of the Existing
Agreement. Section 9.1 of the Existing Agreement is hereby amended to insert
the phrase "or Sub-Servicer" immediately after the reference to "Servicer" set
forth in the twelfth line thereof.
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Section 1.13 Amendment to Section 10.1(b)(vii) of the
Existing Agreement. Clause (vii) of Section 10.1(b) of the Existing Agreement
is hereby amended and restated to read as follows:
(vii) any failure of Seller, as Servicer, Sub-Servicer or
otherwise, to perform any of its duties or obligations in accordance
with the provisions of Article VI or VII hereof, or in accordance with
the provisions of any written direction delivered to Seller in its
capacity as Sub-Servicer pursuant to Sections 7.1(c) and 7.2(j)
hereof.
Section 1.14 Addition of Exhibit "I-1" to the Agreement.
The Existing Agreement is hereby amended to add as an exhibit thereto Exhibit
"I-1" attached hereto and made a part hereof.
Section 1.15 No Other Amendments.
(a) Except as expressly provided in this First Amendment,
this First Amendment is not intended to, shall not, and shall not be deemed or
construed to, at any time, either explicitly or implicitly: (i) alter, waive
or amend any of the provisions of the Existing Agreement or any other
Receivables Document; (ii) waive, retroactively, now or in the future, due,
timely or full performance of, compliance with, or satisfaction of any
covenant, agreement, term, condition or other provision to be performed,
complied with, or satisfied by the Seller at any time before, on or after the
date hereof under or pursuant to the Agreement or any other Receivables
Document as in effect at the time in question; or (iii) impair any right or
remedy of (or available to) the Purchaser before, on or after the date hereof
under the Existing Agreement, any other Receivables Document or otherwise
(including, without limitation, any such right or remedy which may at any time
exist or arise with respect to the occurrence, existence or continuance at any
time of (x) any Termination Event or Potential Termination Event, (y) any
default under any of the other Receivables Documents, or (z) any breach or
violation of any covenant, agreement, term, condition or other provision
referred to in clause (ii) of this Subsection 1.15(a)).
(b) This First Amendment is not intended to, shall not,
and shall not be deemed or construed to, establish (either explicitly or
implicitly): (i) any course of dealing, course of performance or course of
conduct between the Purchaser; or (ii) any obligation or agreement of any
nature whatsoever on the part of the Purchaser with respect to (A) any other or
further amendment, waiver or consent regarding the Agreement or any other
Receivables Document, or (B) any forbearance from the exercise of
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any right or remedy of (or available to) the Purchaser under the Agreement, any
other Receivables Document or otherwise.
ARTICLE II
SELLER'S SUPPLEMENTAL REPRESENTATIONS
As an inducement to the Purchaser to enter into this First
Amendment, the Seller hereby represents and warrants to the Purchaser that:
Section 2.01 Incorporation by Reference. The Seller
hereby repeats herein, for the benefit of the Purchaser, each of the
representations and warranties made by the Seller in Article IV of the Existing
Agreement, except that, for the purposes hereof, such representations and
warranties (i) shall be deemed to be made by the Seller on and as of the First
Amendment Effective Date and (ii) shall also extend to and cover (A) this First
Amendment and (B) the Existing Agreement, as amended by this First Amendment.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01 Conditions Precedent. The execution and
delivery by the Purchaser of this First Amendment, and the effectiveness of
this First Amendment, is subject to the satisfaction by the Seller, on or
before November 30, 1995, of each of the following conditions:
(i) The Purchaser shall have received, on or before the
First Amendment Effective Date (as hereinafter defined) the following items,
each, unless otherwise indicated, dated the First Amendment Effective Date, and
each in form and substance satisfactory in all respects to the Purchaser and
the Purchaser's special counsel, Tucker Arensberg, P.C. ("Purchaser's
Counsel"):
(A) A duly executed counterpart original of this
First Amendment, duly executed and delivered by the Seller;
(B) A duly executed, counterpart original of the
First Amendment to Servicer Deposit Account Agreement substantially in the form
of Exhibit "I-1" hereto;
(C) A duly executed, counterpart original of
direction to Harris Trust and Savings Bank transferring control of any Lockbox
and Lockbox Account maintained at Harris Trust and Saving Bank to Purchaser;
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(D) A certified copy of the corporate action of
the Seller authorizing the Seller's execution, delivery and performance of this
First Amendment;
(E) A certificate of the secretary (or an
assistant secretary) of the Seller certifying the names and incumbency of the
officers of the Seller who are authorized to sign this First Amendment and all
other documents and certificates delivered hereunder, together with the true
signatures of such officers;
(F) A certificate signed by a responsible officer
of Seller and dated the First Amendment Effective Date, stating that the
representations and warranties contained in Article IV and in any instrument,
agreement or certificate executed and delivered in connection herewith are then
true and accurate in all material respects as though made on and as of the
First Amendment Effective Date;
(G) Evidence satisfactory to Purchaser that
Seller is duly organized and validly existing and in good standing under the
laws of the State of Delaware, is duly qualified as a foreign corporation and
in good standing in the State of California and the Commonwealth of
Pennsylvania, and has paid all California corporate taxes which are due and
payable;
(H) A certified copy of each search report,
certified by the appropriate filing officer (or a similar certificate of
counsel admitted to practice in the appropriate jurisdiction), showing that no
financing statements or similar statements or notices of tax levies,
assessments or liens have been filed with respect to, and then presently cover,
any Receivables (except those financing statements filed pursuant to this
Agreement in favor of Purchaser and those financing statements or notices (if
any) as may be otherwise approved by Purchaser, in writing);
(I) The payment in full of the Amendment Fee;
(J) The payment of the reasonable fees and
expenses of counsel to the Purchaser, including without limitation the cost of
any UCC lien and tax lien searches concerning the Seller;
(K) Such other evidence as Purchaser may
reasonably request to establish the consummation of the transactions
contemplated hereby, the taking of all proceedings in connection herewith and
compliance with the conditions set forth in this First Amendment;
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(L) All material consents of all applicable
Governmental Persons and third parties, including without limitation such
sublicenses and consents as the Purchaser shall require with regard to all
programs owned or leased by Seller and used in the servicing of any Pool
Receivables, required to effectuate the transactions contemplated hereby shall
have been obtained;
(M) A duly executed counterpart original of the
direction letter from Servicer to Sub-Servicer, duly executed and delivered by
the Seller, in its capacity as Sub-Servicer; and
(N) Such other instruments, documents and
opinions of counsel as the Purchaser shall reasonably require, each of which
shall be satisfactory in form and substance in all respects to the Purchaser
and Purchaser's Counsel.
(ii) The following statements shall be true and correct on
the First Amendment Effective Date, and the Purchaser shall have received a
certificate signed by an authorized officer of the Seller, dated the First
Amendment Effective Date, and in form and substance satisfactory in all
respects to the Purchaser and Purchaser's Counsel, certifying, on and as of the
First Amendment Effective Date, that:
(A) the representations and warranties of the
Seller contained in Section 2.01 of this First Amendment, and in each of the
other Receivables Documents to which the Seller is a party, are true and
correct on and as of the First Amendment Effective Date as though made on and
as of such date;
(B) no petition by or against the Seller has at
any time been filed under the United States Bankruptcy Code or under any
similar act;
(C) no Termination Event under the Existing
Agreement, nor any default under any of the other Receivables Documents, has
occurred and is continuing, and no Termination Event or Potential Termination
Event under the Existing Agreement, nor any default under any of the other
Receivables Documents, would result from the execution and delivery of this
First Amendment; and
(D) the Seller has in all material respects
performed all agreements, covenants and conditions required to be performed by
it on or prior to the First Amendment Effective Date under the Existing
Agreement and the other Receivables Documents.
Section 3.02 First Amendment Effective Date. For the
purposes of this First Amendment, the term "First Amendment
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Effective Date" shall mean the first Business Day on which the Purchaser and
Purchaser's counsel determine that each of the conditions set forth in Section
3.01 hereof has been either (i) satisfied by the Seller, to the satisfaction of
the Purchaser and Purchaser's counsel, or (ii) expressly waived by the
Purchaser; provided, however, that the amendment set forth in Section 1.01(b)
of this First Amendment shall not become effective until immediately after the
first Purchase to occur after the First Amendment Effective Date. If the First
Amendment Effective Date does not occur on or before November 30, 1995, then,
at the option of the Purchaser, this First Amendment shall be null and void and
of no legal effect, and the Purchaser shall have no duty or obligation with
respect to any amendment or waiver contemplated hereby.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01 Ratification of Terms. Except as and to the
extent expressly amended by this First Amendment, the Existing Agreement and
the other Receivables Documents, and each and all of the representations,
warranties, covenants, agreements, terms, conditions and other provisions
respectively contained therein, are hereby specifically ratified and confirmed.
Section 4.02 References. All notices, communications,
agreements, certificates, documents or other instruments executed and delivered
after the execution and delivery of this First Amendment may refer to the
Existing Agreement without making specific reference to this First Amendment,
but nevertheless all such references shall be deemed to refer to and include
this First Amendment unless expressly stated, or the context requires,
otherwise.
Section 4.03 Counterparts. This First Amendment may be
executed in as many different counterparts as may be convenient, each of which
when executed by the Seller and the Purchaser shall be regarded as an original
and all such counterparts shall constitute one First Amendment. The delivery of
an executed counterpart signature page to this First Amendment by telecopier
shall be effective as a delivery of an executed original counterpart hereto.
Section 4.04 Capitalized Terms and Definitions. Except
for proper nouns and except as otherwise defined herein, all capitalized terms
used herein shall have the respective meanings specified in the Existing
Agreement, as amended by this First Amendment.
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Section 4.05 First Amendment Effective Date; References,
Capitalized Terms and Definitions. From and after the First Amendment
Effective Date: (a) each reference in the Existing Agreement and the other
Receivables Documents to the Agreement shall be deemed to be a reference to the
Existing Agreement, as amended by this First Amendment; and (b) all capitalized
terms which are used in the Receivables Documents, and which (as stated
therein) are used therein with the respective meanings specified in the
Agreement, shall be deemed to have the respective meanings specified in the
Existing Agreement, as amended by this First Amendment.
Section 4.06 Taxes. The Seller shall pay any and all
stamp and other taxes and fees (if any) payable or determined to be payable in
connection with the execution, delivery, filing and recording of this First
Amendment and any other documents related hereto, and the Seller agrees to
indemnify and save the Purchaser harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission
to pay any of such taxes or fees.
Section 4.07 Indemnification and Contribution.
(a) Indemnification. The Seller shall (to the fullest extent
permitted by applicable law) indemnify, upon demand, the Purchaser and any
subsequent holder of the rights of the Purchaser under the Agreement and their
respective shareholders, controlling persons, directors, officers, employees
and agents (each of the foregoing an "Indemnified Party"), from, and hold each
of them harmless against, any and all losses, liabilities, claims, damages or
expenses to which any of them may become subject, insofar as such losses,
liabilities, claims, damages or expenses are awarded against or incurred by any
of them arising out of or relating to or resulting from (a) any actual or
proposed use by the Seller of any of the proceeds of any Current Purchase Price
Payment, or (b) the execution, delivery or performance of this First Amendment
or any other Receivables Document by the Seller or the Purchaser, or (c) the
inability or failure of the Seller to perform its obligations under the
Agreement and any other Receivables Documents, as amended, or any other
agreement between the Seller and a third party, or (d) any other transaction
arising out of or related to this First Amendment or any other Receivables
Document, or (e) any investigation, litigation or other proceeding (including
any threatened investigation or proceeding) relating to any of the foregoing
whether commenced by the Seller or any other Person; and the Seller shall
reimburse any Indemnified Party, upon demand, for any reasonable expenses
(including legal fees) incurred in connection with any such loss, liability,
claim, damage, expense, investigation, litigation or proceeding; but
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excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Indemnified Person
to be indemnified. The indemnification obligations of the Seller in this
Section 4.07 shall survive the payment in full of the Purchaser's Net
Investment.
(b) Contribution. If for any reason the indemnification
provided above in this Section 4.07 (and subject to the exceptions set forth
therein) is unavailable to an Indemnified Party (other than by a final
adjudication by a court of competent jurisdiction that a claim is not within
the scope of such indemnification) or is insufficient to hold an Indemnified
Party harmless, then Seller shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by such Indemnified Party on the one hand and Seller on the other hand
but also the relative fault of such Indemnified Party as well as any other
relevant equitable considerations.
Section 4.08 Costs and Expenses. The Seller will pay all
costs and expenses of the Purchaser (including, without limitation, the
reasonable fees and the disbursements of Purchaser's counsel and all fees and
expenses incurred by Purchaser or its independent accountants in connection
with the audit of the books and records of Seller pertaining to the Pool
Receivables) in connection with the preparation, execution and delivery of this
First Amendment.
Section 4.09 Governing Law. THIS FIRST AMENDMENT AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT
REGARD TO, OR GIVING EFFECT TO, THE PRINCIPLES OF SAID JURISDICTION REGARDING
CONFLICTS OF LAW.
Section 4.10 Headings. The headings used in this First
Amendment are used herein for convenience and for purposes of reference only,
and are not intended to, and shall not, limit or otherwise affect the meaning
of this First Amendment or any provision or part hereof.
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IN WITNESS WHEREOF, the parties hereto, with the intent to be legally
bound hereby, have caused this First Amendment to Receivables Purchase
Agreement to be duly executed by their respective proper and duly authorized
officers as of the day and year first above written.
ATTEST (Seal) KERR GROUP, INC., a Delaware corporation, as
Seller, initial Servicer and Sub-Servicer
<TABLE>
<S> <C>
By /s/ L.R. Knipple By: /s/ Geoffrey A. Whynot
----------------------------------------- ---------------------------------------------------------
Name: Larry R. Knipple Name: Geoffrey A. Whynot
-------------------------------------- --------------------------------------------------------
Title: Secretary Title: Treasurer
------------------------------------ ------------------------------------------------------
PNC BANK, NATIONAL ASSOCIATION, as Purchaser and successor Servicer
By: /s/ Anthony L. Trunzo
---------------------------------------------------------
Name: Anthony L. Trunzo
-------------------------------------------------------
Title: Vice President and Manager
------------------------------------------------------
</TABLE>
-17-
<PAGE> 18
FIRST AMENDMENT TO SERVICER DEPOSIT ACCOUNT AGREEMENT
THIS FIRST AMENDMENT TO SERVICER DEPOSIT ACCOUNT AGREEMENT
dated as of November 30, 1995 (this "First Amendment") is made and entered into
by and between KERR GROUP, INC., a Delaware corporation, as the seller of
Tendered Receivables (the "Seller"), and PNC BANK, NATIONAL ASSOCIATION (the
"Bank"), a banking association organized and existing under the laws of the
United States of America, for the benefit of PNC BANK, NATIONAL ASSOCIATION, a
national banking association, in its capacity as purchaser (the "Purchaser")
under the Purchase Agreement referred to below and as the new servicer of the
Sold Receivables (in such capacity, the "Servicer"), with respect to that
certain Servicer Deposit Account Agreement dated as of January 19, 1995 (the
"Existing Agreement"), by and between the Seller, the Bank, the Purchaser and
Seller in the capacity of Servicer. As used herein, the term "Agreement" means
the Existing Agreement as amended by this First Amendment; and all other
capitalized terms used herein shall have the respective meanings specified in
accordance with Section 2.04 of this First Amendment.
WITNESSETH:
WHEREAS, the Seller and Purchaser have entered into a
Receivables Purchase Agreement (the "Original Purchase Agreement") dated as of
January 19, 1995, whereby Seller agreed to sell, and Purchaser agreed to buy
Tendered Receivables and Related Assets of Seller;
WHEREAS, upon the assignment and transfer of the Tendered
Receivables and the Related Assets to Purchaser, such Tendered Receivables and
the Related Assets are referred to as the Sold Receivables;
WHEREAS, Seller was appointed as the initial servicer of the
Sold Receivables under the Original Purchase Agreement; and
WHEREAS, contemporaneously with the execution hereof, the
Original Purchase Agreement is being amended by a First Amendment to
Receivables Purchase Agreement dated November __, 1995 (the "First Amendment to
Purchase Agreement"); the Original Purchase Agreement, as amended by the First
Amendment to Purchase Agreement and as further amended from time to time
hereafter, the "Purchase Agreement");
EXHIBIT "I-1"
<PAGE> 19
WHEREAS, pursuant to the terms of the First Amendment to
Purchase Agreement, the Seller is being removed as the servicer of the Sold
Receivables, and the Purchaser is to serve in the capacity of Servicer under
the Purchase Agreement;
WHEREAS, the Seller has requested that the Bank, the
Purchaser, and the Purchaser as the new Servicer, amend the Existing Agreement
as set forth herein;
WHEREAS, the Bank, Purchaser and Servicer are willing to agree
to the Seller's request to amend the Existing Agreement upon the terms and
conditions set forth in this First Amendment.
NOW THEREFORE, in consideration of the premises (each of which
is incorporated herein by reference), the Bank, Servicer, Seller and the
Purchaser, intending to be legally bound hereby, hereby agree as follows:
ARTICLE I
AMENDMENTS TO EXISTING AGREEMENT
Section 1.01 Purchaser to Replace Seller as Servicer.
From and after the date hereof, the term "Servicer", as used in the Agreement,
shall mean and refer to Purchaser, or a successor servicer appointed by
Purchaser pursuant to the Purchase Agreement.
Section 1.02 Retitling of the Servicer Deposit Account.
Notwithstanding the provisions of paragraph A. of the Existing Agreement, on
and as of the date hereof, the Servicer Deposit Account shall be retitled
substantially as "PNC Bank, National Association, Servicer Deposit Account re:
Kerr Group, Inc. - Sold Receivables", with such additional identifying
information as the Purchaser may deem appropriate.
Section 1.03 Amendment to Subparagraph B.(2) of the
Existing Agreement. The following clause is hereby deleted from Subparagraph
B.(2) of the Existing Agreement: ", including any obligations of Seller in its
capacity as Servicer,", and the following clause is hereby substituted
therefor:", including any obligations of Seller in its capacity as Sub-Servicer
(as such term is defined in the Purchase Agreement),".
Section 1.04 Amendment to Paragraph H. of the Existing
Agreement. The following parenthetical is hereby inserted into Paragraph H. of
the Existing Agreement immediately after the reference to the "Servicer" in the
first line thereof: "(if Servicer is a person other than Purchaser)".
-2-
<PAGE> 20
Section 1.05 Amendment to Subparagraph K.(1) of the
Existing Agreement. The address shown for Servicer in Subparagraph K.(1) of
the Existing Agreement is hereby deleted and the addresses shown for Purchaser
in Subparagraph K.(4) are substituted therefor.
Section 1.06 Amendment to Paragraph M. of the Existing
Agreement. The proviso in Paragraph M. of the Existing Agreement is hereby
deleted and the following language is substituted therefor:
"provided, however, that neither Servicer (if Servicer is
someone other than Purchaser) nor Seller may assign its rights or duties
hereunder without the prior written consent of Purchaser."
Section 1.07 No Other Amendments.
(a) Except as expressly provided in this First Amendment,
this First Amendment is not intended to, shall not, and shall not be deemed or
construed to, at any time, either explicitly or implicitly: (i) alter, waive
or amend any of the provisions of the Existing Agreement or any other
Receivables Document; (ii) waive, retroactively, now or in the future, due,
timely or full performance of, compliance with, or satisfaction of any
covenant, agreement, term, condition or other provision to be performed,
complied with, or satisfied by the Seller at any time before, on or after the
date hereof under or pursuant to the Agreement or any other Receivables
Document as in effect at the time in question; or (iii) impair any right or
remedy of (or available to) the Purchaser before, on or after the date hereof
under the Existing Agreement, any other Receivables Document or otherwise
(including, without limitation, any such right or remedy which may at any time
exist or arise with respect to the occurrence, existence or continuance at any
time of (x) any Termination Event or Potential Termination Event, (y) any
default under any of the other Receivables Documents, or (z) any breach or
violation of any covenant, agreement, term, condition or other provision
referred to in clause (ii) of this Subsection 1.07(a)).
(b) This First Amendment is not intended to, shall not,
and shall not be deemed or construed to, establish (either explicitly or
implicitly): (i) any course of dealing, course of performance or course of
conduct between the Purchaser; or (ii) any obligation or agreement of any
nature whatsoever on the part of the Purchaser with respect to (A) any other or
further amendment, waiver or consent regarding the Agreement or any other
Receivables Document, or (B) any forbearance from the exercise of any right or
remedy of (or available to) the Purchaser under the Agreement, any other
Receivables Document or otherwise.
-3-
<PAGE> 21
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.01 Ratification of Terms. Except as and to the
extent expressly amended by this First Amendment, the Existing Agreement, and
each and all of the representations, warranties, covenants, agreements, terms,
conditions and other provisions contained therein, are hereby specifically
ratified and confirmed.
Section 2.02 References. All notices, communications,
agreements, certificates, documents or other instruments executed and delivered
after the execution and delivery of this First Amendment may refer to the
Existing Agreement without making specific reference to this First Amendment,
but nevertheless all such references shall be deemed to refer to and include
this First Amendment unless expressly stated, or the context requires,
otherwise.
Section 2.03 Counterparts. This First Amendment may be
executed in as many different counterparts as may be convenient, each of which
when executed by the Seller and the Purchaser shall be regarded as an original
and all such counterparts shall constitute one First Amendment. The delivery of
an executed counterpart signature page to this First Amendment by telecopier
shall be effective as a delivery of an executed original counterpart hereto.
Section 2.04 Capitalized Terms and Definitions. Except
for proper nouns and except as otherwise defined herein, all capitalized terms
used herein shall have the respective meanings specified in the Existing
Agreement, as amended by this First Amendment or in the Purchase Agreement, as
appropriate.
Section 2.05 Costs and Expenses. The Seller will pay all
costs and expenses of the Purchaser and Bank (including, without limitation,
the reasonable fees and the disbursements of Purchaser's counsel) in connection
with the preparation, execution and delivery of this First Amendment.
Section 2.06 Governing Law. THIS FIRST AMENDMENT AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT
REGARD TO, OR GIVING EFFECT TO, THE PRINCIPLES OF SAID JURISDICTION REGARDING
CONFLICTS OF LAW.
Section 2.07 Headings. The headings used in this First
Amendment are used herein for convenience and for purposes
-4-
<PAGE> 22
of reference only, and are not intended to, and shall not, limit or otherwise
affect the meaning of this First Amendment or any provision or part hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto, with the intent to be legally
bound hereby, have caused this First Amendment to Servicer Deposit Account
Agreement to be duly executed by their respective proper and duly authorized
officers as of the day and year first above written.
ATTEST (Seal) KERR GROUP, INC., a Delaware
corporation, as Seller
By: By:
---------------------------- -------------------------------------
Name: Name:
-------------------------- -----------------------------------
Title: Title:
------------------------- ----------------------------------
PNC BANK, NATIONAL ASSOCIATION, as
Purchaser and Service
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
PNC BANK, NATIONAL ASSOCIATION, as Bank
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
-6-
<PAGE> 1
EXHIBIT 10.48
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
among
KERR GROUP, INC.
as Borrower
and
THE FIRST NATIONAL BANK OF BOSTON
as Bank
January 5, 1996
<PAGE> 2
INDEX OF SCHEDULES
<TABLE>
<S> <C>
Schedule A Borrower's Budget
Schedule 4(e) Schedule of Documents
Schedule 6(e) Permitted Indebtedness
</TABLE>
2
<PAGE> 3
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Agreement") is
made as of January 5, 1996, between KERR GROUP, INC., a Delaware corporation,
having its principal place of business at 1840 Century Park East, Los Angeles,
California 90067 ("Borrower"), and THE FIRST NATIONAL BANK OF BOSTON, a
national banking association with its head office at 100 Federal Street,
Boston, Massachusetts 02110 ("Bank").
RECITALS
A. On or about February 9, 1995, Borrower and Bank executed a
letter agreement (the "Original Loan Agreement") pursuant to which Bank
extended to Borrower a line of credit originally evidenced by a Commercial
Promissory Note dated February 1, 1995 in the principal amount of $10,000,000
executed by Borrower to the order of Bank (the "Original Note"; the Original
Loan Agreement, Original Note and all documents executed in connection
therewith or pursuant thereto are referred to collectively as the "Original
Loan Documents").
B. On or about October 24, 1995, Bank notified Borrower that Bank
was terminating Borrower's availability under its line of credit with Bank due
to the deterioration in Borrower's financial performance and Borrower's
anticipated failure to comply with the financial performance covenants set
forth in the Noteholder Agreements (as defined in Section 1 of this Agreement).
C. Borrower has requested that Bank provide additional financing
and amend and restate the Original Loan Agreement, and Bank is willing to do so
subject to the terms and conditions set forth in this Agreement and the related
documents to be executed concurrently herewith or pursuant hereto
(collectively, the "Restated Loan Documents"). This Agreement shall replace
and supersede the Original Loan Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises,
covenants and other agreements hereinafter set forth, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS AND CERTAIN MATTERS OF CONSTRUCTION.
Additional Obligations: Any Obligations other than the Original
Obligations.
Agreement: See preamble.
1
<PAGE> 4
Bank: See preamble.
Bankruptcy Case: Any proceeding commenced by or against Borrower,
under any provision of the Bankruptcy Code or any other federal or state
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally
with its creditors, or proceedings seeking reorganization, arrangement, or
other similar relief, and all converted or succeeding cases in respect thereof.
Bankruptcy Code: The United States Bankruptcy Code (11 U.S.C. Section
101, et seq.).
Base Rate: The higher of (a) the annual rate of interest announced
from time to time by Bank at its head office as Bank's "base rate" and (b)
one-half of one percent (1/2%) above the Federal Funds Effective Rate.
Borrower: See preamble.
Budget: Borrower's projected weekly cash flows and other financial
statements for the period through April 30, 1996, a copy of which is attached
hereto as SCHEDULE A.
Business Day: Any day on which banks in Boston, Massachusetts, are
open for business generally.
Change of Control: The merger or consolidation of Borrower with or
into another corporation and, after such merger or consolidation is
consummated, either (a) Borrower is not the surviving corporation, or (b) if
Borrower is the surviving corporation, then Borrower is a wholly-owned
subsidiary of another corporation and the stockholders of Borrower, immediately
before such merger or consolidation is consummated, do not own at least 80% of
the voting capital stock of Borrower's parent corporation, immediately after
such merger or consolidation is consummated.
Claims: See Section 2(b).
Closing Date: The Business Day on which the conditions precedent set
forth in Section 4 have been satisfied.
Collateral: All of the following described real and personal
property, whether now or hereafter owned by, owing to, or acquired by or
arising in favor of Borrower, and whether consigned by Borrower as consignor or
leased by Borrower as lessor, and located on the real property identified as
500 New Holland Avenue, Lancaster Pennsylvania or Johnny Mitchell Road,
Ahoskie, North Carolina:
2
<PAGE> 5
(a) all Equipment, now or hereafter owned or acquired
by Borrower, in the form of injection molding machines and related
mold frames, lining machines and cut-and-fold machines, and any and
all appurtenances and additions thereto and substitutions or
replacements of any of the foregoing, together with all attachments,
components, parts, equipment, and accessories installed on or affixed
to any of the foregoing;
(b) all Fixtures, now or hereafter owned or acquired by
Borrower, in the form of injection molding machines and related mold
frames, lining machines and cut-and-fold machines, and any and all
appurtenances and additions thereto and substitutions or replacements
of any of the foregoing, now or hereafter attached or affixed to or
constituting a part of, or located in or upon, any of said real
property;
(c) all books and records (including computer programs,
printouts and other computer materials and records) pertaining to any
of the foregoing; and
(d) to the extent not otherwise included, all proceeds,
as such term is defined in the UCC, of the foregoing in any form, and,
in any event, including: (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Borrower from time to time
with respect to any of the foregoing; (ii) any and all payments (in
any form whatsoever) made or due and payable to Borrower from time to
time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the foregoing by any
governmental authority (or any person acting under color of any
governmental authority); (iii) any claims of Borrower against third
parties for loss or damage to, or destruction of, or otherwise
relating to any of the foregoing; (iv) any recoveries by Borrower
against third parties with respect to any litigation or dispute
concerning any of the foregoing; (v) all accessions to, substitutions
and replacements for, and rents, profits and products of, each of the
foregoing; and (vi) any and all other amounts from time to time paid
or payable under or in connection with any of the foregoing, upon
disposition or otherwise.
Collateral to Loan Ratio: The ratio of (a) the value of Collateral to
(b) the outstanding amount of the Additional Obligations.
Consent: In respect of any person or entity, any permit, license or
exemption from, approval or consent of, or registration or filing with any
local, state or federal
3
<PAGE> 6
governmental or regulatory agency or authority required under applicable law.
Default: An event or act that, with the lapse of time, would become an
Event of Default.
Default Rate: See Section 3(d).
Environmental Laws: All laws pertaining to environmental matters,
including the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Clean Water Act, the
Federal Clean Air Act, the Federal Oil Pollution Act, the Toxic Substances
Control Act, and all rules, regulations, judgments, decrees, orders and
licenses arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, and all
rules, regulations, judgments, decrees and orders arising thereunder.
Event of Default: See Section 7.
Federal Funds Effective Rate: For any day, the rate per annum equal
to the weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by Bank from three funds
brokers of recognized standing selected by Bank.
Financial Covenants: The financial performance covenants set forth in
the Noteholder Agreements.
Financials: In respect of any period, the consolidated balance sheet
of Borrower and its Subsidiaries as at the end of such period and the related
consolidated statement of income and consolidated statement of cash flow for
such period, each setting forth in comparative form the figures for the
previous comparable fiscal period, all in reasonable detail and prepared in
accordance with GAAP.
GAAP: Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, as in
effect from time to time.
Guarantor: Santa Fe Plastics Corporation, a California corporation.
4
<PAGE> 7
Indebtedness: In respect of any entity, all obligations, contingent
and otherwise, that in accordance with GAAP should be classified as
liabilities, including (a) all debt obligations, (b) all liabilities secured by
Liens, (c) all guaranties, and (d) all liabilities in respect of bankers'
acceptances or letters of credit.
Interest Reserve: The special reserve for interest payments to be
made by Borrower on or before April 15, 1996 in respect of the Loan, which
shall be calculated based on the Base Rate as of the Closing Date.
Lien: Any lien, encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any entity or person.
Loan: Any loan made or to be made to Borrower pursuant to Section 3.
Loan Documents: The Original Loan Documents and the Restated Loan
Documents.
Material Adverse Effect: Any (i) adverse change in, or a material
adverse effect upon, the operations, business, Collateral, condition (financial
or otherwise) or prospects of Borrower, or (ii) impairment of the ability of
Borrower to perform under any material provision of any of the Loan Documents.
Maturity Date: The earlier of (a) April 15, 1996, and (b) the date on
which all or substantially all of Borrower's assets are sold or a Change of
Control has occurred.
Noteholders: The holders of Borrower's 9.45% Series A Senior Notes due
September 15, 2003 and the 8.99% Series B Senior Notes due September 15, 1999.
Noteholder Agreements: The Note Agreement dated as of September 15,
1993 between each of the Noteholders and Borrower and the related documents
executed concurrently therewith or pursuant thereto, each as in effect on the
Closing Date or as subsequently amended with the prior written consent of Bank.
Obligations: Any and all presently existing or hereafter arising
indebtedness, claims, debts, attorneys' fees and other professional fees, costs
of enforcement, liabilities, and obligations of Borrower owing to Bank under
any Bank Loan Documents, whether direct or indirect, whether contingent or of
any other nature, character, or description (including all interest and other
amounts accruing after commencement of any Bankruptcy Case, and all interest
and other amounts that, but for the provisions of the Bankruptcy Code, would
have accrued and
5
<PAGE> 8
become due or otherwise would have been allowed), and any refinancings,
renewals, refundings, or extensions of any such amounts.
Original Obligations: The Original Principal Obligations and interest
thereon (including interest at the Default Rate).
Original Principal Obligations: See Section 2(a).
Permitted Liens: See Section 6(d).
PNC: PNC Bank, N.A.
PNC Agreements: The Receivables Purchase Agreement between Borrower
and PNC dated January 19, 1995, as amended by amendments dated February 24,
1995, April 18, 1995, and November 30, 1995, and the related documents executed
concurrently therewith or pursuant thereto, each as in effect on the Closing
Date or as subsequently amended with the prior written consent of Bank.
Requirement of Law: Any law, treaty, rule, regulation or determination
of an arbitrator, court, or other governmental authority, in each case
applicable to or binding upon Borrower or affecting any of its property.
Restated Loan Documents: See Recital C.
Restated Note: See Section 3(b).
Subsidiary: In respect of Borrower, any business entity of which
Borrower at any time owns or controls directly or indirectly more than fifty
percent (50%) of the outstanding shares of stock having voting power,
regardless of whether such right to vote depends upon the occurrence of a
contingency.
Any accounting term used in the Agreement or the other Restated Loan
Documents shall have, unless otherwise specifically provided therein, the
meaning customarily given such term in accordance with GAAP, and all financial
computations thereunder shall be computed, unless otherwise specifically
provided therein, in accordance with GAAP consistently applied. That certain
items or computations are explicitly modified by the phrase "in accordance with
GAAP" shall in no way be construed to limit the foregoing. All other undefined
terms contained in the Agreement or the other Restated Loan Documents shall,
unless the context indicates otherwise, have the meanings provided for them by
the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts
to the extent the same are used or defined therein. When used in this
Agreement, the words "herein," "hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the exhibits and
schedules thereto, as the same may from time to time be amended,
6
<PAGE> 9
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
For purposes of this Agreement and the other Loan Documents, the
following additional rules of construction shall apply, unless specifically
indicated to the contrary: (a) wherever from the context it appears
appropriate, each term stated in either the singular or plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter; (b) the term "or" is not exclusive; (c) the term
"including" (or any form thereof) shall not be limiting or exclusive; (d) all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations; and (e) all references to any
instruments or agreements, including references to any of the Loan Documents,
Noteholder Agreements and PNC Agreements, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
SECTION 2. ACKNOWLEDGMENT OF DEBT.
(a) Borrower acknowledges and agrees that, as of the
Closing Date, Borrower was indebted to Bank under the Original Loan Agreement
in an aggregate outstanding principal amount of $6,500,000 (the "Original
Principal Obligations").
(b) Borrower acknowledges and agrees that it has no
offset, defense, counterclaim, dispute or disagreement of any kind or nature
whatsoever (collectively, "Claims") with respect to the amount of the Original
Principal Obligations. To the extent any such Claims exist, it is fully,
forever and irrevocably released as provided in Section 8.
SECTION 3. RESTATED LOAN.
(a) Bank shall make an amended and restated term loan
(the "Loan") on the Closing Date to Borrower in a maximum aggregate principal
amount of TEN MILLION DOLLARS ($10,000,000), the proceeds of which shall be
used for working capital purposes. Subject to the other terms and conditions
hereof, (i) the amount of the Loan equal to the Original Principal Obligations
shall remain outstanding and in full force and effect and (ii) the amount of
the Loan that is in excess of the Original Principal Obligations, less the
Interest Reserve, will be funded to Borrower by wire transfer to a bank account
designated by Borrower. Bank shall establish the Interest Reserve against the
amount of the Additional Obligations, that Borrower may otherwise borrow under
this Section 2.1(a).
7
<PAGE> 10
(b) The obligation of Borrower to repay to Bank the
principal of the Loan, interest accrued thereon and costs and expenses related
thereto shall be evidenced by an amended and restated commercial promissory
note (the "Restated Note") in the maximum aggregate principal amount of
$10,000,000 executed and delivered by Borrower and payable to the order of
Bank, in form and substance satisfactory to Bank.
(c) If Borrower sells any of the Collateral, or if any of
the Collateral is taken by condemnation, Borrower shall pay to Bank, unless
otherwise agreed by Bank, as a mandatory prepayment of the Loan, a sum (not to
exceed the amount of the Additional Obligations) equal to the cash proceeds
received by Borrower from such sale or condemnation and shall assign to Bank
all of its right, title and interest in and to all non-cash proceeds from such
sale or condemnation.
(d) So long as no Default or Event of Default has
occurred and is continuing, Borrower shall pay interest (i) on the Original
Principal Obligations at a rate per annum which is equal to the Base Rate, such
interest to be payable quarterly in arrears on March 31, 1996 and on the last
Business Day of each subsequent fiscal quarter, and (ii) on the remainder of
the Loan at a rate per annum which is equal to the sum of (x) the Base Rate and
(y) two percent (2%), such interest to be payable monthly in arrears on January
31, 1996 and on the last Business Day of each subsequent calendar month.
Interest payments on the Loan (other than payments of the Default Rate of
interest) shall be made by applying amounts held in the Interest Reserve (to
the extent such amounts are available in the Interest Reserve) to the amount
then due and payable. So long as a Default or Event of Default has occurred
and is continuing, amounts payable under any of the Loan Documents shall bear
interest (compounded monthly and payable on demand in respect of overdue
amounts) at a rate per annum which is two percent (2%) per annum above the
rates otherwise applicable (the "Default Rate"). All computations of interest
payable hereunder shall be made by Bank on the basis of actual days elapsed and
on a 360-day year. In no contingency or event whatsoever, whether by reason of
advancement of the Loan or otherwise, shall the amount paid or agreed to be
paid to Bank for the use, forbearance or detention of money advanced hereunder
exceed the highest lawful rate permissible under any law which a court of
competent jurisdiction may deem applicable hereto. In the event that such a
court determines that Bank has charged or received interest hereunder in excess
of the highest applicable rate, such rate shall automatically be reduced to the
maximum rate permitted by law, and Bank shall promptly refund to Borrower any
interest received by it in excess of the maximum lawful rate. It is the intent
hereof that Borrower not pay or contract to pay, and that Bank not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrower under applicable law.
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<PAGE> 11
(e) If, after the date hereof, Bank determines that (i)
the adoption of or any change in any banking law, rule, regulation or guideline
or the administration thereof (whether or not having the force of law), or (ii)
compliance by Bank or its parent bank holding company with any guideline,
request or directive (whether or not having the force of law), has the effect
of reducing the return on Bank's or such holding company's capital as a
consequence of the Loans to a level below that which Bank or such holding
company could have achieved but for such adoption, change or compliance by any
amount deemed by Bank to be material, Bank may notify Borrower thereof.
Borrower agrees to pay Bank the amount of Borrower's allocable share of the
amount of such reduction in the return on capital as and when such allocable
share of the amount of such reduction is determined, upon presentation by Bank
of a statement in the amount and setting forth Bank's calculation thereof,
which statement shall be deemed true and correct absent manifest error. Bank
agrees to allocate shares of such reduction among Borrower and Bank's other
customers similarly situated on a fair and non-discriminatory basis.
SECTION 4. CONDITIONS PRECEDENT.
Bank's obligations hereunder shall be conditioned upon the
fulfillment of each of the following conditions precedent (which are for Bank's
sole benefit):
(a) this Agreement or counterparts thereof shall have
been duly executed by Bank and Borrower and delivered to Bank;
(b) Borrower shall be in good standing in its state of
incorporation and in any other state where such qualification is necessary or
desirable;
(c) Bank shall have received corporate resolutions of
Borrower authorizing Borrower's execution, delivery and performance of all of
its obligations under this Agreement and all of the other Restated Loan
Documents;
(d) Borrower's counsel shall have delivered to Bank its
written opinion in form and substance acceptable to Bank;
(e) Bank shall have received the Restated Note, duly
executed and delivered by Borrower, and such other documents, certificates and
agreements as Bank may reasonably request in connection with the transaction
contemplated by this Agreement, including all documents, certificates,
agreements and other items listed in the Schedule of Documents attached hereto
9
<PAGE> 12
as SCHEDULE 4(E), each in form and substance reasonably satisfactory to Bank;
and
(f) Borrower shall have paid to Bank (i) an arrangement
fee in an amount equal to one-half of one percent (0.5%) of the maximum
aggregate amount of the Additional Obligations (i.e., $17,500), (ii) any
accrued and unpaid interest, and (iii) all other fees, costs and expenses of
the consummation of the transactions contemplated by this Agreement (including
reasonable fees and expenses of appraisers and counsel to Bank presented as of
the Closing Date).
SECTION 5. GRANT OF SECURITY INTEREST.
(a) To secure the payment and performance in full of all
Additional Obligations, Borrower hereby grants to Bank a continuing Lien upon,
and a right of setoff against, and Borrower hereby assigns and pledges to Bank,
all of the now owned and hereafter acquired right, title and interest in the
Collateral.
(b) If Bank determines that the Collateral to Loan Ratio
is not in excess of 1.7 to 1.0 at any time, then Borrower shall pledge
additional assets, as reasonably requested by Bank, as collateral for the
Additional Obligations as necessary to increase the Collateral to Loan Ratio,
in the reasonable determination of Bank, to 1.7 to 1.0.
(c) Upon the reduction of the aggregate outstanding
principal amount of the Loan to $6,500,000 and payment by Borrower to Bank of
any other amounts then due and payable in respect of the Additional
Obligations, Bank shall be deemed to have released its Lien on the Collateral.
At such time, upon the written request of Borrower and at the sole expense of
Borrower, Bank shall execute any and all instruments and documents prepared by
Borrower to evidence the release of its Lien.
(d) All amounts chargeable to Borrower (other than the
Original Obligations) under this Agreement hereof shall be Obligations secured
by all of the Collateral, shall be payable on demand and, with respect to any
advances made by Bank, shall bear interest from the date made until paid in
full at the rate applicable to the Loan from time to time.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Borrower hereby represents, warrants and covenants to Bank the
following, the truth and accuracy of which, and compliance with which, shall be
continuing conditions of the funding of the Loan by Bank to Borrower:
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<PAGE> 13
(a) Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Borrower is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in each state or jurisdiction where the
character of its properties or the nature of its activities make such
qualification necessary, except where the failure of Borrower to be so
qualified would not have a material adverse effect on its financial condition,
business or properties.
(b) Borrower has the right and power and is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents. The execution, delivery and
performance of this Agreement and each of the other Loan Documents have been
duly authorized by all necessary corporate action and do not and will not (i)
require any Consent or any consent or approval of the shareholders of Borrower;
(ii) contravene Borrower's charter, certificate of incorporation or by-laws;
(iii) violate, or cause Borrower to be in default under, any Requirement of Law
having applicability to Borrower; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower is a party or by which it or its
properties may be bound or affected, including the Note Agreements or the PNC
Agreements; or (v) result in, or require, the creation or imposition of any
Lien upon or with respect to any of the properties now owned or hereafter
acquired by Borrower.
(c) This Agreement is, and each of the other Loan
Documents when delivered under this Agreement will be, a legal, valid and
binding obligation of Borrower enforceable against it in accordance with their
respective terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally or by principles of equity pertaining to the availability of
equitable remedies.
(d) Borrower shall not mortgage, pledge, grant or permit
to exist a Lien upon, any of its assets of any kind, now owned or hereafter
acquired, except (i) any Lien in favor of Bank, (ii) any Lien existing on the
Closing Date created under or pursuant to the PNC Agreements, or (iii) any Lien
permitted under Section 10.2 of the Noteholders Agreement (collectively,
"Permitted Liens").
(e) Borrower shall not create, incur, assume or permit to
exist any Indebtedness resulting from borrowings, loans or advances, whether
secured on unsecured, matured or unmatured, liquidated or unliquidated, joint
or several, except (i) the Indebtedness of Borrower to Bank, (ii) the
Indebtedness of Borrower to the Noteholders, (iii) the Indebtedness, if any, of
11
<PAGE> 14
Borrower to PNC, and (iv) any other Indebtedness of Borrower disclosed on
SCHEDULE 6(E).
(f) Borrower shall not sell, discount or otherwise
transfer its accounts receivable against current or deferred payment of the
purchase price thereof except pursuant to the PNC Agreements.
(g) Borrower shall not, without the prior written consent
of Bank, which consent shall not be unreasonably withheld, (i) merge, or permit
any Subsidiary to merge into or consolidate with any corporation or other
entity, (ii) make, or permit any Subsidiary to make any substantial change in
the nature of Borrower's or any such Subsidiary's business, (iii) acquire all
or substantially all of the assets of any corporation or other entity, or (iv)
sell, lease, transfer or otherwise dispose of all or a substantial or material
part of its assets.
(h) Borrower shall not guarantee, or permit any of the
Subsidiaries to guarantee or become liable, or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate, or permit any of its Subsidiaries to
pledge or hypothecate, any assets of Borrower or such Subsidiary as security
for, any liabilities or obligations of any other person or entity other than
the guaranty of the Additional Obligations by Guarantor.
(i) Borrower shall not (i) declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's common
stock now or hereafter outstanding, or (ii) redeem, retire, repurchase or
otherwise acquire any shares of any class of Borrower's stock now or hereafter
outstanding.
(j) Borrower shall maintain adequate books and records in
accordance with GAAP consistently applied, and permit any representative of
Bank, at any reasonable time, to inspect, audit and examine such books and
records, to make copies of the same, and to inspect the properties of Borrower.
(k) Borrower shall provide to Bank all of the following,
in form and detail satisfactory to Bank:
(i) not later than 90 days after and as of the
end of each fiscal year, audited Financials, prepared by KPMG Peat
Marwick or another certified public accounting firm acceptable to
Bank, which acceptance shall not be unreasonably withheld;
12
<PAGE> 15
(ii) not later than 18 days after and as of the
end of each month, Financials prepared by Borrower;
(iii) On or before Wednesday of each week, (A) a
report from the previous week comparing the amounts expended during
the most recent reporting period and the amounts projected to be
expended in the Budget, and (B) a report, in form reasonably
acceptable to Bank, detailing and updating the status (through Friday
of the previous week) of the investment bankers' efforts to sell
Borrower; and
(iv) from time to time, such other information as
Bank may reasonably request.
(l) Borrower shall pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal and
including federal and state income taxes, except such as Borrower may in good
faith contest or as to which a bona fide dispute may arise; provided, that
reasonable provision is made to the satisfaction of Bank for eventual payment
thereof in the event that it is found that the same is an obligation of
Borrower.
(m) Borrower possesses, and will hereafter possess, all
franchises and Consents required and all trademark rights, trade names, trade
name rights, patents, patent rights and fictitious name rights necessary to
enable it to conduct the business in which it is now engaged without conflict
with the rights of others.
(n) Borrower is and shall remain in compliance with all
Requirements of Law, including the Environmental Laws, having applicability to
Borrower except where such noncompliance is not reasonably likely to have a
Material Adverse Effect.
(o) Borrower is and shall remain in compliance in all
material respects with all applicable provisions of ERISA; Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
(p) After giving effect to the transactions contemplated
herein, Borrower (i) owns assets whose fair saleable value is greater than the
amount required to pay all of Borrower's Indebtedness (including contingent
debts), (ii) is
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<PAGE> 16
able to pay all its debts as they become due, and (iii) has capital sufficient
to carry on its business and transactions and all business and transactions in
which it is about to engage.
(q) The Equipment is in good operating condition and
repair, and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of the Equipment shall be maintained
and preserved, reasonable wear and tear excepted. Borrower maintains and shall
keep in force insurance with respect to the Equipment in customary amounts and
with companies reasonably satisfactory to Bank, and Borrower will deliver from
time to time at Bank's request schedules setting forth such insurance as then
in effect. Borrower will not permit any of the Equipment to become an
accession to any personal Property other than Equipment that is subject to
first priority (except for Permitted Liens) Liens in favor of Bank.
(r) Borrower shall keep accurate records itemizing and
describing the kind, type, quality, quantity and value of its Equipment and any
dispositions made in accordance with this Agreement. Promptly on request
therefor by Bank, Borrower shall deliver to Bank any and all evidence of
ownership, if any, of any of the Equipment.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.
(a) All Obligations shall be immediately due and payable,
without notice or demand, and any provisions of this Agreement as to the
funding of any portion of the Loan by Bank shall terminate automatically, upon
the termination or non-renewal of this Agreement or upon the occurrence or
existence of any one or more of the following "Events of Default":
(i) (a) Borrower fails to pay when due any of the
Obligations; or (b) Borrower fails to perform, keep or observe any
other term or provision of this Agreement or any of the other Loan
Documents and any such default shall remain unremedied for a period
ending on the first day to occur of (x) five days after the chief
executive officer, chief financial officer, treasurer, president, or
any executive vice president of Borrower shall receive written notice
of any such failure from Bank or (y) five days after any chief
executive officer, chief financial officer, treasurer, president or
executive vice president of Borrower shall or should have become aware
thereof;
(ii) Any representation, warranty or statement of
fact made by Borrower to Bank in this Agreement or any other Loan
Document shall prove to be false, inaccurate or misleading in any
material respect;
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<PAGE> 17
(iii) Any voluntary petition or application for any
relief under the bankruptcy laws of the United States now or hereafter
in effect or under any insolvency, reorganization, receivership,
readjustment of debt, assignment for the benefit of creditors,
dissolution or liquidation law or similar statute of any jurisdiction
now or hereafter in effect (whether at law or in equity) is filed by
or against Borrower;
(iv) The aggregate amount of actual total cash
outflows of Borrower exceeds by more than fifteen percent (15%) the
amounts projected for total cash outflows for any rolling four-week
period in the Budget;
(v) Any event shall occur or condition shall
exist that shall be or cause a Material Adverse Effect;
(vi) Any involuntary petition or application for
any relief under the bankruptcy laws of the United States now or
hereafter in effect is filed against Borrower, and the same shall not
have been dismissed within fifteen (15) days thereafter; provided,
that notwithstanding any provision of this Agreement to the contrary,
Bank shall have no obligation to fund any portion of the Loan during
the pendency of any such involuntary bankruptcy case; and
(vii) The occurrence of an "Event of Default" under
the Note Agreements or the PNC Agreements.
(b) Upon the occurrence of an Event of Default and at any
time thereafter, Bank shall have all rights and remedies provided in (i) this
Agreement, (ii) any of the other Loan Documents, including the Restated Note,
and (iii) the Uniform Commercial Code of the Commonwealth of Massachusetts or
other applicable law, all of which rights and remedies may be exercised without
notice to Borrower, all such notices being hereby waived, except such notice as
is expressly provided for hereunder or is not waivable under applicable law.
All rights and remedies of Bank are cumulative and not exclusive and are
enforceable, in Bank's discretion, alternatively, successively or concurrently
on any one or more occasions and in any order Bank may determine.
SECTION 8. RELEASE OF ALL CLAIMS.
(a) To the extent any Claims may exist as of the date
hereof, Borrower, on behalf of itself and its successors and assigns, hereby
forever and irrevocably release Bank and its respective officers,
representatives, agents, attorneys, employees, predecessors, successors and
assigns, from any and all Claims.
15
<PAGE> 18
(b) Borrower hereby acknowledges that it is familiar with
the provisions of Section 1542 of the California Civil Code or any similar law
of any other jurisdiction, which provides as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his
favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor.
(c) Borrower has been advised by counsel with respect to
the release contained herein. Upon advice of such counsel, Borrower hereby
waives and relinquishes all of the rights and benefits which it has, or may
have, under Section 1542 of the Civil Code of the State of California or any
similar law of any other jurisdiction.
SECTION 9. WAIVERS AND CONSENTS.
(a) Borrower waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any kind, nature or description in any
action or proceeding instituted by Bank with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating
thereto, except compulsory counterclaims.
(b) Bank shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Bank. A waiver by Bank of any right or remedy on any one occasion
shall not be construed as a bar to or waiver of any such right or remedy which
Bank would otherwise have on any future occasion, whether similar in kind or
otherwise.
SECTION 10. MISCELLANEOUS.
(a) This Agreement shall continue in full force and
effect through the Maturity Date.
(b) Except as otherwise provided, any communications to
be made under this Agreement shall be made in writing to the address or
facsimile number of the party receiving notice which is identified with its
signature below, or to such other address as either party may designate by five
(5) days' prior written notice to the other and shall be deemed to have been
given or made: (i) if by hand, immediately upon delivery;
16
<PAGE> 19
(ii) if by telex, telegram or telecopy (fax), immediately upon receipt; (iii)
if by overnight delivery service, one business day after dispatch; and (iv) if
by first class or certified mail, three (3) days after mailing; provided, that,
in all cases, if pursuant to the foregoing provisions the deemed date of any
such notice, request or demand is not a Business Day, then such notice, request
or demand shall be deemed to have been given or made on the first Business Day
thereafter.
(c) If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect this Agreement as a
whole, but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable.
(d) This Agreement contains the entire agreement of the
parties as to the subject matter hereof, all prior commitments, proposals and
negotiations concerning the subject matter hereof being merged herein. Neither
this Agreement nor any provision hereof shall be amended, modified or
discharged orally or by course of conduct, but only by a written agreement
signed by an authorized officer of each of Bank, Borrower and Noteholders.
This Agreement shall be binding upon and inure to the benefit of each of the
parties hereto and their respective successors and assigns, except that any
obligation of Bank under this Agreement shall not be assignable or inure to the
successors and assigns of Borrower.
(e) Borrower shall pay on demand all reasonable costs and
expenses (including fees of counsel) incurred by Bank in connection with the
preparation, negotiation, execution, delivery, administration, modification,
amendment, waiver and enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the other Restated Loan Documents
and the other documents to be delivered hereunder or thereunder and the
transactions contemplated hereby and thereby and the fulfillment or attempted
fulfillment of conditions precedent hereunder, and all reasonable costs and
expenses related to the following: (i) any amendment, modification or waiver
of, or consent with respect to, any of the Loan Documents or advice in
connection with the administration of the Loan or Bank's rights hereunder or
thereunder; (iii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Bank or any other Person) in any way relating to the
Collateral, any of the Loan Documents or any other agreements to be executed or
delivered in connection herewith or therewith, whether as a party, witness, or
otherwise, including any litigation, contest, dispute, suit, case, proceeding
or action, and any appeal or review thereof, in connection with a case
commenced by or against Borrower or any other person or entity that may be
obligated to Bank by virtue of the Loan Documents, including any litigation,
contest, dispute, suit, case, proceeding or action (and any
17
<PAGE> 20
appeal or review) in connection with a case under the Bankruptcy Code, or any
other applicable Federal, state or foreign bankruptcy or other similar
insolvency law; (iv) any attempt to enforce any rights of Bank against Borrower
or any other person or entity that may be obligated to Bank by virtue of any of
the Loan Documents; or (v) any effort (A) to monitor the Loan, (B) to evaluate,
observe, assess Borrower or its affairs, or (C) to verify, protect, assemble,
complete, evaluate, assess, appraise, collect, sell, liquidate or otherwise
dispose of the Collateral, including the attorneys' and other professional and
service providers' fees arising from such services (including those in
connection with any appellate proceedings). Borrower shall pay on demand all
costs and expenses (including fees of counsel) of Bank in connection with any
Default or Event of Default and any enforcement or collection proceedings
resulting therefrom or any amendment, modification or waiver of, or consent
with respect to any of the Loan Documents. Without limiting the generality of
the foregoing, such expenses, costs, charges and fees may include: fees, costs
and expenses of accountants, workout advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; facsimile charges;
secretarial overtime charges; and expenses for travel, lodging and food, and
all other out-of-pocket costs and expenses of every type and nature paid or
incurred in connection with the performance of such legal or other advisory
services.
(f) Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(g) Except as otherwise provided in this Agreement or any
other Loan Document by specific reference to the applicable provisions of this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any other Loan Document, the provision
contained in this Agreement shall govern and control.
(h) No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party's having or being deemed to have structured, drafted or
dictated such provision.
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<PAGE> 21
(i) No termination of this Agreement shall relieve or
discharge Borrower of its obligations, grants of Collateral, duties and
covenants hereunder or otherwise until such time as all Obligations to Bank
have been indefeasibly paid and satisfied in full in cash, including the
continuation and survival in full force and effect of all security interests
and liens of Bank in and upon all then existing and thereafter-arising or
acquired Collateral, all warranties and waivers of Borrower, and all proxies
and consents executed by Borrower.
(j) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without regard
to its conflicts of law rules.
(k) BORROWER HEREBY IRREVOCABLY CONSENTS TO NON-EXCLUSIVE
PERSONAL JURISDICTION IN THE STATE AND FEDERAL COURTS LOCATED IN THE
COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION OR PROCEEDING ARISING FROM OR
RELATING TO THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, THE COLLATERAL OR
THE OBLIGATIONS, AND WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE IN ANY
SUCH COURTS, AND AGREES NOT TO ASSERT AND HEREBY WAIVES ANY DEFENSE OR
OBJECTION BASED ON LACK OF JURISDICTION, IMPROPER VENUE, OR THE DOCTRINE OF
FORUM NON CONVENIENS IN ANY SUCH COURTS. IN ANY SUCH ACTION OR PROCEEDING,
BORROWER WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR OTHER PROCESS
AND PAPERS THEREIN AND AGREES THAT THE SERVICE THEREOF MAY BE MADE BY MAIL
DIRECTED TO BORROWER AT THE BUSINESS ADDRESS SET FORTH HEREIN OR OTHER ADDRESS
THEREOF OF WHICH BANK HAS RECEIVED NOTICE AS PROVIDED HEREIN, SERVICE TO BE
DEEMED COMPLETE FIVE (5) DAYS AFTER MAILING, OR AS PERMITTED UNDER THE RULES OF
EITHER OF SUCH COURTS.
(l) BORROWER AND BANK EACH WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER
WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE ORIGINAL LOAN
AGREEMENT, ANY OTHER LOAN DOCUMENT, THE OBLIGATIONS, THE COLLATERAL, OR ANY
ALLEGED TORTIOUS CONDUCT BY BORROWER OR BANK IN CONNECTION THEREWITH, OR WHICH
IN ANY WAY DIRECTLY OR INDIRECTLY ARISES OUT OF OR RELATES TO THE RELATIONSHIP
BETWEEN BORROWER AND BANK IN CONNECTION WITH ANY OF THE FOREGOING. IN NO EVENT
WILL BANK BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
19
<PAGE> 22
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as a sealed instrument as of the date first above written.
KERR GROUP, INC.
a Delaware corporation
By: /s/ Geoffrey A. Whynot
-------------------------------------
Geoffrey A. Whynot
Treasurer
Address: 1840 Century Park East
Los Angeles, CA 90067
Attn: Geoffrey A. Whynot
Fax No.: (310) 201-5934
With a copy to:
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 E. 53rd Street
New York, New York 10022
Attn: Harvey Sperry, Esq.
Fax No.: (212) 821-8111
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
W. Douglass Vannah
Vice President
Address: 100 Federal Street
Boston, Massachusetts 02110
Attn: W. Douglass Vannah
Fax No.: (617) 434-1508
With a copy to:
MURPHY, WEIR & BUTLER
2049 Century Park East, 21st Floor
Los Angeles, California 90067
Attn: Gregory A. Bray, Esq.
Fax No.: (310) 788-3777
20
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as a sealed instrument as of the date first above written.
KERR GROUP, INC.
a Delaware corporation
By:
----------------------------------
Geoffrey A. Whynot
Treasurer
Address: 1840 Century Park East
Los Angeles, CA 90067
Attn: Geoffrey A. Whynot
Fax No.: (310) 201-5934
With a copy to:
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 E. 53rd Street
New York, New York 10022
Attn: Harvey Sperry, Esq.
Fax No.: (212) 821-8111
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ W. Douglass Vannah
----------------------------------
W. Douglass Vannah
Vice President
Address: 100 Federal Street
Boston, Massachusetts 02110
Attn: W. Douglass Vannah
Fax No.: (617) 434-1508
With a copy to:
MURPHY, WEIR & BUTLER
2049 Century Park East, 21st Floor
Los Angeles, California 90067
Attn: Gregory A. Bray, Esq.
Fax No.: (310) 788-3777
20
<PAGE> 1
EXHIBIT 10.49
AMENDMENT AGREEMENT
Amendment Agreement, dated as of January 5, 1996, by and among
Kerr Group, Inc., a Delaware corporation (the "Company"), John Hancock Mutual
Life Insurance Company ("John Hancock"), Barnett & Co. ("Barnett"), New York
Life Insurance Company ("New York Life"), Massachusetts Mutual Life Insurance
Company ("Massachusetts Mutual"), and Massmutual/Carlson CBO, N.V.
("Massmutual" and, together with John Hancock, Barnett, New York Life and
Massachusetts Mutual, the "Note Purchasers").
R E C I T A L S:
WHEREAS, the Note Purchasers (or their predecessors in
interest) and the Company entered into certain Note Agreements, each dated as
of September 15, 1993 (collectively, the "Note Agreements"), providing for the
issuance and sale of $41,000,000 aggregate principal amount of the Company's
9.45% Series A Senior Notes due September 15, 2003 (the "Series A Senior
Notes")and $9,000,000 aggregate principal amount of the Company's 8.99% Series
B Senior Notes due September 15, 1999 (collectively with the Series A Senior
Notes, the "Senior Notes")(as amended, the "Note Agreements"); and
WHEREAS, The First National Bank of Boston ("Bank of Boston")
and the Company entered into that certain Letter Agreement, dated February 9,
1995 pursuant to which Bank of Boston extended certain financial accommodations
to the Company, including a loan in the maximum principal amount of $10,000,000
evidenced by a promissory note dated February 1, 1995 to Bank of Boston in the
principal amount of $10,000,000 (collectively, the "Letter Agreement"); and
WHEREAS, Bank of Boston has agreed with the Company to enter
into an Amended and Restated Loan and Security Agreement of even date herewith
and other documents and agreements (collectively, the "Restated Loan
Agreement") amending and restating the terms of the Letter Agreement pursuant
to the Amended and Restated Loan and Security Agreement to be entered into
concurrently herewith; and
WHEREAS, the Note Purchasers have agreed to waive certain
provisions of the Note Agreements; and
WHEREAS, in consideration of the foregoing waivers, the
Company has agreed to amend the Note Agreements in accordance with the terms
hereof.
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the
<PAGE> 2
receipt and adequacy of which are hereby acknowledged, the parties hereby agree
as follows:
SECTION 1. Defined Terms. Terms defined in the Note
Agreements and used herein shall have the meanings given to them in the Note
Agreements.
SECTION 2. Amendments and Agreements. (a) Amendments to
Subsection 9.1 (Required Prepayments) of Note Agreements. Subsection 9.1 of
each of the Note Agreements is hereby amended (1) by retitling paragraph (c)
thereof as paragraph (d) and (2) by adding after paragraph (b) thereof the
following new paragraph (c):
"(c) On the date of the occurrence of a "Change in Control"
(as such term is defined in that certain Amended and Restated Loan
and Security Agreement, dated as of January 5, 1996, between the
Company and The First National Bank of Boston, as in effect on
January 5, 1996 and as it may be amended thereafter with your consent
(the "Bank Loan Agreement")), the Company will prepay, or cause to be
prepaid, the entire outstanding principal amount of the Notes,
together with interest thereon to the date of prepayment plus the
Make-Whole Premium (based on such principal amount)."
(b) Amendments to Subsection 10.5 (Consolidation or Merger;
Sale of Assets) of Note Agreements. Subsection 10.5 of each of the Note
Agreements is hereby amended by adding at the end thereof the following
sentence:
"Notwithstanding anything in this Section 10.5 to the
contrary, the Company may engage in any transaction resulting in a
"Change in Control" (as defined in the Bank Loan Agreement) if the
Company complies with the provisions of Section 9.1(c)."
(c) Agreements with Respect to Payments of Interest.
Notwithstanding anything in the Note Agreements or the Notes to the contrary,
interest shall be payable on the unpaid principal balance of the Notes
quarterly on each December 31, March 31, June 30 and September 30. At the
request of any holder of a Note, the Company shall exchange any currently
outstanding Note for one or more new Notes reflecting the payment of interest
on a quarterly basis and otherwise containing terms identical to the currently
outstanding Notes.
(d) Further Amendments. The parties hereto shall not amend
or modify the terms and provisions of the Note Agreements, as in effect on the
Closing Date, without the prior written consent of The First National Bank of
Boston.
SECTION 3. Representations, Warranties and Covenants.
-2-
<PAGE> 3
The Company represents and warrants that:
(a) Corporate Power and Authority. The Company has all
requisite corporate power and authority to enter into and perform its
obligations under this Amendment Agreement. The execution, delivery and
performance of this Amendment Agreement have been duly authorized by all
necessary corporate action on the part of the Company and, upon execution and
delivery of this Amendment Agreement by each of the Note Purchasers, this
Amendment Agreement will constitute the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
enforcement of creditors' rights generally and by general equitable principles.
(b) Compliance with Other Instruments, etc. The consummation
of the transactions contemplated by this Amendment Agreement will not result in
any breach of, or constitute a default under, or (except as expressly
contemplated hereby) result in the creation of any mortgage, lien, pledge,
charge, security interest or other encumbrance in respect of any property of
the Company under, any indenture, mortgage, deed of trust, bank loan or credit
agreement, corporate charter, by-law, or other agreement or instrument to which
the Company is a party or by which the Company or any of its properties may be
bound or affected, or violate any existing law, governmental rule or
regulations, or any order of any court, arbitrator or governmental body,
applicable to the Company or any of its properties.
(c) Governmental Consent. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
authority is required for the validity of the execution and delivery by the
Company of this Amendment Agreement or the consummation by the Company of the
transactions contemplated hereby.
SECTION 4. Effectiveness. This Amendment Agreement shall
become effective upon the occurrence of the following events:
(a) The Note Purchasers shall have received counterparts of
this Amendment Agreement executed by the Company and each of the Note
Purchasers; and
(b) The transactions contemplated by the Restated Loan
Agreement shall have been consummated.
SECTION 5. Counterparts; Separate Agreements. This Amendment
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
-3-
<PAGE> 4
SECTION 6. Governing Law. This Amendment Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to conflicts of law principles.
SECTION 7. Headings. The headings of the several sections of
this Amendment Agreement are inserted for convenience only and shall not in any
way affect the meaning or construction of this Amendment Agreement.
SECTION 8. No Other Changes. Except as expressly stated
herein, the Note Agreements are unaffected hereby and shall remain in full
force and effect in accordance with the respective terms thereof.
SECTION 9. Successors and Assigns. This Amendment Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed
or not, and, in particular, shall inure to the benefit of and be enforceable by
any holder or holders at any time of any Notes or any part thereof.
[The rest of this page left blank intentionally]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
-------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
------------------------
NEW YORK LIFE INSURANCE
COMPANY
By:
-------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------
MASSMUTUAL/CARLSON
CBO, N.V. LIFE
By:
-------------------------
BARNETT & CO.
By:
-------------------------
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
---------------------------
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:
---------------------------
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
---------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
---------------------
NEW YORK LIFE INSURANCE
COMPANY
By: /s/ LYDIA S. SANGREE
---------------------
Lydia S. Sangree
Assistant Vice President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
--------------------
MASSMUTUAL/CARLSON
CBO, N.V.
By:
---------------------
BARNETT & CO.
By:
---------------------
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
----------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
----------------------
NEW YORK LIFE INSURANCE
COMPANY
By:
----------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ BRUCE E. GAUDETTE
----------------------
Vice President
MASSMUTUAL/CARLSON
CBO, N.V.
By:
----------------------
BARNETT & CO.
By:
---------------------
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
----------------------
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: MEESPIERSON TRUST
(CURACAO) N.V.
----------------------
Managing Director
BARNETT & CO.
By:
----------------------
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
-----------------------
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
-----------------------
-5-
<PAGE> 1
EXHIBIT 10.50
INTERCREDITOR AGREEMENT
This Intercreditor Agreement ("Agreement") is entered into as
of January 5, 1996, by and among The First National Bank of Boston ("Bank") and
each of the following noteholders: John Hancock Mutual Life Insurance Company;
Barnett & Co.; Massachusetts Mutual Life Insurance Company, Mass Mutual/Carlson
CBO, N.V.; and New York Life Insurance Company (collectively, "Noteholders"),
and is made with reference to the following facts:
RECITALS
A. Kerr Group, Inc., a Delaware corporation ("Borrower"), and
Bank entered into a letter agreement dated as of February 9, 1995 (the
"Original Loan Agreement"), pursuant to which Bank agreed to extend certain
financial accommodations to Borrower, including a line of credit and letter of
credit subfacility. Pursuant to the Original Loan Agreement, Borrower executed
a Commercial Promissory Note dated as of February 1, 1995 (the "Original Note")
in favor of Bank in the maximum principal amount of $10,000,000. As of the
date hereof, the principal amount outstanding under the Original Note is
$6,500,000.
B. Bank, at Borrower's request, has agreed on the terms and
conditions set forth in the Amended and Restated Loan and Security Agreement of
even date herewith (the "Restated Loan Agreement") to amend and restate the
Original Loan Agreement and to provide an amended and restated $10,000,000 loan
to Borrower.
C. Pursuant to the terms of the Restated Loan Agreement, Borrower
is granting a security interest to Bank in certain of Borrower's property to
secure the prompt payment and performance of certain obligations of Borrower.
D. Borrower has entered into a Note Agreement dated as of
September 15, 1993, as amended by the Amendment Agreement of even date herewith
(as amended, the "Note Agreement") with each of the Noteholders (or its
predecessors in interest) pursuant to which Borrower issued to the Noteholders
9.45% Series A Senior Notes due September 15, 2003 in the principal amount of
$41,000,000 (the "Series A Notes") and 8.99% Series B Senior Notes due
September 15, 1999 in the principal amount of $9,000,000 (the "Series B Notes";
Series A Notes and Series B Notes being referred to collectively as "Noteholder
Notes").
E. Bank requires, as a condition precedent to Bank's extension of
financial accommodations to Borrower under the Restated Loan Documents, that
each of the Noteholders shall have entered into this Agreement with Bank.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which Bank and each of the Noteholders hereby
acknowledge, the parties hereby agree as follows:
1. Definitions and Rules of Construction.
(a) Definitions. The following terms, as used in
this Agreement, shall have the following meanings:
"Additional Bank Obligations" means any and all Bank
Obligations other than Original Bank Obligations.
"Agreement" is as defined in the preamble to this
agreement.
"Bank" is as defined in the preamble to this
Agreement.
"Bank Loan" means any loan made or to be made to
Borrower pursuant to section 3 of the Restated Loan Agreement.
"Bank Loan Documents" means, collectively, all
Original Loan Documents and all Restated Loan Documents.
"Bank Obligations" means any and all presently
existing or hereafter arising indebtedness, claims, debts, attorneys'
fees and other professional fees, costs of enforcement, liabilities,
and obligations of Borrower owing to Bank under any Bank Loan
Documents, whether direct or indirect, whether contingent or of any
other nature, character, or description (including all interest and
other amounts accruing after the commencement of any Bankruptcy Case,
and all interest and other amounts that, but for the provisions of the
Bankruptcy Code, would have accrued and become due or otherwise would
have been allowed), and any refinancings, renewals, refundings, or
extensions of any such amounts.
"Bankruptcy Case" means any proceeding commenced by
or against Borrower, under any provision of the Bankruptcy Code or any
other federal or state bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar
relief, and all converted or succeeding cases in respect thereof.
2
<PAGE> 3
"Bankruptcy Code" means the United States Bankruptcy
Code (11 U.S.C. Section 101, et seq.).
"Borrower" is as defined in the preamble to this
Agreement.
"Change of Control" means the merger or consolidation
of Borrower with or into another corporation and, after such merger or
consolidation is consummated, either (a) Borrower is not the surviving
corporation, or (b) if Borrower is the surviving corporation, then
Borrower is a wholly-owned subsidiary of another corporation and the
stockholders of Borrower, immediately before such merger or
consolidation is consummated, do not own at least 80% of the voting
capital stock of Borrower's parent corporation, immediately after such
merger or consolidation is consummated.
"Collateral" means all of the real and personal
property of Borrower in which Bank has been granted a security
interest pursuant to the Bank Loan Documents, including the following
real and personal property located at 500 New Holland Avenue,
Lancaster, Pennsylvania or Johnny Mitchell Road, Ahoskie, North
Carolina:
(a) all equipment, as such term is defined in the
UCC, now or hereafter owned or acquired by Borrower, in the
form of injection molding machines and related mold frames,
lining machines and cut-and-fold machines, and any and all
appurtenances and additions thereto and substitutions or
replacements of any of the foregoing, together with all
attachments, components, parts, equipment, and accessories
installed on or affixed to any of the foregoing;
(b) all fixtures, as such term is defined in the
UCC, now or hereafter owned or acquired by Borrower, in the
form of injection molding machines and related mold frames,
lining machines and cut-and-fold machines, and any and all
appurtenances and additions thereto and substitutions or
replacements of any of the foregoing, now or hereafter
attached or affixed to or constituting a part of, or located
in or upon, any of said real property;
(c) all books and records (including computer
programs, printouts, and other computer materials and records)
pertaining to any of the foregoing; and
(d) to the extent not otherwise included, all
proceeds, as such term is defined in the UCC, of the foregoing
in any form, and, in any event, including,
3
<PAGE> 4
without limitation: (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Borrower from time
to time with respect to any of the foregoing; (ii) any and all
payments (in any form whatsoever) made or due and payable to
Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or
any part of the foregoing by any governmental authority (or
any person acting under color of any governmental authority);
(iii) any claims of Borrower against third parties for loss or
damage to, or destruction of, or otherwise relating to any of
the foregoing; (iv) any recoveries by Borrower against third
parties with respect to any litigation or dispute concerning
any of the foregoing; (v) all accessions to, substitutions and
replacements for, and rents, profits and products of, each of
the foregoing; and (vi) any and all other amounts from time to
time paid or payable under or in connection with any of the
foregoing, upon disposition or otherwise.
"Creditors' Documents" means, collectively, all Bank
Loan Documents and Noteholder Agreements.
"Creditors' Obligations" means, collectively, all
Bank Obligations and all Noteholder Obligations.
"Maturity Date" means the earlier of: (a) April 15,
1996, and (b) the date on which a sale of all or substantially all of
the assets of Borrower or a Change of Control has occurred.
"Note Agreement" is as defined in Recital D to this
Agreement.
"Noteholder Agreements" means, collectively, the Note
Agreement, all Noteholder Notes and all related documents executed
concurrently therewith or pursuant thereto.
"Noteholder Notes" is as defined in Recital D to this
Agreement.
"Noteholder Obligations" means any and all presently
existing or hereafter arising indebtedness, claims, debts,
liabilities, and obligations of Borrower owing to any of the
Noteholders under the Noteholder Agreements (including amounts arising
under sections 9.1 and 9.2 of the Note Agreement), whether direct or
indirect, whether contingent or of any other nature, character, or
description (including all interest and other amounts accruing after
commencement of any Bankruptcy Case, and all
4
<PAGE> 5
interest and other amounts that, but for the provisions of the
Bankruptcy Code, would have accrued and become due or otherwise would
have been allowed), and any refinancings, renewals, refundings, or
extensions of any such amounts.
"Noteholders" is as defined in the preamble to this
Agreement.
"Original Bank Obligations" means Borrower's
indebtedness to Bank in the principal amount of $6,500,000, as
originally evidenced by the Original Note and the other Original Loan
Documents, and interest thereon (including interest at the Default
Rate (as defined in section 1 of the Restated Loan Agreement)).
"Original Loan Agreement" is as defined in Recital A
of this Agreement.
"Original Loan Documents" means, collectively, the
Original Loan Agreement, Original Note and all related documents
executed concurrently therewith or pursuant thereto.
"Original Note" is as defined in Recital A to this
Agreement.
"Restated Loan Agreement" is as defined in Recital B
to this Agreement.
"Restated Loan Documents" means, collectively, the
Restated Loan Agreement, the Restated Note and all related documents
to be executed concurrently therewith or pursuant thereto.
"Restated Note" means that certain Amended and
Restated Commercial Promissory Note of even date herewith, executed by
Borrower in favor of Bank pursuant to the Restated Loan Agreement and
in the principal amount of $10,000,000.
"Series A Notes" is as defined in Recital D of this
Agreement.
"Series B Notes" is as defined in Recital D of this
Agreement.
"UCC" means the Uniform Commercial Code as adopted in
the Commonwealth of Massachusetts, or in such other jurisdiction as
governs the perfection of the liens and security interests in the
Collateral for the purposes of the provisions hereof relating to such
perfection or effect of perfection.
5
<PAGE> 6
(b) Rules of Construction. For purposes of this
Agreement, the following rules of construction shall apply, unless specifically
indicated to the contrary: (i) wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include
the singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter; (ii)
the term "or" is not exclusive; (iii) the term "including" (or any form
thereof) shall not be limiting or exclusive; (iv) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; (v) all references to any instruments or agreements,
including references to any of the Creditors' Documents, shall include any and
all modifications or amendments thereto and any and all extensions or renewals
thereof; (vi) the words "herein," "hereof" and "hereunder" or other words of
similar import refer to this Agreement, including the exhibits and schedules
thereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement; and (vii) the words "section" and "paragraph" refer to
sections and paragraphs of this Agreement.
2. Consent to Collateralization of Additional Bank
Obligations. Each of the Noteholders (a) consents to Borrower's pledge of the
Collateral to Bank to secure Borrower's performance of the Additional Bank
Obligations notwithstanding Section 10.2 of the Note Agreement or any other
provision of the Noteholder Agreements prohibiting or otherwise limiting any
such pledge of the Collateral by Borrower, and (b) waives any default or event
of default under the Noteholder Agreements solely arising out of or related to
such pledge of the Collateral to Bank.
3. Nonavoidability and Perfection. Each of the
Noteholders agrees that it will not directly or indirectly take any action to
contest or challenge the validity, legality, perfection, priority,
avoidability, or enforceability of the Bank's Lien on and security interests in
the Collateral granted pursuant to Restated Loan Documents or seek to have the
same avoided, disallowed, set aside, or otherwise invalidated in any judicial
proceeding or otherwise. In the event that any of the Noteholders (either
individually or together with others) breaches or causes to be breached the
terms of the preceding sentence, resulting (directly or indirectly) in the
avoidance or imperfection of Bank's security interest in some or all of the
Collateral, then the security interest of Bank in any such affected Collateral
shall, with respect to such breaching Noteholders, continue in full force and
effect irrespective of the avoidance or imperfection of Bank's security
interest.
4. Management of Collateral. Until the aggregate
outstanding principal amount of the Bank Loan has been reduced to
6
<PAGE> 7
$6,500,000 and Borrower has paid Bank any other amounts then due and payable in
respect of the Additional Bank Obligations: (a) none of the Noteholders shall
have or exercise any rights or remedies of a creditor with respect to the
Collateral; and (b) any and all proceeds of the Collateral which come into the
possession, control, or custody of any of the Noteholders and to which Bank
shall be entitled under the Restated Loan Agreement will be deemed to have been
received for the account of Bank and shall immediately be paid over to Bank.
5. Sale of Collateral. Subject to Section 10.5 of the
Note Agreement, until the aggregate outstanding principal amount of the Bank
Loan has been reduced to $6,500,000 and Borrower has paid Bank any other
amounts then due and payable in respect of the Additional Bank Obligations,
Bank shall have the sole right as the sole secured creditor in respect of the
Collateral to restrict or permit, or approve or disapprove, the sale, transfer,
release or other disposition of the Collateral. Upon payment in full of all
Additional Bank Obligations, payments on account of, or proceeds in respect of,
the Collateral shall be distributed in accordance with paragraph 6 of this
Agreement.
6. Sharing. Upon the occurrence of any of the
following: (a) an event of default under the Bank Loan Documents and the
Noteholder Agreements; or (b) the Maturity Date, any and all cash or property
thereafter received by either (x) Bank pursuant to the Restated Loan Documents
or (y) any of the Noteholders pursuant to the Noteholder Agreements, shall be
applied, first, to the Additional Bank Obligations until paid in full, and
second, on a pari passu basis to the Original Bank Obligations and the
Noteholder Obligations. In addition, any prepayment of any principal amount of
the Noteholder Notes to any of the Noteholders or any prepayment of the
Original Obligations to the Bank shall be applied, first, to the Bank
Obligations until the aggregate outstanding principal amount of the Bank Loan
has been reduced to $6,500,000 and Borrower has paid Bank any other amounts
then due and payable in respect of the Additional Bank Obligations, and second,
on a pari passu basis to the remainder of the Bank Obligations and the
Noteholder Obligations. Any and all cash or other property that should come
into the possession, control, or custody of Bank or any of the Noteholders that
is not in conformity with the terms of this paragraph will be deemed to have
been received for the account of the party entitled to such cash or property
pursuant to the terms of this Agreement and shall be immediately paid over to
such party.
7. Bankruptcy Issues. This Agreement shall continue in
full force and effect after the commencement of a Bankruptcy Case (all
references herein to Borrower being deemed to apply equally to Borrower as a
debtor in possession and to a trustee for Borrower's estate in a Bankruptcy
Case), and shall apply with full force and effect with respect to all
Collateral acquired by
7
<PAGE> 8
Borrower, and to all of the Creditors' Obligations incurred by Borrower,
subsequent to such commencement. The rights and priorities set forth in this
Agreement shall remain binding irrespective of the terms of any plan of
reorganization in any Bankruptcy Case or other provisions of the Bankruptcy
Code or any similar federal or state statute.
8. Notice of Default and Certain Events. Bank, on the
one hand, and each of the Noteholders, on the other hand, shall send written
notice to the other upon the occurrence of any of the following, as applicable:
(a) the declaration of any default or event of
default under any applicable Creditors' Documents, or the acceleration
of any Creditors' Obligations; or
(b) the commencement of any sale or liquidation
of, or realization upon, any of the Collateral; or
(c) the receipt of any payment on account of any
Creditors' Obligations.
Each such notice shall be sent to the appropriate
party contemporaneously with the sending of such notice to Borrower if and when
sent under the applicable Creditors' Documents. The failure of any party
hereto to give such notice shall not affect the relative security interests or
other rights or privileges of such party as provided in this Agreement or give
rise to any liability.
9. Assignment. Bank and each of the Noteholders agrees
that any assignment or transfer of an interest in any of the Bank Obligations
or Noteholder Obligations, respectively, shall be made expressly subject to the
terms of this Agreement and each assignee or transferee shall be required to
acknowledge that fact in writing prior to any such assignment or transfer.
10. Binding Effect. This Agreement shall be a continuing
agreement, shall be binding upon and shall inure to the benefit of the parties
hereto from time to time and their respective successors and assigns, shall be
irrevocable, and shall remain in full force and effect until all of the
Creditors' Obligations shall have been paid in full in cash, and the Creditors'
Documents shall have been irrevocably terminated; provided, this Agreement
shall continue to be effective, or be reinstated, as the case may be, if any
payment, or any part thereof, of any amount paid by or on behalf of Borrower
with regard to any Creditors' Obligations is rescinded or must otherwise be
restored or returned upon or as a result of any Bankruptcy Case, or for any
other reason, all as though such payments had not been made.
8
<PAGE> 9
11. Amendments and Waivers. Any amendment or waiver
hereunder must be evidenced by a signed writing of the party to be bound
thereby and shall only be effective in the specific instance.
12. Governing Law; Miscellaneous. This Agreement shall
be governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts. The parties agree that actions may be tried and litigated in
the state and federal courts located in any county located within the
Commonwealth of Massachusetts.
13. Headings. The headings in this Agreement are for
convenience of reference only, shall have no substantive meaning, and shall not
alter or otherwise affect the meaning of this Agreement.
14. No Third Party Beneficiaries. All of the
understandings, covenants, and agreements contained herein are solely for the
benefit of Bank, each of the Noteholders, their successors and assigns, and
future holders of the Noteholder Obligations and Bank Obligations,
respectively, and there are no other parties, including Borrower or any of its
creditors, successors, or assigns, which are intended to be benefitted, in any
way, by this Agreement.
15. No Limitations on Rights Against Third Parties.
Nothing contained in this Agreement is intended to or shall affect or limit, in
any way, the rights that Bank or any of the Noteholders have with respect to
any third parties. Bank and each of the Noteholders hereby specifically
reserve all of their respective rights against Borrower and all other third
parties.
16. Notice. Whenever it is provided herein that any
notice, demand, request, consent, approval, declaration, or other communication
shall or may be given to or served upon any of the parties hereto, or whenever
any of the parties desires to give or serve upon the other communications with
respect to this Agreement, each such notice, demand, request, consent,
approval, declaration, or other communication shall be in writing and shall be
delivered either in person, with receipt acknowledged, or by regular,
registered, or certified United States mail, postage prepaid, or by facsimile,
or by recognized overnight courier service, addressed as follows:
9
<PAGE> 10
(a) If to Bank:
The First National Bank Of Boston
W. Douglass Vannah
Vice President
100 Federal Street
Boston, Massachusetts 02106
Facsimile Number: (617) 434-1508
with a copy to:
Gregory A. Bray, Esq.
Murphy, Weir & Butler
2049 Century Park East
Suite 2100
Los Angeles, California 90067
Facsimile Number: (310) 788-3777
(b) If to John Hancock Mutual Life Insurance
Company or Barnett & Co.:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attn: Bond and Corporate Finance Department
T-57
Facsimile Number: (617) 572-1606
(c) If to Massachusetts Mutual Life Insurance
Company:
Massachusetts Mutual Life Insurance Company
Securities Investment Division
1295 State Street
Springfield, Massachusetts 01111-0001
Attn: Richard C. Morrison, Vice President
Facsimile Number: (413) 744-6127
with a copy to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111-0001
Attn: Jaqueline M. Hummel, Esq.
Facsimile Number: (413) 744-6210
10
<PAGE> 11
(d) If to MassMutual/Carlson CBO, N.V.,
c/o State Street Bank And Trust Company:
225 Franklin Street
Boston, Massachusetts 02110
Attn: Corporate Trust Department
Facsimile Number: (617) 664-5367
with a copy to:
Massachusetts Mutual Life Insurance Company
Securities Investment Division
1295 State Street
Springfield, Massachusetts 01111-0001
Attn: Richard C. Morrison, Vice President
Facsimile Number: (413) 744-6127
(e) If to New York Life Insurance Company:
New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
Attn: Investment Department, Room 203
Facsimile Number: (212) 447-4122
with a copy to:
New York Life Insurance Company
Office of the General Counsel
51 Madison Avenue
New York, New York 10010
Attn: Investment Section, Room 10SB
Facsimile Number: (212) 576-8340
11
<PAGE> 12
(f) And if a notice is sent to any of the
Noteholders, then a copy shall be sent to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: Cecil Wray, Esq.
Facsimile Number: (212) 909-6836
or at such other address as may be substituted by notice given as herein
provided. Giving of any notice required hereunder may be waived in writing by
the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given when received.
17. Interpretation. No provision of this Agreement shall
be construed against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of such party's
having or being deemed to have structured, drafted or dictated such provision.
18. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
19. Complete Agreement. This Agreement constitutes the
complete agreement and understanding of each of the parties hereto, and
supersedes all prior or contemporaneous oral and written negotiations,
agreements and understandings, express or implied, with respect to the subject
matter hereof.
20. No Joint Venture. Bank and each of the Noteholders
acknowledge and confirm that this Agreement shall not create a joint venture,
agency or fiduciary relationship.
21. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which taken together shall be deemed to be one and the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.
12
<PAGE> 13
22. WAIVER OF JURY TRIAL. BANK AND EACH OF THE
NOTEHOLDERS HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF BANK AND EACH OF THE NOTEHOLDERS WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED BY THEM IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE. BANK AND EACH OF THE NOTEHOLDERS HEREBY AGREE
AND CONSENT THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT JURY, AND THAT ANY OF THEM MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT BY AN PARTY HERETO TO THE WAIVER OF RIGHT TO TRIAL BY JURY.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
BANK:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ W. Douglass Vannah
-------------------------------------
W. Douglass Vannah
Vice-President
NOTEHOLDERS:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
BARNETT & CO.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
BANK:
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
W. Douglass Vannah
Vice-President
NOTEHOLDERS:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Stephen J. Blewett
-------------------------------------
Name: Stephen J. Blewett
--------------------------------
Title: Investment Officer
-------------------------------
BARNETT & CO.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
14
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
BANK:
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
W. Douglass Vannah
Vice-President
NOTEHOLDERS:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
BARNETT & CO.
By: /s/ Richard McCormick
------------------------------------
Name: Richard McCormick
--------------------------------
Title: Assistant Treasurer
-------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
14
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
BANK:
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
W. Douglass Vannah
Vice-President
NOTEHOLDERS:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
BARNETT & CO.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Richard C. Morrison
------------------------------------
Name: Richard C. Morrison
-------------------------------
Title: Vice President
-------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
14
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
BANK:
THE FIRST NATIONAL BANK OF BOSTON
By:
--------------------------------------
W. Douglass Vannah
Vice-President
NOTEHOLDERS:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
BARNETT & CO.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By: /s/ Meespierson Trust
-------------------------------------
Name: Meespierson Trust (Curacao) N.V
---------------------------------
Title: Managing Director
--------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
14
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
BANK:
THE FIRST NATIONAL BANK OF BOSTON
By:
--------------------------------------
W. Douglass Vannah
Vice-President
NOTEHOLDERS:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
BARNETT & CO.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
MASSMUTUAL/CARLSON CBO, N.V.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Lydia S. Sangree
------------------------------------
Name: Lydia S. Sangree
-------------------------------
Title: Assistant Vice President
------------------------------
14
<PAGE> 20
ACKNOWLEDGMENT
The undersigned, KERR GROUP, INC., a Delaware corporation
("Borrower"), hereby acknowledges that it has received a copy of the foregoing
Intercreditor Agreement and consents thereto, and agrees to recognize all
rights granted thereby to the parties thereto, and will not do any act or
perform any obligation which is not in accordance with the agreements set forth
in such Intercreditor Agreement. Without limiting the generality of the
foregoing, Borrower further acknowledges that Borrower is not an intended
beneficiary or third party beneficiary under the Intercreditor Agreement.
Dated as of January 5, 1996.
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
--------------------------------
Name: Geoffrey A. Whynot
---------------------------------
Title: Treasurer
--------------------------------
16
<PAGE> 1
EXHIBIT 10.51
EXECUTION COPY
CONSENT, WAIVER AND AMENDMENT AGREEMENT
Consent, Waiver and Amendment Agreement (this "Agreement"),
dated as of March 15, 1996, by and among Kerr Group, Inc., a Delaware
corporation (the "Company"), PNC Bank, National Association ("PNC"), John
Hancock Mutual Life Insurance Company ("John Hancock"), Barnett & Co.
("Barnett"), New York Life Insurance Company ("New York Life"), Massachusetts
Mutual Life Insurance Company ("Massachusetts Mutual"), Massmutual/Carlson CBO,
N.V. ("Massmutual" and, together with John Hancock, Barnett, New York Life and
Massachusetts Mutual, the "Note Purchasers"), and The First National Bank of
Boston ("Bank of Boston" and, together with PNC and the Note Purchasers, the
"Lenders").
R E C I T A L S:
WHEREAS, PNC and the Company entered into that certain
Receivables Purchase Agreement, dated as of January 1, 1995 (as amended, the
"Receivables Purchase Agreement"); and
WHEREAS, the Note Purchasers (or their predecessors in
interest) and the Company entered into certain Note Agreements, each dated as
of September 15, 1993, providing for the issuance and sale of $41,000,000
aggregate principal amount of the Company's 9.45% Series A Senior Notes due
September 15, 2003 (the "Series A Senior Notes")and $9,000,000 aggregate
principal amount of the Company's 8.99% Series B Senior Notes due September 15,
1999 (collectively with the Series A Senior Notes, the "Senior Notes")(as
amended, the "Note Agreements"); and
WHEREAS, Bank of Boston and the Company entered into that
certain Letter Agreement, dated February 9, 1995 pursuant to which Bank of
Boston extended certain financial accommodations to the Company, including a
loan in the maximum principal amount of $10,000,000 evidenced by a promissory
note dated February 1, 1995 to Bank of Boston in the principal amount of
$10,000,000 (collectively, the "Letter Agreement"); and
WHEREAS, Bank of Boston and the Company further entered into
that certain Amended and Restated Loan and Security Agreement, dated as of
January 5, 1996, pursuant to which Bank of Boston amended and restated the
financial accommodations extended to the Company under the Letter Agreement,
which are presently evidenced by an amended and restated commercial promissory
note dated January 5, 1996 to Bank of Boston in the principal amount of
$10,000,000 (collectively, the "Restated Loan Agreement"); and
WHEREAS, pursuant to a certain Agreement, dated as of January
5, 1996 (the "January Consent"), PNC waived certain provisions of the
Receivables Purchase Agreement, the Note
<PAGE> 2
Purchasers waived certain provisions of the Note Agreements and Bank of Boston
waived certain provisions of the Letter Agreement; and
WHEREAS, pursuant to a certain Amendment Agreement, dated as
of January 5, 1996 (the "Amendment Agreement"), the Note Purchasers and the
Company amended certain provisions of the Note Agreements; and
WHEREAS, in consideration of Bank of Boston entering into the
Restated Loan Agreement, the Company granted to Bank of Boston liens on and
security interests in certain of its assets, which liens and security interests
were consented to by PNC and the Note Purchasers in accordance with the terms
of the January Consent; and
WHEREAS, in further consideration of Bank of Boston entering
into the Restated Loan Agreement, Santa Fe Plastics Corporation, a California
corporation ("Santa Fe"), executed and delivered to Bank of Boston a Continuing
Guaranty, dated as of January 5, 1996 (the "Santa Fe Guaranty"), pursuant to
which Santa Fe guaranteed the payment of the Additional Obligations (as such
term is defined in the Restated Loan Agreement) to Bank of Boston; and
WHEREAS, the Company proposes (i) to sell to Alltrista
Corporation, an Indiana corporation ("Alltrista"), substantially all of its
equipment, contract rights (other than those relating to the sale of finished
home canning inventory), trademarks, and licenses used by Kerr in its consumer
products/home canning business, pursuant to an Asset Purchase Agreement between
Kerr and Alltrista substantially in the form attached hereto as Exhibit A (the
"Asset Purchase Agreement"), and (ii) to retain Alltrista as its sales agent
for its finished home canning inventory, pursuant to a Sales Agent Agreement
between Kerr and Alltrista substantially in the form attached hereto as Exhibit
B (the "Sales Agent Agreement"); and
WHEREAS, the Company has requested that each of the Note
Purchasers, PNC and Bank of Boston consent to the transactions contemplated by,
and the performance by the Company of its obligations under, the Asset Purchase
Agreement and the Sales Agent Agreement, and each of the Note Purchasers, PNC
and Bank of Boston are willing to do so subject to the terms and conditions set
forth in this Agreement; and
WHEREAS, PNC has agreed to waive certain provisions, and to
amend certain other provisions, of the Receivables Purchase Agreement, the Note
Purchasers have agreed to waive certain provisions of the Note Agreements, and
Bank of Boston has agreed to waive certain provisions, and to amend certain
other provisions, of the Restated Loan Agreement.
-2-
<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereby agree as follows:
SECTION 1. Waiver.
Subject to the further provisions of this Agreement:
(a) the Note Purchasers (i) waive from and including March
30, 1996 through and including May 15, 1996 any Default or Event of Default
(each as defined in the Note Agreements) solely arising out of the Company's
failure to comply with the provisions of Section 10.1 or 10.9 of the Note
Agreements, and (ii) waive from and including March 1, 1996 through and
including May 15, 1996 any Default or Event of Default solely arising out of
the Company's failure to comply with the provisions of Section 10.8 or 10.16 of
the Note Agreements;
(b) PNC (i) waives from and including March 30, 1996 through
and including May 15, 1996 any default or Termination Event (each as defined in
the Receivables Purchase Agreement) solely arising out of the Company's failure
to comply with Section 10.1 or 10.9 of the Note Agreements, including without
limitation any default or Termination Event arising under Section 6.17 of the
Receivables Purchase Agreement to the extent such default or Termination Event
solely relates to Section 10.1 or 10.9 of the Note Agreements, and (ii) waives
from and including March 1, 1996 through and including May 15, 1996 any default
or Termination Event solely arising out of the Company's failure to comply with
Section 10.8 or 10.16 of the Note Agreements, including without limitation any
default or Termination Event arising under Section 6.17 of the Receivables
Purchase Agreement to the extent such default or Termination Event solely
relates to Section 10.8 or 10.16 of the Note Agreements; and
(c) Bank of Boston (i) waives from and including March 30,
1996 through and including May 15, 1996 any default or Event of Default (each
as defined in the Restated Loan Agreement) solely arising out of the Company's
failure to comply with Section 10.1 or 10.9 of the Note Agreements, and (ii)
waives from and including March 1, 1996 through and including May 15, 1996 any
default or Event of Default solely arising out of the Company's failure to
comply with Section 10.8 or 10.16 of the Note Agreements.
SECTION 2. Consents. Each of the Note Purchasers, PNC, and
Bank of Boston (collectively, the "Lenders") hereby
(a) consents to the Company entering into the Asset Purchase
Agreement and to the consummation of the transactions
contemplated thereby and the performance by the Company of its
obligations thereunder, notwithstanding Section 6(g) of the
Restated Loan
-3-
<PAGE> 4
Agreement, Sections 10.5 and 10.6 of the Note Agreements, or
any other provision of the Restated Loan Agreement, the Note
Agreements or the Receivables Purchase Agreement, as the case
may be, prohibiting or otherwise limiting any such sale of
assets and property by the Company as is contemplated by, and
on substantially the terms and conditions set forth in, the
Asset Purchase Agreement, provided, that the foregoing consent
shall not, and shall not be construed to, waive any Lender's
right to declare a default or an event of default under the
Restated Loan Agreement, the Note Agreements or the
Receivables Purchase Agreement, as the case may be, arising
out of the Company's payment of indemnity obligations or the
occurrence of a default or other breach of obligation by the
Company under the Asset Purchase Agreement;
(b) waives any default or event of default under the Restated
Loan Agreement, the Note Agreements or the Receivables
Purchase Agreement, as the case may be, solely arising out of
the sale of assets and property by the Company contemplated
by, and on substantially the terms and conditions set forth
in, the Asset Purchase Agreement, provided, that the foregoing
waiver shall not, and shall not be construed to, waive any
Lender's right to declare a default or an event of default
under the Restated Loan Agreement, the Note Agreements or the
Receivables Purchase Agreement, as the case may be, arising
out of the Company's payment of indemnity obligations or the
occurrence of a default or other breach of obligation by the
Company under the Asset Purchase Agreement; and
(c) consents to the payments to be made by the Company to Bank
of Boston and the Note Purchasers, respectively, pursuant to
Section 4(a) and Schedule 1 hereto.
SECTION 3. Amendments to Restated Loan Agreement and
Receivables Purchase Agreement.
(a) Amendment to Restated Loan Agreement. Bank of Boston and
the Company hereby agree that the definition of "Maturity Date" in the Restated
Loan Agreement is amended by deleting "April 15, 1996" and inserting therefor
"May 15, 1996."
(b) Consent to Amendment. Each of the Note Purchasers and
PNC hereby consents to the amendment to the Restated Loan Agreement set forth
in Section 3(a) of this Agreement.
(c) Amendment to Receivables Purchase Agreement. (i) PNC
and the Company hereby agree that the term "Maximum Purchaser's Net Investment"
set forth in Section 1.1 of the
-4-
<PAGE> 5
Receivables Purchase Agreement is amended and restated to read as follows:
"Maximum Purchaser's Net Investment" means (i) Eleven Million
Dollars ($11,000,000) for the period from and including March 15, 1996 to, but
not including, July 15, 1996, and (ii) Ten Million Dollars ($10,000,000) at any
time thereafter.
(d) Consents to Amendment. Each of the Note Purchasers and
Bank of Boston hereby consent to the amendment to the Receivables Purchase
Agreement set forth in Section 3(c) of this Agreement.
SECTION 4. Consideration.
(a) Payments. (i) In consideration of the consents and the
waivers granted by the Lenders in Sections 1 and 2 of this Agreement and the
amendment to the Restated Loan Agreement set forth in Section 3 of this
Agreement, on the first business day following the date of the closing of the
Asset Purchase Agreement (the "Initial Payment Date") the Company will pay to
Bank of Boston and the Note Purchasers the respective amounts set forth on
Schedule 1 hereto in immediately available funds. Immediately following the
closing of the Asset Purchase Agreement, the Company shall give irrevocable
written instructions to wire the funds referred to on Schedule 1 hereto as soon
as practicable and in any event no later than 9:00 a.m. on March 18, 1996, and
shall furnish each of the Lenders with a copy of such instructions.
(ii) If the Company fails to make the payments to Bank of
Boston and the Note Purchasers, respectively, due under the terms of this
Section 4(a) and Schedule 1 hereto, the consents, waivers and amendments
granted and agreed to in this Agreement shall immediately be revoked, and this
Agreement shall immediately terminate without further notice to the Company and
shall have no further force or effect.
(b) Release of Liens. Bank of Boston acknowledges and agrees
that, upon its receipt of $3,500,000 of the amount to be paid to it as
described in Section 4(a) of and Schedule 1 to this Agreement, the Additional
Obligations (as such term is defined in the Restated Loan Agreement) shall be
paid and satisfied in full, and Bank of Boston shall be deemed to have
released its liens on the Collateral (as such term is defined in the Restated
Loan Agreement); provided, that, notwithstanding the foregoing, Bank of Boston
shall retain its right under the Restated Loan Agreement to recover any
hereafter arising reasonable costs, fees and expenses, including, but not
limited to, attorneys' fees and other professional fees, costs of enforcement,
liabilities, and obligations of the Company owing to Bank of Boston in
connection with the Obligations (as such term is defined in the Restated Loan
Agreement). Upon its receipt of such $3,500,000, Bank of Boston will deliver
executed UCC-3 termination statements, in
-5-
<PAGE> 6
form and substance satisfactory to the Company, and such other instruments and
agreements that the Company deems reasonably necessary and appropriate to
release and discharge the liens of Bank of Boston in the Collateral.
SECTION 5. Representations, Warranties and Covenants.
(a) Corporate Power and Authority. Each party hereto
represents that it has all requisite corporate power and authority to enter
into and perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement have been duly authorized by all necessary
corporate action on the part of each such party.
(b) Compliance with Other Instruments, etc. The Company
represents that the consummation of the transactions contemplated by this
Agreement and, except as to such contracts and agreements set forth in Schedule
7.4 to the Asset Purchase Agreement, the Asset Purchase Agreement will not
result in any breach of, or constitute a default under, or result in the
creation of any mortgage, lien, pledge, charge, security interest or other
encumbrance in respect of any property of the Company under, any indenture,
mortgage, deed of trust, bank loan or credit agreement, corporate charter,
by-law, or other agreement or instrument to which the Company is a party or by
which the Company or any of its properties may be bound or affected, or violate
any existing law, governmental rule or regulations, or any order of any court,
arbitrator or governmental body, applicable to the Company or any of its
properties.
(c) Governmental Consent. The Company represents that no
consent, approval or authorization of, or registration, filing or declaration
with, any governmental authority is required for the validity of the execution
and delivery by the Company of this Agreement or the Asset Purchase Agreement
or the consummation of the transactions contemplated hereby or thereby.
(d) Principal Payments. The Company covenants, and each of
the Note Purchasers and Bank of Boston hereby agree, that until May 15, 1996,
the Company shall not (unless each of the Note Purchasers and Bank of Boston
jointly give notice to the Company to the contrary) make any further payments
on the outstanding principal amounts of the obligations under the Note
Agreements and the Restated Loan Agreement (whether by regularly scheduled
payment or mandatory or optional prepayment).
SECTION 6. Expenses. Without limiting the generality of any
provision of the Receivables Purchase Agreement, the Note Agreements (each as
amended by the Amendment Agreement), the Letter Agreement, or the Restated Loan
Agreement, the Company agrees that it will pay on the date of this Agreement
any invoices or statements submitted on or prior to the date of this Agreement
for the reasonable fees, expenses and client charges of counsel for the
Lenders, for any services rendered in connection
-6-
<PAGE> 7
with the transactions contemplated hereby and with respect to this Agreement
and any other document delivered pursuant to this Agreement (including for any
amounts due and unpaid as of the date hereof under the respective agreements,
including the Restated Loan Agreement, the January Consent, and the Amendment
Agreement), and the Company further agrees that it will hereafter promptly pay
any additional reasonable fees, expenses and client charges of counsel for the
Lenders, for any services rendered in connection with the transactions
contemplated hereby and with respect to this Agreement and any other document
delivered pursuant to this Agreement.
SECTION 7. Effectiveness. This Agreement shall become
effective upon the delivery to the Company of a copy of this Agreement executed
by each of the Lenders.
SECTION 8. Counterparts; Separate Agreements. This Agreement
may be executed simultaneously in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
SECTION 9. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
giving effect to conflicts of law principles.
SECTION 10. Headings. The headings of the several sections
of this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of this Agreement.
SECTION 11. No Other Changes. (a) Except as expressly
stated herein, the Receivables Purchase Agreement, the Note Agreements (each as
amended by the Amendment Agreement), the Restated Loan Agreement and the
January Consent are unaffected hereby and shall remain in full force and effect
in accordance with the respective terms thereof.
(b) Except as expressly set forth herein, the Lenders do not
waive (i) any breaches or defaults under the Note Agreements (each as amended
by the Amendment Agreement), the Receivables Purchase Agreement, the Restated
Loan Agreement or the January Consent, as the case may be, or any other
agreements executed concurrently therewith or pursuant thereto, whether known
or unknown, previously or hereafter arising, or of any nature or character
whatsoever, or (ii) any of their respective rights or remedies thereunder or
under applicable law, including (but not limited to) any Make-Whole Premium (as
such term is defined in the Note Agreements) to which the Note Purchasers may
be entitled pursuant to the terms of Section 9 of the Note Agreements on
account of the payments due under the terms of Section 4(a) and Schedule 1
hereto.
-7-
<PAGE> 8
SECTION 12. Reaffirmation. The Company hereby represents and
warrants to the applicable Lender that each of the representations and
warranties contained in the Restated Loan Agreement, the Note Agreements or the
Receivables Purchase Agreement, as the case may be, were true and correct in all
material respects when made and, except to the extent (a) that a particular
representation or warranty by its terms expressly applies only to an earlier
date, or (b) the Company has previously advised such Lender in writing as
contemplated under the respective agreement, are true and correct in all
material respects as of the date of this Agreement.
SECTION 13. Conflict of Terms. In the event of any
inconsistency between the provisions of this Agreement and any provision of the
Note Agreements (each as amended by the Amendment Agreement), the Receivables
Purchase Agreement, or the Letter Agreement or Restated Loan Agreement, as the
case may be, the terms and provisions of this Agreement shall govern and
control.
[The rest of this page is intentionally left blank]
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
NEW YORK LIFE INSURANCE
COMPANY
By:
-------------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
MASSMUTUAL/CARLSON
CBO, N.V. LIFE
By:
-------------------------------------
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ ANTHONY TRUNZO
-------------------------------------
Anthony L. Trunzo
Vice President & Manager
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
NEW YORK LIFE INSURANCE
COMPANY
By:
-------------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
MASSMUTUAL/CARLSON
CBO, N.V. LIFE
By:
-------------------------------------
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /s/ STEPHEN J. BLEWITT
-------------------------------------
Investment Officer
NEW YORK LIFE INSURANCE
COMPANY
By:
-------------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
MASSMUTUAL/CARLSON
CBO, N.V. LIFE
By:
-------------------------------------
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
NEW YORK LIFE INSURANCE
COMPANY
By: /s/ LYDIA S. SANGREE
-------------------------------------
Lydia S. Sangree
Assistant Vice President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
MASSMUTUAL/CARLSON
CBO, N.V. LIFE
By:
-------------------------------------
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
NEW YORK LIFE INSURANCE
COMPANY
By:
-------------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ RICHARD C. MORRISON
-------------------------------------
Vice President
MASSMUTUAL/CARLSON
CBO, N.V. LIFE
By:
-------------------------------------
Kerr Group Inc. Consent, Waiver and Amendment Agreement
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have signed, or caused
their duly elected officer to sign on the date first written above.
KERR GROUP, INC.
By:
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
NEW YORK LIFE INSURANCE
COMPANY
By:
-------------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-------------------------------------
MASSMUTUAL/CARLSON
CBO, N.V. LIFE
By: MESSPIERSON TRUST (CURACAO) N.V.
-------------------------------------
Managing Director
<PAGE> 15
BARNETT & CO.
By: /s/ RICHARD McCORMICK
-------------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------------
<PAGE> 16
BARNETT & CO.
By:
-------------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Dougles Vannah, V.P.
-------------------------------------
<PAGE> 17
SCHEDULE 1
SCHEDULE OF PAYMENTS
1. BANK OF BOSTON
The Company will make a payment to Bank of Boston in
repayment of a portion of the outstanding principal amount of the obligations
under the Restated Loan Agreement (consisting of the entire $3,500,000
principal amount of the Additional Obligations and $460,177 of the principal
amount of the Original Obligations) on or prior to the Initial Payment Date in
the amount of $3,960,177.
2. NOTE PURCHASERS
The Company will make a payment to the Note
Purchasers in repayment of a portion of the aggregate outstanding principal
amount of the obligations under the Note Agreements on or prior to the Initial
Payment Date in the aggregate amount of $3,539,823 (such aggregate amount to be
distributed pro rata to the Note Purchasers in accordance with their respective
shares of the total aggregate outstanding principal amount of the obligations
under the Note Agreements).
<PAGE> 1
EXHIBIT 11.1
KERR GROUP, INC.
Statement Re: Computation of Per Share Earnings (Loss)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands, except per share data)
-------------------------------------
<S> <C> <C> <C> <C> <C>
Primary Net Earnings (Loss) Per
Common Share
Net earnings (loss) ($5,307) $3,404 ($1,633) ($2,697) ($2,579)
Less Preferred Stock dividends (829) (829) (829) (829) (829)
------- ------ ------- ------- -------
Net earnings (loss) applicable to primary
earnings (loss) per common share ($6,136) $2,575 ($2,462) ($3,526) ($3,408)
======= ====== ======= ======= =======
Weighted average number of
common shares outstanding 3,842 3,674 3,669 3,675 3,675
======= ====== ======= ======= =======
Primary net earnings (loss) per
common share ($ 1.60) $ 0.70 ($ 0.67) ($ 0.96) ($ 0.93)
======= ====== ======= ======= =======
Fully Diluted Net Earnings (Loss) Per
Common Share
Net earnings (loss) applicable to primary
earnings (loss) per common share ($6,136) $2,575 ($2,462) ($3,526) ($3,408)
Add Preferred Stock dividends 829 829 829 829 829
------- ------ ------- ------- -------
Net earnings (loss) applicable to
fully diluted earnings (loss)
per common share ($5,307) $3,404 ($1,633) ($2,697) ($2,579)
======= ====== ======= ======= =======
Weighted average number of
common shares outstanding 3,842 3,674 3,669 3,675 3,675
Common shares issuable from assumed
conversion of Preferred Stock 709 709 709 709 709
Incremental common shares
issuable upon assumed exercise
of outstanding stock options 31 22 6 3 --
------- ------ ------- ------- -------
Adjusted weighted average number
of common shares outstanding 4,582 4,405 4,384 4,387 4,384
======= ====== ======= ======= =======
Fully diluted net earnings (loss)
common share:
As computed ($ 1.16) $ 0.77 ($ 0.37) ($ 0.61) ($ 0.59)
======= ====== ======= ======= =======
As reported (a) ($ 1.60) $ 0.70 ($ 0.67) ($ 0.96) ($ 0.93)
======= ====== ======= ======= =======
</TABLE>
(a) The calculation of fully diluted net earnings (loss) per common share for
all years was not dilutive.
<PAGE> 1
EXHIBIT 21.1
Subsidiaries
Name State of Incorporation
- ---- ----------------------
Santa Fe Plastic Corporation California
<PAGE> 1
EXHIBIT 23.1
Consent of Independent
Certified Public Accountants
To the Board of Directors
of Kerr Group, Inc.:
We consent to the incorporation by reference in the Registration Statement No.
2-92721 on Form S-3, Registration Statement No. 33-3517 on Form S-3,
Registration Statement No. 33-18463 on Form S-8 and Registration Statement No.
33-31347 on Forms S-3 and S-8 of Kerr Group, Inc. (Kerr) of our report dated
March 15, 1996 relating to the consolidated balance sheets of Kerr and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of earnings (loss), common stockholders' equity and cash flows and
related schedule for each of the years in the three-year period ended December
31, 1995, which report appears in the December 31, 1995 annual report on Form
10-K of Kerr.
KPMG Peat Marwick LLP
Los Angeles, California
March 29, 1996
<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> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,904
<SECURITIES> 0
<RECEIVABLES> 7,851
<ALLOWANCES> 421
<INVENTORY> 31,041
<CURRENT-ASSETS> 45,483
<PP&E> 113,452
<DEPRECIATION> 61,957
<TOTAL-ASSETS> 120,221
<CURRENT-LIABILITIES> 75,821
<BONDS> 0
0
9,748
<COMMON> 2,113
<OTHER-SE> 12,046
<TOTAL-LIABILITY-AND-EQUITY> 120,221
<SALES> 138,995
<TOTAL-REVENUES> 139,223
<CGS> 108,964
<TOTAL-COSTS> 108,964
<OTHER-EXPENSES> 33,037
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,047
<INCOME-PRETAX> (8,825)
<INCOME-TAX> (3,518)
<INCOME-CONTINUING> (5,307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,307)
<EPS-PRIMARY> (1.60)
<EPS-DILUTED> (1.60)
</TABLE>
