FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year ended November 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-6953
LILLY INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
INDIANA 35-0471010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
733 South West Street
Indianapolis, Indiana 46225
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
317-687-6700
Securities registered pursuant to Section 12(b) of the Act:
None
<PAGE>
Securities registered pursuant to Section 12(g) of the Act:
Class A Stock, without par value
(Title of class)
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. [X]
The aggregate market value of the voting stock held by non-
affiliates of the Registrant as of February 17, 1995 was
$306,750,000.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of February 17, 1995.
22,035,852 shares of Class A Common Stock, without par value
273,137 shares of Class B Common Stock, without par value
DOCUMENTS INCORPORATED BY REFERENCE
Part II: Items 5 Excerpts from the Annual Report to
through 8 Shareholders for Fiscal
Year Ended November 30, 1994
Part III: Items 10 Proxy Statement for Annual Meeting of
through 13 Shareholders to be held April 20, 1995
<PAGE>
PART I
Item 1. Business.
Business Description
Lilly Industries, Inc. (referred to herein as "Lilly" or the
"Company") was incorporated under the laws of the State of
Indiana on December 5, 1888. The Company's business is the
formulation, manufacture and sale of industrial coatings. The
Company's products include liquid and powder coatings used by a
variety of manufacturers to coat wood, metal, plastics and glass
substrates. No one class of similar products (other than
protective and decorative coatings) accounted for 10% or more of
consolidated revenues of the Company in any of the last three
fiscal years, and the Company has only one reportable industry
segment.
On May 7, 1993 Lilly acquired assets of ICI Paints' North
American wood, coil and general liquid industrial coatings
business (the "Acquired Business") in exchange for $37,500,000 in
cash and Lilly's packaging coatings business. The acquired
assets included inventory, certain laboratory equipment, patents,
trademarks and other related intellectual property rights
(together with a non-compete covenant from ICI). Lilly did not
purchase any plant or equipment (other than the immaterial
laboratory equipment referenced above). The acquired business
was integrated into the Company's existing facilities.
The Company's principal markets and examples (among many) of
products coated in those markets are: wood coatings for
furniture, flooring, kitchen cabinets, and paneling; coil
coatings for residential siding and components, appliances,
automotive parts, office furniture, doors, windows, and metal
buildings; general metal coatings for a variety of metal products
including extrusions, appliances, caskets, office furniture, and
truck trailers; and plastics coatings for business machines,
computer enclosures, and automotive parts. The Company also
formulates, manufactures and sells certain specialty coatings,
including gelcoats and mold release agents in the fiberglass
reinforced products industry, silver and copper plating chemicals
for non-conductive surfaces (such as mirrors), some automotive
finishes, and some trade sales coatings for professional
contractors and homeowners.
The Company manufactures its products from a variety of
resins, pigments, solvents and other chemicals, the bulk of which
are obtained from petrochemical feed stocks. In addition, the
Company uses silver and copper. Under normal conditions, all of
these raw materials are available on the open market, although
prices and availability are subject to fluctuation from time to
time.
<PAGE>
Most of the Company's products are sold into industrial
markets through a technical sales force of approximately 260
people. The Company sold products to approximately 3,500
different industrial customers during 1994.(1) Some products are
also sold through retail outlets or through distributors. No
material part of the business is dependent on any single customer
or a few customers, the loss of which would have a material
adverse effect on the Company.
The Company has no significant backlog of orders. No
material part of the business is subject to renegotiation of
profit or termination of contracts or subcontracts at the
election of the Government. Historically, first quarter
operating results are below operating results for the second,
third and fourth quarters due to lower demand for the Company's
products during this time period.
Although the Company holds several patents and trademarks
and considers patent and trademark protection to be important
from an overall standpoint, none are currently material (as a
percent of total revenues) to the Company's business as a whole.
The many patents and licenses in the silver and copper plating
lines are material to those lines and new patents are continually
being developed to replace older patents as they expire.
The Company maintains laboratories at its major facilities.
These laboratories have traditionally emphasized the development
of product finishes to meet specific requirements of customers
and the maintenance of quality throughout the manufacturing
process. They have also, along with the Corporate Technology
Center, engaged in research directed toward the development of
new products and new manufacturing and application techniques.
Research and development expenses were $13.0 million (3.9% of net
sales), $12.3 million (4.3% of net sales), and $11.0 million
(4.7% of net sales) for the years ended November 30, 1994, 1993
and 1992, respectively. Future research and development expenses
as a percent of net sales are anticipated to remain at current
levels with emphasis on new product development.
The industrial coatings industry is very competitive. In
the United States and Canada there are more than 750
manufacturers of protective and decorative coatings. No one
manufacturer dominates. Competition includes national and small
regional firms. While Lilly is among the ten largest
manufacturers of industrial coatings in the United States (based
on annual sales to industrial customers), some competitors have
far greater financial resources than the Company. Price
competition is keen. Among the larger manufacturers, competitive
advantages depend upon the manufacturer's ability to purchase the
--------------
(1) References in this Form 10-K are references to the Company's
fiscal years ended November 30, 1992, 1993 and 1994.
<PAGE>
necessary raw materials in economic quantities, to keep pace with
technological developments (particularly to meet environmental
demands), to develop industrial coatings meeting the specific
(and changing) requirements of a variety of customers, to adhere
to strict quality control standards in manufacturing those
coatings, and to make deliveries punctually.
Most of the Company's customers are located throughout the
United States and Canada, with remaining customers concentrated
in Europe and Asia. During 1994, the Company's operations
outside the United States accounted for approximately 14% of its
total net sales. Information concerning the Company's net sales,
pre-tax profit and assets in foreign countries and the United
States for the three years ended November 30, 1994 is set forth
in Note 8 in the Notes to Consolidated Financial Statements in
the Company's 1994 Annual Report to Shareholders. Note 8 is
incorporated herein by reference.
The Company undertakes to comply with applicable laws
regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment and the
Company believes it is in substantial compliance with such
federal, state and local provisions. Capital expenditures for
this purpose were not material in fiscal 1994, and capital
expenditures for 1995 are not anticipated to be material.
In addition, like most companies in the paint and coatings
industry, the Company has been named as a potentially responsible
party (a "PRP") by the United States Environmental Protection
Agency ("EPA") or similar state agencies with respect to several
inactive waste processing and/or disposal sites where clean-up
costs have been or may be incurred under the Federal
Comprehensive Environmental Response, Compensation and Liability
Act and similar state statutes. While the Company is not usually
a major contributor of wastes to these sites, each contributor
may face agency assertions of joint and several liability.
Generally, however, a final allocation of costs is made based on
relative contributions of wastes to the site. The Company also,
from time to time, conducts or participates in remedial
investigations and clean-up activities at currently and formerly
occupied facilities.
The Company is continually assessing its environmental
matters and establishing reserves to handle these matters as they
arise. The Company's experience to date leads it to believe that
it will have continuing expenditures for compliance with
provisions regulating protection of the environment and
remediation efforts at waste and manufacturing sites. However,
management believes that such expenditures will not have a
material adverse effect on the financial condition of the Company
as a whole.
The Company employs approximately 1,180 people.
<PAGE>
<PAGE>
Executive Officers of the Company
The executive officers of the Company, the age of each, the
positions and offices held by each during the last five years,
and the period during which each has served in such positions and
offices are as follows:
Name of
Executive Officer Age Positions and Offices Held
Robert S. Bailey 64 Director since 1971; Senior
Vice President, Marketing,
since 1989.
William C. Dorris 52 Director since 1989; Vice
President - Corporate
Development and Technology
since July, 1994; General
Manager of the Company's High
Point Division from prior to
1990 to July, 1994; of the
Company's Templeton Division
from 1991 to July, 1994; and
of the Company's Dallas
Division from 1993 to July,
1994.
Douglas W. Huemme 53 Director since 1990; Chairman,
President and Chief Executive
Officer of the Company since
July, 1991; President and
Chief Operating Officer of the
Company from June, 1990 to
July, 1991; Vice President and
Group Executive of the
Chemical Group of Whittaker
Corporation from prior to 1990
to April, 1990.
Roman J. Klusas 48 Director since 1988; Vice
President and Chief Financial
Officer, and Secretary of the
Company since prior to 1990.
Kenneth L. Mills 46 Assistant Secretary since
prior to 1990; Treasurer from
prior to 1990 until October,
1993; Director of Corporate
Accounting since October,
1993.
Robert S. Bailey retired effective November 30, 1994. Each
other executive officer will serve as such until his successor is
<PAGE>
chosen and qualified. No family relationships exist among the
Company's executive officers.
Item 2. Properties.
The Company has 19 principal manufacturing facilities. The
locations and approximate square footage at those facilities are
as follows:
Location Square Feet
Indianapolis, Indiana (2 locations) 296,000
High Point, North Carolina 236,000
North Kansas City, Missouri 106,000
London, Ontario, Canada 103,000
Jamestown, New York 85,000
Kaohsiung Hsien, Taiwan, R.O.C. 64,000
Templeton, Massachusetts 63,000
Montebello, California 58,000
Gardena, California 52,000
Paulsboro, New Jersey 47,000
Dothan, Alabama 42,000
Dallas, Texas 36,000
Tampa, Florida 29,000
Elkhart, Indiana 25,000
Selangor, Malaysia 20,000
Davie, Florida 14,000
Woodbridge, Connecticut 13,000
Wallenfels, West Germany 9,000
All of these principal facilities noted above are owned directly
or indirectly by the Company, except for the facilities in
Gardena, California, and Selangor, Malaysia, which are leased.
The facilities are of varying ages, and are well maintained and
adequate for their present uses. Additional productive capacity
at these facilities is generally available by increasing the
number of shifts worked. The Company also owns the Corporate
Technology Center and office facilities in Indianapolis which
contain approximately 37,000 square feet.
Item 3. Legal Proceedings.
The Company is involved in various litigation and other
asserted and unasserted claims arising in the ordinary course of
business, primarily relating to product warranty and clean-up
costs at independently operated waste treatment/disposal sites
previously used by the Company or the predecessors of businesses
purchased by the Company. While the results of lawsuits or other
proceedings against the Company cannot be predicted with
certainty, management believes that uninsured and unreserved
losses, if any, arising from these proceedings will not have a
material adverse effect on the business or consolidated financial
position of the Company.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of 1994 to
a vote of security holders through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters.
The information required by this item is incorporated by
reference herein from the information included under caption
"Dividend Information and Common Stock Prices" in the Company's
1994 Annual Report to Shareholders and is included in Exhibit 13.
There is no established public trading market for the Company's
Class B Common Stock.
Item 6. Selected Financial Data.
The information required by this item is incorporated by
reference herein from the information included under the caption
"Selected Financial Data" in the Company's 1994 Annual Report to
Shareholders and is included in Exhibit 13.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
The information required by this item is incorporated by
reference herein from the information included under the caption
"Management's Discussion and Analysis of Results of Operations
and Financial Condition" in the Company's 1994 Annual Report to
Shareholders and is included in Exhibit 13.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements of the Company are
incorporated by reference from the Company's 1994 Annual Report
to Shareholders and are included in Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
No information is required to be disclosed under this item
of this report pursuant to Instruction 1 to Item 304.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company.
The information required by this item with respect to
directors of the Company is incorporated herein by reference from
the section entitled "Proposal I, Election of Directors" of the
Company's definitive Proxy Statement relating to its Annual
Meeting of Shareholders to be held April 20, 1995. See Part I,
for a list of the Company's executive officers, and their ages,
positions and offices.
Item 11. Executive Compensation.
The information required by this item is incorporated herein
by reference from the sections entitled "Compensation Committee
Interlocks and Insider Participation," "Compensation of Executive
Officers," "Stock Option Grants," "Option Exercises and Fiscal
Year-End Values," "Pension Plans," "Supplemental Executive
Retirement Plan" and "Employment Termination Agreements" of the
Company's definitive Proxy Statement relating to its Annual
Meeting of Shareholders to be held April 20, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this item is incorporated herein
by reference from the sections entitled "Outstanding Shares and
Voting Rights" and "Proposal I, Election of Directors" of the
Company's definitive Proxy Statement relating to its Annual
Meeting of Shareholders to be held April 20, 1995.
Item 13. Certain Relationships and Related Transactions.
The information required by this item, if any, is
incorporated herein by reference from the section entitled
"Proposal I, Election of Directors" of the Company's definitive
Proxy statement relating to its Annual Meeting of Shareholders to
be held April 20, 1995.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)-1 The following items, included in the Company's 1994
Annual Report to Shareholders, are incorporated herein
by reference and are included herein in Exhibit 13.
Report of Independent Auditors
Consolidated Balance Sheets --
November 30, 1994 and 1993
Consolidated Statements of Income
and Retained Earnings -- Years ended
November 30, 1994, 1993 and 1992
Consolidated Statements of Cash
Flows -- Years ended November 30, 1994,
1993 and 1992
Notes to Consolidated Financial
Statements -- November 30, 1994
(a)-2 The following financial statement schedule is filed as
a part of this report.
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
<PAGE>
(a)-3 Exhibits.
Exhibits Incorporated by Reference
2 Agreement of Sale and Purchase Between The Glidden
Company and Lilly Industries, Inc. dated March 25,
1993 and amended by Amendment No. 1 dated May 7,
1993. This document is incorporated by reference
to Exhibit 2 to the Company's Form 8-K Current
Report dated May 7, 1993 and filed with the SEC on
May 20, 1993.
4 See Exhibits 10(d), 10(i), 10(j), 10(k) and 10(1).
*10(a) Lilly Industries, Inc. Stock Option Plan. This
exhibit is incorporated by reference to Exhibit
10(a) to the Company's Form 10-K Annual Report for
the fiscal year ended November 30, 1988.
*10(b) Lilly Industries, Inc. Unfunded Supplemental
Retirement Plan (as in effect November 29, 1990).
This exhibit is incorporated by reference to
Exhibit 10(b) to the Company's Form 10-K Annual
Report for the fiscal year ended November 30,
1990.
*10(c) Lilly Industries, Inc. Unfunded Excess Benefit
Plan. This exhibit is incorporated by reference to
Exhibit 10(c) to the Company's Form 10-K Annual
Report for the fiscal year ended November 30,
1989.
10(d) Credit Agreement dated as of November 9, 1992, by
and between Lilly Industries, Inc. and INB
National Bank completely restating the Second
Amended and Restated Revolving Loan Agreement
dated May 31, 1991, as amended. This document is
incorporated by reference to Exhibit 10(d) to the
Company's Annual Report for the fiscal year ended
November 30, 1992.
*10(e) Lilly Industries, Inc. Second Unfunded
Supplemental Retirement Plan effective June 4,
1990. This exhibit is incorporated by reference
to Exhibit 10(f) to the Company's Form 10-K Annual
Report for the fiscal year ended November 30,
1990.
*10(f) Lilly Industries, Inc. Termination Benefits
Agreement (form of agreement applicable to 3
officers). This exhibit is incorporated by
reference to Exhibit 10(g) to the Company's Form
10-K Annual Report for the fiscal year ended
November 30, 1990.
<PAGE>
*10(g) Lilly Industries, Inc. 1991 Director Stock Option
Plan. This exhibit is incorporated by reference to
Exhibit 10(i) to the Company's Form 10-K Annual
Report for the fiscal year ended November
30, 1991.
*10(h) Lilly Industries, Inc. 1992 Stock Option Plan.
This exhibit is incorporated by reference to
Exhibit 10(j) to the Company's Form 10-K Annual
Report for the fiscal year ended November 30,
1991.
10(i) Note Agreement among the Company and Principal
Mutual Life Insurance Company and Principal
National Life Insurance Company dated as of
December 22, 1993. This exhibit is incorporated
by reference to Exhibit 10(k) to the Company's 10-
K Annual Report for the fiscal year ended November
30, 1993.
___________________
* Management contracts and compensatory reports
required to be filed pursuant to Item 14(c) of
Form 10-K.
Exhibits Filed Herewith:
10(j) Revolving Credit Agreement [1995] between the
Company and National City Bank, Indiana dated as
of January 27, 1995.
10(k) Revolving Credit Agreement [1995] between the
Company and NBD Bank, N.A. dated as of January 27,
1995.
10(l) Amended and Restated Revolving Credit Agreement
[1995] between the Company and Society National
Bank, Indiana dated as of January 27, 1995.
11 Computation of Earnings Per Share.
13 Excerpts from the Lilly Industries, Inc. 1994
Annual Report.
21 List of Subsidiaries.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
<PAGE>
(b) No reports on Form 8-K were filed during the
fourth quarter of fiscal year 1994.
(c) The response to this portion of this item is
submitted as a separate section of this report.
(d) The response to this portion of this item is
submitted as a separate section of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: February 23, 1995
LILLY INDUSTRIES, INC.
/s/ Douglas W. Huemme
Douglas W. Huemme,
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
(1) Principal Executive
Officer and Director
/s/ Douglas W. Huemme Chairman, President February 23, 1995
Douglas W. Huemme and Chief Executive
Officer
(2) Principal Financial
Officer and Director
/s/ Roman J. Klusas Vice President, February 23, 1995
Roman J. Klusas Chief Financial
Officer and Secretary
(3) Director of Corporate
Accounting and Principal
Accounting Officer
/s/ Kenneth L. Mills Director of Cor- February 23, 1995
Kenneth L. Mills porate Accounting
and Assistant Secretary
(4) A majority of the
<PAGE>
Board of Directors
______________________ Director February 23, 1995
H. J. (Jack) Baker
/s/ William C. Dorris Director February 23, 1995
William C. Dorris
/s/ Robert H. McKinney Director February 23, 1995
Robert H. McKinney
/s/ John D. Peterson Director February 23, 1995
John D. Peterson
/s/ Thomas E. Reilly, Jr. Director February 23, 1995
Thomas E. Reilly, Jr.
/s/ Van P. Smith Director February 23, 1995
Van P. Smith
/s/ Richard A. Steele Director February 23, 1995
Richard A. Steele
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
<S> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E
Additions
Description Balance at (1) (2) Deductions- Balance
Beginning Charged to Charged to Describe at End of
of Period Costs and Other Accounts Period
Expenses - Describe
Year ended November 30, 1994:
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful
accounts receivable $1,353,042 $790,422 $ - $384,695(A) $1,758,769
========== ======== ======== ======== ==========
Year ended November 30, 1993:
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful
accounts receivable $1,193,639 $827,912 $ - $668,509(A) $1,353,042
========== ======== ======== ======== ==========
Year ended November 30, 1992:
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful
accounts receivable $ 686,730 $968,952 $ - $462,043(A) $1,193,639
========== ======== ======== ======== ==========
<FN>
Note A - Uncollectible accounts receivable charged off, net of recoveries
</TABLE>
EXHIBIT 10(j)
REVOLVING CREDIT AGREEMENT
[1995]
Between
LILLY INDUSTRIES, INC.
and
NATIONAL CITY BANK, INDIANA
Dated as of January 27, 1995
<PAGE>
TABLE OF CONTENTS
Page
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Definitions. . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . 9
1.3 Other Definitions; Singular and Plural . . . . . . . 9
SECTION 2. Credit . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . 9
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Payments of Principal and
Interest . . . . . . . . . . . . . . . . . . . . . 10
2.4 Use of Proceeds. . . . . . . . . . . . . . . . . . . 10
2.5 Method of Advance. . . . . . . . . . . . . . . . . . 10
2.6 Conversion of Advances . . . . . . . . . . . . . . . 11
2.7 Method of Payment. . . . . . . . . . . . . . . . . . 12
2.8 Prepayment . . . . . . . . . . . . . . . . . . . . . 13
2.9 Computations of Interest . . . . . . . . . . . . . . 13
2.10 Additional Costs . . . . . . . . . . . . . . . . . . 13
2.11 Commitment Fees . . . . . . . . . . . . . . . . . . 14
2.12 Reductions of Revolving Credit
Commitment . . . . . . . . . . . . . . . . . . . . 14
SECTION 3. Conditions Precedent . . . . . . . . . . . . . . . 14
3.1 Conditions Precedent to the
Initial Advance of the Loan. . . . . . . . . . . . 14
3.2 Conditions to Subsequent Advances. . . . . . . . . . 15
SECTION 4. Representations and Warranties . . . . . . . . . . 15
4.1 Corporate Existence. . . . . . . . . . . . . . . . . 15
4.2 Corporate Powers . . . . . . . . . . . . . . . . . . 16
4.3 Power of Officers . . . . . . . . . . . . . . . . . 16
4.4 Government and Other Approvals . . . . . . . . . . . 16
4.5 Compliance with Laws;
Environmental Matters. . . . . . . . . . . . . . . 16
4.6 Enforceability of Agreement. . . . . . . . . . . . . 16
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . 17
4.8 Events of Default. . . . . . . . . . . . . . . . . . 17
4.9 Investment Company Act of 1940 . . . . . . . . . . . 17
4.10 Financial Information . . . . . . . . . . . . . . . 17
4.11 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 17
4.12 Full Disclosure . . . . . . . . . . . . . . . . . . 18
- i -
<PAGE>
Page
SECTION 5. Covenants . . . . . . . . . . . . . . . . . . . . 18
5.1 Use of Proceeds . . . . . . . . . . . . . . . . . . 18
5.2 Maintain Existence, Etc.. . . . . . . . . . . . . . 18
5.3 Financial Statements, Etc.. . . . . . . . . . . . . 18
5.4 Adequate Books . . . . . . . . . . . . . . . . . . 19
5.5 Leverage Ratio . . . . . . . . . . . . . . . . . . 19
5.6 Current Ratio . . . . . . . . . . . . . . . . . . 19
5.7 Cash Flow Coverage Ratio. . . . . . . . . . . . . . 19
5.8 Net Worth . . . . . . . . . . . . . . . . . . . . . 19
5.9 Hazardous Materials . . . . . . . . . . . . . . . . 19
5.10 Mergers, Etc. . . . . . . . . . . . . . . . . . . . 20
5.11 Liens . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Notice of Default . . . . . . . . . . . . . . . . . 20
5.13 Indebtedness. . . . . . . . . . . . . . . . . . . . 20
5.14 Insurance . . . . . . . . . . . . . . . . . . . . . 20
5.15 No Material Adverse Change. . . . . . . . . . . . . 20
5.16 Margin Rules. . . . . . . . . . . . . . . . . . . . 21
SECTION 6. Default and Remedy. . . . . . . . . . . . . . . . 21
6.1 Events of Default . . . . . . . . . . . . . . . . . 21
6.1.1 Nonpayment. . . . . . . . . . . . . . . . 21
6.1.2 Representation or Warranty. . . . . . . . 21
6.1.3 Other Defaults. . . . . . . . . . . . . . 21
6.1.4 Voluntary Bankruptcy. . . . . . . . . . . 21
6.1.5 Involuntary Bankruptcy. . . . . . . . . . 21
6.1.6 Cross Default . . . . . . . . . . . . . . 22
6.1.7 Adverse Judgments . . . . . . . . . . . . 22
6.2 Remedy. . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7. Miscellaneous . . . . . . . . . . . . . . . . . . 22
7.1 Notices . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Successors and Assigns . . . . . . . . . . . . . . 23
7.3 Participation and Assignments . . . . . . . . . . . 23
7.4 Amendments and Waivers . . . . . . . . . . . . . . 23
7.5 Costs and Expenses . . . . . . . . . . . . . . . . 23
7.6 Entire Agreement . . . . . . . . . . . . . . . . . 24
7.7 Governing Law . . . . . . . . . . . . . . . . . . . 24
7.8 Section Headings. . . . . . . . . . . . . . . . . . 24
7.9 Severability . . . . . . . . . . . . . . . . . . . 24
7.10 Indemnity . . . . . . . . . . . . . . . . . . . . 24
7.11 Jury Trial Waiver . . . . . . . . . . . . . . . . . 25
Schedule 1 Permitted Liens
Exhibit A Revolving Credit Note
Exhibit B Opinion of Counsel to Borrower
- ii -
<PAGE>
REVOLVING CREDIT AGREEMENT
National City Bank, Indiana
[1995]
THIS AGREEMENT, is made as of the 27th day of January, 1995,
between LILLY INDUSTRIES, INC., an Indiana corporation (the
"Borrower") and National City Bank, Indiana, a national banking
association (the "Bank");
SECTION 1
Definitions
1.1 Defined Terms. As used herein:
"Additional Costs" shall have the meaning ascribed in
Section 2.10.
"Advance" means a disbursement of proceeds of a Loan.
"Affiliate" means, with respect to any Person, any other
Person (including, but not limited to, each officer and director
of such Person) directly or indirectly controlling, controlled
by, or under direct or indirect common control with such Person.
(A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract
or otherwise.)
"Agreement" means this Revolving Credit Agreement [1995], as
the same may be amended from time to time.
"Applicable Margin" means as to a Eurodollar Rate Advance
(a) 43.75 basis points if the Cash Flow Coverage ratio is 1.3:1.0
or greater or (b) 56.25 basis points if the Cash Flow Coverage
Ratio is less than 1.3:1.0.
"Base Rate" means that rate of interest established from
time to time by the Bank as the Bank's Prime Rate whether or not
such rate is publicly announced, which rate may not be the lowest
interest rate charged by the Bank for commercial or other
extensions of credit.
"Business Day" means a day other than a Saturday, Sunday or
other day on which the Bank is open for the conduct of its
general banking business and, if the applicable day relates to
any Eurodollar Rate Advance, or notice with respect to any
Eurodollar Rate Advance, a day on which dealings in Dollar
deposits are also carried on in the London interbank market and
banks are open for business in London.
<PAGE>
"Cash Flow Coverage Ratio" means, as of the date of
determination, (a) the sum of (i) net income after taxes, plus
(ii) income tax expense, plus (iii) interest expense, plus (iv)
depreciation, amortization and other non-cash expenses; divided
by (b) the sum of (i) income tax expense, plus (ii) interest
expense, plus (iii) current maturities of long term debt, plus
(iv) cash dividends, plus (v) additional Investments in treasury
stock, for the four (4) fiscal quarters immediately preceding
such date all as determined by reference to the financial
statements furnished to the Bank from time to time pursuant to
Section 5.3.
"Commitment" means the obligation of the Bank to make Loans
during the Commitment Period up to a maximum aggregate principal
amount outstanding at any time of $15,000,000.
"Commitment Period" means the period from the date hereof
through June 30, 1996, unless extended or renewed by a prior
written agreement executed by the Borrower and the Bank (it
being understood that, if so agreed by the Borrower and the Bank,
the Commitment Period shall be considered for extension annually
and shall be extended for successive 2-year periods).
"Compliance Certificate" means a Compliance Certificate in a
form prescribed by the Bank, establishing Borrower's compliance
with the terms and conditions of this Agreement.
"Consolidated" means: (a) when used herein with reference to
financial statements, ratios, assets or liabilities, that any
calculations have been made by consolidating the assets,
liabilities, income, expenses, and cash flows of a Person and its
Consolidated Subsidiaries after eliminating all intercompany
items and making such adjustments as required by GAAP; and (b)
when used herein with reference to a Subsidiary of a Person, a
Subsidiary, the financial statements of which have been or, in
accordance with GAAP, are required to be presented together on a
Consolidated basis with those of such Person.
"Consolidated Net Worth" means the excess of total assets
over total liabilities and reserves of a Person and its
Consolidated Subsidiaries, computed on a Consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Tangible Net Worth" means, with respect to any
Person, such Person's Consolidated Net Worth, less:
(a) Goodwill (including the unallocated excess purchase
cost of assets acquired in a transaction accounted for as a
purchase over the aggregate fair market value thereof on the
date of acquisition), patents, trademarks, trade names,
copyrights, franchises, deferred charges, (including
unamortized debt discount and expense, deferred research and
development expenses and organizational costs), treasury
<PAGE>
stock and all other items that would be treated as intangible
assets under GAAP; and
(b) Any write-up of the book value of any asset of such
Person or any of its Consolidated Subsidiaries other than a
write-up in accordance with GAAP of assets of a Subsidiary of
such Person in connection with the acquisition of such
Subsidiary by such Person.
"Consolidated Total Liabilities" means the excess of (a)
total assets of a Person and its Consolidated Subsidiaries, over
(b) Consolidated Net Worth, computed on a Consolidated basis in
accordance with GAAP consistently applied.
"Conversion Date" means any date specified on which Borrower
elects to convert an Advance of any type to an Advance of another
type.
"Current Assets" means, as to any Person, the aggregate book
value of all assets which would be classified as current assets
of such Person in accordance with GAAP after making adequate
reserves in each case where a reserve is proper in accordance
with GAAP.
"Current Liabilities" means, as to any Person, all
Indebtedness of such Person maturing on demand or within one (1)
year after the date on which such determination is made and all
other items (including estimated accrued taxes) which would be
classified as current liabilities in accordance with GAAP.
"Default" means an event, which with notice or lapse of time
or both, would become an Event of Default.
"Deposit Account" means Borrower's demand depository account
at the Bank which either exists or will be opened by Borrower.
"Dollars" and the sign "$" shall mean the lawful money of the
United States of America.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all the rules and regulations promulgated pursuant
thereto, as amended from time to time.
"ERISA Event" means, as to any Person, (a) a Reportable Event
described in Section 4043 of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the
provision for thirty (30)-day notice to the PBGC under such
regulations); or (b) the withdrawal of such Person or any member
of its controlled group from a Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; or (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA; or (d) the institution of proceedings to
terminate a Plan by the PBGC; or (e) a transaction that occurs on
<PAGE>
or after April 7, 1986 and that is reasonably likely to be
subject to Section 4060 of ERISA without regard to the
termination date, if any, of any former Plan; or (f) any other
event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,
any Plan or to result in the imposition of any liability under
Title IV of ERISA.
"Eurocurrency Liabilities" has the meaning ascribed to such
term in Regulation D of the Federal Reserve Board, as in effect
from time to time.
"Eurodollar Rate" means, for each Interest Period for a
Eurodollar Rate Advance, an interest rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) determined
pursuant to the following formula:
Eurodollar Rate = LIBOR
-------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means, for each
Interest Period in respect of a Eurodollar Rate Advance,
the maximum reserve percentage in effect on the date
LIBOR for such Interest Period is determined under
regulations (whether or not applicable to Bank) issued
from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other
marginal reserve requirement) with respect to liabilities
or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period;
and
"LIBOR" means, for each Interest Period in respect
of a Eurodollar Rate Advance, the rate of interest
determined and quoted by the Bank to be the rate of
interest at which Dollar deposits for such Interest
Period, and in an amount approximately equal to the
principal amount of the Eurodollar Rate Advance to be
made or maintained by the Bank during such Interest
Period would be offered to major banks in the London
interbank market at their request at or about 11:00 A.M.
(London time) two (2) Business Days prior to the
commencement of such Interest Period.
"Eurodollar Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to the
Eurodollar Rate.
<PAGE>
"Event of Default" means any event set forth in Section 6
hereof.
"Federal Funds Effective Rate" means, for any day, an
interest rate per annum equal to the weighted average of the
rates on over night Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on
such date, as published for such date (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of Chicago, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations at approximately 11:00 a.m. (Indianapolis time) on
such day on such transactions received by the Bank from three (3)
Federal funds brokers of recognized standing selected by the Bank
in its sole discretion.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereof.
"Floating Rate" means, for any day, a rate of interest per
annum equal to the greater of (a) the Base Rate for such day
minus 50 basis points or (b) the Federal Funds Effective Rate for
such day plus 100 basis points.
"Floating Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to the
Floating Rate.
"Fiscal Year" means a year commencing December 1 and ending
November 30.
"Fixed Assets" means land, buildings, property and equipment.
"GAAP" means generally accepted accounting principles in the
United States of America from time to time as promulgated by the
Financial Standards Accounting Board and recognized and
interpreted by the American Institute of Certified Public
Accountants; provided, however, that in the determination of the
Borrower's compliance with Sections 5.5 through 5.8 hereof, the
effect of FASB 106 shall be disregarded.
"Hazardous Material" means and includes any hazardous, toxic
or dangerous waste, substance or material defined as such in or
for the purpose of the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order, decree or other
requirement of any governmental authority regulating, relating
to, or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste or material, as now or at any
time hereafter in effect.
"Indebtedness" means as to any Person (a) all indebtedness or
other obligations of a Person for borrowed money or for the
<PAGE>
deferred purchase price of property or services; (b) all
indebtedness or other obligations of any other Person for
borrowed money or for the deferred purchase price of property or
services, the payment or collection of which the subject Person
has guaranteed (except by reason of endorsement for collection in
the ordinary course of business) or in respect of which the
subject Person is liable, contingently or otherwise, including,
without limitation, liability by way of agreement to purchase, to
provide funds for payment, to supply funds to or otherwise to
invest in such other Person, or otherwise to assure a creditor
against loss; (c) all indebtedness or other obligations of any
other Person for borrowed money or for the deferred purchase
price of property or services secured by (or for which the holder
of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance upon or in
property owned by the subject Person, whether or not the subject
Person has assumed or become liable for the payment of such
indebtedness or obligations; and (d) capitalized lease
obligations of such Person.
"Interest Period" means:
(a) With respect to each Eurodollar Rate Advance,
the period commencing on the Business Day such Advance is
disbursed or on the Conversion Date on which an Advance
is converted to such Eurodollar Rate Advance and ending
either on the date thirty (30), sixty (60), ninety (90),
one hundred twenty (120) or one hundred eighty (180) days
thereafter, as selected by Borrower pursuant to Section
2.5 hereof; provided, however, that:
(i) In the case of the continuation of
a Eurodollar Rate Advance, the Interest Period
applicable after the continuation of such
Advance shall commence on the last day of the
preceding Interest Period; and
(ii) Any Interest Period which would
otherwise end on a day which is not a Business
Day shall be extended to the next succeeding
Business Day unless such Business Day falls in
another calendar month, in which case such
Interest Period shall end on the next preceding
Business Day; and
(b) With respect to each Negotiated Rate Advance,
the period commencing on the Business Day such Advance is
disbursed and ending on the date specified in the Request
for such Negotiated Rate Advance.
"Interest Period Payment Date" means the first day of each
calendar month.
"Investment" means (a) any loan, advance, guarantee,
extension of credit (other than in the ordinary course of
<PAGE>
business to trade customers) or contribution of capital to any
Person or the purchase of any Persons' notes, stock, bonds or
other securities; (b) advances to employees of a Person other
than advances for the purpose of defraying travel, relocation or
business expenses in the ordinary course of business; and (c) any
capital, property, or services contributed or committed to be
contributed to a Person in connection with the purchase of debt,
equity or other ownership interest.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement
to provide any of the foregoing), any conditional sale or other
title retention agreement or any lease in the nature thereof, or
any filing or agreement to file a financing statement as debtor
on any property leased under a lease which is not in the nature
of a conditional sale or title retention agreement.
"Loan Documents" means, collectively, this Agreement, the
Note and each other document now or hereafter executed by the
Borrower in favor of the Bank governing, evidencing or otherwise
related to the Obligations.
"Loans" means the revolving loans made by the Bank to the
Borrower from time to time pursuant to Section 2.1 hereof in the
maximum aggregate principal amount of $15,000,000 in accordance
with the Commitment, including any extensions or renewals
thereof.
"Negotiated Rate" means a fixed rate per annum which is
offered to Borrower by the Bank in its sole discretion and which
is accepted by Borrower.
"Negotiated Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to a
Negotiated Rate.
"Note" means the Revolving Credit Note in the form attached
hereto as Exhibit A in the maximum aggregate principal amount of
$15,000,000 (or so much thereof as may be advanced or
outstanding from time to time) executed by the Borrower in favor
of the Bank.
"Obligations" means all obligations, indebtedness and
liabilities of Borrower under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation created
under Section 4002(a) of ERISA or any successor thereto.
"Permitted Liens" means:
(a) Liens (i) for taxes not yet due or (ii) which
are being actively contested in good faith by appropriate
proceedings (in a manner sufficient to prevent
enforcement of the matter under contest) as to which
<PAGE>
adequate reserves have been set aside in an amount
determined in accordance with GAAP;
(b) Liens incidental to the conduct of the business
of the Borrower and its Consolidated Subsidiaries or the
ownership of their respective owned properties and assets
which were not incurred in connection with the incurring
of Indebtedness, and which do not materially detract from
the value of such property or assets or impair the use
thereof in the operation of the Borrower's or such
Subsidiaries' business;
(c) Liens on property or assets of a Subsidiary of
the Borrower to secure obligations of such Subsidiary to
the Borrower or another Subsidiary of the Borrower;
(d) Liens on the properties and assets acquired by
the Borrower or of any Subsidiary of the Borrower
subsequent to the date hereof, which Liens pre-exist the
date of such acquisition;
(e) Liens on properties or assets of the Borrower
and its Consolidated Subsidiaries, which properties and
assets do not exceed Ten Percent (10%) of the total
tangible assets of the Borrower and its Consolidated
Subsidiaries; and
(f) As set forth on Schedule 1 hereto.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization,
including a governmental or political subdivision or an agent or
instrumentality thereof.
"Plan" means any defined benefit plan maintained or
contributed to by Borrower or any of its Subsidiaries or by any
trade or business (whether or not incorporated) under common
control with Borrower or any of its Subsidiaries as defined in
Section 4001(b) of ERISA and insured by the PBGC under Title IV
of ERISA.
"Regulatory Change" shall have the meaning ascribed in
Section 2.10.
"Reportable Event" shall be as defined in ERISA.
"Request" shall have the meaning ascribed in Section 2.5
hereof.
"Subsidiary" of a Person means any corporation of which such
Person owns or otherwise controls, directly or indirectly, more
than 50% of the total voting securities thereof, and shall
include any such corporation which becomes a Subsidiary of such
Person after the date hereof.
<PAGE>
"Termination Date" means July 1, 1996.
"Wholly-Owned Subsidiary" means a Consolidated Subsidiary of
a Person, 100% of the voting securities of which is owned or
controlled by such Person.
1.2 Accounting Terms. All accounting terms used herein and
not used herein and not expressly defined herein shall (unless
otherwise expressly indicated) have the respective meanings given
to them in accordance with GAAP. All financial computations made
under this Agreement for the purpose of determining compliance
with the financial requirements of this Agreement shall be made
on a Consolidated basis and shall be made, and all financial
information required under this Agreement shall be prepared, in
accordance with GAAP consistently applied. In determining the
value of assets, Investments in Persons other than Consolidated
Subsidiaries shall be determined on the basis of the lesser of
cost or the book value of such Person on the date of
determination.
1.3 Other Definitions; Singular and Plural. The terms
defined in the preamble of this Agreement and used herein shall
have the meanings ascribed in the preamble hereof. Use of the
terms "herein", "hereof", and "hereunder" shall be deemed
references to this Agreement in its entirety and not to the
Section or clause in which such term appears. The foregoing
definitions shall be equally applicable to both the singular and
plural forms of the defined terms.
SECTION 2
Credit
2.1 Commitments. Subject to the terms and conditions
hereof, the Bank agrees to make Loans to the Borrower from time
to time during the Commitment Period in a principal amount not in
excess of the unborrowed portion of the Commitment on the
borrowing date. During the Commitment Period, the Borrower may
use the Commitment by borrowing, prepaying the Loans, in whole or
in part, and reborrowing, all subject to, and in accordance with,
the terms and conditions hereof. The Loans shall be evidenced by
the Note.
2.2 Interest. Prior to maturity or the occurrence of an
Event of Default, the principal amount of the Loans shall bear
interest at the election of the Borrower at any of the following
rates (a) a per annum rate equal to the Eurodollar Rate, plus the
Applicable Margin; (b) at a per annum rate equal to the Floating
Rate; or (c) at a Negotiated Rate. After maturity or the
occurrence of an Event of Default, interest shall be calculated
in accordance with Section 2.9
2.3 Payments of Principal and Interest. Interest only on
the outstanding Advances of the Loans from time to time shall be
<PAGE>
due and payable on the Interest Period Payment Date throughout
the term of the Commitment Period. Unless sooner paid, the
Borrower shall make principal payments in an amount sufficient
that the outstanding principal balance of the Loans shall not
exceed the Commitment. Unless the Loans are sooner paid by the
Borrower or extended by the Bank in its sole discretion, the
entire principal balance of the Loans, together with all accrued
and unpaid interest thereon, and all fees and charges payable in
connection therewith, shall be due and payable on July 1, 1996.
2.4 Use of Proceeds. The proceeds of the Loans shall be
used to fund the general working capital of the Borrower and its
Subsidiaries (including, but not limited to, the construction or
purchase of Fixed Assets) and for acquisition purposes.
2.5 Method of Advance. Subject to the provisions of Section
2.1:
(a) Advances of the Loans shall be made available to
Borrower prior to the Termination Date, provided the Bank
receives, at the time and in accordance with the terms of
this Section, a request ("Request") specifying the amount of
the Advance, the interest rate election of Borrower related
thereto and, if appropriate, the Interest Period related
thereto. Requests may be made by telephone, and the Bank may
rely, without further inquiry, on such telephonic Requests as
the act of Borrower through an authorized representative;
provided, however, that the Bank may require telephonic or
other oral requests to be followed immediately by a written
Request. Notwithstanding anything to the contrary contained
in the definition of "Interest Period", the Borrower may not
select an Interest Period with respect to any Advance which
ends after the Termination Date.
(b) Each Request shall constitute a representation and
warranty by the Borrower that no Default or Event of Default
has occurred and is continuing or would result from the
making of the requested Advance and that the requested
Advance shall not cause the principal balance of the Loans to
exceed the Commitment.
(c) Each Request, which shall be irrevocable once
received, must be received by the Bank not later than 11:00
A.M. (Indianapolis time), (i) on the date such Advance is to
be made, if such Advance is to be made as a Negotiated Rate
Advance or a Floating Rate Advance, and (ii) three (3)
Business Days prior to the date such Advance is to be made,
if such Advance is to be an Eurodollar Rate Advance. Prior to
11:00 A.M. (Indianapolis time) on the second (2nd) Business
Day prior to the date such Advance is to be made, the Bank
will, through designated employees, quote the Eurodollar
Rate. The Borrower shall then have until 1:00 P.M.
(Indianapolis time) on that same Business Day of the quote by
the Bank to execute its option to elect the Eurodollar Rate.
<PAGE>
(d) All Advances shall be in a minimum amount of
$1,000,000 and integral multiples of $100,000 and shall be
made by credit to the Deposit Account.
(e) All notices (including Requests) made by Borrower
to the Bank and received by the Bank after 11:00 A.M.
(Indianapolis time) (or such other time as is specified in
any Section hereof) on a Business Day shall be deemed
received on the next succeeding Business Day.
(f) If the Borrower fails to give timely notice of its
interest rate election pursuant to this Section 2.5, or if
the Borrower and the Bank do not agree on a Negotiated Rate,
Borrower shall be deemed to have selected the Floating Rate.
(g) All Advances by the Bank and payments by the
Borrower shall be recorded by the Bank on its books and
records, and the principal amount outstanding from time to
time, plus interest payable thereon, shall be determined from
the books and records of the Bank. The books and records of
the Bank shall be presumed prima facie correct as to such
matter. Any statement of a the Bank to the Borrower setting
forth the Borrower's account regarding the Advances and
payments shall be considered true and correct and binding on
the Borrower unless the Bank is notified in writing of any
discrepancy or exception within thirty (30) days from the
date of mailing such monthly statement. Notwithstanding the
foregoing, the failure to make, or an error in making, a
notation with respect to any Advance shall not limit or
otherwise affect the obligation of the Borrower hereunder.
2.6 Conversion of Advances. Borrower may, upon receipt by
the Bank of a Request not later than 11:00 A.M. (Indianapolis
time) three (3) Business Days prior to the applicable Conversion
Date:
(a) Elect to convert on any Business Day any Floating
Rate Advance into an Advance of any other type;
(b) Elect to convert upon expiration of any Interest
Period, any Eurodollar Rate Advance or Negotiated Rate
Advance maturing at the end of such Interest Period into an
Advance of any other type; or
(c) Elect to renew, upon expiration of any Interest
Period, any Eurodollar Rate Advance maturing at the end of
such Interest Period by selecting the duration of the next
Interest Period thereof; provided, however, that if any
Eurodollar Rate Advance shall have an outstanding principal
balance of less than $1,000,000, the Eurodollar Rate Advance
subject to renewal shall automatically convert to a Floating
Rate Advance and after such date the right of Borrower to
continue any such Advance as a Eurodollar Rate Advance shall
terminate.
<PAGE>
If upon the expiration of any Interest Period applicable to a
Eurodollar Rate Advance, Borrower has failed to select a new
Interest Period to be applicable to such Advance as the case may
be, Borrower shall be deemed to have elected to convert such
Advance into a Floating Rate Advance effective as of the
expiration of the then current Interest Period. Notwithstanding
any other provision of this Agreement:
(aa) If Borrower desires to convert any Advance to a
Eurodollar Rate Advance or continue or renew any Eurodollar
Rate Advance at the expiration of an Interest Period, the
provisions of Section 2.5(c) shall apply; and
(bb) In the event that the Bank determines (which
determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the
London interbank market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for any Eurodollar
Interest Period at a time when a Eurodollar Rate is requested
or when the outstanding balance of Advances under the Loans
is being maintained at the Eurodollar Rate, the Bank shall
forthwith give notice of such determination, confirmed in
writing, to the Borrower (if such confirmation is requested
by the Borrower), whereupon the selection of an Eurodollar
Rate shall be prohibited, and if the Borrower and the Bank
are unable to agree on a Negotiated Rate, the outstanding
principal balance of Advances under the Loans then bearing
interest at the Eurodollar Rate shall be converted, on the
last day of the then current Eurodollar Interest Period, to
the Floating Rate.
2.7 Method of Payment. All payments of principal and
interest on the Note shall be made without setoff or counterclaim
by the Borrower to the Bank at its main office in Indianapolis,
Indiana, by 11:30 A.M. (Indianapolis time) on the date when due.
All sums received after such time shall be deemed received on the
next Business Day. Any payment due on a day that is not a
Business Day shall be made on the next Business Day. The Bank is
hereby authorized by the Borrower to debit the Deposit Account
for each payment of principal or interest under the Loans as it
becomes due. All payments with respect to the Loans shall be
payable in funds available for the Bank's immediate use at
Indianapolis, Indiana, and no payment will be considered to have
been made until received in such funds. All payments received on
account of any of the Loans will be applied first to the
satisfaction of any interest which is then due and payable, and
to principal only after all interest which is due and payable has
been satisfied.
2.8 Prepayment. The Borrower may prepay any Floating Rate
Advance in whole or in any multiple at any time, and from time to
time, without notice, premium or penalty. The Borrower may not
prepay any Eurodollar Rate Advance or Negotiated Rate Advance at
<PAGE>
any time prior to the last day of the Interest Period applicable
thereto.
2.9 Computations of Interest. All computations of interest
and fees under this Agreement shall be made on the basis of a
360-day year and calculated for the actual number of days
elapsed. Any change in the rate of interest on any Floating Rate
Advance occasioned by a change in the Base Rate or Federal Funds
Effective Rate shall be effective on the same day as the change
in Base Rate or the Federal Funds Effective rate, as the case may
be. Interest shall accrue on any principal balance outstanding
from and including the date of disbursement to, but excluding,
the date on which such principal balance is repaid.
Notwithstanding anything to the contrary herein contained, all
principal hereunder not paid when due, whether by lapse of time
or by acceleration, shall bear interest after maturity at a per
annum rate equal to Two Percent (2%) above the otherwise
applicable rate.
2.10 Additional Costs. Borrower shall pay to the Bank from
time to time such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs incurred by the
Bank which the Bank determines is attributable to its making or
maintaining any Eurodollar Rate Advance hereunder or its
obligation to make any Advance hereunder, or any reduction in any
amount receivable by the Bank under this Agreement or the Note in
respect of any such Advance or such obligation (such increases in
costs and reductions in amounts receivable being herein called
"Additional Costs") resulting from any change after the date of
this Agreement in federal, state, municipal, or foreign laws or
regulations (including Regulation D of the Federal Reserve Board)
or the adoption or making after such date of any interpretations,
directives, or requirements applying to a class of banks
including the Bank of or under any federal, state, municipal, or
foreign laws or regulations (whether or not having the force of
law) by any court or governmental authority charged with the
administration thereof ("Regulatory Change"), which: (a) changes
the basis of taxation of any amounts payable to the Bank under
this Agreement in respect of any Advance (other than taxes
imposed on the overall net income of the Bank); or (b) imposes or
modifies any reserve, special deposit, or similar requirements
relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of the Bank; or (c) imposes
any other condition affecting this Agreement (or any of such
extensions of credit or liabilities). The Bank will notify
Borrower of any event occurring after the date of this Agreement
which will entitle the Bank to compensation under this Section
2.10 as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation.
Determinations by the Bank for the purposes of this Section 2.10
of the effect of any Regulatory Change on its cost of making or
maintaining any Loan or on amounts receivable by or in respect of
any Loan, and of the additional amounts required to compensate
Bank in respect of Additional Costs, shall be conclusive,
<PAGE>
provided that such determinations are made on a reasonable basis
and the Bank provides Borrower with its calculations of
Additional Costs.
2.11 Commitment Fee. Borrower shall pay to the Bank a
commitment fee equal to three-sixteenths (3/16) of one percent
(1%) per annum on the maximum amount of the Commitment, which fee
shall be due and payable quarterly in advance, within fifteen
(15) days of receipt by the Borrower of an invoice therefor.
2.12 Reductions of Revolving Credit Commitment. The
Borrower shall have the right to terminate or reduce the
aggregate amount of the Commitment at any time or from time to
time, provided that (a) the Borrower shall give notice of each
such termination or reduction in the manner provided in Section
7.1; (b) each partial reduction shall be in an aggregate amount
at least equal to $1,000,000 and integral multiples of $100,000;
(c) the aggregate Commitment shall not be reduced to an amount
less than the outstanding principal balance of the Revolving
Credit Loans; and (d) the Commitment once terminated or reduced
may not be reinstated without the prior written approval of the
Bank.
SECTION 3
Conditions Precedent
3.1 Conditions Precedent to the Initial Advance of the Loan.
In addition to the requirements set forth in Section 3.2, the
obligations of the Bank to make the initial Advance is subject to
the condition precedent that the following shall have been
delivered to the Bank in form and substance satisfactory to the
Bank:
(a) Organic Documents. A copy of the articles of
incorporation and by-laws, including all amendments thereto,
of Borrower, certified by the Secretary or an Assistant
Secretary as being in full force and effect on the date
hereof.
(b) Corporate Resolutions. Copies of resolutions
passed by the Board of Directors of Borrower, certified by
the Secretary or Assistant Secretary of Borrower, as
applicable, as being in full force and effect on the date
hereof.
(c) Loan Documents. The Loan Documents duly executed
by Borrower.
(d) Certificate of Existence. A Certificate of
Existence or Good Standing for Borrower in the jurisdiction
<PAGE>
of its incorporation certified by the Secretary of State or
other appropriate official of such jurisdictions.
(e) Opinion of Counsel. The favorable written opinion
of counsel to Borrower, dated as of the date hereof,
substantially in the form and of the substance attached
hereto as Exhibit B.
(f) Other Evidence Bank May Require. Such other
documents or evidence as the Bank may reasonably request in
writing in order to consummate the transactions contemplated
hereby or to evidence the taking of all necessary actions in
any proceedings in connection herewith and compliance with
the conditions set forth in this Agreement.
(g) Expenses. Payment of the expenses of the Bank
described in Section 7.5 for which Borrower has received
proper invoices or requests for payment.
3.2 Conditions to Subsequent Advances. The obligations of
the Bank to make any Advance after the date hereof is subject to
the following conditions precedent:
(a) The representations and warranties contained in
Section 4 shall be true and correct and no Default or Event
of Default shall have occurred and be continuing;
(b) The Bank shall have received a Request;
(c) All fees, expenses and other amounts due and
payable to or for the benefit of the Bank under the Loan
Documents shall have been paid; and
(d) The aggregate outstanding principal balance of the
Loans, after giving effect to the requested Advance, may not
exceed the Commitment.
SECTION 4
Representations and Warranties
Borrower represents and warrants to the Bank on the date
hereof, and shall be deemed to have made such representations and
warranties to Bank on the date of each Advance hereunder, that:
4.1 Corporate Existence. Borrower and each of its
Consolidated Subsidiaries is a corporation duly organized and
existing under the laws of the jurisdiction of its incorporation,
and is duly qualified as a foreign corporation and is properly
licensed and in good standing in each jurisdiction where the
failure to qualify or be licensed would have a material adverse
<PAGE>
effect on its business, properties or conditions (financial or
otherwise).
4.2 Corporate Powers. The execution, delivery and
performance of the Loan Documents by Borrower are within
Borrower's corporate powers, have been duly authorized by all
requisite corporate action, and are not in conflict with the
terms of any charter, by-laws or other organization papers of
Borrower, or any instrument or agreement to which Borrower is a
party or by which Borrower is bound or affected.
4.3 Power of Officers. The officers of Borrower executing
the Loan Documents and any certificate, instrument or agreement
required to be delivered by Borrower thereunder have been duly
elected or appointed and were fully authorized to execute the
same at the time such agreement, certificate or instrument was
executed.
4.4 Government and Other Approvals. No approval, consent,
exemption or other action by, notice to or filing with, any
governmental authority which has not been obtained is necessary
in connection with the execution, delivery or performance by
Borrower of the Loan Documents.
4.5 Compliance with Laws; Environmental Matters. To the
best of Borrower's knowledge, there is no law, rule or
regulation, nor is there any judgment, decree or order of any
court or governmental authority specifically directed to Borrower
or any of its Consolidated Subsidiaries and binding on Borrower
or any of its Consolidated Subsidiaries which would be
contravened by the execution, delivery or performance of the Loan
Documents. Borrower and each of its Consolidated Subsidiaries is
in material compliance with all material laws and regulations,
including all material requirements of applicable federal, state
and local environmental, health and safety statutes and
regulations and to the best of Borrower's knowledge, neither it
nor any of its Consolidated Subsidiaries, is the subject of any
federal, state or local investigation evaluating whether any
remedial action is needed to respond to a release of any
Hazardous Material which investigation will result in clean-up
costs having a materially adverse effect on the Borrower and its
Consolidated subsidiaries, taken as a whole, and for which
Borrower, or such Consolidated Subsidiary is not indemnified.
4.6 Enforceability of Agreement. The Loan Documents are
legal, valid and binding agreements of Borrower and are
enforceable against Borrower in accordance with their respective
terms, and any other exhibit, instrument or agreement required
hereunder, when executed and delivered, will be similarly legal,
valid, binding and enforceable in accordance with its terms.
4.7 Litigation. Except as disclosed in its financial
statements, there are no suits, proceedings, claims or disputes
pending or, to the knowledge of Borrower, threatened against or
<PAGE>
affecting Borrower, or any of its Consolidated Subsidiaries or
any of their respective properties, which individually or in the
aggregate will materially adversely affect the business,
properties or condition (financial or otherwise) of the Borrower
and its Consolidated Subsidiaries, taken as a whole, or impair
Borrower's ability to perform the Obligations.
4.8 Events of Default. No Default or Event of Default has
occurred and is continuing or would result from the execution or
performance of any Loan Document or the incurring of the
Obligations by Borrower. Neither Borrower nor any of its
Consolidated Subsidiaries is in violation of, or default under,
(a) any charter instrument or by-law, or under any loan agreement
or (b) any material agreement or instrument to which it is a
party or by which it or its properties are bound.
4.9 Investment Company Act of 1940. Borrower is not an
investment company within the meaning of the Investment Company
Act of 1940.
4.10 Financial Information.
(a) The balance sheets of Borrower dated as of November
30, 1993 and August 31, 1994, and the operating statements
for the fiscal periods then ended, (complete and accurate
copies of which have been delivered by Borrower to Bank) and
all other information and data furnished by Borrower to Bank
are complete and correct, and such financial statements have
been prepared in accordance with GAAP, consistently applied,
and fairly present the Consolidated financial condition of
Borrower on November 30, 1993 and August 31, 1994 and the
Consolidated results of their operations for the periods then
ended, except in the case of the unaudited interim financial
statements for normal year end adjustments and the absence of
footnote disclosures.
(b) Since November 30, 1993, there has not been and
Borrower does not know of any development or threatened
development (other than general economic conditions) of a
nature which may cause any material adverse change in the
Consolidated financial condition or operations of Borrower
and its Consolidated Subsidiaries, taken as a whole, or
sufficient to impair Borrower's ability to repay the Loan and
otherwise perform the Obligations in accordance with the
terms of the Loan Documents.
4.11 ERISA. Except as previously disclosed to the Bank, no
fact or circumstance, including but not limited to any Reportable
Event, exists in connection with any Plan of Borrower, or any of
its Consolidated Subsidiaries which would constitute grounds for
the termination of any such plan by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer any such Plan and which would result in the
termination of a Plan and the incurrence of material liability by
the beneficiaries or a trustee under ERISA. For the purposes of
<PAGE>
this Section 4.11, Borrower, if it is not the Plan administrator,
shall be deemed to have knowledge of all facts attributable to
the Plan administrator designated pursuant to ERISA.
4.12 Full Disclosure. To the knowledge of the Borrower, no
information, exhibit, memorandum, or report furnished by the
Borrower to the Bank in connection with the negotiation of the
Loans contains any material misstatement of fact or omits to
state any fact necessary to make the statements contained therein
not materially misleading.
SECTION 5
Covenants
Borrower covenants that until all Obligations have been paid
in full it will (and will cause its Subsidiaries to), unless
otherwise agreed by the Bank:
5.1 Use of Proceeds. Use Advances solely for the purposes
provided for herein.
5.2 Maintain Existence, Etc. Maintain its existence;
maintain in good order its licenses, properties, insurance and
books; pay when due taxes, trade accounts and other obligations;
comply with law; and generally conduct its affairs in accordance
with standard industry practices.
5.3 Financial Statements, Etc. During the term of the
Loans, Borrower shall furnish to the Bank:
(a) Within sixty (60) days after the end of each fiscal
quarter, a balance sheet and operating statement of Borrower
prepared on a Consolidated and consolidating basis and in
accordance with GAAP consistently applied and accompanied by
a Compliance Certificate completed and signed by the chief
financial officer of Borrower certifying, among other things,
that there exists no Default or Event of Default under the
Loan Documents or, if a Default or Event of Default exists,
stating the nature and status thereof;
(b) Within one hundred twenty (120) days after the end
of each of Borrower's Fiscal Years, a balance sheet and
operating statement and statement of cash flows certified by
an independent certified public accountant satisfactory to
Bank (provided that any "Big Six" accounting firm shall be
deemed satisfactory to the Bank); such financial statements
to be prepared on a Consolidated basis in accordance with
GAAP applied on a basis consistent with prior practice unless
otherwise specifically noted thereon, accompanied by (i)
unaudited consolidating balance sheets and operating
statements of Borrower and each of its Consolidated
Subsidiaries, (ii) a detailed letter from the chief financial
officer of the Borrower which analyzes the results of
<PAGE>
operations for the period covered by such financial
statements, and (iii) a Compliance Certificate completed and
signed by the chief financial officer of Borrower certifying,
among other things, that there exists no Default or Event of
Default under the Loan Documents or, if a Default or Event of
Default exists, stating the nature and status thereof; and
(c) As soon as possible, but in any event within ten
(10) days after the filing with the Securities and Exchange
Commission, or any successor thereto, or any state securities
regulatory authority, copies of all registration statements
and all periodic and special reports required or permitted to
be filed under federal or state securities laws and
regulations.
5.4 Adequate Books. Permit representatives of the Bank, at
any reasonable time and upon reasonable prior notice, to inspect
its properties, to examine its inventory, books, and accounts,
and to discuss its finances and affairs with its accountants (and
by these provisions Borrower authorizes such accountants to
discuss with the Bank the finances and affairs of Borrower).
5.5 Leverage Ratio. Maintain a ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth of not more than
(a) 3.0 to 1.0 as at the end of each fiscal quarter ending on and
after November 30, 1994 through August 31, 1995; and (b) 2.0 to
1.0 as at November 30, 1995 and as at the end of each fiscal
quarter ending thereafter.
5.6 Current Ratio. Maintain a ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than 1.50
to 1.00 as at the end of each fiscal quarter.
5.7 Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage
Ratio of not less than (a) 1.15 to 1.00 as at the end of each
fiscal quarter ending on and after the date hereof through August
31, 1995; and (b) 1.30 to 1.00 as at the end of each fiscal
quarter ending thereafter.
5.8 Net Worth. Maintain Consolidated Tangible Net Worth of
not less than the sum of (i) $14,000,000, plus (ii) an amount not
less than Twenty-Five Percent (25%) of the cumulative reported
net profits of the Borrower for all fiscal quarters ending after
November 30, 1993, without reduction for any reported net losses
incurred during such periods, as at the end of each fiscal
quarter ending on or after the date hereof.
5.9 Hazardous Materials. Indemnify and hold harmless the
Bank and its respective officers, employees, agents, consultants
and affiliates from and against all losses, costs, damages and
expenses (including reasonable attorneys' fees and expenses) any
such person may sustain in connection with the use, disposal or
release of any Hazardous Material or in connection with the
<PAGE>
existence of any Hazardous Material on or under any of the
properties of Borrower or any of its Subsidiaries.
5.10 Mergers, Etc. Not permit Borrower to enter into any
consolidation, merger, or other combination, or sell, lease,
assign, transfer or otherwise dispose of any assets, whether now
owned or hereafter acquired, in a single transaction or in a
series of transactions, or enter into any sale and leaseback
transactions, other than: (a) the sale of inventory in the
ordinary course of business; (b) the disposition of property no
longer used or useful in the conduct of its business; (c) any
merger in which Borrower is the legal surviving corporation,
provided no Default or Event of Default then exists or is
occasioned thereby; (d) any merger, consolidation or transfer of
the business or assets of any Subsidiary of the Borrower to
Borrower or to any Consolidated Subsidiary; and (e) the sale and
leaseback, sale or other disposition of assets in an amount not
in excess of $20,000,000 in any Fiscal Year.
5.11 Liens. Not create, assume or suffer to exist any Lien
on any of its properties or assets, whether now owned or
hereafter acquired, except Permitted Liens.
5.12 Notice of Default. Immediately upon the occurrence of
any Default or an Event of Default, furnish to the Bank a
certificate of Borrower stating the specific nature of the
Default or Event of Default, Borrower's intended actions to cure
such Default or Event of Default and the time period in which
such cure is to occur.
5.13 Indebtedness. Not create, incur or suffer to exist any
Indebtedness for the purpose of refinancing a portion of the
Loans, except on such terms and conditions as have been subject
to the prior written approval of the Bank.
5.14 Insurance. Maintain in full force and effect adequate
insurance in amounts and against liabilities consistent with
sound business practices and with reputable insurers and upon
terms acceptable to the Bank.
5.15 No Material Adverse Change. Not permit any event to
occur or condition to exist which has a materially adverse effect
upon business, operations, financial condition, properties or
prospects of the Borrower or its Consolidated Subsidiaries, taken
as a whole.
5.16 Margin Rules. Not use the Advances in any manner that
would violate Regulation G, T, U or X of the Federal Reserve
Board.
SECTION 6
Default and Remedy
<PAGE>
6.1 Events of Default. The occurrence of any of the
following events shall be an Event of Default hereunder:
6.1.1 Nonpayment. Borrower fails to pay when due any
installment of principal or interest or any other sum due
under the Loan Documents and such failure continues for ten
(10) Business Days thereafter.
6.1.2 Representation or Warranty. Any written
represen-tation or warranty in any of the Loan Documents
proves to have been materially false or misleading in any
material respect when made.
6.1.3 Other Defaults. Borrower fails to perform or
observe any of the other covenants or agreements contained in
the Loan Documents, and such failure, if capable of being
remedied, continues unremedied for a period of thirty (30)
days after written notice thereof from the Bank.
6.1.4 Voluntary Bankruptcy. Borrower or any one or
more of its Wholly-Owned Subsidiaries which, in the
aggregate, have Twenty-Five Percent (25%) or more of the
Consolidated total assets of the Borrower fails to pay or
admits in writing its or their inability to pay debts as they
come due, or files any petition or action for relief under
any bankruptcy, reorganization, insolvency or moratorium law,
or any other similar law for the relief of, or relating to,
debtors, or applies for or consents to a receiver, trustee or
custodian for it or a substantial portion of its property, or
makes a general assignment for the benefit of creditors.
6.1.5 Involuntary Bankruptcy. An involuntary petition
is filed under any bankruptcy or similar statute against
Borrower or any one or more of its Wholly-Owned Subsidiaries
which, in the aggregate, have Twenty-Five Percent (25%) or
more of the Consolidated total assets of the Borrower, or a
custodian, receiver, trustee, assignee for the benefit of
creditors (or other similar official) is appointed to take
possession, custody or control of the properties of Borrower
or any such Consolidated Subsidiary unless such petition or
appointment is set aside or withdrawn or ceases to be in
effect within sixty (60) days from the date of such filing or
appointment.
6.1.6 Cross Default. Any material breach or default
shall have occurred (after giving effect to any applicable
cure period or waiver) under any other agreement between
Borrower, or any Consolidated Subsidiary and any bank, or
under any other material agreement pursuant to which
Borrower, or any of its Consolidated Subsidiaries may be
obligated in an amount in excess of $1,000,000 as a borrower,
guarantor or lessee (including, without limitation, any
Indebtedness incurred to refinance any portion of the Loans),
if such default consists of the failure by such borrower,
<PAGE>
guarantor or lessee to pay Indebtedness when due and,
following any applicable cure period, permits the holder or
any trustee thereof to cause the acceleration of such
Indebtedness or the termination of any commitment to lend or
permits a lessor to terminate the applicable lease.
6.1.7 Adverse Judgments. Any one or more judgments or
orders for payment of money in an aggregate amount exceeding
$1,000,000 shall be rendered against the Borrower and/or any
of its Consolidated Subsidiaries and either (a) such judgment
or order shall remain unsatisfied and the Borrower and/or its
Consolidated Subsidiary shall not have taken action necessary
to stay enforcement thereof prior to the expiration of the
applicable period of limitations for taking such action or
(b) enforcement proceedings shall have been commenced by any
creditor upon any such judgment or order.
6.2 Remedy. If any Event of Default described in Sections
6.1.4 and 6.1.5 occurs, the Commitment shall automatically
terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Bank.
If any other Event of Default occurs, the Bank may terminate the
Commitment and declare the Obligations to be due and payable,
whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any
kind, all of which Borrower hereby expressly waives. Upon the
occurrence of an Event of Default, the Bank may immediately
proceed to exercise all remedies available to it under the Loan
Documents or otherwise under applicable law.
SECTION 7
Miscellaneous
7.1 Notices. Any communications between the parties hereto
or notices or requests provided herein to be given may be given
by mailing the same, first class postage prepaid, or by telex or
electronic transmission to each party at its address set forth on
the signature pages hereto (with a copy to each address indicated
for notices), or to such other address as any party may in
writing hereafter indicate to the other. Notices shall be
effective on the date sent by electronic transmission and telex
and three (3) Business Days after the date sent by U.S. mail.
7.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns; provided, however, that
Borrower shall not assign this Agreement or any of its rights
hereunder without the prior written consent of the Bank.
7.3 Participation and Assignments. The Bank may
participate, sell, transfer or assign its rights and obligations
under this Agreement to an entity Affiliate of the Bank without
the prior written consent of the Borrower and to any other Person
<PAGE>
with the prior written consent of the Borrower, which consent
shall not be unreasonably withheld or delayed; provided, however,
that no prior consent of the Borrower shall be required at any
time during which a Default or Event of Default shall have
occurred and be continuing. Any participant purchasing such a
participation shall have all rights of the Bank pursuant to this
Agreement, and the Bank may provide such participant with credit
information received by such Bank from Borrower or any Subsidiary
which is otherwise publicly available. Borrower agrees that any
participant permitted or consented to under this Section 7.3
shall at any time during the pendency of an Event of Default have
the right to set off any Obligations not paid when due against
any accounts or other assets of Borrower held by, on deposit
with, or in the possession of, such participant. The Bank will
use its best efforts to cause such participant to grant to
Borrower the right to set off, appropriate and apply against that
portion of the Obligations then owned by such other participant
any monies, securities and other property of Borrower now or
hereafter held or received by, or in transit to, such participant
in the event such participant becomes involved in any voluntary
insolvency, bankruptcy or receivership proceedings, or in any
involuntary proceedings of such nature or comes under the
management or control of any governmental or private deposit
insurer. In no event shall the insolvency, bankruptcy or
receivership of a participant grant to Borrower the right of set
off against the Bank, including any other participant.
7.4 Amendments and Waivers. No delay or omission by the
Bank to exercise any right under this Agreement shall impair any
such right, nor shall it be construed to be a waiver thereof. No
waiver of any single breach or default under this Agreement shall
be deemed a waiver of any other breach or default. Any waiver,
modification, amendment, consent or approval relating to the Loan
Documents, must be in writing to be effective and must be signed
by or on behalf of the Bank.
7.5 Costs and Expenses. Borrower agrees to pay on demand to
the Bank all reasonable costs and expenses incurred by the Bank
including, without limitation, reasonable attorneys' and
consultants' fees (a) in connection with the enforcement of the
Loan Documents or in connection with any proposed refinancing or
restructuring of the credit provided in this Agreement, and (b)
for all stamp, registration and other duties to which any Loan
Document may be subject. Borrower further agrees to pay or to
reimburse the Bank upon demand for its reasonable attorneys' fees
and other reasonable expenses incurred in connection with
preparing, drafting and negotiating any amendments, consents, or
waivers hereto requested by Borrower. Borrower shall indemnify
the Bank against any and all liabilities and penalties resulting
from any delay in payment, or failure to pay, any such duties
referenced above upon written notice from the Bank that such
amounts have been assessed.
<PAGE>
7.6 Entire Agreement. The Loan Documents integrate all the
terms and conditions mentioned herein or incidental hereto, and
supersede all oral negotiations and prior writings in respect to
the subject matter hereof. In the event of any conflict between
the terms, conditions and provisions of this Agreement and the
other Loan Documents, the provisions of this Agreement shall
control.
7.7 Governing Law. This Agreement and all other Loan
Documents executed in connection herewith shall be governed by
and construed in accordance with the laws of the State of
Indiana.
7.8 Section Headings. Section headings are for reference
only, and shall not affect the interpretation of meanings of any
provision of this Agreement.
7.9 Severability. The illegality or unenforceability of any
provision of any Loan Document shall not in any way affect or
impair the legality or enforceability of the remaining provisions
of such Loan Document or any other Loan Document.
7.10 Indemnity. Borrower hereby agrees to indemnify, protect
and hold harmless the Bank and its officers, directors, agents,
employees, attorneys and shareholders ("Indemnified Persons")
from and against all reasonable costs and expenses (including,
without limitation, the reasonable cost of counsel), and all
actions, claims (whether made or threatened), suits, liabilities,
damages and losses incurred by or imposed on any Indemnified
Persons in connection with or as a result of the execution,
delivery and performance of the Loan Documents and the use of the
proceeds thereunder, provided, however, that such indemnity shall
not apply to any action by Borrower against a Bank; and provided,
further, that the foregoing provision shall not be deemed to
limit the provisions of Section 7.5 hereof. Notwithstanding
anything to the contrary in this Section 7.10, Borrower shall not
be obligated to indemnify any Indemnified Person for any losses,
claims, damages, liabilities and expenses incurred by such
Indemnified Person which have finally been determined to have
resulted from the gross negligence or willful misconduct on the
part of such Indemnified Person. Without limiting the generality
of the foregoing, such indemnity shall extend to any and all
reasonable costs and expenses whatsoever incurred by the
Indemnified Persons (including, without limitation, the
reasonable cost of counsel, whether staff counsel or otherwise
and whether allocated or out-of-pocket) in connection with
investigating, preparing for or defending against or providing
evidence, producing documents or taking any action with respect
to any such action, claim (whether made or threatened and whether
or not such Indemnified Person is a party to such action or
claim), suit, liability, damage or loss, whether or not resulting
in any liability. The Indemnified Person may select its own
legal counsel in connection with any matters indemnified against
hereunder. This indemnity shall survive the execution, delivery
<PAGE>
and consummation of the transactions contemplated by this
Agreement. Payment by Borrower in respect to an undisputed claim
made by an Indemnified Person pursuant to this Section shall be
made within thirty (30) days after demand therefor; otherwise,
promptly upon resolution of such dispute.
7.11 JURY TRIAL WAIVER. THE BANK AND THE BORROWER, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER
OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON
OR RISING OUT OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
BETWEEN THEM CONTEMPLATED BY THE LOAN DOCUMENTS OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF EITHER OF THEM. NEITHER SHALL THE BANK NOR THE
BORROWER SEEK TO CONSOLIDATE, BY COUNTER-CLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THIS SECTION 7.11 SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY THE BANK NOR THE BORROWER EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers as of the date and
year first above written.
"BORROWER"
LILLY INDUSTRIES, INC.
Attest: By: /s/ Roman J. Klusas
----------------------
Roman J. Klusas,
Vice President, Chief
/s/ Kenneth L. Mills Financial Officer and
--------------------------- Secretary
Kenneth L. Mills,
Director of Corporate Accounting Address:
and Assistant Secretary 733 South West Street
Indianapolis, IN 46225
Attn: Vice President, Chief
Financial Officer and
Secretary
Telephone: (317) 687-6702
Telecopier: (317) 687-6710
"BANK"
NATIONAL CITY BANK, INDIANA
By: /s/ Frank B. Meltzer
----------------------
Frank B. Meltzer,
Vice President
<PAGE>
Address:
101 W. Washington St., #200E
Indianapolis, IN 46255
Attn: Frank B. Meltzer
Telephone: (317) 267-6132
Telecopier: (317) 267-8899
<PAGE>
Schedule 1
Immaterial leases of furniture, fixtures and equipment.
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$15,000,000.00 Indianapolis, Indiana
January ____, 1995
FOR VALUE RECEIVED, on or before July 1, 1996 (subject to
acceleration, extension or prepayment), LILLY INDUSTRIES, INC.,
an Indiana corporation ("Borrower"), hereby promises to pay to
the order of NATIONAL CITY BANK, INDIANA, a national banking
association (the "Bank"), or its assigns, at the main office of
the Bank at Indianapolis, Indiana, or at such other place as the
holder hereof may designate in writing, in lawful money of the
United States of America, the principal sum of Fifteen Million
Dollars ($15,000,000), or so much thereof as may be advanced and
outstanding from time to time, together with (a) interest on the
unpaid principal balance existing from time to time at the rates
set forth in Section 2.2 of the Agreement (as hereinafter
defined) prior to maturity and while and so long as there exists
no uncured Event of Default, and (b) interest after maturity,
whether by acceleration or otherwise, or during any period while
there exists any uncured Event of Default at a per annum rate
equal to two percent (2%) above the otherwise applicable rate.
Such interest shall be paid on actual daily balances of
outstanding principal for the exact number of days such principal
remains outstanding and shall be computed on the basis of a three
hundred sixty (360) day year. Any change in the rate of interest
on any Floating Rate Advance occasioned by a change in the
Floating Rate shall be effective on the same day as the change in
Floating Rate.
Principal and interest under this Note shall be payable as
follows:
1. Interest only on the outstanding principal balance
shall be due and payable on the first day of each month,
commencing on the first day of the month following the
initial Advance;
2. From time to time, the Borrower shall pay
installments of principal in an amount sufficient that the
outstanding principal balance of this Note shall not exceed
the Bank's commitment; and
3. Unless extended by the Bank or sooner paid by the
Borrower, the entire unpaid balance of principal, and all
accrued and unpaid interest thereon, shall be due and
payable on July 1, 1996.
If any installment of principal or interest under this Note
is payable on a day other than a Business Day, the maturity of
<PAGE>
such installment shall be extended to the next succeeding
Business Day, and interest shall be payable during such extension
of maturity.
Subject to the terms of the Agreement, the Borrower may
borrow, pay, reborrow and repay the principal amount of this Note
at any time and from time to time.
This Note is referred to in, and is entitled to the benefit
of, a certain Revolving Credit Agreement [1995] executed between
Borrower and National City Bank, Indiana of even date (as the
same may be amended from time to time, the "Agreement").
Advances under this Note shall be made in accordance with the
Agreement. The Agreement, among other things, contains a
definition of the capitalized terms used herein and provisions
for acceleration of the maturity hereof upon the happening of
certain stated events.
If Borrower fails to make the payment of any installment of
principal or interest, as herein provided, when due, or fails in
the performance of any of the terms, agreements, covenants or
conditions contained in the Agreement beyond any applicable grace
period set forth therein, then in any of such events, or at any
time thereafter, the entire principal balance of this Note, and
all accrued and unpaid interest thereon, irrespective of the
maturity date specified herein, together with reasonable
attorneys' fees and other costs incurred in collecting or
enforcing payment or performance hereof and with interest from
the date of the Event of Default on the unpaid principal balance
hereof at the default rate hereinabove specified, shall, at the
election of the holder hereof, and without relief from valuation
and appraisement laws, become immediately due and payable.
The Borrower and all endorsers, guarantors, sureties,
accommodation parties hereof and all other parties liable or to
become liable for all or any part of this indebtedness, severally
waive demand, presentment for payment, notice of dishonor,
protest and notice of protest and expressly agree that this Note
and any payment coming due under it may be extended or otherwise
modified from time to time without in any way affecting their
liability hereunder.
This Note shall be construed according to and governed by
the laws of the State of Indiana.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed by its duly authorized officers as of the date and year
first hereinabove written.
LILLY INDUSTRIES, INC.
an Indiana corporation
By: /s/ Roman J. Klusas
<PAGE>
-------------------------
Roman J. Klusas,
Vice President, Chief
Financial Officer and
Secretary
Attest:
/s/ Kenneth L. Mills
-----------------------
Kenneth L. Mills,
Director of Corporate Accounting
and Assistant Secretary
<PAGE>
EXHIBIT B
January 27, 1995
National City Bank, Indiana
101 West Washington Street
Indianapolis, IN 46255
Re: Revolving Credit Agreement (1995) of even date between
National City Bank, Indiana (the "Bank") and Lilly
Industries, Inc. (the "Borrower") (the "Agreement")
Gentlemen:
We have acted as special counsel to the Borrower in
connection with the transactions contemplated by the above
referenced Agreement. Capitalized terms used herein and not
specifically herein defined shall have the meanings ascribed to
them in the Agreement.
In such capacity, and for the purpose of rendering this
opinion, we have examined the following:
(a) The Agreement;
(b) The Revolving Credit Note; and
(c) Copies, certified by the Secretary of the Corporation,
of the corporate proceedings pursuant to which the
execution of the Agreement, and the Revolving Credit
Note (collectively, the "Loan Documents") were
ratified, approved and authorized.
In arriving at the opinions expressed below, we have
examined such other documents and have considered such questions
of law, as, in our judgment, have been necessary to enable us to
render this opinion. With respect to factual matters material to
our opinion, we have, when such facts have not been independently
established, relied upon certificates of officers of the
Borrower, certificates or other information obtained from
governmental authorities and such other information as in our
judgment is necessary or appropriate to render the opinions
expressed below.
In rendering the opinions set forth herein we have assumed,
with your consent and without any independent inquiry, the
following:
(i) The genuineness of signatures of the persons
executing all instruments, documents, certificates, and/or
<PAGE>
agreements evidenced by or related to the transactions
contemplated by the Loan Documents;
(ii) The authority of the persons executing the Loan
Documents and all other instruments, documents, certificates
and/or agreements related to the transactions contemplated
thereby on behalf of the parties thereto (other than the
Borrower);
(iii) The due authorization by all necessary corporate
action of the execution and delivery of the Loan Documents and
all instruments, documents, certificates, and/or agreements
related to the transactions contemplated thereby on behalf of the
parties thereto (other than the Borrower);
(iv) The authenticity of all documents submitted to us
as originals; and
(v) The conformity to authentic original documents of
documents submitted to us as certified, conformed or photostatic
copies.
Based upon the foregoing and subject to the further
qualifications and limitations hereinafter set forth, it is our
opinion, limited in all respects to the present internal laws of
the State of Indiana and the present federal laws of the United
States of America, that, insofar as those laws are applicable:
1. The Borrower is a corporation, duly organized and
validly existing under and by virtue of the laws of the State of
Indiana. The Borrower has taken all necessary corporate action to
authorize the execution and delivery of the Loan Documents.
2. The Borrower possesses the requisite corporate power to
enter into the Loan Documents and to perform its obligations
thereunder.
3. The execution and delivery of the Loan Documents by the
Borrower will not violate, breach, contravene, cause a default or
result in the imposition of a lien under any provision of the
Articles of Incorporation or Bylaws of the Borrower or, to our
knowledge, any existing note, bond, mortgage, debenture,
indenture, trust, lease, instrument, judgment, order, decree, or
other agreement to which the Borrower is a party or by which it
or its assets may be bound.
4. The Loan Documents will, upon due execution and
delivery by an authorized officer of the Borrower, constitute
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their terms, except as
the same may be limited by (i) the United States Bankruptcy Code,
(ii) any applicable insolvency, reorganization, moratorium or
similar laws of the State of Indiana or the United States
relating to or affecting the enforcement of creditors' rights
<PAGE>
generally, (iii) general principles of equity, and (iv) judicial
discretion.
5. To our knowledge, no authorization, consent, approval,
registration, license or any form of exemption of any Indiana
state or United States federal governmental authority is required
in connection with the execution, delivery and performance by the
Borrower of its obligations under the Loan Documents.
6. To our knowledge, (i) no litigation or proceeding of
any Indiana state or United States federal governmental authority
or any other person is presently pending or threatened against
the Borrower, nor (ii) has any claim been asserted against the
Borrower, which in the case of (i) or (ii) above seeks to enjoin
the transactions contemplated by the Loan Documents.
Our opinion is subject to the following qualifications:
A. The enforceability of the Loan Documents may be limited
if the Bank should fail to act in good faith or in a commercially
reasonable manner in seeking to exercise rights or remedies
thereunder.
B. Whenever our opinion with respect to the existence or
absence of facts is qualified by the phase "to our knowledge," it
is intended to indicate that during the course of our
representation of the Borrower no information has come to our
attention which would give us actual knowledge of the existence
or absence of such facts. Moreover, we have not undertaken any
independent investigation to determine the existence or absence
of such facts, and any limited inquiries made by us should not be
regarded as such an investigation. Any certificates or
representations obtained by us form officers of the Borrower with
respect to such opinions have been relied upon without any
independent verification.
C. Whenever we have stated we assumed any matter, it is
intended to indicate that we have assumed such matter without
making any factual, legal, or other inquiry or investigation, and
without expressing any opinion or stating any conclusion of any
kind concerning such matter.
D. This opinion is furnished to you pursuant to the Loan
Documents and is not to be used, circulated, quoted or otherwise
referred to for any other purpose.
E. This opinion is dated and speaks as of the date of
delivery. We have no obligation to advise you or any third
parties of any changes in law or fact that may hereafter occur or
come to our attention, even though the legal analysis or legal
conclusions contained in this opinion letter may be affected by
such change.
Very truly yours,
EXHIBIT 10(k)
REVOLVING CREDIT AGREEMENT
[1995]
Between
LILLY INDUSTRIES, INC.
and
NBD BANK, N.A.
Dated as of January 27, 1995
<PAGE>
TABLE OF CONTENTS
Page
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Definitions. . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . 9
1.3 Other Definitions; Singular and Plural . . . . . . . 9
SECTION 2. Credit . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . 9
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Payments of Principal and
Interest . . . . . . . . . . . . . . . . . . . . . 10
2.4 Use of Proceeds. . . . . . . . . . . . . . . . . . . 10
2.5 Method of Advance . . . . . . . . . . . . . . . . . 10
2.6 Conversion of Advances . . . . . . . . . . . . . . . 11
2.7 Method of Payment. . . . . . . . . . . . . . . . . . 12
2.8 Prepayment . . . . . . . . . . . . . . . . . . . . . 13
2.9 Computations of Interest . . . . . . . . . . . . . . 13
2.10 Additional Costs . . . . . . . . . . . . . . . . . . 13
2.11 Commitment Fees . . . . . . . . . . . . . . . . . . 14
2.12 Reductions of Revolving Credit
Commitment . . . . . . . . . . . . . . . . . . . . 14
SECTION 3. Conditions Precedent . . . . . . . . . . . . . . . 14
3.1 Conditions Precedent to the
Initial Advance of the Loan . . . . . . . . . . . .14
3.2 Conditions to Subsequent Advances . . . . . . . . . .15
SECTION 4. Representations and Warranties . . . . . . . . . .15
4.1 Corporate Existence . . . . . . . . . . . . . . . . .15
4.2 Corporate Powers . . . . . . . . . . . . . . . . . .16
4.3 Power of Officers . . . . . . . . . . . . . . . . . .16
4.4 Government and Other Approvals . . . . . . . . . . .16
4.5 Compliance with Laws;
Environmental Matters . . . . . . . . . . . . . . .16
4.6 Enforceability of Agreement . . . . . . . . . . . . .16
4.7 Litigation . . . . . . . . . . . . . . . . . . . . .17
4.8 Events of Default . . . . . . . . . . . . . . . . . .17
4.9 Investment Company Act of 1940. . . . . . . . . . . .17
4.10 Financial Information . . . . . . . . . . . . . . . .17
4.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . .17
4.12 Full Disclosure . . . . . . . . . . . . . . . . . . .18
- i -
<PAGE>
Page
SECTION 5. Covenants . . . . . . . . . . . . . . . . . . . . 18
5.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . 18
5.2 Maintain Existence, Etc. . . . . . . . . . . . . . . 18
5.3 Financial Statements, Etc. . . . . . . . . . . . . . 18
5.4 Adequate Books . . . . . . . . . . . . . . . . . . . 19
5.5 Leverage Ratio . . . . . . . . . . . . . . . . . . . 19
5.6 Current Ratio. . . . . . . . . . . . . . . . . . . . 19
5.7 Cash Flow Coverage Ratio . . . . . . . . . . . . . . 19
5.8 Net Worth. . . . . . . . . . . . . . . . . . . . . . 19
5.9 Hazardous Materials. . . . . . . . . . . . . . . . . 20
5.10 Mergers, Etc.. . . . . . . . . . . . . . . . . . . . 20
5.11 Liens. . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Notice of Default. . . . . . . . . . . . . . . . . . 20
5.13 Indebtedness . . . . . . . . . . . . . . . . . . . . 20
5.14 Insurance . . . . . . . . . . . . . . . . . . . . . 20
5.15 No Material Adverse Change . . . . . . . . . . . . . 20
5.16 Margin Rules . . . . . . . . . . . . . . . . . . . . 21
SECTION 6. Default and Remedy . . . . . . . . . . . . . . . . 21
6.1 Events of Default . . . . . . . . . . . . . . . . . 21
6.1.1 Nonpayment . . . . . . . . . . . . . . . . 21
6.1.2 Representation or Warranty . . . . . . . . 21
6.1.3 Other Defaults . . . . . . . . . . . . . . 21
6.1.4 Voluntary Bankruptcy . . . . . . . . . . . 21
6.1.5 Involuntary Bankruptcy . . . . . . . . . . 21
6.1.6 Cross Default . . . . . . . . . . . . . . 22
6.1.7 Adverse Judgments. . . . . . . . . . . . . 22
6.2 Remedy . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7. Miscellaneous. . . . . . . . . . . . . . . . . . . 22
7.1 Notices. . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Successors and Assigns . . . . . . . . . . . . . . . 23
7.3 Participation and Assignments . . . . . . . . . . . 23
7.4 Amendments and Waivers . . . . . . . . . . . . . . . 23
7.5 Costs and Expenses . . . . . . . . . . . . . . . . . 23
7.6 Entire Agreement . . . . . . . . . . . . . . . . . . 24
7.7 Governing Law. . . . . . . . . . . . . . . . . . . . 24
7.8 Section Headings . . . . . . . . . . . . . . . . . . 24
7.9 Severability . . . . . . . . . . . . . . . . . . . . 24
7.10 Indemnity . . . . . . . . . . . . . . . . . . . . . 24
7.11 Jury Trial Waiver. . . . . . . . . . . . . . . . . . 25
Schedule 1 Permitted Liens
Exhibit A Revolving Credit Note
Exhibit B Opinion of Counsel to Borrower
- ii -
<PAGE>
REVOLVING CREDIT AGREEMENT
NBD Bank, N.A.
[1995]
THIS AGREEMENT, is made as of the 27th day of January, 1995,
between LILLY INDUSTRIES, INC., an Indiana corporation (the
"Borrower") and NBD Bank, N.A., a national banking association
(the "Bank");
SECTION 1
Definitions
1.1 Defined Terms. As used herein:
"Additional Costs" shall have the meaning ascribed in
Section 2.10.
"Advance" means a disbursement of proceeds of a Loan.
"Affiliate" means, with respect to any Person, any other
Person (including, but not limited to, each officer and director
of such Person) directly or indirectly controlling, controlled
by, or under direct or indirect common control with such Person.
(A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract
or otherwise.)
"Agreement" means this Revolving Credit Agreement [1995], as
the same may be amended from time to time.
"Applicable Margin" means as to a Eurodollar Rate Advance
(a) 43.75 basis points if the Cash Flow Coverage ratio is 1.3:1.0
or greater or (b) 56.25 basis points if the Cash Flow Coverage
Ratio is less than 1.3:1.0.
"Base Rate" means that rate of interest established from
time to time by the Bank as the Bank's Prime Rate whether or not
such rate is publicly announced, which rate may not be the lowest
interest rate charged by the Bank for commercial or other
extensions of credit.
"Business Day" means a day other than a Saturday, Sunday or
other day on which the Bank is open for the conduct of its
general banking business and, if the applicable day relates to
any Eurodollar Rate Advance, or notice with respect to any
Eurodollar Rate Advance, a day on which dealings in Dollar
deposits are also carried on in the London interbank market and
banks are open for business in London.
<PAGE>
"Cash Flow Coverage Ratio" means, as of the date of
determination, (a) the sum of (i) net income after taxes, plus
(ii) income tax expense, plus (iii) interest expense, plus (iv)
depreciation, amortization and other non-cash expenses; divided
by (b) the sum of (i) income tax expense, plus (ii) interest
expense, plus (iii) current maturities of long term debt, plus
(iv) cash dividends, plus (v) additional Investments in treasury
stock, for the four (4) fiscal quarters immediately preceding
such date all as determined by reference to the financial
statements furnished to the Bank from time to time pursuant to
Section 5.3.
"Commitment" means the obligation of the Bank to make Loans
during the Commitment Period up to a maximum aggregate principal
amount outstanding at any time of $15,000,000.
"Commitment Period" means the period from the date hereof
through June 30, 1996, unless extended or renewed by a prior
written agreement executed by the Borrower and the Bank (it
being understood that, if so agreed by the Borrower and the Bank,
the Commitment Period shall be considered for extension annually
and shall be extended for successive 2-year periods).
"Compliance Certificate" means a Compliance Certificate in a
form prescribed by the Bank, establishing Borrower's compliance
with the terms and conditions of this Agreement.
"Consolidated" means: (a) when used herein with reference to
financial statements, ratios, assets or liabilities, that any
calculations have been made by consolidating the assets,
liabilities, income, expenses, and cash flows of a Person and its
Consolidated Subsidiaries after eliminating all intercompany
items and making such adjustments as required by GAAP; and (b)
when used herein with reference to a Subsidiary of a Person, a
Subsidiary, the financial statements of which have been or, in
accordance with GAAP, are required to be presented together on a
Consolidated basis with those of such Person.
"Consolidated Net Worth" means the excess of total assets
over total liabilities and reserves of a Person and its
Consolidated Subsidiaries, computed on a Consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Tangible Net Worth" means, with respect to any
Person, such Person's Consolidated Net Worth, less:
(a) Goodwill (including the unallocated excess purchase
cost of assets acquired in a transaction accounted for as a
purchase over the aggregate fair market value thereof on the
date of acquisition), patents, trademarks, trade names,
copyrights, franchises, deferred charges, (including
unamortized debt discount and expense, deferred research and
development expenses and organizational costs), treasury
<PAGE>
stock and all other items that would be treated as intangible
assets under GAAP; and
(b) Any write-up of the book value of any asset of such
Person or any of its Consolidated Subsidiaries other than a
write-up in accordance with GAAP of assets of a Subsidiary of
such Person in connection with the acquisition of such
Subsidiary by such Person.
"Consolidated Total Liabilities" means the excess of (a)
total assets of a Person and its Consolidated Subsidiaries, over
(b) Consolidated Net Worth, computed on a Consolidated basis in
accordance with GAAP consistently applied.
"Conversion Date" means any date specified on which Borrower
elects to convert an Advance of any type to an Advance of another
type.
"Current Assets" means, as to any Person, the aggregate book
value of all assets which would be classified as current assets
of such Person in accordance with GAAP after making adequate
reserves in each case where a reserve is proper in accordance
with GAAP.
"Current Liabilities" means, as to any Person, all
Indebtedness of such Person maturing on demand or within one (1)
year after the date on which such determination is made and all
other items (including estimated accrued taxes) which would be
classified as current liabilities in accordance with GAAP.
"Default" means an event, which with notice or lapse of time
or both, would become an Event of Default.
"Deposit Account" means Borrower's checking account at the
Bank.
"Dollars" and the sign "$" shall mean the lawful money of the
United States of America.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all the rules and regulations promulgated pursuant
thereto, as amended from time to time.
"ERISA Event" means, as to any Person, (a) a Reportable Event
described in Section 4043 of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the
provision for thirty (30)-day notice to the PBGC under such
regulations); or (b) the withdrawal of such Person or any member
of its controlled group from a Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; or (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA; or (d) the institution of proceedings to
terminate a Plan by the PBGC; or (e) a transaction that occurs on
<PAGE>
or after April 7, 1986 and that is reasonably likely to be
subject to Section 4060 of ERISA without regard to the
termination date, if any, of any former Plan; or (f) any other
event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,
any Plan or to result in the imposition of any liability under
Title IV of ERISA.
"Eurocurrency Liabilities" has the meaning ascribed to such
term in Regulation D of the Federal Reserve Board, as in effect
from time to time.
"Eurodollar Rate" means, for each Interest Period for a
Eurodollar Rate Advance, an interest rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) determined
pursuant to the following formula:
Eurodollar Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means, for each
Interest Period in respect of a Eurodollar Rate Advance,
the maximum reserve percentage in effect on the date
LIBOR for such Interest Period is determined under
regulations (whether or not applicable to Bank) issued
from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other
marginal reserve requirement) with respect to liabilities
or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period;
and
"LIBOR" means, for each Interest Period in respect
of a Eurodollar Rate Advance, the rate of interest
determined and quoted by the Bank to be the rate of
interest at which Dollar deposits for such Interest
Period, and in an amount approximately equal to the
principal amount of the Eurodollar Rate Advance to be
made or maintained by the Bank during such Interest
Period would be offered to major banks in the London
interbank market at their request at or about 11:00 A.M.
(London time) two (2) Business Days prior to the
commencement of such Interest Period.
"Eurodollar Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to the
Eurodollar Rate.
<PAGE>
"Event of Default" means any event set forth in Section 6
hereof.
"Federal Funds Effective Rate" means, for any day, an
interest rate per annum equal to the weighted average of the
rates on over night Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on
such date, as published for such date (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of Chicago, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations at approximately 11:00 a.m. (Indianapolis time) on
such day on such transactions received by the Bank from three (3)
Federal funds brokers of recognized standing selected by the Bank
in its sole discretion.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereof.
"Floating Rate" means, for any day, a rate of interest per
annum equal to the greater of (a) the Base Rate for such day
minus 50 basis points or (b) the Federal Funds Effective Rate for
such day plus 100 basis points.
"Floating Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to the
Floating Rate.
"Fiscal Year" means a year commencing December 1 and ending
November 30.
"Fixed Assets" means land, buildings, property and equipment.
"GAAP" means generally accepted accounting principles in the
United States of America from time to time as promulgated by the
Financial Standards Accounting Board and recognized and
interpreted by the American Institute of Certified Public
Accountants; provided, however, that in the determination of the
Borrower's compliance with Sections 5.5 through 5.8 hereof, the
effect of FASB 106 shall be disregarded.
"Hazardous Material" means and includes any hazardous, toxic
or dangerous waste, substance or material defined as such in or
for the purpose of the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order, decree or other
requirement of any governmental authority regulating, relating
to, or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste or material, as now or at any
time hereafter in effect.
"Indebtedness" means as to any Person (a) all indebtedness or
other obligations of a Person for borrowed money or for the
<PAGE>
deferred purchase price of property or services; (b) all
indebtedness or other obligations of any other Person for
borrowed money or for the deferred purchase price of property or
services, the payment or collection of which the subject Person
has guaranteed (except by reason of endorsement for collection in
the ordinary course of business) or in respect of which the
subject Person is liable, contingently or otherwise, including,
without limitation, liability by way of agreement to purchase, to
provide funds for payment, to supply funds to or otherwise to
invest in such other Person, or otherwise to assure a creditor
against loss; (c) all indebtedness or other obligations of any
other Person for borrowed money or for the deferred purchase
price of property or services secured by (or for which the holder
of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance upon or in
property owned by the subject Person, whether or not the subject
Person has assumed or become liable for the payment of such
indebtedness or obligations; and (d) capitalized lease
obligations of such Person.
"Interest Period" means:
(a) With respect to each Eurodollar Rate Advance,
the period commencing on the Business Day such Advance is
disbursed or on the Conversion Date on which an Advance
is converted to such Eurodollar Rate Advance and ending
either on the date thirty (30), sixty (60), ninety (90),
one hundred twenty (120) or one hundred eighty (180) days
thereafter, as selected by Borrower pursuant to Section
2.5 hereof; provided, however, that:
(i) In the case of the continuation of
a Eurodollar Rate Advance, the Interest Period
applicable after the continuation of such
Advance shall commence on the last day of the
preceding Interest Period; and
(ii) Any Interest Period which would
otherwise end on a day which is not a Business
Day shall be extended to the next succeeding
Business Day unless such Business Day falls in
another calendar month, in which case such
Interest Period shall end on the next preceding
Business Day; and
(b) With respect to each Negotiated Rate Advance,
the period commencing on the Business Day such Advance is
disbursed and ending on the date specified in the Request
for such Negotiated Rate Advance.
"Interest Period Payment Date" means the first day of each
calendar month.
"Investment" means (a) any loan, advance, guarantee,
extension of credit (other than in the ordinary course of
<PAGE>
business to trade customers) or contribution of capital to any
Person or the purchase of any Persons' notes, stock, bonds or
other securities; (b) advances to employees of a Person other
than advances for the purpose of defraying travel, relocation or
business expenses in the ordinary course of business; and (c) any
capital, property, or services contributed or committed to be
contributed to a Person in connection with the purchase of debt,
equity or other ownership interest.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement
to provide any of the foregoing), any conditional sale or other
title retention agreement or any lease in the nature thereof, or
any filing or agreement to file a financing statement as debtor
on any property leased under a lease which is not in the nature
of a conditional sale or title retention agreement.
"Loan Documents" means, collectively, this Agreement, the
Note and each other document now or hereafter executed by the
Borrower in favor of the Bank governing, evidencing or otherwise
related to the Obligations.
"Loans" means the revolving loans made by the Bank to the
Borrower from time to time pursuant to Section 2.1 hereof in the
maximum aggregate principal amount of $15,000,000 in accordance
with the Commitment, including any extensions or renewals
thereof.
"Negotiated Rate" means a fixed rate per annum which is
offered to Borrower by the Bank in its sole discretion and which
is accepted by Borrower.
"Negotiated Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to a
Negotiated Rate.
"Note" means the Revolving Credit Note in the form attached
hereto as Exhibit A in the maximum aggregate principal amount of
$15,000,000 (or so much thereof as may be advanced or
outstanding from time to time) executed by the Borrower in favor
of the Bank.
"Obligations" means all obligations, indebtedness and
liabilities of Borrower under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation created
under Section 4002(a) of ERISA or any successor thereto.
"Permitted Liens" means:
(a) Liens (i) for taxes not yet due or (ii) which
are being actively contested in good faith by appropriate
proceedings (in a manner sufficient to prevent
enforcement of the matter under contest) as to which
<PAGE>
adequate reserves have been set aside in an amount
determined in accordance with GAAP;
(b) Liens incidental to the conduct of the business
of the Borrower and its Consolidated Subsidiaries or the
ownership of their respective owned properties and assets
which were not incurred in connection with the incurring
of Indebtedness, and which do not materially detract from
the value of such property or assets or impair the use
thereof in the operation of the Borrower's or such
Subsidiaries' business;
(c) Liens on property or assets of a Subsidiary of
the Borrower to secure obligations of such Subsidiary to
the Borrower or another Subsidiary of the Borrower;
(d) Liens on the properties and assets acquired by
the Borrower or of any Subsidiary of the Borrower
subsequent to the date hereof, which Liens pre-exist the
date of such acquisition;
(e) Liens on properties or assets of the Borrower
and its Consolidated Subsidiaries, which properties and
assets do not exceed Ten Percent (10%) of the total
tangible assets of the Borrower and its Consolidated
Subsidiaries; and
(f) As set forth on Schedule 1 hereto.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization,
including a governmental or political subdivision or an agent or
instrumentality thereof.
"Plan" means any defined benefit plan maintained or
contributed to by Borrower or any of its Subsidiaries or by any
trade or business (whether or not incorporated) under common
control with Borrower or any of its Subsidiaries as defined in
Section 4001(b) of ERISA and insured by the PBGC under Title IV
of ERISA.
"Regulatory Change" shall have the meaning ascribed in
Section 2.10.
"Reportable Event" shall be as defined in ERISA.
"Request" shall have the meaning ascribed in Section 2.5
hereof.
"Subsidiary" of a Person means any corporation of which such
Person owns or otherwise controls, directly or indirectly, more
than 50% of the total voting securities thereof, and shall
include any such corporation which becomes a Subsidiary of such
Person after the date hereof.
<PAGE>
"Termination Date" means July 1, 1996.
"Wholly-Owned Subsidiary" means a Consolidated Subsidiary of
a Person, 100% of the voting securities of which is owned or
controlled by such Person.
1.2 Accounting Terms. All accounting terms used herein and
not used herein and not expressly defined herein shall (unless
otherwise expressly indicated) have the respective meanings given
to them in accordance with GAAP. All financial computations made
under this Agreement for the purpose of determining compliance
with the financial requirements of this Agreement shall be made
on a Consolidated basis and shall be made, and all financial
information required under this Agreement shall be prepared, in
accordance with GAAP consistently applied. In determining the
value of assets, Investments in Persons other than Consolidated
Subsidiaries shall be determined on the basis of the lesser of
cost or the book value of such Person on the date of
determination.
1.3 Other Definitions; Singular and Plural. The terms
defined in the preamble of this Agreement and used herein shall
have the meanings ascribed in the preamble hereof. Use of the
terms "herein", "hereof", and "hereunder" shall be deemed
references to this Agreement in its entirety and not to the
Section or clause in which such term appears. The foregoing
definitions shall be equally applicable to both the singular and
plural forms of the defined terms.
SECTION 2
Credit
2.1 Commitments. Subject to the terms and conditions
hereof, the Bank agrees to make Loans to the Borrower from time
to time during the Commitment Period in a principal amount not in
excess of the unborrowed portion of the Commitment on the
borrowing date. During the Commitment Period, the Borrower may
use the Commitment by borrowing, prepaying the Loans, in whole or
in part, and reborrowing, all subject to, and in accordance with,
the terms and conditions hereof. The Loans shall be evidenced by
the Note.
2.2 Interest. Prior to maturity or the occurrence of an
Event of Default, the principal amount of the Loans shall bear
interest at the election of the Borrower at any of the following
rates (a) a per annum rate equal to the Eurodollar Rate, plus the
Applicable Margin; (b) at a per annum rate equal to the Floating
Rate; or (c) at a Negotiated Rate. After maturity or the
occurrence of an Event of Default, interest shall be calculated
in accordance with Section 2.9
2.3 Payments of Principal and Interest. Interest only on
the outstanding Advances of the Loans from time to time shall be
<PAGE>
due and payable on the Interest Period Payment Date throughout
the term of the Commitment Period. Unless sooner paid, the
Borrower shall make principal payments in an amount sufficient
that the outstanding principal balance of the Loans shall not
exceed the Commitment. Unless the Loans are sooner paid by the
Borrower or extended by the Bank in its sole discretion, the
entire principal balance of the Loans, together with all accrued
and unpaid interest thereon, and all fees and charges payable in
connection therewith, shall be due and payable on July 1, 1996.
2.4 Use of Proceeds. The proceeds of the Loans shall be
used to fund the general working capital of the Borrower and its
Subsidiaries (including, but not limited to, the construction or
purchase of Fixed Assets) and for acquisition purposes.
2.5 Method of Advance. Subject to the provisions of Section
2.1:
(a) Advances of the Loans shall be made available to
Borrower prior to the Termination Date, provided the Bank
receives, at the time and in accordance with the terms of
this Section, a request ("Request") specifying the amount of
the Advance, the interest rate election of Borrower related
thereto and, if appropriate, the Interest Period related
thereto. Requests may be made by telephone, and the Bank may
rely, without further inquiry, on such telephonic Requests as
the act of Borrower through an authorized representative;
provided, however, that the Bank may require telephonic or
other oral requests to be followed immediately by a written
Request. Notwithstanding anything to the contrary contained
in the definition of "Interest Period", the Borrower may not
select an Interest Period with respect to any Advance which
ends after the Termination Date.
(b) Each Request shall constitute a representation and
warranty by the Borrower that no Default or Event of Default
has occurred and is continuing or would result from the
making of the requested Advance and that the requested
Advance shall not cause the principal balance of the Loans to
exceed the Commitment.
(c) Each Request, which shall be irrevocable once
received, must be received by the Bank not later than 11:00
A.M. (Indianapolis time), (i) on the date such Advance is to
be made, if such Advance is to be made as a Negotiated Rate
Advance or a Floating Rate Advance, and (ii) three (3)
Business Days prior to the date such Advance is to be made,
if such Advance is to be an Eurodollar Rate Advance. Prior to
11:00 A.M. (Indianapolis time) on the second (2nd) Business
Day prior to the date such Advance is to be made, the Bank
will, through designated employees, quote the Eurodollar
Rate. The Borrower shall then have until 1:00 P.M.
(Indianapolis time) on that same Business Day of the quote by
the Bank to execute its option to elect the Eurodollar Rate.
<PAGE>
(d) All Advances shall be in a minimum amount of
$1,000,000 and integral multiples of $100,000 and shall be
made by credit to the Deposit Account.
(e) All notices (including Requests) made by Borrower
to the Bank and received by the Bank after 11:00 A.M.
(Indianapolis time) (or such other time as is specified in
any Section hereof) on a Business Day shall be deemed
received on the next succeeding Business Day.
(f) If the Borrower fails to give timely notice of its
interest rate election pursuant to this Section 2.5, or if
the Borrower and the Bank do not agree on a Negotiated Rate,
Borrower shall be deemed to have selected the Floating Rate.
(g) All Advances by the Bank and payments by the
Borrower shall be recorded by the Bank on its books and
records, and the principal amount outstanding from time to
time, plus interest payable thereon, shall be determined from
the books and records of the Bank. The books and records of
the Bank shall be presumed prima facie correct as to such
matter. Any statement of a the Bank to the Borrower setting
forth the Borrower's account regarding the Advances and
payments shall be considered true and correct and binding on
the Borrower unless the Bank is notified in writing of any
discrepancy or exception within thirty (30) days from the
date of mailing such monthly statement. Notwithstanding the
foregoing, the failure to make, or an error in making, a
notation with respect to any Advance shall not limit or
otherwise affect the obligation of the Borrower hereunder.
2.6 Conversion of Advances. Borrower may, upon receipt by
the Bank of a Request not later than 11:00 A.M. (Indianapolis
time) three (3) Business Days prior to the applicable Conversion
Date:
(a) Elect to convert on any Business Day any Floating
Rate Advance into an Advance of any other type;
(b) Elect to convert upon expiration of any Interest
Period, any Eurodollar Rate Advance or Negotiated Rate
Advance maturing at the end of such Interest Period into an
Advance of any other type; or
(c) Elect to renew, upon expiration of any Interest
Period, any Eurodollar Rate Advance maturing at the end of
such Interest Period by selecting the duration of the next
Interest Period thereof; provided, however, that if any
Eurodollar Rate Advance shall have an outstanding principal
balance of less than $1,000,000, the Eurodollar Rate Advance
subject to renewal shall automatically convert to a Floating
Rate Advance and after such date the right of Borrower to
continue any such Advance as a Eurodollar Rate Advance shall
terminate.
<PAGE>
If upon the expiration of any Interest Period applicable to a
Eurodollar Rate Advance, Borrower has failed to select a new
Interest Period to be applicable to such Advance as the case may
be, Borrower shall be deemed to have elected to convert such
Advance into a Floating Rate Advance effective as of the
expiration of the then current Interest Period. Notwithstanding
any other provision of this Agreement:
(aa) If Borrower desires to convert any Advance to a
Eurodollar Rate Advance or continue or renew any Eurodollar
Rate Advance at the expiration of an Interest Period, the
provisions of Section 2.5(c) shall apply; and
(bb) In the event that the Bank determines (which
determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the
London interbank market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for any Eurodollar
Interest Period at a time when a Eurodollar Rate is requested
or when the outstanding balance of Advances under the Loans
is being maintained at the Eurodollar Rate, the Bank shall
forthwith give notice of such determination, confirmed in
writing, to the Borrower (if such confirmation is requested
by the Borrower), whereupon the selection of an Eurodollar
Rate shall be prohibited, and if the Borrower and the Bank
are unable to agree on a Negotiated Rate, the outstanding
principal balance of Advances under the Loans then bearing
interest at the Eurodollar Rate shall be converted, on the
last day of the then current Eurodollar Interest Period, to
the Floating Rate.
2.7 Method of Payment. All payments of principal and
interest on the Note shall be made without setoff or counterclaim
by the Borrower to the Bank at its main office in Indianapolis,
Indiana, by 11:30 A.M. (Indianapolis time) on the date when due.
All sums received after such time shall be deemed received on the
next Business Day. Any payment due on a day that is not a
Business Day shall be made on the next Business Day. The Bank is
hereby authorized by the Borrower to debit the Deposit Account
for each payment of principal or interest under the Loans as it
becomes due. All payments with respect to the Loans shall be
payable in funds available for the Bank's immediate use at
Indianapolis, Indiana, and no payment will be considered to have
been made until received in such funds. All payments received on
account of any of the Loans will be applied first to the
satisfaction of any interest which is then due and payable, and
to principal only after all interest which is due and payable has
been satisfied.
2.8 Prepayment. The Borrower may prepay any Floating Rate
Advance in whole or in any multiple at any time, and from time to
time, without notice, premium or penalty. The Borrower may not
prepay any Eurodollar Rate Advance or Negotiated Rate Advance at
<PAGE>
any time prior to the last day of the Interest Period applicable
thereto.
2.9 Computations of Interest. All computations of interest
and fees under this Agreement shall be made on the basis of a
360-day year and calculated for the actual number of days
elapsed. Any change in the rate of interest on any Floating Rate
Advance occasioned by a change in the Base Rate or Federal Funds
Effective Rate shall be effective on the same day as the change
in Base Rate or the Federal Funds Effective rate, as the case may
be. Interest shall accrue on any principal balance outstanding
from and including the date of disbursement to, but excluding,
the date on which such principal balance is repaid.
Notwithstanding anything to the contrary herein contained, all
principal hereunder not paid when due, whether by lapse of time
or by acceleration, shall bear interest after maturity at a per
annum rate equal to Two Percent (2%) above the otherwise
applicable rate.
2.10 Additional Costs. Borrower shall pay to the Bank from
time to time such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs incurred by the
Bank which the Bank determines is attributable to its making or
maintaining any Eurodollar Rate Advance hereunder or its
obligation to make any Advance hereunder, or any reduction in any
amount receivable by the Bank under this Agreement or the Note in
respect of any such Advance or such obligation (such increases in
costs and reductions in amounts receivable being herein called
"Additional Costs") resulting from any change after the date of
this Agreement in federal, state, municipal, or foreign laws or
regulations (including Regulation D of the Federal Reserve Board)
or the adoption or making after such date of any interpretations,
directives, or requirements applying to a class of banks
including the Bank of or under any federal, state, municipal, or
foreign laws or regulations (whether or not having the force of
law) by any court or governmental authority charged with the
administration thereof ("Regulatory Change"), which: (a) changes
the basis of taxation of any amounts payable to the Bank under
this Agreement in respect of any Advance (other than taxes
imposed on the overall net income of the Bank); or (b) imposes or
modifies any reserve, special deposit, or similar requirements
relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of the Bank; or (c) imposes
any other condition affecting this Agreement (or any of such
extensions of credit or liabilities). The Bank will notify
Borrower of any event occurring after the date of this Agreement
which will entitle the Bank to compensation under this Section
2.10 as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation.
Determinations by the Bank for the purposes of this Section 2.10
of the effect of any Regulatory Change on its cost of making or
maintaining any Loan or on amounts receivable by or in respect of
any Loan, and of the additional amounts required to compensate
Bank in respect of Additional Costs, shall be conclusive,
<PAGE>
provided that such determinations are made on a reasonable basis
and the Bank provides Borrower with its calculations of
Additional Costs.
2.11 Commitment Fee. Borrower shall pay to the Bank a
commitment fee equal to three-sixteenths (3/16) of one percent
(1%) per annum on the maximum amount of the Commitment, which fee
shall be due and payable quarterly in advance, within fifteen
(15) days of receipt by the Borrower of an invoice therefor.
2.12 Reductions of Revolving Credit Commitment. The
Borrower shall have the right to terminate or reduce the
aggregate amount of the Commitment at any time or from time to
time, provided that (a) the Borrower shall give notice of each
such termination or reduction in the manner provided in Section
7.1; (b) each partial reduction shall be in an aggregate amount
at least equal to $1,000,000 and integral multiples of $100,000;
(c) the aggregate Commitment shall not be reduced to an amount
less than the outstanding principal balance of the Revolving
Credit Loans; and (d) the Commitment once terminated or reduced
may not be reinstated without the prior written approval of the
Bank.
SECTION 3
Conditions Precedent
3.1 Conditions Precedent to the Initial Advance of the Loan.
In addition to the requirements set forth in Section 3.2, the
obligations of the Bank to make the initial Advance is subject to
the condition precedent that the following shall have been
delivered to the Bank in form and substance satisfactory to the
Bank:
(a) Organic Documents. A copy of the articles of
incorporation and by-laws, including all amendments thereto,
of Borrower, certified by the Secretary or an Assistant
Secretary as being in full force and effect on the date
hereof.
(b) Corporate Resolutions. Copies of resolutions
passed by the Board of Directors of Borrower, certified by
the Secretary or Assistant Secretary of Borrower, as
applicable, as being in full force and effect on the date
hereof.
(c) Loan Documents. The Loan Documents duly executed
by Borrower.
(d) Certificate of Existence. A Certificate of
Existence or Good Standing for Borrower in the jurisdiction
<PAGE>
of its incorporation certified by the Secretary of State or
other appropriate official of such jurisdictions.
(e) Opinion of Counsel. The favorable written opinion
of counsel to Borrower, dated as of the date hereof,
substantially in the form and of the substance attached
hereto as Exhibit B.
(f) Other Evidence Bank May Require. Such other
documents or evidence as the Bank may reasonably request in
writing in order to consummate the transactions contemplated
hereby or to evidence the taking of all necessary actions in
any proceedings in connection herewith and compliance with
the conditions set forth in this Agreement.
(g) Expenses. Payment of the expenses of the Bank
described in Section 7.5 for which Borrower has received
proper invoices or requests for payment.
3.2 Conditions to Subsequent Advances. The obligations of
the Bank to make any Advance after the date hereof is subject to
the following conditions precedent:
(a) The representations and warranties contained in
Section 4 shall be true and correct and no Default or Event
of Default shall have occurred and be continuing;
(b) The Bank shall have received a Request;
(c) All fees, expenses and other amounts due and
payable to or for the benefit of the Bank under the Loan
Documents shall have been paid; and
(d) The aggregate outstanding principal balance of the
Loans, after giving effect to the requested Advance, may not
exceed the Commitment.
SECTION 4
Representations and Warranties
Borrower represents and warrants to the Bank on the date
hereof, and shall be deemed to have made such representations and
warranties to Bank on the date of each Advance hereunder, that:
4.1 Corporate Existence. Borrower and each of its
Consolidated Subsidiaries is a corporation duly organized and
existing under the laws of the jurisdiction of its incorporation,
and is duly qualified as a foreign corporation and is properly
licensed and in good standing in each jurisdiction where the
failure to qualify or be licensed would have a material adverse
<PAGE>
effect on its business, properties or conditions (financial or
otherwise).
4.2 Corporate Powers. The execution, delivery and
performance of the Loan Documents by Borrower are within
Borrower's corporate powers, have been duly authorized by all
requisite corporate action, and are not in conflict with the
terms of any charter, by-laws or other organization papers of
Borrower, or any instrument or agreement to which Borrower is a
party or by which Borrower is bound or affected.
4.3 Power of Officers. The officers of Borrower executing
the Loan Documents and any certificate, instrument or agreement
required to be delivered by Borrower thereunder have been duly
elected or appointed and were fully authorized to execute the
same at the time such agreement, certificate or instrument was
executed.
4.4 Government and Other Approvals. No approval, consent,
exemption or other action by, notice to or filing with, any
governmental authority which has not been obtained is necessary
in connection with the execution, delivery or performance by
Borrower of the Loan Documents.
4.5 Compliance with Laws; Environmental Matters. To the
best of Borrower's knowledge, there is no law, rule or
regulation, nor is there any judgment, decree or order of any
court or governmental authority specifically directed to Borrower
or any of its Consolidated Subsidiaries and binding on Borrower
or any of its Consolidated Subsidiaries which would be
contravened by the execution, delivery or performance of the Loan
Documents. Borrower and each of its Consolidated Subsidiaries is
in material compliance with all material laws and regulations,
including all material requirements of applicable federal, state
and local environmental, health and safety statutes and
regulations and to the best of Borrower's knowledge, neither it
nor any of its Consolidated Subsidiaries, is the subject of any
federal, state or local investigation evaluating whether any
remedial action is needed to respond to a release of any
Hazardous Material which investigation will result in clean-up
costs having a materially adverse effect on the Borrower and its
Consolidated subsidiaries, taken as a whole, and for which
Borrower, or such Consolidated Subsidiary is not indemnified.
4.6 Enforceability of Agreement. The Loan Documents are
legal, valid and binding agreements of Borrower and are
enforceable against Borrower in accordance with their respective
terms, and any other exhibit, instrument or agreement required
hereunder, when executed and delivered, will be similarly legal,
valid, binding and enforceable in accordance with its terms.
4.7 Litigation. Except as disclosed in its financial
statements, there are no suits, proceedings, claims or disputes
pending or, to the knowledge of Borrower, threatened against or
<PAGE>
affecting Borrower, or any of its Consolidated Subsidiaries or
any of their respective properties, which individually or in the
aggregate will materially adversely affect the business,
properties or condition (financial or otherwise) of the Borrower
and its Consolidated Subsidiaries, taken as a whole, or impair
Borrower's ability to perform the Obligations.
4.8 Events of Default. No Default or Event of Default has
occurred and is continuing or would result from the execution or
performance of any Loan Document or the incurring of the
Obligations by Borrower. Neither Borrower nor any of its
Consolidated Subsidiaries is in violation of, or default under,
(a) any charter instrument or by-law, or under any loan agreement
or (b) any material agreement or instrument to which it is a
party or by which it or its properties are bound.
4.9 Investment Company Act of 1940. Borrower is not an
investment company within the meaning of the Investment Company
Act of 1940.
4.10 Financial Information.
(a) The balance sheets of Borrower dated as of November
30, 1993 and August 31, 1994, and the operating statements
for the fiscal periods then ended, (complete and accurate
copies of which have been delivered by Borrower to Bank) and
all other information and data furnished by Borrower to Bank
are complete and correct, and such financial statements have
been prepared in accordance with GAAP, consistently applied,
and fairly present the Consolidated financial condition of
Borrower on November 30, 1993 and August 31, 1994, and the
Consolidated results of their operations for the periods then
ended, except in the case of the unaudited interim financial
statements for normal year end adjustments and the absence of
footnote disclosures.
(b) Since November 30, 1993, there has not been and
Borrower does not know of any development or threatened
development (other than general economic conditions) of a
nature which may cause any material adverse change in the
Consolidated financial condition or operations of Borrower
and its Consolidated Subsidiaries, taken as a whole, or
sufficient to impair Borrower's ability to repay the Loan and
otherwise perform the Obligations in accordance with the
terms of the Loan Documents.
4.11 ERISA. Except as previously disclosed to the Bank, no
fact or circumstance, including but not limited to any Reportable
Event, exists in connection with any Plan of Borrower, or any of
its Consolidated Subsidiaries which would constitute grounds for
the termination of any such plan by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer any such Plan and which would result in the
termination of a Plan and the incurrence of material liability by
the beneficiaries or a trustee under ERISA. For the purposes of
<PAGE>
this Section 4.11, Borrower, if it is not the Plan administrator,
shall be deemed to have knowledge of all facts attributable to
the Plan administrator designated pursuant to ERISA.
4.12 Full Disclosure. To the knowledge of the Borrower, no
information, exhibit, memorandum, or report furnished by the
Borrower to the Bank in connection with the negotiation of the
Loans contains any material misstatement of fact or omits to
state any fact necessary to make the statements contained therein
not materially misleading.
SECTION 5
Covenants
Borrower covenants that until all Obligations have been paid
in full it will (and will cause its Subsidiaries to), unless
otherwise agreed by the Bank:
5.1 Use of Proceeds. Use Advances solely for the purposes
provided for herein.
5.2 Maintain Existence, Etc. Maintain its existence;
maintain in good order its licenses, properties, insurance and
books; pay when due taxes, trade accounts and other obligations;
comply with law; and generally conduct its affairs in accordance
with standard industry practices.
5.3 Financial Statements, Etc. During the term of the
Loans, Borrower shall furnish to the Bank:
(a) Within sixty (60) days after the end of each fiscal
quarter, a balance sheet and operating statement of Borrower
prepared on a Consolidated and consolidating basis and in
accordance with GAAP consistently applied and accompanied by
a Compliance Certificate completed and signed by the chief
financial officer of Borrower certifying, among other things,
that there exists no Default or Event of Default under the
Loan Documents or, if a Default or Event of Default exists,
stating the nature and status thereof;
(b) Within one hundred twenty (120) days after the end
of each of Borrower's Fiscal Years, a balance sheet and
operating statement and statement of cash flows certified by
an independent certified public accountant satisfactory to
Bank (provided that any "Big Six" accounting firm shall be
deemed satisfactory to the Bank); such financial statements
to be prepared on a Consolidated basis in accordance with
GAAP applied on a basis consistent with prior practice unless
otherwise specifically noted thereon, accompanied by (i)
unaudited consolidating balance sheets and operating
statements of Borrower and each of its Consolidated
Subsidiaries, (ii) a detailed letter from the chief financial
officer of the Borrower which analyzes the results of
<PAGE>
operations for the period covered by such financial
statements, and (iii) a Compliance Certificate completed and
signed by the chief financial officer of Borrower certifying,
among other things, that there exists no Default or Event of
Default under the Loan Documents or, if a Default or Event of
Default exists, stating the nature and status thereof; and
(c) As soon as possible, but in any event within ten
(10) days after the filing with the Securities and Exchange
Commission, or any successor thereto, or any state securities
regulatory authority, copies of all registration statements
and all periodic and special reports required or permitted to
be filed under federal or state securities laws and
regulations.
5.4 Adequate Books. Permit representatives of the Bank, at
any reasonable time and upon reasonable prior notice, to inspect
its properties, to examine its inventory, books, and accounts,
and to discuss its finances and affairs with its accountants (and
by these provisions Borrower authorizes such accountants to
discuss with the Bank the finances and affairs of Borrower).
5.5 Leverage Ratio. Maintain a ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth of not more than
(a) 3.0 to 1.0 as at the end of each fiscal quarter ending on and
after November 30, 1994 through August 31, 1995; and (b) 2.0 to
1.0 as at November 30, 1995 and as at the end of each fiscal
quarter ending thereafter.
5.6 Current Ratio. Maintain a ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than 1.50
to 1.00 as at the end of each fiscal quarter.
5.7 Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage
Ratio of not less than (a) 1.15 to 1.00 as at the end of each
fiscal quarter ending on and after the date hereof through August
31, 1995; and (b) 1.30 to 1.00 as at the end of each fiscal
quarter ending thereafter.
5.8 Net Worth. Maintain Consolidated Tangible Net Worth of
not less than the sum of (i) $14,000,000, plus (ii) an amount not
less than Twenty-Five Percent (25%) of the cumulative reported
net profits of the Borrower for all fiscal quarters ending after
November 30, 1993, without reduction for any reported net losses
incurred during such periods, as at the end of each fiscal
quarter ending on or after the date hereof.
5.9 Hazardous Materials. Indemnify and hold harmless the
Bank and its respective officers, employees, agents, consultants
and affiliates from and against all losses, costs, damages and
expenses (including reasonable attorneys' fees and expenses) any
such person may sustain in connection with the use, disposal or
release of any Hazardous Material or in connection with the
<PAGE>
existence of any Hazardous Material on or under any of the
properties of Borrower or any of its Subsidiaries.
5.10 Mergers, Etc. Not permit Borrower to enter into any
consolidation, merger, or other combination, or sell, lease,
assign, transfer or otherwise dispose of any assets, whether now
owned or hereafter acquired, in a single transaction or in a
series of transactions, or enter into any sale and leaseback
transactions, other than: (a) the sale of inventory in the
ordinary course of business; (b) the disposition of property no
longer used or useful in the conduct of its business; (c) any
merger in which Borrower is the legal surviving corporation,
provided no Default or Event of Default then exists or is
occasioned thereby; (d) any merger, consolidation or transfer of
the business or assets of any Subsidiary of the Borrower to
Borrower or to any Consolidated Subsidiary; and (e) the sale and
leaseback, sale or other disposition of assets in an amount not
in excess of $20,000,000 in any Fiscal Year.
5.11 Liens. Not create, assume or suffer to exist any Lien
on any of its properties or assets, whether now owned or
hereafter acquired, except Permitted Liens.
5.12 Notice of Default. Immediately upon the occurrence of
any Default or an Event of Default, furnish to the Bank a
certificate of Borrower stating the specific nature of the
Default or Event of Default, Borrower's intended actions to cure
such Default or Event of Default and the time period in which
such cure is to occur.
5.13 Indebtedness. Not create, incur or suffer to exist any
Indebtedness for the purpose of refinancing a portion of the
Loans, except on such terms and conditions as have been subject
to the prior written approval of the Bank.
5.14 Insurance. Maintain in full force and effect adequate
insurance in amounts and against liabilities consistent with
sound business practices and with reputable insurers and upon
terms acceptable to the Bank.
5.15 No Material Adverse Change. Not permit any event to
occur or condition to exist which has a materially adverse effect
upon business, operations, financial condition, properties or
prospects of the Borrower or its Consolidated Subsidiaries, taken
as a whole.
5.16 Margin Rules. Not use the Advances in any manner that
would violate Regulation G, T, U or X of the Federal Reserve
Board.
SECTION 6
Default and Remedy
<PAGE>
6.1 Events of Default. The occurrence of any of the
following events shall be an Event of Default hereunder:
6.1.1 Nonpayment. Borrower fails to pay when due any
installment of principal or interest or any other sum due
under the Loan Documents and such failure continues for ten
(10) Business Days thereafter.
6.1.2 Representation or Warranty. Any written
represen-tation or warranty in any of the Loan Documents
proves to have been materially false or misleading in any
material respect when made.
6.1.3 Other Defaults. Borrower fails to perform or
observe any of the other covenants or agreements contained in
the Loan Documents, and such failure, if capable of being
remedied, continues unremedied for a period of thirty (30)
days after written notice thereof from the Bank.
6.1.4 Voluntary Bankruptcy. Borrower or any one or
more of its Wholly-Owned Subsidiaries which, in the
aggregate, have Twenty-Five Percent (25%) or more of the
Consolidated total assets of the Borrower fails to pay or
admits in writing its or their inability to pay debts as they
come due, or files any petition or action for relief under
any bankruptcy, reorganization, insolvency or moratorium law,
or any other similar law for the relief of, or relating to,
debtors, or applies for or consents to a receiver, trustee or
custodian for it or a substantial portion of its property, or
makes a general assignment for the benefit of creditors.
6.1.5 Involuntary Bankruptcy. An involuntary petition
is filed under any bankruptcy or similar statute against
Borrower or any one or more of its Wholly-Owned Subsidiaries
which, in the aggregate, have Twenty-Five Percent (25%) or
more of the Consolidated total assets of the Borrower, or a
custodian, receiver, trustee, assignee for the benefit of
creditors (or other similar official) is appointed to take
possession, custody or control of the properties of Borrower
or any such Consolidated Subsidiary unless such petition or
appointment is set aside or withdrawn or ceases to be in
effect within sixty (60) days from the date of such filing or
appointment.
6.1.6 Cross Default. Any material breach or default
shall have occurred (after giving effect to any applicable
cure period or waiver) under any other agreement between
Borrower, or any Consolidated Subsidiary and any bank, or
under any other material agreement pursuant to which
Borrower, or any of its Consolidated Subsidiaries may be
obligated in an amount in excess of $1,000,000 as a borrower,
guarantor or lessee (including, without limitation, any
Indebtedness incurred to refinance any portion of the Loans),
if such default consists of the failure by such borrower,
<PAGE>
guarantor or lessee to pay Indebtedness when due and,
following any applicable cure period, permits the holder or
any trustee thereof to cause the acceleration of such
Indebtedness or the termination of any commitment to lend or
permits a lessor to terminate the applicable lease.
6.1.7 Adverse Judgments. Any one or more judgments or
orders for payment of money in an aggregate amount exceeding
$1,000,000 shall be rendered against the Borrower and/or any
of its Consolidated Subsidiaries and either (a) such judgment
or order shall remain unsatisfied and the Borrower and/or its
Consolidated Subsidiary shall not have taken action necessary
to stay enforcement thereof prior to the expiration of the
applicable period of limitations for taking such action or
(b) enforcement proceedings shall have been commenced by any
creditor upon any such judgment or order.
6.2 Remedy. If any Event of Default described in Sections
6.1.4 and 6.1.5 occurs, the Commitment shall automatically
terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Bank.
If any other Event of Default occurs, the Bank may terminate the
Commitment and declare the Obligations to be due and payable,
whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any
kind, all of which Borrower hereby expressly waives. Upon the
occurrence of an Event of Default, the Bank may immediately
proceed to exercise all remedies available to it under the Loan
Documents or otherwise under applicable law.
SECTION 7
Miscellaneous
7.1 Notices. Any communications between the parties hereto
or notices or requests provided herein to be given may be given
by mailing the same, first class postage prepaid, or by telex or
electronic transmission to each party at its address set forth on
the signature pages hereto (with a copy to each address indicated
for notices), or to such other address as any party may in
writing hereafter indicate to the other. Notices shall be
effective on the date sent by electronic transmission and telex
and three (3) Business Days after the date sent by U.S. mail.
7.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns; provided, however, that
Borrower shall not assign this Agreement or any of its rights
hereunder without the prior written consent of the Bank.
7.3 Participation and Assignments. The Bank may
participate, sell, transfer or assign its rights and obligations
under this Agreement to an entity Affiliate of the Bank without
the prior written consent of the Borrower and to any other Person
<PAGE>
with the prior written consent of the Borrower, which consent
shall not be unreasonably withheld or delayed; provided, however,
that no prior consent of the Borrower shall be required at any
time during which a Default or Event of Default shall have
occurred and be continuing. Any participant purchasing such a
participation shall have all rights of the Bank pursuant to this
Agreement, and the Bank may provide such participant with credit
information received by such Bank from Borrower or any Subsidiary
which is otherwise publicly available. Borrower agrees that any
participant permitted or consented to under this Section 7.3
shall at any time during the pendency of an Event of Default have
the right to set off any Obligations not paid when due against
any accounts or other assets of Borrower held by, on deposit
with, or in the possession of, such participant. The Bank will
use its best efforts to cause such participant to grant to
Borrower the right to set off, appropriate and apply against that
portion of the Obligations then owned by such other participant
any monies, securities and other property of Borrower now or
hereafter held or received by, or in transit to, such participant
in the event such participant becomes involved in any voluntary
insolvency, bankruptcy or receivership proceedings, or in any
involuntary proceedings of such nature or comes under the
management or control of any governmental or private deposit
insurer. In no event shall the insolvency, bankruptcy or
receivership of a participant grant to Borrower the right of set
off against the Bank, including any other participant.
7.4 Amendments and Waivers. No delay or omission by the
Bank to exercise any right under this Agreement shall impair any
such right, nor shall it be construed to be a waiver thereof. No
waiver of any single breach or default under this Agreement shall
be deemed a waiver of any other breach or default. Any waiver,
modification, amendment, consent or approval relating to the Loan
Documents, must be in writing to be effective and must be signed
by or on behalf of the Bank.
7.5 Costs and Expenses. Borrower agrees to pay on demand to
the Bank all reasonable costs and expenses incurred by the Bank
including, without limitation, reasonable attorneys' and
consultants' fees (a) in connection with the enforcement of the
Loan Documents or in connection with any proposed refinancing or
restructuring of the credit provided in this Agreement, and (b)
for all stamp, registration and other duties to which any Loan
Document may be subject. Borrower further agrees to pay or to
reimburse the Bank upon demand for its reasonable attorneys' fees
and other reasonable expenses incurred in connection with
preparing, drafting and negotiating any amendments, consents, or
waivers hereto requested by Borrower. Borrower shall indemnify
the Bank against any and all liabilities and penalties resulting
from any delay in payment, or failure to pay, any such duties
referenced above upon written notice from the Bank that such
amounts have been assessed.
<PAGE>
7.6 Entire Agreement. The Loan Documents integrate all the
terms and conditions mentioned herein or incidental hereto, and
supersede all oral negotiations and prior writings in respect to
the subject matter hereof. In the event of any conflict between
the terms, conditions and provisions of this Agreement and the
other Loan Documents, the provisions of this Agreement shall
control.
7.7 Governing Law. This Agreement and all other Loan
Documents executed in connection herewith shall be governed by
and construed in accordance with the laws of the State of
Indiana.
7.8 Section Headings. Section headings are for reference
only, and shall not affect the interpretation of meanings of any
provision of this Agreement.
7.9 Severability. The illegality or unenforceability of any
provision of any Loan Document shall not in any way affect or
impair the legality or enforceability of the remaining provisions
of such Loan Document or any other Loan Document.
7.10 Indemnity. Borrower hereby agrees to indemnify, protect
and hold harmless the Bank and its officers, directors, agents,
employees, attorneys and shareholders ("Indemnified Persons")
from and against all reasonable costs and expenses (including,
without limitation, the reasonable cost of counsel), and all
actions, claims (whether made or threatened), suits, liabilities,
damages and losses incurred by or imposed on any Indemnified
Persons in connection with or as a result of the execution,
delivery and performance of the Loan Documents and the use of the
proceeds thereunder, provided, however, that such indemnity shall
not apply to any action by Borrower against a Bank; and provided,
further, that the foregoing provision shall not be deemed to
limit the provisions of Section 7.5 hereof. Notwithstanding
anything to the contrary in this Section 7.10, Borrower shall not
be obligated to indemnify any Indemnified Person for any losses,
claims, damages, liabilities and expenses incurred by such
Indemnified Person which have finally been determined to have
resulted from the gross negligence or willful misconduct on the
part of such Indemnified Person. Without limiting the generality
of the foregoing, such indemnity shall extend to any and all
reasonable costs and expenses whatsoever incurred by the
Indemnified Persons (including, without limitation, the
reasonable cost of counsel, whether staff counsel or otherwise
and whether allocated or out-of-pocket) in connection with
investigating, preparing for or defending against or providing
evidence, producing documents or taking any action with respect
to any such action, claim (whether made or threatened and whether
or not such Indemnified Person is a party to such action or
claim), suit, liability, damage or loss, whether or not resulting
in any liability. The Indemnified Person may select its own
legal counsel in connection with any matters indemnified against
hereunder. This indemnity shall survive the execution, delivery
<PAGE>
and consummation of the transactions contemplated by this
Agreement. Payment by Borrower in respect to an undisputed claim
made by an Indemnified Person pursuant to this Section shall be
made within thirty (30) days after demand therefor; otherwise,
promptly upon resolution of such dispute.
7.11 JURY TRIAL WAIVER. THE BANK AND THE BORROWER, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER
OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON
OR RISING OUT OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
BETWEEN THEM CONTEMPLATED BY THE LOAN DOCUMENTS OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF EITHER OF THEM. NEITHER SHALL THE BANK NOR THE
BORROWER SEEK TO CONSOLIDATE, BY COUNTER-CLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THIS SECTION 7.11 SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY THE BANK NOR THE BORROWER EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers as of the date and
year first above written.
"BORROWER"
LILLY INDUSTRIES, INC.
Attest: By: /s/ Roman J. Klusas
-----------------------
Roman J. Klusas,
Vice President, Chief
/s/ Kenneth L. Mills Financial Officer
----------------------------- and Secretary
Kenneth L. Mills, Director of
Corporate Accounting and
Assistant Secretary Address:
733 South West Street
Indianapolis, IN 46225
Attn: Vice President, Chief
Financial Officer and
Secretary
Telephone: (317) 687-6702
Telecopier: (317) 687-6710
"BANK"
NBD BANK, N.A.
By: /s/ Thomas F. Bareford
Title: Vice President
Address:
One Indiana Square, #460
Indianapolis, IN 46266
Attn: Thomas F. Bareford
Telephone: (317) 266-6430
Telecopier: (317) 266-6042
<PAGE>
Schedule 1
Immaterial leases of furniture, fixtures and equipment.
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$15,000,000.00 Indianapolis, Indiana
January ____, 1995
FOR VALUE RECEIVED, on or before July 1, 1996 (subject to
acceleration, extension or prepayment), LILLY INDUSTRIES, INC.,
an Indiana corporation ("Borrower"), hereby promises to pay to
the order of NBD BANK, N.A., a national banking association (the
"Bank"), or its assigns, at the main office of the Bank at
Indianapolis, Indiana, or at such other place as the holder
hereof may designate in writing, in lawful money of the United
States of America, the principal sum of Fifteen Million Dollars
($15,000,000), or so much thereof as may be advanced and
outstanding from time to time, together with (a) interest on the
unpaid principal balance existing from time to time at the rates
set forth in Section 2.2 of the Agreement (as hereinafter
defined) prior to maturity and while and so long as there exists
no uncured Event of Default, and (b) interest after maturity,
whether by acceleration or otherwise, or during any period while
there exists any uncured Event of Default at a per annum rate
equal to two percent (2%) above the otherwise applicable rate.
Such interest shall be paid on actual daily balances of
outstanding principal for the exact number of days such principal
remains outstanding and shall be computed on the basis of a three
hundred sixty (360) day year. Any change in the rate of interest
on any Floating Rate Advance occasioned by a change in the
Floating Rate shall be effective on the same day as the change in
Floating Rate.
Principal and interest under this Note shall be payable as
follows:
1. Interest only on the outstanding principal balance
shall be due and payable on the first day of each month,
commencing on the first day of the month following the
initial Advance;
2. From time to time, the Borrower shall pay
installments of principal in an amount sufficient that the
outstanding principal balance of this Note shall not exceed
the Bank's commitment; and
3. Unless extended by the Bank or sooner paid by the
Borrower, the entire unpaid balance of principal, and all
accrued and unpaid interest thereon, shall be due and
payable on July 1, 1996.
<PAGE>
If any installment of principal or interest under this Note
is payable on a day other than a Business Day, the maturity of
such installment shall be extended to the next succeeding
Business Day, and interest shall be payable during such extension
of maturity.
Subject to the terms of the Agreement, the Borrower may
borrow, pay, reborrow and repay the principal amount of this Note
at any time and from time to time.
This Note is referred to in, and is entitled to the benefit
of, a certain Revolving Credit Agreement [1995] executed between
Borrower and NBD Bank, N.A. of even date (as the same may be
amended from time to time, the "Agreement"). Advances under this
Note shall be made in accordance with the Agreement. The
Agreement, among other things, contains a definition of the
capitalized terms used herein and provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
If Borrower fails to make the payment of any installment of
principal or interest, as herein provided, when due, or fails in
the performance of any of the terms, agreements, covenants or
conditions contained in the Agreement beyond any applicable grace
period set forth therein, then in any of such events, or at any
time thereafter, the entire principal balance of this Note, and
all accrued and unpaid interest thereon, irrespective of the
maturity date specified herein, together with reasonable
attorneys' fees and other costs incurred in collecting or
enforcing payment or performance hereof and with interest from
the date of the Event of Default on the unpaid principal balance
hereof at the default rate hereinabove specified, shall, at the
election of the holder hereof, and without relief from valuation
and appraisement laws, become immediately due and payable.
The Borrower and all endorsers, guarantors, sureties,
accommodation parties hereof and all other parties liable or to
become liable for all or any part of this indebtedness, severally
waive demand, presentment for payment, notice of dishonor,
protest and notice of protest and expressly agree that this Note
and any payment coming due under it may be extended or otherwise
modified from time to time without in any way affecting their
liability hereunder.
This Note shall be construed according to and governed by
the laws of the State of Indiana.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed by its duly authorized officers as of the date and year
first hereinabove written.
LILLY INDUSTRIES, INC.
an Indiana corporation
<PAGE>
By: /s/ Roman J. Klusas
-----------------------
Roman J. Klusas,
Vice President, Chief
Financial Officer and
Secretary
Attest:
/s/ Kenneth L. Mills
-----------------------
Kenneth L. Mills,
Director of Corporate Accounting
and Assistant Secretary
<PAGE>
EXHIBIT B
January 27, 1995
NBD Bank, N.A.
One Indiana Square, # 460
Indianapolis, Indiana 46266
Re: Revolving Credit Agreement (1995) of even date between
NBD Bank, N.A. (the "Bank") and Lilly Industries, Inc.
(the "Borrower") (the "Agreement")
Gentlemen:
We have acted as special counsel to the Borrower in
connection with the transactions contemplated by the above
referenced Agreement. Capitalized terms used herein and not
specifically herein defined shall have the meanings ascribed to
them in the Agreement.
In such capacity, and for the purpose of rendering this
opinion, we have examined the following:
(a) The Agreement;
(b) The Revolving Credit Note; and
(c) Copies, certified by the Secretary of the Corporation,
of the corporate proceedings pursuant to which the
execution of the Agreement, and the Revolving Credit
Note (collectively, the "Loan Documents") were
ratified, approved and authorized.
In arriving at the opinions expressed below, we have
examined such other documents and have considered such questions
of law, as, in our judgment, have been necessary to enable us to
render this opinion. With respect to factual matters material to
our opinion, we have, when such facts have not been independently
established, relied upon certificates of officers of the
Borrower, certificates or other information obtained from
governmental authorities and such other information as in our
judgment is necessary or appropriate to render the opinions
expressed below.
In rendering the opinions set forth herein we have assumed,
with your consent and without any independent inquiry, the
following:
(i) The genuineness of signatures of the persons
executing all instruments, documents, certificates, and/or
<PAGE>
agreements evidenced by or related to the transactions
contemplated by the Loan Documents;
(ii) The authority of the persons executing the Loan
Documents and all other instruments, documents, certificates
and/or agreements related to the transactions contemplated
thereby on behalf of the parties thereto (other than the
Borrower);
(iii) The due authorization by all necessary corporate
action of the execution and delivery of the Loan Documents and
all instruments, documents, certificates, and/or agreements
related to the transactions contemplated thereby on behalf of the
parties thereto (other than the Borrower);
(iv) The authenticity of all documents submitted to us
as originals; and
(v) The conformity to authentic original documents of
documents submitted to us as certified, conformed or photostatic
copies.
Based upon the foregoing and subject to the further
qualifications and limitations hereinafter set forth, it is our
opinion, limited in all respects to the present internal laws of
the State of Indiana and the present federal laws of the United
States of America, that, insofar as those laws are applicable:
1. The Borrower is a corporation, duly organized and
validly existing under and by virtue of the laws of the State of
Indiana. The Borrower has taken all necessary corporate action to
authorize the execution and delivery of the Loan Documents.
2. The Borrower possesses the requisite corporate power to
enter into the Loan Documents and to perform its obligations
thereunder.
3. The execution and delivery of the Loan Documents by the
Borrower will not violate, breach, contravene, cause a default or
result in the imposition of a lien under any provision of the
Articles of Incorporation or Bylaws of the Borrower or, to our
knowledge, any existing note, bond, mortgage, debenture,
indenture, trust, lease, instrument, judgment, order, decree, or
other agreement to which the Borrower is a party or by which it
or its assets may be bound.
4. The Loan Documents will, upon due execution and
delivery by an authorized officer of the Borrower, constitute
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their terms, except as
the same may be limited by (i) the United States Bankruptcy Code,
(ii) any applicable insolvency, reorganization, moratorium or
similar laws of the State of Indiana or the United States
relating to or affecting the enforcement of creditors' rights
<PAGE>
generally, (iii) general principles of equity, and (iv) judicial
discretion.
5. To our knowledge, no authorization, consent, approval,
registration, license or any form of exemption of any Indiana
state or United States federal governmental authority is required
in connection with the execution, delivery and performance by the
Borrower of its obligations under the Loan Documents.
6. To our knowledge, (i) no litigation or proceeding of
any Indiana state or United States federal governmental authority
or any other person is presently pending or threatened against
the Borrower, nor (ii) has any claim been asserted against the
Borrower, which in the case of (i) or (ii) above seeks to enjoin
the transactions contemplated by the Loan Documents.
Our opinion is subject to the following qualifications:
A. The enforceability of the Loan Documents may be limited
if the Bank should fail to act in good faith or in a commercially
reasonable manner in seeking to exercise rights or remedies
thereunder.
B. Whenever our opinion with respect to the existence or
absence of facts is qualified by the phase "to our knowledge," it
is intended to indicate that during the course of our
representation of the Borrower no information has come to our
attention which would give us actual knowledge of the existence
or absence of such facts. Moreover, we have not undertaken any
independent investigation to determine the existence or absence
of such facts, and any limited inquiries made by us should not be
regarded as such an investigation. Any certificates or
representations obtained by us form officers of the Borrower with
respect to such opinions have been relied upon without any
independent verification.
C. Whenever we have stated we assumed any matter, it is
intended to indicate that we have assumed such matter without
making any factual, legal, or other inquiry or investigation, and
without expressing any opinion or stating any conclusion of any
kind concerning such matter.
D. This opinion is furnished to you pursuant to the Loan
Documents and is not to be used, circulated, quoted or otherwise
referred to for any other purpose.
E. This opinion is dated and speaks as of the date of
delivery. We have no obligation to advise you or any third
parties of any changes in law or fact that may hereafter occur or
come to our attention, even though the legal analysis or legal
conclusions contained in this opinion letter may be affected by
such change.
Very truly yours,
EXHIBIT 10(l)
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
[1995]
Between
LILLY INDUSTRIES, INC.
and
SOCIETY NATIONAL BANK, INDIANA
Dated as of January 27, 1995
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TABLE OF CONTENTS
Page
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Definitions. . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . 9
1.3 Other Definitions; Singular and Plural . . . . . . . 9
SECTION 2. Credit . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Commitment; Termination of Prior Revolving
Credit Agreement . . . . . . . . . . . . . . . . . 9
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Payments of Principal and
Interest . . . . . . . . . . . . . . . . . . . . . 10
2.4 Use of Proceeds. . . . . . . . . . . . . . . . . . . 10
2.5 Method of Advance. . . . . . . . . . . . . . . . . . 10
2.6 Conversion of Advances . . . . . . . . . . . . . . . 11
2.7 Method of Payment. . . . . . . . . . . . . . . . . . 12
2.8 Prepayment . . . . . . . . . . . . . . . . . . . . . 13
2.9 Computations of Interest . . . . . . . . . . . . . . 13
2.10 Additional Costs . . . . . . . . . . . . . . . . . . 13
2.11 Commitment Fees . . . . . . . . . . . . . . . . . . 14
2.12 Reductions of Revolving Credit
Commitment . . . . . . . . . . . . . . . . . . . . 14
SECTION 3. Conditions Precedent . . . . . . . . . . . . . . . 14
3.1 Conditions Precedent to the
Initial Advance of the Loan. . . . . . . . . . . . 14
3.2 Conditions to Subsequent Advances. . . . . . . . . . 15
SECTION 4. Representations and Warranties . . . . . . . . . . 16
4.1 Corporate Existence. . . . . . . . . . . . . . . . . 16
4.2 Corporate Powers . . . . . . . . . . . . . . . . . . 16
4.3 Power of Officers. . . . . . . . . . . . . . . . . . 16
4.4 Government and Other Approvals . . . . . . . . . . . 16
4.5 Compliance with Laws;
Environmental Matters. . . . . . . . . . . . . . . 16
4.6 Enforceability of Agreement. . . . . . . . . . . . . 17
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . 17
4.8 Events of Default. . . . . . . . . . . . . . . . . . 17
4.9 Investment Company Act of 1940 . . . . . . . . . . . 17
4.10 Financial Information . . . . . . . . . . . . . . . 17
4.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Full Disclosure. . . . . . . . . . . . . . . . . . . 18
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<PAGE>
Page
SECTION 5. Covenants . . . . . . . . . . . . . . . . . . . . 18
5.1 Use of Proceeds . . . . . . . . . . . . . . . . . . 18
5.2 Maintain Existence, Etc.. . . . . . . . . . . . . . 18
5.3 Financial Statements, Etc.. . . . . . . . . . . . . 18
5.4 Adequate Books . . . . . . . . . . . . . . . . . . 19
5.5 Leverage Ratio . . . . . . . . . . . . . . . . . . 19
5.6 Current Ratio . . . . . . . . . . . . . . . . . . . 19
5.7 Cash Flow Coverage Ratio . . . . . . . . . . . . . 20
5.8 Net Worth . . . . . . . . . . . . . . . . . . . . . 20
5.9 Hazardous Materials . . . . . . . . . . . . . . . . 20
5.10 Mergers, Etc. . . . . . . . . . . . . . . . . . . . 20
5.11 Liens . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Notice of Default . . . . . . . . . . . . . . . . . 20
5.13 Indebtedness. . . . . . . . . . . . . . . . . . . . 21
5.14 Insurance . . . . . . . . . . . . . . . . . . . . . 21
5.15 No Material Adverse Change . . . . . . . . . . . . 21
5.16 Margin Rules. . . . . . . . . . . . . . . . . . . . 21
SECTION 6. Default and Remedy. . . . . . . . . . . . . . . . 21
6.1 Events of Default . . . . . . . . . . . . . . . . . 21
6.1.1 Nonpayment. . . . . . . . . . . . . . . . 21
6.1.2 Representation or Warranty. . . . . . . . 21
6.1.3 Other Defaults. . . . . . . . . . . . . . 21
6.1.4 Voluntary Bankruptcy. . . . . . . . . . . 21
6.1.5 Involuntary Bankruptcy. . . . . . . . . . 22
6.1.6 Cross Default . . . . . . . . . . . . . . 22
6.1.7 Adverse Judgments . . . . . . . . . . . . 22
6.2 Remedy . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7. Miscellaneous . . . . . . . . . . . . . . . . . . 23
7.1 Notices . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Successors and Assigns. . . . . . . . . . . . . . . 23
7.3 Participation and Assignments . . . . . . . . . . . 23
7.4 Amendments and Waivers. . . . . . . . . . . . . . . 24
7.5 Costs and Expenses. . . . . . . . . . . . . . . . . 24
7.6 Entire Agreement. . . . . . . . . . . . . . . . . . 24
7.7 Governing Law . . . . . . . . . . . . . . . . . . . 24
7.8 Section Headings. . . . . . . . . . . . . . . . . . 24
7.9 Severability . . . . . . . . . . . . . . . . . . . 24
7.10 Indemnity . . . . . . . . . . . . . . . . . . . . . 24
7.11 Jury Trial Waiver . . . . . . . . . . . . . . . . . 25
Schedule 1 Permitted Liens
Exhibit A Revolving Credit Note
Exhibit B Opinion of Counsel to Borrower
- ii -
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Society National Bank, Indiana
[1995]
THIS AGREEMENT, is made as of the 27th day of January, 1995,
between LILLY INDUSTRIES, INC., an Indiana corporation (the
"Borrower") and Society National Bank, Indiana, a national
banking association (the "Bank");
SECTION 1
Definitions
1.1 Defined Terms. As used herein:
"Additional Costs" shall have the meaning ascribed in
Section 2.10.
"Advance" means a disbursement of proceeds of a Loan.
"Affiliate" means, with respect to any Person, any other
Person (including, but not limited to, each officer and director
of such Person) directly or indirectly controlling, controlled
by, or under direct or indirect common control with such Person.
(A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract
or otherwise.)
"Agreement" means this Revolving Credit Agreement [1995], as
the same may be amended from time to time.
"Applicable Margin" means as to a Eurodollar Rate Advance
(a) 43.75 basis points if the Cash Flow Coverage ratio is 1.3:1.0
or greater or (b) 56.25 basis points if the Cash Flow Coverage
Ratio is less than 1.3:1.0.
"Base Rate" means that rate of interest established from
time to time by the Bank as the Bank's Prime Rate whether or not
such rate is publicly announced, which rate may not be the lowest
interest rate charged by the Bank for commercial or other
extensions of credit.
"Business Day" means a day other than a Saturday, Sunday or
other day on which the Bank is open for the conduct of its
general banking business and, if the applicable day relates to
any Eurodollar Rate Advance, or notice with respect to any
Eurodollar Rate Advance, a day on which dealings in Dollar
deposits are also carried on in the London interbank market and
banks are open for business in London.
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"Cash Flow Coverage Ratio" means, as of the date of
determination, (a) the sum of (i) net income after taxes, plus
(ii) income tax expense, plus (iii) interest expense, plus (iv)
depreciation, amortization and other non-cash expenses; divided
by (b) the sum of (i) income tax expense, plus (ii) interest
expense, plus (iii) current maturities of long term debt, plus
(iv) cash dividends, plus (v) additional Investments in treasury
stock, for the four (4) fiscal quarters immediately preceding
such date all as determined by reference to the financial
statements furnished to the Bank from time to time pursuant to
Section 5.3.
"Commitment" means the obligation of the Bank to make Loans
during the Commitment Period up to a maximum aggregate principal
amount outstanding at any time of $15,000,000.
"Commitment Period" means the period from the date hereof
through June 30, 1996, unless extended or renewed by a prior
written agreement executed by the Borrower and the Bank (it
being understood that, if so agreed by the Borrower and the Bank,
the Commitment Period shall be considered for extension annually
and shall be extended for successive 2-year periods).
"Compliance Certificate" means a Compliance Certificate in a
form prescribed by the Bank, establishing Borrower's compliance
with the terms and conditions of this Agreement.
"Consolidated" means: (a) when used herein with reference to
financial statements, ratios, assets or liabilities, that any
calculations have been made by consolidating the assets,
liabilities, income, expenses, and cash flows of a Person and its
Consolidated Subsidiaries after eliminating all intercompany
items and making such adjustments as required by GAAP; and (b)
when used herein with reference to a Subsidiary of a Person, a
Subsidiary, the financial statements of which have been or, in
accordance with GAAP, are required to be presented together on a
Consolidated basis with those of such Person.
"Consolidated Net Worth" means the excess of total assets
over total liabilities and reserves of a Person and its
Consolidated Subsidiaries, computed on a Consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Tangible Net Worth" means, with respect to any
Person, such Person's Consolidated Net Worth, less:
(a) Goodwill (including the unallocated excess purchase
cost of assets acquired in a transaction accounted for as a
purchase over the aggregate fair market value thereof on the
date of acquisition), patents, trademarks, trade names,
copyrights, franchises, deferred charges, (including
unamortized debt discount and expense, deferred research and
development expenses and organizational costs), treasury
<PAGE>
stock and all other items that would be treated as intangible
assets under GAAP; and
(b) Any write-up of the book value of any asset of such
Person or any of its Consolidated Subsidiaries other than a
write-up in accordance with GAAP of assets of a Subsidiary of
such Person in connection with the acquisition of such
Subsidiary by such Person.
"Consolidated Total Liabilities" means the excess of (a)
total assets of a Person and its Consolidated Subsidiaries, over
(b) Consolidated Net Worth, computed on a Consolidated basis in
accordance with GAAP consistently applied.
"Conversion Date" means any date specified on which Borrower
elects to convert an Advance of any type to an Advance of another
type.
"Current Assets" means, as to any Person, the aggregate book
value of all assets which would be classified as current assets
of such Person in accordance with GAAP after making adequate
reserves in each case where a reserve is proper in accordance
with GAAP.
"Current Liabilities" means, as to any Person, all
Indebtedness of such Person maturing on demand or within one (1)
year after the date on which such determination is made and all
other items (including estimated accrued taxes) which would be
classified as current liabilities in accordance with GAAP.
"Default" means an event, which with notice or lapse of time
or both, would become an Event of Default.
"Deposit Account" means Borrower's checking account at the
Bank.
"Dollars" and the sign "$" shall mean the lawful money of the
United States of America.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all the rules and regulations promulgated pursuant
thereto, as amended from time to time.
"ERISA Event" means, as to any Person, (a) a Reportable Event
described in Section 4043 of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the
provision for thirty (30)-day notice to the PBGC under such
regulations); or (b) the withdrawal of such Person or any member
of its controlled group from a Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; or (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA; or (d) the institution of proceedings to
terminate a Plan by the PBGC; or (e) a transaction that occurs on
<PAGE>
or after April 7, 1986 and that is reasonably likely to be
subject to Section 4060 of ERISA without regard to the
termination date, if any, of any former Plan; or (f) any other
event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,
any Plan or to result in the imposition of any liability under
Title IV of ERISA.
"Eurocurrency Liabilities" has the meaning ascribed to such
term in Regulation D of the Federal Reserve Board, as in effect
from time to time.
"Eurodollar Rate" means, for each Interest Period for a
Eurodollar Rate Advance, an interest rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) determined
pursuant to the following formula:
Eurodollar Rate = LIBOR
-------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means, for each
Interest Period in respect of a Eurodollar Rate Advance,
the maximum reserve percentage in effect on the date
LIBOR for such Interest Period is determined under
regulations (whether or not applicable to Bank) issued
from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other
marginal reserve requirement) with respect to liabilities
or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period;
and
"LIBOR" means, for each Interest Period in respect
of a Eurodollar Rate Advance, the rate of interest
determined and quoted by the Bank to be the rate of
interest at which Dollar deposits for such Interest
Period, and in an amount approximately equal to the
principal amount of the Eurodollar Rate Advance to be
made or maintained by the Bank during such Interest
Period would be offered to major banks in the London
interbank market at their request at or about 11:00 A.M.
(London time) two (2) Business Days prior to the
commencement of such Interest Period.
"Eurodollar Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to the
Eurodollar Rate.
<PAGE>
"Event of Default" means any event set forth in Section 6
hereof.
"Federal Funds Effective Rate" means, for any day, an
interest rate per annum equal to the weighted average of the
rates on over night Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on
such date, as published for such date (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of Chicago, or, if such rate is not so
published for any day which is a Business Day, the average of the
quotations at approximately 11:00 a.m. (Indianapolis time) on
such day on such transactions received by the Bank from three (3)
Federal funds brokers of recognized standing selected by the Bank
in its sole discretion.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereof.
"Floating Rate" means, for any day, a rate of interest per
annum equal to the greater of (a) the Base Rate for such day or
(b) the Federal Funds Effective Rate for such day plus 100 basis
points.
"Floating Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to the
Floating Rate.
"Fiscal Year" means a year commencing December 1 and ending
November 30.
"Fixed Assets" means land, buildings, property and equipment.
"GAAP" means generally accepted accounting principles in the
United States of America from time to time as promulgated by the
Financial Standards Accounting Board and recognized and
interpreted by the American Institute of Certified Public
Accountants; provided, however, that in the determination of the
Borrower's compliance with Sections 5.5 through 5.8 hereof, the
effect of FASB 106 shall be disregarded.
"Hazardous Material" means and includes any hazardous, toxic
or dangerous waste, substance or material defined as such in or
for the purpose of the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order, decree or other
requirement of any governmental authority regulating, relating
to, or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste or material, as now or at any
time hereafter in effect.
"Indebtedness" means as to any Person (a) all indebtedness or
other obligations of a Person for borrowed money or for the
<PAGE>
deferred purchase price of property or services; (b) all
indebtedness or other obligations of any other Person for
borrowed money or for the deferred purchase price of property or
services, the payment or collection of which the subject Person
has guaranteed (except by reason of endorsement for collection in
the ordinary course of business) or in respect of which the
subject Person is liable, contingently or otherwise, including,
without limitation, liability by way of agreement to purchase, to
provide funds for payment, to supply funds to or otherwise to
invest in such other Person, or otherwise to assure a creditor
against loss; (c) all indebtedness or other obligations of any
other Person for borrowed money or for the deferred purchase
price of property or services secured by (or for which the holder
of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance upon or in
property owned by the subject Person, whether or not the subject
Person has assumed or become liable for the payment of such
indebtedness or obligations; and (d) capitalized lease
obligations of such Person.
"Interest Period" means:
(a) With respect to each Eurodollar Rate Advance,
the period commencing on the Business Day such Advance is
disbursed or on the Conversion Date on which an Advance
is converted to such Eurodollar Rate Advance and ending
either on the date thirty (30), sixty (60), ninety (90),
one hundred twenty (120) or one hundred eighty (180) days
thereafter, as selected by Borrower pursuant to Section
2.5 hereof; provided, however, that:
(i) In the case of the continuation of
a Eurodollar Rate Advance, the Interest Period
applicable after the continuation of such
Advance shall commence on the last day of the
preceding Interest Period; and
(ii) Any Interest Period which would
otherwise end on a day which is not a Business
Day shall be extended to the next succeeding
Business Day unless such Business Day falls in
another calendar month, in which case such
Interest Period shall end on the next preceding
Business Day; and
(b) With respect to each Negotiated Rate Advance,
the period commencing on the Business Day such Advance is
disbursed and ending on the date specified in the Request
for such Negotiated Rate Advance.
"Interest Period Payment Date" means the first day of each
calendar month.
"Investment" means (a) any loan, advance, guarantee,
extension of credit (other than in the ordinary course of
<PAGE>
business to trade customers) or contribution of capital to any
Person or the purchase of any Persons' notes, stock, bonds or
other securities; (b) advances to employees of a Person other
than advances for the purpose of defraying travel, relocation or
business expenses in the ordinary course of business; and (c) any
capital, property, or services contributed or committed to be
contributed to a Person in connection with the purchase of debt,
equity or other ownership interest.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement
to provide any of the foregoing), any conditional sale or other
title retention agreement or any lease in the nature thereof, or
any filing or agreement to file a financing statement as debtor
on any property leased under a lease which is not in the nature
of a conditional sale or title retention agreement.
"Loan Documents" means, collectively, this Agreement, the
Note and each other document now or hereafter executed by the
Borrower in favor of the Bank governing, evidencing or otherwise
related to the Obligations.
"Loans" means the revolving loans made by the Bank to the
Borrower from time to time pursuant to Section 2.1 hereof in the
maximum aggregate principal amount of $15,000,000 in accordance
with the Commitment, including any extensions or renewals
thereof.
"Negotiated Rate" means a fixed rate per annum which is
offered to Borrower by the Bank in its sole discretion and which
is accepted by Borrower.
"Negotiated Rate Advance" means the amount of an Advance on
which interest is or is to be calculated with reference to a
Negotiated Rate.
"Note" means the Revolving Credit Note in the form attached
hereto as Exhibit A in the maximum aggregate principal amount of
$15,000,000 (or so much thereof as may be advanced or
outstanding from time to time) executed by the Borrower in favor
of the Bank.
"Obligations" means all obligations, indebtedness and
liabilities of Borrower under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation created
under Section 4002(a) of ERISA or any successor thereto.
"Permitted Liens" means:
(a) Liens (i) for taxes not yet due or (ii) which
are being actively contested in good faith by appropriate
proceedings (in a manner sufficient to prevent
enforcement of the matter under contest) as to which
<PAGE>
adequate reserves have been set aside in an amount
determined in accordance with GAAP;
(b) Liens incidental to the conduct of the business
of the Borrower and its Consolidated Subsidiaries or the
ownership of their respective owned properties and assets
which were not incurred in connection with the incurring
of Indebtedness, and which do not materially detract from
the value of such property or assets or impair the use
thereof in the operation of the Borrower's or such
Subsidiaries' business;
(c) Liens on property or assets of a Subsidiary of
the Borrower to secure obligations of such Subsidiary to
the Borrower or another Subsidiary of the Borrower;
(d) Liens on the properties and assets acquired by
the Borrower or of any Subsidiary of the Borrower
subsequent to the date hereof, which Liens pre-exist the
date of such acquisition;
(e) Liens on properties or assets of the Borrower
and its Consolidated Subsidiaries, which properties and
assets do not exceed Ten Percent (10%) of the total
tangible assets of the Borrower and its Consolidated
Subsidiaries; and
(f) As set forth on Schedule 1 hereto.
"Person" means an individual, a corporation, a partnership,
an association, a trust or any other entity or organization,
including a governmental or political subdivision or an agent or
instrumentality thereof.
"Plan" means any defined benefit plan maintained or
contributed to by Borrower or any of its Subsidiaries or by any
trade or business (whether or not incorporated) under common
control with Borrower or any of its Subsidiaries as defined in
Section 4001(b) of ERISA and insured by the PBGC under Title IV
of ERISA.
"Prior Revolving Credit Agreement" means the Revolving Credit
Agreement [1993], dated October 6, 1993, between Lilly
Industries, Inc., an Indiana corporation and Society National
Bank, Indiana, a national banking association.
"Regulatory Change" shall have the meaning ascribed in
Section 2.10.
"Reportable Event" shall be as defined in ERISA.
"Request" shall have the meaning ascribed in Section 2.5
hereof.
<PAGE>
"Subsidiary" of a Person means any corporation of which such
Person owns or otherwise controls, directly or indirectly, more
than 50% of the total voting securities thereof, and shall
include any such corporation which becomes a Subsidiary of such
Person after the date hereof.
"Termination Date" means July 1, 1996.
"Wholly-Owned Subsidiary" means a Consolidated Subsidiary of
a Person, 100% of the voting securities of which is owned or
controlled by such Person.
1.2 Accounting Terms. All accounting terms used herein and
not used herein and not expressly defined herein shall (unless
otherwise expressly indicated) have the respective meanings given
to them in accordance with GAAP. All financial computations made
under this Agreement for the purpose of determining compliance
with the financial requirements of this Agreement shall be made
on a Consolidated basis and shall be made, and all financial
information required under this Agreement shall be prepared, in
accordance with GAAP consistently applied. In determining the
value of assets, Investments in Persons other than Consolidated
Subsidiaries shall be determined on the basis of the lesser of
cost or the book value of such Person on the date of
determination.
1.3 Other Definitions; Singular and Plural. The terms
defined in the preamble of this Agreement and used herein shall
have the meanings ascribed in the preamble hereof. Use of the
terms "herein", "hereof", and "hereunder" shall be deemed
references to this Agreement in its entirety and not to the
Section or clause in which such term appears. The foregoing
definitions shall be equally applicable to both the singular and
plural forms of the defined terms.
SECTION 2
Credit
2.1 Commitments; Termination of Prior Revolving Credit
Agreement. Subject to the terms and conditions hereof, the Bank
agrees to make Loans to the Borrower from time to time during the
Commitment Period in a principal amount not in excess of the
unborrowed portion of the Commitment on the borrowing date.
During the Commitment Period, the Borrower may use the Commitment
by borrowing, prepaying the Loans, in whole or in part, and
reborrowing, all subject to, and in accordance with, the terms
and conditions hereof. The Loans shall be evidenced by the Note.
This Agreement completely amends and supersedes the Prior
Revolving Credit Agreement. The Prior Revolving Credit Agreement
is hereby terminated, shall be of no further force or effect and
none of the parties thereto shall have any further liabilities or
obligations with respect thereto. All promissory notes executed
<PAGE>
and delivered in connection with the Prior Revolving Credit
Agreement shall be cancelled by the Bank and delivered to the
Borrower.
2.2 Interest. Prior to maturity or the occurrence of an
Event of Default, the principal amount of the Loans shall bear
interest at the election of the Borrower at any of the following
rates (a) a per annum rate equal to the Eurodollar Rate, plus the
Applicable Margin; (b) at a per annum rate equal to the Floating
Rate; or (c) at a Negotiated Rate. After maturity or the
occurrence of an Event of Default, interest shall be calculated
in accordance with Section 2.9
2.3 Payments of Principal and Interest. Interest only on
the outstanding Advances of the Loans from time to time shall be
due and payable on the Interest Period Payment Date throughout
the term of the Commitment Period. Unless sooner paid, the
Borrower shall make principal payments in an amount sufficient
that the outstanding principal balance of the Loans shall not
exceed the Commitment. Unless the Loans are sooner paid by the
Borrower or extended by the Bank in its sole discretion, the
entire principal balance of the Loans, together with all accrued
and unpaid interest thereon, and all fees and charges payable in
connection therewith, shall be due and payable on July 1, 1996.
2.4 Use of Proceeds. The proceeds of the Loans shall be
used to fund the general working capital of the Borrower and its
Subsidiaries (including, but not limited to, the construction or
purchase of Fixed Assets) and for acquisition purposes.
2.5 Method of Advance. Subject to the provisions of Section
2.1:
(a) Advances of the Loans shall be made available to
Borrower prior to the Termination Date, provided the Bank
receives, at the time and in accordance with the terms of
this Section, a request ("Request") specifying the amount of
the Advance, the interest rate election of Borrower related
thereto and, if appropriate, the Interest Period related
thereto. Requests may be made by telephone, and the Bank may
rely, without further inquiry, on such telephonic Requests as
the act of Borrower through an authorized representative;
provided, however, that the Bank may require telephonic or
other oral requests to be followed immediately by a written
Request. Notwithstanding anything to the contrary contained
in the definition of "Interest Period", the Borrower may not
select an Interest Period with respect to any Advance which
ends after the Termination Date.
(b) Each Request shall constitute a representation and
warranty by the Borrower that no Default or Event of Default
has occurred and is continuing or would result from the
making of the requested Advance and that the requested
Advance shall not cause the principal balance of the Loans to
exceed the Commitment.
<PAGE>
(c) Each Request, which shall be irrevocable once
received, must be received by the Bank not later than 11:00
A.M. (Indianapolis time), (i) on the date such Advance is to
be made, if such Advance is to be made as a Negotiated Rate
Advance or a Floating Rate Advance, and (ii) three (3)
Business Days prior to the date such Advance is to be made,
if such Advance is to be an Eurodollar Rate Advance. Prior to
11:00 A.M. (Indianapolis time) on the second (2nd) Business
Day prior to the date such Advance is to be made, the Bank
will, through designated employees, quote the Eurodollar
Rate. The Borrower shall then have until 1:00 P.M.
(Indianapolis time) on that same Business Day of the quote by
the Bank to execute its option to elect the Eurodollar Rate.
(d) All Advances shall be in a minimum amount of
$1,000,000 and integral multiples of $100,000 and shall be
made by credit to the Deposit Account.
(e) All notices (including Requests) made by Borrower
to the Bank and received by the Bank after 11:00 A.M.
(Indianapolis time) (or such other time as is specified in
any Section hereof) on a Business Day shall be deemed
received on the next succeeding Business Day.
(f) If the Borrower fails to give timely notice of its
interest rate election pursuant to this Section 2.5, or if
the Borrower and the Bank do not agree on a Negotiated Rate,
Borrower shall be deemed to have selected the Floating Rate.
(g) All Advances by the Bank and payments by the
Borrower shall be recorded by the Bank on its books and
records, and the principal amount outstanding from time to
time, plus interest payable thereon, shall be determined from
the books and records of the Bank. The books and records of
the Bank shall be presumed prima facie correct as to such
matter. Any statement of a the Bank to the Borrower setting
forth the Borrower's account regarding the Advances and
payments shall be considered true and correct and binding on
the Borrower unless the Bank is notified in writing of any
discrepancy or exception within thirty (30) days from the
date of mailing such monthly statement. Notwithstanding the
foregoing, the failure to make, or an error in making, a
notation with respect to any Advance shall not limit or
otherwise affect the obligation of the Borrower hereunder.
2.6 Conversion of Advances. Borrower may, upon receipt by
the Bank of a Request not later than 11:00 A.M. (Indianapolis
time) three (3) Business Days prior to the applicable Conversion
Date:
(a) Elect to convert on any Business Day any Floating
Rate Advance into an Advance of any other type;
<PAGE>
(b) Elect to convert upon expiration of any Interest
Period, any Eurodollar Rate Advance or Negotiated Rate
Advance maturing at the end of such Interest Period into an
Advance of any other type; or
(c) Elect to renew, upon expiration of any Interest
Period, any Eurodollar Rate Advance maturing at the end of
such Interest Period by selecting the duration of the next
Interest Period thereof; provided, however, that if any
Eurodollar Rate Advance shall have an outstanding principal
balance of less than $1,000,000, the Eurodollar Rate Advance
subject to renewal shall automatically convert to a Floating
Rate Advance and after such date the right of Borrower to
continue any such Advance as a Eurodollar Rate Advance shall
terminate.
If upon the expiration of any Interest Period applicable to a
Eurodollar Rate Advance, Borrower has failed to select a new
Interest Period to be applicable to such Advance as the case may
be, Borrower shall be deemed to have elected to convert such
Advance into a Floating Rate Advance effective as of the
expiration of the then current Interest Period. Notwithstanding
any other provision of this Agreement:
(aa) If Borrower desires to convert any Advance to a
Eurodollar Rate Advance or continue or renew any Eurodollar
Rate Advance at the expiration of an Interest Period, the
provisions of Section 2.5(c) shall apply; and
(bb) In the event that the Bank determines (which
determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the
London interbank market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for any Eurodollar
Interest Period at a time when a Eurodollar Rate is requested
or when the outstanding balance of Advances under the Loans
is being maintained at the Eurodollar Rate, the Bank shall
forthwith give notice of such determination, confirmed in
writing, to the Borrower (if such confirmation is requested
by the Borrower), whereupon the selection of an Eurodollar
Rate shall be prohibited, and if the Borrower and the Bank
are unable to agree on a Negotiated Rate, the outstanding
principal balance of Advances under the Loans then bearing
interest at the Eurodollar Rate shall be converted, on the
last day of the then current Eurodollar Interest Period, to
the Floating Rate.
2.7 Method of Payment. All payments of principal and
interest on the Note shall be made without setoff or counterclaim
by the Borrower to the Bank at its main office in Indianapolis,
Indiana, by 11:30 A.M. (Indianapolis time) on the date when due.
All sums received after such time shall be deemed received on the
next Business Day. Any payment due on a day that is not a
<PAGE>
Business Day shall be made on the next Business Day. The Bank is
hereby authorized by the Borrower to debit the Deposit Account
for each payment of principal or interest under the Loans as it
becomes due. All payments with respect to the Loans shall be
payable in funds available for the Bank's immediate use at
Indianapolis, Indiana, and no payment will be considered to have
been made until received in such funds. All payments received on
account of any of the Loans will be applied first to the
satisfaction of any interest which is then due and payable, and
to principal only after all interest which is due and payable has
been satisfied.
2.8 Prepayment. The Borrower may prepay any Floating Rate
Advance in whole or in any multiple at any time, and from time to
time, without notice, premium or penalty. The Borrower may not
prepay any Eurodollar Rate Advance or Negotiated Rate Advance at
any time prior to the last day of the Interest Period applicable
thereto.
2.9 Computations of Interest. All computations of interest
and fees under this Agreement shall be made on the basis of a
360-day year and calculated for the actual number of days
elapsed. Any change in the rate of interest on any Floating Rate
Advance occasioned by a change in the Base Rate or Federal Funds
Effective Rate shall be effective on the same day as the change
in Base Rate or the Federal Funds Effective rate, as the case may
be. Interest shall accrue on any principal balance outstanding
from and including the date of disbursement to, but excluding,
the date on which such principal balance is repaid.
Notwithstanding anything to the contrary herein contained, all
principal hereunder not paid when due, whether by lapse of time
or by acceleration, shall bear interest after maturity at a per
annum rate equal to Two Percent (2%) above the otherwise
applicable rate.
2.10 Additional Costs. Borrower shall pay to the Bank from
time to time such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs incurred by the
Bank which the Bank determines is attributable to its making or
maintaining any Eurodollar Rate Advance hereunder or its
obligation to make any Advance hereunder, or any reduction in any
amount receivable by the Bank under this Agreement or the Note in
respect of any such Advance or such obligation (such increases in
costs and reductions in amounts receivable being herein called
"Additional Costs") resulting from any change after the date of
this Agreement in federal, state, municipal, or foreign laws or
regulations (including Regulation D of the Federal Reserve Board)
or the adoption or making after such date of any interpretations,
directives, or requirements applying to a class of banks
including the Bank of or under any federal, state, municipal, or
foreign laws or regulations (whether or not having the force of
law) by any court or governmental authority charged with the
administration thereof ("Regulatory Change"), which: (a) changes
the basis of taxation of any amounts payable to the Bank under
<PAGE>
this Agreement in respect of any Advance (other than taxes
imposed on the overall net income of the Bank); or (b) imposes or
modifies any reserve, special deposit, or similar requirements
relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of the Bank; or (c) imposes
any other condition affecting this Agreement (or any of such
extensions of credit or liabilities). The Bank will notify
Borrower of any event occurring after the date of this Agreement
which will entitle the Bank to compensation under this Section
2.10 as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation.
Determinations by the Bank for the purposes of this Section 2.10
of the effect of any Regulatory Change on its cost of making or
maintaining any Loan or on amounts receivable by or in respect of
any Loan, and of the additional amounts required to compensate
Bank in respect of Additional Costs, shall be conclusive,
provided that such determinations are made on a reasonable basis
and the Bank provides Borrower with its calculations of
Additional Costs.
2.11 Commitment Fee. Borrower shall pay to the Bank a
commitment fee equal to three-sixteenths (3/16) of one percent
(1%) per annum on the maximum amount of the Commitment, which fee
shall be due and payable quarterly in advance, within fifteen
(15) days of receipt by the Borrower of an invoice therefor.
2.12 Reductions of Revolving Credit Commitment. The
Borrower shall have the right to terminate or reduce the
aggregate amount of the Commitment at any time or from time to
time, provided that (a) the Borrower shall give notice of each
such termination or reduction in the manner provided in Section
7.1; (b) each partial reduction shall be in an aggregate amount
at least equal to $1,000,000 and integral multiples of $100,000;
(c) the aggregate Commitment shall not be reduced to an amount
less than the outstanding principal balance of the Revolving
Credit Loans; and (d) the Commitment once terminated or reduced
may not be reinstated without the prior written approval of the
Bank.
SECTION 3
Conditions Precedent
3.1 Conditions Precedent to the Initial Advance of the Loan.
In addition to the requirements set forth in Section 3.2, the
obligations of the Bank to make the initial Advance is subject to
the condition precedent that the following shall have been
delivered to the Bank in form and substance satisfactory to the
Bank:
(a) Organic Documents. A copy of the articles of
incorporation and by-laws, including all amendments thereto,
<PAGE>
of Borrower, certified by the Secretary or an Assistant
Secretary as being in full force and effect on the date
hereof.
(b) Corporate Resolutions. Copies of resolutions
passed by the Board of Directors of Borrower, certified by
the Secretary or Assistant Secretary of Borrower, as
applicable, as being in full force and effect on the date
hereof.
(c) Loan Documents. The Loan Documents duly executed
by Borrower.
(d) Certificate of Existence. A Certificate of
Existence or Good Standing for Borrower in the jurisdiction
of its incorporation certified by the Secretary of State or
other appropriate official of such jurisdictions.
(e) Opinion of Counsel. The favorable written opinion
of counsel to Borrower, dated as of the date hereof,
substantially in the form and of the substance attached
hereto as Exhibit B.
(f) Other Evidence Bank May Require. Such other
documents or evidence as the Bank may reasonably request in
writing in order to consummate the transactions contemplated
hereby or to evidence the taking of all necessary actions in
any proceedings in connection herewith and compliance with
the conditions set forth in this Agreement.
(g) Expenses. Payment of the expenses of the Bank
described in Section 7.5 for which Borrower has received
proper invoices or requests for payment.
3.2 Conditions to Subsequent Advances. The obligations of
the Bank to make any Advance after the date hereof is subject to
the following conditions precedent:
(a) The representations and warranties contained in
Section 4 shall be true and correct and no Default or Event
of Default shall have occurred and be continuing;
(b) The Bank shall have received a Request;
(c) All fees, expenses and other amounts due and
payable to or for the benefit of the Bank under the Loan
Documents shall have been paid; and
(d) The aggregate outstanding principal balance of the
Loans, after giving effect to the requested Advance, may not
exceed the Commitment.
<PAGE>
SECTION 4
Representations and Warranties
Borrower represents and warrants to the Bank on the date
hereof, and shall be deemed to have made such representations and
warranties to Bank on the date of each Advance hereunder, that:
4.1 Corporate Existence. Borrower and each of its
Consolidated Subsidiaries is a corporation duly organized and
existing under the laws of the jurisdiction of its incorporation,
and is duly qualified as a foreign corporation and is properly
licensed and in good standing in each jurisdiction where the
failure to qualify or be licensed would have a material adverse
effect on its business, properties or conditions (financial or
otherwise).
4.2 Corporate Powers. The execution, delivery and
performance of the Loan Documents by Borrower are within
Borrower's corporate powers, have been duly authorized by all
requisite corporate action, and are not in conflict with the
terms of any charter, by-laws or other organization papers of
Borrower, or any instrument or agreement to which Borrower is a
party or by which Borrower is bound or affected.
4.3 Power of Officers. The officers of Borrower executing
the Loan Documents and any certificate, instrument or agreement
required to be delivered by Borrower thereunder have been duly
elected or appointed and were fully authorized to execute the
same at the time such agreement, certificate or instrument was
executed.
4.4 Government and Other Approvals. No approval, consent,
exemption or other action by, notice to or filing with, any
governmental authority which has not been obtained is necessary
in connection with the execution, delivery or performance by
Borrower of the Loan Documents.
4.5 Compliance with Laws; Environmental Matters. To the
best of Borrower's knowledge, there is no law, rule or
regulation, nor is there any judgment, decree or order of any
court or governmental authority specifically directed to Borrower
or any of its Consolidated Subsidiaries and binding on Borrower
or any of its Consolidated Subsidiaries which would be
contravened by the execution, delivery or performance of the Loan
Documents. Borrower and each of its Consolidated Subsidiaries is
in material compliance with all material laws and regulations,
including all material requirements of applicable federal, state
and local environmental, health and safety statutes and
regulations and to the best of Borrower's knowledge, neither it
nor any of its Consolidated Subsidiaries, is the subject of any
federal, state or local investigation evaluating whether any
remedial action is needed to respond to a release of any
<PAGE>
Hazardous Material which investigation will result in clean-up
costs having a materially adverse effect on the Borrower and its
Consolidated subsidiaries, taken as a whole, and for which
Borrower, or such Consolidated Subsidiary is not indemnified.
4.6 Enforceability of Agreement. The Loan Documents are
legal, valid and binding agreements of Borrower and are
enforceable against Borrower in accordance with their respective
terms, and any other exhibit, instrument or agreement required
hereunder, when executed and delivered, will be similarly legal,
valid, binding and enforceable in accordance with its terms.
4.7 Litigation. Except as disclosed in its financial
statements, there are no suits, proceedings, claims or disputes
pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, or any of its Consolidated Subsidiaries or
any of their respective properties, which individually or in the
aggregate will materially adversely affect the business,
properties or condition (financial or otherwise) of the Borrower
and its Consolidated Subsidiaries, taken as a whole, or impair
Borrower's ability to perform the Obligations.
4.8 Events of Default. No Default or Event of Default has
occurred and is continuing or would result from the execution or
performance of any Loan Document or the incurring of the
Obligations by Borrower. Neither Borrower nor any of its
Consolidated Subsidiaries is in violation of, or default under,
(a) any charter instrument or by-law, or under any loan agreement
or (b) any material agreement or instrument to which it is a
party or by which it or its properties are bound.
4.9 Investment Company Act of 1940. Borrower is not an
investment company within the meaning of the Investment Company
Act of 1940.
4.10 Financial Information.
(a) The balance sheets of Borrower dated as of November
30, 1993 and August 31, 1994, and the operating statements
for the fiscal periods then ended, (complete and accurate
copies of which have been delivered by Borrower to Bank) and
all other information and data furnished by Borrower to Bank
are complete and correct, and such financial statements have
been prepared in accordance with GAAP, consistently applied,
and fairly present the Consolidated financial condition of
Borrower on November 30, 1993 and August 31, 1994 and the
Consolidated results of their operations for the periods then
ended, except in the case of the unaudited interim financial
statements for normal year end adjustments and the absence of
footnote disclosures.
(b) Since November 30, 1993, there has not been and
Borrower does not know of any development or threatened
development (other than general economic conditions) of a
<PAGE>
nature which may cause any material adverse change in the
Consolidated financial condition or operations of Borrower
and its Consolidated Subsidiaries, taken as a whole, or
sufficient to impair Borrower's ability to repay the Loan and
otherwise perform the Obligations in accordance with the
terms of the Loan Documents.
4.11 ERISA. Except as previously disclosed to the Bank, no
fact or circumstance, including but not limited to any Reportable
Event, exists in connection with any Plan of Borrower, or any of
its Consolidated Subsidiaries which would constitute grounds for
the termination of any such plan by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer any such Plan and which would result in the
termination of a Plan and the incurrence of material liability by
the beneficiaries or a trustee under ERISA. For the purposes of
this Section 4.11, Borrower, if it is not the Plan administrator,
shall be deemed to have knowledge of all facts attributable to
the Plan administrator designated pursuant to ERISA.
4.12 Full Disclosure. To the knowledge of the Borrower, no
information, exhibit, memorandum, or report furnished by the
Borrower to the Bank in connection with the negotiation of the
Loans contains any material misstatement of fact or omits to
state any fact necessary to make the statements contained therein
not materially misleading.
SECTION 5
Covenants
Borrower covenants that until all Obligations have been paid
in full it will (and will cause its Subsidiaries to), unless
otherwise agreed by the Bank:
5.1 Use of Proceeds. Use Advances solely for the purposes
provided for herein.
5.2 Maintain Existence, Etc. Maintain its existence;
maintain in good order its licenses, properties, insurance and
books; pay when due taxes, trade accounts and other obligations;
comply with law; and generally conduct its affairs in accordance
with standard industry practices.
5.3 Financial Statements, Etc. During the term of the
Loans, Borrower shall furnish to the Bank:
(a) Within sixty (60) days after the end of each fiscal
quarter, a balance sheet and operating statement of Borrower
prepared on a Consolidated and consolidating basis and in
accordance with GAAP consistently applied and accompanied by
a Compliance Certificate completed and signed by the chief
financial officer of Borrower certifying, among other things,
that there exists no Default or Event of Default under the
<PAGE>
Loan Documents or, if a Default or Event of Default exists,
stating the nature and status thereof;
(b) Within one hundred twenty (120) days after the end
of each of Borrower's Fiscal Years, a balance sheet and
operating statement and statement of cash flows certified by
an independent certified public accountant satisfactory to
Bank (provided that any "Big Six" accounting firm shall be
deemed satisfactory to the Bank); such financial statements
to be prepared on a Consolidated basis in accordance with
GAAP applied on a basis consistent with prior practice unless
otherwise specifically noted thereon, accompanied by (i)
unaudited consolidating balance sheets and operating
statements of Borrower and each of its Consolidated
Subsidiaries, (ii) a detailed letter from the chief financial
officer of the Borrower which analyzes the results of
operations for the period covered by such financial
statements, and (iii) a Compliance Certificate completed and
signed by the chief financial officer of Borrower certifying,
among other things, that there exists no Default or Event of
Default under the Loan Documents or, if a Default or Event of
Default exists, stating the nature and status thereof; and
(c) As soon as possible, but in any event within ten
(10) days after the filing with the Securities and Exchange
Commission, or any successor thereto, or any state securities
regulatory authority, copies of all registration statements
and all periodic and special reports required or permitted to
be filed under federal or state securities laws and
regulations.
5.4 Adequate Books. Permit representatives of the Bank, at
any reasonable time and upon reasonable prior notice, to inspect
its properties, to examine its inventory, books, and accounts,
and to discuss its finances and affairs with its accountants (and
by these provisions Borrower authorizes such accountants to
discuss with the Bank the finances and affairs of Borrower).
5.5 Leverage Ratio. Maintain a ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth of not more than
(a) 3.0 to 1.0 as at the end of each fiscal quarter ending on and
after November 30, 1994 through August 31, 1995; and (b) 2.0 to
1.0 as at November 30, 1995 and as at the end of each fiscal
quarter ending thereafter.
5.6 Current Ratio. Maintain a ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than 1.50
to 1.00 as at the end of each fiscal quarter.
5.7 Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage
Ratio of not less than (a) 1.15 to 1.00 as at the end of each
fiscal quarter ending on and after the date hereof through August
<PAGE>
31, 1995; and (b) 1.30 to 1.00 as at the end of each fiscal
quarter ending thereafter.
5.8 Net Worth. Maintain Consolidated Tangible Net Worth of
not less than the sum of (i) $14,000,000, plus (ii) an amount not
less than Twenty-Five Percent (25%) of the cumulative reported
net profits of the Borrower for all fiscal quarters ending after
November 30, 1993, without reduction for any reported net losses
incurred during such periods, as at the end of each fiscal
quarter ending on or after the date hereof.
5.9 Hazardous Materials. Indemnify and hold harmless the
Bank and its respective officers, employees, agents, consultants
and affiliates from and against all losses, costs, damages and
expenses (including reasonable attorneys' fees and expenses) any
such person may sustain in connection with the use, disposal or
release of any Hazardous Material or in connection with the
existence of any Hazardous Material on or under any of the
properties of Borrower or any of its Subsidiaries.
5.10 Mergers, Etc. Not permit Borrower to enter into any
consolidation, merger, or other combination, or sell, lease,
assign, transfer or otherwise dispose of any assets, whether now
owned or hereafter acquired, in a single transaction or in a
series of transactions, or enter into any sale and leaseback
transactions, other than: (a) the sale of inventory in the
ordinary course of business; (b) the disposition of property no
longer used or useful in the conduct of its business; (c) any
merger in which Borrower is the legal surviving corporation,
provided no Default or Event of Default then exists or is
occasioned thereby; (d) any merger, consolidation or transfer of
the business or assets of any Subsidiary of the Borrower to
Borrower or to any Consolidated Subsidiary; and (e) the sale and
leaseback, sale or other disposition of assets in an amount not
in excess of $20,000,000 in any Fiscal Year.
5.11 Liens. Not create, assume or suffer to exist any Lien
on any of its properties or assets, whether now owned or
hereafter acquired, except Permitted Liens.
5.12 Notice of Default. Immediately upon the occurrence of
any Default or an Event of Default, furnish to the Bank a
certificate of Borrower stating the specific nature of the
Default or Event of Default, Borrower's intended actions to cure
such Default or Event of Default and the time period in which
such cure is to occur.
5.13 Indebtedness. Not create, incur or suffer to exist any
Indebtedness for the purpose of refinancing a portion of the
Loans, except on such terms and conditions as have been subject
to the prior written approval of the Bank.
5.14 Insurance. Maintain in full force and effect adequate
insurance in amounts and against liabilities consistent with
<PAGE>
sound business practices and with reputable insurers and upon
terms acceptable to the Bank.
5.15 No Material Adverse Change. Not permit any event to
occur or condition to exist which has a materially adverse effect
upon business, operations, financial condition, properties or
prospects of the Borrower or its Consolidated Subsidiaries, taken
as a whole.
5.16 Margin Rules. Not use the Advances in any manner that
would violate Regulation G, T, U or X of the Federal Reserve
Board.
SECTION 6
Default and Remedy
6.1 Events of Default. The occurrence of any of the
following events shall be an Event of Default hereunder:
6.1.1 Nonpayment. Borrower fails to pay when due any
installment of principal or interest or any other sum due
under the Loan Documents and such failure continues for ten
(10) Business Days thereafter.
6.1.2 Representation or Warranty. Any written
represen-tation or warranty in any of the Loan Documents
proves to have been materially false or misleading in any
material respect when made.
6.1.3 Other Defaults. Borrower fails to perform or
observe any of the other covenants or agreements contained in
the Loan Documents, and such failure, if capable of being
remedied, continues unremedied for a period of thirty (30)
days after written notice thereof from the Bank.
6.1.4 Voluntary Bankruptcy. Borrower or any one or
more of its Wholly-Owned Subsidiaries which, in the
aggregate, have Twenty-Five Percent (25%) or more of the
Consolidated total assets of the Borrower fails to pay or
admits in writing its or their inability to pay debts as they
come due, or files any petition or action for relief under
any bankruptcy, reorganization, insolvency or moratorium law,
or any other similar law for the relief of, or relating to,
debtors, or applies for or consents to a receiver, trustee or
custodian for it or a substantial portion of its property, or
makes a general assignment for the benefit of creditors.
6.1.5 Involuntary Bankruptcy. An involuntary petition
is filed under any bankruptcy or similar statute against
Borrower or any one or more of its Wholly-Owned Subsidiaries
which, in the aggregate, have Twenty-Five Percent (25%) or
more of the Consolidated total assets of the Borrower, or a
<PAGE>
custodian, receiver, trustee, assignee for the benefit of
creditors (or other similar official) is appointed to take
possession, custody or control of the properties of Borrower
or any such Consolidated Subsidiary unless such petition or
appointment is set aside or withdrawn or ceases to be in
effect within sixty (60) days from the date of such filing or
appointment.
6.1.6 Cross Default. Any material breach or default
shall have occurred (after giving effect to any applicable
cure period or waiver) under any other agreement between
Borrower, or any Consolidated Subsidiary and any bank, or
under any other material agreement pursuant to which
Borrower, or any of its Consolidated Subsidiaries may be
obligated in an amount in excess of $1,000,000 as a borrower,
guarantor or lessee (including, without limitation, any
Indebtedness incurred to refinance any portion of the Loans),
if such default consists of the failure by such borrower,
guarantor or lessee to pay Indebtedness when due and,
following any applicable cure period, permits the holder or
any trustee thereof to cause the acceleration of such
Indebtedness or the termination of any commitment to lend or
permits a lessor to terminate the applicable lease.
6.1.7 Adverse Judgments. Any one or more judgments or
orders for payment of money in an aggregate amount exceeding
$1,000,000 shall be rendered against the Borrower and/or any
of its Consolidated Subsidiaries and either (a) such judgment
or order shall remain unsatisfied and the Borrower and/or its
Consolidated Subsidiary shall not have taken action necessary
to stay enforcement thereof prior to the expiration of the
applicable period of limitations for taking such action or
(b) enforcement proceedings shall have been commenced by any
creditor upon any such judgment or order.
6.2 Remedy. If any Event of Default described in Sections
6.1.4 and 6.1.5 occurs, the Commitment shall automatically
terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Bank.
If any other Event of Default occurs, the Bank may terminate the
Commitment and declare the Obligations to be due and payable,
whereupon the Obligations shall become immediately due and
payable, without presentment, demand, protest or notice of any
kind, all of which Borrower hereby expressly waives. Upon the
occurrence of an Event of Default, the Bank may immediately
proceed to exercise all remedies available to it under the Loan
Documents or otherwise under applicable law.
SECTION 7
Miscellaneous
7.1 Notices. Any communications between the parties hereto
or notices or requests provided herein to be given may be given
<PAGE>
by mailing the same, first class postage prepaid, or by telex or
electronic transmission to each party at its address set forth on
the signature pages hereto (with a copy to each address indicated
for notices), or to such other address as any party may in
writing hereafter indicate to the other. Notices shall be
effective on the date sent by electronic transmission and telex
and three (3) Business Days after the date sent by U.S. mail.
7.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns; provided, however, that
Borrower shall not assign this Agreement or any of its rights
hereunder without the prior written consent of the Bank.
7.3 Participation and Assignments. The Bank may
participate, sell, transfer or assign its rights and obligations
under this Agreement to an entity Affiliate of the Bank without
the prior written consent of the Borrower and to any other Person
with the prior written consent of the Borrower, which consent
shall not be unreasonably withheld or delayed; provided, however,
that no prior consent of the Borrower shall be required at any
time during which a Default or Event of Default shall have
occurred and be continuing. Any participant purchasing such a
participation shall have all rights of the Bank pursuant to this
Agreement, and the Bank may provide such participant with credit
information received by such Bank from Borrower or any Subsidiary
which is otherwise publicly available. Borrower agrees that any
participant permitted or consented to under this Section 7.3
shall at any time during the pendency of an Event of Default have
the right to set off any Obligations not paid when due against
any accounts or other assets of Borrower held by, on deposit
with, or in the possession of, such participant. The Bank will
use its best efforts to cause such participant to grant to
Borrower the right to set off, appropriate and apply against that
portion of the Obligations then owned by such other participant
any monies, securities and other property of Borrower now or
hereafter held or received by, or in transit to, such participant
in the event such participant becomes involved in any voluntary
insolvency, bankruptcy or receivership proceedings, or in any
involuntary proceedings of such nature or comes under the
management or control of any governmental or private deposit
insurer. In no event shall the insolvency, bankruptcy or
receivership of a participant grant to Borrower the right of set
off against the Bank, including any other participant.
7.4 Amendments and Waivers. No delay or omission by the
Bank to exercise any right under this Agreement shall impair any
such right, nor shall it be construed to be a waiver thereof. No
waiver of any single breach or default under this Agreement shall
be deemed a waiver of any other breach or default. Any waiver,
modification, amendment, consent or approval relating to the Loan
Documents, must be in writing to be effective and must be signed
by or on behalf of the Bank.
<PAGE>
7.5 Costs and Expenses. Borrower agrees to pay on demand to
the Bank all reasonable costs and expenses incurred by the Bank
including, without limitation, reasonable attorneys' and
consultants' fees (a) in connection with the enforcement of the
Loan Documents or in connection with any proposed refinancing or
restructuring of the credit provided in this Agreement, and (b)
for all stamp, registration and other duties to which any Loan
Document may be subject. Borrower further agrees to pay or to
reimburse the Bank upon demand for its reasonable attorneys' fees
and other reasonable expenses incurred in connection with
preparing, drafting and negotiating any amendments, consents, or
waivers hereto requested by Borrower. Borrower shall indemnify
the Bank against any and all liabilities and penalties resulting
from any delay in payment, or failure to pay, any such duties
referenced above upon written notice from the Bank that such
amounts have been assessed.
7.6 Entire Agreement. The Loan Documents integrate all the
terms and conditions mentioned herein or incidental hereto, and
supersede all oral negotiations and prior writings in respect to
the subject matter hereof. In the event of any conflict between
the terms, conditions and provisions of this Agreement and the
other Loan Documents, the provisions of this Agreement shall
control.
7.7 Governing Law. This Agreement and all other Loan
Documents executed in connection herewith shall be governed by
and construed in accordance with the laws of the State of
Indiana.
7.8 Section Headings. Section headings are for reference
only, and shall not affect the interpretation of meanings of any
provision of this Agreement.
7.9 Severability. The illegality or unenforceability of any
provision of any Loan Document shall not in any way affect or
impair the legality or enforceability of the remaining provisions
of such Loan Document or any other Loan Document.
7.10 Indemnity. Borrower hereby agrees to indemnify, protect
and hold harmless the Bank and its officers, directors, agents,
employees, attorneys and shareholders ("Indemnified Persons")
from and against all reasonable costs and expenses (including,
without limitation, the reasonable cost of counsel), and all
actions, claims (whether made or threatened), suits, liabilities,
damages and losses incurred by or imposed on any Indemnified
Persons in connection with or as a result of the execution,
delivery and performance of the Loan Documents and the use of the
proceeds thereunder, provided, however, that such indemnity shall
not apply to any action by Borrower against a Bank; and provided,
further, that the foregoing provision shall not be deemed to
limit the provisions of Section 7.5 hereof. Notwithstanding
anything to the contrary in this Section 7.10, Borrower shall not
be obligated to indemnify any Indemnified Person for any losses,
<PAGE>
claims, damages, liabilities and expenses incurred by such
Indemnified Person which have finally been determined to have
resulted from the gross negligence or willful misconduct on the
part of such Indemnified Person. Without limiting the generality
of the foregoing, such indemnity shall extend to any and all
reasonable costs and expenses whatsoever incurred by the
Indemnified Persons (including, without limitation, the
reasonable cost of counsel, whether staff counsel or otherwise
and whether allocated or out-of-pocket) in connection with
investigating, preparing for or defending against or providing
evidence, producing documents or taking any action with respect
to any such action, claim (whether made or threatened and whether
or not such Indemnified Person is a party to such action or
claim), suit, liability, damage or loss, whether or not resulting
in any liability. The Indemnified Person may select its own
legal counsel in connection with any matters indemnified against
hereunder. This indemnity shall survive the execution, delivery
and consummation of the transactions contemplated by this
Agreement. Payment by Borrower in respect to an undisputed claim
made by an Indemnified Person pursuant to this Section shall be
made within thirty (30) days after demand therefor; otherwise,
promptly upon resolution of such dispute.
7.11 JURY TRIAL WAIVER. THE BANK AND THE BORROWER, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER
OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON
OR RISING OUT OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
BETWEEN THEM CONTEMPLATED BY THE LOAN DOCUMENTS OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF EITHER OF THEM. NEITHER SHALL THE BANK NOR THE
BORROWER SEEK TO CONSOLIDATE, BY COUNTER-CLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THIS SECTION 7.11 SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY THE BANK NOR THE BORROWER EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers as of the date and
year first above written.
"BORROWER"
LILLY INDUSTRIES, INC.
Attest: By: /s/ Roman J. Klusas
Roman J. Klusas,
/s/ Kenneth L. Mills Vice President, Chief
-------------------------- Financial Officer and
Kenneth L. Mills, Secretary
Director of Corporate Accounting
and Assistant Secretary
Address:
733 South West Street
Indianapolis, IN 46225
Attn: Vice President, Chief
Financial Officer and
Secretary
Telephone: (317) 687-6702
Telecopier: (317) 687-6710
"BANK"
SOCIETY NATIONAL BANK, INDIANA
By: /s/ Daniel J. Lee
Title: Vice President
Address:
10 West Market Street
Indianapolis, IN 46204
Attn: Daniel J. Lee
Telephone: (317)
Telecopier: (317) 464-8050
<PAGE>
Schedule 1
Immaterial leases of furniture, fixtures and equipment.
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$15,000,000.00 Indianapolis, Indiana
January ____, 1995
FOR VALUE RECEIVED, on or before July 1, 1996 (subject to
acceleration, extension or prepayment), LILLY INDUSTRIES, INC.,
an Indiana corporation ("Borrower"), hereby promises to pay to
the order of SOCIETY NATIONAL BANK, INDIANA, a national banking
association (the "Bank"), or its assigns, at the main office of
the Bank at Indianapolis, Indiana, or at such other place as the
holder hereof may designate in writing, in lawful money of the
United States of America, the principal sum of Fifteen Million
Dollars ($15,000,000), or so much thereof as may be advanced and
outstanding from time to time, together with (a) interest on the
unpaid principal balance existing from time to time at the rates
set forth in Section 2.2 of the Agreement (as hereinafter
defined) prior to maturity and while and so long as there exists
no uncured Event of Default, and (b) interest after maturity,
whether by acceleration or otherwise, or during any period while
there exists any uncured Event of Default at a per annum rate
equal to two percent (2%) above the otherwise applicable rate.
Such interest shall be paid on actual daily balances of
outstanding principal for the exact number of days such principal
remains outstanding and shall be computed on the basis of a three
hundred sixty (360) day year. Any change in the rate of interest
on any Floating Rate Advance occasioned by a change in the
Floating Rate shall be effective on the same day as the change in
Floating Rate.
Principal and interest under this Note shall be payable as
follows:
1. Interest only on the outstanding principal balance
shall be due and payable on the first day of each month,
commencing on the first day of the month following the
initial Advance;
2. From time to time, the Borrower shall pay
installments of principal in an amount sufficient that the
outstanding principal balance of this Note shall not exceed
the Bank's commitment; and
3. Unless extended by the Bank or sooner paid by the
Borrower, the entire unpaid balance of principal, and all
accrued and unpaid interest thereon, shall be due and
payable on July 1, 1996.
If any installment of principal or interest under this Note
is payable on a day other than a Business Day, the maturity of
<PAGE>
such installment shall be extended to the next succeeding
Business Day, and interest shall be payable during such extension
of maturity.
Subject to the terms of the Agreement, the Borrower may
borrow, pay, reborrow and repay the principal amount of this Note
at any time and from time to time.
This Note is referred to in, and is entitled to the benefit
of, a certain Revolving Credit Agreement [1995] executed between
Borrower and Society National Bank, Indiana of even date (as the
same may be amended from time to time, the "Agreement").
Advances under this Note shall be made in accordance with the
Agreement. The Agreement, among other things, contains a
definition of the capitalized terms used herein and provisions
for acceleration of the maturity hereof upon the happening of
certain stated events.
If Borrower fails to make the payment of any installment of
principal or interest, as herein provided, when due, or fails in
the performance of any of the terms, agreements, covenants or
conditions contained in the Agreement beyond any applicable grace
period set forth therein, then in any of such events, or at any
time thereafter, the entire principal balance of this Note, and
all accrued and unpaid interest thereon, irrespective of the
maturity date specified herein, together with reasonable
attorneys' fees and other costs incurred in collecting or
enforcing payment or performance hereof and with interest from
the date of the Event of Default on the unpaid principal balance
hereof at the default rate hereinabove specified, shall, at the
election of the holder hereof, and without relief from valuation
and appraisement laws, become immediately due and payable.
The Borrower and all endorsers, guarantors, sureties,
accommodation parties hereof and all other parties liable or to
become liable for all or any part of this indebtedness, severally
waive demand, presentment for payment, notice of dishonor,
protest and notice of protest and expressly agree that this Note
and any payment coming due under it may be extended or otherwise
modified from time to time without in any way affecting their
liability hereunder.
This Note shall be construed according to and governed by
the laws of the State of Indiana.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed by its duly authorized officers as of the date and year
first hereinabove written.
LILLY INDUSTRIES, INC.
an Indiana corporation
By: /s/ Roman J. Klusas
-------------------------
<PAGE>
Roman J. Klusas,
Vice President, Chief
Financial Officer and
Secretary
Attest:
/s/ Kenneth L. Mills
------------------------
Kenneth L. Mills,
Director of Corporate Accounting
and Assistant Secretary
<PAGE>
EXHIBIT B
January 27, 1995
Society National Bank, Indiana
10 West Market Street
Indianapolis, Indiana 46204
Re: Revolving Credit Agreement (1995) of even date between
Society National Bank, Indiana (the "Bank") and Lilly
Industries, Inc. (the "Borrower") (the "Agreement")
Gentlemen:
We have acted as special counsel to the Borrower in
connection with the transactions contemplated by the above
referenced Agreement. Capitalized terms used herein and not
specifically herein defined shall have the meanings ascribed to
them in the Agreement.
In such capacity, and for the purpose of rendering this
opinion, we have examined the following:
(a) The Agreement;
(b) The Revolving Credit Note; and
(c) Copies, certified by the Secretary of the Corporation,
of the corporate proceedings pursuant to which the
execution of the Agreement, and the Revolving Credit
Note (collectively, the "Loan Documents") were
ratified, approved and authorized.
In arriving at the opinions expressed below, we have
examined such other documents and have considered such questions
of law, as, in our judgment, have been necessary to enable us to
render this opinion. With respect to factual matters material to
our opinion, we have, when such facts have not been independently
established, relied upon certificates of officers of the
Borrower, certificates or other information obtained from
governmental authorities and such other information as in our
judgment is necessary or appropriate to render the opinions
expressed below.
In rendering the opinions set forth herein we have assumed,
with your consent and without any independent inquiry, the
following:
(i) The genuineness of signatures of the persons
executing all instruments, documents, certificates, and/or
agreements evidenced by or related to the transactions
contemplated by the Loan Documents;
<PAGE>
(ii) The authority of the persons executing the Loan
Documents and all other instruments, documents, certificates
and/or agreements related to the transactions contemplated
thereby on behalf of the parties thereto (other than the
Borrower);
(iii) The due authorization by all necessary corporate
action of the execution and delivery of the Loan Documents and
all instruments, documents, certificates, and/or agreements
related to the transactions contemplated thereby on behalf of the
parties thereto (other than the Borrower);
(iv) The authenticity of all documents submitted to us
as originals; and
(v) The conformity to authentic original documents of
documents submitted to us as certified, conformed or photostatic
copies.
Based upon the foregoing and subject to the further
qualifications and limitations hereinafter set forth, it is our
opinion, limited in all respects to the present internal laws of
the State of Indiana and the present federal laws of the United
States of America, that, insofar as those laws are applicable:
1. The Borrower is a corporation, duly organized and
validly existing under and by virtue of the laws of the State of
Indiana. The Borrower has taken all necessary corporate action to
authorize the execution and delivery of the Loan Documents.
2. The Borrower possesses the requisite corporate power to
enter into the Loan Documents and to perform its obligations
thereunder.
3. The execution and delivery of the Loan Documents by the
Borrower will not violate, breach, contravene, cause a default or
result in the imposition of a lien under any provision of the
Articles of Incorporation or Bylaws of the Borrower or, to our
knowledge, any existing note, bond, mortgage, debenture,
indenture, trust, lease, instrument, judgment, order, decree, or
other agreement to which the Borrower is a party or by which it
or its assets may be bound.
4. The Loan Documents will, upon due execution and
delivery by an authorized officer of the Borrower, constitute
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their terms, except as
the same may be limited by (i) the United States Bankruptcy Code,
(ii) any applicable insolvency, reorganization, moratorium or
similar laws of the State of Indiana or the United States
relating to or affecting the enforcement of creditors' rights
generally, (iii) general principles of equity, and (iv) judicial
discretion.
<PAGE>
5. To our knowledge, no authorization, consent, approval,
registration, license or any form of exemption of any Indiana
state or United States federal governmental authority is required
in connection with the execution, delivery and performance by the
Borrower of its obligations under the Loan Documents.
6. To our knowledge, (i) no litigation or proceeding of
any Indiana state or United States federal governmental authority
or any other person is presently pending or threatened against
the Borrower, nor (ii) has any claim been asserted against the
Borrower, which in the case of (i) or (ii) above seeks to enjoin
the transactions contemplated by the Loan Documents.
Our opinion is subject to the following qualifications:
A. The enforceability of the Loan Documents may be limited
if the Bank should fail to act in good faith or in a commercially
reasonable manner in seeking to exercise rights or remedies
thereunder.
B. Whenever our opinion with respect to the existence or
absence of facts is qualified by the phase "to our knowledge", it
is intended to indicate that during the course of our
representation of the Borrower no information has come to our
attention which would give us actual knowledge of the existence
or absence of such facts. Moreover, we have not undertaken any
independent investigation to determine the existence or absence
of such facts, and any limited inquiries made by us should not be
regarded as such an investigation. Any certificates or
representations obtained by us form officers of the Borrower with
respect to such opinions have been relied upon without any
independent verification.
C. Whenever we have stated we assumed any matter, it is
intended to indicate that we have assumed such matter without
making any factual, legal, or other inquiry or investigation, and
without expressing any opinion or stating any conclusion of any
kind concerning such matter.
D. This opinion is furnished to you pursuant to the Loan
Documents and is not to be used, circulated, quoted or otherwise
referred to for any other purpose.
E. This opinion is dated and speaks as of the date of
delivery. We have no obligation to advise you or any third
parties of any changes in law or fact that may hereafter occur or
come to our attention, even though the legal analysis or legal
conclusions contained in this opinion letter may be affected by
such change.
Very truly yours,
Exhibit 11
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS PER SHARE
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
Year Ended November 30
1994 1993 1992
<S> <C> <C> <C>
Primary:
Average shares outstanding - -
Note A 22,660 22,383 22,715
Net Income $23,302 $16,155 $12,706
Net Income per common share - -
Note A $1.03 $0.72 $0.56
======= ======= =======
Average shares outstanding - -
Note A 22,660 22,383 22,715
Dilutive stock options based
on treasury stock method
using average market
price - - Note A 571 579 333
------- ------- -------
23,231 22,962 23,048
======= ======= =======
Net Income $23,302 $16,155 $12,706
Net Income per common
and common equivalent
share - - Note A $1.00 $0.70 $0.55
======= ======= =======
Fully diluted:
Average shares outstanding - -
Note A 22,660 22,383 22,715
Dilutive stock options based
on treasury stock method
using the higher of year end,
quarter end or average market
price - - Note A 590 740 474
------- ------- -------
23,250 23,123 23,189
======= ======= =======
Net Income $23,302 $16,155 $12,706
Net Income per common
and common equivalent
share - - Note A $1.00 $0.70 $0.55
======= ======= =======
<FN>
<PAGE>
Note A - - Amounts have been adjusted to recognize the effect of all stock
splits and stock dividends through November 30, 1994.
</TABLE>
EXHIBIT 13
Dividend Information and
Common Stock Prices
Dividends are traditionally paid on the 1st business day of
January, April, July and October to shareholders of record
approximately three weeks prior.
The following table sets forth the dividends paid per share of
stock and the high and low prices in each of the quarters in the
past two years ended November 30.
Dividends have been adjusted for all stock splits. Quotations
represent prices between dealers and do not reflect retail mark-
ups, mark-downs or commissions.
<TABLE>
<CAPTION>
Fiscal 1994 Dividends Per Share High Low
<S> <C> <C> <C>
1st quarter ended February 28 $.060 $16 7/8 $13 1/2
2nd quarter ended May 31 .067 18 14 1/2
3rd quarter ended August 31 .070 15 11 3/4
4th quarter ended November 30 .070 14 1/2 12
-----------------------------
$.267
=====
Fiscal 1993
1st quarter ended February 28 $.058 $11 3/8 $ 9 3/8
2nd quarter ended May 31 .060 12 5/8 10 3/8
3rd quarter ended August 31 .060 12 1/2 10 1/2
4th quarter ended November 30 .060 15 7/8 11 1/2
-----------------------------
$.238
=====
</TABLE>
Stock Trading
The Company's Class A stock is traded on the national over-the-
counter market. Its trading symbol is LICIA. Stock price
quotations can be found in major daily newspapers and in The Wall
Street Journal.
At November 30, 1994, there were 2,080 registered shareholders of
Class A stock and 78 registered shareholders of Class B stock.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA(1)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Year Ended November 30 1994 1993 1992 1991
Operations
Net sales $331,306 $284,325 $236,476 $220,508
Cost of products sold 214,809 189,111 152,480 150,669
Selling, administrative, research and
development expenses 74,480 65,644 61,158 57,527
Income taxes 16,350 11,784 9,201 4,417
Minority shareholders' interests (deduction)
Net income 23,302 16,155 12,706 6,357
Per Share Data(2)
Net income 1.00 .70 .55 .27
Cash dividends .267 .238 .223 .214
Book value 4.38 3.60 3.16 3.16
Average number of shares and
equivalent shares outstanding(3) 23,250 23,123 23,189 23,499
Shares outstanding at year end 22,710 22,517 22,226 23,480
Price range of Class A stock 18 15-7/8 9-3/4 6-1/8
to 11-3/4 to 9-3/8 to 5-5/8 to 4-1/8
Other Data
Working capital 41,604 33,270 27,131 30,405
Current ratio 1.8:1 1.9:1 2.0:1 2.0:1
Total assets 190,252 167,044 117,049 127,342
Additions to property and equipment(4) 6,693 7,598 3,262 1,928
Depreciation 4,637 3,746 3,965 4,038
Cash dividends 6,049 5,327 5,104 5,005
Long-term debt 28,026 40,621 10,361 16,638
Shareholders' equity 99,424 81,128 70,125 74,187
Return on average equity 25.8% 21.4% 17.6% 8.6%
Return on sales before minority
shareholders' interests 7.0% 5.7% 5.4% 2.9%
<FN>
(1) This table of Selected Financial Data should be read in conjunction with Management's Discussion and Analysis of
Results of Operations and Financial Condition and the Company's consolidated financial statements included herein.
<PAGE>
(2) Adjusted for all stock splits and stock dividends through November 30, 1994, inclusive. Prices are rounded to
nearest 1/8.
(3) Used to calculate net income per share.
(4) Excludes effect of acquisitions.
</TABLE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA (1) - Continued
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended November 30 1990 1989 1988 1987 1986 1985 1984
Operations
Net Sales $240,146 $219,713 $203,499 $189,213 $147,524 $149,858 $140,693
Cost of products sold 161,626 145,592 134,114 122,135 96,196 98,910 92,507
Selling, administrative,
research and
development expenses 61,218 53,821 51,496 48,651 35,551 35,502 32,079
Income taxes 6,850 8,399 7,550 8,599 7,785 7,542 8,469
Minority shareholders'
interests (deduction) 286 356 94 (404) (437) (820)
Net income 10,022 12,574 11,284 10,272 8,515 8,648 8,550
Per Share Data (2)
Net income .41 .51 .45 .40 .33 .34 .34
Cash dividends .199 .173 .153 .141 .131 .113 .093
Book value 3.10 3.00 2.65 2.34 2.11 1.92 1.70
Average number of shares
and equivalent shares
outstanding(3) 24,659 24,863 24,921 25,511 25,482 25,416 25,317
Shares outstanding at year end 23,634 24,863 24,863 25,104 25,284 24,870 24,629
Price range of Class A stock 7-5/8 7-1/8 7-1/8 7-5/8 6 4-7/8 4-1/4
to 4 to 5-3/8 to 4-7/8 to 4-5/8 to 4-1/4 to 3-3/8 to 2-7/8
Other Data
Working capital 34,513 40,389 36,368 26,006 31,798 32,891 32,819
Current ratio 2.6:1 2.5:1 2.8:1 2.0:1 3.6:1 3.4:1 3.7:1
Total assets 125,371 129,025 101,357 96,814 75,924 69,153 61,085
Additions to property and
equipment(4) 3,968 2,486 2,930 5,397 4,304 4,447 4,165
Depreciation 4,021 3,387 3,133 2,785 2,123 2,098 1,576
<PAGE>
Cash dividends 4,923 4,341 3,843 3,603 3,293 2,796 2,282
Long-term debt 23,016 21,105 5,829 3,137 1,006 910 1,050
Shareholders' equity 73,185 74,482 65,987 58,755 53,359 47,658 41,931
Return on average equity 13.6% 17.9% 18.1% 18.3% 16.9% 19.3% 22.1%
Return on sales before minority
shareholders' interests 4.2% 5.6% 5.4% 5.4% 6.0% 6.1% 6.7%
<FN>
(1) This table of Selected Financial Data should be read in conjunction with Management's Discussion and Analysis of
Results of Operations and Financial Condition and the Company's consolidated financial statements included herein.
(2) Adjusted for all stock splits and stock dividends through November 30, 1994, inclusive. Prices are rounded to
nearest 1/8.
(3) Used to calculate net income per share.
(4) Excludes effect of acquisitions.
</TABLE>
<PAGE>
MANAGEMENT S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company s fiscal 1994 operating results reached all-time
record levels. Sales and net income increased 17% and 44%,
respectively, over the prior year. Fiscal 1994 represents the
third consecutive year in which record profitability has been
achieved.
Sales in 1994 climbed to $331.3 million from $284.3 million in
1993. Sales gains were realized in all business units resulting
from a strong manufacturing sector of the North American economy
and the integration of a full year of operations of the ICI
Paints liquid industrial coatings business acquired in May 1993.
Fiscal 1993 sales increased 20% over 1992 levels due largely to
an improving economy and the acquired business.
Cost of products sold represented 64.8% of net sales in 1994 as
compared to 66.5% in 1993. This improvement resulted from gains
in production efficiencies and higher business volumes. Fiscal
1993 cost of products sold as a percentage of net sales were 2%
higher than 1992 due primarily to transition and start-up costs
associated with the acquired business.
Increased business volumes caused higher operating expenses in
fiscal 1994 and 1993. However, operating expenses as a percentage
of net sales continued to decrease due to effective cost control
and were 22.5%, 23.1% and 25.9% of net sales in 1994, 1993 and
1992, respectively.
Operating income of $42.0 million in 1994 was a record high and
represents a 42% increase over the previous record high of $29.6
million attained in 1993. Increases in operating income in 1994
and 1993 resulted from increased business levels and effective
cost control.
Net non-operating expense increased in 1994 and 1993 due mainly
to higher interest costs associated with debt obligations for the
acquired business. Income tax rates remained relatively stable
over the last three years with rates ranging from 41.2% to 42.2%
of pre-tax income.
In 1994, net income climbed to a record level of $23.3 million,
or $1.00 per share, representing a 44% increase over 1993 net
income of $16.2 million, or $.70 per share. Net income in 1993
increased 27% over net income earned in 1992.
The Company adopted Statements of Financial Accounting Standards
Nos. 106 and 109 in 1994. See Note 4 and Note 6 of the
consolidated financial statements for a discussion of the effects
of adopting these statements.
Liquidity and Capital Resources
<PAGE>
During the year ended November 30, 1994, the Company generated
sufficient cash flow from operations to meet operating
requirements, reduce debt, pay increased dividends to
shareholders and fund capital spending. Operating cash flow
generated in 1994 totaled $39.0 million compared to $17.4 million
in 1993. This increase is due to higher net income and the prior
year increases in working capital accounts associated with higher
business volumes.
In 1993, the Company financed the acquired business with new
short-term borrowings from banks. On January 12, 1994, the
Company issued $35 million of 4.92% unsecured senior notes to
refinance these borrowings from banks. Principal on the senior
notes in the amount of $7 million is due annually beginning in
January 1995. Concurrently with the issuance of these unsecured
senior notes, the Company entered into a three year interest rate
swap agreement with a notional amount of $35 million which
declines ratably as principal payments are made on the senior
notes. This swap agreement effectively converts the notes from
fixed rate debt to six-month LIBOR-based floating rate debt. The
Company s strong cash flow allowed it to pay off essentially all
other outstanding
debt during 1994.
In addition to internal sources of funds, the Company maintains
$46 million in lines of credit with various banks all of which
were available at November 30, 1994. Use of these facilities was
not required at any time during 1994. The Company s 1994 current
ratio was 1.8:1 compared to the 1993 current ratio of 1.9:1. This
decrease is due to an increase in current maturities of long-term
debt associated with the senior notes and increases in other
operating liabilities offset by an increase in cash.
The Company s 1994 financing activities also included cash
dividend payments to shareholders of $6.0 million compared to
cash dividend payments of $5.3 million and $5.1 million in 1993
and 1992, respectively. The rate of dividends paid to
shareholders was increased 17% in 1994 from 6 cents to 7 cents
per share. The Company s 1994 investing activities included
capital expenditures of $6.7 million.
As is common in the paint and coatings industry, the Company has
been notified that it is a potentially responsible party for
clean-up costs with respect to several governmental
investigations at independently operated waste disposal sites
previously used by the Company. Management has accrued, as
appropriate, for these environmental matters. Management believes
expenditures associated with these sites will not have a material
adverse effect on its consolidated financial position.
The Company is well positioned financially to repay existing
debt, fund general operating needs and obtain additional
financing at reasonable rates and terms for additional investment
opportunities.
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Lilly Industries, Inc. is responsible for the
preparation of the financial statements in the Annual Report and
for the integrity and objectivity of the information presented.
The financial statements have been prepared in conformity with
generally accepted accounting principles and necessarily include
amounts which are estimates and judgments. The fairness of the
presentation in these statements of the Company s financial
position, results of operations and cash flows is reported on by
the independent auditors.
To assist in carrying out the above responsibility, the Company
has internal systems which provide for selection of personnel,
segregation of duties and the maintenance of accounting policies,
systems, procedures and related controls.
Although no cost-effective system can insure the elimination of
errors, the Company s systems have been designed to provide
reasonable but not absolute assurances that assets are
safeguarded, that policies and procedures are followed, and that
the financial records are adequate to permit the production of
reliable financial statements. The Audit Committee of the Board
of Directors, which is composed of directors who are not
employees of the Company or its subsidiaries, meets regularly
with Company officers and independent auditors in connection with
the adequacy and integrity of the Company s financial reporting
and internal controls.
Roman J. Klusas
Vice President and Chief Financial Officer
Report of Independent Auditors
Shareholders and Board of Directors
Lilly Industries, Inc.
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of
Lilly Industries, Inc. and subsidiaries as of November 30, 1994
and 1993, and the related consolidated statements of income and
retained earnings and cash flows for each of the three years in
the period ended November 30, 1994. These financial statements
are the responsibility of the Company s management. Our
responsibility is to express an opinion on these financial
statements 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
<PAGE>
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 financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Lilly Industries, Inc. and subsidiaries at
November 30, 1994 and 1993, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended November 30, 1994, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Indianapolis, Indiana
January 27, 1995
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In thousands, except per share data)
<S> <C> <C> <C>
Year Ended November 30 1994 1993 1992
Net sales $331,306 $284,325 $236,476
Costs and expenses
Cost of products sold 214,809 189,111 152,480
Selling, administrative and general 61,498 53,319 50,128
Research and development 12,982 12,325 11,030
-------- -------- --------
289,289 254,755 213,638
-------- -------- --------
Operating Income 42,017 29,570 22,838
Other income (expense)
Interest income and sundry 554 294 731
Interest expense (2,919) (1,925) (1,662)
-------- -------- --------
(2,365) (1,631) (931)
-------- -------- --------
Income Before Income Taxes 39,652 27,939 21,907
Income taxes Note 6 16,350 11,784 9,201
-------- -------- --------
Net Income 23,302 16,155 12,706
Retained earnings at beginning of year 20,970 10,142 10,927
-------- -------- --------
44,272 26,297 23,633
Deduct dividends paid
Cash (1994, $.267 per share; 1993,
$.238 per share; 1992, $.223
per share) 6,049 5,327 5,104
Stock - - 8,387
-------- -------- --------
6,049 5,327 13,491
-------- -------- --------
Retained Earnings at End of Year $ 38,223 $ 20,970 $ 10,142
======== ======== ========
Average number of shares and equivalent
shares of capital stock outstanding 23,250 23,123 23,189
Net income per share $ 1.00 $ .70 $ .55
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(In thousands)
<S> <C> <C>
November 30 1994 1993
Assets
Current assets
Cash and cash equivalents $ 26,581 $ 7,384
Accounts receivable, less allowances
for doubtful accounts
1994, $1,759; 1993, $1,353) 42,231 39,936
Inventories Note 3 23,885 22,727
Other 360 174
-------- --------
Total Current Assets 93,057 70,221
Other assets
Goodwill, less amortization
(1994, $3,978; 1993, $2,968) 28,511 29,521
Other intangibles, less amortization
(1994, $9,697; 1993, $9,996) 22,467 25,950
Sundry 10,464 7,576
-------- --------
61,442 63,047
Property and equipment
Land 4,044 3,910
Buildings 25,382 24,752
Equipment 46,339 41,143
Allowances for depreciation (deduction) (40,012) (36,029)
-------- --------
35,753 33,776
-------- --------
$190,252 $167,044
======== ========
Liabilities and Shareholders Equity
Current liabilities
Accounts payable $ 29,288 $ 24,872
Salaries, wages, commissions
and related items 9,160 7,341
State and local taxes 1,520 273
Federal income taxes 4,401 985
Current portion of long-term debt Note 5 7,084 3,480
-------- --------
Total Current Liabilities 51,453 36,951
Long-term debt Note 5 28,026 40,621
Other liabilities 11,349 8,344
Shareholders equity Notes 7 and 9
Capital stock $.55 stated value per share:
Class A (limited voting) 26,695 shares
issued (1993, 26,469 shares) 14,831 14,705
Class B (voting) 540 shares issued 300 300
Additional capital 71,972 70,635
Retained earnings 38,223 20,970
Currency translation adjustments 185 105
<PAGE>
Cost of capital stock in treasury
(deduction) (26,087) (25,587)
-------- --------
99,424 81,128
-------- --------
$190,252 $167,044
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<S> <C> <C> <C>
Year Ended November 30 1994 1993 1992
Operating Activities
Net income $ 23,302 $ 16,155 $ 12,706
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 4,637 3,746 3,965
Amortization of intangibles and other 4,328 3,141 2,827
Deferred income taxes (1,789) (745) (46)
Changes in operating assets and
liabilities net of effects
from acquired business:
Accounts receivable (2,295) (10,335) (903)
Inventories (1,158) (2,974) 2,665
Other current assets (186) 121 382
Accounts payable and accrued
expenses 7,482 9,185 228
Federal income taxes 3,416 398 (1,163)
Sundry 1,233 (1,264) 1,588
--------- --------- ---------
Net Cash Provided by
Operating Activities 38,970 17,428 22,249
Investing Activities
Purchases of property and equipment (6,693) (7,598) (3,262)
Payment for acquired business - (37,500) -
Purchases of short-term investments - - (2,778)
Proceeds from maturities of
short-term investments - 2,417 2,291
Sundry 1,005 159 1,390
--------- --------- ---------
Net Cash Used by
Investing Activities (5,688) (42,522) (2,359)
Financing Activities
Cash dividends paid (6,049) (5,327) (5,104)
Proceeds from short-term and
long-term borrowings - 39,000 -
Principal payments on short-term
and long-term borrowings (9,000) (9,529) (7,481)
Purchases of capital stock for treasury - - (11,054)
Sundry 964 - -
--------- --------- ---------
Net Cash (Used) Provided by
Financing Activities (14,085) 24,144 (23,639)
--------- --------- ---------
Increase (Decrease) in Cash
and Cash Equivalents 19,197 (950) (3,749)
<PAGE>
Cash and cash equivalents at beginning of year 7,384 8,334 12,083
--------- --------- ---------
Cash and cash equivalents at end of year $26,581 $ 7,384 $ 8,334
========= ========= =========
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Consolidation and Business
The consolidated financial statements include the accounts of all
subsidiaries after elimination of intercompany accounts and
transactions. Lilly Industries, Inc. and its subsidiaries (the
Company) are principally in the business of manufacturing and
selling industrial coatings (including enamels, varnishes,
lacquers, gelcoats, silver solutions and similar coatings) to
other manufacturing companies.
Cash Equivalents
Cash equivalents include time deposits and certificates of
deposit with original maturities of three months or less.
Inventories
Inventories in the United States are stated at the lower of cost,
determined by the last-in, first-out (LIFO) method, or market.
Inventories of foreign subsidiaries are stated at the lower of
cost, determined by the first-in, first-out (FIFO) method, or
market.
Intangible Assets
Goodwill (the excess of cost over the fair value of net assets of
purchased businesses) and other intangible assets are amortized
by the straight-line method over periods ranging from 5 to 40
years.
Property and Equipment
Property and equipment is recorded on the basis of cost and
includes expenditures for new facilities and items which
substantially increase the useful life of existing buildings and
equipment. Depreciation is based on estimated useful lives and
computed primarily by the straight-line method.
Net Income Per Share
Net income per share is computed on the basis of the weighted
average number of shares outstanding during each year, adjusted
for stock splits, stock dividends and the dilutive effect, if
any, of common stock equivalents.
2. Acquisition
On May 7, 1993, the Company acquired assets of ICI Paints North
American wood, coil and general liquid industrial coatings
business (the Acquired Business ), including inventory, certain
laboratory equipment, patents, trademarks and other related
intellectual property rights (together with a non-compete
covenant from ICI) in exchange for $37,500,000 in cash and the
Company s packaging coatings business. The acquired business was
integrated into the Company s existing facilities. Proceeds of
bank loans were used to fund the cash portion of the purchase
price. The acquisition transaction was recorded by the purchase
method and the consolidated financial statements include the
<PAGE>
results of operations of the acquired business since the date of
acquisition. The excess of the purchase price over fair value of
assets acquired is being amortized by the straight-line method
over 20 years.
The following pro forma consolidated results of operations are
stated as though the acquisition occurred on December 1, 1991 and
are not necessarily indicative of actual results of operations
that would have occurred had the purchase been made at that date,
or of future results of operations. Unaudited pro forma net
sales, net income and net income per share for the year ended
November 30, 1993 were $311,725,000, $16,913,000 and $.73,
respectively. Unaudited pro forma net sales, net income and net
income per share for the year ended November 30, 1992 were
$296,876,000, $14,269,000 and $.61, respectively.
3. Inventories
<TABLE>
<CAPTION>
The principal inventory classifications at November 30
are summarized as follows (in thousands):
1994 1993
<S> <C> <C>
Finished products $16,831 $12,971
Raw materials 15,127 17,619
------- -------
31,958 30,590
Less adjustment of certain inventories
to last-in, first-out (LIFO) basis 8,073 7,863
------- -------
$23,885 $22,727
======= =======
</TABLE>
Inventory cost is determined by the LIFO method of inventory
valuation for approximately 82% and 85% of inventories at
November 30, 1994 and 1993, respectively. While management
believes the LIFO method results in a better matching of current
costs and revenues, the FIFO method is used to cost inventories
of foreign subsidiaries because foreign statutory requirements
prohibit use of the LIFO method.
4. Benefit Plans
The Company maintains defined benefit and defined contribution
plans that cover substantially all employees. Retirement benefits
under the defined benefit plans are based on final monthly
compensation and years of service. Retirement benefits under the
defined contribution plan are based on employer and employee
contributions plus earnings to retirement. The plans assets
consist primarily of common stock, fixed income securities and
guaranteed insurance contracts. In addition, an unfunded
supplemental executive retirement plan covers certain employees
in which benefits, determined by the Board of Directors, are
<PAGE>
payable over 15 years. This plan is designed so that if certain
assumptions regarding mortality experience, policy dividends and
other factors are realized, the Company will recover all costs
through insurance policies.
The provision for defined benefit pension cost is determined
using the projected unit credit actuarial method. The Company s
policy is to fund amounts as are necessary on an actuarial basis
to provide assets sufficient to meet the benefits to be paid to
plan members in accordance with the Employee Retirement Income
Security Act of 1974. Amounts contributed to union-sponsored
pension plans are based upon requirements of collective
bargaining agreements. Company contributions to the defined
contribution plan are based on a percentage of employee
contributions.
A summary of the components of net pension cost for the defined
benefit plans and amounts charged to expense for the other plans
described above for the years ended November 30 follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Defined benefit plans:
Service cost benefits earned
during the period $ 2,109 $ 1,800 $ 1,680
Interest cost on projected
benefit obligation 2,638 2,549 2,300
Actual net loss (gain) on
plan assets 529 (3,503) (4,000)
Net amortization and deferral (4,224) 160 937
------- ------- -------
Net pension cost 1,052 1,006 917
Other plans 759 705 540
------- ------- -------
Pension expense $ 1,811 $ 1,711 $ 1,457
======= ======= =======
</TABLE>
The expected long-term rate of return on assets used to compute
the defined benefit plans pension expense was 9.25% for 1994,
1993 and 1992.
Assumptions used in the accounting for the defined benefit plans
as of November 30 were:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Discount rate on benefit obligation 8.0% 7.0%
Rates of increase in compensation levels 5.0% 5.0%
<PAGE>
</TABLE>
Effective December 1, 1994, the defined benefit pension plan
covering substantially all U.S. employees was amended to freeze
years of service at November 30, 1994. Concurrently with this
amendment, the Company increased its matching contribution rates
to defined contribution plans. Total pension expense is not
expected to change materially as a result of these modifications
to the benefit plans.
The following table sets forth the funded status and amounts
recognized in the consolidated balance sheets at November 30 for
the Company s defined benefit pension plans (in thousands). The
1994 amounts reflect the effect of the amendment to freeze years
of service:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 27,598 $ 28,641
Nonvested 2,944 4,683
-------- --------
Total accumulated benefit obligations $ 30,542 $ 33,324
======== ========
Actuarial present value of projected benefit
obligations for services rendered to date $(35,257) $(38,579)
Plan assets at fair value 38,714 40,100
-------- --------
Excess of plan assets over projected
benefit obligations 3,457 1,521
Unrecognized net (gains) losses (990) 130
Unrecognized prior service cost 2,455 2,778
Unrecognized net excess plan assets at
December 1, 1985, net of amortization (1,741) (1,943)
-------- --------
Net pension asset $ 3,181 $ 2,486
========= ========
</TABLE>
The plan amendment and the increase in discount rate resulted in
a decrease of approximately $5,000,000 in the projected benefit
obligations.
Accumulated benefits for the supplemental executive retirement
plan totaled approximately $2,290,000 and $2,218,000 at November
30, 1994 and 1993, respectively.
The Company provides health care benefits to retirees meeting
certain eligibility requirements. Eligibility is based on age and
years of service. Retirees participate in the cost of these
benefits through contributions and other cost sharing features
such as deductibles and coinsurance, which are subject to
periodic adjustment by the Company. Funding of benefits is
provided by the Company and retiree contributions.
<PAGE>
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 106,
Employers Accounting for Postretirement Benefits Other Than
Pensions . SFAS No. 106 requires accrual accounting for the
expected cost of providing postretirement health care benefits to
retirees. Prior to fiscal 1994, the Company recognized the cost
of these benefits as claims were paid. Expense recognized under
SFAS No.106 is not materially different from expense recognized
prior to 1994 using the cash basis. The accumulated
postretirement benefit obligation resulting from the adoption of
this statement is being amortized over 20 years.
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost includes the following
components for the year ended November 30, 1994 (in thousands):
1994
<S> <C>
Service cost $ 50
Interest cost 380
Amortization of transition obligation 238
-----
$ 668
=====
</TABLE>
<TABLE>
<CAPTION>
The funded status and amounts recognized in the Company s
consolidated balance sheet for postretirement benefits at
November 30, 1994 were as follows (in thousands):
1994
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $3,469
Eligible active employees 1,429
------
4,898
Unrecognized transition obligation (4,530)
------
Accrued postretirement benefit cost $ 368
======
</TABLE>
The accumulated postretirement benefit obligation was determined
using a discount rate of 8.5%. The health care cost trend rate
used in determining the accumulated postretirement benefit
obligation was 12% in 1994 and is assumed to decrease gradually
to 6% in the year 2000 and finally to 5.5% in the year 2019 and
thereafter. A one percent increase in the health care cost trend
rate would increase the accumulated postretirement benefit
obligation by approximately 7% and fiscal 1994 expense by
approximately 4%.
<PAGE>
5. Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the following as of November 30 (in
thousands):
1994 1993
<S> <C> <C>
4.92% unsecured senior notes $35,000 $ --
Unsecured revolving notes payable
to banks -- 35,000
Unsecured note payable to bank -- 6,875
Unsecured note payable to bank -- 2,000
Other 110 226
------- -------
35,110 44,101
Less current portion 7,084 3,480
------- -------
$28,026 $40,621
======= =======
</TABLE>
On January 12, 1994, the Company issued $35,000,000 of 4.92%
unsecured senior notes. The proceeds were used to repay the
unsecured revolving notes payable to banks. Outstanding principal
of the senior notes in the amount of $7,000,000 becomes due each
year beginning in 1995. The entire unpaid principal amount
becomes due in 1999. Interest is payable semiannually beginning
in 1994. Concurrently with the issuance of these senior notes,
the Company entered into a three year interest rate swap
agreement with a notional amount of $35,000,000 which declines
ratably as principal payments are made on the senior notes. This
agreement effectively converts the senior notes from fixed rate
debt to six-month LIBOR-based floating rate debt.
The unsecured notes payable to banks of $6,875,000 and $2,000,000
paid interest at 9.56% and 8.68%, respectively.
Scheduled maturities of long-term debt are: 1995 - $7,084,000;
1996 - $7,026,000; 1997 - $7,000,000; 1998 - $7,000,000 and 1999
- $7,000,000. Interest of $1,853,000, $1,992,000 and $1,673,000
was paid in 1994, 1993 and 1992, respectively.
The Company s term and revolving loan agreements provide for
revolving lines of credit of up to $46,000,000 through June 1,
1995, all of which were available at November 30, 1994. Interest
rates for these lines are to be determined at the time of
borrowing based on a choice of formulas specified in the
agreements.
Certain of the Company s financing arrangements contain covenants
which, among other things, require maintenance of certain
financial ratios. The Company was in compliance with such ratios
at November 30, 1994.
<PAGE>
6. Income Taxes
Effective December 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes which requires use of the liability method for
financial reporting. Financial statements for prior years have
not been restated and the cumulative effect of the accounting
change was not material.
<TABLE>
<CAPTION>
Income tax expense for the years ended November 30 is comprised of the
following components (in thousands):
Liability Deferred
Method Method
1994 1993 1992
<S> <C> <C> <C>
Current expense:
Federal $12,395 $ 8,001 $5,521
Foreign 2,944 2,563 2,575
------- -------- ------
15,339 10,564 8,096
Deferred expense (credit):
Federal (1,627) (674) 200
Foreign (162) (71) (246)
------- ------- ------
(1,789) (745) (46)
State 2,800 1,965 1,151
------- ------- ------
$16,350 $ 11,784 $9,201
======= ======== ======
</TABLE>
<TABLE>
<CAPTION>
A reconciliation of the statutory U.S. federal rate to the
effective income tax rate for the years ended November 30
is as follows:
<S> <C> <C> <C>
1994 1993 1992
Statutory U.S. federal income
tax rate 35.0% 34.9% 34.0%
Increase resulting from:
State income taxes, net of
federal income tax benefit 3.7 3.6 3.5
Foreign tax rates .2 .1 1.0
Other items 2.3 3.6 3.5
---- ---- ----
Effective income tax rate 41.2% 42.2% 42.0%
==== ==== ====
</TABLE>
Deferred income taxes are recorded based upon differences between
the financial statement and tax basis of assets and liabilities.
The deferred tax assets and liabilities recorded on the balance
sheet at November 30, 1994 are as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
1994
<S> <C>
Deferred tax assets:
Goodwill $1,308
Employee benefits 1,499
Accounts receivable, inventory and other 5,331
------
8,138
Deferred tax liabilities:
Property and equipment $2,994
Pension 1,310
Intangibles and other 1,534
------
5,838
------
Net deferred tax assets $2,300
======
</TABLE>
No provision has been made for U.S. federal income taxes on
certain undistributed earnings of foreign subsidiaries that the
Company intends to permanently invest or that may be remitted
tax-free. The total of undistributed earnings that would be
subject to federal income tax if remitted under existing law is
approximately $10,000,000 at November 30, 1994. Determination of
the unrecognized deferred tax liability related to these earnings
is not practicable because of the complexities with its
hypothetical calculation. Upon distribution of these earnings,
the Company will be subject to U.S. taxes and withholding taxes
payable to various foreign governments. A credit for foreign
taxes already paid will be available to reduce the U.S. tax
liability.
Income taxes of $13,400,000, $12,877,000 and $9,840,000 were paid
in 1994, 1993 and 1992, respectively.
7. Capital Stock
Authorized shares of Class A and Class B stock are 48,500,000 and
1,500,000 shares, respectively. In May 1994, a three-for-two
stock split was affected for Class A and Class B stock whereby
one additional share was issued for every two shares outstanding.
References to average number shares outstanding, net income per
share and dividends per share have been adjusted to recognize the
effect of this stock split.
The limited voting rights of Class A shareholders are equal to
voting rights of Class B shareholders only with regard to voting
for merger, consolidation or dissolution of the Company and
voting and electing four directors of the Company if there are
ten or more directors and two directors if there are nine or
fewer directors. With respect to all rights other than voting,
Class A shareholders are the same as Class B shareholders.
<PAGE>
The terms of the Class B stock, which is held only by employees,
provide that these shares be exchanged for Class A stock on a
share-for-share basis when the shareholder ceases to be an
employee or decides to dispose of the shares. Accordingly,
1,500,000 shares of authorized Class A stock are reserved for
this purpose.
<TABLE>
<CAPTION>
A summary of shares issued and held in treasury follows (in thousands):
Capital Stock Capital Stock
Issued Held in Treasury
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Balance at November 30, 1991 11,032 240 1,199 135
Class A exchanged for Class B - - 42 (42)
Class B exchanged for Class A - - (33) 33
5% stock dividend 472 - - -
Acquisition for treasury - - 575 -
Stock options exercised 84 - 26 15
------ ---- ----- ---
Balance at November 30, 1992 11,588 240 1,809 141
Class A exchanged for Class B - - 66 (66)
Class B exchanged for Class A - - (11) 11
Stock options exercised 237 - 40 21
Three-for-two stock split 5,821 120 921 63
------ --- ----- ---
Balance at November 30, 1993 17,646 360 2,825 170
Class A exchanged for Class B - - 74 (74)
Class B exchanged for Class A - - (40) 40
Stock options exercised 161 - 8 17
Three-for-two stock split 8,888 180 1,437 69
------ --- ----- ---
Balance at November 30, 1994 26,695 540 4,304 222
====== === ===== ===
</TABLE>
<TABLE>
<CAPTION>
Changes in capital stock are summarized as follows (in thousands):
Cost of
Capital Stock Capital
(Stated Amount) Additional Stock in
Class A Class B Capital Treasury
<S> <C> <C> <C> <C>
November 30, 1991 $13,789 $300 $59,915 $12,544
5% stock dividend 591 - 7,796 -
Acquisition for treasury - - - 11,054
Stock options exercised 104 - 970 790
------- ---- ------- -------
November 30, 1992 14,484 300 68,681 24,388
Stock options exercised 221 - 1,954 1,199
------- ---- ------- -------
November 30, 1993 14,705 300 70,635 25,587
<PAGE>
Stock options exercised 126 - 1,177 500
Disqualifying disposition
of stock options - - 160 -
------- ---- ------- -------
November 30, 1994 $14,831 $300 $71,972 $26,087
======= ==== ======= =======
</TABLE>
Incentive stock option plans entitle certain directors, officers
and other key employees to buy shares of Class A stock at prices
not less than fair market value on the date of grant. The number
of shares reserved and the number and price per share of options
granted are adjusted for subsequent stock dividends and stock
splits. Shares originally reserved under these plans totaled
4,179,688 of which 776,509 shares remain reserved for the grant
of options. At November 30, 1994, options to buy 1,319,418 shares
at prices ranging from $5.01 per share to $17.17 per share were
outstanding of which 390,754 shares were exercisable.
The Company sponsors an employees stock purchase plan and a
401(k) savings plan that allow participants to acquire Class A
stock at the current fair market value. At November 30, 1994,
2,167,000 shares of Class A stock were reserved for sale under
the plans.
8. Foreign Operations
<TABLE>
<CAPTION>
United States and foreign operations, which include subsidiaries located in
Canada, Germany, Malaysia and Taiwan, are as follows (in thousands):
1994 1993 1992
<S> <C> <C> <C>
Net sales to unaffiliated customers:
United States $284,826 $246,162 $207,702
Foreign 46,480 38,163 28,774
-------- -------- --------
Consolidated $331,306 $284,325 $236,476
======== ======== ========
Income before income taxes:
United States $ 30,421 $ 19,638 $ 15,634
Foreign 9,231 8,301 6,273
-------- -------- --------
Consolidated $ 39,652 $ 27,939 $ 21,907
======== ======== ========
Total assets:
United States $165,182 $146,356 $102,139
Foreign 25,572 23,857 16,670
Eliminations (deductions) (502) (3,169) (1,760)
-------- -------- --------
Consolidated $190,252 $167,044 $117,049
======== ======== ========
</TABLE>
9. Quarterly Results of Operations (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
Quarterly results of operations are summarized as follows (in
thousands, except per share data):
<S> <C> <C> <C> <C>
1994 Quarter Ended Feb 28 May 31 Aug 31 Nov 30
Net sales $73,972 $84,520 $86,639 $86,175
Gross profit 24,241 29,724 30,948 31,584
Net income 3,141 5,786 6,973 7,402
Net income per share .13 .25 .30 .32
1993 Quarter Ended Feb 28 May 31 Aug 31 Nov 30
Net sales $54,524 $65,825 $82,807 $81,169
Gross profit 18,125 23,124 26,731 27,234
Net income 2,288 4,106 4,601 5,160
Net income per share .10 .18 .20 .22
</TABLE>
Exhibit 21
SUBSIDIARIES OF LILLY INDUSTRIES, INC. AS OF
FEBRUARY 23, 1995
All subsidiaries other than London Laboratories GmbH are
doing business as Lilly Industries, Inc.
Name of Subsidiary State of Incorporation
1. Lilly Industries, Inc.(Canada) Ontario, Canada
2. Lilly Jamestown, Inc. Indiana
3. Lilly High Point, Inc. Indiana
4. Lilly London, Inc. Indiana
5. London Laboratories Limited Ontario, Canada
(Subsidiary of
Lilly London, Inc.)
6. London Laboratories GmbH Germany
(Subsidiary of
Lilly London, Inc.)
7. Lilly Industries
(Far East), Ltd. Taiwan
8. Lilly Industries
(Malaysia) Sdn.Bhd. Malaysia
9. Lilly Industries (Asia) Ltd. Hong Kong
10. Lilly Industries
(Thailand) Ltd. Thailand
11. Dongguan Lilly Paint
Industries Ltd. Peoples Republic
(Subsidiary of of China
Lilly Industries (Asia) Ltd.)
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Lilly Industries, Inc. of our report dated
January 27, 1995, included in the 1994 Annual Report to
Shareholders of Lilly Industries, Inc.
Our audits also included the financial statement schedule of
Lilly Industries, Inc. listed in Item 14(a). This schedule is
the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
We further consent to the incorporation by reference in
Registration Statements (Form S-8 Nos. 33-52959, 33-52956 and 33-
52958 pertaining to the Lilly Industries, Inc. 1991 Director
Stock Option Plan, the Lilly Industries, Inc. Employee 401(k)
Savings Plan and the Lilly Industries, Inc 1992 Stock Option
Plan, respectively) of our report dated January 27, 1995, with
respect to the consolidated financial statements incorporated
herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Lilly Industries,
Inc.
/s/ Ernst & Young
February 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED CONDENSED BALANCE SHEET OF LILLY INDUSTRIES,
INC. AS AT November 30, 1994 AND THE CONSOLIDATED CONDENSED
STATEMENT OF INCOME OF LILLY INDUSTRIES, INC. FOR THE YEAR THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<CASH> 26,581
<SECURITIES> 75
<RECEIVABLES> 43,990
<ALLOWANCES> ( 1,759)
<INVENTORY> 23,885
<CURRENT-ASSETS> 93,057
<PP&E> 75,765
<DEPRECIATION> ( 40,012)
<TOTAL-ASSETS> 190,252
<CURRENT-LIABILITIES> 51,453
<BONDS> 0
0
0
<COMMON> 87,104
<OTHER-SE> 12,321
<TOTAL-LIABILITY-AND-EQUITY> 190,252
<SALES> 331,306
<TOTAL-REVENUES> 331,306
<CGS> 214,809
<TOTAL-COSTS> 289,289
<OTHER-EXPENSES> ( 554)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,919
<INCOME-PRETAX> 39,652
<INCOME-TAX> 16,350
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,302
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
