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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 33-97056
CALMAR INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-3833709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
333 South Turnbull Canyon Road
City of Industry, California 91745
(Address of principal executive offices)
Registrant's telephone number, including area code: (626) 330-3161
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 common stock of Calmar Inc. held by non-
affiliates of Calmar Inc. is inapplicable as the common stock of Calmar Inc. is
privately held.
The number of shares of common stock of Calmar Inc. outstanding on March
15, 1998 was 3,092,031.
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
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Page 1 of __ Pages
Exhibit Index begins on Page __.
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CALMAR INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 1997
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<CAPTION>
Page
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PART I
<S> <C> <C>
Item 1. Business............................................................... 3
Item 2. Properties............................................................. 10
Item 3. Legal Proceedings...................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders.................... 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.. 13
Item 6. Selected Financial Data................................................ 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 15
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.............. 19
Item 8. Financial Statements and Supplementary Data............................ 19
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure................................................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant..................... 21
Item 11. Executive Compensation................................................. 24
Item 12. Security Ownership of Certain Beneficial Owners and Management......... 30
Item 13. Certain Relationships and Related Transactions......................... 31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....... 32
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS.
As used in this Annual Report on Form 10-K ("Form 10-K"), unless the
context indicates otherwise, the terms "Company" and "Calmar" refer to Calmar
Inc., a Delaware corporation, and its predecessor companies.
GENERAL
Calmar believes it is the leading worldwide manufacturer of plastic
dispensing and spraying systems. Calmar offers the broadest range of such
systems in the world, including a full line of fine mist, regular and trigger
sprayers; regular, large and high-viscosity dispensers; and other specialty
products. These products are used primarily for dispensing and packaging
personal care, household, automotive, chemical and pharmaceutical products.
Management attributes the Company's success to its global relationships with
major customers, excellent product quality and service, advanced manufacturing
capabilities and development of innovative products. The Company's largest
customers include most major consumer products companies. The Company has been
doing business with its ten largest customers, which together accounted for
approximately 30% of its net sales in 1997, for an average of over 20 years.
The markets for Calmar's products are generally characterized by stable
aggregate end-user demand. These markets have grown as: (i) the demand for
consumer products has grown, particularly internationally; (ii) Calmar's
customers have increasingly used high-value-added dispensing and spraying
systems to differentiate, add convenience and improve their products; (iii) new
applications for the Company's technology have been developed, such as drug
delivery systems, certain food applications and body sprays; and (iv) the cost
of these products has continued to decline as technology and manufacturing
techniques have improved.
Calmar was incorporated in 1983 to carry on the business formerly conducted
by the Calmar division of Diamond International Corporation. In 1987, Beijer
Industries AB ("Beijer"), a Swedish corporation and the 65% stockholder of the
Company, through two wholly-owned subsidiaries, acquired the remaining 35% of
the common stock of the Company. In 1988, FS Equity Partners II, L.P., a
California limited partnership and an affiliate of Freeman Spogli & Co.
("FS&Co."), purchased a 52% interest in Calmar and has, from time to time, made
additional equity investments in the Company to support its growth. In a
creditor proceeding in 1994 involving Beijer and its parent Kongsbo Industrier
AB, a Swedish corporation, the equity interest in the Company retained by Beijer
was transferred to AB Handel och Industri, a Swedish corporation.
THE REFINANCING
On August 18, 1995, the Company refinanced a substantial portion of its
long-term debt. The Company sold $120.0 million aggregate principal amount of
its 11 1/2 Senior Subordinated Notes due 2005, Series A (the "Old Notes").
Concurrently therewith, Calmar entered into a new senior secured credit
agreement (the "New Credit Facility") which provides for term loan facilities
aggregating $105.0 million and a revolving credit facility of up to $20.0
million (the "Revolver"). The Revolver expires in 1999. The New Credit
Facility is secured by, among other things, a first priority lien on all of the
Company's domestic real properties.
On September 18, 1995, net proceeds from the sale of the Old Notes
(approximately $116.0 million), together with borrowings under the term loan
portion of the New Credit Facility ($105.0 million), were used: (i) to redeem
the $90.0 million outstanding principal amount of the Company's 12% Senior
Secured Notes due 1997 (the "Senior Secured Notes"); (ii) to redeem the $104.8
million outstanding principal amount of the Company's 14% Subordinated Notes due
1999 (the "Subordinated Notes"); (iii) to pay related call premiums aggregating
$5.7 million plus associated redemption costs and accrued interest on such
securities to their date of redemption; (iv) to repay all outstanding amounts
($6.5 million) under the Company's then existing revolving credit agreement; and
(v) for working capital and general corporate purposes.
3
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As used herein, the term "Refinancing" shall refer to the transactions
which occurred on August 18, 1995 and September 18, 1995 described above.
On January 10, 1996, the Company consummated an offer to exchange (the
"Exchange Offer") $1,000 principal amount of its 11 1/2 Senior Subordinated
Notes due 2005, Series B (the "Senior Subordinated Notes") which were registered
under the Securities Act of 1933, as amended, pursuant to a Registration
Statement on Form S-4, for each $1,000 principal amount of its outstanding Old
Notes, of which $120.0 million principal amount was outstanding. As of March
15, 1998, $120.0 million principal amount of the Senior Subordinated Notes was
outstanding.
On October 4, 1996, the Company amended its New Credit Facility. The
amendment replaced its current lender under the Revolver within the New Credit
Facility, reduced the maximum borrowings permitted under the Revolver from $20.0
million to $12.0 million, revised certain financial covenants pursuant to the
New Credit Facility and provided some technical revisions to the New Credit
Facility. At December 31, 1997, the borrowing base test permitted the Company
to borrow up to $12.0 million.
On July 16, 1997, the Company amended (the Second Amendment) its New Credit
Facility to permit the Company to acquire certain assets of an existing licensee
in Argentina and Brazil. See "--International Operations." On January 20, 1998,
the Company amended (the Third Amendment) the New Credit Facility by increasing
the amount the Company may borrow under its AXEL Series A facility by $5.0
million to support the Company's working capital requirements.
The Company's executive offices are located at 333 South Turnbull Canyon
Road, City of Industry, California 91749, and its telephone number is (626) 330-
3161.
Unless otherwise indicated, as used in this Form 10-K (i) all references to
square feet are to gross square feet, rather than net selling space; and (ii)
all references to a year shall mean the fiscal year of the Company which
commences in such year (for example, the fiscal year commencing January 1, 1997
and ending December 31, 1997 is referred to herein as "1997").
PRODUCTS
Calmar believes it is the largest manufacturer of plastic pump spraying and
dispensing systems in the world. Calmar manufactures three types of plastic
pump sprayers (fine mist, regular and trigger sprayers), three types of plastic
pump dispensers (regular, large and high-viscosity dispensers), child-resistant
closures as well as custom-molded inhaler casings and aerosol valves. Calmar's
products are designed, developed and manufactured using the Company's patents,
proprietary processes and technology.
The following table shows the contribution to Calmar's net sales made by
plastic pump sprayers, plastic pump dispensers and other products during each of
the last three years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1995 1996 1997
---------------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Sprayers......... $129,331 58% $129,107 59% $135,910 59%
Dispensers....... 71,209 32 69,469 32 74,301 32%
Other Products... 23,925 10 20,861 9 20,034 9%
-------- --- -------- --- -------- ---
Total........ $224,465 100% $219,437 100% $230,245 100%
======== === ======== === ======== ===
</TABLE>
4
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Plastic Pump Sprayers
- ---------------------
Calmar's plastic pump sprayers are used to dispense a wide variety of
liquid products for various applications. Different applications require the
sprayers to have different performance characteristics. Calmar has designed and
developed or acquired three basic types of sprayers and has several relevant
patents related to these products.
Fine Mist Sprayers. Fine mist sprayers emit a fine spray for use with
such products as hair sprays, fragrances, nasal sprays and other pharmaceutical
products. Calmar is a major supplier of fine mist sprayers to the hair care
industry in the U.S. and to the hair care, deodorant, fragrance and
pharmaceutical markets in Europe. The Company currently manufactures nine models
of fine mist sprayers. Fine mist sprayers are required for the application of
fragrances and hair spray products in order to avoid concentrations of the
products on any one area and to promote rapid drying. Pharmaceutical products,
such as nasal sprays, require fine, micron sized particles for product efficacy.
The Company's products are used for nasal applications in both the over-the-
counter and prescription pharmaceutical markets. Recently, these sprayers have
also begun to be used for food applications and body sprays.
Regular Sprayers. Regular sprayers emit a wetter, larger particle sized
spray than fine mist sprayers and are used with household cleaners, including
window, tile and all-purpose cleaners, as well as throat sprays, automotive
cleaners and insecticides. In Europe, regular sprayers are typically used in
certain hair care and medical applications. The Company currently manufactures
two models of regular sprayers. Regular sprayers are typically used with
smaller-sized packages.
Trigger Sprayers. Trigger sprayers emit a spray similar to that of the
regular sprayers described above but are generally used for larger sized
containers such as household, automotive and chemical products. The world
market for trigger sprayers has experienced significant growth over the past
five years primarily as a result of: (i) a significant decrease in trigger
sprayer prices and manufacturing costs; (ii) the conversion from regular
sprayers to trigger sprayers for larger applications; and (iii) the conversion
from conventional closures to trigger sprayers for added convenience. Calmar
currently manufactures three models of trigger sprayers.
Plastic Pump Dispensers
- -----------------------
The Company's plastic pump dispensers are primarily used to dispense pre-
measured amounts of liquids, lotions and high-viscosity products.
Regular Dispensers. Regular dispensers are used primarily with products
such as liquid soaps, hand, face and body lotions and other applications
requiring pre-measured amounts of products. The Company currently manufactures
five models of regular dispensers, with several designs of each. Growth in this
category has been driven by liquid soap products which have gained market share
from traditional bar soaps. Regular dispenser sales have increased further as
hand, face and body lotions were packaged to use dispensers.
Large Dispensers. Large dispensers dispense from one-eighth of an ounce
to one ounce of product at a time, which is a greater output than that of
Calmar's regular dispensers. Large dispensers are used primarily for shampoos,
hair conditioners, syrups, food products (such as mustard and ketchup in
institutional size containers) and liquid detergents. The Company currently
manufactures four models of large dispensers, with several designs of each,
which include a product line with a locking pump which does not require outer
protection for shipping.
High-Viscosity Dispensers. High-viscosity dispensers, which are sold
mainly in the U.S., are used almost exclusively with one major toothpaste
manufacturer.
5
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Other Products
- --------------
The Company is a supplier to Rhone-Poulenc Rorer of an inhaler casing used
by asthmatics and sold under the Azmacort brand name. The product was
introduced by Rhone-Poulenc Rorer in 1991 and is produced by Calmar in a clean
room environment.
Calmar is a leading manufacturer of child-resistant closures for use in the
U.S. over-the-counter pharmaceutical market. The Company manufactures a one
piece plastic child-resistant safety cap under the trademark Snap-Safe(R) which
meets the protocol standards established by the United States Consumer Products
Safety Commission for "child-resistant" closures. This cap is used with dry
pharmaceutical products such as analgesics, cold tablets and vitamins.
Calmar also sells aerosol valves that are manufactured at its facility in
Spain. These products are sold to the Spanish market only.
MARKETING STRATEGY AND DISTRIBUTION
In North America, product managers are responsible for marketing and
distribution and also act as liaisons with the Company's technology,
manufacturing and finance personnel. Sales to customers in North America are
made directly through the Company's direct sales force located throughout North
America and indirectly through packaging distributors. In Europe, country
managers have key account responsibilities for major customers, while sales and
marketing are handled by a direct sales force under the direction of the Vice
President of European Operations. Sales to the Pacific Rim are conducted
through a direct sales force and licensees and are coordinated by a Managing
Director based in Singapore. South American sales are conducted both through
direct sales and licensees. Calmar also actively markets its products worldwide
in trade journals and at trade shows.
CUSTOMERS
The Company's largest customers include most major consumer products
companies. The Company has long-standing relationships with and is the sole
supplier to many of its major customers. Management believes that Calmar's
focus on product development, quality and excellent service has allowed the
Company to develop and maintain close and long-standing relationships with its
customers.
Although the Company has over 1,500 customers, approximately 30% of
Calmar's net sales in 1997 were to its ten largest customers. The personal care
and household products industry has consolidated over the past several years led
primarily by multinational companies. These companies are increasingly
demanding that their suppliers provide high quality products directly to their
operations around the world on a cost-efficient and timely basis. Furthermore,
as these companies continue to rationalize their supplier base, management
believes that Calmar's ability to provide a broad range of products will improve
the Company's competitive position.
The Company sells components and finished goods to licensees in South
America and the Pacific Rim. Calmar typically supplies such licensees with
molded parts and such licensees then assemble the parts into finished products
for sale in a specific market.
COMPETITION
The markets for Calmar's products are highly competitive. Calmar competes
with a number of public and privately-held companies, including divisions of
larger companies, some of which have greater financial resources than the
Company. Nonetheless, Calmar is the largest manufacturer of plastic pump
spraying and dispensing systems in the world, measured by the number of units
sold. In North America, Calmar believes that it has or shares a leading
position in each of the markets in which it competes. In addition, the Company
6
<PAGE>
believes that no other manufacturer produces as wide a variety of plastic
spraying and dispensing systems as Calmar.
The European markets for Calmar's products are highly fragmented. In
addition to the presence of North American competitors in Europe, there are a
number of local competitors in most of the major product categories. Calmar
believes it has a leading market share in Europe for trigger sprayers, regular
sprayers and large dispensers and has the second largest market share in its
other product categories. Calmar's European competitors are focused largely on
one or two major product areas while Calmar offers the widest variety of options
for their customers' needs.
In the Pacific Rim and South America, Calmar typically competes with other
multinational companies as well as local producers. In an effort to take
advantage of the rapidly growing markets in the Pacific Rim and South America,
Calmar has created three new wholly owned subsidiaries, Calmar Mercosur, S.A.,
Calmar do Brasil in South America, and Calmar Wuxi Dispensing Systems Ltd. in
China. In addition, Calmar has signed a joint venture agreement in Indonesia in
an effort to further increase presence and market share in the Pacific Rim. See
"-International Operations."
Calmar believes that it effectively competes primarily on the basis of its
reputation and the quality, reliability, performance and prompt delivery of its
products. Many of the Company's major customers are multinational companies
competing on a global basis with worldwide brands and place increased emphasis
on global sourcing of input materials and components. Management believes that
Calmar's ability to serve these customers globally from its North American,
European, South American, and Asian production bases will continue to be an
important competitive factor.
RESEARCH AND DEVELOPMENT
Management believes that Calmar is a leader in the technological
development and innovation of products in the industry. The focus of the
Company's research, development and engineering efforts is to: (i) develop
products that will increase the size of the available market; (ii) provide the
highest level of quality; (iii) develop unique value-added product features;
(iv) customize products for specific customer applications; and (v) continue to
simplify the design/production process to reduce costs.
The Company's technology effort is very closely associated with its
customers. Many development projects are conducted jointly with customers and,
in some instances, are partially or fully funded by these customers. These
projects may include cost sharing agreements regarding the purchase of
manufacturing equipment for new products and/or additional capacity. These
arrangements help the Company to share some of the risk in both product
development and product sales associated with introducing a new product or a
modified product into the market. Calmar is currently working on several
confidential joint development projects with major multinational companies to
develop new proprietary products.
In 1995, 1996 and 1997, Research and Development expenditures totalled $4.5
million, $5.1 million and $5.0 million, respectively.
MANUFACTURING, DESIGN AND RAW MATERIAL
The Company molds precision plastic components using tight tolerance,
multi-cavity molds in standard injection molding machines. Plastic components
are produced primarily at Calmar's manufacturing facilities, with support from
contract molders. The extent to which contract molders are used varies monthly
and depends on current product demand. In addition, Calmar operates a captive
spring-making plant which manufactures the majority of metal springs used in its
pump products; the remaining springs and certain other components are purchased
from outside suppliers. The Company also manufactures most of its own extruded
tubing for its pumps.
7
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Pump components are assembled automatically on proprietary design assembly
machines. Each pump is inspected for product integrity and tested for
functionality throughout the assembly process, utilizing state-of-the-art
sensors and computer controls to minimize defective products. Calmar has
developed significant expertise in automated assembly equipment, having designed
and built the majority of its assembly equipment to exacting product design and
manufacturing requirements.
The principal raw materials used by Calmar are polypropylene and high-
density polyethylene resins. These raw materials are available from a number of
suppliers in the United States and in Europe. Approximately 15% of Calmar's
cost of sales in 1997 was attributable to plastic resin costs. The cost of
plastic resins purchased by Calmar is subject to commodity pricing. The
overall average price of plastic resins purchased by Calmar remained relatively
unchanged during 1997. To date, the Company has been able to obtain sufficient
quantities of plastic resin for its requirements. Calmar does not have long-
term supply contracts for the purchase of raw materials, although it has long-
standing relationships with its major suppliers.
Calmar's manufacturing facilities (the majority of which are Company owned)
and equipment represent advanced technology for the industry. The Company's
Spanish and German plants have been International Standards Organization (ISO)
9001 certified. All of the Company's plants in the United States have been (ISO)
9001 certified. The production capacity of Calmar's manufacturing facilities
depends to a great extent on the products manufactured. Since most of Calmar's
injection molding machines are readily adapted to the manufacture of various
products or components, production capacity may be shifted among various
products by reallocating the injection molding machines or by contracting with
independent molders who are provided with the Company's molds. Currently Calmar
is at capacity with respect to the production of certain of its products. One of
the Company's European subsidiaries has recently completed construction of a new
facility which has reduced the Company's reliance on independent molders.
BACKLOG
Calmar's largest customers typically provide Calmar with quarterly or
annual estimates of their product requirements and confirm specific orders on a
monthly basis. Calmar's backlog of orders, which it believes to be firm, was
approximately $119 million as of February 28, 1998. Calmar expects that
substantially all of its present backlog will be filled within the next 12
months.
INTERNATIONAL OPERATIONS
The Company's German subsidiary, Calmar-Albert GmbH, manufactures and sells
plastic pump sprayers and dispensers, primarily in the European market. The
Company's Spanish subsidiary, Monturas S.A., is the largest producer of
sprayers, dispensing pumps and aerosol valves in Spain. Calmar's French,
Belgian, English and Italian subsidiaries are trading companies selling products
produced by Calmar-Albert GmbH and Monturas S.A., as well as products
manufactured by the Company in the U.S. The Company's Canadian subsidiary sells
certain of Calmar's products manufactured in the U.S. The Company's Argentinean
and Brazilian subsidiaries sell plastic pump sprayers and dispensers in South
America. The Company's Chinese subsidiary assembles and sells plastic pump
sprayers and dispensers in Asia. For a discussion of the amounts of revenue,
operating income and identifiable assets attributable to the Company's
international operations and the amount of export sales, see Note 12 to the
Company's Consolidated Financial Statements.
In August 1997, Calmar acquired certain assets of a licensee in Argentina
and Brazil, Magiplast S.A. through its two new wholly-owned subsidiaries,
Calmar Mercosur, S.A. and Calmar do Brasil. The main purpose for this
acquisition was to take advantage of the rapidly growing South American market
and to provide Calmar control of its sales, marketing and distribution channel
in this market. Calmar's manufacturing operations in South America continue to
be performed by Magiplast S.A.
8
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In October 1997, Calmar incorporated a Chinese subsidiary, Calmar Wuxi
Dispensing Systems Ltd., to take advantage of the rapidly growing Chinese market
and to provide Calmar control of its sales, marketing and distribution channel
in this market.
The Company also has licensees located in Japan, South Korea, Hong Kong,
South Africa, Australia, Argentina and India.
The Company signed a joint venture agreement in Indonesia in August 1997
and is waiting for government approval for consummation of the joint venture
arrangement.
Sales outside of North America (including export sales) accounted for
approximately 47% and 45% of the Company's total revenues in 1996 and 1997,
respectively. These sales are subject to a number of inherent risks, including
the impact of inflationary environments in economies outside the United States
and generally longer receivables collection periods, as well as tariffs and
other potential trade barriers which may reduce the profitability to the Company
of such sales.
The U.S. dollar value of revenues derived from products sold outside the
United States (excluding U.S. export sales) varies with currency exchange rate
fluctuations, and the Company's consolidated revenues may be unfavorably
impacted by significant increases in the value of the U.S. dollar relative to
certain foreign currencies. Calmar's domestic operations currently export
products with invoices denominated in U.S. dollars to eliminate any such
exchange rate risk. During 1997, many Asian nations including Indonesia,
experienced significant currency devaluation. In previous years, similar
circumstances have occurred in certain South American economies. See Note 1 to
the Consolidated Financial Statements. In addition, with respect to product
sales which are denominated in a currency other than the functional currency of
the country in which the Company subsidiary making the sale is located, the
Company may be exposed to gains or losses based upon fluctuations in exchange
rates. In practice, Calmar's subsidiaries invoice in their own functional
currency whenever possible and are involved in some hedging arrangements with
respect to foreign currencies. See "Item 7.--Management's Discussion and
Analysis of Financial Condition and Results of Operations."
PATENTS AND TRADEMARKS
Many of Calmar's products are protected by patents and the Company is
continually exploring opportunities for new patentable products through research
and development. While Calmar believes that its patents are important to its
business and enhance its competitive position, Calmar does not believe that the
loss of any one particular patent would have a material adverse effect on
Calmar's business.
Most of Calmar's products are sold under registered trademarks. Although
Calmar believes that its trademarks are useful, it does not believe that their
loss would have a material adverse effect on Calmar's business.
EMPLOYEES
As of December 31, 1997, Calmar employed 1,950 persons. At such date, 28%
of Calmar's U.S. employees were covered by collective bargaining agreements.
Approximately 130 employees in Germany and 217 employees in Spain were
represented by national labor unions. The collective bargaining agreement
covering employees at the Company's facility which represents 12% of the
workforce in California will expire during 1998.
Calmar believes that its relationship with its employees is excellent and
is not aware of any threatened labor activity affecting its employees. Calmar
has never experienced a work stoppage due to a labor dispute.
9
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ITEM 2. PROPERTIES.
Calmar manufactures products at six Company-owned plants located in
California, Ohio, Missouri, Germany and Spain and a leased plant located in
Germany and assembles products in leased facilities in Argentina and China, and
manufactures springs at one Company-owned facility in Ohio. Calmar also leases
a number of sales offices throughout the world. All of the Company's domestic
real properties are subject to a first priority lien securing the New Credit
Facility. See "Item 1. Business--The Refinancing."
Calmar's manufacturing operations are conducted at the facilities described
below:
<TABLE>
<CAPTION>
SIZE
(APPROX.)
LOCATION SQ. FT.
- ----------------------------------- ----------
<S> <C>
City of Industry, California....... 125,800
Washington Court House, Ohio....... 117,000
Washington Court House, Ohio....... 15,600
Lee's Summit, Missouri............. 133,100
Lee's Summit, Missouri............. 65,000
Hemer, Germany..................... 90,000
Hemer, Germany (leased)............ 43,000
Barcelona, Spain................... 129,000
Buenos Aires, Argentina (leased)... 22,000
Wuxi, China (leased)............... 20,000
</TABLE>
The Company believes that its existing facilities are in good condition and
are suitable and adequate to meet its current needs. The Company has plans to
purchase a building in the United States to handle its anticipated future
growth. Currently, the Company's planned capital expenditures contemplate the
acquisition of additional molding equipment. Historically, contract molders
have been readily available to provide the Company with additional molding
capacity and the Company expects that contract molders will continue to be
readily available.
ENVIRONMENTAL REGULATIONS
Management believes the Company is in substantial compliance with national,
state and local laws and regulations governing the use, discharge and disposal
of hazardous materials, except as outlined below. In June 1987, the California
Regional Water Quality Control Board (Water Control Board) required the Company
to conduct an investigation of possible soil and groundwater contamination of
the Company's City of Industry facility. This investigation indicated that
soils and groundwater under the site had been impacted by industrial cleaning
solvents. Since 1987, the Company has continued to investigate and monitor the
site. The investigations performed to date indicate that some of the
contamination on the site may result from off-site sources unrelated to the
Company. The Water Control Board has requested that the Company begin soil
remediation at the site. In October 1997, the Company submitted a remediation
plan to the Water Control Board and is currently waiting for Board approval.
The Company also continues to evaluate soil cleanup options. The Company
believes it will have some insurance coverage for this matter.
In June 1993, the EPA sent 64 companies and individuals, including the
Company, letters notifying the recipients that they were considered potentially
liable for groundwater contamination in the Puente Valley Operable Unit of the
San Gabriel Superfund Site. The Company's City of Industry facility is located
in the Puente Valley Operable Unit. In response to the EPA's request, the
Company and a majority of the recipients of the notice formed a steering
committee known as the Puente Valley Steering Committee (PVSC). In September
1993, 47 companies (including Calmar) and individuals in the Puente Valley,
entered into an Administrative Order on Consent (AOC) whereby such companies and
individuals, including the Company, agreed to conduct a remedial investigation
and feasibility study under the oversight of the EPA. A remedial
10
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investigation report and feasibility study were issued in May 1997. The total
costs related to conducting this study were estimated to be approximately
$5,000,000 of which $4,800,000 has been paid to date. The Company's share is
expected to be approximately $150,000 of which $132,000 has been paid to date.
The Company believes that it will have some insurance coverage in this matter.
In January 1998, the EPA issued a proposed remediation plan which
identified a remedial system for intermediate and shallow groundwater zones as
the preferred remedy. The estimated cost of the plan, if ultimately approved,
is approximately $29 million if only treatment for industrial solvents is
necessary or $51 million if treatments for total dissolved solids and nitrates
is also required. The EPA is expected to issue its final Record of Decision by
mid 1998. Upon issuance of the final Record of Decision, it is expected that
the potentially responsible parties (PRPs) identified by the EPA will develop
specific remediation plans in response to a demand by the EPA and that the
parties will participate in a cost allocation process whereby each PRP will be
allocated a percentage share of the remediation responsibility (and thus a
percentage share of the remediation costs). A precise estimate of the total
remediation cost ultimately to be paid by the Company is not yet determinable.
A more precise estimate of costs will be available upon issuance of the Record
of Decision and demand by the EPA, the development of the response and
remediation plan by the PRPs, and an agreement on allocable percentages of
responsibility of the PRPs. It is expected that any remediation plan developed
by the PRPs will include ongoing monitoring of the site, as well as intermediate
groundwater zones. It is estimated that any remediation would require at least
15 years to complete and perhaps significantly longer. The Company believes it
has insurance coverage for legal defense costs, and possibly indemnity, in this
matter. Some amounts of defense costs have already been paid by the carriers.
No amounts have yet been incurred for remediation and therefore no claims have
been forwarded to the carriers for payment. At December 31, 1997, the Company
has accrued approximately $400,000 for potential environmental liability.
Estimates of ultimate liability (as well as the Company's allocated percentage
of responsibility) may change significantly based upon the nature of the
proposed remediation plan which has yet to be developed by the PRPs.
The Company may be required to incur other costs and expenses from time to
time in order to generally comply with environmental laws and regulations;
however, the Company does not anticipate that such costs and expenses will have
a material adverse effect on the Company's results of operations. No assurances
can be given, however, that the historical, current or future uses and
conditions of the Company's facilities or operations will not result in the
imposition of liability under environmental laws.
GOVERNMENT REGULATION
Although the Company is not generally subject to significant government
regulation of its products, several states have mandated a reduction in the
level of volatile organic compounds ("VOC") in the formulation of certain
products, such as hairspray, that may be dispensed by Calmar's fine mist
products. The current regulations require manufacturers of hairsprays to
maintain a VOC level of no more than 80%. Effective June 1, 1999, the maximum
permissible VOC level will be reduced to 55% in California. In reduced VOC
level hairspray formulations, VOC's are typically replaced by water. Currently,
formulations are being developed and the Company is aggressively working to
adapt fine mist sprayer products to reduced VOC level formulations. Although
the Company has been successful in redesigning a fine mist sprayer to
accommodate currently allowable VOC formulations and is aggressively working to
adapt a fine mist sprayer to accommodate further reductions in the permitted VOC
content of product formulations mandated in 1999, there can be no assurance that
consumers will find reduced VOC hairspray acceptable, that such reductions would
be compatible with a fine mist sprayer or that an effective fine mist sprayer
could be developed at a reasonable cost and, in such event, there may be an
adverse impact on the Company's results of operations.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending against the Company or any
of its properties, except as noted in "Item 2. Properties--Environmental
Regulations." In addition, please see Note 11 to the Consolidated Financial
Statements and "Item 7. Management's Discussion and Analysis of Financial
Condition
11
<PAGE>
and Results of Operations--Liquidity and Capital Resources" for a discussion of
the pending tax audit of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is no established public trading market for the common stock of the
Company. As of March 15, 1998, the number of record holders of common stock of
the Company was 36.
The Company has not declared or paid cash dividends to its stockholders.
The Company anticipates that all of its earnings in the near future will be
retained for the development and expansion of its business and, therefore, does
not anticipate paying dividends on its common stock in the foreseeable future.
Declaration of dividends on the common stock will depend, among other things,
upon levels of indebtedness, future earnings, the operating and financial
condition of the Company, its capital requirements and general business
conditions. The agreements governing the Company's indebtedness contain
provisions which restrict the ability of the Company to pay dividends on its
common stock. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information has been derived
from the historical consolidated financial statements of the Company.
The information set forth below should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto included
elsewhere in this Form 10-K.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1993 1994 1995(1) 1996 1997
------ ------ --------- ------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $175,364 $203,344 $224,465 $219,437 $230,245
Gross profit....................... 42,812 53,284 56,021 56,450 63,295
Selling, general and
administrative expenses........... 34,437 34,641 35,559 37,097 37,956
Operating income................... 8,375 18,643 20,462 19,353 25,339
Income before net interest and
taxes(2).......................... 8,918 19,201 21,520 20,555 26,289
Interest expense................... (28,277) (27,788) (27,265) (24,487) (24,943)
Interest income.................... 382 413 396 320 285
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting change....... (18,977) (8,174) (5,349) (3,612) 1,697
Income (loss) before extraordinary
item and cumulative effect of
accounting change................. (17,813) (9,090) (6,432) (3,398) 1,631
Net income (loss).................. (25,527) (9,090) (15,960) (4,016) 1,697
BALANCE SHEET DATA:
Total assets....................... $280,595 $282,405 $289,785 $282,738 $284,641
Long-term debt..................... 212,859 208,705 235,785 232,867 238,571
Stockholders' equity (deficiency).. (2,428) (9,632) (23,619) (29,398) (32,241)
OTHER DATA:
Capital expenditures............... $ 22,930 $ 18,707 $ 18,290 $ 16,681 $ 22,947
Research and development costs..... 3,262 4,065 4,546 5,139 5,017
Depreciation and amortization
expense........................... 23,970 24,835 25,135 24,167 24,502
EBITDA(3).......................... 36,565 44,574 47,212 45,190 51,007
Ratio of EBITDA to total interest
expense(4)........................ 1.29x 1.60x 1.73x 1.85x 2.04x
Ratio of earnings to fixed
charges(5)........................ - - - - 1.06x
Net cash provided by operating
activities........................ 9,233 12,976 17,274 21,233 10,767
Net cash used in investing
activities........................ (20,503) (14,873) (14,361) (15,228) (23,506)
Net cash provided by (used in)
financing activities.............. 7,462 (3,298) 3,534 (5,701) 10,942
</TABLE>
Footnotes on following page
13
<PAGE>
___________________
(1) The consolidated financial information includes adjustments to reflect the
issuance of the Old Notes and New Credit Facility, redemption of the Senior
Secured Notes and Subordinated Notes and recognition of an extraordinary
loss for redemption of such former indebtedness. See the Consolidated
Financial Statements.
(2) Income before net interest and taxes is before the effect of an
extraordinary charge for certain extinguishments of debt in 1995 and 1996
and a change in the method of accounting for postretirement benefits in
1993.
(3) EBITDA represents income before interest, income taxes, depreciation and
amortization and certain other non-recurring items. EBITDA data is included
because the Company believes that such information is an indicator of a
leveraged company's ability to service debt and because such data is used in
certain financial tests in the Indenture. However, EBITDA is not intended
to be a performance measure that should be regarded as an alternative either
to net income as an indicator of operating performance or to cash flows as a
measure of liquidity, as determined in accordance with generally accepted
accounting principles. Under the Company's former and existing credit
agreements, EBITDA excludes the effects of certain non-recurring items
amounting to $3,677, $538, $557, $469 and $216 for the years ended December
31, 1993 through 1997, respectively. Non-recurring items in fiscal 1993
consisted of additional consulting services, termination expenses associated
with the closure of the Mexican manufacturing facility and the relocation of
such facility to the United States, and certain operating expenses related
to the adoption of Statement of Financial Accounting Standards ("SFAS") No.
106 for postretirement benefits other than pensions. In each of the other
periods presented above, non-recurring items resulted from certain operating
expenses associated with SFAS No. 106. The adoption of the accounting change
for postretirement benefits did not require any cash outlay.
(4) The ratio of EBITDA (as defined in footnote 3 above) to total interest
expense is calculated by dividing EBITDA by total interest expense. Total
interest expense consists of total interest paid or accrued on the Company's
debt obligations. This ratio is included because the Company believes it is
a measure of the availability of cash from operations to pay interest and
because such data is used in certain financial tests in the Company's debt
agreements. However, this ratio is not intended to be a substitute for the
ratio of earnings to fixed charges.
(5) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes, and fixed charges. Fixed
charges consist of interest expense, amortization of debt issuance costs and
that portion of operating lease rental expense which represents the interest
factor. As set forth in the table above, the consolidated earnings of the
Company were inadequate to cover fixed charges during 1993 through 1996. The
deficiency of earnings available to cover fixed charges for these years
amounted to ($18,997), ($8174), ($5349) and ($3612) respectively. The ratio
of earnings to fixed charges is calculated by dividing earnings by fixed
charges.
14
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
GENERAL
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with the "Selected Consolidated Financial Data"
and the Consolidated Financial Statements and notes thereto included elsewhere
in this Form 10-K.
The following table sets forth selected results of operations as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEARS
--------------------------
1995 1996 1997
--------------------------
<S> <C> <C> <C>
Sprayers....................................... 57.6% 58.8% 59.0%
Dispensers..................................... 31.7 31.7 32.3
Other products................................. 10.7 9.5 8.7
------ ------ ------
Net sales..................................... 100.0% 100.0% 100.0%
Gross profit................................... 25.0% 25.7% 27.5%
Selling, general and administrative expenses... 15.8 16.9 16.5
Operating income............................... 9.1 8.8 11.0
</TABLE>
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 1997 to the Year Ended December
31, 1996
Net sales for the year ended December 31, 1997 totaled $230.2 million, an
increase of $10.8 million, or 4.9%, from 1996. Net sales would have grown by
10.3% but for the unfavorable impact in foreign exchange rates of $11.7 million.
Sprayer sales experienced sales growth of 5.3% in the aggregate from the prior
year. Of the sprayer sales increase, trigger sprayers increased 11.1% from the
prior year. The increased trigger sprayer sales in North America and Europe
resulted from product promotions and increased business from certain major
customers. Although fine mist sales in units increased by 14.6%, sales in
dollars increased only slightly primarily due to lower selling prices and the
negative impact of exchange rate translations relating to Europe. Total
dispenser sales experienced sales growth of 7.0% in the aggregate from the prior
year. The increase in dispenser sales was a result of increased demand for
liquid soaps and body lotions.
Gross profit for the year ended December 31, 1997 increased $6.8 million,
or 12.1%, from the comparable 1996 period. Gross profit percentage of sales
increased from 25.7% in 1996 to 27.5% in 1997. The increase in gross profit as
a percentage of sales is a result of higher sales volumes, increased cost
absorption and lower outside molding costs in Europe.
Selling, general, and administrative expenses were $38.0 million, or 16.5%,
of net sales for the year ended December 31, 1997 as compared to $37.1 million,
or 16.9%, of net sales for 1996. The increase in selling, general, and
administrative expenses is primarily due to incremental expenses related to
South America. Selling, general, and administrative expenses remained relatively
consistent for North America and the other subsidiaries.
Operating income for the year ended December 31, 1997 increased to $25.3
million, or 11.0%, of net sales as compared to $19.4 million, or 8.8%, of net
sales for 1996. The increase was achieved principally through significant
growth in sales as discussed above.
15
<PAGE>
Interest expense increased $0.5 million, or 2%, from the previous year due
to increases in the Company's borrowing levels. The income tax benefit for 1997
was primarily due to the decrease in deferred tax liabilities from the Company's
European operations. The U.S. tax liability for the year ended December 31, 1997
was partially offset by the Company utilizing U.S. net operating loss
carryforward.
Net income for the year ended December 31, 1997 increased to $1.7 million
as compared to a net loss of $4.0 million in 1996. The increase was principally
a result of increased operating profit due to significant growth in sales in the
current year.
Comparison of the Year Ended December 31, 1996 to the Year Ended December
31, 1995
Net sales for the year ended December 31, 1996 totaled $219.4 million, a
decrease of $5.0 million or 2.2% from 1995. Net sales were unfavorably impacted
by $2.8 million due to foreign exchange rate changes. Sprayer sales were
generally unchanged from the prior year; although sales were up in North
America, they were offset by decreases in Europe. The increase in sales in
North America was primarily from increased demand for trigger sprayers. The
decrease in sales in Europe was primarily due to weaker demand and lower selling
prices. Total dispenser sales decreased slightly from the prior year due to the
effects of non-recurring product promotions in North America, the switch by
certain customers towards lower-priced non-pump alternatives and lower selling
prices. Lower selling prices have been influenced by the negotiations of long-
term contracts and competitive pressures. Other product sales decreased as the
result of lower sales to licensees, lower aerosol valve sales, which are
produced and sold in Spain, and a customer's major product promotion in 1995
which did not repeat in 1996.
Gross profit for the year ended December 31, 1996 was $56.4 million as
compared to $56.0 million in 1995. Gross profit as a percentage of sales
increased from 25.0% in 1995 to 25.7% in 1996. The increase in gross profit as
a percentage of sales resulted primarily from improvements in North American
operations. The increase reflects lower unit costs resulting from higher sales
volume, enhanced automation of certain assembly operations, lower resin prices
and lower purchase costs associated with new purchasing programs. The
improvements in North America were partially offset by lower gross margins in
Europe which were due to increased outsourcing of molding requirements, lower
overall prices and the effect of foreign exchange rate changes.
Selling, general and administrative expenses were $37.1 million or 16.9% of
net sales for the year ended December 31, 1996 as compared to $35.6 million or
15.8% of net sales for 1995. The increase in selling, general and
administrative expenses is due to higher compensation, legal expenses,
professional fees, research and development, and the effect of changes in
foreign exchange rates.
Operating income for the year ended December 31, 1996 decreased to $19.4
million or 8.8% of net sales as compared to $20.5 million or 9.1% of net sales
in 1995. The decrease was primarily the result of higher selling, general and
administrative expenses as discussed above.
Interest expense decreased $2.8 million to $24.5 million from the previous
year. The decrease reflects the benefits of lower interest rates resulting from
the refinancing of the majority of the Company's long-term debt in 1995. As no
income tax benefit was recorded against the U.S. losses due to uncertainty of
its ultimate realization, the income tax provision for 1996 was primarily
related to income from the Company's European operations.
In 1996, the Company recognized an extraordinary loss on extinguishment of
debt of $0.6 million, consisting principally of prepayments, other fees and
write-offs of the unamortized portion of related deferred financing costs in
connection with the replacement of the Company's lender under the Revolver
within the New Credit Facility which was treated for accounting purposes as an
extinguishment of debt. See "Item 1. Business--The Refinancing."
Net loss for the year ended December 31, 1996 decreased to $4.0 million as
compared to $16.0 million in 1995. The decrease was principally as a result of
lower interest expense and significantly lower extraordinary items of $0.6
million in 1996 related to the amendment of the Revolver discussed above as
compared to extraordinary items of $9.5 million incurred in 1995 in connection
with the Refinancing.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its cash needs through cash flow from operations,
existing cash balances, equipment financing and the Revolver under the New
Credit Facility. See "Item 1. Business--The Refinancing."
The Company's primary source of cash continues to be its cash flow from
operations. In addition, the Revolver is available to support the Company's
working capital requirements. The net cash provided by operating activities
decreased by $10.5 million for the year ended December 31, 1997 under the
comparable 1996 period. The decrease in cash flows from operations was mainly
due to the cash used by the changes to support increases in accounts receivable
and inventories and decreases in accounts payable. Working capital at December
31, 1997 was $27.7 million compared to $20.5 million at December 31, 1996. The
increase in working capital is primarily attributable to an increase in accounts
receivables and inventories partially offset by increased short-term borrowings.
The net cash used in investing activities for the year ended December 31,
1997 increased by $8.3 million due primarily to increased purchases of property
and equipment. For the year ended December 31, 1997, capital expenditures were
$22.9 million which were funded primarily by available cash. Capital
expenditures, primarily for the purchase of new manufacturing equipment, for
fiscal 1998 and for fiscal 1999 are expected to exceed $23.0 million for each
year. These amounts represent both expected cash outlays and equipment
financings. Currently Calmar is at capacity with respect to the in-house molding
of certain of its products and the Company's planned capital expenditures
contemplate expanding its molding capacity. The production capacity of Calmar's
manufacturing facilities depends to a great extent on the products manufactured.
Since most of Calmar's injection molding machines are readily adapted to the
manufacture of various products or components, production capacity may be
shifted among various products by reallocating molding machines or by
contracting with independent molders who are provided with the Company's molds.
The Company's capital expenditure program is designed, in part, to reduce the
Company's use of contract molders, and thereby increase the Company's margins.
The Company plans to fund new equipment purchases through equipment financing
and leasing, existing cash balances (which were $7.2 million as of December 31,
1997) and cash flow from operations. The Company did not have any other material
commitments for capital expenditures as of the end of fiscal 1997.
The net cash provided by financing activities increased by $16.6 million
for the year ended December 31, 1997 from the comparable period of 1996
primarily due to the Company utilizing $5.0 million on the "Revolver," lower
principal payments on long-term debt and the increase in cash overdraft.
Additionally, in 1996, the Company prepaid certain equipment debt and certain
Monturas acquisition obligations which totalled approximately $3.5 million. The
Company has entered into certain interest rate cap agreements to reduce the risk
of significant increases in interest payments for the term loan portion of the
New Credit Facility that would be caused by interest rate increases. In January
1998, the Company amended its New Credit Facility to increase the amount the
Company may borrow under its AXEL Series A facility by $5.0 million to support
the Company's working capital requirements.
In 1997, the Company made scheduled principal payments of $1.1 million
and $4.7 million with respect to the New Credit Facility and other long-term
debt, respectively. The scheduled principal payments over the next five years
pursuant to the New Credit Facility are $1.1 million in 1998; $10.0 million in
1999; $12.0 million in 2000; $15.0 million in 2001; and $17.0 million in 2002.
In addition, other long-term debt requires scheduled principal payments of
approximately $4.1 million, $8.6 million, $3.5 million, $3.1 million and $1.3
million in 1998 through 2002, respectively. There is no principal amortization
of the Senior Subordinated Notes during these periods. It is expected that
these payments will be funded through cash flow from operations.
In 1997, cash interest expense for existing borrowings was $24.7 million.
The Company estimates that cash interest expense for existing borrowings for the
fiscal years 1998 through 2002 will be approximately $23.4 million, $23.1
million, $22.5 million, $21.4 million and $20.2 million, respectively, assuming
(i) the interest rate for borrowings under the Senior Subordinated Notes, the
Series A term loan under the New Credit Facility, the Series B term loan under
the New Credit Facility and other long-term debt is 11.5%, 9.0%, 9.2% and
various
17
<PAGE>
rates ranging from 5.5% to 10.5%, respectively; and (ii) only scheduled
amortization payments on the term loans and other long-term debt are made during
this period.
In October 1996, the Company amended its New Credit Facility. The
amendment replaced the Company's current lender under the Revolver within the
New Credit Facility through assignment of the Revolver to a new lender which was
deemed to be a repayment of the Revolver, reduced the maximum borrowings
permitted under the Revolver from $20.0 million to $12.0 million, revised
certain financial covenants pursuant to the New Credit Facility and provided
some technical revisions to the New Credit Facility. As amended, the Revolver
under the New Credit Facility has a remaining term of three years and permits
borrowing of up to the lesser of $12.0 million or the maximum amount permitted
under an eligible borrowing base test and contains a $5.0 million sublimit for
letters of credit. At December 31, 1997, the borrowing base test permitted the
Company to borrow up to $12.0 million. At such date, the Company had
outstanding borrowings of $5.0 million in the aggregate and letters of credit of
$1.0 million, leaving $6.0 million available for borrowing.
In connection with obtaining the amendment and significantly modifying the
New Credit Facility, the Company incurred fees (to lenders and advisors) of $0.7
million. These amounts were recorded as debt issue costs and are amortized over
the remaining terms of the respective components of the New Credit Facility. In
addition, as discussed above, the Company recognized an extraordinary loss on
the extinguishment of the Revolver under the New Credit Facility in the amount
of $0.6 million.
The indenture which governs the terms of the Senior Subordinated Notes (the
"Indenture") and the New Credit Facility contain significant financial and
operating covenants. The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur debt,
issue certain preferred stock, create liens securing subordinated debt, sell or
transfer assets, make restricted payments (dividends, redemptions, investments,
and unscheduled payments on subordinated debt) and engage in certain
transactions with affiliates and certain mergers. The New Credit Facility
contains certain financial covenants, including, but not limited to, covenants
related to a minimum interest coverage ratio, a minimum consolidated EBITDA, a
maximum leverage ratio and a minimum current ratio. In addition, the New Credit
Facility contains other affirmative and negative covenants relating to (among
other things) limitations on capital expenditures, other indebtedness, liens,
investments, guarantees, restricted junior payments (dividends, redemptions, and
payments on subordinated debt), mergers and acquisitions, sales of assets,
leases and transactions with affiliates. The New Credit Facility also contains
customary events of default, including certain changes of control of the
Company. As of December 31, 1997, the Company was in compliance with all
covenants contained in such debt instruments.
The terms of the Indenture allow for the incurrence of additional
indebtedness, including Senior Debt (as defined in the Indenture) and secured
indebtedness. The incurrence of additional indebtedness is limited by certain
conditions, including compliance with a Consolidated Cash Flow Ratio (as defined
in the Indenture), calculated on a pro forma basis to reflect such additional
indebtedness, of 2.0 to 1.0. At December 31, 1997, the Consolidated Cash Flow
Ratio was 2.0 to 1.0. In addition and notwithstanding the foregoing, the
Indenture permits the Company, and in certain cases its subsidiaries, to incur
certain specified additional indebtedness without regard to the compliance with
the Consolidated Cash Flow Ratio referred to above. The terms of the New Credit
Facility permit the Company, and in certain cases its subsidiaries, to incur
additional indebtedness only under certain circumstances.
The Company has a substantial amount of indebtedness. The degree to which
the Company is leveraged could have important consequences to investors,
including the following: (i) the Company's ability to obtain additional
financing in the future for refinancing indebtedness, working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired, (ii) a
substantial portion of the Company's consolidated cash flow from operations must
be used for the payment of interest and principal on its indebtedness, (iii) the
Company may be more highly leveraged than its competitors, which may place it at
a competitive disadvantage, (iv) the Indenture and the New Credit Facility
contain restrictive financial and operating covenants, (v) the borrowings under
the New Credit Facility have floating rates of interest, which cause the Company
to be vulnerable to increases in interest
18
<PAGE>
rates, and (vi) the Company's substantial degree of leverage could make it more
vulnerable to a downturn in general economic conditions.
Cumulative dividends aggregating $78.5 million have accumulated on the
Company's outstanding Series A and Series B Preferred Stock through December 31,
1997. Such dividends, payable in shares of Series A and Series B Preferred
Stock, respectively, had not been declared as of December 31, 1997.
The Company had unused credit facilities available to its European
subsidiaries of $2.9 million at December 31, 1997.
The Company believes that cash flow from operations, existing cash balances
and the financial resources available to it, including the Revolver under the
New Credit Facility and equipment financing and leasing, will be sufficient to
meet its debt service, working capital and capital investment needs through the
term of the Revolver.
The Company's Federal income tax returns for calendar years 1986 through
1991 are currently under examination by the Internal Revenue Service ("IRS").
On March 10, 1997, the Company received notice from the IRS of proposed
adjustments for such calendar years which would result in additional federal
taxes of up to $5.5 million, plus interest from the date when such additional
taxes would have been due, and in the reduction of the Company's net operating
loss carryovers from $36.7 million to $27.6 million. Most of the proposed
adjustments relate to the Company's amortization deductions with respect to a
covenant not to compete purchased from the Company's former parent corporation
when that corporation sold a controlling interest in the Company in 1988.
The Company, after consultation with tax counsel, continues to believe in
the propriety of its positions set forth in its tax returns and will vigorously
contest the adjustments being proposed by the IRS.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard Nos. 130 and 131, "Reporting Comprehensive
Income" (SFAS No. 130) and "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131), respectively; in February 1998, FASB issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits" (SFAS No. 132) (collectively,
the Statements). The Statements are effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 established standards for reporting of
comprehensive income and its components in annual financial statements. SFAS No.
131 establishes standards for reporting financial and descriptive information
about an enterprise's operating segments in it annual financial statements SFAS
No. 132 revised employers disclosures about pension and other postretirement
benefit plans. Reclassification or restatement of comparative financial
statements or financial information for earlier periods is required upon
adoption of SFAS No. 130, SFAS No. 131 and SFAS No. 132, respectively.
Application of the Statements' requirements is not expected to have a material
impact on the Company's consolidated financial position, results of operations
or liquidity.
YEAR 2000
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Processing errors due to Year
2000 software failures are a known risk. The Company has established processes
for evaluating and managing the risks and costs associated with this potential
problem. The cost of achieving Year 2000 compliance is estimated to be
approximately $200,000 over the cost of normal software upgrades and
replacements and will be incurred and expensed through fiscal 1999.
EFFECT OF INFLATION
The effect of inflation on the Company's results of operations has not been
material in the periods discussed.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Index to Consolidated Financial Statements and the Index to
Financial Statement Schedules included at "Item 14. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K."
19
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The current executive officers and directors of the Company are listed
below, together with their ages and all Company positions and offices held by
them.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- -----------------------------------------
<S> <C> <C>
Richard J. Hartl............. 60 President, Chief Executive Officer,
Chairman of the Board and Director
C. Richard Huebner........... 51 Executive Vice President, Chief Financial
Officer, Secretary and Director
Jacques J. Barriac........... 57 Vice President, Technology
David C. Guinta.............. 49 Vice President, North American Sales
Ramon Marti.................. 46 Vice President and Managing Director,
European and South American Operations
Christopher M. Harrison(1)... 50 Managing Director and Vice President,
European Operations and Director
Aldie E. Johnson, III........ 46 Vice President and General Manager,
Personal Care Products Division
John P. McKernan............. 38 Vice President and General Manager,
Chemical and Cleaning Products Division
Donald K. Miller............. 60 Vice President, Engineering
Thomas F. Perong............. 58 Vice President, Human Resources
Gunnar Backman(2)............ 60 Director
Matt L. Figel................ 38 Director
Donald E. Knox............... 78 Director
Harry T.J. Roberts........... 63 Director
John M. Roth................. 39 Director
Ronald P. Spogli............. 50 Director
William M. Wardlaw........... 51 Director
</TABLE>
______________
(1) Mr. Harrison resigned from the Company and as director effective March 31,
1997.
(2) Mr. Backman resigned as director effective December 31, 1997.
Mr. Hartl has served as President since September 1991 and as Chairman of
the Board of Directors of Calmar Inc. (the "Board") since September 1995. Prior
to joining Calmar, Mr. Hartl had been employed for 16 years by Avery-Dennison
where he held various positions, including Group Vice President for the
Specialty Tapes and Adhesives Group and Group Vice President for Technology and
Ventures. Mr. Hartl's previous employment included senior management positions
with General Electric in its Engineering Plastics operation and with the
Plastics Division of Monsanto. Mr. Hartl has been a director of the Company
since September 1991.
Mr. Huebner has served as Executive Vice President since August 1988 and
Chief Financial Officer and Secretary since December 1988. From March 1988 to
August 1988, Mr. Huebner served as Senior Vice President of Finance, and from
April 1983 to March 1988 he served as Vice President-Finance, Treasurer and
Secretary. Mr. Huebner has been a director of the Company since April 1983.
Mr. Barriac has served as Vice President of Technology of the Company since
July 1992. Prior to joining Calmar, Mr. Barriac was Vice President of
Technology for West Company where he had been employed since
21
<PAGE>
1987. Mr. Barriac also was employed by Owens Illinois as Manager of Technology
for Plastic Closures. Mr. Barriac holds a Ph.D. in Polymer Chemistry from the
Sorbonne University.
Mr. Guinta joined Calmar in September 1991 and became Vice President of
North American Sales in January 1997. From 1991 to January 1997, Mr. Guinta
held various positions in sales, including Sales Representative, East Coast
Regional Manager and Director North American Sales. Prior to joining Calmar,
Mr. Guinta was employed for five years with Amoco Container Company Division of
Amoco Oil Company as Sales Representative and for eight years with VCA Molded
Products Division of Ethyl Corporation as Sales Representative.
Mr. Harrison has served as Managing Director of European Operations of the
Company since February 1992 and Vice President, European Operations since April
1992. Prior to joining Calmar, Mr. Harrison had been employed by CMB Packaging,
S.A. since 1989 where he held various positions, including Group Director of CMB
Bottles and Closures PLC. From 1987 until 1989, he was employed by MB Group
P.L.C. where he was Managing Director of UCP-Metalbox. Mr. Harrison became a
director of the Company in March 1996. Mr. Harrison resigned from the Company
and as a director effective March 31, 1997.
Mr. Marti has served as Vice President and Managing Director of European
and South American Operations of the Company since June 1997 and Managing
Director of Monturas S.A., which became Calmar's Spanish subsidiary in December
1992, from June 1989 to June 1997. Prior to such time, Mr. Marti was employed as
Deputy General Manager of Monturas S.A. from July 1988 to June 1989 and then was
appointed Chief Executive Officer in December 1992. From 1980 to 1988, Mr. Marti
was employed by CCL Iberica-Barcelona as General Manager and then was promoted
to President in 1984.
Mr. Johnson has served as Vice President and General Manager of the
Personal Care Products Division of the Company since February 1996. From July
1990 to February 1996, Mr. Johnson served as Vice President of Manufacturing.
Prior to joining Calmar, Mr. Johnson served as Vice President and General
Manager of the Specialty Plastics Product Division of Kerr from March 1983 until
July 1990.
Mr. McKernan joined Calmar in February 1996 as Vice President and General
Manager of the Chemical and Cleaning Products Division of Calmar. Prior to
joining Calmar, Mr. McKernan was employed for 10 years by Setco, a division of
McCormick and Company, where he held various positions, including Vice President
of Sales and Marketing.
Mr. Miller has served as Vice President of Engineering since January 1988.
From March 1978 to December 1987, he served as Engineering Director and from
March 1976 to February 1978, he served as Chief Engineer of the Company.
Mr. Perong joined Calmar in August 1991 and become Vice President of Human
Resources in January 1996. From August 1991 to January 1996, Mr. Perong served
as Director of Human Resources. Prior to joining Calmar, Mr. Perong was
employed for 15 years by Bourns, Inc. as Division Vice President of Human
Resources.
Mr. Backman has been with Svenska Handelsbanken, a major Swedish bank,
since 1970 serving in various capacities before becoming General Manager and
Senior Vice President of Svenska Handelsbanken New York in 1983. In 1986, Mr.
Backman was appointed Deputy of the Central Credit Department in Sweden and
became an Executive Vice President of Svenska Handelsbanken Sweden in 1989.
Since 1994, Mr. Backman has also served on the boards of directors of several
subsidiaries of the bank. AB Handel och Industri, which owns 36.4% of the
outstanding common stock of Calmar, is a wholly-owned subsidiary of Svenska
Handelsbanken Sweden. Mr. Backman became a director of the Company in December
1995. Mr. Backman resigned as director effective December 31, 1997.
Mr. Figel founded Doramar Capital, a private investment firm, in January
1997. From October 1986 to December 1996, Mr. Figel was employed by FS&Co. (or
its affiliates). FS&Co. is a private investment company that was founded in
1983. Mr. Figel became a Director of the Company in January 1995. Mr. Figel is
also a member of the Board of Directors of Buttrey Food and Drug Stores Company.
22
<PAGE>
Mr. Knox continues to be a director of the Company. He served as Chairman
of the Board from September 1987 until October 1991. From April 1983 to August
1988, he served as President and Chief Executive Officer of the Company.
Mr. Roberts became a director of the Company in December 1995. Since 1985
Mr. Roberts has been Senior Vice President and in general management of Svenska
Handelsbanken New York, a branch of Svenska Handelsbanken Sweden. Mr. Roberts
holds a fellowship in the Chartered Institute of Bankers. Mr. Roberts is also a
member of the Board of Directors of D.V.I. Inc.
Mr. Roth joined FS&Co. in March 1988 and became a general partner in March
1993. From 1984 to 1988 Mr. Roth was employed by Kidder, Peabody & Co.
Incorporated, his most recent position being Vice President in the Merger and
Acquisition Group. Mr. Roth became a director of the Company in 1988. Mr. Roth
is also a member of the Boards of Directors of EnviroSource, Inc. and Brylane
Inc.
Mr. Spogli is a founding partner of FS&Co. Mr. Spogli became a director of
the Company in 1988. Mr. Spogli is the Chairman of the Board and a director of
EnviroSource, Inc. Mr. Spogli also serves on the Boards of Directors of Buttrey
Food and Drug Stores Company and Brylane Inc.
Mr. Wardlaw joined FS&Co. in March 1988 and became a general partner in
January 1991. From 1984 to 1988, Mr. Wardlaw was a principal of the law firm of
Riordan & McKinzie. Mr. Wardlaw became a director of the Company in 1988. Mr.
Wardlaw is also a member of the Board of Directors of Buttrey Food and Drug
Stores Company.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers serve at the
discretion of the Board. The Board has a Compensation Committee, consisting of
all of the members of the Board except Messrs. Hartl and Huebner, which
administers both the Company's stock option plan and the Company's bonus plan.
The members of the Board do not receive compensation for services on the Board
or for services on the Compensation Committee but are reimbursed for their out-
of-pocket expenses in serving on the Board and any committee thereof. There are
no family relationships between any member of the Board and any executive
officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the other four most highly compensated
executive officers (the "Named Executive Officers") for their services to the
Company for (i) the year ended December 31, 1995, (ii) the year ended December
31, 1996, and (iii) the year ended December 31, 1997.
23
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------------- ----------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) COMPENSATION(4)
- ---------------------------------------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard J. Hartl........................... 1997 $301,000 $175,000 -- $32,214
President and Chief Executive Officer 1996 301,000 145,000 -- 22,609
1995 301,000 150,000 -- 22,270
C. Richard Huebner......................... 1997 196,000 80,000 -- 46,333
Executive Vice President and Chief 1996 192,000 60,202 -- 47,577
Financial Officer 1995 188,000 64,814 -- 45,390
Aldie E. Johnson, III...................... 1997 162,000 80,000 -- 10,528
Vice President and General Manager, 1996 153,558 52,963 -- 3,341
Personal Care Products Division 1995 134,000 43,557 -- 7,533
Ramon Marti(5)............................. 1997 146,704 17,810 -- 0
Vice President and Managing Director, 1996 151,077 7,845 -- 0
European and South American Operations 1995 143,392 8,927 -- 0
John McKernan(6)........................... 1997 146,415 54,000 -- 4,974
Vice President and General Manager, 1996 126,000 43,458 64,183 (7) 1,325
Chemical and Cleaning Products Division
</TABLE>
___________________
(1) Amounts include $41,000 of supplemental deferred compensation earned by Mr.
Hartl in 1995, 1996 and 1997.
(2) Represents payments made to executive officers pursuant to the Calmar Inc.
Executive Incentive Plan in 1995, 1996 and 1997 with the exception of
$150,000, $145,000 and $175,000 bonuses earned but deferred by Mr. Hartl in
1995, 1996 and 1997 respectively.
(3) While certain officers received certain perquisites, such perquisites do not
exceed the lesser of $50,000 or 10% of such officers' respective salaries
and bonuses.
(4) Amounts shown include compensation earned and received by executive officers
as well as amounts earned but deferred at the election of those officers
which specifically include the following for Messrs. Hartl, Huebner,
Johnson, Marti and McKernan, respectively: (i) Company contributions to the
401(k) Plan of: Hartl: $4,750 in 1997, $4,750 in 1996 and $4,620 in 1995;
Huebner: $4,750 in 1997, $4,750 in 1996 and $4,620 in 1995; Johnson: $0 in
1997, 1996 and 1995; Marti: $0 in 1997, 1996 and 1995; and McKernan:
$4,750 in 1997 and $1,131 in 1996; (ii) Company payments to the Deferred
Compensation Plan of: Hartl: $22,550 in 1997, $14,709 in 1996 and $14,500
in 1995; Huebner: $12,841 in 1997, $12,792 in 1996 and $9,950 in 1995;
Johnson: $9,856 in 1997, $2,712 in 1996 and $7,225 in 1995; Marti: $0 in
1997, 1996 and 1995; and McKernan: $0 in 1997 and 1996; (iii) Company
payments of term life insurance premiums of: Hartl: $4,914 in 1997, $3,150
in 1996 and 1995; Huebner: $1,405 in 1997, $1,371 in 1996 and $807 in 1995;
Johnson: $672 in 1997, $629 in 1996 and $308 in 1995; and McKernan: $224
in 1997 and $194 in 1996. In addition, amounts shown include imputed
interest on certain employee loans for Mr. Huebner of $27,337 in 1997,
$28,664 in 1996 and $30,013 in 1995.
(5) Mr. Marti joined the Company in December 1992 and became Vice President and
Managing Director, European and South American Operations in June 1997.
(6) Mr. McKernan joined the Company in February 1996.
(7) Consists of a moving allowance of $39,183 and a signing bonus of $25,000
paid to Mr. McKernan in 1996.
24
<PAGE>
EXECUTIVE INCENTIVE PLAN
In January 1993, the Company adopted the Calmar Inc. Executive Incentive
Compensation Plan (the "Executive Incentive Plan") which provides for the
payment of bonuses to (i) persons who hold a Vice Presidential title, (ii)
Directors, and (iii) Key Managers approved by the President/CEO. The
President/CEO's incentive compensation is determined separately by the Board of
Directors. Each eligible participant may be paid a bonus according to a formula
which takes into account the participant's level of responsibility and quality
of performance, and the Company's performance as a whole. If the Company's
performance-to-budget is below 85%, bonuses are given only at the discretion of
the President/CEO and Board of Directors. No bonuses are given if performance
is less than 50% of budget.
Bonuses paid or to be paid to the Named Executive Officers under the
Executive Incentive Plan in 1995, 1996 and 1997 have been included in the
Summary Compensation Table set forth above.
401(k) PLAN
The Company maintains a 401(k) plan (the "401(k) Plan") pursuant to which
all domestic salaried and hourly employees (except employees covered by a union
retirement plan), after completing six months of service with the Company, can
elect to defer Federal income taxation on up to 15% of their total annual
compensation, including salaries and bonuses, by having such amount contributed
by Calmar to the trust established under the plan rather than paid to the
employee. All salary deferral and voluntary contributions made for or by the
employee participant are immediately fully vested. Calmar will make a
contribution each year in an amount equal to 50% of the employee's salary
deferral contributions for management employees, up to a maximum of 3% of the
employee's total compensation (not to exceed $4,750). Calmar will make a
contribution each year in an amount equal to 75% of the employee's salary
deferral contributions for qualified hourly employees, up to a maximum of 4.5%
of the employee's total compensation (not to exceed $7,125). Company matching
contributions vest at the rate of 20% thereof for each full year of service.
Although generally amounts held for the account of the employee under the 401(k)
Plan cannot be distributed until the employee reaches the age of 65, or 55 and
has 10 full years of service, or has 30 full years of service, early
distribution of (or borrowing from) voluntary contributions is permitted, and
early distribution of salary deferred contributions is permitted, in certain
circumstances of hardship.
Salary deferral and Company matching contributions to the 401(k) Plan made
or to be made for or by the Named Executive Officers of the Company have been
included in the notes to the Summary Compensation Table set forth above.
DEFERRED COMPENSATION PLAN
Calmar maintains a deferred compensation plan (the "Deferred Compensation
Plan") which provides certain executives with retirement income and permits such
executives to determine the manner in which they will receive such income.
Under such plan, for the calendar years 1987 through 1994, the Company credited
to an account established for each eligible participant 5% of such participant's
base salary and bonus. For calendar years after 1994, the Company shall
determine, in its sole discretion, the deferral percentage or amount that shall
be credited to the participant's deferred compensation account (the "Deferred
Compensation Account"). The amount contributed is typically used to purchase an
insurance policy on the life of the participant. A participant who, after five
years of consecutive employment with the Company, is terminated for cause or
resigns prior to the established retirement date, is entitled to receive a
benefit equal to 100% of the amount in the participant's Deferred Compensation
Account. This amount will be distributed in a lump sum or 20 equal quarterly
installments. A participant who is terminated without cause, is entitled to a
benefit equal to 120% of the amount in the participant's Deferred Compensation
Account. If a participant's employment is terminated for any reason other than
death before five consecutive years of employment, such participant's Deferred
Compensation Account is forfeited to the Company. If the participant dies
before completing five years of consecutive employment, the designated
beneficiary is entitled to 50% of the net proceeds of the participant's policy,
while the beneficiary of a participant dying after five years of consecutive
employment is entitled to 100% of the net proceeds of the participant's policy.
Benefits for death
25
<PAGE>
and termination without cause may be disbursed in a lump sum or in 20 equal
quarterly installments. As of December 31, 1997, approximately $893,000 has
been provided for in the Deferred Compensation Accounts established under the
Deferred Compensation Plan.
Company payments to the Deferred Compensation Accounts of the Named
Executive Officers have been included in the notes to the Summary Compensation
Table set forth above.
NONQUALIFIED STOCK OPTION PLAN
Officers, key employees and consultants, including directors who are
officers, key employees or consultants of the Company or its direct or indirect
subsidiaries (the "Subsidiaries") who are chosen by the Compensation Committee
of the Company are eligible to participate in the Company's 1988 Employee Stock
Option Plan (the "Option Plan") of the Company. Under the Option Plan, the
participants may be granted nonqualified options to purchase shares of common
stock of the Company (the "Options") at an option price (the "Option Price")
determined by the Board of Directors of the Company. The Options are not
intended to qualify for treatment as incentive stock options under Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code").
Up to 216,360 shares of Calmar's common stock may be issued under the
Option Plan upon the exercise of Options granted thereunder. On September 3,
1991, in connection with its offer of employment, the Company granted a
nonqualified stock option under the Option Plan to Mr. Hartl for 50,000 shares
of common stock at an exercise price of $10.00 per share. As of March 15, 1998,
Options covering an aggregate of 152,177 shares (including Mr. Hartl's option)
of the Company's common stock were outstanding under the Option Plan.
The Options terminate at the earlier of (i) three months after termination
of employment other than by resignation or for cause, (ii) on the effective date
of the participant's voluntary resignation or termination for cause, (iii) one
year after death or permanent disability, or (iv) ten years and one month from
the date of grant. Options vest in annual installments of 20% per year over
five years. The exercisability of Options may be accelerated, at the discretion
of the Compensation Committee, upon the occurrence of certain events
constituting an Extraordinary Corporate Event (as defined in the Option Plan).
However, no Option granted to an officer or director of Calmar will be
exercisable within six months from the date of its grant as a result of
acceleration. Under the Option Plan, any time prior to four years after the
date of grant of an Option, the Company has the option to repurchase all or any
portion of the shares of its common stock acquired by the participant by the
exercise of the Options for a period of six months after the date of termination
of the participant for any reason except death or disability. The purchase
price for such repurchased shares shall equal the price set forth in the
individual nonqualified stock option agreements. The Company has a right of
first refusal in the event a participant proposes to sell after the fourth
anniversary of the date of grant any shares purchased upon exercise of such
participant's Options.
The Option Plan also provides for the grant of "Limited Rights" to any
holders of Options granted thereunder. A Limited Right may be granted at any
time during the term of a related Option. The purpose of the Limited Rights
feature is to allow participants who are subject to the short-term trading
provisions of the federal securities laws to obtain the full economic benefit of
their related Options in the event an Extraordinary Corporate Event occurs. A
Limited Right permits the holder to receive upon exercise cash equal to the
number of shares as to which the Limited Right is being exercised multiplied by
the difference between the Option Price per share and the price per share of
common stock paid or to be paid to the holder of the Limited Right in any
Extraordinary Corporate Event in effect at the time such Limited Right is
exercised.
The following table sets forth information concerning the number and value
of securities underlying unexercised Options held by each of the Named Executive
Officers at December 31, 1997. No Options were granted to the Named Executive
Officers or exercised by the Named Executive Officers in 1997.
26
<PAGE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
---------------------------------- ---------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------- ---------------------------------- ---------------------------------
<S> <C> <C>
Richard J. Hartl........ 50,000/0 N/A
C. Richard Huebner...... 61,331/0 N/A
Aldie E. Johnson, III... 0/0 N/A
Ramon Marti............. 0/0 N/A
John McKernan........... 0/0 N/A
</TABLE>
_______________
(1) Because there is no established public trading market for the common stock
of the Company, the Board of Directors of the Company determines the fair
market value of the Company's common stock from time to time. The Company
believes that the fair market value of the Company's common stock was $10.00
per share as of December 31, 1997. The exercise price of each of the Options
listed above is $10.00 per share. On this basis, none of the Options held by
the Named Executive Officers were "in-the-money" as of December 31, 1997.
1995 STOCK OPTION PLAN
In December 1995, the Board of Directors of the Company approved and
adopted the Calmar Inc. 1995 Employee Stock Option Plan (the "New Plan"). The
New Plan is a successor to the Calmar Inc. 1988 Employee Stock Option Plan (the
"Old Plan") and was established to replace the Old Plan and to grant additional
options to officers, certain directors, key employees and consultants of the
Company. Under the New Plan, persons holding unexercised stock options (the
"Old Options") under the Old Plan will be allowed to exchange such Old Options
for similar options (the "New Options") under the New Plan. The New Options
will cover the same number of shares and be exercisable at the same option price
as the Old Options. In addition, optionees will be vested in the New Options to
the same extent as they are vested in their Old Options. The expiration dates
of the New Options will extend for two years beyond the respective expiration
dates of the Old Options.
The New Plan authorizes granting of options to purchase up to 910,000
shares of the Company's common stock. The New Options will be designated as
either Incentive Stock Options or Nonqualified Stock Options. Incentive Stock
Options may not be granted to directors who are not otherwise employees of the
Company; while Nonqualified Stock Options may be granted to directors only if
they are outside directors (i.e., non-employees). The exercise price of the
Incentive Stock Options will be not less than the fair market value of the
shares underlying such option on the date of the grant. The exercise price of
the Nonqualified Stock Options shall be not less than 85 percent of the fair
market value of the shares underlying such option on the date of the grant.
Vesting of all options may be based on the Company's attaining of performance
criteria as specified at the time of the granting and/or may also be based on
the passage of time. The Options terminate at the earliest of (i) ninety (90)
days after termination of employment other than (a) by death or disability, (b)
for cause, or (c) if the participant dies within ninety (90) days of termination
(other than for cause), (ii) thirty (30) days after the participant's
termination for cause, (iii) one year after death, permanent disability or
termination if the participant dies within ninety (90) days of termination
(other than for cause), or (iv) ten years from the date of grant. The New
Options also provide for certain "tag along" rights whereby, in the event that
FS Equity Partners II, L.P., the majority stockholder of Calmar ("FSEP II"),
finds a third party buyer for all or part of its shares of common stock,
participants will have the right to sell an equivalent percentage of their
shares of common stock on the same terms. Similarly, the New Options also
provide for certain "drag along" rights whereby, in the event that FSEP II finds
a third party buyer for all of its shares of common stock, participants will be
obligated to sell all of their New Options and/or common stock on the same
terms. To date, no New Options have been granted and no Old Options have been
exchanged for New Options under the New Plan.
27
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Hartl is party to an employment agreement with the Company which
contains customary employment terms and provides for a current annual base
salary of $301,000, an annual incentive bonus under the Executive Incentive
Plan, fringe benefits, participation in benefit plans, and such other
compensation as approved by the Board of Directors. The term of the employment
agreement is the latter of the close of business on the date of a Change of
Control (as defined below) or May 2, 1998, unless earlier terminated as provided
therein. The Company may terminate Mr. Hartl's employment during the term for
cause, upon Mr. Hartl's disability or without cause. If Mr. Hartl is terminated
without cause, he would be entitled to, among other things, 125% of his base
annual salary payable for the remainder of the term as if he had not been
terminated but no less than the amount of the annual base salary and the bonus
payable to him under the Incentive Plan for the most recently completed fiscal
year prior to termination (if not previously paid by the Company). In addition,
the Company would continue to pay all benefits, including his premiums for
health care continuation coverage under the Calmar Inc. Retiree Health Benefit
Plan. Upon a change of control, Mr. Hartl will be entitled to the use of his
company vehicle for the remainder of the current lease term, the transfer of
ownership of a certain personal computer and continued participation in the
Calmar Medical Plan until he reaches age 65. The employment agreement also
contains noncompetition and confidentiality provisions. Pursuant to the Deferred
Compensation Arrangement effective as of January 1, 1995, by and between Mr.
Hartl and the Company, Mr. Hartl may defer until a subsequent year up to 100% of
his compensation. The Company maintains a Supplemental Executive Retirement Plan
for the benefit of Mr. Hartl. Under this Plan, Mr. Hartl will, upon retirement,
receive an annual benefit in an amount determined by Mr. Hartl's age at
retirement.
Mr. Huebner is a party to an employment agreement with the Company which
contains customary employment terms and provides for an annual base salary of
$196,000 and for an annual incentive bonus under the Executive Incentive Plan.
If the successor to all or substantially all of the business and/or assets of
the Company does not assume the Company's obligations under Mr. Huebner's
employment agreement, then Mr. Huebner would be entitled to a payment equal to
two times the sum of his base salary and all incentive compensation awarded
pursuant to the Executive Incentive Plan during the 12 months preceding such
termination of his employment agreement. In addition, upon termination of his
employment agreement under certain circumstances (including the failure of a
successor entity to assume the obligations of his employment contract), Mr.
Huebner would be entitled to the continuation of all employee benefit plans for
two years following such termination and payment of any legal fees incurred by
Mr. Huebner as a result of such termination of employment. The employment
agreement also includes confidentiality provisions.
Certain employees, including Messrs. Johnson, McKernan and Marti are
parties to agreements affording them certain rights upon a Change of Control (as
defined below) of the Company. If any such employee is terminated without cause
within one year of a Change of Control, he will be entitled to (i) a lump sum
amount equal to his base annual salary prior to the Change of Control and (ii)
the reimbursement of reasonable expenses accrued through the effective date of
such termination. For purposes of such agreements and Mr. Hartl's employment
agreement discussed above, the term "Change of Control" is defined as: (i) the
acquisition in one or more transactions of beneficial ownership (within the
meaning of Rule 13d(3) under the Exchange Act) by (y) any person or entity
(other than FS&Co. and its affiliates) or (z) any group (as defined in Section
13(d) under the Exchange Act) other than FS&Co. and its affiliates of any voting
stock of the Company such that, as a result of such acquisition, such person,
entity or group has the ability to elect, directly or indirectly, a majority of
the members of the Board, or (ii) the sale of all or substantially all of the
assets of the Company (including within such assets the capital stock of any
subsidiary) and its subsidiaries, in a single transaction or a series of
transactions, to any person or persons.
PENSION PLAN
Each of Calmar's domestic employees (except employees covered by a union
retirement plan) including executive officers, participate in Calmar's Salaried
Retirement Plan, a defined benefit plan (the "Pension Plan"). The Pension Plan
is funded entirely through cash contributions made by the Company. Because
contributions are calculated on an actuarial basis for all participants, it is
not practicable to determine actuarial amounts set aside or accrued for an
individual or group of individuals. An employee's years of service and average
annual compensation during the highest consecutive five years over the last ten
years of employment before retirement are the major factors affecting the amount
of their pension. Credit for this purpose is given for service under a plan
sponsored
28
<PAGE>
by Realex Corporation, a company purchased by Calmar in 1985, which plan was
merged into the Pension Plan. The normal retirement age under the Pension Plan
is 65.
The following table sets forth estimated annual benefits payable upon
retirement to persons in specified remuneration and years of service
classifications under the Pension Plan (without regard to the maximum annual
accrued benefit permitted by the Code, which, except for certain grandfather
rights or in the event of early or late retirement, was $125,000 for 1997,
subject to cost of living adjustments). Remuneration covered by the Pension
Plan consists of total cash compensation including any bonuses. The benefits
shown in the table below are not subject to deduction for Social Security
benefits or other offset amounts. As of December 31, 1997, the credited years
of service under the Pension Plan of Messrs. Hartl, Huebner, Johnson and
McKernan were approximately 6, 24, 7 and 1, respectively.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION
AVERAGE ANNUAL COMPENSATION FOR REPRESENTATIVE YEARS
DURING THE HIGHEST OF CREDITED SERVICES OVER
CONSECUTIVE FIVE YEARS THE FOLLOWING YEARS
- --------------------------- -------------------------------------
10 20 30 OR MORE
------- ------- ----------
<S> <C> <C> <C>
$40,000............................ $ 4,753 $ 9,506 $ 14,259
60,000............................ 7,753 15,506 23,259
80,000............................ 10,753 21,506 32,259
100,000............................ 13,753 27,506 41,259
154,000............................ 21,854 43,710 65,562
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No officer or employee of the Company or its subsidiaries participated in
the deliberations of the Board of Directors concerning executive officer
compensation during fiscal 1997.
29
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock, Series A Preferred Stock and Series B
Preferred Stock, as of March 15, 1998, by each person who is known by the
Company to own beneficially more than 5% of the capital stock, by each director
of the Company, each of the Named Executive Officers and by all directors and
officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE NUMBER OF NUMBER OF
OF COMMON SHARES OF PERCENTAGE SHARES OF
PERCENTAGE STOCK ON A SERIES A OF SERIES A SERIES B
NUMBER OF SHARES OF OF COMMON FULLY DILUTED PREFERRED PREFERRED PREFERRED
NAME COMMON STOCK(1) STOCK(1) BASIS STOCK(1) STOCK(1) STOCK(1)
- ----------------------------- ------------------- ---------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Freeman Spogli & Co. (2)..... 5,332,922(3) 78.3% 59.2% 254,197 57.4% 1,000,000(4)
John M. Roth
Ronald P. Spogli
William M. Wardlaw
AB Handel och Industri
Humlegardsgatan 6
S-114 46 Stockholm,
Sweden...................... 3,033,046(5) 60.7% 33.7% -- -- --
REXAM PLC
114 Knightsbridge
London SWIX 7NN
United Kingdom.............. -- -- -- 177,938(6) 40.2% --
Richard J. Hartl............. 100,000(7) 3.2% 1.1% -- -- --
C. Richard Huebner........... 137,414(8) 4.4% 1.5% 250 * --
Aldie E. Johnson, III........ 5,000(9) * * 375 * --
Donald E. Knox............... 54,553(10) 1.8% * 500 * --
Directors and officers as a
group (16 persons).......... 5,655.674(11) 81.2% 62.8% 255,522 57.7% --
</TABLE>
- -----------------------------
* Less than 1%.
(1) The persons named in this table have sole voting power and investment power
with respect to all shares of capital stock shown as beneficially owned by
them, subject to community property laws where applicable and the
information contained in this table and these notes.
(2) All shares are held of record by FSEP II of which FS&Co. is the general
partner. As general partner of FSEP II, FS&Co. has the sole power to vote
and dispose of such shares. Messrs. Spogli, Wardlaw and Roth (each of whom
are directors of the Company) and Messrs. Bradford M. Freeman and J.
Frederick Simmons are general partners of FS&Co., and as such may be deemed
to be the beneficial owners of the Company's capital stock indicated as
beneficially owned by FS&Co. The business address of FS&Co. and its general
partners is 11100 Santa Monica Boulevard, Suite 1900, Los Angeles,
California 90025.
(3) Includes 3,722,627 shares issuable upon exercise of warrants.
(4) Constitutes 100% of the outstanding shares of Series B Preferred Stock.
(5) Includes 1,905,840 shares issuable upon exercise of warrants.
(6) Constitutes all of the preferred stock owned by and transferred from AB
Handel och Industri.
(7) Includes 50,000 shares issuable with respect to options exercisable within
60 days of March 15, 1998.
(8) Includes 72,750 shares of common stock held by C. Richard Huebner and Debra
Ann Huebner, as Co-Trustees of the C. Richard Huebner and Debra Ann Huebner
Family Trust dated August 5, 1988. Includes 3,333 shares issuable upon
exercise of warrants and 61,331 shares issuable with respect to options
exercisable within 60 days of March 15, 1998.
(9) Consists of 5,000 shares issuable upon exercise of warrants.
(10) Includes 6,667 shares issuable upon exercise of warrants and 17,886 shares
issuable with respect to options exercisable within 60 days of March 15,
1998.
(11) Includes 3,739,960 shares issuable upon exercise of warrants and 136,669
shares issuable with respect to options exercisable within 60 days of March
15, 1998.
30
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On August 5, 1988, the Company loaned C. Richard Huebner, Executive Vice
President, Chief Financial Officer and a director of the Company, and his wife
$398,000. The loan is evidenced by a promissory note secured by a deed of
trust. Principal is payable in equal monthly payments based on a 30-year
amortization. As of March 15, 1998, the outstanding principal amount was
$264,000. The note does not bear interest unless Mr. Huebner is terminated by
the Company for other than reasonable cause, at which time the note shall bear
interest at the rate of 10% per annum. Upon termination for cause, the entire
amount of the loan may become due and payable at the option of the Company. In
addition, on December 8, 1988, in connection with his acquisition of 72,750
shares of Calmar's common stock at a price of $10.00 per share, Mr. Huebner paid
$466,000 in cash and gave his promissory note for approximately $262,000 which
note, together with all accrued and unpaid interest thereon, is payable in full
upon the earlier of December 31, 1998 or a Change of Control (as defined). As
of March 15, 1998, the outstanding principal amount of the note was $384,000.
On September 3, 1991, Richard J. Hartl, President and Chief Executive
Officer and a director of the Company, purchased 50,000 shares of common stock
of Calmar at a price of $7.50 a share, for an aggregate purchase price of
$375,000. Of such price, $375,000 was represented by a promissory note which
bears interest at a defined prime rate which as of March 15, 1998 was 8.25%.
The principal balance of and all accrued and unpaid interest on the note are
payable in full upon the earlier of December 31, 1998 or a Change of Control (as
defined). As of March 15, 1998, the outstanding principal amount was $189,000.
The note is secured by a pledge of the 50,000 shares of common stock purchased
by Mr. Hartl.
On December 19, 1991, the Company loaned Ramon Marti, Vice President
and Managing Director, European and South American Operations, $131,700, payable
in full on December 31, 2006. The note evidencing the loan bears interest at a
rate of 0.25%. As of March 15, 1998, the outstanding principal amount was
$131,700.
31
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(a)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
CALMAR INC. AND SUBSIDIARIES
Independent Auditors' Report.................................................... F-1
Consolidated Balance Sheets as of December 31, 1997 and 1996.................... F-2
Consolidated Statements of Operations for the years ended December 31, 1997,
1996 and 1995.................................................................. F-3
Consolidated Statements of Stockholders' Deficiency for the years
ended December 31, 1997, 1996 and 1995......................................... F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995.................................................................. F-5
Notes to Consolidated Financial Statements...................................... F-7
(a)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES:
Schedule II -- Valuation and Qualifying Accounts................................. S-1
</TABLE>
All other schedules are omitted as the required information is
inapplicable or not present in amounts sufficient to require submission of the
schedule, or because the information is presented in the consolidated financial
statements or related notes.
(a)(3) EXHIBITS:
The exhibits listed on the accompanying Exhibit Index are filed as part
of this Form 10-K. In addition, following is a list of each executive
compensation plan and arrangement required to be filed as an exhibit.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Calmar Inc. Salaried Retirement Plan dated as of June 22, 1983, as
amended--Exhibit 10.46 to 1992 Form 10-K (No. 0-12054).
Calmar Inc. Incentive Plan dated December 1983, as amended--Exhibit
10.43 to 1992 Form 10-K (No. 0-12054).
Stock Subscription Agreement dated as of December 8, 1988 among CSS
Holding Corporation, FS Equity Partners II, L.P. (formerly RFS Equity
Partners II, L.P.) (hereinafter, "FSEP II") and C. Richard Huebner, with
form of note and pledge agreement attached thereto as Exhibits A and B,
respectively--Exhibit 10.4 to Registration Statement on Form S-1 (No.
33-26281).
Form of Stock Subscription Agreement dated as of December 1, 1988 by and
between CSS Holding Corporation and certain members of management who
purchased shares of common stock of CSS Holding Corporation for cash--
Exhibit 10.1 to Registration Statement on Form S-1 (No. 33-26281).
Form of Stock Subscription Agreement dated as of December 1, 1988 by and
between CSS Holding Corporation and certain members of management who
purchased shares of common stock of CSS Holding Corporation for
promissory notes, with form of note attached thereto as Exhibit A--
Exhibit 10.2 to Registration Statement on Form S-1 (No. 33-26281).
32
<PAGE>
Form of Stock Subscription Agreement dated as of December 1, 1988 by and
between CSS Holding Corporation and certain members of management who
purchased shares of common stock of CSS Holding Corporation for cash and
promissory notes, with form of note attached thereto as Exhibit A--
Exhibit 10.3 to Registration Statement on Form S-1 (No. 33-26281).
Stock Subscription Agreement dated as of December 8, 1988 by and among
CSS Holding Corporation, FSEP II (formerly RFS Equity Partners II, L.P.)
and Donald E. Knox--Exhibit 10.5 to Registration Statement on Form S-1
(No. 33-26281).
CSS Holding Corporation 1988 Employee Stock Option Plan dated December
1, 1988, as amended--Exhibit 10.3 to Registration Statement on Form S-4
(No. 33-47304).
Form of Nonqualified Stock Option Agreement by and between CSS Holding
Corporation and certain members of management--Exhibit 10.9 to
Registration Statement on Form S-1 (No. 33-26281).
Form of Nonqualified Stock Option Agreement dated as of December 8, 1988
between CSS Holding Corporation and C. Richard Huebner--Exhibit 10.10 to
Registration Statement on Form S-1 (No. 33-26281).
Form of Nonqualified Stock Option Agreement by and between CSS Holding
Corporation and Donald E. Knox--Exhibit 10.11 to Registration Statement
on Form S-1 (No. 33-26281).
Employment Agreement dated January 13, 1988 between Calmar Inc. and C.
Richard Huebner--Exhibit 10.23 to Registration Statement on Form S-1
(No. 33-26281).
Calmar Inc. 401(k) Plan dated as of January 1, 1989, as amended--Exhibit
10.45 to 1992 Form 10-K (No. 0-12054).
Securities Subscription Agreement dated as of September 28, 1990 by and
among CSS Holding Corporation, FSEP II and C. Richard Huebner--Exhibit
10.22 to Registration Statement on Form S-4 (No. 33-97056).
Form of Securities Subscription Agreement dated as of September 28, 1990
by and between CSS Holding Corporation and certain members of
management--Exhibit 10.23 to Registration Statement on Form S-4 (No.
33-97056).
Securities Subscription Agreement dated as of September 28, 1990 by and
among CSS Holding Corporation, FSEP II and Donald E. Knox--Exhibit 10.24
to Registration Statement on Form S-4 (No. 33-97056).
Form of Warrant dated as of October 5, 1990 issued to certain members of
management--Exhibit 10.9 to Registration Statement on Form S-4 (No. 33-
47304).
Stock Subscription Agreement dated as of September 3, 1991 between CSS
Holding Corporation and Richard J. Hartl, with form of note and pledge
agreement attached thereto as Exhibits A and B, respectively--Exhibit
10.29 to Registration Statement on Form S-4 (No. 33-47304).
Nonqualified Stock Option Agreement dated as of September 3, 1991
between CSS Holding Corporation and Richard J. Hartl--Exhibit 10.32 to
Registration Statement on Form S-4 (No. 33-47304).
Calmar Inc. Supplemental Executive Retirement Plan dated as of September
3, 1991--Exhibit 10.31 to Registration Statement on Form S-4 (No. 33-
97056 ).
33
<PAGE>
Form of Securities Subscription Agreement dated as of October 31, 1991
by and between CSS Holding Corporation and certain members of
management--Exhibit 10.35 to Registration Statement on Form S-4 (No.
33-97056).
Form of Warrant dated as of October 31, 1991 issued to certain members
of management--Exhibit 10.38 to Registration Statement on Form S-4 (No.
33-47304).
Calmar Inc. Deferred Compensation Plan 1993 Restatement effective as of
January 1, 1993--Exhibit 10.41 to Registration Statement on Form S-4
(No. 33-97056).
Form of Stock Subscription Agreement dated as of April 1, 1993 by and
between Calmar, Inc. and certain members of management who purchased
shares of common stock of Calmar Inc. for cash--Exhibit 10.42 to
Registration Statement on Form S-4 (No. 33-97056).
Stock Subscription Agreement dated as of April 1, 1993 by and between
Calmar Inc. and Jacques Barriac, with form of note and pledge agreement
attached thereto as Exhibits A and B, respectively--Exhibit 10.43 to
Registration Statement on Form S-4 (No. 33-97056).
Form of Key Employee Retention Agreement between Calmar Inc. and certain
members of management--Exhibit 10.49 hereto.
Employment Agreement dated as of January 1, 1998 by and between Calmar
Inc. and Richard J. Hartl--Exhibit 10.50 hereto.
Calmar Inc. Deferred Compensation Arrangement effective as of January 1,
1995 between Calmar Inc. and Richard J. Hartl--Exhibit 10.48 to
Registration Statement on Form S-4 (No. 33-97056).
Calmar Inc. Executive Incentive Compensation Plan dated January, 1993--
Exhibit 10.49 to Registration Statement on Form S-4 (No. 33-97056).
(b) REPORTS ON FORM 8-K:
None.
(c) EXHIBITS:
The exhibits listed on the accompanying Exhibit Index are filed as part
of this Form 10-K.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Industry, State of California, on March 27, 1998.
Calmar Inc.
By: /s/ Richard J. Hartl
----------------------------------
Richard J. Hartl
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Richard J. Hartl President, Chief Executive Officer, March 27, 1998
- ----------------------- Chairman of the Board and Director
Richard J. Hartl (Principal Executive Officer)
/s/ C. Richard Huebner Executive Vice President, March 27, 1998
- ----------------------- Chief Financial Officer,
C. Richard Huebner Secretary and Director
(Principal Financial and
Accounting Officer)
/s/ Matt L. Figel Director March 27, 1998
- -----------------------
Matt L. Figel
/s/ Donald E. Knox Director March 27, 1998
- -----------------------
Donald E. Knox
/s/ Harry T.J. Roberts Director March 27, 1998
- -----------------------
Harry T.J. Roberts
/s/ John M. Roth Director March 27, 1998
- -----------------------
John M. Roth
/s/ Ronald P. Spogli Director March 27, 1998
- -----------------------
Ronald P. Spogli
/s/ William M. Wardlaw Director March 27, 1998
- -----------------------
William M. Wardlaw
</TABLE>
<PAGE>
[LOGO OF PEAT MARWICK LLP]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Calmar Inc.:
We have audited the consolidated balance sheets of Calmar Inc. and subsidiaries
as of December 31, 1997 and 1996 and the related consolidated statements of
operations, stockholders' deficiency and cash flows for each of the years in the
three-year period ended December 31, 1997. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Calmar Inc. and
subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Orange County, California
March 9, 1998
F-1
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,218 $ 9,198
Accounts receivable, less allowance for doubtful accounts of $994
in 1997 and $1,563 in 1996 41,350 35,153
Inventories 24,767 20,679
Income taxes receivable 44 444
Prepaid expenses 1,273 1,710
--------- ---------
Total current assets 74,652 67,184
Property and equipment, net 105,839 106,619
Cost in excess of net assets acquired, less accumulated amortization
of $28,909 in 1997 and $26,360 in 1996 90,759 93,649
Other intangible assets, less accumulated amortization of $12,501 in
1997 and $12,758 in 1996 4,721 6,275
Other assets, net 8,670 9,011
--------- ---------
$ 284,641 $ 282,738
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings $ 4,502 $ 2,640
Current installments of long-term debt 5,199 5,857
Accounts payable 19,140 18,941
Accrued liabilities 18,142 19,246
--------- ---------
Total current liabilities 46,983 46,684
Long-term debt 238,571 232,867
Deferred income taxes 10,831 12,380
Other liabilities 20,497 20,205
--------- ---------
Total liabilities 316,882 312,136
--------- ---------
Stockholders' deficiency:
Preferred stock, par value $.01 per share; liquidation preference
aggregating $54,250 for all outstanding preferred stock:
Series A Preferred Stock, liquidation preference $100 per share;
authorized 450,000 shares; issued and outstanding 442,500
shares in 1997 and 1996 4 4
Series B Preferred Stock, liquidation preference $10 per share.
Authorized 1,000,000 shares; issued and outstanding 1,000,000
shares in 1997 and 1996 10 10
Common stock, par value $.01 per share. Authorized 8,500,000
shares; issued and outstanding 3,092,031 in 1997 and 3,097,031
in 1996 31 31
Additional paid-in capital 77,936 77,986
Accumulated deficit (101,705) (103,402)
Accumulated translation adjustment (7,947) (3,473)
Notes receivable from officers for purchase of common stock (570) (554)
--------- ---------
Total stockholders' deficiency (32,241) (29,398)
--------- ---------
$ 284,641 $ 282,738
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $ 230,245 $ 219,437 $ 224,465
Cost of sales 166,950 162,987 168,444
---------- ---------- ----------
Gross profit 63,295 56,450 56,021
Selling, general and administrative expenses 37,956 37,097 35,559
---------- ---------- ----------
Operating income 25,339 19,353 20,462
Other income 1,235 1,522 1,454
Interest expense (24,943) (24,487) (27,265)
---------- ---------- ----------
Income (loss) before income taxes and
extraordinary item 1,631 (3,612) (5,349)
Income tax provision (benefit) (66) (214) 1,083
---------- ---------- ----------
Income (loss) before extraordinary item 1,697 (3,398) (6,432)
Extraordinary item - loss on extinguishment of debt - (618) (9,528)
---------- ---------- ----------
Net income (loss) $ 1,697 $ (4,016) $ (15,960)
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Deficiency
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
PREFERRED STOCK
----------------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL
----------------- ------------------ ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------- ------ --------- ------ --------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 442,550 $ 4 1,000,000 $ 10 3,098,531 $ 31 78,019 (83,425)
Additions to notes
receivable from officers -- -- -- -- -- -- -- --
Repurchase of preferred
stock (50) -- -- -- -- -- (5) --
Issuance of common stock -- -- -- -- 1,000 -- 1 --
Repurchase of common stock -- -- -- -- (2,500) (29) --
Foreign currency
translation adjustment -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- (15,960)
------- ------ --------- ------ --------- ------ ------ --------
Balance, December 31, 1995 442,500 4 1,000,000 10 3,097,031 31 77,986 (99,385)
Additions to notes
receivable from officers -- -- -- -- -- -- --
Foreign currency
translation adjustment -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- (4,015)
------- ------ --------- ------ --------- ------ ------ --------
Balance, December 31, 1996 442,500 4 1,000,000 10 3,097,031 31 77,986 (103,402)
Additions to notes
receivable from officers -- -- -- -- -- -- -- --
Repurchase of common stock -- -- -- -- (5,000) -- (50) --
Foreign currency
translation adjustment -- -- -- -- -- -- -- --
Net income -- -- -- -- -- -- -- 1,697
------- ------ --------- ------ --------- ------ ------ --------
Balance, December 31, 1997 442,500 $ 4 1,000,000 $ 10 3,092,031 $ 31 77,936 (101,705)
======= ====== ========= ====== ========= ====== ====== ========
<CAPTION>
NOTES
RECEIVABLE
FROM OFFICERS TOTAL
ACCUMULATED FOR PURCHASE STOCKHOLDERS'
TRANSLATION OF COMMON EQUITY
ADJUSTMENT STOCK (DEFICIENCY)
----------- ------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1994 (3,746) (524) (9,632)
Additions to notes
receivable from officers -- (15) (15)
Repurchase of preferred
stock -- -- (5)
Issuance of common stock -- -- 1
Repurchase of common stock -- -- (29)
Foreign currency
translation adjustment 2,021 -- 2,021
Net loss -- -- (15,960)
-------- ---- -------
Balance, December 31, 1995 (1,725) (539) (23,619)
Additions to notes
receivable from officers -- (15) (15)
Foreign currency
translation adjustment -- -- (1,148)
Net loss -- -- (4,016)
-------- ---- -------
Balance, December 31, 1996 (3,473) (554) (29,398)
Additions to notes
receivable from officers -- (16) (16)
Repurchase of common stock -- -- (50)
Foreign currency
translation adjustment (4,474) -- (4,474)
Net income -- -- 1,697
-------- ---- -------
Balance, December 31, 1997 (7,947) (570) (32,241)
========= ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,697 $ (4,016) $(15,960)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Extraordinary item - 618 9,528
Depreciation and amortization 24,502 24,167 25,135
Amortization of discount on notes payable 37 103 201
Deferred income tax benefit (1,203) (888) (1,104)
Additions to notes receivable from officers
for purchase of common stock (16) (15) (15)
Gain on sale of property and equipment (69) (81) (104)
Changes in assets and liabilities:
Accounts receivable (8,719) (1,341) 915
Inventories (5,553) (3,814) 635
Income taxes receivable 353 11 (45)
Prepaid expenses 277 659 148
Accounts payable (1,378) 4,399 (14)
Accrued liabilities (346) (237) (3,292)
Other long-term liabilities 1,185 1,668 1,246
-------- -------- --------
Net cash provided by operating
activities 10,767 21,233 17,274
======== ======== ========
Cash flows from investing activities:
Purchases of property and equipment (22,414) (15,940) (14,208)
Proceeds from sales of equipment 124 626 180
Increase in other intangibles (463) (66) --
Decrease (increase) in other assets (753) 152 (333)
-------- -------- --------
Net cash used in investing activities (23,506) (15,228) (14,361)
======== ======== ========
</TABLE>
(Continued)
F-5
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds (repayments) of short-term borrowings,
net $ 2,338 $ 2,343 $ (909)
Increase (decrease) in cash overdraft 3,364 (2,578) (844)
Net change in revolver 5,000 -- --
Proceeds from issuance of senior and
subordinated debt -- -- 225,000
Redemption of senior and subordinated debt -- -- (194,847)
Payment of deferred financing fees -- (704) (7,928)
Payment of call premiums for debt redemption -- (81) (5,697)
Proceeds from issuance of long-term debt 6,064 5,002 3,224
Principal payments on long-term debt (5,774) (9,683) (14,432)
Repurchase of preferred stock -- -- (5)
Proceeds from issuance of common stock -- -- 1
Repurchase of common stock (50) -- (29)
------ ------- ---------
Net cash provided by (used in)
financing activities 10,942 (5,701) 3,534
------ ------- ---------
Effect of exchange rate changes on cash and cash
equivalents (183) (143) (49)
------ ------- ---------
Net increase (decrease) in cash and
cash equivalents (1,980) 161 6,398
Cash and cash equivalents, beginning of year 9,198 9,037 2,639
------ ------- ---------
Cash and cash equivalents, end of year $ 7,218 $ 9,198 $ 9,037
====== ======= =========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Income taxes $ 1,463 $ 2,168 $ 3,259
======= ======= =========
Interest $24,742 $24,306 $ 28,559
======= ======= =========
Supplemental schedule of noncash investing and
financing activities - equipment acquired in
exchange for long-term debt $ 533 $ 741 $ 4,082
======= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Calmar Inc. is a multinational manufacturer of plastic dispensing and
spraying systems. The primary products manufactured and sold by Calmar Inc.
include a full line of fine mist, regular and trigger sprayers; regular,
large and high-viscosity dispensers; and other specialty products.
Manufacturing is performed in the United States, Spain and Germany. The
Company sells through direct sales forces in the United States, Canada,
Western Europe, South America, Mexico, Indonesia and China, distributors in
the United States and Western Europe, and licensees in South America and
Asia. The principal markets for Calmar Inc.'s products are North American,
Western European, South American and Asian based dispensing and packaging
personal care, household, automotive, chemical and pharmaceutical
businesses.
Approximately 50% of Calmar's workforce is covered by collective bargaining
agreements. Contracts representing 12% of the workforce are subject to
renegotiation in 1998.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Calmar Inc. include the accounts of
its wholly owned subsidiaries: Calmar International, Inc., Calmar - Albert
GmbH, Monturas, S.A., Calmar - Spanish Branch, Calmar - Albert France
S.A.R.L., Calmar - Albert (U.K.) Limited, Calmar Plastics Limited, Calmar -
Albert Belgium S.A., Calmar - Albert Italia, Calmar Mercosur, S.A., Calmar
do Brazil Ltda and Calmar Wuxi Dispensing Systems Ltd. (collectively, the
Company). All significant intercompany balances and transactions have been
eliminated in consolidation.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1995 balances to
conform to the 1997 presentation.
FOREIGN CURRENCY TRANSLATION
The Company uses the local currency as the functional currency for most
foreign operations. Assets and liabilities are translated at year-end
exchange rates, and income and expense items are translated at average
exchange rates prevailing during the year. Translation adjustments are
recorded as a separate component of stockholders' deficiency. The net gain
(loss) from foreign exchange transactions was insignificant in 1997, 1996
and 1995.
REVENUE RECOGNITION
Revenue is recognized upon shipment of products to customers.
F-7
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
CASH AND CASH EQUIVALENTS
Cash equivalents consist principally of interest bearing foreign currency
accounts. For purposes of the consolidated statements of cash flows, the
Company considers all short-term investments with original maturities of 90
days or less to be cash equivalents. The carrying amount approximates fair
value because of the short maturity of the financial instruments.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets up
to 40 years for buildings and land improvements, 3 to 10 years for machinery
and equipment, and the respective lease term for assets under capital leases.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired (goodwill) is amortized over 10 to 40
years using the straight-line method. Such amortization expense amounted to
$3,353,000 in both 1997 and 1996 and $3,543,000 in 1995 and is included in
selling, general and administrative expenses in the accompanying consolidated
statements of operations.
OTHER INTANGIBLE ASSETS
The costs of patents, trademarks, licenses and other intangible assets are
amortized over the estimated lives of the related assets ranging from 5 to 17
years using the straight-line method. Such aggregate amortization expense
amounted to $1,539,000 in both 1997 and 1996 and $1,542,000 in 1995 and is
included in selling, general and administrative expenses and cost of sales in
the accompanying consolidated statements of operations.
IMPAIRMENT OF ASSETS
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
on January 1, 1994. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. Adoption of this Statement did not have a
material impact on the Company's financial position, results of operations or
liquidity.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the lives of the respective debt
agreements using the effective interest method and are included in other
assets in the accompanying consolidated balance sheets.
F-8
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
OTHER POSTRETIREMENT BENEFITS
The Company accounts for other postretirement benefits under Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Postretirement benefit expense
was $342,000, $415,000 and $509,000 in 1997, 1996 and 1995, respectively.
Cash paid for actual claims in 1997, 1996 and 1995 was $100,000, $161,000 and
$51,000, respectively.
OTHER POSTEMPLOYMENT BENEFITS
The Company accounts for other postemployment benefits under Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." The Company currently provides for certain
postemployment benefits, primarily in the form of limited continuation of
health care insurance, to nearly all domestic employees. The premiums for
these benefits are paid for by the employees, and any additional costs are
paid by the Company. Such were immaterial in 1997, 1996 and 1995.
FAIR VALUE OF FINANCIAL INSTRUMENTS
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
INTEREST RATE CAP AND FOREIGN CURRENCY AGREEMENT
An interest rate cap used to establish an effective maximum rate for certain
long-term debt and a foreign currency agreement used for hedging purposes are
carried at amortized costs which approximate market. The agreements are in
effect for three years and expire in 1998. The Company is exposed to credit
losses in the event of nonperformance by the counterparties to its agreements
but has no off-balance-sheet credit risk of accounting loss. The Company
anticipates, however, that the counterparties will be able to fully satisfy
their obligations under the agreements.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases.
United States income taxes are not provided, with certain exceptions, on the
undistributed earnings of the foreign subsidiaries as such earnings are
intended to be indefinitely reinvested in those operations.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred. Such
costs amounted to $5,017,000, $5,139,000 and $4,546,000 in 1997, 1996 and
1995, respectively, and are included in selling, general and administrative
expenses in the accompanying consolidated statements of operations.
F-9
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
EARNINGS (LOSS) PER SHARE
The Company does not currently have publicly traded equity securities
pursuant to the Securities Act of 1933, therefore earnings (loss) per share
information has not been disclosed.
USE OF ESTIMATES AND UNCERTAINTIES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
The Company currently operates subsidiaries in Western Europe, Canada, South
America and Asia. In addition, the Company signed a joint venture agreement
in Indonesia in August 1997 and is waiting for government approval to
finalize the formation of the joint venture. The Company anticipates that
the joint venture will be operational by June 1998. The Joint venture calls
for the Company to share 51% of profits and losses and joint venture
ownership. In subsequent periods it is expected that the Company will make
more substantial investments in its Asian and South American operations.
During 1997, many Asian nations including Indonesia, experienced significant
currency devaluation. In previous years, similar circumstances have occurred
in certain South American economies. Investments in foreign operations are
subject to foreign currency translation losses during times of declining
foreign currency values.
STOCK OPTION PLANS
Prior to January 1, 1996, the Company accounted for its stock option plans in
accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock-
Based Compensation," which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123. No stock options were granted in 1995, 1996 or
1997, thus there are no further disclosures required under SFAS No. 123.
F-10
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) INVENTORIES
Inventories consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1997 1996
------- -------
<S> <C> <C>
Raw materials $ 4,483 $ 4,713
Work in process 10,960 10,063
Finished goods 9,324 5,903
------- -------
$24,767 $20,679
======= =======
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Land and land improvements $ 11,842 $ 12,097
Buildings 35,767 36,941
Machinery and equipment 180,222 170,077
Assets under capital leases 3,116 4,011
Construction in progress 12,932 12,629
--------- ---------
Accumulated depreciation and amortization (138,040) (129,136)
--------- ---------
$ 105,839 $ 106,619
========= =========
</TABLE>
(4) SHORT-TERM BORROWINGS
Short-term borrowings consist principally of European bank overdrafts and
other facilities, which are used principally for working capital purposes
and are secured by accounts receivables and inventories of certain European
subsidiaries. Borrowings aggregating $4,502,000 and $2,640,000 were
outstanding as of December 31, 1997 and 1996, respectively, at weighted
average interest rates of 7.4% and 8.6%, respectively.
The Company has unused credit facilities available to its European
subsidiaries of $2,902,000 at December 31, 1997.
F-11
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) LONG-TERM DEBT
Long-term debt consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1997 1996
-------- --------
<S> <C> <C>
Senior Subordinated Notes $120,000 $120,000
New Credit Facility 102,638 103,688
Revolving credit agreement 5,000 --
Other 16,132 15,036
-------- --------
243,770 238,724
Less current installments 5,199 5,857
-------- --------
$238,571 $232,867
======== ========
</TABLE>
SENIOR SUBORDINATED NOTES
On August 18, 1995, the Company sold $120,000,000 principal amount of Senior
Subordinated Notes due 2005 (Senior Subordinated Notes) to consummate the
refinancing of a substantial portion of the Company's long-term debt. In
connection with the refinancing transactions, the Company recognized an
extraordinary loss of $9,528,000, which included call premiums of redeemed
notes, certain fees and the write-off of the related deferred financing
costs.
Interest on the Senior Subordinated Notes accrues at a rate of 11.5% per
annum and is payable semiannually, which commenced February 15, 1996. The
notes are redeemable at the option of the Company, in whole or in part, at
any time on or after August 15, 2000, at a redemption price of 105.75% of
the principal amount, decreasing to 102.875% in 2001 and to 100% by 2002. No
principal payments are due until August 15, 2005.
NEW CREDIT FACILITY
On August 18, 1995, the Company entered into a senior secured credit
agreement (New Credit Facility) pursuant to which $105,000,000 was made
available on September 18, 1995, to consummate the refinancing of a
substantial portion of the Company's long-term debt. In addition, the New
Credit Facility included a $20,000,000 revolving line of credit (Revolver)
to support the Company's working capital requirements.
The term loan component of the New Credit Facility includes two portions:
Series A with a face value of $60,000,000 due 2003 and Series B with a face
value of $45,000,000 due 2004. The Series A bears interest at either London
Interbank Offered Rate (LIBOR) which was 5.81% at December 31, 1997 plus 3%
per annum or a Base Rate which was 8.50% at December 31, 1997, as defined,
plus 2% per annum. The Series B bears interest at either a LIBOR rate plus
3.25% per annum or a Base Rate, as defined, plus 2.25% per annum. In
connection with LIBOR interest rate options, interest is payable at the
Company's election, for either a one-, two-, three- or six-month period.
The New Credit Facility is secured by a first priority interest in nearly
all domestic assets, including both tangible and intangible assets, of the
Company and a pledge of a portion of the capital shares of the Company's
subsidiaries.
F-12
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
On July 16, 1997, the Company amended (Second Amendment) the Credit
Agreement to permit the Company to acquire certain assets of its existing
licensee in Argentina and Brazil, and to make certain other amendments, as
they relate to the Second Amendment.
Subsequent to year end, on January 20, 1998, the Company amended (Third
Amendment) the Credit Agreement by increasing the Series A obligation by
$5,000,000 to support the Company's working capital requirements.
REVOLVING CREDIT AGREEMENTS
On September 18, 1995, the Revolver of the New Credit Facility became
available to the Company. The Revolver provided for borrowings of up to
$20,000,000 based on 75% of eligible domestic accounts receivable and 40% of
eligible domestic inventory.
In October 1996, the Company amended its New Credit Facility. The amendment
replaced its current lender under the Revolver within the New Credit
Facility through assignment and repayment, reduced the maximum borrowings
permitted under the Revolver from $20,000,000 to $12,000,000, revised
certain financial covenants pursuant to the New Credit Facility and provided
some technical revisions to the New Credit Facility. Commitment fees
relating to the Revolver increased from $75,000 to $125,000 for an annual
administration fee and continue to include a 0.5% non-use fee based on a
daily average of the unused credit facility balances. The Revolver
terminates in 1999 and bears interest at either LIBOR plus 2.5% or a Base
Rate, as defined, plus 1.5%. At December 31, 1997, the borrowing base test
permitted the Company to borrow up to $12,000,000. At such date, the Company
had borrowings outstanding and letters of credit of $5,000,000 and
$1,000,000, respectively leaving $6,000,000 available for borrowing.
In connection with obtaining the amendment and significantly modifying the
New Credit Facility, the Company incurred fees (to lenders and advisors) of
$704,000. These amounts were recorded as debt issue costs and are amortized
over the remaining terms of the respective components of the New Credit
Facility. In addition, the Company recognized an extraordinary loss on the
extinguishment of the Revolver under the New Credit Facility in the amount
of $618,000.
COVENANTS
In connection with the New Credit Facility and other debt agreements, the
Company has agreed to comply with a number of restrictive and financial
covenants that require, among other things, limiting the ability of the
Company and its subsidiaries to incur debt, issue certain preferred stock,
create liens securing subordinated debt, sell or transfers assets, make
restricted payments (dividends, redemptions, investments and unscheduled
payments on subordinated debt) and engage in certain transactions with
affiliates and certain mergers. The New Credit Facility also contains
certain financial covenants, including, but not limited to, covenants
related to a minimum interest coverage ratio, a minimum consolidated EBITDA,
a maximum leverage ratio and a minimum current asset ratio. In addition, the
New Credit Facility contains other affirmative and negative covenants
relating to (among other things) limitations on capital expenditures, other
indebtedness, liens, investments, guarantees, restricted junior payments
(dividends, redemptions and payments on subordinated debt), mergers and
acquisitions, sales of assets, leases and transactions with affiliates. The
New Credit Facility also contains customary events of default, including
certain changes of control of the Company. As of December 31, 1997, the
Company was in compliance with all covenants contained in such debt
instruments.
F-13
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MONTURAS ACQUISITION OBLIGATIONS
In connection with the acquisition of the remaining 51% interest in Monturas
in December 1992, the Company agreed to pay certain amounts aggregating
$7,949,000 through February 1, 1998 (Monturas Acquisition Obligations). Such
payments were discounted to a present value of $6,553,000 at the date of
acquisition using an estimated market rate of interest of 8% and have been
included as part of the cost of the acquisition. The fixed portion of the
Monturas acquisition obligation was fully paid during 1996. Additional
payments beyond the above amounts may be payable to the seller through 1998
based on a fixed formula of worldwide sales of specific products. Such
additional amounts will be expensed if and when they are earned. No such
amounts were earned through December 31, 1997.
OTHER
Other long-term debt consists of (1) domestic equipment notes payable
aggregating $9,417,000 and $7,999,000 as of December 31, 1997 and 1996,
respectively, bearing interest at rates ranging from 7.6% to 10.2% and due in
various monthly installments through 2002; (2) notes payable aggregating
$5,892,000 and $5,465,000 as of December 31, 1997 and 1996, respectively, to
four German commercial banks, bearing interest at rates ranging from 5.5% to
8.3%, due in scheduled maturities of various amounts through 2005,
collateralized by land, building and equipment; (3) various capital lease
obligations aggregating $823,000 and $1,572,000 as of December 31, 1997 and
1996, respectively, due in scheduled maturities of various amounts through
2000.
Principal amounts due under all long-term debt agreements are presented below
(dollars in thousands):
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1998 $ 5,199
1999 18,591
2000 15,464
2001 18,054
2002 18,297
Thereafter 168,165
--------
Total $243,770
========
</TABLE>
F-14
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
Accounts receivable, short-term borrowings and accrued liabilities are
carried at cost which approximate fair value due to their short-term
maturity. The estimated fair values of the Company's other financial
instruments are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
CARRYING FAIR
AMOUNT VALUE
--------- ---------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 7,218 $ 7,218
========= =========
Long-term debt:
Senior Subordinated Notes $ 120,000 $ 126,600
New Credit Facility 102,638 102,638
Revolver 5,000 5,000
Long-term debt - other 16,132 16,132
--------- ---------
Total long-term debt $ 243,770 $ 250,370
========= =========
Interest rate cap $ 55 $ 55
========= =========
Foreign currency agreement $ 29 $ 29
========= =========
</TABLE>
(7) ACCRUED LIABILITIES
Accrued liabilities consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Compensation and benefits $ 6,626 $ 6,646
Interest payable 5,668 5,625
Other 5,848 6,975
--------- ---------
$ 18,142 $ 19,246
========= =========
</TABLE>
(8) STOCKHOLDERS' DEFICIENCY
PREFERRED STOCK
The Company has issued two series of preferred stock, Series A Preferred
Stock (Series A) and Series B Preferred Stock (Series B). The Senior
Subordinated Notes and the New Credit Facility limit the ability of the
Company to pay dividends on or redeem the Series A and Series B. Dividends
on the Series A and Series B accrue and compound quarterly at the rate of
15% per annum and are each payable in
F-15
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
shares of the Company's Series A and Series B. Subject to certain
limitations, the Series A and Series B may each be redeemed, at the option
of the Board, in cash for $100 and $10, respectively, per share, plus
accrued and unpaid dividends. Subject to certain limitations, the Series A
and Series B are exchangeable at any time at the option of the Company for
ten year 15% junior subordinated notes. Holders of outstanding shares of the
Series A and Series B shall each vote as a single class with the common
stock and are entitled to two votes per share of Series A and Series B.
Cumulative dividends aggregating 78,463,000 had accrued on the Series A and
Series B through December 31, 1997. Such dividends, payable in shares of
Series A and Series B, were not declared as of the balance sheet date and
therefore are not reflected as issued. Such dividends per weighted average
share of preferred stock were $37.85, $32.66 and $28.19 in 1997, 1996 and
1995, respectively.
WARRANTS
In conjunction with certain equity issuances, including the issuance of
preferred stock, the Company has issued warrants to purchase shares of
common stock. The warrants are immediately exercisable in exchange for one
share of common stock and expire eight years from the date of issuance. The
warrants begin to expire 1996 through 2001. A summary of warrant activity is
as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER
WARRANTS SHARES
--------- --------------
<S> <C> <C>
Outstanding, December 31, 1995 5,832,233 $ 7.50 - 10.00
Warrants expired (75,000) 10.00
--------- --------------
Outstanding, December 31, 1996 5,757,233 7.50 - 10.00
Warrants expired -- --
--------- --------------
Outstanding, December 31, 1997 5,757,233 $ 7.50 - 10.00
========= ==============
</TABLE>
(9) STOCK OPTIONS
The Company has a Nonqualified Stock Option Plan which authorizes the
granting of options to directors, officers and key employees of the Company
or its subsidiaries to purchase, within a period of ten years and one month
from date of grant, up to 216,360 shares of the Company's common stock at a
price per share determined by the Board of Directors. All options granted
have an exercise price of $10 per share which was estimated to be no less
than the fair market value on the date of grant. As of December 31, 1997,
there were 64,183 shares available for grant under the plan.
Options granted under the Nonqualified Stock Option Plan generally vest over
a five-year period. The exercisability of the options may be accelerated at
the option of the Compensation Committee of the Board of Directors. Options
outstanding and exercisable at December 31, 1997, 1996 and 1995 were
152,177, 154,177 and 152,777 and 158,217 and 144,817 respectively.
F-16
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Changes in the number of shares represented by all outstanding options are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Outstanding at beginning of year ($10 per share) 154,177 158,217 295,023
Options granted ($10 per share)
Options canceled ($10 per share) (2,000) (4,040) (136,806)
------- ------- --------
Outstanding at end of year ($10 per share) 152,177 154,177 158,217
======= ======= ========
</TABLE>
In December 1995, the Board approved and adopted the Calmar Inc. 1995
Employee Stock Option Plan (the New Plan). The New Plan is a successor to
the Calmar Inc. 1988 Employee Stock Option Plan (the Old Plan) and has been
established to replace the Old Plan and grant additional options to officers,
outside directors, key employees and consultants of the Company. Under the
New Plan, the employees owning options under the Old Plan are allowed to
exchange their old options for new options. The new options cover the same
number of shares and are exercisable at the same option price as the old
options. The employees are vested in the new option to the same extent as
they are vested in the old options. The expiration dates on the new options
will extend for two years beyond the expiration date of the old options. At
December 31, 1997, no holders of options under the old plan have exchanged
for options under the new plan.
The New Plan authorizes granting of up to 910,000 options to purchase shares
of common stock. The options under the New Plan are designated as either
Incentive Stock Options or Nonqualified Stock Options. The options expire no
more than ten years from the date of grant. The exercise price of the
Incentive Stock Options are not less than the fair market value at the date
of the grant. The exercise price of the Nonqualified Stock Options are not
less than 85% of the fair market value on the date of the grant. Vesting of
all options may be based on the Company's attaining of performance criteria
as specified at the time of the granting and on the passage of time. As of
December 31, 1997, no options had been granted under the Plan.
F-17
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) EMPLOYEE BENEFITS
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
At December 31, 1997 and 1996, the actuarial and recorded liabilities for
post-retirement benefits other than pensions for eligible domestic
employees, none of which have been funded, were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $3,960 $3,744
Active employees fully eligible 699 977
Other active employees 1,611 1,742
----- -----
Total 6,270 6,463
Plan assets at fair value --
----- -----
Excess of accumulated postretirement benefit
obligation over plan assets
6,270 6,463
Unrecognized net gain 4,192 3,841
Unrecognized prior service cost (552) (636)
----- -----
Accrued postretirement benefit cost
$9,910 $9,668
===== =====
</TABLE>
The components of periodic expense for these postretirement benefits for
1997, 1996 and 1995 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Service cost $ 131 $ 164 $ 177
Interest cost 413 416 499
Net amortization (202) (165) (167)
----- ----- -----
Net periodic postretirement benefit cost $ 342 $ 415 $ 509
===== ===== =====
</TABLE>
The weighted-average discount rates used in determining the accumulated
postretirement benefit obligation and net periodic postretirement benefit
cost were 7.25% and 7.75% in 1997, 7.75% and 7.25% in 1996 and 7.25% and 9%
in 1995, respectively.
F-18
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The health care cost trend rates for both the indemnity and HMO Plans for
1995 through 2007 and thereafter are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Indemnity plan 9% 10% 10%
HMO plan 7 7 7
Ultimate indemnity plan 5 5 5
Ultimate HMO plan 4 4 4
</TABLE>
The health care trend rate has a significant effect on the amounts reported.
To illustrate, increasing the health care trend rates by one percentage point
each year would increase the accumulated postretirement benefit obligation as
of December 31, 1997 by $488,000 and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for
1997 by $58,000.
PENSION PLANS
The Company has domestic and foreign noncontributory defined benefit plans
covering substantially all employees except certain domestic hourly factory
employees who are covered by union retirement plans and all employees at the
Company's subsidiary in Spain. Employees with more than one year of service
are eligible to participate in the plans. The benefits payable under the
plans are generally determined on the basis of the employee's length of
service and earnings.
The Company's funding policy for the U.S. plan is to contribute annually the
minimum recommended contribution, while no funding is made for the foreign
plan. The following table sets forth the funded status and amounts
recognized in the Company's consolidated balance sheets as of December 31,
1997 and 1996 for the U.S. and foreign plans (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997 U.S. PLAN FOREIGN PLAN
- -------------------------------------------------------------------- --------- ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 16,884 $ 2,663
======== =======
Accumulated benefit obligation $ 18,078 $ 3,536
======== =======
Projected benefit obligation for service rendered to date $ 21,880 $ 4,367
Plan assets at fair value on December 31, 1997 18,742 --
-------- -------
Projected benefit obligation in excess of plan assets 3,138 4,367
Unrecognized net gain from past experience different from that
assumed and effects of changes in assumptions (342) 1,200
Prior service cost not yet recognized in net periodic
pension cost (42) --
-------- -------
Accrued pension cost $ 2,754 $ 5,567
======== =======
</TABLE>
F-19
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
DECEMBER 31, 1996 U.S. PLAN FOREIGN PLAN
-------------------------------------------------------------------- --------- ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $13,785 $2,783
======= ======
Accumulated benefit obligation $14,801 $3,881
======= ======
Projected benefit obligation for service rendered to date $18,062 $4,917
Plan assets at fair value on December 31, 1996 15,897 -
------- ------
Projected benefit obligation in excess of plan assets 2,165 4,917
Unrecognized net gain from past experience different from that
assumed and effects of changes in assumptions 204 1,177
Prior service cost not yet recognized in net periodic
pension cost (83) -
------- ------
Accrued pension cost $ 2,286 $6,094
======= ======
</TABLE>
Plan assets consist of equity securities, U.S. Government obligations and
cash equivalents.
Net periodic pension costs for 1997, 1996 and 1995 consist of the following
(dollars in thousands):
<TABLE>
<CAPTION>
U.S. PLAN FOREIGN PLAN
--------------------------- ------------------
1997 1996 1995 1997 1996 1995
------- ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 889 879 611 219 249 251
Interest cost 1,373 1,305 1,146 285 316 332
Actual return on assets (3,237) (2,137) (3,202) - - -
Net amortization and
deferral 1,922 1,192 2,268 (59) (53) (48)
------- ------ ------ --- --- ---
Net periodic
pension cost $ 947 1,239 823 445 512 535
======= ====== ====== === === ===
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation for the U.S. plan were 7.25% and 5% in 1997,
7.75% and 5% in 1996 and 7.25% and 5% in 1995. The average expected long-
term rate of return on assets was 9% in 1997 and 1996 and 8.5% in 1995,
respectively.
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation for the foreign plan were 7% and 4% in 1997 and
1996 and 7.5% and 4.5% in 1995.
F-20
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MULTIEMPLOYER PENSION PLAN
Certain of the Company's domestic hourly employees are covered by union-
sponsored, collectively-bargained multiemployer pension plans.
Contributions into multiemployer pension plans are based upon collectively-
bargained agreements and were $587,000, $486,000 and $479,000 in 1997, 1996
and 1995, respectively.
SAVINGS PLAN (401(K) PLAN)
In general, all domestic employees other than those covered under union
agreements are eligible to participate in a defined contribution plan
sponsored by the Company, which is qualified under section 401(k) of the
Internal Revenue Code. The Company contributes to the plan an amount equal
to a portion of each participant's contribution. Expense for the Company's
401(k) Plan was $660,000, $627,000 and $624,000 in 1997, 1996 and 1995,
respectively.
INCENTIVE PLANS
The Company has incentive plans covering certain domestic personnel of the
Company. Incentive bonuses of $1,709,000, $1,250,000 and $971,000 were
provided for under these plans in 1997, 1996 and 1995, respectively.
EMPLOYMENT CONTRACTS
Certain executive officers are employed under employment contracts
containing customary employment terms and providing for base annual
salaries and for annual incentive bonuses as the Board of Directors may, in
its discretion, determine pursuant to its incentive plan in accordance with
past practices or otherwise. Upon termination, they are entitled to certain
severance benefits, unless termination is for cause, at which point the
Company will have no further obligation. These benefits have not been
accrued since it is not probable the liability will be incurred.
(11) INCOME TAXES
The components of the income (loss) before income tax provision (benefit)
and extraordinary item are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Domestic earnings (loss) $2,175 $(4,455) $(8,467)
Foreign earnings (loss) (544) 843 3,118
------ ------- -------
Income (loss) before income tax
provision (benefit) and
extraordinary item $1,631 $(3,612) $(5,349)
====== ======= =======
</TABLE>
F-21
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
There was no tax benefit recorded in connection with the extraordinary items.
The income tax provision (benefit) associated with the income (loss) before
extraordinary item is comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Current:
Domestic $ 149 $ 22 $ (79)
Foreign 1,334 815 2,093
Deferred - foreign (1,549) (1,051) (931)
------- ------- ------
Total $ (66) $ (214) $1,083
======= ======= ======
</TABLE>
Provision has not been made, with certain exceptions, for U.S. or additional
foreign taxes on approximately $13,500,000 of undistributed earnings of
foreign subsidiaries, as those earnings are intended to be indefinitely
reinvested. If, not withstanding management's intent in this regard, such
undistributed earnings become taxable in the U.S. by repatriation or other
means, net operating loss carryforwards and foreign tax credits would be
available to mitigate substantially all of the U.S. tax liability
attributable to such earnings.
The income tax provision (benefit) related to the income (loss) before
extraordinary item differs from the amounts computed by applying the United
States statutory income tax rate as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Income tax provision (benefit) at statutory
tax rate $ 571 $(1,264) $(1,872)
Extraordinary item -- (216) (3,293)
Effect of foreign operations (42) (301) (23)
Effect of domestic net operating loss (1,962) (688) 5,931
Amortization of goodwill 1,005 1,005 1,005
Accrued bonuses -- 438
Other 362 812 (665)
------- ------- -------
Income tax provision (benefit) $ (66) $ (214) $ 1,083
======= ======= =======
</TABLE>
F-22
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1997 and 1996 are presented below (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Self insurance reserves $ 401 $ 469
Inventories, principally due to additional
costs for tax purposes 223 293
Deferred bonus payments 710 520
Accrued vacation 1,233 1,038
Accrued postretirement benefit obligation 4,117 4,067
Accrued pension 1,501 1,415
Net operating loss carryforward 14,246 18,826
Other 1,134 1,378
-------- -------
Total gross deferred tax assets 23,565 28,006
Less valuation allowance (15,368) (19,079)
-------- -------
Net deferred tax assets 8,197 8,927
-------- -------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation (9,198) (10,212)
Intangibles, principally due to differences
in amortization (463) (639)
Difference in basis of noncurrent assets
related to Monturas acquisition (6,037) (7,086)
Other (3,330) (3,370)
-------- -------
Total gross deferred tax liabilities (19,028) (21,307)
-------- -------
Net deferred tax liabilities $(10,831) $(12,380)
======== =======
</TABLE>
The increase or (decrease) in the valuation allowance in 1997, 1996 and 1995
was $(3,711,000), $1,068,000 and $7,371,000, respectively.
As of December 31, 1997, the Company had Federal net operating loss
carryforwards for tax purposes of approximately $36,700,000, which, if not
utilized, will expire in 2003 through 2010.
The Company's Federal income tax returns for calendar years 1986 through 1991
are currently under examination by the Internal Revenue Service (IRS). On
March 1997, the Company received notice from the IRS of proposed
adjustments for such calendar years which would result in additional Federal
taxes of up to $5,500,000, plus interest from the date when such additional
taxes would have been due, and in the reduction of the Company's net
operating loss carryovers from $36,700,000 to $27,600,000. Most of the
proposed adjustments relate to the Company's amortization deductions with
respect to a covenant not to compete purchased from the Company's former
parent corporation when that corporation sold a controlling interest in the
Company in 1988.
F-23
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company, after consultation with tax counsel, continues to believe in
the propriety of its positions set forth in its tax returns and will
vigorously contest the adjustments being proposed by the IRS.
At December 31, 1997, the Company has recorded a significant valuation
allowance against its net deferred tax assets, which includes net operating
loss carryovers. No additional amounts have been accrued for any alleged
deficiency resulting from the proposed adjustments as the Company does not
presently believe that any payment amount is probable.
(12) SEGMENT AND FOREIGN OPERATIONS
The Company operates in one industry segment: the design, manufacture and
sale of plastic pump sprayers, dispensers, valves and closures as well as
various custom-molded products.
The foreign subsidiaries operate in four geographical areas: Western
Europe, Canada, South America and Asia. Information relating to the
Company's foreign and domestic operations are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Sales:
United States $ 158,926 $ 144,094 $ 143,428
Western Europe 78,679 81,122 85,991
Canada 6,498 6,045 6,489
South America 3,881 -- --
Eliminations (17,739) (11,824) (11,443)
---------- ---------- ---------
$ 230,245 $ 219,437 $ 224,465
========== ========== =========
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Operating income (loss):
United States $ 25,719 $ 18,918 $ 17,669
Western Europe 145 (120) 2,149
Canada 243 426 471
South America (436) -- --
Eliminations (332) 129 173
---------- ---------- ---------
$ 25,339 $ 19,353 $ 20,462
========== ========== =========
</TABLE>
F-24
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Identifiable assets:
United States $ 181,214 $ 176,431 $ 181,014
Western Europe 96,333 104,551 106,977
Canada 2,146 2,415 2,474
South America 5,586 - -
Eliminations (638) (659) (680)
---------- ---------- ----------
$ 284,641 $ 282,738 $ 289,785
========== ========== ==========
</TABLE>
Export sales from the United States aggregated $20,577,000, $21,668,000 and
$20,887,000 in 1997, 1996 and 1995, respectively.
(13) RELATED PARTY TRANSACTIONS
The Company has made loans to certain executive officers which are
evidenced by promissory notes and secured by deeds of trust. The loans have
maturities up to 30 years. As of December 31, 1997 and 1996, outstanding
principal amounts of $772,000 and $619,000, respectively, are included in
other assets in the accompanying consolidated balance sheets. Included in
the above amounts are loans in the amount of $289,000 and $339,000 at
December 31, 1997 and 1996, respectively, which carry interest at a rate of
0.25% per annum and are payable in the year 2006. The remaining notes do
not bear interest unless the officers are terminated for other than
reasonable cause, at which time the notes will bear interest at the rate of
10% per annum. Upon termination for cause, the entire amount of the loan
may become due and payable. The terms of the loan may be more favorable
than terms which would be obtained from an unrelated third party.
The Company holds promissory notes from certain executive officers for the
purchase of common stock. These notes aggregated $570,000 and $554,000 at
December 31, 1997 and 1996, respectively, and mature in 1998. Interest on
these stock subscription notes accrue at defined interest rates which
approximated 8.25% at December 31, 1997 and 1996.
As of December 31, 1997, a certain executive officer had deferred $779,000
of compensation. The Company is paying interest on this deferred amount.
(14) COMMITMENTS AND CONTINGENCIES
ROYALTIES
Under the terms of various exclusive and nonexclusive licensing agreements,
the Company is obligated to pay royalties based on percentages of the net
sales (as defined) of products subject to such agreements. The agreements,
which generally extend for the life of the respective patents, are
cancelable by the Company at any time. The licensor has the right to cancel
the agreements under certain conditions, primarily default on royalty
payments. Royalty expense related to the agreements was $137,000 in both
1997 and 1996 and $160,000 in 1995.
F-25
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
LEASES
The Company leases certain warehouse and office facilities and equipment
under noncancelable operating leases. The aggregate minimum future lease
commitments under operating leases with noncancelable terms of one year or
more are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1998 $1,108
1999 900
2000 520
2001 389
2002 376
Thereafter 3,183
------
$6,476
======
</TABLE>
Rental expense was $1,317,000, $1,103,000 and $992,000 1997, 1996 and 1995,
respectively.
ENVIRONMENTAL
Management believes the Company is in substantial compliance with national,
state and local laws and regulations governing the use, discharge and
disposal of hazardous materials, except as outlined below. In June 1987, the
California Regional Water Quality Control Board (Water Control Board)
required the Company to conduct an investigation of possible soil and
groundwater contamination of the Company's City of Industry facility. This
investigation indicated that soils and groundwater under the site had been
impacted by industrial cleaning solvents. Since 1987, the Company has
continued to investigate and monitor the site. The investigations performed
to date indicate that some of the contamination on the site may result from
off-site sources unrelated to the Company. The Water Control Board has
requested that the Company begin soil remediation at the site. In October
1997, the Company submitted a soil remediation plan to the Water Control
Board and is currently waiting for Board approval. The Company also
continues to evaluate soil cleanup options. The Company believes it will
have some insurance coverage for this matter.
In June 1993, the EPA sent 64 companies and individuals, including the
Company, letters notifying the recipients that they were considered
potentially liable for groundwater contamination in the Puente Valley
Operable Unit of the San Gabriel Superfund Site. The Company's City of
Industry facility is located in the Puente Valley Operable Unit. In response
to the EPA's request, the Company and a majority of the recipients of the
notice formed a steering committee known as the Puente Valley Steering
Committee (PVSC). In September 1993, 47 companies (including Calmar) and
individuals in the Puente Valley, entered into a Administrative Order on
Consent (AOC) whereby such companies and individuals, including the Company,
agreed to conduct a remedial investigation/feasibility study under the
oversight of the EPA. A Remedial Investigation Report and Feasibility Study
were issued in May 1997. The total costs related to conducting this study
were estimated to be approximately $5,000,000, of which $4,800,000 has been
paid to date. The Company's share is expected to be approximately $150,000
of which $132,000 has been paid to date. The Company believes that it will
have some insurance coverage in this matter.
F-26
<PAGE>
CALMAR INC
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In January 1998, the EPA issued a proposed remediation plan which identified
a remedial system for intermediate and shallow groundwater zones as the
preferred remedy. The estimated cost of the plan, if ultimately approved, is
approximately $29 million if only treatment for industrial solvents is
necessary or $51 million if treatments for total dissolved solids and
nitrates is also required. The EPA is expected to issue its final Record of
Decision by mid 1998. Upon issuance of the final Record of Decision, it is
expected that the potentially responsible parties (PRP) identified by the EPA
will develop specific remediation plans in response to a demand by the EPA
and that the parties will participate in a cost allocation process whereby
each PRP will be allocated a percentage share of the remediation
responsibility (and thus a percentage share of the remediation cost). A
precise estimate of total remediation cost ultimately to be paid by the
Company is not yet determinable. A more precise estimate of cost will be
available upon issuance of the Record of Decision and a demand by the EPA,
the development of the response and remediation plan by the PRP, and an
agreement on allocable percentages of responsibility to the PRP. It is
expected that any remediation plan developed by the PRP will include ongoing
monitoring of the site, as well as, some response action for the shallow and
intermediate groundwater zones. It is estimated that any remediation would
require at least 15 years to complete and potentially significantly longer.
The Company believes it has insurance coverage for legal defense costs, and
possibly, indemnity in this matter. Some amounts of defense costs have
already been paid by the carriers. No amounts have yet been incurred for
remediation and therefore no claims have been forwarded to the carriers for
payment. At December 31, 1997, the Company has accrued approximately
$400,000 for potential environmental liability. Estimates of ultimate
liability may change significantly based upon the nature of the proposed
remediation plan which has yet to be developed by the PRP, as well as, the
Company's final allocated percentage of responsibility.
The Company may be required to incur other costs and expenses from time to
time in order to generally comply with environmental laws and regulations,
however, the Company does not anticipate that such costs and expenses will
have a material adverse effect on the Company's results of operations. No
assurances can be given, however, that the historical, current or future uses
and conditions of the Company's facilities or operations will not result in
the imposition of liability under environmental laws.
F-27
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Consolidated
Years ended December 31, 1995, 1996 and 1997
(dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance Charges to Charges to Balance
at Beginning Costs and Other Deductions/ at End
Description of the Period Expenses Accounts Write-offs (1) of the Period
- ----------- ------------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Allowance for doubtful accounts $1,305 $ 209 $ 0 $ (113) $1,401
Reserve for obsolete inventories 1,387 381 70 (755) 1,083
Self-insurance reserves (2) 2,155 4,558 36 (5,087) 1,662
Environmental reserve 500 - - (103) 397
Defective product liability (3) 73 137 474 (356) 328
------ ------ ----- ------- ------
Total 5,420 5,285 580 (6,414) 4,871
====== ====== ===== ======= ======
December 31, 1996:
Allowance for doubtful accounts 1,401 501 13 (352) 1,563
Reserve for obsolete inventories(4) 1,083 320 (270) (706) 427
Self-insurance reserves 1,662 4,031 - (4,569) 1,124
Environmental reserve 397 159 - (156) 400
Defective product liability (4) 328 130 232 (149) 541
------ ------ ----- ------- ------
Total 4,871 5,141 (25) (5,932) 4,055
====== ====== ===== ======= ======
December 31, 1997:
Allowance for doubtful accounts(5) 1,563 (219) - (350) 994
Reserve for obsolete inventories 427 546 86 (623) 436
Self-insurance reserves 1,124 3,974 - (4,311) 787
Environmental reserve 400 33 - (25) 408
Defective product liability 541 46 (124) (141) 322
------ ------ ----- ------- ------
Total $4,055 $4,380 $ (38) $(5,450) $2,947
====== ====== ===== ======= ======
</TABLE>
<PAGE>
(1) Deductions/Write-offs include the effects of foreign currency translation
totaling $116,000, ($20,000) and ($211,000) in 1995, 1996 and 1997,
respectively.
(2) Charges to other accounts includes excess liability insurance refunds on
certain workman's compensation claims totaling $36,000 in 1995.
(3) Charges to other accounts represents a reclassification of Calmar-Albert
GmbH reserves to defective product liability in 1995.
(4) Charges to other accounts primarily represents a reclassification of
domestic reserves for obsolete inventories to domestic defective product
liability.
(5) Charges to costs and expenses includes a reduction in reserves of $302,640
in 1997.
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.1++ Certificate of Incorporation of Calmar Inc., as amended to date
(with Certificate of Correction attached thereto).
3.2*** Bylaws of Calmar Inc., as amended to date.
4.1++ Indenture dated as of August 18, 1995 between Calmar Inc. and
United States Trust Company of New York, as Trustee, with respect
to the 11 1/2% Senior Subordina ted Notes due 2005.
4.2++ Purchase Agreement, dated August 3, 1995, by and among Calmar Inc.,
Goldman, Sachs & Co. and Merrill Lynch & Co.
4.3++ Registration Rights Agreement, dated as of August 18, 1995, by and
among Calmar Inc., Goldman, Sachs & Co. and Merrill Lynch & Co.
4.4++ Credit Agreement dated as of August 18, 1995 between Calmar Inc.
and Pearl Street L.P., Bankers Trust Company and the financial
institutions listed therein (collectively, including Pearl Street
L.P. and Bankers Trust Company, "Lenders"), Goldman, Sachs & Co.,
as syndication agent, Bankers Trust Company, as administrative
agent for Lenders, and Mellon Bank, N.A., as documentation agent
and collateral agent for Lenders.
4.5+++ Security Agreement, dated as of September 18, 1995, by and between
Calmar Inc. and Mellon Bank, N.A., as Collateral Agent.
4.6+++ Pledge Agreement, dated as of September 18, 1995, by and between
Calmar Inc. and Mellon Bank, N.A., as Collateral Agent.
4.7+++ Trademark Collateral Security Agreement, dated as of September 18,
1995, by and between Calmar Inc. and Mellon Bank, N.A., as
Collateral Agent.
4.8+++ Patent Collateral and Security Agreement, dated as of September 18,
1995, by and between Calmar Inc. and Mellon Bank, N.A., as
Collateral Agent.
4.9+++ Collateral Account Agreement, dated as of September 18, 1995, by
and between Calmar Inc. and Mellon Bank, N.A., as Collateral Agent.
4.10++ Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing (California), dated August 16, 1995, executed by Calmar
Inc., as Trustor, in favor of Mellon Bank, N.A., as Collateral
Agent, as Beneficiary, covering property located at 333 South
Turnbull Canyon Road, City of Industry, California 91749.
4.11++ Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing (Missouri), dated August 16, 1995, executed by Calmar Inc.,
as Trustor, in favor of Mellon Bank, N.A., as Collateral Agent, as
Beneficiary, covering property located at 1001 S.E. 291 Highway,
Lee's Summit, Missouri 64081.
4.12++ Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing (Missouri), dated August 16, 1995, executed by Calmar Inc.,
as Trustor, in favor of Mellon Bank, N.A., as Collateral Agent, as
Beneficiary, covering property located at 1204 Southwest Jefferson
Road, Lee's Summit, Missouri 64081.
4.13++ Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing (Ohio), dated August 16, 1995, executed by Calmar Inc., as
Trustor, in favor of Mellon Bank, N.A., as Collateral Agent, as
Beneficiary, covering properties located at 2550 Kenskill Avenue,
Washington Court House, Ohio 43160, and 238 South Main Street,
Washington Court House, Ohio 43160.
10.1@@ Calmar Inc. Salaried Retirement Plan dated as of June 22, 1983,
as amended.
10.2@@ Calmar Inc. Incentive Plan dated December 1983, as amended.
10.3* Stock Subscription Agreement dated as of December 8, 1988 among CSS
Holding Corporation, FS Equity Partners II, L.P. (formerly RFS
Equity Partners II, L.P.) (hereinafter, "FSEP II") and C. Richard
Huebner, with form of note and pledge agreement attached thereto as
Exhibits A and B, respectively.
10.4* Form of Stock Subscription Agreement dated as of December 1, 1988
by and between CSS Holding Corporation and certain members of
management who purchased shares of common stock of CSS Holding
Corporation for cash.
10.5* Form of Stock Subscription Agreement dated as of December 1, 1988
by and between CSS Holding Corporation and certain members of
management who purchased shares of common stock of CSS Holding
Corporation for promissory notes, with form of note attached
thereto as Exhibit A.
1
<PAGE>
Exhibit
Number Description
------- -----------
10.6* Form of Stock Subscription Agreement dated as of December 1, 1988
by and between CSS Holding Corporation and certain members of
management who purchased shares of common stock of CSS Holding
Corporation for cash and promissory notes, with form of note
attached thereto as Exhibit A.
10.7* Stock Subscription Agreement dated as of December 8, 1988 by and
among CSS Holding Corporation, FSEP II (formerly RFS Equity
Partners II, L.P.) and Donald E. Knox.
10.8*** CSS Holding Corporation 1988 Employee Stock Option Plan dated
December 1, 1988, as amended.
10.9* Form of Nonqualified Stock Option Agreement by and between CSS
Holding Corporation and certain members of management.
10.10* Form of Nonqualified Stock Option Agreement dated as of December 8,
1988 between CSS Holding Corporation and C. Richard Huebner.
10.11* Form of Nonqualified Stock Option Agreement by and between CSS
Holding Corporation and Donald E. Knox.
10.12* Registration Rights Agreement dated December 9, 1988 by and among
CSS Holding Corporation, Beijer Industries AB and FSEP II.
10.13* Stockholders' Agreement dated December 9, 1988 among FSEP II
(formerly RFS Equity Partners II, L.P.), Beijer Industries AB,
Calmar Inc., CSS Holding Corporation and Calmar Spraying Systems,
Inc.
10.14* Registration Rights Agreement dated as of December 8, 1988 by and
among CSS Holding Corporation and the investors who are signatories
thereto.
10.15* Purchase and Warrant Agreement dated as of December 8, 1988 by and
among CSS Holding Corporation and the investors who are signatories
thereto.
10.16* Promissory Note secured by Deed of Trust dated August 5, 1988 of C.
Richard Huebner and Debra A. Huebner in favor of Calmar Inc., its
successors and assigns.
10.17* Employment Agreement dated January 13, 1988 between Calmar Inc. and
C. Richard Huebner.
10.18@@ Calmar Inc. 401(k) Plan dated as of January 1, 1989, as amended.
10.19*** Shareholders Agreement dated July 26, 1990 between
Antonio Puig, S.A. and Others, J.M. Puig Planas and Others and
Monturas S.A., on the one hand, and Calmar Spraying Systems, Inc.,
on the other hand.
10.20*** License Agreement dated as of July 27, 1990 between Monturas S.A.
and Calmar Inc.
10.21*** Distributorship Agreement dated as of July 27, 1990 between
Monturas S.A. and Calmar Inc.
10.22*** Agency Agreement dated as of July 27, 1990 between Monturas S.A.
and Calmar Inc.
10.23*** Sale and Purchase Agreement dated as of July 30, 1990 among Aerosol
Research (Participations) S.A., Calmar Spraying Systems, Inc. and
Cope Allman Packaging PLC.
10.24*** Subscription Agreement dated as of September 28, 1990 among CSS
Holding Corporation, FSEP II and Beijer Industries AB.
10.25++ Securities Subscription Agreement dated as of September 28, 1990 by
and among CSS Holding Corporation, FSEP II and C. Richard Huebner.
10.26++ Form of Securities Subscription Agreement dated as of September 28,
1990 by and between CSS Holding Corporation and certain members of
management.
10.27++ Securities Subscription Agreement dated as of September 28, 1990 by
and among CSS Holding Corporation, FSEP II and Donald E. Knox.
10.28*** Warrant to purchase 722,627 shares of common stock dated as of
October 5, 1990 issued to FSEP II.
10.29*** Subscription Agreement dated as of October 4, 1990 by and among CSS
Holding Corporation, FSEP II and Chesterfield Investments.
10.30*** Warrant to purchase 66,667 shares of common stock dated as of
October 5, 1990 issued to Atwell & Co.
10.31*** Form of
Warrant dated as of October 5, 1990 issued to certain members of
management.
10.32*** Stock Subscription Agreement dated as of September 3, 1991 between
CSS Holding Corporation and Richard J. Hartl, with form of note and
pledge agreement attached thereto as Exhibits A and B,
respectively.
2
<PAGE>
Exhibit
Number Description
------- -----------
10.33*** Nonqualified Stock Option Agreement dated as of September 3, 1991
between CSS Holding Corporation and Richard J. Hartl.
10.34++ Calmar Inc. Supplemental Executive Retirement Plan dated as of
September 3, 1991.
10.35*** Subscription Agreement dated as of October 31, 1991 among CSS
Holding Corporation, FSEP II and Beijer Industries AB.
10.36*** Warrant to purchase 2,000,000 shares of common stock dated as of
October 31, 1991 issued to FSEP II.
10.37*** Subscription Agreement dated as of November 1, 1991 among Calmar
Spraying Systems, Inc. (formerly CSS Holding Corporation), FSEP
II and Beijer Industries AB.
10.38++ Form of Securities Subscription Agreement dated as of October 31,
1991 by and between CSS Holding Corporation and certain members
of management.
10.39*** Form of Warrant dated as of October 31, 1991 issued to certain
members of management.
10.40++ Amendment Agreement dated as of February 15, 1992 among FSEP II,
Beijer Industries AB, Kongsbo Industrier AB and Calmar Inc.
10.41+ Subscription Agreement dated as of May 7, 1992 among Calmar Inc.,
Calspray Investors, L.P., FSEP II and Kongsbo Industrier AB.
10.42+ Warrant to purchase 25,000 shares of common stock dated as of May
7, 1992 issued to Jefco.
10.43++ Promissory Note secured by Deed of Trust dated September 10, 1992
of Jacques J. Barriac and Jessica M. Barriac in favor of Calmar
Inc., its successors and assigns.
10.44++ Calmar Inc. Deferred Compensation Plan 1993 Restatement effective
as of January 1, 1993.
10.45++ Form of Stock Subscription Agreement dated as of April 1, 1993 by
and between Calmar, Inc. and certain members of management who
purchased shares of common stock of Calmar Inc. for cash.
10.46++ Stock Subscription Agreement dated as of April 1, 1993 by and
between Calmar Inc. and Jacques Barriac, with form of note and
pledge agreement attached thereto as Exhibits A and B,
respectively.
10.47++ Warrant to purchase 500,000 shares of common stock dated as of
September 10, 1993 issued to FSEP II.
10.48++ Warrant to purchase 500,000 shares of common stock dated as of
October 11, 1993 issued to FSEP II.
10.49## Form of Key Employee Retention Agreement between Calmar Inc. and
certain members of management.
10.50## Form of Employment Agreement dated as of January 1, 1998 by and
between Calmar Inc. and Richard J. Hartl.
10.51++ Calmar Inc. Deferred Compensation Arrangement effective as of
January 1, 1995 between Calmar Inc. and Richard J. Hartl.
10.52++ Calmar Inc. Executive Incentive Compensation Plan dated January,
1993.
10.53++ Warrant to purchase 1,400,000 shares of common stock dated as of
May 25, 1995 issued to AB Handel och Industri.
10.54++ Warrant to purchase 505,840 shares of common stock dated as of
May 25, 1995 issued to AB Handel och Industri.
10.55@ Waiver and Agreement dated as of January 15, 1993 among Calmar
Inc., FSEP II, Kongsbo Industrier AB In Bankruptcy and Svenska
Handelsbanken.
10.56@ Waiver and Agreement dated as of October 27, 1993 among Calmar
Inc., FSEP II, Kongsbo Industrier AB In Bankruptcy, Svenska
Handelsbanken and AB Handel och Industri.
10.57# Amendment No. 1 to Senior Secured Credit Facility dated as of
October 4, 1996.
10.58## Amendment No. 2 to Senior Secured Credit Facility dated July 16,
1997.
10.59## Amendment No. 3 to Senior Secured Credit Facility dated January
20, 1998.
12.1## Computation of ratio of earnings to fixed charges.
12.2## Computation of ratio of consolidated long-term debt to
consolidated stockholders' deficiency.
21.1## Subsidiaries of Calmar Inc.
27.1## Financial Data Schedule.
3
<PAGE>
__________
* Filed as an exhibit to Registration Statement on Form S-1
(No. 33- 26281) filed on December 23, 1988.
** Filed as an exhibit to Amendment No. 2 to Registration Statement
on Form S-1 (No. 33-26281) filed on February 14, 1989.
*** Filed as an exhibit to Registration Statement on Form S-4
(No. 33-47304) filed on April 21, 1992.
+ Filed as an exhibit to Amendment No. 1 to Registration Statement
on Form S-4 (No. 33-47304) filed on June 2, 1992.
++ Filed as an exhibit to Registration Statement on Form S-4
(No. 33- 97056) filed on September 18, 1995.
+++ Filed as an exhibit to Amendment No. 1 to Registration Statement
on Form S-4 (No. 33-97056) filed on October 11, 1995.
@ Filed as an exhibit to Amendment No. 3 to Registration Statement
on Form S-4 (No. 33-97056) filed on November 30, 1995.
@@ Filed as an exhibit to Annual Report on Form 10-K (No. 0-12054)
for the fiscal year ended December 31, 1992, filed on March 31,
1993.
# Filed as an exhibit to Quarterly Report on Form 10-Q (No. 33-
97056) for the quarterly period ended September 28, 1996, filed
on November 12, 1996.
## Filed herewith.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to security holders during
the fiscal year ended December 31, 1997.
4
<PAGE>
EXHIBIT 10.49
-------------
CALMAR INC.
KEY EMPLOYEE RETENTION AGREEMENT
1. Description and Purpose of the Agreement. This is a Key
----------------------------------------
Executive Retention Agreement (the "Agreement") by and between Calmar Inc., a
Delaware corporation (the "Corporation"), and ____________ (the "Participant").
This Agreement is dated as of ____________, 1998. Under this Agreement, the
Participant is granted certain rights upon any Change of Control (as hereinafter
defined) of the Corporation.
2. Purpose of the Agreement. The purpose of this Agreement and of
------------------------
the granting of the rights and benefits granted hereunder to the Participant is
to assist the Corporation in retaining the Participant in its employ and thereby
to assist the Corporation in achieving its growth and competitive objectives.
3. Administration. This Agreement shall be administered by the
--------------
Board of Directors of the Corporation.
4. Triggering Events; Change of Control.
------------------------------------
(a) If, the Participant is employed by the Corporation at the
time of a Change of Control and within one year after the Change of Control is
terminated by the Corporation without Cause (a "Triggering Event,"), the
Participant shall be entitled to the payment provided in Section 5 hereof.
(b) Change of Control, as used herein, means: (i) the acquisition
in one or more transactions of beneficial ownership (within the meaning of Rule
13d(3) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) by (y) any person or entity (other than FS Equity Partners II, L.P., a
California limited partnership ("FSEP") and its affiliates) or (z) any group (as
defined in Rule 13d(3) under the Exchange Act) other than FSEP and its
affiliates of any Voting Stock of the Corporation such that, as a result of such
acquisition, such person, entity or group has the ability to elect, directly or
indirectly, a majority of the members of the Board of Directors of the
Corporation, or (ii) the sale of all or substantially all of the assets of the
Corporation (including within such assets the capital stock of any subsidiary)
and its subsidiaries, in a single transaction or a series of transactions, to
any person or persons. "Voting Stock" as used in this Section 4(b) shall mean
all shares having general voting power to vote in any election of the Board of
Directors of the Corporation.
5. Payments Upon Occurrence of a Triggering Event. Upon the
----------------------------------------------
occurrence of a Triggering Event with regard to the Participant, the Participant
shall be entitled to receive a lump sum payment equal to the Participant's
annual base salary as in effect immediately prior to the Triggering Event. In
addition, the Participant shall be entitled to be promptly reimbursed in
accordance with the established practices and policies of the Corporation for
all reasonable
<PAGE>
expenses actually accrued through the effective date of such termination but not
reimbursed previously by the Corporation.
6. Withholdings, etc. All payments hereunder shall be subject to
------------------
any statutorily required federal and state withholding obligations.
7. Other Termination. Nothing in this Agreement shall require the
-----------------
Corporation to continue the Participant's employment with the Corporation prior
to the occurrence of a Triggering Event, nor shall any payment be due hereunder
by reason of the Participant's death or Disability prior to a Triggering Event.
8. Certain Defined Terms.
---------------------
(a) Cause. Cause, as used herein, means: (i) fraud,
-----
embezzlement, gross negligence or other illegal or wrongful conduct engaged in
by the Participant materially detrimental to the business or reputation of the
Corporation; (ii) the conviction of the Participant of a felony; (iii) the
development or pursuit of interests by the Participant materially adverse to the
Corporation; or (iv) the intentional imparting by the Participant of material
confidential information relating to the Corporation or any of its businesses to
a third party, other than in the course of performing his duties to the
Corporation.
(b) Disability. Disability, as used herein, means the
----------
disability or incapacity of the Participant to perform his duties as the result
of any injury, sickness or physical, mental or emotional condition that
continues for a period of ninety days in any twelve month period or can
reasonably be expected to continue for such period.
9. Attorney's Fees. In the event the Participant is required to
---------------
pursue legal remedies to enforce his rights under this Agreement, and prevails
in such action, the Corporation shall pay the reasonable costs (including
attorney's fees) incurred by the Participant in connection therewith.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
_____________, 1998.
CALMAR INC.
By: ________________________________
Name:__________________________
Title:_________________________
PARTICIPANT:
____________________________________
[NAME]
3
<PAGE>
EXHIBIT 10.50
-------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated as of January 1,
1998, and is entered into by and between Calmar Inc., a Delaware corporation
(the "Corporation"), and Richard J. Hartl (the "Executive").
R E C I T A L S:
- - - - - - - -
A. The Corporation and the Executive have heretofore entered into
that certain Employment Agreement dated as of September 1, 1994 which Agreement
expired by its terms on December 31, 1997.
B. The Corporation desires to continue to have the benefit of the
services of the Executive and the Executive desires to continue to render such
services to the Corporation.
C. The Corporation and the Executive desire to set forth the terms
and conditions of the Executive's continued employment with the Corporation in
this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties agree as follows:
1. Employment. The Corporation hereby continues the Executive's
----------
employment, and the Executive hereby accepts such continued employment with the
Corporation, on the terms set forth herein. The Executive shall serve as
President and Chief Executive Officer of the Corporation, and shall perform all
the duties that are usual and customary for the offices of President and Chief
Executive Officer, including, without limitation, the performance of all
services and acts necessary or advisable to assist in the management, conduct
and successful operations of the business of the Corporation and such other
usual and customary duties as may be assigned to him from time to time by the
Corporation's Board of Directors (the "Board"), subject always to the policies
set by the Board and the Bylaws of the Corporation.
2. Employment Term. This Agreement shall be for a term commencing
---------------
on January 1, 1998 and automatically terminating on the later of (i) the close
of business on the date on which a Change of Control (as hereinafter defined)
occurs or (ii) May 2, 1998, unless earlier terminated pursuant to the terms
hereof (the "Employment Term").
<PAGE>
3. Principal Office. The Executive's principal office and normal
----------------
place of work, subject to reasonable travel, shall be at the executive offices
of the Corporation located in City of Industry, California.
4. Compensation, Expenses and Benefits.
-----------------------------------
4.1 Base Salary. The Executive shall receive a base salary
-----------
during the Employment Term at the rate of $301,000 per annum, payable in
accordance with the Corporation's standard payroll procedures.
4.2 Bonus. In addition to the amount set forth in Section 4.1
-----
hereof, the Executive shall be entitled to a bonus for the Employment Term as
payable under the Corporation's Executive Incentive Compensation Plan based on
the "Target Opportunity Percentage" (as defined in said plan) and prorated for
applicable portion of the Corporation's 1998 fiscal year corresponding to the
period of the Employment Term.
4.3 Expenses. During the Employment Term, the Executive shall
--------
be reimbursed for his reasonable travel, entertainment, business, meeting and
similar expenditures, incurred for the benefit of the Corporation in accordance
with the policies of the Corporation as adopted by the Board from time to time.
As an additional condition to the reimbursement of such expenses by the
Corporation to the Executive, the Executive shall provide the Corporation with
copies of all available invoices and receipts, and otherwise account to the
Corporation in sufficient detail and with adequate documentation to allow the
Corporation to confirm the business nature of the expenses and claim an income
tax deduction for such paid items, if such items are deductible.
4.4 Additional Benefits.
-------------------
(a) During the Employment Term, the Executive shall be entitled
to all rights and benefits under any life, family medical and dental insurance
plans and long-term or permanent disability plans which the Corporation adopts
from time to time for executive officers of the Corporation, subject to any
waiting periods or other qualifications or limitations set forth in such plans.
(b) In addition to, and not in limitation of the benefits
provided under Section 4.4(a) hereof, the Executive shall be entitled to receive
the same type and amount of benefits provided under the Calmar Inc. Retiree
Health Benefit Plan (the "Retiree Health Plan"), in the event that the Executive
satisfies the conditions for eligibility to participate in the Retiree Health
Plan. Notwithstanding anything in the Retiree Plan to the contrary:
2
<PAGE>
(i) The Executive will be entitled to benefits described in
the preceding sentence before he reaches the age of sixty-five if the Executive
completes five or more years of credited service, as determined under the rules
of the Retiree Health Plan;
(ii) The Company shall have the discretion as to whether the
benefits payable to the Executive under this Section 4.4(b) shall be paid
through the Retiree Health Plan, an individual insurance contract, by self-
funding or otherwise; and
(iii) Benefits shall be payable under clause (ii) above only
if the Executive remains employed by the Company continuously until retirement,
unless the Executive is terminated by the Company without Cause or there occurs
a Change of Control (as hereinafter defined), in which event benefits shall be
payable as if the Executive had completed five or more years of credited service
and retired.
(c) During the Employment Term, the Executive shall be entitled to
four weeks per year of paid vacations, as well as personal and sick days
consistent with the general policy of the Corporation adopted by the Corporation
from time to time for its executive officers.
(d) During the Employment Term, the Executive will participate in
the Corporation's Executive Auto Policy No. 3000 to compensate the Executive for
expenses incurred in connection with the use of an automobile (including,
without limitation, insurance, maintenance and gasoline therefor) in the
performance of the Executive's duties hereunder.
(e) During the Employment Term, the Executive shall have the right
to participate in a Supplemental Executive Retirement Plan ("SERP"). Benefits
shall be payable under the SERP only if the Executive remains employed by the
Corporation continuously until retirement, unless the Executive is terminated by
the Company without Cause or there occurs a Change of Control (as hereinafter
defined), with the benefits payable thereunder to become payable immediately
upon termination. The amount of the annual benefit payable with respect to the
Executive shall be determined in accordance with whichever of the following
payment schedules the Executive elects:
3
<PAGE>
<TABLE>
<CAPTION>
Amount of Benefit
-----------------
Age at Benefit Joint and Survivor
-------------- ------------------
Commencement Single Life Annuity Annuity
- ----------------- ------------------- -------
<S> <C> <C>
60 30,000 27,300
61 39,000 35,490
62 48,000 43,680
63 57,000 51,870
64 66,000 60,060
65 or older 75,000 68,250
</TABLE>
The Executive's benefit under the SERP shall be offset, on a dollar for dollar
basis, by the benefit payable to the Executive under the Calmar Pension Plan
(the "Pension Plan"). The Executive's election as to the form of the benefit
payable under the SERP shall be the same as the Executive's election as to the
form of the benefit payable under the Pension Plan. If the Executive elects
that his benefit under the Pension Plan be payable in the form of a Single Life
Annuity, the amount of the benefit under the SERP shall be payable in the form
of a Single Life Annuity. On the other hand, if the Executive elects that his
benefit under the Pension Plan be payable in the form of a Joint and Survivor
Annuity, the amount of the benefit under the SERP shall be payable in the form
of a Joint and Survivor Annuity.
5. Termination of Employment.
-------------------------
5.1 Termination For Cause.
---------------------
(a) The Corporation may terminate the employment of the
Executive for Cause (as hereinafter defined) at any time during the Employment
Term by giving written notice thereof to the Executive in accordance with
Section 8.7 hereof. Cause, as used herein, means: (i) fraud, embezzlement, gross
negligence or other illegal or wrongful conduct engaged in by the Executive
materially detrimental to the business or reputation of the Corporation; (ii)
the conviction of the Executive of a felony; (iii) the development or pursuit of
interests by the Executive materially adverse to the Corporation; or (iv) the
intentional imparting by the Executive of material confidential information
relating to the Corporation or any of its businesses to a third party, other
than in the course of performing his duties hereunder.
(b) Upon termination in accordance with this Section 5.1,
the Executive shall be entitled to no further compensation hereunder other than
(i) the base salary provided by Section 4.1 hereof earned hereunder through the
effective date of such termination but not paid previously by the Corporation;
(ii) the reimbursement of expenses provided by Section 4.3 hereof through the
effective date of such termination but not
4
<PAGE>
reimbursed previously by the Corporation; and (iii) the benefits provided by
Section 4.4 hereof through the effective date of such termination. Such payments
shall be made by the Corporation on the effective date of such termination.
5.2 Voluntary Termination by the Executive.
--------------------------------------
(a) The Executive may terminate his employment at any
time during the Employment Term by giving no less than 30 days' prior written
notice to the Corporation in accordance with Section 8.7 hereof.
(b) Upon termination in accordance with this Section 5.2,
the Executive shall be entitled to no further compensation hereunder other than
(i) the base salary provided by Section 4.1 hereof earned hereunder through the
effective date of such termination but not paid previously by the Corporation;
(ii) the reimbursement of expenses provided by Section 4.3 hereof through the
effective date of such termination but not reimbursed previously by the
Corporation; and (iii) the benefits provided by Section 4.4 hereof earned
hereunder through the effective date of such termination. Such payments shall be
made by the Corporation on the effective date of such termination.
5.3 Termination Due to Death or Disability.
--------------------------------------
(a) This Agreement shall automatically terminate upon the
death of the Executive. In addition, if any disability or incapacity of the
Executive to perform his duties as the result of any injury, sickness or
physical, mental or emotional condition continues for a period of 90 days in any
12-month period during the Employment Term, or can reasonably be expected to
continue for such period (in either case, a "Disability"), the Corporation may
terminate the Executive's employment by giving 15 days' prior written notice
thereof to the Executive in accordance with Section 8.7 hereof.
(b) Upon termination in accordance with this Section 5.3,
the Executive (or the Executive's estate, as the case may be) shall be entitled
to no further compensation hereunder other than (i) the base salary provided by
Section 4.1 hereof earned hereunder through the date of death but not paid
previously by the Corporation, or in the case of a Disability, through the
effective date of such termination as provided in the notice but not paid
previously by the Corporation; (ii) the bonus provided by Section 4.2 hereof
earned under the Corporation's Incentive Plan, as amended, for the most recently
completed fiscal year of the Corporation prior to the date of death (as
determined pursuant to the Corporation's Incentive Plan, as amended) but not
paid previously by the Corporation, or in the case of a Disability, prior to the
effective date of such termination as provided in the notice (as determined
pursuant to the Corporation's Incentive Plan, as amended) but not paid
previously
5
<PAGE>
by the Corporation; (iii) the reimbursement of expenses provided by Section 4.3
hereof through the date of death but not reimbursed previously by the
Corporation, or in the case of a Disability, through the effective date of such
termination as provided in the notice but not reimbursed previously by the
Corporation; and (iv) the benefits provided by Section 4.4 hereof through the
date of death, or in the case of a Disability, through the effective date of
such termination as provided in the notice. Such payments shall be made by the
Corporation within 30 days after the date of death of the Executive, or in the
case of a Disability, on the effective date of such termination as provided in
the notice.
5.4 Termination Without Cause by the Corporation.
--------------------------------------------
(a) The Corporation may terminate the Executive's
employment under this Agreement without Cause at any time during the Employment
Term.
(b) Upon termination in accordance with this Section 5.4,
the Executive shall be entitled to no further compensation hereunder other than
(i) 125 percent of the base salary provided by Section 4.1 hereof payable for
the remaining period of the Employment Term as if the Executive's employment
hereunder was not terminated, provided that in no event shall the amount payable
under this clause (i) be less than the amount of the annual base salary
(including any amounts deferred under the Deferred Compensation Plan) for a 12
month period as provided by Section 4.1; (ii) the bonus provided by Section 4.2
hereof earned under the Corporation's Incentive Plan, as amended, for the most
recently completed fiscal year of the Corporation prior to the effective date of
termination (as determined pursuant to the Corporation's Incentive Plan, as
amended) but not paid previously by the Corporation; (iii) the reimbursement of
expenses provided by Section 4.3 hereof through the effective date of such
termination but not reimbursed previously by the Corporation; and (iv) the
benefits provided by Section 4.4 hereof through the effective date of such
termination. The payments referred to in clause (i) of this Section 5.4(b) shall
be made, at the option of the Executive, either in accordance with the
Corporation's standard payroll procedures for the period during which such
payments are required to be so paid or in one lump sum payment within 15 days
after the effective date of such termination. The payments referred to in
clauses (ii), (iii) and (iv) of this Section 5.4(b) shall be made by the
Corporation on the effective date of such termination.
5.5 Obligation to Mitigate. The Executive shall be obligated
----------------------
to make reasonable efforts to mitigate damages or the amount of any payments
provided for under Section 5.4(b) of this Agreement upon termination for any
reason of the Executive's employment by the Corporation by seeking other
employment, and the amount of any payments provided for under this Agreement
upon such termination shall be reduced by any compensation or other remuneration
earned by the Executive as a result of employment by another employer after the
date of termination or otherwise. In addition, the payments
6
<PAGE>
required pursuant to clause (v) of Section 5.4 terminate at such time as the
Executive becomes eligible for coverage under a group health plan sponsored by a
subsequent employer of the Executive. The Executive shall promptly provide the
Corporation with any payroll stubs, W-2 forms and other evidence of
compensation, remuneration and incentives, as the Corporation may reasonably
request.
6. Rights After a Change of Control.
--------------------------------
(a) Upon and following a Change of Control (as hereinafter
defined) the Executive shall be entitled to the following:
(i) The Executive shall be entitled to continued
use of the 1997 BMW 740i (the "Vehicle") currently leased by the Corporation for
the Executive during the remainder of the current lease term (expiring July
2001). The Corporation shall continue to pay the monthly lease payments and any
other amounts due under the lease as currently paid by the Corporation, but the
Executive's entitlement to participate under the Corporation's Executive Auto
Policy (referred to in Section 4.4(d) above) shall cease upon the Change of
Control. The Executive shall be responsible for maintaining and insuring the
Vehicle in good condition. The Executive shall be entitled to purchase the
Vehicle at any time in accordance with the provisions of the Corporation's
Executive Auto Policy No. 3000.
(ii) The Corporation shall transfer title and
ownership of that certain personal computer (Model IBM 760 ThinkPad and Docking
Station) currently used by the Executive to the Executive without requirement of
any payment.
(iii) The Corporation agrees (to the extent permitted
by applicable law) to continue the participation of the Executive and his
dependants (to the extent currently participating) in the Calmar Executive
Medical Plan (or any successor comparable plan adopted by the Corporation) until
the Executive reaches age 65, with the Corporation paying all premiums and other
costs attributable thereto, except that the Executive shall be responsible for
paying the premiums or other payments as generally required of senior executives
of the Corporation from time to time. In the event that the Corporation shall
fail to maintain the Calmar Executive Medical Plan or any successor comparable
plan, or that the Executive shall be deemed to be ineligible to continue
participation therein for himself and/or his dependants, the Corporation will
pay up to $400 per year to cover the cost of premiums for a similar plan until
the Executive reaches age 65.
(b) "Change of Control", as used herein, means: (i) the
acquisition in one or more transactions of beneficial ownership (within the
meaning of Rule 13d(3) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) by (y) any person or entity (other than FS Equity Partners
II, L.P., a California limited partnership
7
<PAGE>
("FSEP") and its affiliates) or (z) any group (as defined in Section 13(d) under
the Exchange Act) other than FSEP and its affiliates of any Voting Stock of the
Corporation such that, as a result of such acquisition, such person, entity or
group has the ability to elect, directly or indirectly, a majority of the
members of the Board of Directors of the Corporation, or (ii) the sale of all or
substantially all of the assets of the Corporation (including within such assets
the capital stock of any subsidiary) and its subsidiaries, in a single
transaction or a series of transactions, to any person or persons. "Voting
Stock" as used in this Section 6(b) shall mean all shares having general voting
power to vote in any election of the Board of Directors of the Corporation.
7. Noncompetition and Confidential Information.
-------------------------------------------
7.1 Noncompetition. As long as the Executive is employed by
--------------
the Corporation, the Executive shall not directly or indirectly (i) engage in;
(ii) own or control any interest in (except as a passive investor of not more
than five percent of the capital stock or publicly traded notes or debentures of
a publicly held company); or (iii) act as a director, officer, manager, employee
trustee, agent, partner, trade venturer, manager, participant, consultant or be
obligated to, or connected in any advisory, business or ownership capacity with
any Person (a "Competitor") that directly or indirectly (A) conducts any
activity in competition with the business of the Corporation, including the
production, promotional and marketing activities of the Corporation or engages
in the distribution of products or services which compete with the business of
the Corporation; (B) provides management, consulting, advisory or similar
services to any Person so engaged, or takes any action to finance, guarantee or
provide any similar assistance to any Person so engaged; or (C) influences or
attempts to influence any Person who is a contracting party with the Corporation
with respect to the action of the Corporation to terminate or amend any written
or oral agreement with the Corporation. For the purposes of this Agreement the
Executive shall be deemed to be indirectly engaging in any business which is a
Competitor if the Executive in any way provides, or facilitates the provision
of, funds, credit enhancements or other financial support to any Competitor
whether or not the Executive thereby obtains an interest in such Competitor.
7.2 Nondisclosure of Confidential Information. Except as
-----------------------------------------
directed by the Corporation in writing or as required by applicable law, the
Executive shall not at any time during or after the Employment Term, disclose
any confidential information of the Corporation or any of its Affiliates to any
Person whatsoever, examine or make copies of any reports or other documents,
papers, memoranda or extracts, nor utilize for his own benefit or for the
benefit of any other party any such confidential information, and the Executive
shall at all times exercise diligence to maintain any secret or proprietary
character of all confidential information.
8
<PAGE>
7.3 Survivability. The Executive acknowledges that his
-------------
obligations hereunder shall continue beyond the Employment Term with respect to
any confidential information which came into his possession during the
Employment Term, and these obligations shall be binding upon his assigns,
executors, administrators and other legal representatives.
7.4 Return of Confidential Information. Upon termination of
----------------------------------
the Executive's employment, the Executive shall promptly deliver to the
Corporation all drawings, blueprints, manuals, lists, documentation, tapes,
disks and other storage media, letters, notes, notebooks, reports, flow charts
and all other materials in his possession or under his control relating to the
Corporation's activities and constituting, making use of or referring to any
confidential information, as well as all other property of the Corporation or
its respective clients which is then in the Executive's possession or under the
Executive's control.
8. Miscellaneous.
-------------
8.1 Assignment. The services to be performed by the Executive
----------
hereunder are personal in nature, and the obligations to perform such services
and the conditions and covenants of this Agreement cannot be delegated by the
Executive. The Corporation may assign (provided that such assignment is with
full recourse), with absolute discretion, any or all of its rights, and
delegate, with absolute discretion, any or all of its obligations, under this
Agreement to any of its affiliates, successors and assigns.
8.2 Waiver and Amendment. No waiver of any term, provision or
--------------------
condition of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or be construed as a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement. This Agreement may be amended
only by a written agreement signed by the parties hereto.
8.3 Entire Agreement. This Agreement constitutes the entire
----------------
agreement of the parties hereto and supersedes and replaces any and all prior
agreements and understandings, whether oral or written, express or implied,
between the parties with respect to the subject matter herein.
8.4 Severability. Nothing in this Agreement shall be construed
------------
so as to require the commission of any act contrary to law, and wherever there
may be any conflict between any provision of this Agreement and any statute,
ordinance, regulation, or other Rule of law, the latter shall prevail, but in
such event the provision of this Agreement so affected shall be curtailed and
limited only to the extent necessary to bring it within the
9
<PAGE>
requirement of such law. In no event shall such illegality or invalidity affect
the remaining parts of this Agreement.
8.5 Captions. The captions of the several sections and
--------
paragraphs of this Agreement are used for convenience only and shall not be
considered or referred to in resolving questions of interpretation with respect
to this Agreement.
8.6 Applicable Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of California.
8.7 Notices. Except as otherwise provided herein, any notice
-------
or demand which, by the provisions hereof, is required or which may be given to
or served upon the parties hereto shall be in writing and, if by telegram,
telecopy or telex, shall be deemed to have been validly served, given or
delivered when sent, if by personal delivery, shall be deemed to have been
validly served, given or delivered upon actual delivery and, if mailed, shall be
deemed to have been validly served, given or delivered three business days after
deposit in the United States mails, by first class, as registered or certified
mail, with proper postage prepaid and addressed to the party or parties to be
notified, at the following addresses (or such other address(es) as a party may
designate for itself by like notice):
If to the Corporation:
Calmar Inc.
333 South Turnbull Canyon Road
City of Industry, California 91749
Attention: Mr. C. Richard Huebner
If to the Executive:
Mr. Richard J. Hartl
5168 Oakwood Avenue
La Canada, California 91001
In each case, with copies to:
Freeman Spogli & Co. Incorporated
11000 Santa Monica Blvd., Suite 1900
Los Angeles, California 90025
Attention: Mr. William M. Wardlaw
10
<PAGE>
Riordan & McKinzie
300 South Grand Avenue, 29th Floor
Los Angeles, California 90071
Attention: Richard J. Welch, Esq.
Alan Stamm, Esq.
1840 Century Park East, Floor 8
Los Angeles, California 90067
8.8 Withholding Taxes. Any and all payments required to be
-----------------
made to the Executive under this Agreement shall be subject to the deduction of
any and all applicable federal, state, social security and other taxes the
Corporation is required to withhold from its employees generally.
8.9 Arbitration. Any dispute or controversy arising under
-----------
or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three arbitrators in the State of
California, County of Los Angeles, in accordance with the rules of the American
Arbitration Association then in effect. The parties hereto expressly authorize
the arbitrators to award attorneys' fees to the prevailing party in the manner
and to the extent that such arbitrators deem appropriate. Judgment may be
entered on the arbitrator's award in any court having jurisdiction. To the
extent necessary to obtain any provisional relief of any dispute or controversy
arising under or in connection with this Agreement, the Corporation and the
Executive expressly consent to the jurisdiction of the State of California,
County of Los Angeles, and consent that any service of process therefor may be
made by personal service upon the Corporation or the Executive wherever each may
be located, or by certified or registered mail directed to the Corporation or
the Executive at each such party's last known address.
11
<PAGE>
8.10 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed a original, and all of which
together shall constitute a single, original Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by each of
the parties effective as of the day and year first above written.
THE CORPORATION:
CALMAR INC.,
a Delaware corporation
By:
----------------------------
Name:
-----------------------
Its:
------------------------
THE EXECUTIVE:
----------------------------------
RICHARD J. HARTL
12
<PAGE>
EXHIBIT 10.58
EXECUTION
CALMAR INC.
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as
of July 16, 1997, and entered into by and among Calmar Inc., a Delaware
corporation ("COMPANY"), and the financial institutions listed on the
signature pages hereof, and Credit Agricole Indosuez (formerly Banque Indosuez)
("INDOSUEZ"), as administrative agent (in such capacity, "ADMINISTRATIVE
AGENT"), and is made with reference to that certain Credit Agreement dated as
of August 18, 1995, as amended by that certain First Amendment to Credit
Agreement dated as of October 4, 1996 (as so amended, the "CREDIT AGREEMENT"),
by and among Company, the financial institutions listed on the signature pages
thereto, Goldman, Sachs & Co. as syndication agent, Bankers Trust Company, as
administrative agent (Bankers Trust Company resigned as administrative agent
effective on the close of business on August 18, 1995, and Mellon Bank, N.A.
("MELLON") became the successor administrative agent; Mellon resigned as
administrative agent effective on October 25, 1996, and Indosuez became the
successor administrative agent), and Mellon, as documentation and collateral
agent (Mellon resigned as documentation and collateral agent effective on
October 25, 1996, and Indosuez became the successor documentation and collateral
agent). Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement to permit
Company or a Wholly Owned Subsidiary of Company organized in Argentina and a
Wholly Owned Subsidiary of Company organized in Brazil to acquire certain assets
of Company's existing licensee in Argentina and Brazil and to make certain other
amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
<PAGE>
SECTION 1.
AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENT TO SECTION 1: DEFINITIONS.
-----------------------------------
Subsection 1.1 of the Credit Agreement is hereby amended by adding
thereto the following definition, which shall be inserted in proper alphabetical
order:
" `ARGENTINE ACQUISITION' means the acquisition of certain assets of
Magiplast S.A., a corporation organized under the laws of Argentina,
consisting of goodwill, customer lists, machinery, equipment, dies, molds,
patterns, vehicles, furniture, fixtures, computers and computer related
equipment and inventory located in Brazil and Argentina and distribution
rights in certain South American countries."
1.2 AMENDMENTS TO SECTION 7: COMPANY'S NEGATIVE COVENANTS.
-----------------------------------------------------
A. Subsection 7.3 of the Credit Agreement is hereby amended by (a)
deleting "and" at the end of clause (v) thereof; (b) deleting the "." at the
end of clause (vi) thereof and substituting therefor "; and"; and (c) adding a
new subsection 7.3(vii) at the end thereof as follows:
"(vii) Company may make and own Investments in a Wholly Owned
Subsidiary organized in Argentina and a Wholly Owned Subsidiary of Company
organized in Brazil for the purpose of consummating the Argentine
Acquisition in accordance with subsection 7.7(vii), provided that the
--------
amount of such Investments, together with the aggregate amount of all
Investments permitted pursuant to subsection 7.3(iv), shall not at any time
exceed the amount set forth in clause (b) of subsection 7.3(iv)."
B. Subsection 7.7 of the Credit Agreement is hereby amended by (a)
deleting "and" at the end of clause (v) thereof; (b) deleting the "." at the
end of clause (vi) thereof and substituting therefor "; and"; and (c) adding a
new subsection 7.7(vii) at the end thereof as follows:
"(vii) Company or a Wholly Owned Subsidiary of Company organized in
Argentina and a Wholly Owned Subsidiary of Company organized in Brazil may
make the Argentine Acquisition, provided that (a) at the time of such
--------
acquisition, and after giving effect thereto, no Potential Event of Default
or Event of Default shall have occurred and be continuing, (b) the total
consideration paid by Company and its Subsidiaries in connection with the
Argentine Acquisition and any related covenant not-to-compete shall not
exceed $4,500,000 and (c) if the Argentine Acquisition is made by a Wholly
Owned Subsidiary or Wholly Owned Subsidiaries of Company, Company shall
pledge all of the capital stock of each such Wholly
2
<PAGE>
Owned Subsidiary to Administrative Agent to secure the Obligations under
the Loan Documents (except to the extent, and only to the extent, such
pledge would result in Company incurring additional liabilities for
taxes)."
SECTION 2.
CONDITIONS TO EFFECTIVENESS
Notwithstanding anything to the contrary herein, this Amendment shall
become effective only upon the satisfaction of all of the following conditions
precedent (the date of satisfaction of such conditions being referred to herein
as the "SECOND AMENDMENT EFFECTIVE DATE"):
A. On or before the Second Amendment Effective Date, Company shall
deliver to Lenders (or to Indosuez, as Agent for Lenders with sufficient
originally executed copies, where appropriate, for each Lender and its counsel)
the following, each, unless otherwise noted, dated the Second Amendment
Effective Date:
(1) Certified copies of any amendments made to its Certificate of
Incorporation on or after October 25, 1996 (the "PRIOR DELIVERY DATE"),
certified as of the Second Amendment Effective Date by its corporate
secretary or an assistant secretary as being the only amendments thereto
since the Prior Delivery Date (or, if there have been no such amendments
since the Prior Delivery Date, a certificate of its corporate secretary or
an assistant secretary to that effect), together with a good standing
certificate from the Secretary of State of the State of Delaware, dated a
recent date prior to the Second Amendment Effective Date;
(2) Copies of any amendments made to its Bylaws on or after the Prior
Delivery Date, certified as of the Second Amendment Effective Date by its
corporate secretary or an assistant secretary as being the only amendments
thereto since the Prior Delivery Date (or, if there have been no such
amendments since the Prior Delivery Date, a certificate of its corporate
secretary or an assistant secretary to that effect);
(3) Resolutions of its Board of Directors approving and authorizing
the execution and delivery of this Amendment and the performance of the
Amended Agreement (as defined below), certified as of the Second Amendment
Effective Date by its corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment;
(4) Signature and incumbency certificates of its officers executing
this Amendment; and
(5) Executed copies of this Amendment.
3
<PAGE>
B. On or before the Second Amendment Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Indosuez, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Indosuez and such counsel, and Indosuez
and such counsel shall have received all such counterpart originals or certified
copies of such documents as Indosuez may reasonably request.
SECTION 3.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, Company represents and warrants
to each Lender that the following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate
power and authority to enter into this Amendment, to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement as
amended by this Amendment (as so amended, the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of Company.
C. NO CONFLICT. The execution and delivery by Company of this Amendment
and the performance by Company of the Amended Agreement do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency or government binding on Company
or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than Liens created under any
of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not require any registration with, consent or approval of or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body.
4
<PAGE>
E. BINDING OBLIGATION. This Amendment and the Amended Agreement have
been duly executed and delivered by Company and are the legally valid and
binding obligations of Company enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT.
The representations and warranties contained in Section 5 of the Credit
Agreement are and will be true, correct and complete in all material respects on
and as of the Second Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier dale.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
SECTION 4.
MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the Second Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and
each reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words or like import referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of Agent
or any Lender under, the Credit Agreement or any of the other Loan
Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees and
expenses as described in subsection 10.2 of the Credit Agreement incurred by
Agents and their
5
<PAGE>
respective counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Company.
C. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTIONS 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterpart and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment shall become effective upon the execution of
a counterpart hereof by Company and Requisite Lenders and receipt by Company and
Indosuez of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
CALMAR INC.
By: /s/ C. Richard Huebner
--------------------------------------------
Name: C. Richard Huebner
Title: Executive Vice President,
Chief Financial Officer and
Secretary
CREDIT AGRICOLE INDOSUEZ,
as a Lender and as Administrative Agent,
Collateral Agent and Documentation Agent
By: /s/
-------------------------------------------
Name:
Title:
By: /s/
-------------------------------------------
Name:
Title:
Notice Address:
Credit Agricole Indosuez
New York Branch
1211 Avenue of the Americas
New York, New York 10036-8701
Attention: Haynes Chidsey
S-1
<PAGE>
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO,
A Unit of The Chase Manhattan Bank,
as a Lender
By: /s/ James P. Ferguson
--------------------------------------------
Name: JAMES P. FERGUSON
Title: MANAGING DIRECTOR
INDOSUEZ CAPITAL FUNDING II,
LIMITED, as a Lender
BY: INDOSUEZ CAPITAL
LUXEMBOURG,
as Collateral Manager
By: /s/ Francoise Berthelot
---------------------------------------
Name: FRANCOISE BERTHELOT
Title: AUTHORIZED SIGNATORY
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, as a Lender
By: /s/ John B. Wheeler
--------------------------------------------
Name: JOHN B. WHEELER
Title: MANAGING DIRECTOR
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED, as a Lender
By: /s/ John B. Wheeler
--------------------------------------------
Name: JOHN B. WHEELER
Title: MANAGING DIRECTOR
S-2
<PAGE>
MERRILL LYNCH PRIME RATE
PORTFOLIO,
as a Lender
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment Advisor
By: /s/ Anthony R. Clemente
--------------------------------------
Name: ANTHONY R. CLEMENTE
Title: AUTHORIZED SIGNATORY
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC., as a Lender
By: /s/ Anthony R. Clemente
--------------------------------------------
Name: ANTHONY R. CLEMENTE
Title: AUTHORIZED SIGNATORY
PILGRIM AMERICA PRIME RATE TRUST,
as a Lender
By: /s/ Daniel A. Norman
--------------------------------------------
Name: DANIEL A. NORMAN
Title: SENIOR VICE PRESIDENT
PRIME INCOME TRUST,
as a Lender
By:
--------------------------------------------
Name:
Title:
S-3
<PAGE>
ML CBO IV (Cayman) LTD
By Protective Asset Management, L.L.C.
As Collateral Manager
By: /s/ James Dondero
--------------------------------------------
Name: JAMES DONDERO CPA, CFA
Title: PRESIDENT, PROTECTIVE ASSET
MANAGEMENT, L.L.C.
SENIOR DEBT PORTFOLIO,
as a Lender
BY: BOSTON MANAGEMENT AND RESEARCH, as
Investment Advisor
By:
---------------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST,
as a Lender
By: /s/ Jeffrey W. Maillett
-------------------------------------------
Name: JEFFREY W. MAILLETT
Title: SENIOR VICE PRESIDENT - PORTFOLIO
MANAGER
S-4
<PAGE>
EXHIBIT 10.59
EXECUTION
---------
CALMAR INC.
THIRD AMENDMENT
TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of
January 20, 1998, and entered into by and among Calmar Inc., a Delaware
corporation ("COMPANY"), and the financial institutions listed on the signature
pages hereof ("LENDERS"), and is made with reference to that certain Credit
Agreement dated as of August 18, 1995, as amended to the date hereof (as so
amended, the "CREDIT AGREEMENT"), by and among Company, Lenders, Goldman, Sachs
& Co., as syndication agent, and Credit Agricole Indosuez, as administrative
agent (in such capacity, "ADMINISTRATIVE AGENT"), documentation and collateral
agent. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement in order
to increase the amount of the AXELs Series A by $5,000,000:
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1.
AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: DEFINITIONS.
------------------------------------
A. Subsection 1.1 of the Credit Agreement is hereby amended by deleting
the definition of "AXEL Series A Notes" set forth therein in its entirety and
substituting therefor the following:
"AXEL SERIES A NOTES" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E(i)(a) on the Closing Date, (ii) the promissory
note of Company issued to Goldman Sachs Credit Partners L.P. on the Third
Amendment Effective Date to evidence the additional AXELs Series A made by
Goldman Sachs Credit Partners L.P. on the Third Amendment Effective Date,
and (iii) any promissory notes issued by Company pursuant to the last
sentence of subsection 10.1B(i) in connection with assignments of the AXEL
Series A Commitments or AXELs Series A of any Lenders, in each case
substantially in the form of Exhibit IV-A annexed hereto, as they may be
------------
amended, supplemented or otherwise modified from time to time.
<PAGE>
B. Subsection 1.1 of the Credit Agreement is hereby further amended by
adding thereto the following definitions, which shall be inserted in proper
alphabetical order:
"THIRD AMENDMENT" means that certain Third Amendment to Credit
Agreement dated as of January __, 1998 by and among Company and Lenders.
"THIRD AMENDMENT EFFECTIVE DATE" has the meaning assigned to that term
in the Third Amendment.
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.
-------------------------------------------------------------------
A. Subsection 2.1A(i) of the Credit Agreement is hereby amended by
deleting it in its entirety and substituting therefor the following:
"(i) AXELs Series A. Each Lender having an AXEL Series A Commitment
--------------
as of the Refinancing Date, as set forth on Schedule 2.1 annexed hereto as
------------
of the Refinancing Date, has loaned to Company on the Refinancing Date an
amount equal to its Pro Rata Share, as of the Refinancing Date, of the
aggregate $60,000,000 amount of the AXEL Series A Commitments as in effect
on the Refinancing Date, the proceeds of which AXELs Series A have been
used for the purposes identified in subsection 2.5A. In addition, Goldman
Sachs Credit Partners L.P. hereby agrees to lend to Company on the Third
Amendment Effective Date, as additional AXELs Series A, an amount equal to
$5,000,000, the proceeds of which additional AXELs Series A shall be used
for the purposes identified in subsection 2.5A. The amount of each
Lender's AXELs Series A as of the Third Amendment Effective Date, and each
Lender's Pro Rata Share with respect to the AXELs Series A (in each case
after giving effect to the $5,000,000 of additional AXELs Series A to be
made on the Third Amendment Effective Date), is set forth opposite its name
on Schedule 2.1 annexed hereto as in effect on the Third Amendment
------------
Effective Date (which Schedule 2.1 also reflects the AXELs Series B and the
------------
Revolving Loan Commitments of Lenders, and the corresponding Pro Rata
Shares of Lenders with respect thereto, as of the Third Amendment Effective
Date). Company has made one borrowing in the amount of $60,000,000 under
the AXEL Series A Commitments on the Refinancing Date, and Company may make
only one additional borrowing of AXELs Series A in the amount of $5,000,000
on the Third Amendment Effective Date. Amounts borrowed under this
subsection 2.1A(i) and subsequently repaid or prepaid may not be
reborrowed."
B. Subsection 2.4A(i) of the Credit Agreement is hereby amended by
deleting it in its entirety and substituting therefor the following:
"(i) Scheduled Payments of AXELs Series A. Company shall make
------------------------------------
principal payments on the AXELs Series A in installments on the dates and
in the amounts set forth below (it being understood that the following
table gives effect to any principal payments in respect of the AXELs Series
A prior to the Third Amendment Effective Date):
2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED
REPAYMENT OF
DATE AXELS SERIES A
--------------------------------------
<S> <C>
March 15, 1998 $ 162,787.72
June 15, 1998 $ 162,787.72
September 15, 1998 $ 162,787.72
December 15, 1998 $ 162,787.72
March 15, 1999 $2,591,037.94
June 15, 1999 $2,591,037.94
September 15, 1999 $2,591,037.94
December 15, 1999 $2,591,037.94
March 15, 2000 $3,133,663.68
June 15, 2000 $3,133,663.68
September 15, 2000 $3,133,663.68
December 15, 2000 $3,133,663.68
March 15, 2001 $3,947,602.30
June 15, 2001 $3,947,602.30
September 15, 2001 $3,947,602.30
December 15, 2001 $3,947,602.30
March 15, 2002 $4,490,228.05
June 15, 2002 $4,490,228.05
September 15, 2002 $4,490,228.05
December 15, 2002 $4,490,228.05
March 15, 2003 $2,116,240.41
June 15, 2003 $2,116,240.41
September 15, 2003 $2,116,240.42
</TABLE>
; provided that the scheduled installments of principal of the AXELs Series
--------
A set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the AXELs Series A in accordance with subsection
2.4B(iv); and provided, further that the AXELs Series A and all other
-------- -------
amounts owed hereunder with respect to the AXELs Series A shall be paid in
full no later than September 15,
3
<PAGE>
2003, and the final installment payable by Company in respect of the AXELs
Series A on such date shall be in an amount, if such amount is different
from that specified above, sufficient to repay all amounts owing by Company
under this Agreement with respect to the AXELs Series A."
1.3 SUBSTITUTION OF SCHEDULE.
------------------------
(i) Schedule 2.1 to the Credit Agreement is hereby amended by deleting it
------------
in its entirety and substituting therefor a new Schedule 2.1 in the form of
------------
Annex A to this Amendment.
- -------
(ii) Schedule 5.14 to the Credit Agreement is hereby amended by deleting it
-------------
in its entirety and substituting therefor a new Schedule 5.14 in the form of
-------------
Annex B to this Amendment.
- -------
1.4 NEW LENDER.
----------
Goldman Sachs Credit Partners L.P. is hereby added as a Lender to the
Credit Agreement.
SECTION 2.
CONDITIONS TO EFFECTIVENESS
Notwithstanding anything to the contrary herein, Section 1 of this
Amendment shall become effective only upon the satisfaction of all of the
following conditions precedent (the date of satisfaction of such conditions
being referred to herein as the "THIRD AMENDMENT EFFECTIVE DATE"):
A. On or before the Third Amendment Effective Date, Company shall deliver
to Lenders (or to Administrative Agent for Lenders with sufficient originally
executed copies, where appropriate, for each Lender and its counsel) the
following, each, unless otherwise noted, dated the Third Amendment Effective
Date:
(1) Certified copies of any amendments made to its Certificate of
Incorporation on or after October 25, 1996 (the "PRIOR DELIVERY DATE"),
certified as of the Third Amendment Effective Date by its corporate
secretary or an assistant secretary as being the only amendments thereto
since the Prior Delivery Date (or, if there have been no such amendments
since the Prior Delivery Date, a certificate of its corporate secretary or
an assistant secretary to that effect), together with a good standing
certificate from the Secretary of State of the State of Delaware, dated a
recent date prior to the Third Amendment Effective Date;
(2) Copies of any amendments made to its Bylaws on or after the Prior
Delivery Date, certified as of the Third Amendment Effective Date by its
corporate secretary or an assistant secretary as being the only amendments
thereto since the Prior Delivery Date (or, if there have been no such
amendments since the Prior
4
<PAGE>
Delivery Date, a certificate of its corporate secretary or an assistant
secretary to that effect);
(3) Resolutions of its Board of Directors approving and authorizing
the execution and delivery of this Amendment, the performance of the
Amendment and the Amended Agreement (as defined below), and the issuance
and payment of the Additional AXEL Series A Note (as defined below),
certified as of the Third Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment;
(4) Signature and incumbency certificates of its officers executing
this Amendment and the Additional AXEL Series A Note;
(5) Executed copies of this Amendment; and
(6) An executed AXEL Series A Note, payable to Goldman Sachs Credit
Partners L.P. in the principal amount of $5,000,000 (the "ADDITIONAL AXEL
SERIES A NOTE").
B. OPINION OF COMPANY'S COUNSEL. Lenders and their respective counsel
shall have received originally executed copies of one or more favorable written
opinions of Riordan & McKinzie, counsel for Company, in form and substance
reasonably satisfactory to Goldman Sachs Credit Partners L.P. and its counsel
and to Administrative Agent, dated as of the Third Amendment Effective Date and
setting forth substantially the matters in the opinions designated in Exhibit I
---------
annexed hereto and as to such other matters as Goldman Sachs Credit Partners
L.P. and Administrative Agent acting on behalf of Lenders may reasonably
request.
C. On or before the Third Amendment Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel
shall be satisfactory in form and substance to Administrative Agent and such
counsel, and Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
SECTION 3.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, Company represents and warrants
to each Lender that the following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate
power and authority to enter into this Amendment, to carry out the transactions
contemplated by,
5
<PAGE>
and perform its obligations under, the Credit Agreement as amended by this
Amendment (as so amended, the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of Company.
C. NO CONFLICT. The execution and delivery by Company of this Amendment
and the performance by Company of the Amended Agreement do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency or government binding on Company
or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than Liens created under any
of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not require any registration with, consent or approval of or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement have
been duly executed and delivered by Company and are the legally valid and
binding obligations of Company enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT.
After giving full effect to this Amendment and any actions taken pursuant
hereto, the representations and warranties contained in Section 5 of the Credit
Agreement are and will be true, correct and complete in all material respects on
and as of the Third Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
6
<PAGE>
SECTION 4.
MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the Third Amendment Effective Date, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words or like import referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of Agent
or any Lender under, the Credit Agreement or any of the other Loan
Documents.
B. The parties hereto agree and acknowledge that the additional borrowing
under the AXEL Series A on the Third Amendment Effective Date is included in (i)
the definition of "Obligations" under the Credit Agreement and (ii) the
definition of "Secured Obligations" under each of the Collateral Documents, and
as such is secured by the Collateral Documents.
C. FEES AND EXPENSES. Company acknowledges that all costs, fees and
expenses as described in subsection 10.2 of the Credit Agreement incurred by
Agents and their respective counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
D. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
E. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGA TIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTIONS 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
F. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterpart and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts
7
<PAGE>
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Amendment (other than the provisions of Section 1 hereof, the
effectiveness of which is governed by Section 2 hereof) shall become effective
upon the execution of a counterpart hereof by Company and Lenders and receipt by
Company and Administrative Agent of written or telephonic notification of such
execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
CALMAR INC.
By: /s/ C. R. Huebner
--------------------------------------------
Name:
Title:
CREDIT AGRICOLE INDOSUEZ,
as a Lender and as Administrative Agent,
Collateral Agent and Documentation Agent
By: /s/ Francoise Berthelot
--------------------------------------------
Name: FRANCOISE BERTHELOT
Title: VICE PRESIDENT
By: /s/ Patrick Reidy
--------------------------------------------
Name: PATRICK REIDY
Title: CHIEF CREDIT OFFICER
Notice Address:
Credit Agricole Indosuez
New York Branch
1211 Avenue of the Americas
New York, New York 10036-8701
Attention: Andrew Brady
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO,
A Unit of The Chase Manhattan Bank,
as a Lender
By:
--------------------------------------------
Name:
Title:
S-1
<PAGE>
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO,
A Unit of The Chase Manhattan Bank,
as a Lender
By: /s/ James P. Ferguson
--------------------------------------------
Name: JAMES P. FERGUSON
Title: MANAGING DIRECTOR
INDOSUEZ CAPITAL FUNDING II,
LIMITED, as a Lender
BY: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By: /s/ Francoise Berthelot
-------------------------------------
Name: FRANCOISE BERTHELOT
Title: AUTHORIZED SIGNATORY
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, as a Lender
By: /s/ John B. Wheeler
--------------------------------------------
Name: JOHN B. WHEELER
Title: MANAGING DIRECTOR
MASS MUTUAL CORPORATE VALUE
PARTNERS LIMITED, as a Lender
By: /s/ John B. Wheeler
--------------------------------------------
Name: JOHN B. WHEELER
Title: MANAGING DIRECTOR
S-2
<PAGE>
MERRILL LYNCH PRIME RATE
PORTFOLIO,
as a Lender
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment
Advisor
By: /s/ Anthony Clemente
---------------------------------------
Name: ANTHONY CLEMENTE
Title: AUTHORIZED SIGNATORY
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC., AS A LENDER
By: /s/ Anthony Clemente
--------------------------------------------
Name: ANTHONY CLEMENTE
Title: AUTHORIZED SIGNATORY
PILGRIM AMERICA PRIME RATE TRUST,
as a Lender
By: /s/ Daniel A. Norman
--------------------------------------------
Name: DANIEL A. NORMAN
Title: SENIOR VICE PRESIDENT
PRIME INCOME TRUST,
as a Lender
By: /s/ Rafael Scolari
--------------------------------------------
Name: RAFAEL SCOLARI
Title: VICE PRESIDENT
S-3
<PAGE>
MLCBO IV (CAYMAN) LTD.
as a Lender
BY: PROTECTIVE ASSET MANAGEMENT
COMPANY
as Collateral Manager
By: /s/ James Dondero CFA
---------------------------------------
Name: JAMES DONDERO CFA
Title: PRESIDENT
PROTECTIVE ASSET MANAGEMENT
COMPANY
SENIOR DEBT PORTFOLIO,
as a Lender
BY: BOSTON MANAGEMENT AND RESEARCH,
as Investment Advisor
By: /s/ Scott H. Page
---------------------------------------
Name: SCOTT H. PAGE
Title: VICE PRESIDENT
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST,
as a Lender
By: /s/ Jeffrey W. Maillet
--------------------------------------------
Name: JEFFREY W. MAILLET
Title: SENIOR VICE PRESIDENT & DIRECTOR
GOLDMAN SACHS CREDIT PARTNERS L.P.
as a Lender
By: /s/
--------------------------------------------
Name:
Title: AUTHORIZED SIGNATORY
S-4
<PAGE>
ANNEX A
SCHEDULE 2.1
------------
<TABLE>
<CAPTION>
PRO RATA SHARE OF
NAME OF LENDER AXELS SERIES A AXELS SERIES A
- -------------------------------- -------------- ------------------
<S> <C> <C>
Octagon Credit Investors $ 8,378,571.25 13.16%
Indosuez Capital Funding II,
Limited $ 4,747,857.27 7.46%
Massachusetts Mutual Life
Insurance Company $ 3,909,609.00 6.14%
Mass Mutual Corporate Value
Partners Limited $ 1,955,391.00 3.07%
Merrill Lynch Prime Rate
Portfolio $ 5,306,429.04 8.34%
Merrill Lynch Senior Floating
Rate Fund $10,333,570.87 16.23%
Pilgrim America Prime Rate
Trust $ 2,792,857.29 4.39%
Prime Income Trust $ 5,865,000.00 9.21%
MLCBO IV (Cayman) Ltd.
(Protective Life Insurance
Company) $ 2,513,571.55 3.95%
Senior Debt Portfolio $ 5,865,000.00 9.21%
Van Kampen American Capital
Prime Rate Income Trust $ 6,982,142.73 10.97%
Goldman Sachs Credit
Partners L.P. $ 5,000,000.00 7.86%
<CAPTION>
PRO RATA SHARE OF
NAME OF LENDER AXELS SERIES B AXELS SERIES B
- -------------- --------------- -----------------
<S> <C> <C>
Octagon Credit Investors $6,283,928.44 14.3%
Indosuez Capital Funding II,
Limited $3,560,892.72 8.1%
Massachusetts Mutual Life
Insurance Company $2,932,206.75 6.7%
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C> <C>
Mass Mutual Corporate Value
Partners Limited $1,466,543.25 3.3%
Merrill Lynch Prime Rate
Portfolio $3,979,821.28 9.0%
Merrill Lynch Senior Floating
Rate Fund $7,750,179.13 17.6%
Pilgrim America Prime Rate
Trust $2,094,642.72 4.8%
Prime Income Trust $4,398,750.00 10.0%
MLCBO IV (Cayman) Ltd.
(Protective Life Insurance
Company) $1,885,178.44 4.3%
Senior Debt Portfolio $4,398,750.00 10.0%
Van Kampen American Capital
Prime Rate Income Trust $5,236,607.28 11.9%
<CAPTION>
PRO RATA SHARE OF
NAME OF LENDER REVOLVING LOAN COMMITMENT REVOLVING LOAN COMMITMENTS
- -------------- ------------------------- --------------------------
<S> <C> <C>
Credit Agricole Indosuez $12,000,000 100%
</TABLE>
A-2
<PAGE>
EXHIBIT I
[FORM OF OPINION OF COUNSEL TO COMPANY]
[Effective Date of Amendment]
Credit Agricole Indosuez
[Address]
and
The Lenders Listed on
Schedule A Hereto
Re: Third Amendment dated as of January __, 1997 to Credit Agreement
dated as of August 18, 1995 among Calmar Inc., the Lenders Party
Thereto, Goldman Sachs & Co., as Syndication Agent, and Credit
Agricole Indosuez, as Administrative Agent, Documentation Agent
-------------------
and Collateral Agent
--------------------
Ladies and Gentlemen:
We have acted as counsel to Calmar Inc., a Delaware corporation
("COMPANY"), in connection with the Third Amendment to Credit Agreement dated as
of January __, 1998 (the "AMENDMENT") among Company and the financial
institutions listed on the signature pages thereof as Lenders ("LENDERS"), which
amends that certain Credit Agreement dated as of August 18, 1995, as previously
amended, among Company, Lenders, Goldman Sachs & Co., as Syndication Agent, and
Credit Agricole Indosuez, as Administrative Agent (in such capacity,
"ADMINISTRATIVE AGENT"), Documentation Agent and Collateral Agent (the "CREDIT
AGREEMENT"). This opinion is rendered to you in compliance with Section 2B of
the Amendment. The Credit Agreement, as amended by the Amendment, is
hereinafter referred to as the "AMENDED CREDIT AGREEMENT". Capitalized terms
used herein without definition have the same meanings as in the Amended Credit
Agreement.
In our capacity as such counsel, we have examined originals, or copies
identified to our satisfaction as being true copies, of such records, documents
or other instruments as in our judgment are necessary or appropriate to enable
us to render the opinions expressed below. These records, documents and
instruments included the following:
(a) The Certificate of Incorporation of Company, as amended to date;
I-1
<PAGE>
(b) The Bylaws of Company, as amended to date;
(c) All records of proceedings and actions of the Board of Directors
of Company relating to the Amendment, the Amended Credit Agreement and the
AXEL Series A Note being delivered to Goldman Sachs Credit Partners L.P. on
the date hereof (the "ADDITIONAL AXEL SERIES A NOTE") and the transactions
contemplated thereby;
(d) The Credit Agreement;
(e) The Amendment; and
(f) The Additional AXEL Series A Note.
We have been furnished with, and with Lenders' consent have relied
upon, certificates of officers of Company with respect to certain factual
matters, copies of which have been delivered to Lenders. In addition, we have
obtained and relied upon such certificates and assurances from public officials
as we have deemed necessary, copies of which have been delivered to Lenders. In
all such examinations, we have assumed the genuineness of all signatures on
original and certified documents, and the conformity to original or certified
documents of all documents submitted to us as conformed or photostatic copies.
We have investigated such questions of law for the purpose of
rendering this opinion as we have deemed necessary. We are opining herein as to
the effect on the subject transactions of only present United States Federal
law; the General Corporation Law of the State of Delaware; and the laws of the
State of New York. As to matters governed by the laws of the State of New York,
we are relying exclusively on the opinion of Richards & O'Neil, LLP of even date
herewith, subject to all of the assumptions, qualifications, limitations and
exceptions set forth in such opinion, a copy of which is attached hereto as
Exhibit A. We are not opinion on, and we assume no responsibility as to, the
- ---------
applicability to or effect on any of the matters covered herein of the laws of
any other jurisdiction. In addition, except as expressly covered in this
opinion, we are not expressing any opinion as to the effect of compliance by
Lenders with any state or federal laws or regulations applicable to the
transactions because of the nature of any of their businesses. We express no
opinion with respect to state securities or "blue sky" laws or state or federal
antifraud, antitrust or environmental laws.
On the basis of the foregoing, and in reliance thereon, and subject to the
limitations, qualifications and exceptions set forth below, we are of the
opinion that:
1. Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted.
2. Company has all requisite corporate power and authority to
execute and deliver the Amendment, to carry out the transactions contemplated
by, and perform its
I-2
<PAGE>
obligations under, the Amendment and the Amended Credit Agreement, and to issue
and pay the Additional AXEL Series A Note.
3. The execution and delivery of the Amendment, the performance of
the Amendment and the Amended Credit Agreement and the issuance, delivery and
payment of the Additional AXEL Series A Note have been duly authorized by all
necessary corporate action on the part of Company. The Amendment and the
Additional AXEL Series A Note have been duly executed and delivered by Company
and the Amendment, the Amended Credit Agreement and the Additional AXEL Series A
Note constitute the legally valid and binding obligations of Company,
enforceable against Company in accordance with their respective terms.
4. Neither the execution and delivery of the Amendment nor the
issuance and payment of the Additional AXEL Series A Note by Company nor the
consummation of the transactions contemplated by the Amendment nor compliance
with the terms and conditions of the Amended Credit Agreement by Company (A)
conflicts with, results in a breach or violation of, or constitutes a default
under, any of the terms, conditions or provisions of (x) the Certificate of
Incorporation or Bylaws of Company or (y) any material term of any material
agreement, instrument, order, writ, judgment or decree known to us after due
inquiry to which Company is a party or by which any of its respective properties
or assets are bound, or (z) any present Federal or New York statute, rule or
regulation or General Corporation Law of the State of Delaware binding on
Company or (B) results in the creation of any Lien upon any of the properties or
assets of Company under any agreement or order referred to in clause (y) above
(other than Liens created pursuant to the Collateral Documents); provided,
--------
however, that we express no opinion as to whether or not the execution, delivery
or performance by Company of the Amendment or the Additional AXEL Series A Note
will constitute a violation of or a default under any covenant, restriction or
provision with respect to financial ratios or tests or any aspect of the
financial condition or results of operations of Company.
5. No governmental consents, approvals, authorizations,
registrations, declarations or filings with any federal, Delaware corporation,
California State or New York state governmental authority are required by
Company in connection with the execution and delivery by Company of the
Amendment, the performance by Company of the Amendment or the Amended Agreement,
or the issuance, delivery and payment of the Additional AXEL Series A Note by
Company.
6. The making of the Loans and the application of the proceeds
thereof as provided in the Amended Credit Agreement do not violate Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System.
Our opinion in paragraph 3 above as to the validity, binding effect
and enforceability of the Amendment, the Amended Credit Agreement, and the
Additional AXEL Series A Note is subject to all applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally. In addition, we advise you that the
enforceability of the Amendment, the Amended Credit Agreement and the Additional
AXEL Series A Note is subject to (i) the effect of general
I-3
<PAGE>
principles of equity including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law, and (ii) the qualification that the enforcement
of certain indemnification or waiver provisions may be limited by law or public
policy considerations and that certain remedial and exculpatory provisions
(including set-off rights) may be unenforceable but the remedies and protections
provided in such documents, taken as a whole, should not be inadequate for the
practical realization of the benefits intended to be afforded thereby.
Our opinions in paragraph 4 above as to the compliance with certain
statutes, rules and regulations and as to the lack of any required consents or
approvals of, authorizations by, or registrations, declarations or filings with
certain governmental authorities are based upon a review of those statutes,
rules and regulations which, in our experience, are normally applicable to
transactions of the type contemplated by the Amendment and the Amended Credit
Agreement.
To the extent that the obligations of Company may be dependent upon
such matters, we have assumed for purposes of this opinion, other than with
respect to Company, that each additional party to the agreements and contracts
referred to herein is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation; that each such other party
has the requisite corporate or other organizational power and authority to
perform its obligations under such agreements and contracts, as applicable; and
that such agreements and contracts have been duly authorized, executed and
delivered by, and each of them constitutes the legal, valid and binding
obligation of, such other parties, as applicable, enforceable against such other
parties in accordance with their respective terms. Except as expressly covered
in this opinion, we are not expressing any opinion as to the effect of
compliance by any Lender with any state or federal laws or regulations
applicable to the transactions because of the nature of any of its businesses.
This opinion is rendered only to Administrative Agent and Lenders and
is solely for their benefit in connection with the above transactions. This
opinion may not be relied upon by Administrative Agent or Lenders for any other
purpose, or quoted to or relied upon by any other person, firm or corporation
for any purpose without our prior written consent.
Very truly yours,
I-4
<PAGE>
CALMAR INC. AND SUBSIDIARIES
EXHIBIT 12.1
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes, extraordinary item,
and cumulative effect of accounting change $(18,977) $(8,174) $(5,349) $(3,612) $ 1,631
-------- ------- ------- ------- -------
Interest expense 28,277 27,788 27,265 24,487 24,943
Amortization of debt expense 1,170 1,274 1,146 955 1,037
Portion of rental expense representing interest 169 146 114 118 145
-------- ------- ------- ------- -------
Total fixed charges 29,616 29,208 28,525 25,560 26,125
-------- ------- ------- ------- -------
Total earnings before fixed charges $ 10,639 $21,034 $23,176 $21,948 $27,756
======== ======= ======= ======= =======
Ratio of earnings to fixed charges - - - - 1.06:1
======== ======= ======= ======= =======
Surplus (deficiency) of earnings to cover fixed charges $(18,977) $(8,174) $(5,349) $(3,612) $ 1,631
======== ======= ======= ======= =======
</TABLE>
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Exhibit 12.2
Computation of Ratio of Consolidated Long-Term Debt
to Consolidated Stockholders' Deficiency
(dollars in thousands)
<TABLE>
<CAPTION>
Actual
12/31/97
--------
<S> <C>
Consolidated long-term debt $238,571
--------
Consolidated stockholders' deficiency ($32,241)
---------
Ratio of long-term debt to stockholders' deficiency (7.40): 1
---------
</TABLE>
<PAGE>
EXHIBIT 21.1
------------
SUBSIDIARIES OF COMPANY
Name and jurisdiction of incorporation or organization of each subsidiary:
<TABLE>
<S> <C>
Calmar-Albert Belgium S.A............................... Belgium
Calmar-Albert Italia S.r.l.............................. Italy
Calmar-Albert France S.A.R.L............................ France
Calmar-Albert GmbH...................................... Germany
Calmar-Albert (U.K.) Ltd................................ England
Calmar International, Inc............................... Virgin Islands
Calmar Plastics Limited................................. Canada
Monturas, S.A........................................... Spain
Calmar Mercosur, S.A.................................... Argentina
Calmar do Brasil LTDA................................... Brazil
Calmar Wuxi Dispensing Systems Ltd...................... China
</TABLE>
All Subsidiaries are foreign subsidiaries.
The Company owns 100% of all Subsidiaries except as follows:
1. Monturas, S.A., in which one share is owned by C. Richard Huebner.
2. Calmar-Albert GmbH, of which the Company owns 60.80%, Calmar-Albert (U.K.)
Ltd. owns 17.58%, and Calmar Plastics Limited owns 21.62%.
3. Calmar-Albert Belgium S.A., of which the Company owns 95.04% and Calmar-
Albert (U.K.) Ltd. owns 4.96%.
4. Calmar-Albert Italia S.r.l., of which the Company owns 99.00% and Calmar-
Albert (U.K.) Ltd. owns 1.00%.
5. Calmar do Brasil LTDA, of which the Company owns 99.00% and Monturas, S.A.
owns 1.00%.
6. Calmar Mercosur, S.A., of which the Company owns 99.00% and C. Richard
Huebner owns 1.00%.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,218
<SECURITIES> 0
<RECEIVABLES> 42,344
<ALLOWANCES> 994
<INVENTORY> 24,767
<CURRENT-ASSETS> 74,652
<PP&E> 243,879
<DEPRECIATION> 138,040
<TOTAL-ASSETS> 284,641
<CURRENT-LIABILITIES> 46,983
<BONDS> 120,000
0
14
<COMMON> 31
<OTHER-SE> (32,286)
<TOTAL-LIABILITY-AND-EQUITY> 284,641
<SALES> 230,245
<TOTAL-REVENUES> 230,245
<CGS> 166,950
<TOTAL-COSTS> 204,906
<OTHER-EXPENSES> (1,235)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,943
<INCOME-PRETAX> 1,631
<INCOME-TAX> (66)
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<CHANGES> 0
<NET-INCOME> 1,697
<EPS-PRIMARY> (5.33)
<EPS-DILUTED> (5.33)
</TABLE>