<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No. 0-3134
March 31, 1995
PARK-OHIO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
OHIO 34-6520107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 TOWER EAST 44122
20600 CHAGRIN BOULEVARD (Zip Code)
CLEVELAND, OHIO
(Address of principal executive offices)
Registrant's telephone number, including 216/991-9700
area code
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 twelve 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
--- ---
Number of shares outstanding of registrant's Common Stock, par value $1.00 per
share, as of April 30, 1995: 10,965,151 including 562,500 shares held in escrow.
The Exhibit Index is located on page 12.
1
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INDEX
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated condensed balance sheets - March 31, 1995 and December
31, 1994
Consolidated condensed statements of income - Three months ended
March 31, 1995 and 1994
Consolidated condensed statements of cash flows - Three months ended
March 31, 1995 and 1994
Notes to consolidated condensed financial statements - March 31, 1995
Independent accountants' review report
Item 2. Management's Discussion
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
2
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PART I
FINANCIAL INFORMATION
3
<PAGE> 4
CONSOLIDATED CONDENSED BALANCE SHEETS
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31
1995 1994
----------- -----------
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,534 $ 2,172
Accounts receivable, less allowances for
doubtful accounts of $794,000 at March 31,
1995 and $394,000 at December 31, 1994 68,438 27,165
Inventories 65,234 25,651
Prepaid expenses 2,259 1,845
--------- ---------
Total Current Assets 137,465 56,833
Property, Plant and Equipment 123,145 111,881
Less accumulated depreciation 62,569 61,246
--------- ---------
60,576 50,635
Excess Purchase Price Over Net Assets Acquired, net 54,651 16,727
Other Assets 23,774 10,420
--------- ---------
$ 276,466 $ 134,615
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 40,284 $ 15,353
Accrued expenses 20,126 8,884
Current portion of long-term liabilities 2,560 2,469
--------- ---------
Total Current Liabilities 62,970 26,706
Long-Term Liabilities, less current portion
Long-term debt 75,536 9,513
Other postretirement benefits 33,454 27,800
Other 6,611 1,646
--------- ---------
115,601 38,959
Convertible Senior Subordinated Debentures 22,235 22,235
Shareholders' Equity
Capital stock, par value $1 a share:
Serial Preferred Stock -0- -0-
Common Stock 10,403 8,192
Additional paid-in capital 49,183 26,189
Retained earnings 16,074 12,334
--------- ---------
75,660 46,715
--------- ---------
$ 276,466 $ 134,615
========= =========
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to consolidated condensed financial statements.
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
(In Thousands - Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------
1995 1994
---- ----
<S> <C> <C>
Net sales $62,810 $52,288
Cost and expenses:
Cost of products sold 52,327 42,750
Selling, general and administrative expenses 6,042 5,919
Interest expense 651 428
------- -------
59,020 49,097
------- -------
Income before Federal Income Taxes 3,790 3,191
Federal income taxes 50 53
------- -------
Net Income $ 3,740 $ 3,138
======= =======
Net income per common share $ .43 $ .40
======= =======
Shares used in calculation 8,731 7,844
</TABLE>
See notes to consolidated condensed financial statements.
5
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CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS (UNAUDITED)
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,740 $ 3,138
Adjustments to reconcile net income to net
cash provided (used):
Depreciation and amortization 1,981 1,587
Changes in noncurrent assets and liabilities (166) (338)
Changes in operating assets and liabilities (9,345) (2,926)
-------- --------
Net Cash Provided (Used) by Operations (3,790) 1,461
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net (2,377) (1,563)
Cost of acquisitions, net of cash acquired (33,394) -0-
-------- --------
Net Cash Used by Financing Activities (35,771) (1,563)
FINANCING ACTIVITIES
Proceeds from bank arrangements for acquisitions 33,894 -0-
Proceeds from bank arrangements for operations 5,075 2,150
Payments on bank borrowings (46) (481)
-------- --------
Net Cash Provided from Financing Activities 38,923 1,669
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (638) 1,567
Cash and Cash Equivalents at Beginning
of Period 2,172 133
-------- --------
Cash and Cash Equivalents at End of
Period $ 1,534 $ 1,700
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
March 31, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 1995
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
NOTE B - ACQUISITION OF RB&W CORPORATION
On March 31, 1995, the Company acquired all of the shares of RB&W Corporation
in an exchange of 2,023,000 shares of the Company's common stock ($11.50 market
value as of March 31, 1995) and cash of $30,968,000. The transaction has been
accounted for as a purchase.
The following is the current value of the net assets acquired as of March 31,
1995:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Cash $ 510
Accounts receivable 29,551
Inventories 36,731
Property, plant and equipment 5,591
Excess purchase price over net assets acquired 35,200
Other assets 15,620
Notes payable (28,739)
Trade accounts payable (21,524)
Accrued expenses (8,398)
Long-term liabilities (10,300)
--------------
Total Cost of Acquisition $ 54,242
==============
</TABLE>
The following unaudited pro forma results of operations assume the
acquisition occurred on January 1, 1994. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
the results of operations which actually would have resulted had the acquisition
occurred on the date indicated, or which may result in the future.
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Net sales $ 109,842 $ 94,025
Gross profit 15,978 15,210
Net income 2,724 3,131
Net income per common share $ .25 $ .32
</TABLE>
NOTE C - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
-------- -----------
(In thousands)
<S> <C> <C>
In Process and finished goods $48,535 $14,496
Raw materials and supplies 16,699 11,155
------- -------
$65,234 $25,651
======= =======
</TABLE>
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NOTE D - SHAREHOLDERS' EQUITY
Capital stock consists of the following:
Serial Preferred Stock:
Authorized - 632,470 shares; none issued
Common Stock:
Authorized - 20,000,000 shares
Issued and outstanding - 10,402,651 shares at March 31, 1995 and
8,191,810 at December 31, 1994. The increase in outstanding shares
results from the issuance of 2,023,000 shares as discussed in Note B
and 187,500 shares relating to the earn-out provision of the
acquisition of General Aluminum Mfg. Company.
NOTE E - NET INCOME PER COMMON SHARE
Net income per common share is based on the average number of common shares
outstanding and assumes the exercise of outstanding dilutive stock options and
the issuance of certain additional shares subject to earn-out provisions.
NOTE F - SUBSEQUENT EVENT
On April 11, 1995, the Company entered into a new credit agreement with a
group of banks under which it may borrow up to $100 million on an unsecured
basis. The agreement which replaced the Company's existing credit facility,
consists of a $65 million revolving credit and a $35 million term loan payable
over seven years. Interest is payable quarterly at the prime lending rate or at
a percentage over LIBOR which fluctuates based on specific financial ratios.
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
Park-Ohio Industries, Inc.
We have reviewed the accompanying consolidated condensed balance sheet of
Park-Ohio Industries, Inc. and subsidiaries as of March 31, 1995, and the
related consolidated condensed statements of income and cash flows for the
three-month periods ended March 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated condensed financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Park-Ohio Industries, Inc. and
subsidiaries as of December 31, 1994, and the related consolidated statements of
operations, shareholders equity, and cash flows for the year then ended, not
presented herein, and in our report dated February 22, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of December 31, 1994, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
April 24, 1995
Cleveland, Ohio /s/ Ernst & Young LLP
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MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS
FIRST QUARTER 1995 VERSUS FIRST QUARTER 1994
On March 7, 1995, the shareholders of the Company and RB&W Corporation (RB&W)
approved the acquisition of RB&W by the Company . Effective March 31, 1995, the
Company acquired all of the shares of RB&W in an exchange of $31 million and
2.0 million of its common shares in a transaction valued at $54.2 million. The
combination will be accounted for as a purchase and, accordingly, the operations
of RB&W were consolidated as of that date.
Net sales increased by 20% in the first quarter of 1995 compared to the first
quarter of 1994. Sales increases were recorded in all business segments. Of the
total sales increase of $10.5 million, the Container group accounted for $7.6
million or 72% of the increase. Shipments of containers increased by 33% while
the average price per container increased by 22% largely offsetting dramatic
increases in raw material costs.
Gross profit rose to $10.5 million or 17% of sales in the quarter from $9.5
million (18% of sales) in the first quarter of 1994. The increase in gross
profit results from increased sales particularly in the Container group
offsetting lower margins in the Consumer group caused by increased raw material
costs and product mix changes.
Selling, general and administrative costs increased minimally in the quarter
even though net sales increased by 20%. As a percentage of sales, these costs
accounted for 9.6% of the sales dollar as compared to 11.3% in the first quarter
of 1994.
Interest expense increased by 52% to $651 thousand in the first quarter of
1995. This increase is a result of issuing $22.2 million principal amount of
7-1/4% convertible senior subordinated debentures in the second quarter of 1994
and to increased borrowings under the Company's revolving credit arrangements
necessitated by higher demands on the Company's working capital to support the
20% increase in net sales.
The Federal income tax provision primarily related to the alternative minimum
tax due as a result of utilizing available net operating loss carryforwards.
At December 31, 1994, the Company had net operating loss carryforwards for
tax purposes of $21.6 million available to offset future taxable income.
Additional net operating loss carryforwards amounting to $2.5 million relating
to a consolidated subsidiary are also available subject to certain limitations.
Also, a net operating loss carryforward of $21.1 million pertaining to RB&W is
available to offset future taxable income of RB&W subject to certain
limitations. For financial reporting purposes, the Company has additional net
operating loss carryforwards relating to deductible temporary differences, the
most significant of which relates to other postretirement benefits. Federal
income tax expense for the 1995 period has been reduced by approximately $1.3
million ($1.1 million in 1994) due to the utilization of net operating loss
carryforwards.
LIQUIDITY AND SOURCES OF CAPITAL
On April 11, 1995, the Company entered into a Credit Agreement with three
banks that replaced the Company's existing credit agreement with the same three
banks. The new agreement provides $100 million in unsecured credit consisting
of a $65 million revolving credit facility to be used for general
corporate purposes including working capital and acquisitions and a $35
million term facility to be used to replace RB&W's current lender. As of March
31, 1995, $73.1 million was deemed to be outstanding under this facility.
During the quarter, the Company used $3.8 million to fund operations,
primarily accounts receivable and inventories, invested $2.4 million in
machinery and equipment, and completed the acquisition of RB&W by issuing 2.0
million common shares and paying $31.0 million for all the outstanding common
stock of RB&W. The cash component was provided under the Company's $100 million
credit facility.
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at March 31, 1995, and for
the three-month period then ended have been reviewed, prior to filing, by Ernst
& Young, the Company's independent accountants, and their report is included
herein.
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PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A special meeting of shareholders was held on March 7, 1995.
(c) The following matter was voted upon at the special meeting of
shareholders:
Proposal to approve the issuance of up to an additional two
million two hundred fifty thousand shares of Common Stock in
connection with the acquisition of RB&W Corporation.
<TABLE>
<S> <C>
7,370,468 affirmative votes
71,861 negative votes
33,613 abstentions
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is included herein:
(4) Credit agreement among Park-Ohio Industries, Inc., Society National
Bank, The Huntington National Bank, and NBD Bank, N.A., dated April
11, 1995
(11) Computation of net income per common share
(15) Letter re: unaudited financial information
(27) Financial data schedule (Electronic Filing Only)
The Company did not file any reports on Form 8-K during the three months ended
March 31, 1995. On April 17, 1995, the Company filed a Form 8-K regarding the
Company's acquisition of RB&W Corporation. See Management's discussion on page
10 herein.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PARK-OHIO INDUSTRIES, INC.
----------------------------------
(Registrant)
By /s/ J.S. WALKER
-------------------------------
Name: J.S. Walker
Title: Vice President - Treasurer
and Controller
Dated May 12, 1995
-----------------------------
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EXHIBIT INDEX
QUARTERLY REPORT ON FORM 10-Q
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
FOR THE QUARTER ENDED MARCH 31, 1995
EXHIBIT
-------
4 Credit agreement among Park-Ohio Industries, Inc., Society
National Bank, The Huntington National Bank, and NBD Bank,
N.A., dated April 11, 1995.
11 Computation of net income per common share
15 Letter re: unaudited financial information
27 Financial data schedule (Electronic filing only)
12
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EXHIBIT (4)
C R E D I T A G R E E M E N T
Credit agreement, effective as of the 11th day of April, 1995,
between PARK-OHIO INDUSTRIES, INC., an Ohio corporation (hereinafter sometimes
called the "Borrower"), the banking institutions named in Annex 1 attached
hereto and made a part hereof (hereinafter sometimes collectively called the
"Banks" and individually "Bank") and SOCIETY NATIONAL BANK, 127 Public Square,
Cleveland, Ohio 44114-1306, as Agent for the Banks under this credit agreement
(hereinafter sometimes called the "Agent").
WITNESSETH:
WHEREAS, the Borrower and the Banks desire to contract for the
establishment of credits in the aggregate principal amounts hereinafter set
forth, to be made available to the Borrower upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
As used in this credit agreement, the following terms shall have the
following meanings:
"Adjusted LIBOR" shall mean a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the nearest 1/100th of 1%) by
dividing (a) the applicable LIBOR rate by (b) 1.00 minus the Reserve
Percentage.
"Adjusted Prime Rate" shall mean the greater of (a) the Prime Rate
or (b) one and one-half percent (1 1/2%) in excess of the Federal Funds
Effective Rate.
"Advantage" shall mean any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by any Bank in respect of Borrower's Debt to the Banks if such payment
results in that Bank having a lesser share of Borrower's Debt to the Banks,
than was the case immediately before such payment.
"Applicable Spread" shall mean a percentage to be determined by (a)
calculating the ratio of the Total Funded Indebtedness to the Capitalization
for the most recent calendar quarter, and (b) selecting the corresponding
applicable percentage contained in the following matrix:
<PAGE> 2
<TABLE>
<CAPTION>
Ratio of
--------
Total Funded Indebtedness to Capitalization Applicable Percentage
- ------------------------------------------- ---------------------
<S> <C>
Equal to or greater than .60 to 1.00 One and three-fourths percent (1-3/4 %)
Equal to or greater than .55 to 1.00, One and one-half percent (1-1/2 %)
but less than .60 to 1.00
Equal to or greater than .50 to 1.00, One and one fourth percent (1-1/4 %)
but less than .55 to 1.00
Equal to or greater than .45 to 1.00, One and one eighth percent (1-1/8 %)
but less than .50 to 1.00
Less than .45 to 1.00 One percent (1%)
</TABLE>
Each Applicable Spread shall be effective on the first day of each fiscal
quarter which follows the date upon which the Agent received, or, if earlier,
the Agent should have received pursuant to Section 5.3 hereof, the consolidated
financial statements of Borrower. Anything herein to the contrary
notwithstanding, from the Closing Date until the earlier of (a) April 30, 1996
or (b) receipt by Agent of audited financial statements for Borrower's fiscal
year ending December 31, 1995, the Applicable Spread shall be one and
forty-two one-hundredths percent (1-42/100%). Furthermore, the above matrix
does not modify or waive, in any respect, the requirements of Section 5.25
hereof, the rights of the Banks to charge the default rate described in Section
2.1 hereof, or the rights and remedies of the Banks pursuant to Articles VII
and VIII hereof.
"Capital Distributions" shall mean a payment made, liability
incurred or other consideration given for the purchase, acquisition, redemption
or retirement of any capital stock of any Company or as a dividend, return of
capital or other distribution (other than any stock dividend or stock split
payable only in capital stock of the Company in question) in respect of any
Company's capital stock.
"Capital Expenditures" shall mean the amount as determined in
accordance with generally accepted accounting principles, applied on a basis
not inconsistent with present accounting procedures.
"Capitalization" shall mean the sum of (a) Total Funded Indebtedness
plus (b) Equity.
"Cleveland Banking Day" shall mean a day on which the main office of
the Agent is open for the transaction of business.
"Closing Date" shall mean the effective date of this credit
agreement.
"Commitment" shall mean the obligation hereunder of each Bank to
make loans pursuant to the Revolving Credit Commitment and the Term Loan
Commitment up to the amount set forth
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opposite such Bank's name under the column headed "Maximum Amount" as described
in Annex 1 hereof during the Commitment Period (or such lesser amount as shall
be determined pursuant to Section 2.5 hereof).
"Commitment Period" shall mean the period from the Closing Date to
March 31, 1999.
"Company" shall mean Borrower or a Subsidiary.
"Consolidated Cash-In-Flow" shall mean, for the time period in
question and on a consolidated basis and in accordance with generally accepted
accounting principles not inconsistent with their present accounting
procedures, the aggregate of (a) Consolidated Net Earnings and (b) Consolidated
Depreciation, Obsolescence and Amortization Charges, less (c) Capital
Distributions.
"Consolidated Cash-Out-Flow" shall mean, for the time period in
question and on a consolidated basis and in accordance with generally accepted
accounting principles not inconsistent with their present accounting
procedures, the aggregate of (a) the current portion of Funded Indebtedness for
the period in question as of the end of that period, (b) all Capital
Expenditures, and (c) all capital assets acquired for cash (nonborrowed money)
as a result of one or more corporate acquisitions, mergers and/or
consolidations.
"Consolidated Depreciation, Obsolescence and Amortization Charges"
shall mean the aggregate of all such charges for fixed assets, leasehold
improvements and general intangibles (specifically including goodwill) of
Borrower and its Consolidated Subsidiaries for the year in question as
determined in accordance with generally accepted accounting principles not
inconsistent with their present accounting procedures.
"Consolidated Net Current Assets" shall mean the excess of Current
Assets of Borrower and its Consolidated Subsidiaries over their Current
Liabilities as determined on a consolidated basis and in accordance with
generally accepted accounting principles not inconsistent with their present
accounting procedures, with the understanding, however, that, without limiting
the generality of the foregoing, the amounts of the principal installments
maturing within twelve months of the date in question on any promissory note
(including any Note), and all accrued taxes shall be included in Current
Liabilities and applicable reserves and other properly deductible items shall
be deducted from Current Assets.
"Consolidated Net Earnings" shall mean the net earnings (losses) of
Borrower and its Consolidated Subsidiaries, after taxes and after extraordinary
items (but without giving effect to any gain resulting from the re-appraisal or
write-up of any asset or the sale of any asset other than inventory), as
determined on a consolidated basis in accordance with generally accepted
accounting principles applied on a basis not inconsistent with their present
accounting procedures.
"Consolidated Net Worth" shall mean the excess of the net book value
(after deduction of all applicable reserves and excluding any re-appraisal or
write-up of assets) of the assets (other than patents, good will, treasury
stock and other intangibles) of Borrower and its Consolidated
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<PAGE> 4
Subsidiaries over all of their liabilities (other than Subordinated
liabilities) as determined on a consolidated basis in accordance with generally
accepted accounting principles applied on a basis not inconsistent with their
present accounting procedures.
"Consolidated Subsidiary" shall mean, at any particular time, every
Subsidiary other than those Subsidiaries which are not included as consolidated
subsidiaries of Borrower in the financial statements contained in the then most
recent annual or periodic report filed by Borrower with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of such Commission) on Form 10-K, 10-Q or 8-K pursuant to the
Securities Exchange Act of 1934, as then in effect (or any comparable forms
under similar federal statutes then in force), and in Borrower's most recent
financial statements furnished to its stockholders and certified by Borrower's
independent certified public accountants; provided that such excluded
Subsidiary or Subsidiaries shall be excluded from Consolidated Subsidiaries
hereunder only for so long as it or they are so excluded from such financial
statements filed with such Commission and furnished to such stockholders.
"Controlled Group" shall mean a controlled group of corporations as
defined in Section 1563 of the Internal Revenue Code of 1986, as may be amended
from time to time, of which Borrower or any Consolidated Subsidiary is a part.
"Current Assets" and "Current Liabilities" shall mean the amounts as
determined on a consolidated basis and in accordance with generally accepted
accounting principles, applied on a basis not inconsistent with present
accounting procedures, with the understanding, however, that without limiting
the generality of the foregoing, the amounts of the principal installments
maturing within twelve months of the date in question on any promissory note
(including any Note), and all accrued taxes shall be included in Current
Liabilities and applicable reserves and other properly deductible items shall
be deducted from Current Assets.
"Debt" shall mean, collectively, all indebtedness incurred by
Borrower to the Banks pursuant to this credit agreement and includes the
principal of and interest on all Notes and each extension, renewal or
refinancing thereof in whole or in part, the commitment fees, other fees and
any prepayment premium payable hereunder.
"Derived LIBOR Rate" shall mean a rate per annum which shall be the
Applicable Spread in excess of Adjusted LIBOR.
"Environmental Laws" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the
government of the United States of America or by any state or municipality
thereof or by any court, agency, instrumentality, regulatory authority or
commission of any of the foregoing concerning health, safety and protection of,
or regulation of the discharge of substances into, the environment.
"Equity" shall mean the sum, on a consolidated basis, of Borrower's
retained earnings, common stock, cumulative preferred stock (so long as it is
not convertible into indebtedness or
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<PAGE> 5
redeemable prior to payment in full of the Debt), and additional paid in
capital, less treasury stock.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Event of Default" shall mean an event, condition or thing which
constitutes any event of default referred to in Article VII hereof and which
has not been appropriately waived by the Majority Banks in writing.
"Federal Funds Effective Rate" shall mean for any day, the rate per
annum (rounded upward to the nearest 1/100 of one percent) announced by the
Federal Reserve Bank of New York (or any successor) on such day as being the
weighted average of the rates on overnight federal funds transactions arranged
by federal funds brokers on the previous trading day, as computed and announced
by such Federal Reserve Bank (or any successor) in substantially the same
manner as such Federal Reserve Bank computes and announces the weighted average
it refers to as the "Federal Funds Effective Rate" as of the date of this
credit agreement.
"Funded Indebtedness" shall mean indebtedness which (including any
renewal or extension in whole or in part) matures or remains unpaid more than
twelve (12) months after the date on which originally incurred.
"Guarantor" means one who pledges its credit or property in any
manner for the payment or other performance of the indebtedness, contract or
other obligation of another and includes (without limitation) any guarantor
(whether of payment or of collection), surety, co-maker, endorser or one who
agrees conditionally or otherwise to make any purchase, loan or investment in
order thereby to enable another to prevent or correct a default of any kind.
"Guarantor of Payment" means any one of Bennett Industries, Inc.,
Castle Rubber Company, Kay Home Products, Inc., General Aluminum Mfg. Company,
Blue Falcon Investments, Inc., RB&W Corporation, Blue Falcon Forge, Inc., and
Tocco, Inc., which are each executing and delivering a Guaranty of Payment, or
any other party which shall deliver a Guaranty of Payment to the Agent
subsequent to the Closing Date.
"Guaranty of Payment" means each of the guaranties of payment of
debt executed and delivered on or about the date hereof in connection herewith
by the Guarantors of Payment, as the same may be from time to time amended,
supplemented or otherwise modified.
"Interest Adjustment Date" shall mean the last day of each Interest
Period.
"Interest Period" shall mean a period of one (1), two (2), three
(3), or six (6) months (as selected by Borrower) commencing on the applicable
borrowing or conversion date of each LIBOR Loan and on each Interest Adjustment
Date with respect thereto; provided, however, that if any such period would be
affected by a reduction in Commitment as provided in Section 2.5 hereof,
prepayment or conversion rights or obligations as provided in 3.5 hereof, or
maturity of
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LIBOR Loans as provided in Section 2.1A or 2.1B hereof, such period shall be
shortened to end on such date. If Borrower fails to select a new Interest
Period with respect to an outstanding LIBOR Loan at least three (3) London
Banking Days prior to any Interest Adjustment Date, Borrower shall be deemed to
have converted such LIBOR Loan to a Prime Rate Loan. With respect only to
that portion of the LIBOR Loans (as described in Section 2.1B hereof) during
the seven (7) year term loan period which represents a mandatory quarter-annual
installment of principal during the last six (6) years, Borrower may not select
an Interest Period the maturity of which would extend beyond the due date of
such installment payment without becoming subject to the provisions of Section
2.4 hereof.
"Letter of Credit" shall mean any sight commercial documentary
letter of credit or any standby letter of credit which shall be issued by the
Agent for the benefit of Borrower or a Guarantor of Payment, including
amendments thereto, if any, and shall have an expiration date no later than the
earlier of (a) one (1) year after its date of issuance or (b) the last day of
the Commitment Period.
"LIBOR" shall mean the average (rounded upward to the nearest 1/16th
of 1%) of the per annum rates at which deposits in immediately available funds
in United States dollars for the relevant Interest Period and in the amount of
the LIBOR Loan to be disbursed or to remain outstanding during such Interest
Period, as the case may be, are offered to the Reference Bank by prime banks in
any Eurodollar market reasonably selected by the Reference Bank, determined as
of 11:00 a.m. London time (or as soon thereafter as practicable), two (2)
London Banking Days prior to the beginning of the relevant Interest Period
pertaining to a LIBOR Loan hereunder.
"LIBOR Loans" shall mean those loans described in Sections 2.1A or
2.1B hereof on which Borrower shall pay interest at a rate based on LIBOR.
"London Banking Day" shall mean a day on which banks are open for
business in London, England, and quoting deposit rates for dollar deposits.
"Majority Banks" shall mean the holders of sixty-six and two-thirds
percent (66-2/3%) of the amount of the Commitments, or, if there is any
borrowing hereunder, the holders of sixty-six and two-thirds percent (66-2/3%)
of the amount of the Notes.
"Note" or "Notes " shall mean any Revolving Credit Note or Notes and
any Term Note or Notes, executed and delivered pursuant to Sections 2.1A and
2.1B hereof, or any other note delivered pursuant to this credit agreement.
"Plan" shall mean any employee pension benefit plan subject to Title
IV of the Employee Retirement Income Security Act of 1974, as amended,
established or maintained by Borrower, any Consolidated Subsidiary, or any
member of the Controlled Group, or any such Plan to which Borrower, any
Consolidated Subsidiary, or any member of the Controlled Group is required to
contribute on behalf of any of its employees.
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"Prime Rate" shall mean the interest rate established from time to
time by Agent as Agent's prime rate, whether or not such rate is publicly
announced; the Prime Rate may not be the lowest interest rate charged by Bank
for commercial or other extensions of credit.
"Prime Rate Loans" shall mean those loans described in Sections 2.1A
or 2.1B hereof on which Borrower shall pay interest at a rate based on the
Adjusted Prime Rate.
"Possible Default" shall mean an event, condition or thing which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, any Event of Default and which has
not been appropriately waived by the Majority Banks in writing or fully
corrected prior to becoming an actual event of default.
"Reference Bank" shall mean the Cayman Islands branch office of
Society National Bank.
"Related Writing" shall mean any Note, assignment, mortgage,
security agreement, guaranty agreement, subordination agreement, financial
statement, audit report or other writing furnished by Borrower, any Subsidiary
or any Guarantor of Payment, or any of their respective officers, to the Banks
pursuant to or otherwise in connection with this credit agreement.
"Reportable Event" shall mean a reportable event as that term is
defined in Title IV of the Employee Retirement Income Security Act of 1974, as
amended, except actions of general applicability by the Secretary of Labor
under Section 110 of such Act.
"Reserve Percentage" shall mean for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, all
basic, supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
for a member bank of the Federal Reserve System in Cleveland, Ohio, in respect
of Eurocurrency Liabilities. The Adjusted LIBOR shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Percentage.
"Revolving Credit Commitment" shall mean the obligation hereunder of
each Bank to make revolving loans and to participate in the issuance of Letters
of Credit, up to the aggregate amount set forth opposite such Bank's name
under the column headed "Revolving Credit Commitment Amount" as listed in Annex
1 hereof during the Commitment Period (or such lesser amount as shall be
determined pursuant to Section 2.5 hereof).
"Revolving Credit Note" shall mean any Revolving Credit Note
executed and delivered pursuant to Section 2.1A hereof.
"Subordinated", as applied to indebtedness, shall mean that the
indebtedness has been subordinated (by written terms or written agreement
being, in either case, in form and substance satisfactory to the Banks) in
favor of the prior payment in full of Borrower's Debt to the Banks.
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"Subsidiary" shall mean an existing or future corporation, the
majority of the outstanding capital stock or voting power, or both, of which is
(or upon the exercise of all outstanding warrants, options and other rights
would be) owned at the time in question by Borrower or by another such
corporation or by any combination of Borrower and such corporations.
"Term Loan Commitment" shall mean the obligation hereunder of each
Bank to make a term loan, up to the aggregate amount set forth opposite such
Bank's name under the column headed "Term Loan Commitment Amount" as listed in
Annex 1 hereof.
"Term Note" shall mean the Term Notes executed and delivered
pursuant to Section 2.1B hereof.
"Total Funded Indebtedness" shall mean all indebtedness of Borrower,
on a consolidated basis, which (including any renewal or extension in whole or
in part) matures or remains unpaid more than twelve (12) months after the date
on which originally incurred.
"Total Liabilities" shall mean the total of all items of
indebtedness or liability which, in accordance with generally accepted
accounting principles, applied on a basis not inconsistent with present
accounting procedures, would be included in determining total liabilities on
the liability side of the balance sheet as of the date of determination.
"Voting Stock" shall mean stock of a corporation of a class or
classes having general voting power under ordinary circumstances to elect a
majority of the board of directors, managers or trustees of such corporation
(irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by the reason of the happening of any
contingency).
"Wholly-Owned Consolidated Subsidiary" shall mean each Consolidated
Subsidiary all of whose outstanding stock, other than directors' qualifying
shares, shall at the time be owned by Borrower and/or by one or more
Wholly-Owned Consolidated Subsidiaries.
Any accounting term not specifically defined in this Article I shall
have the meaning ascribed thereto by generally accepted accounting principles,
applied on a basis not inconsistent with Borrower's present accounting
procedures.
The foregoing definitions shall be applicable to the singular and
plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the
terms and provisions of this credit agreement, each Bank will participate to
the extent hereinafter provided in making loans to Borrower, and issuing
Letters of Credit at the request of Borrower, in such aggregate amount as
Borrower shall request pursuant to the Revolving Credit Commitment and the Term
Loan Commitment; provided, however, that in no event shall the aggregate
principal
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amount of all loans and Letters of Credit outstanding under this credit
agreement during the Commitment Period be in excess of One Hundred Million
Dollars ($100,000,000).
Each Bank, for itself and not one for any other, agrees to
participate in borrowings made and Letters of Credit issued hereunder on such
basis that (a) immediately after the completion of any borrowing by Borrower or
issuance of a Letter of Credit hereunder, the aggregate principal amount then
outstanding on Notes issued to such Bank, when combined with such Bank's pro
rata share of issued and outstanding Letters of Credit, shall not be in excess
of the amount shown opposite the name of such Bank under the column headed
"Maximum Amount" as set forth in Annex 1 hereto for the Commitment Period, and
(b) such aggregate principal amount outstanding on Notes issued to such Bank,
when combined with such Bank's pro rata share of issued and outstanding Letters
of Credit, shall represent that percentage of the aggregate principal amount
then outstanding on all Notes (including the Notes held by such Bank) which is
shown opposite the name of such Bank under the column headed "Percentage" in
Annex 1 hereto.
Each borrowing from, and reduction of Commitments of, the Banks
hereunder shall be made pro rata according to their respective Commitments. The
aforementioned loans may be made as revolving loans and as term loans, and
Letters of Credit may be issued, as follows:
A. Revolving Credit.
1. Loans. Subject to the terms and conditions of this
credit agreement, during the Commitment Period, each Bank will make a loan or
loans to Borrower in such amount or amounts as Borrower may from time to time
request, but not exceeding in aggregate principal amount at any one time
outstanding hereunder the Revolving Credit Commitment of such Bank, when such
loans are combined with such Bank's pro rata share of issued and outstanding
Letters of Credit described in paragraph 2 below. Borrower shall have the
option, subject to the terms and conditions set forth herein, to borrow
hereunder up to the Revolving Credit Commitment amount by means of any
combination of (a) Prime Rate Loans maturing on the last day of the Commitment
Period, bearing interest at a rate per annum which shall be the Adjusted Prime
Rate from time to time in effect and drawn down in aggregate amounts of not
less than Five Hundred Thousand Dollars ($500,000) or any multiple thereof, or
(b) LIBOR Loans maturing on the last day of the Commitment Period, drawn down
in aggregate amounts of not less than One Million Dollars ($1,000,000) or any
multiple thereof, bearing interest at a rate per annum which shall be the
Derived LIBOR Rate, fixed in advance of each Interest Period as herein provided
for each such Interest Period. Interest hereunder shall be based on a year
having 360 days, and calculated for the actual number of days elapsed.
Borrower shall pay interest on the unpaid principal amount of Prime
Rate Loans outstanding from time to time from the date thereof until paid, on
the last day of each succeeding June, September, December and March of each
year and at the maturity thereof, commencing June 30, 1995. Borrower shall pay
interest at a fixed rate for each Interest Period on the unpaid principal
amount of LIBOR Loans outstanding from time to time from the date thereof until
paid, payable on each Interest Adjustment Date with respect to an Interest
Period (provided that if an
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Interest Period exceed three months, the interest must be paid every three
months from the beginning of such Interest Period).
At the request of Borrower, provided no Event of Default exists
hereunder, the Banks shall convert Prime Rate Loans to LIBOR Loans at any time
and shall convert LIBOR Loans to Prime Rate Loans on any Interest Adjustment
Date, but each request for loans under this Paragraph A must either be for
Prime Rate Loans or LIBOR Loans.
The obligation of Borrower to repay the Prime Rate Loans and the
LIBOR Loans made by each Bank and to pay interest thereon shall be evidenced by
a Revolving Credit Note of Borrower substantially in the form of Exhibit A
hereto, with appropriate insertions, dated the date of this credit agreement
and payable to the order of such Bank on the last day of the Commitment Period
in the principal amount of its Revolving Credit Commitment, or, if less, the
aggregate unpaid principal amount of revolving credit loans made hereunder by
such Bank. The principal amount of the Prime Rate Loans and the LIBOR Loans
made by each Bank and all prepayments and payments thereof and the applicable
dates with respect thereto shall be recorded by each Bank from time to time on
the records of such Bank by such method as each Bank may generally employ;
provided, however, that failure to make any such entry shall in no way detract
from Borrower's obligations under such Note. The aggregate unpaid amount of
Prime Rate Loans and LIBOR Loans set forth on the records of such Bank shall be
rebuttably presumptive evidence of the principal amount owing and unpaid on
such Revolving Credit Note. If an Event of Default shall occur hereunder, the
principal of the Revolving Credit Note and the unpaid interest thereon shall
bear interest, until paid (or until, if ever, such Event of Default may be
waived in writing by the Banks), at a rate per annum which shall be two per
cent (2%) in excess of the Adjusted Prime Rate from time to time in effect.
Subject to the provisions of this credit agreement, Borrower shall be entitled
under this Paragraph A to borrow funds, repay the same in whole or in part and
reborrow hereunder at any time and from time to time during the Commitment
Period.
2. Letters of Credit. Subject to the terms and conditions
of this credit agreement, during the Commitment Period, the Agent will, in the
name of Society National Bank, but only as Agent for the Banks, issue such
Letters of Credit for the account of Borrower or any Guarantor of Payment, as
Borrower may from time to time request. Borrower shall not request any Letter
of Credit (and the Agent shall not be obligated to issue any Letter of Credit)
if, after giving effect thereto, (a) the aggregate amount of all issued and
outstanding Letters of Credit would exceed Four Million Dollars ($4,000,000) or
(b) the sum of (i) the aggregate outstanding principal amount of the revolving
credit loans described in paragraph 1 above, plus (ii) the aggregate of all
issued and outstanding Letters of Credit shall exceed the Revolving Credit
Commitment. The issuance of each Letter of Credit shall confer upon each Bank
the benefits and liabilities of a participation consisting of an undivided pro
rata interest in the Letter of Credit to the extent of that Bank's percentage
as set forth on Annex 1.
Each request for a Letter of Credit shall be delivered to the Agent
not later than 11:00AM (Cleveland, Ohio time) three (3) Cleveland Banking Days
prior to the day upon which the Letter of Credit is to be issued. Each such
request shall be in a form acceptable to the Agent and specify the face amount
thereof, whether such Letter of Credit is a commercial documentary or
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a standby Letter of Credit, the account party, the beneficiary and the intended
date of issuance. Concurrently with each such request, Borrower, and any
Guarantor of Payment for whose benefit the Letter of Credit is to be issued,
shall execute and deliver to the Agent an appropriate application and
agreement, being in the standard form of Society National Bank for such letters
of credit, as amended to conform to the provisions of this credit agreement if
required by the Agent. The Agent shall give each Bank notice of each such
request for a Letter of Credit.
In respect of each Letter of Credit which is a commercial
documentary letter of credit and the drafts thereunder, whether issued for the
account of Borrower or a Guarantor of Payment, Borrower agrees to pay to
Society National Bank, for its sole account, a non-refundable commission based
upon the face amount of the Letter of Credit, which shall be paid on the date
that any draw is made on a Letter of Credit, at the rate of one-fourth of one
percent (1/4%) of the amount drawn under the Letter of Credit, in addition to
such other issuance, amendment, negotiation, draw, acceptance, telex, courier,
postage and similar transactional fees as are generally charged by Society
National Bank under its fee schedule as in effect from time to time. In
respect of each Letter of Credit which is a standby letter of credit and the
drafts thereunder, if any, whether issued for the account of Borrower or a
Guarantor of Payment, Borrower agrees (a) to pay to Society National Bank, for
the pro rata benefit of the Banks, a non-refundable commission based upon the
face amount of the Letter of Credit, which shall be paid on the date that such
Letter of Credit is issued, at the rate of one percent (1%) of the face amount
of the Letter of Credit; and (b) to pay to Society National Bank for its sole
account, such other issuance, amendment, negotiation, draw, acceptance, telex,
courier, postage and similar transactional fees as are generally charged by
Society National Bank under its fee schedule as in effect from time to time.
Whenever a Letter of Credit is drawn, unless the amount drawn is
immediately reimbursed by Borrower, the amount outstanding thereunder shall be
deemed to be a revolving credit loan to Borrower subject to the provisions of
this Section 2.1A and shall be evidenced by the Revolving Credit Notes. Each
such revolving credit loan shall be deemed to be a Prime Rate Loan unless
otherwise requested by and available to Borrower hereunder. Each Bank is
hereby authorized to record on its Revolving Credit Note such Bank's pro rata
share of the amounts paid and not reimbursed on the Letters of Credit.
B. Term Loan. Subject to the conditions of this credit
agreement, the Banks will make a seven (7) year term loan to Borrower in such
amount, if any, as Borrower may request on the Closing Date, but not exceeding
the Term Loan Commitment of such Bank then in effect. To evidence the term
loan, Borrower shall execute and deliver to each Bank an appropriate Term Note
dated the date the term loan is to be made, and substantially in the form of
Exhibit B hereto, with appropriate insertions. The Term Notes shall be payable
in twenty-four (24) consecutive quarter annual installments aggregating One
Million Two Hundred Fifty Thousand Dollars ($1,250,000) for each quarter,
commencing June 30, 1996 and continuing on the last day of each succeeding
September, December, March and June of each year, through December 31, 2001,
with the balance thereof payable in full on March 31, 2002. Borrower shall
notify the Agent at the time of the request whether the term loan will be a
Prime Rate Loan or a LIBOR Loan. The term loan must be either a Prime Rate
Loan or a LIBOR Loan, and may not be a
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mixture of a Prime Rate Loan and a LIBOR Loan; but the Banks, at the request of
Borrower, shall convert a Prime Rate Loan to a LIBOR Loan at any time and shall
convert a LIBOR Loan to a Prime Rate Loan on any Interest Adjustment Date.
Interest hereunder shall be based on a year having 360 days, and calculated for
the actual number of days elapsed.
If the loan is a Prime Rate Loan, Borrower shall pay interest on the
unpaid principal amount thereof outstanding from time to time from the date
thereof until paid, on the last day of each succeeding June, September,
December, and March of each year and at the maturity thereof, commencing June
30, 1995, at a rate per annum which shall be the Adjusted Prime Rate from time
to time in effect. Any change in such rate resulting from a change in the
Adjusted Prime Rate shall be effective immediately from and after such change
in the Adjusted Prime Rate. If the loan is a LIBOR Loan, Borrower shall pay
interest at a fixed rate for each Interest Period on the unpaid principal
amount of the LIBOR Loan outstanding from time to time from the date thereof
until paid, payable on each Interest Adjustment Date with respect to an
Interest Period (provided that if an Interest Period exceeds three months, the
interest must be paid every three months, commencing three months from the
beginning of such Interest Period), at a rate per annum which shall be the
Derived LIBOR Rate, fixed in advance of each Interest Period as herein provided
for each such Interest Period.
The principal amount of the Prime Rate Loans and the LIBOR Loans
made by each Bank and all prepayments and payments thereof and the applicable
dates with respect thereto shall be recorded by such Bank from time to time on
the records of such Bank by such method as each Bank may generally employ. The
aggregate unpaid amount of Prime Rate Loans and LIBOR Loans set forth on the
records of each Bank shall be rebuttably presumptive evidence of the principal
amount owing and unpaid on each Term Note; provided, however, that failure to
make any such entry shall in no way detract from Borrower's obligations under
such Note. If an Event of Default shall occur hereunder, the principal of each
Term Note and the unpaid interest thereon shall bear interest, until paid (or
until, if ever, such Event of Default may be waived in writing by the Banks),
at a rate per annum which shall be two per cent (2%) in excess of the Adjusted
Prime Rate from time to time in effect.
SECTION 2.2. CONDITIONS TO LOANS. The obligation of each
Bank to make the loans hereunder is conditioned, in the case of each borrowing
hereunder, upon (a) receipt by the Agent of one (1) Cleveland Banking Day's
notice from Borrower of the proposed date and aggregate amount of the borrowing
of any Prime Rate Loans, and three (3) London Banking Days' notice from
Borrower of the proposed date, aggregate amount and initial Interest Period of
any LIBOR Loans, of which date, amount and initial Interest Period (if
applicable) the Agent shall notify each Bank promptly upon the receipt of such
notice, and, in any event, by 2:00 P.M. on the date such notice is received,
and on the date such loan is to be made, each Bank shall provide the Agent not
later than 2:00 P.M. Cleveland time, with the amount in federal or other
immediately available funds, required of it; (b) the fact that no Possible
Default shall then exist or immediately after the loan would exist; and (c) the
fact that the representations and warranties contained in Article VI hereof
shall be true and correct in all material respects with the same force and
effect as if made on and as of the date of such borrowing except to the extent
that any thereof expressly relate to an earlier date. Each request for a
borrowing by Borrower hereunder
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shall be deemed to be a representation and warranty by Borrower as of the date
of such request for a borrowing as to the facts specified in (b) and (c) above.
SECTION 2.3. PAYMENT ON NOTES, ETC. All payments of
principal, interest and commitment and other fees shall be made to the Agent in
immediately available funds for the account of the Banks, and the Agent, within
one (1) Cleveland Banking Day, shall distribute to each Bank its ratable share
of the amount of principal, interest, and commitment and other fees received by
it for the account of such Bank. Each Bank shall endorse each Note held by it
with appropriate notations evidencing each payment of principal made thereon or
shall record such principal payment by such other method as such Bank may
generally employ; provided, however, that failure to make any such entry shall
in no way detract from Borrower's obligations under each such Note. Whenever
any payment to be made hereunder, including without limitation any payment to
be made on any Note, shall be stated to be due on a day which is not a
Cleveland Banking Day, such payment shall be made on the next succeeding
Cleveland Banking Day and such extension of time shall in each case be included
in the computation of the interest payable on such Note; provided, however,
that with respect to any LIBOR Loan, if the next succeeding Cleveland Banking
Day falls in the succeeding calendar month, such payment shall be made on the
preceding Cleveland Banking Day and the relevant Interest Period shall be
adjusted accordingly.
SECTION 2.4. PREPAYMENT. Borrower shall have the right
at any time or from time to time, upon two (2) Cleveland Banking Days' prior
written notice to the Agent in the case of Prime Rate Loans, without the
payment of any premium or penalty, or three (3) London Banking Days' prior
written notice in the case of LIBOR Loans (subject to the payment of a
prepayment penalty as hereinafter described in this Section 2.4), to prepay on
a pro rata basis, all or any part of the principal amount of the Notes then
outstanding as designated by Borrower, plus interest accrued on the amount so
prepaid to the date of such prepayment. In any case of prepayment of any LIBOR
Loans, Borrower agrees that if Adjusted LIBOR as determined as of 11:00 a.m.
London time, three (3) London Banking Days prior to the date of prepayment of
any LIBOR Loans (hereinafter, "Prepayment LIBOR") shall be lower than the last
Adjusted LIBOR previously determined for those LIBOR Loans with respect to
which prepayment is intended to be made (hereinafter, "Last LIBOR"), then
Borrower shall, upon written notice by the Agent, promptly pay to the Agent,
for the account of each of the Banks, in immediately available funds, a
prepayment penalty measured by a rate (the "Prepayment Penalty Rate") which
shall be equal to the difference between the Last LIBOR and the Prepayment
LIBOR. In determining the Prepayment LIBOR, Agent shall apply a rate equal to
Adjusted LIBOR for a deposit approximately equal to the amount of such
prepayment which would be applicable to an Interest Period commencing on the
date of such prepayment and having a duration as nearly equal as practicable to
the remaining duration of the actual Interest Period during which such
prepayment is to be made. The Prepayment Penalty Rate shall be applied to all
or such part of the principal amounts of the Notes as related to the LIBOR
Loans to be prepaid, and the prepayment penalty shall be computed for the
period commencing with the date on which such prepayment is to be made to that
date which coincides with the last day of the Interest Period previously
established when the LIBOR Loans, which are to be prepaid, were made. Each
prepayment of a LIBOR Loan shall be in the aggregate principal sum of not less
than One Million Dollars ($1,000,000). In the
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event Borrower cancels a proposed LIBOR Loan subsequent to the delivery to the
Agent of the notice of the proposed date, aggregate amount and initial Interest
Period of such loan, but prior to the draw down of funds thereunder, such
cancellation shall be treated as a prepayment subject to the aforementioned
prepayment penalty. Each prepayment of the Notes evidencing the term loan shall
be applied to the principal installments thereof in the inverse order of their
respective maturities.
SECTION 2.5. COMMITMENT FEES; TERMINATION OR REDUCTION OF
COMMITMENTS. Borrower agrees to pay to Agent, for the ratable account of each
Bank, as a consideration for its Commitment hereunder, a commitment fee
calculated at the rate of one fourth of one per cent (1/4%) per annum (based on
a year having 360 days, and calculated for the actual number of days elapsed)
from the date hereof to and including the last day of the Commitment Period, on
the average daily unborrowed amount of each Bank's Commitment hereunder, which
unborrowed amount, for purposes of the commitment fee payable to each Bank,
shall specifically include the sum of each Bank's undivided pro rata interest
in the aggregate of all issued and outstanding Letters of Credit. The
commitment fee shall be payable on June 30, 1995 and quarter-annually
thereafter. Borrower may at any time or from time to time terminate in whole or
ratably in part the Commitment of the Banks hereunder to an amount not less
than the aggregate principal amount of the loans then outstanding, by giving
Agent not less than two (2) Cleveland Banking Days' notice, provided that any
such partial termination shall be in an aggregate amount for all of the Banks
of Five Million Dollars ($5,000,000) or any integral multiple thereof. The
Agent shall promptly notify each Bank of its proportionate amount and the date
of each such termination. After each such termination, the commitment fees
payable hereunder shall be calculated upon the Commitment of the Banks as so
reduced. If Borrower terminates in whole the Commitment of the Banks, on the
effective date of such termination (Borrower having prepaid in full the unpaid
principal balance, if any, of the Notes outstanding, together with all interest
(if any) and commitment and other fees accrued and unpaid and provided that no
issued and outstanding Letters of Credit shall exist) all of the Notes
outstanding shall be delivered to the Agent marked "Cancelled" and redelivered
to Borrower. Any partial reduction in the Commitment of the Banks shall be
effective during the remainder of the Commitment Period.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If
at any time any law, treaty or regulation (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or the
interpretation thereof by any governmental authority charged with the
administration thereof or any central bank or other fiscal, monetary or other
authority shall impose (whether or not having the force of law), modify or deem
applicable any reserve and/or special deposit requirement (other than reserves
included in the Reserve Percentage, the effect of which is reflected in the
interest rate(s) of the LIBOR Loan(s) in question) against assets held by, or
deposits in or for the amount of any loans by, any Bank, and the result of the
foregoing is to increase the cost (whether by incurring a cost or adding to a
cost) to such Bank of making or maintaining hereunder LIBOR Loans or to reduce
the amount
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of principal or interest received by such Bank with respect to such LIBOR
Loans, then, upon demand by such Bank, Borrower shall pay to such Bank from
time to time on Interest Adjustment Dates with respect to such loans, as
additional consideration hereunder, additional amounts sufficient to fully
compensate and indemnify such Bank for such increased cost or reduced amount,
assuming (which assumption such Bank need not corroborate) such additional cost
or reduced amount was allocable to such LIBOR Loans. A certificate as to the
increased cost or reduced amount as a result of any event mentioned in this
Section 3.1, setting forth the calculations therefor, shall be promptly
submitted by such Bank to Borrower and shall, in the absence of manifest error,
be conclusive and binding as to the amount thereof. Notwithstanding any other
provision of this credit agreement, after any such demand for compensation by
any Bank, Borrower, upon at least three (3) Cleveland Banking Days' prior
written notice to such Bank through the Agent, may prepay the affected LIBOR
Loans in full or convert all LIBOR Loans to Prime Rate Loans regardless of the
Interest Period of any thereof. Any such prepayment or conversion shall be
subject to the prepayment penalties set forth in Section 2.4 hereof. Each Bank
will notify Borrower as promptly as practicable (with a copy thereof delivered
to the Agent) of the existence of any event which will likely require the
payment by Borrower of any such additional amount under this Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason
of any law, regulation or requirement or in the interpretation thereof by an
official authority, or the imposition of any requirement of any central bank
whether or not having the force of law, any Bank shall, with respect to this
credit agreement or any transaction under this credit agreement, be subjected
to any tax, levy, impost, charge, fee, duty, deduction or withholding of any
kind whatsoever (other than any tax imposed upon the total net income of such
Bank) and if any such measures or any other similar measure shall result in an
increase in the cost to such Bank of making or maintaining any LIBOR Loan or in
a reduction in the amount of principal, interest or commitment fee receivable
by such Bank in respect thereof, then such Bank shall promptly notify Borrower
stating the reasons therefor. Borrower shall thereafter pay to such Bank upon
demand from time to time on Interest Adjustment Dates with respect to such
LIBOR Loans, as additional consideration hereunder, such additional amounts as
will fully compensate such Bank for such increased cost or reduced amount. A
certificate as to any such increased cost or reduced amount, setting forth the
calculations therefor, shall be submitted by such Bank to Borrower and shall,
in the absence of manifest error, be conclusive and binding as to the amount
thereof.
If any Bank receives such additional consideration from Borrower
pursuant to this Section 3.2, such Bank shall use its best efforts to obtain
the benefits of any refund, deduction or credit for any taxes or other amounts
on account of which such additional consideration has been paid and shall
reimburse Borrower to the extent, but only to the extent, that such Bank shall
receive a refund of such taxes or other amounts together with any interest
thereon or an effective net reduction in taxes or other governmental charges
(including any taxes imposed on or measured by the total net income of such
Bank) of the United States or any state or subdivision thereof by virtue of any
such deduction or credit, after first giving effect to all other deductions and
credits otherwise available to such Bank. If, at the time any audit of such
Bank's income tax return is completed, such Bank determines, based on such
audit, that it was not entitled to the full amount of any refund reimbursed to
Borrower as aforesaid or that its net income taxes are not reduced
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by a credit or deduction for the full amount of taxes reimbursed to Borrower as
aforesaid, Borrower, upon demand of such Bank, will promptly pay to such Bank
the amount so refunded to which such Bank was not so entitled, or the amount by
which the net income taxes of such Bank were not so reduced, as the case may
be.
Notwithstanding any other provision of this credit agreement, after
any such demand for compensation by any Bank, Borrower, upon at least three (3)
Cleveland Banking Days' prior written notice to such Bank through the Agent,
may prepay the affected LIBOR Loans in full or convert all LIBOR Loans to Prime
Rate Loans regardless of the Interest Period of any thereof. Any such
prepayment or conversion shall be subject to the prepayment penalties set forth
in Section 2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST
RATE UNASCERTAINABLE. In respect of any LIBOR Loans, in the event that the
Agent shall have determined that dollar deposits of the relevant amount for the
relevant Interest Period for such LIBOR Loans are not available to the
Reference Bank in the applicable Eurodollar market or that, by reason of
circumstances affecting such market, adequate and reasonable means do not exist
for ascertaining the LIBOR rate applicable to such Interest Period, as the case
may be, the Agent shall promptly give notice of such determination to Borrower
and (a) any notice of new LIBOR Loans (or conversion of existing loans to LIBOR
Loans) previously given by Borrower and not yet borrowed (or converted, as the
case may be) shall be deemed a notice to make Prime Rate Loans, and (b)
Borrower shall be obligated either to prepay or to convert any outstanding
LIBOR Loans on the last day of the then current Interest Period or Periods with
respect thereto.
SECTION 3.4. INDEMNITY. Without prejudice to any other
provisions of this Article III, Borrower hereby agrees to indemnify each Bank
against any loss or expense which such Bank may sustain or incur as a
consequence of any default by Borrower in payment when due of any amount
hereunder in respect of any LIBOR Loan, including, but not limited to, any loss
of profit, premium or penalty incurred by such Bank in respect of funds
borrowed by it for the purpose of making or maintaining such LIBOR Loan, as
determined by such Bank in the exercise of its sole but reasonable discretion.
A certificate as to any such loss or expense shall be promptly submitted by
such Bank to Borrower and shall, in the absence of manifest error, be
conclusive and binding as to the amount thereof.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS
UNLAWFUL. If at any time any new law, treaty or regulation, or any change in
any existing law, treaty or regulation, or any interpretation thereof by any
governmental or other regulatory authority charged with the administration
thereof, shall make it unlawful for any Bank to fund any LIBOR Loans which it
is committed to make hereunder with moneys obtained in the Eurodollar market,
the Commitment of such Bank to fund LIBOR Loans shall, upon the happening of
such event forthwith be suspended for the duration of such illegality, and such
Bank shall by written notice to Borrower and the Agent declare that its
Commitment with respect to such loans has been so suspended and, if and when
such illegality ceases to exist, such suspension shall cease and such Bank
shall similarly notify Borrower and the Agent. If any such change shall make it
unlawful for any Bank to continue in effect the funding in the applicable
Eurodollar market of any LIBOR
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Loan previously made by it hereunder, such Bank shall, upon the happening of
such event, notify Borrower, the Agent and the other Banks thereof in writing
stating the reasons therefor, and Borrower shall, on the earlier of (a) the
last day of the then current Interest Period or (b) if required by such law,
regulation or interpretation, on such date as shall be specified in such
notice, either convert all LIBOR Loans to Prime Rate Loans or prepay all LIBOR
Loans to the Banks in full. Any such prepayment or conversion shall be subject
to the prepayment penalties described in Section 2.4 hereof.
SECTION 3.6. FUNDING. Each Bank may, but shall not be
required to, make LIBOR Loans hereunder with funds obtained outside the United
States.
ARTICLE IV. OPENING COVENANTS
Prior to or concurrently with the execution and delivery of this
credit agreement, Borrower shall furnish to each Bank the following:
SECTION 4.1. RESOLUTIONS, ORGANIZATIONAL DOCUMENTS.
Certified copies of (a) the resolutions of the board of directors of Borrower
evidencing approval of the execution of this credit agreement and the execution
and delivery of the Notes as provided for herein and the execution of other
Related Writings to which Borrower is a party, and (b) Borrower's Articles of
Incorporation and all amendments thereto.
SECTION 4.2. LEGAL OPINION. A favorable opinion of
counsel for Borrower as to (a) the matters referred to in Sections 6.1, 6.2,
6.3, 6.4 and 6.9 of this credit agreement, (b) that all of the indebtedness of
Borrower and its Consolidated Subsidiaries relating to the 7-1/4% Convertible
Senior Subordinated Debentures are fully subordinated, by their terms to
payment in full of the Debt, (c) that RB&W Corporation is, as of the Closing
Date, a Wholly-Owned Subsidiary of Borrower and (d) such other matters as Agent
and the Banks may reasonably request.
SECTION 4.3. CERTIFICATE OF INCUMBENCY. A certificate of
the secretary or assistant secretary of Borrower certifying the names of the
officers of Borrower authorized to sign this credit agreement, and the Notes,
together with the true signatures of such officers.
SECTION 4.4. GUARANTOR OF PAYMENT RESOLUTIONS,
ORGANIZATIONAL DOCUMENTS. Certified copies of (a) the resolutions of the
boards of directors, or executive committees thereof, of each Guarantor of
Payment evidencing approval of the execution of its Guaranty of Payment and any
other Related Writings to which such Guarantor of Payment is a party, and (b)
each Guarantor of Payment's Articles (or Certificate) of Incorporation and all
amendments thereto.
SECTION 4.5. GUARANTOR OF PAYMENT LEGAL OPINIONS. A
favorable opinion of counsel for each Guarantor of Payment as to such matters
as Bank may reasonably request.
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SECTION 4.6. GUARANTOR OF PAYMENT CERTIFICATES OF
INCUMBENCY. A certificate of the secretary or assistant secretary of each
Guarantor of Payment certifying the names of the officers of such Guarantor of
Payment authorized to sign its Guaranty of Payment and any other Related
Writings to which such Guarantor of Payment is a party.
SECTION 4.7. GOOD STANDING CERTIFICATES. A good standing
certificate for Borrower and each Guarantor of Payment issued on or about the
date hereof by the Secretary of State in the state(s) where such Borrower or
Guarantor of Payment is incorporated or qualified as a foreign corporation;
provided that, with respect to RB&W Corporation, Borrower need only provide
good standing certificates for the states of Delaware and Ohio.
SECTION 4.8. CLOSING FEE/AGENT FEE. A closing fee of
one-fourth of one percent (1/4%) (less, for each Bank, fees paid to such Bank
pursuant to paragraph (k) of the letter agreement, dated as of February 6,
1995, among the Agent, the Banks, Borrower and the Guarantors of Payment)
payable on the Closing Date to each Bank, based upon each Bank's pro rata share
of the Commitment. In addition, Borrower shall pay to the Agent such agent fee
as shall be agreed by Borrower and Agent.
SECTION 4.9. LIEN SEARCHES. With respect to the property
owned by Borrower and its Consolidated Subsidiaries: (a) the results of U.C.C.
lien searches, satisfactory to the Agent and the Banks; and (b) the results of
federal and state tax lien and judicial lien searches regarding Borrower and
its Consolidated Subsidiaries, satisfactory to the Agent and the Banks.
ARTICLE V. COVENANTS
Borrower agrees that so long as the Commitments remain in effect and
thereafter until the principal of and interest on all Notes and all other
payments due hereunder shall have been paid in full, Borrower will perform and
observe all of the following provisions, namely:
SECTION 5.1. INSURANCE. Borrower and each Subsidiary
will (a) maintain insurance to such extent and against such hazards and
liabilities as is commonly maintained by companies similarly situated; and (b)
within ten (10) days of any Bank's written request, furnish to such Bank such
information about any Company's insurance as that Bank may from time to time
reasonably request (but in no event shall there be more than one such request
by the Banks during any thirty (30) day period), which information shall be
prepared in form and detail satisfactory to such Bank and certified by an
officer of such Company.
SECTION 5.2. MONEY OBLIGATIONS. Borrower and each
Subsidiary will pay in full (a) prior in each case to the date when penalties
would attach, all taxes, assessments and governmental charges and levies
(except only those so long as and to the extent that the same shall be
contested in good faith by appropriate and timely proceedings) for which they
may be or become liable or to which any or all of their properties may be or
become subject; (b) all of
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their wage obligations to their employees in compliance with the Fair Labor
Standards Act (29 U.S.C. 206-207) or any comparable provisions; and (c) all of
their other obligations calling for the payment of money (except only those so
long as and to the extent that the same shall be contested in good faith)
before such payment becomes overdue.
SECTION 5.3. FINANCIAL STATEMENTS. Borrower will furnish
to each Bank:
(a) within sixty (60) days after the end of each of the
first three quarter-annual periods of each of its fiscal years, balance sheets
of Borrower and its Consolidated Subsidiaries as of the end of such period and
statements of income (loss), stockholders equity and cash flow for the quarter
and fiscal year to date periods, all prepared on consolidated and consolidating
bases, in accordance with generally accepted accounting principles, applied on
a basis not inconsistent with Borrower's present accounting procedures, and in
form and detail satisfactory to the Banks and certified by a financial officer
of Borrower; together with a certificate of such officer setting forth the
Possible Defaults coming to such officer's attention or, if none, a statement
to that effect;
(b) within ninety (90) days after the end of each of its
fiscal years, an annual audit report of Borrower and its Consolidated
Subsidiaries for that year prepared on consolidated basis, in accordance with
generally accepted accounting principles, applied on a basis not inconsistent
with Borrower's present accounting procedures, and in form and detail
satisfactory to the Banks and certified by an independent public accountant
satisfactory to the Banks, which report shall include balance sheets and
statements of income (loss), stockholder's equity and cash-flow for that
period, together with a certificate by the accountant setting forth the
Possible Defaults coming to its attention during the course of its audit or, if
none, a statement to that effect;
(c) within ninety (90) days after the end of each of its
fiscal years, annual pro-forma projections for the then current fiscal year and
the next two succeeding fiscal years, to be in form acceptable to the Agent;
(d) as soon as available, copies of all notices, reports,
definitive proxy or other statements and other documents sent by Borrower to
its shareholders, to the holders of any of its debentures or bonds or the
trustee of any indenture securing the same or pursuant to which they be issued,
or sent by Borrower (in final form) to any securities exchange or over the
counter authority or system, or to the Securities and Exchange Commission or
any similar federal agency having regulatory jurisdiction over the issuance of
Borrower's securities; and
(e) within ten (10) days of any Bank's written request, such
other information about the financial condition, properties and operations of
any Company as such Bank may from time to time reasonably request, which
information shall be submitted in form and detail satisfactory to such Bank and
certified by an officer of the Company or Companies in question.
SECTION 5.4. FINANCIAL RECORDS. Borrower and each
Subsidiary will at all times maintain true and complete records and books of
account including, without limiting the generality of the foregoing,
appropriate reserves for possible losses and liabilities, all in accordance
with generally accepted accounting principles applied on a basis not
inconsistent with
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present accounting procedures, and at all reasonable times (during normal
business hours and upon notice to Borrower) permit the Banks to examine that
Company's books and records and to make excerpts therefrom and transcripts
thereof.
SECTION 5.5. FRANCHISES. Borrower and each Consolidated
Subsidiary will preserve and maintain at all times its existence, rights and
franchises.
SECTION 5.6. ERISA COMPLIANCE. Neither Borrower nor any
Consolidated Subsidiary will incur any material accumulated funding deficiency
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations thereunder, or any material
liability to the Pension Benefit Guaranty Corporation, established thereunder
in connection with any Plan. Borrower will furnish to the Banks (a) as soon as
possible and in any event within thirty (30) days after Borrower or such
Consolidated Subsidiary knows or has reason to know that any Reportable Event
with respect to any Plan has occurred, a statement of the chief financial
officer of Borrower or such Consolidated Subsidiary setting forth details as to
such Reportable Event and the action which Borrower or such Consolidated
Subsidiary proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event given to the Pension Benefit Guaranty
Corporation if a copy of such notice is available to Borrower or such
Consolidated Subsidiary, (b) promptly after the filing thereof with the
Internal Revenue Service, copies of each annual report with respect to each
Plan established or maintained by Borrower or such Consolidated subsidiary for
each plan year, including (i) where required by law, a statement of assets and
liabilities of such Plan as of the end of such plan year and statements of
changes in fund balance and in financial position, or a statement of changes in
net assets available for plan benefits, for such plan year, certified by an
independent public accountant satisfactory to the Banks and (ii) an actuarial
statement of such Plan applicable to such plan year, certified by an enrolled
actuary of recognized standing acceptable to the Banks, and (c) promptly after
receipt thereof a copy of any notice Borrower or such Consolidated Subsidiary,
or any member of the Controlled Group may receive from the Pension Benefit
Guaranty Corporation or the Internal Revenue Service with respect to any Plan
administered by Borrower or such Consolidated Subsidiary; provided, that this
latter clause shall not apply to notices of general application promulgated by
the Pension Benefit Guaranty Corporation or the Internal Revenue Service.
Borrower will promptly notify the Banks of any material taxes assessed,
proposed to be assessed or which Borrower has reason to believe may be assessed
against Borrower by the Internal Revenue Service with respect to any Plan. As
used in this Section "material" means the measure of a matter of significance
which shall be determined as being an amount equal to five per cent (5%) of the
Consolidated Net Worth of Borrower and its Consolidated Subsidiaries.
SECTION 5.7. WORKING CAPITAL. Borrower will not suffer
or permit the Consolidated Net Current Assets at any time to fall below the
current minimum amount required, which current minimum amount required shall be
(a) Fifty Million Dollars ($50,000,000) on March 31, 1995 through December 30,
1996, (b) Seventy Million Dollars ($70,000,000) on December 31, 1996 through
December 30, 1997 and (c) Eighty Million Dollars ($80,000,000) on December 31,
1997 and thereafter, based upon Borrower's financial statements for the most
recent calendar quarter. Borrower and its Consolidated Subsidiaries will
maintain at all times the
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ratio of Current Assets to Current Liabilities of no less than the current
minimum ratio required, which current minimum ratio required shall be (a) 1.75
to 1.00 on March 31, 1995 through December 30, 1996, (b) 2.00 to 1.00 on
December 31, 1996 through December 30, 1997, and (c) 2.25 to 1.00 on December
31, 1997 and thereafter, based upon Borrower's financial statements for the
most recent calendar quarter.
SECTION 5.8. CASH-FLOW COVERAGE. Borrower and its
Consolidated Subsidiaries will maintain at all times a ratio of Consolidated
Cash-In-Flow to Consolidated Cash-Out-Flow of no less than the current minimum
ratio required, which current minimum ratio required shall be (a) 1.75 to 1.00
on March 31, 1995 through December 30, 1995, (b) 2.15 to 1.00 on December 31,
1995, (c) 1.35 to 1.00 on January 1, 1996 through December 31, 1996, (d) 1.90
to 1.00 on January 1, 1997 through December 31, 1997, and (e) 2.00 to 1.00 on
January 1, 1998 and thereafter, based upon Borrower's financial statements for
the most recent calendar quarter and the fiscal year to date period ended at
the end of such quarter.
SECTION 5.9. NET WORTH. Borrower will not suffer or
permit the Consolidated Net Worth of Borrower and its Consolidated Subsidiaries
at any time to fall below the current minimum amount required, which current
minimum amount required shall be Forty Five Million Dollars ($45,000,000) on
March 31, 1995 through December 30, 1995, (b) Fifty Nine Million Dollars
($59,000,000) on December 31, 1995 through December 30, 1996, (c) Seventy
Three Million Dollars ($73,000,000) on December 31, 1996 through December 30,
1997, and (c) Ninety Five Million Dollars ($95,000,000) on December 31, 1997
and thereafter, based upon Borrower's financial statements for the most recent
calendar quarter; provided, however, that in the event that Borrower's
Consolidated Net Worth, as of March 31, 1995, is (i) below the current minimum
amount required and such decreased Consolidated Net Worth is solely
attributable to a decrease in the acquired opening balances of RB&W Corporation
and the write-off of assets of RB&W Corporation and the establishment of
reserves and valuation accounts relating thereto (hereinafter referred to as
the "Write-Down"), and (ii) not less than Forty-One Million Dollars
($41,000,000), then Borrower shall have until May 15, 1995 to enter into an
amendment to this Section, in form and substance satisfactory to the Banks,
which takes into account the Write-Down, and prior to May 15, 1995, such
decreased Consolidated Net Worth shall not constitute a Possible Default
hereunder.
SECTION 5.10. LEVERAGE. Borrower and its Consolidated
Subsidiaries will not suffer or permit at any time the ratio of (a) Total
Liabilities minus Subordinated indebtedness to (b) Consolidated Net Worth
(hereinafter referred to as "Leverage Ratio"), to exceed (i) 4.00 to 1.00 on
March 31, 1995 through December 30, 1995, (ii) 3.00 to 1.00 on December 31,
1995 through December 30, 1996, (iii) 2.25 to 1.00 on December 31, 1996 through
December 30, 1997, and (iv) 1.65 to 1.00 on December 31, 1997 and thereafter,
based upon Borrower's financial statements for the most recent calendar
quarter; provided, however, that in the event that (A) Borrower's Consolidated
Net Worth, as of March 31, 1995, is (1) below the current minimum amount
required in Section 5.9 hereof, and such decreased Consolidated Net Worth is
solely attributable to a decrease in the acquired opening balances of RB&W
Corporation and the write-off of assets of RB&W Corporation and the
establishment of reserves and valuation accounts relating thereto (the
"Write-Down"), and (2) not less than Forty-One Million Dollars ($41,000,000)
and (B) Borrower's Leverage Ratio is no greater than 4.25 to 1.00, then
Borrower
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shall have until May 15, 1995 to enter into an amendment to this Section, in
form and substance satisfactory to the Banks, which takes into account the
Write-Down, and prior to May 15, 1995, such increased Leverage Ratio shall not
constitute a Possible Default hereunder.
SECTION 5.11. BORROWING. Borrower will not create, incur
or have outstanding or permit any Subsidiary to create, incur or have
outstanding any obligation for borrowed money or any Funded Indebtedness of any
kind; provided, that this Section shall not apply to (a) the loans evidenced by
the Notes issued pursuant to this credit agreement; (b) any loans granted to
Borrower evidenced by promissory notes issued pursuant to any other agreement
hereafter in effect so long as the aggregate principal amount of all such loans
does not exceed Two Hundred Fifty Thousand Dollars ($250,000) at any one time
outstanding; (c) the indebtedness set forth in Annex 2 attached hereto and made
a part hereof; (d) indebtedness which may be incurred in connection with
Borrower's acquisition, pursuant to the terms of Section 5.16 hereof, of Utica
Corporation, so long as (i) such indebtedness is Subordinated by written
agreement with the Agent and the Banks, and (ii) such indebtedness does not
exceed the amount of Six Million Two Hundred Thousand Dollars ($6,200,000); (e)
the indebtedness of RB&W Corporation to GE Credit Corporation so long as (i)
such indebtedness does not exceed the amount of Thirty Million Dollars
($30,000,000), and (ii) all such indebtedness is paid in full on or before
April 30, 1995; or (f) loans to Subsidiaries from Borrower.
SECTION 5.12. LIENS. Borrower will not and will not
permit any Subsidiary to create, assume or suffer to exist any lien upon any of
its property or assets whether now owned or hereafter acquired; provided that
this Section shall not apply to the following:
(a) liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings;
(b) other statutory liens incidental to the conduct of its
business or the ownership of its property and assets which (i) were not
incurred in connection with the borrowing of money or the obtaining of advances
or credit, and (ii) which do not in the aggregate materially detract from the
value of its property or assets or materially impair the use thereof in the
operation of its business;
(c) liens on property or assets of a Consolidated Subsidiary
to secure obligations of such Consolidated Subsidiary to Borrower or another
Consolidated Subsidiary;
(d) purchase money security interests or liens on fixed
assets securing the loans pursuant to Section 5.11 (b) hereof;
(e) liens on fixed assets securing the loans pursuant to
Section 5.11 (c) hereof; and
(f) liens on fixed assets securing the loans pursuant to
Section 5.11 (e) hereof, so long as such liens and financing statements
relating thereto are terminated on or prior to April 30, 1995, and evidence of
such termination is provided to the Agent on or before May 15, 1995.
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Borrower will not and will not permit any Consolidated Subsidiary to enter into
any contract or agreement which would prohibit the Agent or the Banks from
acquiring a security interest, mortgage or other lien on, or a collateral
assignment of, any of the property or assets of Borrower and/or any of its
Consolidated Subsidiaries.
SECTION 5.13. REGULATIONS U and X. Borrower will not nor
will it permit any Subsidiary to take any action that would result in any
non-compliance of the loans made hereunder with Regulations U and X of the
Board of Governors of the Federal Reserve System.
SECTION 5.14. INVESTMENTS. No Company will (a) create,
acquire or hold any Subsidiary, (b) make or hold any investment in any stocks,
bonds or securities of any kind, (c) be or become a party to any joint venture
or other partnership without the Bank's prior consent (which shall not be
unreasonably withheld), (d) make or keep outstanding any advance or loan, or
(e) be or become a Guarantor of any kind, except guarantees securing only
indebtedness of the Companies incurred pursuant to this credit agreement;
provided, that this Section shall not apply to (i) any endorsement of a check
or other medium of payment for deposit or collection through normal banking
channels or similar transaction in the normal course of business, (ii) any
investment in direct obligations of the United States of America or in
certificates of deposit issued by a member bank of the Federal Reserve System,
(iii) any investment in commercial paper or securities which at the time of
such investment is assigned the highest quality rating in accordance with the
rating systems employed by either Moody's Investor Service, Inc. or Standard
and Poor's Corporation; (iv) the holding of Subsidiaries listed on Annex 3
attached hereto and made a part hereof; (v) the holding of Subsidiaries
acquired pursuant to Section 5.16 hereof; (vi) the creation of a Subsidiary to
make an acquisition pursuant to Section 5.16 hereof, so long as such Subsidiary
is a Guarantor of Payment; (vii) any loan to a Subsidiary from Borrower; (viii)
any investment of a Subsidiary of up to One Million Dollars ($1,000,000) in the
common stock of a corporation that such Subsidiary is considering acquiring, so
long as (A) such Subsidiary is a Guarantor of Payment, (B) the investment of
all Companies for such purposes does not exceed the aggregate amount of Three
Million Dollars ($3,000,000) and (C) the stock acquired by all Companies in any
one corporation shall not exceed the amount of One Million Dollars
($1,000,000), unless acquired pursuant to the terms of Section 5.16 hereof; and
(ix) the creation of new Subsidiaries, so long as (A) the total assets of each
such Subsidiary at all times is less than the amount of Two Hundred Fifty
Thousand Dollars ($250,000), and (B) the total assets of all such new
Subsidiaries shall not exceed the aggregate amount of One Million Dollars
($1,000,000). In the event of the creation of any Subsidiary permitted
hereunder, Borrower shall provide to the Banks prompt written notice of such
creation. In the event that the total assets of any Subsidiary which is not a
Guarantor of Payment shall become or are equal to or greater than Two Hundred
Fifty Thousand Dollars ($250,000), Borrower shall provide the Banks with prompt
written notice of such asset value.
SECTION 5.15. MERGER AND SALE OF ASSETS. Borrower will not
merge or consolidate with nor permit any Subsidiary to merge or consolidate
with any other corporation or sell, lease or transfer or otherwise dispose of
all or, during any twelve-month period, a substantial part of its assets to any
person or entity, except that if no Possible Default shall then exist or
immediately thereafter will begin to exist,
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(a) any Consolidated Subsidiary, other than RB&W
Corporation, may merge with (i) Borrower (provided that Borrower shall be the
continuing or surviving corporation) or (ii) any one or more other Consolidated
Subsidiaries, provided that either (x) the continuing or surviving corporation
shall be a Wholly-Owned Consolidated Subsidiary, or (y) after giving effect to
any merger pursuant to this sub-clause (ii), Borrower and/or one or more
Wholly-Owned Consolidated Subsidiaries shall own not less than the same
percentage of the outstanding Voting Stock of the continuing or surviving
corporation as Borrower and/or one or more Wholly-Owned Consolidated
Subsidiaries owned of the merged Consolidated Subsidiary immediately prior to
such merger, or
(b) any Consolidated Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to (i) Borrower, (ii) any Wholly-Owned
Consolidated Subsidiary, other than RB&W Corporation, or (iii) any Consolidated
Subsidiary, other than RB&W Corporation, of which Borrower and/or one or more
Wholly-Owned Consolidated Subsidiaries shall own not less than the same
percentage of Voting Stock as Borrower and/or one or more Wholly-Owned
Consolidated Subsidiaries then own of the Consolidated Subsidiary making such
sale, lease, transfer or other disposition.
SECTION 5.16 ACQUISITIONS. Borrower will not acquire nor
permit any Subsidiary to acquire the assets or stock of any other corporation
(except as permitted by Section 5.14 (viii)) or other legal entity unless all
of the following conditions are met:
(a) the acquisition of any legal entity (including
Subsidiaries and affiliated legal entities), or the purchase of a substantial
portion of the assets of any legal entity, shall not exceed the aggregate
purchase price (including borrowed funds, cash, the issuance of securities or
notes, the assumption or incurring of liabilities (direct or contingent), the
payment of consulting fees or fees for a covenant not to compete and any other
consideration paid for the purchase) of Ten Million Dollars ($10,000,000),
without the prior written approval of the Majority Banks. In the event that
approval of the Banks is desired, pursuant to this subpart (a), (i) Borrower
shall request that a meeting of the Banks be arranged as soon as possible, (ii)
Borrower shall provide to the Banks appropriate and complete information
(including such information as shall be requested by any Bank) for the
evaluation of the acquisition, and (iii) the Banks shall provide to Borrower,
through the Agent, a response to the request for approval of the acquisition
within fifteen (15) Cleveland Banking Days after the termination of the
aforesaid meeting of the Banks;
(b) commencing on the Closing Date, there shall be no more
than four (4) acquisitions within any twelve (12) month period, unless the
Majority Banks shall consent in writing to more than four such acquisitions;
(c) the acquisition shall be of a corporation organized and
located within the United States, unless the Majority Banks shall consent in
writing to a foreign acquisition;
(d) the acquisition shall be in a line of business similar,
as determined by the Majority Banks, to the current lines of business of
Borrower and its Consolidated Subsidiaries, unless the Majority Banks shall
consent in writing to an unrelated line of business;
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(e) the acquisition shall be a friendly acquisition such
that the Board of Directors and, to the extent necessary, the shareholders of
the legal entity to be acquired, have approved the acquisition, unless the
Majority Banks shall consent in writing to an unfriendly acquisition;
(f) Borrower shall have provided the Agent, at least
fourteen (14) Cleveland Banking Days prior to the acquisition, with copies of
the Purchase Agreement, pro forma financial projections for three (3) years,
certifications of compliance with all financial covenants and of no default
under the credit agreement, both prior to and subsequent to the acquisition
(after taking the acquisition into effect) and such other financial information
as the Banks may request;
(g) the aggregate amount of borrowed money, other than
indebtedness which has been Subordinated, utilized for all such acquisitions
shall not exceed Twenty Five Million Dollars ($25,000,000); and
(h) the acquired legal entity shall execute and deliver to
the Agent at the time of such acquisition, a Guaranty of Payment of the Debt,
in form and substance satisfactory to the Agent and the Majority Banks.
SECTION 5.17. NOTICE. Borrower will cause its treasurer,
or in his/her absence another officer designated by the treasurer, to promptly
notify the Banks whenever any Possible Default may occur hereunder or any other
representation or warranty made in Article VI hereof or elsewhere in this
credit agreement or in any Related Writing may for any reason cease in any
material respect to be true and complete.
SECTION 5.18. ENVIRONMENTAL COMPLIANCE. Borrower and each
Subsidiary will comply in all material respects with any and all Environmental
Laws including, without limitation, all Environmental Laws in jurisdictions in
which Borrower or any Subsidiary owns or operates a facility or site, arranges
for disposal or treatment of hazardous substances, solid waste or other wastes,
accepts for transport any hazardous substances, solid waste or other wastes or
holds any interest in real property or otherwise. Borrower will furnish to the
Banks promptly after receipt thereof a copy of any notice Borrower or any
Subsidiary may receive from any governmental authority, private person or
entity or otherwise that any material litigation or proceeding pertaining to
any environmental, health or safety matter has been filed or is threatened
against Borrower or such Subsidiary, any real property in which Borrower or
such Subsidiary holds any interest or any past or present operation of Borrower
or such Subsidiary. Neither Borrower nor any Subsidiary will allow the release
or disposal of hazardous waste, solid waste or other wastes on, under or to any
real property in which Borrower or such Subsidiary holds any interest or
performs any of its operations, in violation of any Environmental Law. As used
in this Section, "litigation or proceeding" means any demand, claim, notice,
suit, suit in equity action, administrative action, investigation or inquiry
whether brought by any governmental authority, private person or entity or
otherwise. Borrower shall defend, indemnify and hold the Banks harmless against
all costs, expenses, claims, damages, penalties and liabilities of every kind
or nature whatsoever (including attorneys fees) arising out of or resulting
from the noncompliance of Borrower or any Subsidiary with any Environmental
Law.
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SECTION 5.19. PLAN. Neither Borrower nor any Consolidated
Subsidiary will suffer or permit any Plan to be amended if, as a result of such
amendment, the current liability under the Plan is increased to such an extent
that security is required pursuant to Section 307 of the Employee Retirement
Income Security Act of 1974, as amended from time to time. As used herein,
"current liability" means current liability as defined in Section 307 of such
Act.
SECTION 5.20. USE OF PROCEEDS. Borrower's use of the
proceeds of the Revolving Credit Notes shall be solely for working capital and
other general corporate purposes of Borrower and its Consolidated Subsidiaries
and for acquisition purposes consistent with the conditions set forth in
Section 5.16 hereof. Borrower's use of the proceeds of the Term Notes shall be
solely for the acquisition by Borrower of RB&W Corporation and Capital
Expenditures (as may be permitted pursuant to Section 5.21 hereof) of RB&W
Corporation in connection with such acquisition.
SECTION 5.21. CAPITAL EXPENDITURES. Borrower and its
Consolidated Subsidiaries will not invest in Capital Expenditures (a) more than
an aggregate amount equal to Twelve Million Dollars ($12,000,000) during the
1995 fiscal year of Borrower, and (b) more than an amount equal to Ten Million
Dollars ($10,000,000) during the 1996 fiscal year of Borrower and during each
fiscal year of Borrower thereafter.
SECTION 5.22. CORPORATE NAMES. No Company will change
its corporate name, unless, in each case, Borrower shall provide each Bank with
thirty (30) days prior written notice thereof.
SECTION 5.23. LEASE RENTALS. Borrower and its
Consolidated Subsidiaries will not pay or commit themselves to pay lease
rentals on operating leases, for all Companies, in excess of the aggregate sum
of Seven Million Dollars ($7,000,000) during any fiscal year of Borrower,
commencing with the current fiscal year.
SECTION 5.24. SUBSIDIARY GUARANTIES. Each Subsidiary or
other affiliate of Borrower, created, acquired or held subsequent to the
Closing Date, shall execute and deliver to the Agent a Guaranty of Payment of
all of the Debt, such agreement to be in form and substance acceptable to the
Agent and the Majority Banks; provided, however, that a Subsidiary shall not
be required to execute such Guaranty of Payment so long as (a) the total assets
of such Subsidiary are less than the amount of Two Hundred Fifty Thousand
Dollars ($250,000) and (b) the aggregate of the total assets of all of such
Subsidiaries with total asset values of less than Two Hundred Fifty Thousand
Dollars ($250,000) do not exceed the aggregate amount of One Million Dollars
($1,000,000).
SECTION 5.25. TOTAL DEBT TO CAPITALIZATION. Borrower and
its Consolidated Subsidiaries will not suffer or permit at any time the ratio
of (a) Total Funded Indebtedness to (b) Total Funded Indebtedness plus Equity,
to exceed (i) .60 to 1.00 on March 31, 1995 through December 30, 1995, (ii) .55
to 1.00 on December 31, 1995 through December 30, 1996, (iii) .48 to 1.00 on
December 31, 1996 through December 30, 1997, and (iv) .45 to
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1.00 on December 31, 1997 and thereafter, based upon Borrower's financial
statements for the most recent calendar quarter.
SECTION 5.26. SALE OF RB&W ASSETS. In the event that
Borrower or RB&W Corporation sells any assets of RB&W Corporation pursuant to a
bulk sale, Borrower shall pay to the Agent for the benefit of the Banks, on a
pro rata basis, an amount equal to seventy-five percent (75%) of the proceeds
of such sale as a mandatory partial prepayment of the Term Notes. Any such
prepayment shall be subject to the prepayment penalties described in Section
2.4 hereof.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
Subject only to such exceptions, if any, as may be fully disclosed
in an officer's certificate or written opinion of counsel furnished by Borrower
to each Bank prior to the execution and delivery hereof, Borrower represents
and warrants as follows:
SECTION 6.1. EXISTENCE. Borrower is a duly organized and
validly existing Ohio corporation and is in good standing in the office of
Ohio's Secretary of State.
SECTION 6.2. RIGHT TO ACT. No registration with or
approval of any governmental agency of any kind is required for the due
execution and delivery or for the enforceability of this credit agreement and
any Note issued pursuant to this credit agreement. Borrower has legal power and
right to execute and deliver this credit agreement and any Note issued pursuant
to this credit agreement and to perform and observe the provisions of this
credit agreement and any Note issued pursuant hereto. By executing and
delivering this credit agreement and any Note issued pursuant to this credit
agreement and by performing and observing the provisions of this credit
agreement and any Note issued pursuant hereto, Borrower will not violate any
existing provision of its articles of incorporation, code of regulations or
by-laws or any applicable law or violate or otherwise become in default under
any existing contract or other obligation binding upon Borrower. The officers
executing and delivering this credit agreement on behalf of Borrower have been
duly authorized to do so, and this credit agreement and any Note, when
executed, are legally binding upon Borrower in every respect.
SECTION 6.3. LITIGATION AND LIENS. No litigation or
proceeding is pending or threatened against Borrower or its Subsidiaries before
any court or any administrative agency which is reasonably expected to have a
material adverse effect on Borrower. The Internal Revenue Service has not
alleged any material default by Borrower in the payment of any tax or
threatened to make any material assessment in respect thereof.
SECTION 6.4. ERISA COMPLIANCE. Neither Borrower nor any
Consolidated Subsidiary has incurred any material accumulated funding
deficiency within the meaning of the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder. No
Reportable Event has occurred with respect to any Plan. The Pension Benefit
Guaranty Corporation, established thereunder, has not asserted that Borrower or
any
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Consolidated Subsidiary has incurred any material liability in connection with
any Plan. No lien has been attached and no person has threatened to attach a
lien on any property of Borrower or any Consolidated Subsidiary as a result of
Borrower's or any Consolidated Subsidiary's failing to comply with such act or
regulation. As used in this Section "material" means the measure of a matter of
significance which shall be determined as being an amount equal to at least
five per cent (5%) of the Consolidated Net Worth of Borrower and its
Consolidated Subsidiaries.
SECTION 6.5. ACTUARIAL VALUATION REPORTS. To the best of
Borrower's knowledge, the actuarial valuation reports respectively prepared and
certified by the actuaries and employee benefit consultants of Borrower and its
Consolidated Subsidiaries, with respect to each Plan as of the end of
Borrower's preceding fiscal year, copies of which actuarial valuation reports
have been furnished to the Banks, fairly present the actuarial condition of
each Plan as of the end of Borrower's preceding fiscal year and the annual
contribution requirements for the year in which this credit agreement is
executed.
SECTION 6.6. ENVIRONMENTAL COMPLIANCE. Borrower and each
Subsidiary are in substantial compliance with any and all Environmental Laws
including, without limitation, all Environmental Laws in all jurisdictions in
which Borrower or any Subsidiary owns or operates, or has owned or operated, a
facility or site, arranges or has arranged for disposal or treatment of
hazardous substances, solid waste or other wastes, accepts or has accepted for
transport any hazardous substances, solid waste or other wastes or holds or has
held any interest in real property or otherwise. No material litigation or
proceeding arising under, relating to or in connection with any Environmental
Law is pending or, to the best of their knowledge, threatened against Borrower
or any Subsidiary, any real property in which Borrower or any Subsidiary holds
or has held an interest or any past or present operation of Borrower or any
Subsidiary. No release, threatened release or disposal of hazardous waste,
solid waste or other wastes is occurring, or has occurred (other than those
that are currently being cleaned up in accordance with Environmental Laws), on,
under or to any real property in which Borrower or any Subsidiary holds any
interest or performs any of its operations, in violation of any Environmental
Law. As used in this Section, "litigation or proceeding" means any demand,
claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority, private
person or entity or otherwise.
SECTION 6.7. SOLVENCY. Borrower has received
consideration which is the reasonable equivalent value of the obligations and
liabilities that Borrower has incurred to the Banks. Borrower is not insolvent
as defined in any applicable state or federal statute, nor will Borrower be
rendered insolvent by the execution and delivery of this credit agreement or
any Note to the Banks. Borrower is not engaged or about to engage in any
business or transaction for which the assets retained by it shall be an
unreasonably small capital, taking into consideration the obligations to the
Banks incurred hereunder. Borrower does not intend to, nor does it believe that
it will, incur debts beyond its ability to pay them as they mature.
SECTION 6.8. FINANCIAL STATEMENTS. Borrower's and its
Consolidated Subsidiaries' most recent consolidated financial statements,
furnished to each Bank, are true and complete, have been prepared in accordance
with generally accepted accounting principles applied
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on a basis consistent with those used by Borrower and its Consolidated
Subsidiaries during Borrower's immediately preceding full fiscal year, except
as stated therein, and fairly present Borrower's and its Consolidated
Subsidiaries' financial condition as of the date of such financial statements
and the results of their operations for the interim period then ending. Since
that date, there has been no material adverse change in Borrower's and its
Consolidated Subsidiaries' financial condition, properties or business nor any
change in their accounting procedures. As used in this Section, "material"
means the measure of a matter of significance which shall be determined as
being an amount equal to at least ten per cent (10%) of the Consolidated Net
Worth of Borrower and its Consolidated Subsidiaries.
SECTION 6.9. REGULATIONS. Borrower is not engaged
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any "margin stock" (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
of the United States of America). Neither the granting of any loans hereunder
(or any conversion thereof) nor the use of the proceeds of such loans will
violate, or be inconsistent with, the provisions of Regulation U or X of said
Board of Governors.
SECTION 6.10 LIENS AND SECURITY INTERESTS. On the
Closing Date, except for liens permitted pursuant to Section 5.12 hereof, (a)
there is no financing statement outstanding covering any personal property of
Borrower or of any Subsidiary, other than a financing statement in favor of the
Agent on behalf of the Banks, if any; (b) there is no mortgage outstanding
covering any real property of Borrower or of any Subsidiary, other than a
mortgage in favor of the Agent on behalf of the Banks, if any; and (c) no real
or personal property of Borrower or of any Subsidiary is subject to any
security interest or lien of any kind other than any security interest or lien
which may be granted to the Agent on behalf of the Banks. On the Closing Date,
neither Borrower nor any Consolidated Subsidiary has entered into any contract
or agreement which would prohibit the Agent or the Banks from acquiring a
security interest, mortgage or other lien on, or a collateral assignment of,
any of the property or assets of Borrower and/or any of its Consolidated
Subsidiaries.
SECTION 6.11. DEFAULTS. No Possible Default exists
hereunder, nor will any begin to exist immediately after the execution and
delivery hereof.
ARTICLE VII. EVENTS OF DEFAULT
Each of the following shall constitute an event of default hereunder:
SECTION 7.1. PAYMENTS. If the principal of or interest
on any Note or any commitment or other fee shall not be paid in full punctually
when due and payable and shall remain unpaid for a period of five (5)
consecutive Cleveland Banking Days.
SECTION 7.2. SPECIAL COVENANTS. If Borrower, any
Guarantor of Payment or any Consolidated Subsidiary shall fail or omit to
perform and observe Sections 5.7, 5.8, 5.9, 5.10, 5.11, 5.15, 5.16, 5.20, 5.25
OR 5.26 hereof.
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SECTION 7.3. OTHER COVENANTS. If Borrower, any Guarantor
of Payment or any Consolidated Subsidiary shall fail or omit to perform and
observe any agreement or other provision (other than those referred to in
Sections 7.1 or 7.2 hereof) contained or referred to in this credit agreement
or any Related Writing that is on Borrower's part to be complied with, and that
Possible Default shall not have been fully corrected within fifteen (15) days
after the giving of written notice thereof to Borrower by Agent or any Bank
that the specified Possible Default is to be remedied.
SECTION 7.4. WARRANTIES. If any representation, warranty
or statement made in or pursuant to this credit agreement or any Related
Writing or any other material information furnished by Borrower, any Guarantor
of Payment or any Consolidated Subsidiary to the Banks or any thereof or any
other holder of any Note, shall be false or erroneous in any material respect.
SECTION 7.5. CROSS DEFAULT. If Borrower, any Guarantor
of Payment or any Consolidated Subsidiary shall default in the payment of
principal or interest due and owing upon any other obligation for borrowed
money in excess of Fifty Thousand Dollars ($50,000) beyond any period of grace
provided with respect thereto or in the performance or observance of any other
agreement, term or condition contained in any agreement under which such
obligation is created, if the effect of such default is to accelerate the
maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to its stated maturity.
SECTION 7.6. TERMINATION OF PLAN. If (a) any Reportable
Event occurs and the Banks, in their sole determination, deem such Reportable
Event to constitute grounds (i) for the termination of any Plan by the Pension
Benefit Guaranty Corporation or (ii) for the appointment by the appropriate
United States district court of a trustee to administer any Plan and such
Reportable Event shall not have been fully corrected or remedied to the full
satisfaction of the Banks within thirty (30) days after giving of written
notice of such determination to Borrower by the Banks or (b) any Plan shall be
terminated within the meaning of Title IV of the Employee Retirement Income
Security Act of 1974, as amended, or (c) a trustee shall be appointed by the
appropriate United States district court to administer any Plan, or (d) the
Pension Benefit Guaranty Corporation shall institute proceedings to terminate
any Plan or to appoint a trustee to administer any Plan; provided, however,
that such events described in clauses (a), (b), (c) or (d) above shall only
constitute an Event of Default if the "amount of unfunded benefit liabilities"
(as defined in Title IV of ERISA) of such Plan shall exceed Fifty Thousand
Dollars ($50,000).
SECTION 7.7. CHANGE IN MANAGEMENT/OWNERSHIP. If Edward
Crawford shall cease to own at least twenty percent (20%) of the outstanding
stock of Borrower or shall cease to perform his role as chief executive officer
of Borrower.
SECTION 7.8. MONEY JUDGMENT. A final judgment or order
for the payment of money shall be rendered against Borrower, any Guarantor of
Payment or any Consolidated Subsidiary by a court of competent jurisdiction,
which remains unpaid or unstayed and undischarged for a period (during which
execution shall not be effectively stayed) of thirty (30)
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days after the date on which the right to appeal has expired, provided that the
aggregate of all such judgments shall exceed Five Hundred Thousand Dollars
($500,000).
SECTION 7.9. SOLVENCY. If Borrower, any Guarantor of
Payment or any Consolidated Subsidiary shall (a) discontinue business (except
as the result of a merger into, or a transfer of its assets and business to
Borrower or a Guarantor of Payment as may be permitted hereunder and except as
to a Subsidiary with total assets having a fair market value of less than Two
Hundred Fifty Thousand Dollars ($250,000)), or (b) generally not pay its debts
as such debts become due, or (c) make a general assignment for the benefit of
creditors, or (d) apply for or consent to the appointment of a receiver, a
custodian, a trustee, an interim trustee or liquidator of all or a substantial
part of its assets, or (e) be adjudicated a debtor or have entered against it
an order for relief under Title 11 of the United States Code, as the same may
be amended from time to time, or (f) file a voluntary petition in bankruptcy or
file a petition or an answer seeking reorganization or an arrangement with
creditors or seeking to take advantage of any other law (whether federal or
state) relating to relief of debtors, or admit (by answer, by default or
otherwise) the material allegations of a petition filed against it in any
bankruptcy, reorganization, insolvency or other proceeding (whether federal or
state) relating to relief of debtors, or (g) suffer or permit to continue
unstayed and in effect for thirty (30) consecutive days any judgment, decree or
order entered by a court of competent jurisdiction, which approves a petition
seeking its reorganization or appoints a receiver, custodian, trustee, interim
trustee or liquidator of all or a substantial part of its assets, or (h) take,
or omit to take, any action in order thereby to effect any of the foregoing.
ARTICLE VIII. REMEDIES UPON DEFAULT
Notwithstanding any contrary provision or inference herein or
elsewhere,
SECTION 8.1. OPTIONAL DEFAULTS. If any event of default
referred to in Section 7.1, 7.2., 7.3, 7.4, 7.5, 7.6, 7.7 or 7.8 hereof shall
occur, the Majority Banks shall have the right in their discretion, by
directing the Agent, on behalf of the Banks, to give written notice to
Borrower, to
(a) terminate the Commitments and the credits hereby
established, if not theretofore terminated, and, immediately upon such
election, the obligations of Banks, and each thereof, to make any further loan
or loans hereunder, and the obligation of the Agent to issue any Letter of
Credit hereunder, immediately shall be terminated, and/or
(b) accelerate the maturity of all of Borrower's Debt to the
Banks (if it be not already due and payable), whereupon all of Borrower's Debt
to the Banks shall become and thereafter be immediately due and payable in full
without any presentment or demand and without any further or other notice of
any kind, all of which are hereby waived by Borrower.
SECTION 8.2. AUTOMATIC DEFAULTS. If any event of default
referred to in Section 7.9 hereof shall occur,
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(a) all of the Commitments and the credits hereby
established shall automatically and immediately terminate, if not theretofore
terminated, and no Bank thereafter shall be under any obligation to grant any
further loan or loans hereunder, nor shall the Agent be obligated to issue any
Letter of Credit hereunder, and
(b) the principal of and interest on any Notes then
outstanding, and all of Borrower's Debt to the Banks, shall thereupon become
and thereafter be immediately due and payable in full (if it be not already due
and payable), all without any presentment, demand or notice of any kind, which
are hereby waived by Borrower.
SECTION 8.3. LETTERS OF CREDIT. If the maturity of the
Notes is accelerated pursuant to Sections 8.1 or 8.2 hereof, Borrower shall
immediately deposit with the Agent, as security for Borrower's and any
Guarantor of Payment's obligations to reimburse the Agent and the Banks for any
then outstanding Letters of Credit, cash equal to the sum of the aggregate
undrawn balance of any then outstanding Letters of Credit. The Agent and the
Banks are hereby authorized, at their option, to deduct any and all such
amounts from any deposit balances then owing by any Bank to or for the credit
or account of Borrower and its Subsidiaries or any thereof, as security for
Borrower's and any Guarantor of Payment's obligations to reimburse the Agent
and the Banks for any then outstanding Letters of Credit.
SECTION 8.4. OFFSETS. If there shall occur or exist any
Possible Default referred to in Section 7.9 hereof or if the maturity of the
Notes is accelerated pursuant to Section 8.1 or 8.2 hereof, each Bank shall
have the right at any time to set off against, and to appropriate and apply
toward the payment of, any and all Debt then owing by Borrower to that Bank
(including, without limitation, any participation purchased or to be purchased
pursuant to Section 8.5 hereof), whether or not the same shall then have
matured, any and all deposit balances and all other indebtedness then held or
owing by that Bank to or for the credit or account of Borrower, all without
notice to or demand upon Borrower or any other person, all such notices and
demands being hereby expressly waived by Borrower.
SECTION 8.5. EQUALIZATION PROVISION. Each Bank agrees
with the other Banks that if it, at any time, shall obtain any Advantage over
the other Banks or any thereof in respect of Borrower's Debt to the Banks
(except under Article III hereof), it will purchase from the other Banks, for
cash and at par, such additional participation in Borrower's Debt to the Banks
as shall be necessary to nullify the Advantage. If any such Advantage resulting
in the purchase of an additional participation as aforesaid shall be recovered
in whole or in part from the Bank receiving the Advantage, each such purchase
shall be rescinded, and the purchase price restored (but without interest
unless the Bank receiving the Advantage is required to pay interest on the
Advantage to the person recovering the Advantage from such Bank) ratably to the
extent of the recovery. Borrower agrees that any Bank so purchasing a
participation from the other Banks or any thereof pursuant to this Section may
exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Bank was a direct creditor of
Borrower in the amount of such participation.
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ARTICLE IX. THE AGENT
The Banks authorize Society National Bank and Society National Bank
hereby agrees to act as Agent for the Banks in respect of this credit agreement
upon the terms and conditions set forth elsewhere in this credit agreement, and
upon the following terms and conditions:
SECTION 9.1. APPOINTMENT AND AUTHORIZATION. Each Bank
hereby irrevocably appoints and authorizes the Agent to take such action as
Agent on its behalf and to exercise such powers hereunder as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. Neither the Agent nor any of its directors, officers,
attorneys or employees shall be liable for any action taken or omitted to be
taken by it or them hereunder or in connection herewith, except for its or
their own gross negligence or willful misconduct.
SECTION 9.2. NOTE HOLDERS. The Agent may treat the payee
of any Note as the holder thereof until written notice of transfer shall have
been filed with it signed by such payee and in form satisfactory to the Agent.
SECTION 9.3. CONSULTATION WITH COUNSEL. The Agent may
consult with legal counsel selected by it and shall not be liable for any
action taken or suffered in good faith by it in accordance with the opinion of
such counsel.
SECTION 9.4. DOCUMENTS. The Agent shall not be under a
duty to examine into or pass upon the validity, effectiveness, genuineness or
value of this credit agreement, the Notes, any other Related Writing furnished
pursuant hereto or in connection herewith or the value of any collateral
obtained hereunder, and the Agent shall be entitled to assume that the same are
valid, effective and genuine and what they purport to be.
SECTION 9.5. AGENT AND AFFILIATES. With respect to the
loans made hereunder, the Agent shall have the same rights and powers hereunder
as any other Bank and may exercise the same as though it were not the Agent,
and the Agent and its affiliates may accept deposits from, lend money to and
generally engage in any kind of business with Borrower or any Subsidiary or
affiliate of Borrower.
SECTION 9.6. KNOWLEDGE OF DEFAULT. It is expressly
understood and agreed that the Agent shall be entitled to assume that no
Possible Default has occurred and is continuing, unless the Agent has been
notified by a Bank in writing that such Bank considers that a Possible Default
has occurred and is continuing and specifying the nature thereof.
SECTION 9.7. ACTION BY AGENT. So long as the Agent shall
be entitled, pursuant to Section 9.6 hereof, to assume that no Possible Default
shall have occurred and be continuing, the Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising any rights
which may be vested in it by, or with respect to taking or refraining from
taking any action or actions which it may be able to take under or in respect
of, this credit agreement. The Agent shall incur no liability under or in
respect of this credit agreement by
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acting upon any notice, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper party
or parties, or with respect to anything which it may do or refrain from doing
in the reasonable exercise of its judgment, or which may seem to it to be
necessary or desirable in the premises.
SECTION 9.8. NOTICES, DEFAULT, ETC. In the event that
the Agent shall have acquired actual knowledge of any Possible Default, the
Agent shall promptly notify the Banks and will take such action and assert such
rights under this credit agreement as the Majority Banks shall direct and the
Agent shall inform the other Banks in writing of the action taken. The Agent
may take such action and assert such rights as it deems to be advisable, in its
discretion, for the protection of the interests of the holders of the Notes.
SECTION 9.9. INDEMNIFICATION OF AGENT. The Banks agree
to indemnify the Agent (to the extent not reimbursed by Borrower), ratably
according to the respective principal amounts of their Commitments from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in its capacity as agent in any way relating to or arising out of this
credit agreement or any action taken or omitted by the Agent with respect to
this credit agreement, provided that no Bank shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorney fees) or disbursements resulting
from the Agent's gross negligence, willful misconduct or from any action taken
or omitted by the Agent in any capacity other than as agent under this credit
agreement.
ARTICLE X. MISCELLANEOUS
SECTION 10.1. BANKS' INDEPENDENT INVESTIGATION. Each
Bank, by its signature to this credit agreement, acknowledges and agrees that
the Agent has made no representation or warranty, express or implied, with
respect to the creditworthiness, financial condition, or any other condition of
Borrower or any Subsidiary or with respect to the statements contained in any
information memorandum furnished in connection herewith or in any other oral or
written communication between the Agent and such Bank. Each Bank represents
that it has made and shall continue to make its own independent investigation
of the creditworthiness, financial condition and affairs of Borrower and any
Subsidiary in connection with the extension of credit hereunder, and agrees
that the Agent has no duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other information with
respect thereto (other than such notices as may be expressly required to be
given by Agent to the Banks hereunder), whether coming into its possession
before the granting of the first loans hereunder or at any time or times
thereafter.
SECTION 10.2. NO WAIVER; CUMULATIVE REMEDIES. No omission
or course of dealing on the part of Agent, any Bank or the holder of any Note
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the
34
<PAGE> 35
exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and in addition to any other rights, powers or
privileges held by operation of law, by contract or otherwise.
SECTION 10.3. AMENDMENTS, CONSENTS. No amendment,
modification, termination, or waiver of any provision of this credit agreement
or of the Notes nor consent to any variance therefrom, shall be effective
unless the same shall be in writing and signed by the Majority Banks and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. Notwithstanding the foregoing provision
to the contrary, the consent the holders of seventy-six percent (76%) of the
amount of the Commitments, or, if there is borrowing hereunder, the holders of
seventy-six percent (76%) of the amount of the Notes, shall be required with
respect to Sections 5.8, 5.9 and 5.25 hereof. Furthermore, anything herein to
the contrary notwithstanding, unanimous consent of the Banks shall be required
with respect to (a) the extension of maturity of the Notes, the payment date of
interest thereunder, or the payment of commitment or other fees or amounts
payable hereunder, (b) any reduction in the rate of interest on the Notes, or
in any amount of principal or interest due on any Note, or the payment of
commitment or other fees hereunder or any change in the manner of pro rata
application of any payments made by Borrower to the Banks hereunder, (c) any
change in any percentage voting requirement in this credit agreement, or (d)
the release of any Guarantor of Payment. Notice of amendments or consents
ratified by the Banks hereunder shall immediately be forwarded by Borrower to
all Banks. Each Bank or other holder of a Note shall be bound by any
amendment, waiver or consent obtained as authorized by this Section, regardless
of its failure to agree thereto.
SECTION 10.4 EXTENSION OF REVOLVING CREDITS. Upon the
written request of Borrower received by the Agent at least ninety (90) days
prior to the first and/or second anniversary of the Closing Date, the Banks
shall have the option of extending the revolving credit described in Section
2.1A for an additional year. Each such extension shall require the unanimous
written consent of each of the Banks. Upon each one year extension of the
Revolving Credit Commitment, whether or not occurring pursuant to this Section,
Borrower shall pay to Agent, on behalf of all Banks, an extension fee of
one-tenth of one percent (1/10%) of the Revolving Credit Commitment as
extended, such amount to be shared pro rata by the Banks in accordance with the
Commitment of each Bank. Such extension fee shall be payable on the date of
execution of documents relating to the extension and shall not be refundable in
any event. Such extension fee shall be in addition to all fees, costs and
other amounts payable under the terms of this credit agreement.
SECTION 10.5. INCREASE IN REVOLVING CREDIT COMMITMENT.
Upon the written request of Borrower received by the Agent, the Banks shall
have the option of increasing the amount of the Revolving Credit Commitment by
an additional Ten Million Dollars ($10,000,000). Such increase shall require
the unanimous written consent of each of the Banks. Such increase shall be
upon similar terms and conditions as are set forth in this credit agreement.
Borrower shall pay all fees, costs and other amounts payable in connection with
such increase.
35
<PAGE> 36
SECTION 10.6. NOTICES. All notices, requests, demands and
other communications provided for hereunder shall be in writing and, if to
Borrower, mailed or delivered to it, addressed to it at the address specified
on the signature pages of this credit agreement, if to a Bank, mailed or
delivered to it, addressed to the address of such Bank specified on the
signature pages of this credit agreement, or, as to each party, at such other
address as shall be designated by such party in a written notice to each of the
other parties. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or made when
delivered or forty-eight (48) hours after being deposited in the mails with
postage prepaid by registered or certified mail, addressed as aforesaid, or
sent by facsimile with telephonic confirmation of receipt, except that notices
from Borrower to Agent or the Banks pursuant to any of the provisions hereof
shall not be effective until received by Agent or the Banks.
SECTION 10.7. COSTS, EXPENSES AND TAXES. Borrower agrees
to pay on demand all costs and expenses of the Banks and Agent, including, but
not limited to, (a) administration and out-of-pocket expenses of Agent in
connection with the administration of this credit agreement, the Notes, the
collection and disbursement of all funds hereunder and the other instruments
and documents to be delivered hereunder, (b) extraordinary expenses of Agent or
the Banks in connection with the administration of this credit agreement, the
Notes and the other instruments and documents to be delivered hereunder, (c)
the reasonable fees and out-of-pocket expenses of special counsel for the
Banks, with respect thereto and of local counsel, if any, who may be retained
by said special counsel with respect thereto, and (d) all costs and expenses,
including reasonable attorney's fees, in connection with the restructuring or
enforcement of this credit agreement or any Related Writing. Borrower also
agrees to pay any expenses of the Banks and the Agent incurred in connection
with the preparation of this credit agreement and any Related Writings, so long
as attorneys fees incurred for preparation of the credit agreement, the
Guaranties of Payment and the Agent Fee Letter, exclusive of reimbursement of
out-of pocket costs and attorney fees relating to lien searches, do not exceed
the aggregate of Fifteen Thousand Dollars ($15,000). In addition, Borrower
shall pay any and all stamp and other taxes and fees payable or determined to
be payable in connection with the execution and delivery of this credit
agreement or the Notes, and the other instruments and documents to be delivered
hereunder, and agrees to save Agent and each Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees.
SECTION 10.8. INDEMNIFICATION. Borrower agrees to defend,
indemnify and hold harmless the Agent and the Banks from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorney fees), or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted against
the Agent or any Bank in connection with any investigative, administrative or
judicial proceeding (whether or not such Bank or the Agent shall be designated
a party thereto) or any other claim by any person or entity relating to or
arising out of this credit agreement or any actual or proposed use of proceeds
of the loans hereunder or any activities of Borrower, any Guarantor of Payment,
any Consolidated Subsidiary or any of their affiliates; provided that no Bank
nor the Agent shall have the right to be indemnified under this Section for its
own gross negligence or willful misconduct as determined by a court of
competent jurisdiction. All
36
<PAGE> 37
obligations provided for in this Section 10.7 shall survive any termination of
this credit agreement.
SECTION 10.9. CAPITAL ADEQUACY. To the extent not covered
by Article III hereof, if any Bank shall have determined, after the date
hereof, that the adoption of any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its lending office) with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's capital (or the capital of
its holding company) as a consequence of its obligations hereunder to a level
below that which such Bank (or its holding company) could have achieved but for
such adoption, change or compliance (taking into consideration such Bank's
policies or the policies of its holding company with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from time to
time, within 15 days after demand by such Bank (with a copy to the Agent),
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its holding company) for such reduction. Each Bank
will designate a different lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of any Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods. Failure on the part of any
Bank to demand compensation for any reduction in return on capital with respect
to any period shall not constitute a waiver of such Bank's rights to demand
compensation for any reduction in return on capital in such period or in any
other period. The protection of this Section shall be available to each Bank
regardless of any possible contention of the invalidity or inapplicability of
the law, regulation or other condition which shall have been imposed.
SECTION 10.10. OBLIGATIONS SEVERAL; NO FIDUCIARY
OBLIGATIONS. The obligations of the Banks hereunder are several and not joint.
Nothing contained in this credit agreement and no action taken by Agent or the
Banks pursuant hereto shall be deemed to constitute the Banks a partnership,
association, joint venture or other entity. No default by any Bank hereunder
shall excuse the other Banks from any obligation under this credit agreement;
but no Bank shall have or acquire any additional obligation of any kind by
reason of such default. The relationship among Borrower and the Banks with
respect to this credit agreement, any Note and any Related Writing is and shall
be solely that of debtor and creditor, respectively, and no Bank has any
fiduciary obligation toward Borrower with respect to any such documents or the
transactions contemplated thereby.
SECTION 10.11. EXECUTION IN COUNTERPARTS. This credit
agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute but one and the same agreement.
37
<PAGE> 38
SECTION 10.12. BINDING EFFECT; BORROWER'S ASSIGNMENT. This
credit agreement shall become effective when it shall have been executed by
Borrower, Agent and by each Bank and thereafter shall be binding upon and inure
to the benefit of Borrower and each of the Banks and their respective
successors and assigns, except that Borrower shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent
of all of the Banks.
SECTION 10.13. BANK ASSIGNMENTS/PARTICIPATIONS. With the
written consent of the Agent, any Bank may assign its rights and obligations
under this credit agreement to another financial institution, provided that
each Bank shall retain an undivided ten percent (10%) in the Commitment and in
the aggregate amount of the Notes issued hereunder. Each assignment shall be
subject to the payment, by the assignor, of a service fee of Two Thousand Five
Hundred Dollars ($2,500) to the Agent at least ten (10) days prior to the date
of transfer of the assigned interest. In the event that a Bank grants a
participation to another financial institution, the voting rights of such
participant shall be limited to those items requiring the unanimous consent of
the Banks pursuant to Section 10.3 hereof.
SECTION 10.14. GOVERNING LAW. This credit agreement, each
of the Notes and any Related Writing shall be governed by and construed in
accordance with the laws of the State of Ohio and the respective rights and
obligations of Borrower and the Banks shall be governed by Ohio law, without
regard to principles of conflict of laws.
SECTION 10.15. SEVERABILITY OF PROVISIONS; CAPTIONS. Any
provision of this credit agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. The several captions to Sections and subsections
herein are inserted for convenience only and shall be ignored in interpreting
the provisions of this credit agreement.
SECTION 10.16. INVESTMENT PURPOSE. Each of the Banks
represents and warrants to Borrower that it is entering into this credit
agreement with the present intention of acquiring any Note issued pursuant
hereto for investment purposes only and not for the purpose of distribution or
resale, it being understood, however, that each Bank shall at all times retain
full control over the disposition of its assets.
SECTION 10.17. ENTIRE AGREEMENT. This credit agreement,
any Note and any other agreement, document or instrument attached hereto or
referred to herein or executed on or as of the date hereof integrate all the
terms and conditions mentioned herein or incidental hereto and supersede all
oral representations and negotiations and prior writings with respect to the
subject matter hereof.
38
<PAGE> 39
SECTION 10.18. JURY TRIAL WAIVER. BORROWER AND EACH OF THE
BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER AND THE BANKS,
OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS CREDIT
AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS
WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY ANY BANK'S
ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT
PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
AMONG BORROWER AND THE BANKS, OR ANY THEREOF.
<TABLE>
<S> <C> <C>
Address: 600 Tower East PARK-OHIO INDUSTRIES, INC.
20600 Chagrin Blvd.
Shaker Heights, Ohio 44122 By:_______________________________
James S. Walker, Vice President
and_______________________________
Ronald J. Cozean, Secretary
Address: Society Center SOCIETY NATIONAL BANK, individually
127 Public Square and as Agent
Cleveland, Ohio 44114-1306
Attention: Commercial Loans- By:_________________________________
Cleveland District Kenneth M. Merhar, Vice President
Address: 611 Woodward Avenue NBD BANK, N.A.
Detroit, Michigan 48226
Attention: Midwest Banking By:__________________________________
Frederick Crawford, Vice President
Address: Huntington Building THE HUNTINGTON NATIONAL BANK
917 Euclid Avenue
Attention: Commercial By:_________________________________
Banking Division John P. Barsotti, Vice President
</TABLE>
39
<PAGE> 1
EXHIBIT (11)
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(In Thousands - Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
---- ----
<S> <C> <C>
Net income $ 3,740 $ 3,138
Amortization of imputed goodwill associated
with the earnout shares (21) -0-
------- -------
Net income related to shareholders of Common
Stock (Primary) 3,719 3,138
Interest associated with convertible senior
subordinated debentures 403 -0-
------- -------
Net income related to shareholders of Common
Stock (Fully Diluted) $ 4,122 $ 3,138
======= =======
PRIMARY COMPUTATION
Average shares outstanding during the period 8,401 6,772
Effect of Kay Home Products, Inc. earnout shares
deemed to be issued (Note A) -0- 725
Effect of General Aluminum Mfg. Company earnout
shares deemed to be issued (Note B) 188 188
Effect of dilutive stock options based on the
treasury stock method using the average
market price for the period 142 159
------- -------
Shares used 8,731 7,844
======= =======
Net income per share of Common Stock $ .43 $ .40
======= =======
FULLY DILUTED COMPUTATION
Average shares outstanding per primary computation
above 8,731 7,844
Additional effect of dilutive stock options based
on the treasury stock method using the end of
period market price, if higher than the average
market price -0- 50
Effect of assuming conversion of the
Convertible Senior Subordinated Debentures 1,151 -0-
------- -------
Shares used 9,882 7,894
======= =======
Net income per share of Common Stock:* $ .42 $ .40
======= =======
</TABLE>
* Disclosure not presented in the consolidated condensed statement of income
because the effect is either anti-dilutive or not material.
NOTE A - Shares issued in January, 1995, and are included in average shares
outstanding for the period ended March 31, 1995.
NOTE B - Shares are earned during the four-year period ending December
31, 1997. Shares deemed to be issued for the period ended March 31,
1994 have been issued and are included in average shares
outstanding for the period ended March 31, 1995.
<PAGE> 1
EXHIBIT (15) LETTER RE: UNAUDITED FINANCIAL INFORMATION
Board of Directors and Shareholders
Park-Ohio Industries, Inc.
We are aware of the incorporation by reference in the Registration Statements on
Forms S-3 and S-8 (relating to the 1992 Stock Option Plan) of Park-Ohio
Industries, Inc. for the registration of 363,094 shares and 350,000 shares,
respectively, of its common stock of our report dated April 24, 1995 relating
to the unaudited condensed consolidated interim financial statements of
Park-Ohio Industries, Inc. which is included in its Form 10-Q for the quarter
ended March 31, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
April 24, 1995
Cleveland, Ohio /s/ Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000076282
<NAME> PARK-OHIO INDUSTRIES INC.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,534
<SECURITIES> 0
<RECEIVABLES> 68,438
<ALLOWANCES> 794
<INVENTORY> 65,234
<CURRENT-ASSETS> 137,465
<PP&E> 123,145
<DEPRECIATION> 62,569
<TOTAL-ASSETS> 276,466
<CURRENT-LIABILITIES> 62,970
<BONDS> 97,771
<COMMON> 10,403
0
0
<OTHER-SE> 65,257
<TOTAL-LIABILITY-AND-EQUITY> 276,466
<SALES> 62,810
<TOTAL-REVENUES> 62,810
<CGS> 52,327
<TOTAL-COSTS> 52,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 651
<INCOME-PRETAX> 3,790
<INCOME-TAX> 50
<INCOME-CONTINUING> 3,740
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,740
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
</TABLE>
