UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1995
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OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13940
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CENTRAL SPRINKLER CORPORATION
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2328106
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
451 North Cannon Avenue, Lansdale, Pennsylvania 19446
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: 215-362-0700
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
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The aggregate market value of the voting stock held by non-affiliates
of the Registrant (computed by reference to the closing price of such stock in
the NASDAQ National Market on December 31, 1995 -- $35.50) was approximately
$122.3 million.
The number of shares of the Registrant's common stock outstanding as of
December 31, 1995 was 3,791,197 shares.
DOCUMENTS INCORPORATED BY REFERENCE
(Specific pages incorporated are indicated
under applicable Item herein):
Registrant's definitive Proxy Statement for its 1996 Annual Meeting of
Shareholders is incorporated by reference into Part III hereof.
Exhibit Index - Pages 28-32
<PAGE>
PART I
Item 1. Business.
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(a) General Development of Business
--- -------------------------------
Central Sprinkler Corporation (the "Company"), through its wholly-owned
subsidiaries, Central Sprinkler Company ("Central Sprinkler"), Spraysafe
Automatic Sprinklers Limited ("Spraysafe"), Central Sprink Inc. ("Sprink"),
Central Castings Corporation ("Castings") and Central CPVC Corporation ("CPVC"),
is a leading manufacturer of automatic fire sprinkler heads, valves and other
sprinkler system components as well as a distributor of component parts of
complete automatic fire sprinkler systems that are either manufactured by the
Company or purchased by the Company for resale to its customers.
The Company acquired Central Sprinkler in May 1984. Key executives of
Central Sprinkler remained with the business and purchased a portion of the
Company's common stock with the remainder purchased by an outside investor
group. Prior to the acquisition, the Company did not have any significant assets
or liabilities or engage in any activities other than those related to the
acquisition. In May 1985, the Company went public by its sale of shares of
common stock of the Company in an underwritten public offering.
In September 1985, the Company conducted an underwritten public
offering of 8% Convertible Subordinated Debentures due 2010 (the "Debentures")
in an aggregate principal amount of $17.3 million. During 1988, the Company
called for early redemption all of its outstanding Debentures. Holders of $16.8
million face value of such Debentures elected to convert them into 1.6 million
shares of newly issued common stock while $135 thousand face value of such
Debentures were redeemed for cash.
On November 1, 1985, the Company acquired 80% of the outstanding common
stock and 100% of the outstanding preferred stock of Spraysafe, a sprinkler head
manufacturer and distributor in the United Kingdom. During 1989, the Company
increased its ownership in Spraysafe from 80% to 100% by purchasing all of the
remaining common stock from the minority shareholder. The acquisition resulted
in an expansion of the Company's product lines to include Spraysafe's glass bulb
sprinkler heads and provide a further means of distributing the Company's
products in foreign markets.
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On November 1, 1992, Central Sprinkler acquired certain business assets
of a midwestern company engaged in the distribution of fire sprinkler equipment
at a cost of approximately $1.2 million. The acquired assets consisted primarily
of inventory. Central Sprinkler merged the acquired assets into its distribution
network and strengthened its overall distribution network. On August 17, 1993,
Central Sprinkler acquired certain business assets and assumed certain
liabilities of Sprink, Inc., a company engaged in the business of manufacturing
and distributing pipe couplings, fittings and other products that are used in
fire sprinkler systems. The assets acquired included, among other things,
inventories (excluding selected items), property and equipment, customer
records, patents, warehouse and office supplies, computer software and the
capital stock of Sprink International, S.A. de C.V. for a purchase price of
approximately $4.1 million. The liabilities assumed were principally warranty
obligations and obligations under operating leases. The acquisition was made
through a newly organized company, Central Sprink Inc.
In July 1994, Central Sprinkler formed a new company, Central Castings
Corporation ("Castings"). Castings acquired substantially all of the business
assets of a foundry in the Southeastern United States engaged in manufacturing
piping system components. The purchase price was approximately $1.8 million for
assets consisting primarily of property, plant and equipment. The Company is
undergoing a substantial expansion of such facility to accommodate production of
several additional product lines.
In May 1995, Central Sprinkler formed a new company, Central CPVC
Corporation ("CPVC"). Central Sprinkler Company contributed business assets to
CPVC. CPVC is engaged in manufacturing CPVC plastic pipe and fittings.
(b) Financial Information About Industry Segments.
--- ----------------------------------------------
The Company operates in one industry; the manufacture and sale or
purchase and sale of component parts of complete automatic fire sprinkler
systems.
(c) Narrative Description of Business.
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General
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The Company is a leading manufacturer of automatic fire sprinkler heads
and valves and other components as well as a distributor of component parts of
complete automatic fire sprinkler system. Approximately 56% of the Company's
fiscal 1995 annual sales are derived from the manufacture and sale of the
Company's primary product lines which are fire sprinkler heads and valves. The
balance is derived principally from the sale of other component parts, several
of which are also manufactured by the Company's subsidiaries. The Company
designs, manufactures and markets a wide variety of sprinkler heads and valves
for commercial, industrial, residential and institutional uses throughout the
world. The Company sells its products to approximately 3 thousand customers,
most of which are sprinkler installation contractors.
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Products
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The principal components of a sprinkler system are the sprinkler heads
and the valves, both of which are manufactured and marketed by the Company and
represented approximately 47% and 9%, respectively, of the Company's sales in
fiscal 1995 and 49% and 10%, respectively, in both fiscal 1994 and 1993. The
Company also manufactures and distributes several other components and
distributes other sprinkler system component parts. Other product lines
manufactured and sold under the Company's various trade names are steel and CPVC
plastic pipe and fittings as well as other piping system components.
The sprinkler head is the mechanism that is activated by heat and
discharges a water spray. The sprinkler head is composed principally of copper,
brass and other non-corrosive materials. The Company presently produces and
markets six basic types of sprinkler heads: the standard commercial sprinkler,
the residential/life-safety sprinkler, the Flow Control (TM) sprinkler, the
extended coverage commercial sprinkler, the early suppression fast response
sprinkler and specific application series sprinklers which were introduced in
fiscal 1994.
The standard commercial sprinkler head is installed near the ceiling of
a structure and consists of a fusable alloy pellet which is sealed into a bronze
center strut by a stainless steel ball. When the alloy melts at its rated
temperature, the ball is forced upward into the center strut, releasing two
ejector springs and activating the sprinkler, which discharges water in a
prescribed flow path. The Company also has standard commercial sprinklers with
glass bulb activating mechanisms. Generally, standard commercial sprinklers are
designed to activate at specified temperatures between 135 and 286 degrees.
Standard commercial sprinkler heads are manufactured in a wide variety of
models, sizes, and finishes. The Company also has several adjustable concealed
standard commercial sprinklers. These models have several advantages over
previous models produced by both the Company and its competitors.
The second type of sprinkler head produced and marketed by the Company
are residential/life-safety sprinklers. These sprinklers have quick response
features and are designed to react to a fire before it has a chance to spread,
which effectively minimizes the smoke, fumes and toxic by-products of the fire.
These residential/life-safety sprinklers are recognized today as the best means
to protect a life in the event of a fire. In fiscal 1983, the Company introduced
its first life-safety sprinkler in the form of the Omega (TM) sprinkler. This
patented Omega (TM) sprinkler is equipped with unique design features which
provide two principal advantages over the standard commercial sprinkler. The
Omega (TM) sprinkler operates five to six times faster than a standard
commercial sprinkler and features a spray pattern that has been shown to be more
effective in the control or extinguishment of fire. In late 1989, the Company
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introduced new residential/life-safety sprinklers with glass bulb activating
mechanisms. These models featured more traditional sprinkler designs along with
the quick response features previously only available in the Omega (TM) model.
These sprinklers are more moderately priced than the Omega (TM) model. The
Company introduced several new models of its Glass Bulb residential sprinklers
in fiscal 1995 and fiscal 1994. Additionally, the Company introduced a new
residential series of concealed sprinklers called ROC (Residential Optima
Concealed). These sprinklers offer the best flows at the greatest area of
coverage on the market.
The third type of sprinkler head produced by the Company is the Flow
Control (TM) sprinkler, which the Company has marketed since 1984. Unlike the
standard commercial sprinkler head and the residential/life-safety sprinkler
head, which continue to spray water until manually turned off, the Flow Control
(TM) sprinkler head has a distinct operating feature which allows it to open and
close automatically as heat conditions dictate. It is, therefore, particularly
well suited for areas sensitive to water damage, such as libraries, museums or
computer rooms. The Flow Control (TM) sprinkler operates faster than a standard
commercial sprinkler and is able to react to a fire before it has a chance to
spread, thereby limiting damage to the affected area.
The fourth type of sprinkler head produced by the Company is the
extended coverage commercial sprinkler. This sprinkler line brings about a
dramatic turning point in sprinkler technology by extending ordinary spacing
from 130 sq. ft. to 400 sq. ft. These sprinklers are being marketed under the
trade name of Optima (TM) sprinklers. The Company introduced the Optima (TM)
sprinkler in 1993 and developed new models in both fiscal 1995 and 1994. A
patent has been issued on these sprinklers that provide uniform distribution of
minimum densities at very low start pressures, while achieving superior fire
control when compared to the standard commercial sprinkler line.
The fifth type of sprinkler head produced by the Company starting in
fiscal 1993 is the early suppression fast response ("ESFR") sprinkler. This
sprinkler is designed for use in special hazards situations. It is used
primarily to protect storage areas where there is a need for a high density of
water with a quick responding sprinkler head.
The sixth type of sprinkler produced and marketed by the Company is the
specific application series. These sprinklers, such as the Window Sprinklers
introduced in fiscal 1995 and the Attic (TM) and the ELO-231 specific
application sprinklers, are designed to provide better fire protection for
specific occupancies while providing overall economic savings to our
installation contractor customers.
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The Company markets a wide variety of sprinkler system valves which are
used specifically in fire sprinkler installations. Several of these valves are
manufactured by the Company (alarm valve, butterfly valve, check valve, deluge
valve and dry pipe valve), while certain other valves are manufactured by others
and marketed by the Company. In fiscal 1995, 1994 and 1993 the Company
introduced several new manufactured valve models including butterfly valves and
a new deluge valve. A sprinkler system valve is the mechanical device by which
the water supply is controlled. When the sprinkler head is activated, the valve
allows water to flow into and through the system.
The average cost of sprinkler heads and valves used in a complete fire
sprinkler system is generally less than 5% of the total cost of a complete
system.
In addition to its primary product lines of manufactured sprinkler
heads and valve products, the Company also manufactures under a production
supply contract its own line of CPVC plastic pipe and CPVC plastic pipe
fittings. The Company expanded such CPVC product lines and manufacturing
capacity in fiscal 1995 and fiscal 1994. The Company also manufactures its own
line of steel sprinkler pipe by an investment in and production supply contract
with a steel pipe manufacturer. In fiscal 1993, the Company started to
manufacture its own line of glass bulb ampules for use as activating mechanisms
in sprinkler heads. In addition, the 1993 acquisition of Sprink brought the
Company into the manufacture of pipe couplings and fittings and a 1994
acquisition brought the Company the ability to manufacture other piping system
components. The Company also distributes a wide variety of other parts used in
sprinkler system installations. The majority of the other components include
fittings, control valves, electric switches, hangers and a variety of other
items. The Company developed and markets a computer aided design ("CAD") system
to architects, designers, and contractors for use in the design and installation
of sprinkler systems. The Company also provides other CAD related services
through its SprinkCAD division.
Marketing and Customers
- -----------------------
The Company's products are marketed by its own sales and marketing
staff. This staff consists of approximately 175 people and operates from fifteen
regional sales office/distribution centers located near Boston, Atlanta, Miami,
Dallas, Chicago, Los Angeles, San Francisco, Seattle, Philadelphia, Baltimore,
Salt Lake City, Greensboro, and Portland and from one distribution center in the
United Kingdom. A new center was opened in the latter part of fiscal 1995 in
Singapore. Unlike the majority of the industry which markets its products
primarily through wholesale distributors, the Company sells most of its products
directly to sprinkler installation contractors. This places the Company in
direct contact with its customers and allows it to respond effectively to
customer demands and suggestions.
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The Company's sales and marketing efforts are directed primarily to
these sprinkler installation contractors. Additional sales and marketing efforts
are directed to the introduction and promotion of the Company's products to
architects, engineers, builders, end-users, local fire authorities and insurance
underwriters, for purposes of encouraging them to recommend or specify the
Company's sprinklers for use in new construction and retrofit installations.
The Company markets its products to approximately 3 thousand customers,
the majority of whom are sprinkler industry contractors, for commercial,
industrial, residential and institutional use throughout the world.
In fiscal 1995, no single customer accounted for more than 3% of the
Company's net sales.
The Company typically manufactures about 90% of its products for
estimated shipping demands and 10% pursuant to specific customer orders. The
Company does not have any significant order backlog.
The Company advertises its products through various media including
insurance publications and trade journals. The Company also participates in
trade shows and trade organizations. Approximately $662 thousand was spent on
advertising the Company's products in 1995.
The Company's products are not marketed pursuant to long-term purchase
agreements, but are sold pursuant to individual purchase orders. Often the
Company's published sales terms sheet is the controlling purchase document.
The Company is affected by seasonal factors as well as the level of new
construction activity, remodeling and retrofitting of older properties in the
commercial, industrial, residential and institutional real estate markets. The
Company's sales tend to increase the most when there is a high level of new
construction activity in all such real estate markets and decline when there is
a slowdown in new construction activity. In addition, as a result of relatively
higher levels of new construction during warmer spring and summer months, the
demand for sprinkler system components tends to be greater during the summer and
fall than during other seasons.
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Competition
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The Company competes on the basis of price, service, product quality,
design and performance characteristics. The Company encounters competition
worldwide primarily from approximately seven domestic manufacturers of sprinkler
heads and valves and a large number of manufacturers and/or distributors of
other sprinkler system component parts.
The Company is the world's leading manufacturer of fire sprinklers. The
Company also believes its position is due in large part to its relationships
with customers and the innovative technological features of its products.
Research and Development
- ------------------------
Research and development has contributed significantly to the Company's
success over the years and will be a major factor in the Company's ability to
continue its future growth.
The Company maintains a staff of fourteen engineers and thirty-three
support technicians who devote their time to research and development
activities. During the 1995 fiscal year, the Company spent $5.1 million on
research and development compared to $4.1 million in fiscal 1994 and $2.8
million in fiscal 1993. The Company's efforts in this area are primarily focused
on sprinkler head and valve design and development, and are directed toward both
new product development and further refinement of the quick response technology
designed for residential/life-safety purposes, extended coverage sprinklers and
the specific application sprinkler series. A facility used for research and
development of glass bulb sprinkler activating mechanisms was converted to
production of such products early in the 1993 fiscal year leading to a reduction
in the related research and development costs from year-to-year for such
facility. The Company's heavy emphasis on the development of new products
continued throughout the year and led to many new products in fiscal 1995 and
fiscal 1994.
Patents
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The Company holds a number of patents. The Omega (TM) sprinkler head
patent, which expires January 1, 2002, protects a unique operating feature
(relating to increased activating speed and extended water coverage of the spray
pattern) and sets the Omega (TM) head apart from standard commercial sprinklers.
The Company was issued a patent on the new extended coverage commercial
sprinkler and additional related patent applications are pending on the product
line. These are very important to the Company based upon the Company's
substantial investment in the product line and the dramatic turning point they
provide in fire sprinkler protection and technology. The Company has also filed
for patent protection on a number of other products.
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Trademarks
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The Company has a number of trademarks on various product names and
selected product components. An important trademark was recently obtained on the
appearance of installed Omega (TM) products and the Company hopes it will
ultimately prevent others from copying this product.
Sources of Supply
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The Company uses a number of component parts in its manufacture of
sprinkler heads and valves. The principal components of the sprinkler head
include the frame, the deflector and the activating mechanism. The major
component of the valve is the metal casting.
Materials, parts and components purchased by the Company for the
production of its sprinkler heads and valves are generally available from a
large number of suppliers. The vast majority of items are manufactured
specifically for the Company's needs from molds, dies and patterns owned by the
Company. The Company has not experienced any shortages or significant delays in
delivery of these materials in the recent past, and management believes that
adequate supplies will continue to be available.
The Company also has a non-exclusive supply contract with the B.F.
Goodrich Company to supply the resin that the Company uses to produce CPVC
plastic pipe and fittings. This supply contract, which expires in December 1997,
is important since this resin is not generally available. Other products
manufactured by the Company such as steel pipe, fittings and couplings and other
piping system components use raw materials that are available from a wide
variety of suppliers.
Other component parts purchased by the Company for distribution
purposes are generally available from a number of manufacturers.
Effect of Environmental Protection Regulations
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The Company is subject to compliance with various federal, state and
local regulations relating to protection of the environment. The Company has not
made nor does it currently expect to make any material capital expenditures for
environmental protection and control equipment for its current operations. As
more fully discussed in Item 7, "Environmental Matters", the Company has been
advised by the Environmental Protection Agency of a potential contamination
problem in the vicinity of the Company's primary plant.
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Employees
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The Company employs approximately 900 people, of whom approximately 600
are production or shipping employees, with the remainder serving in executive,
administrative or sales capacities. The Company's sprinkler and valve production
and shipping employees are covered by a collective bargaining agreement with the
International Association of Machinists & Aerospace Workers. The agreement will
expire in October 1997. All of the covered employees are located at the
Company's primary manufacturing plant in Lansdale, Pennsylvania.
(d) Financial Information about Foreign and Domestic Operations and
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Export Sales.
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The Company operates in one business segment and engages in business
activity outside the United States. During fiscal 1995, 1994 and 1993, the
combined export and foreign sales represented approximately 9.9%, 8.6% and 9.0%,
respectively, of the Company's net sales. Included in foreign sales are the
sales of the Company's United Kingdom subsidiary (Spraysafe). Spraysafe
primarily manufactures sprinkler heads and distributes them and other products
in Europe and other foreign countries. Significant financial information about
Spraysafe's operations consists of the following in thousands of dollars:
Year Ended October 31,
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1995 1994 1993
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Sales $11,210 $8,800 $6,259
Operating Income 1,202 702 644
Net Income 699 440 279
Total Assets 7,903 5,065 3,872
Total Liabilities 4,862 2,710 2,140
Item 2. Properties.
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The Company's primary manufacturing plant and executive offices are
located in Lansdale, Pennsylvania. The Lansdale facility is owned by the
Company. It is comprised of several buildings which contain approximately 166
thousand square feet of floor space on a parcel of about 7 acres. This facility
is pledged as security for a mortgage loan. The SprinkCAD division is in a
separate leased facility in Lansdale, Pennsylvania of approximately 3 thousand
square feet. The lease term is through October 1996 with annual renewals. The
Company also owns a separate fire sprinkler component manufacturing facility of
approximately 10 thousand square feet in Pennsylvania, a piping systems
components manufacturing facility and foundry of approximately 120 thousand
square feet on a 67 acre parcel in Alabama purchased in fiscal 1994 and has
contract manufacturing facilities for steel and plastic pipe and fittings in
Ohio and Alabama.
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The Company's thirteen domestic sales office/distribution centers are
located in major cities across the United States listed in Item 1(c), Marketing
and Customers, hereof and range in size from 9 thousand to 66 thousand square
feet per building. These facilities are leased by the Company pursuant to leases
which terminate from 1996 through 2002. The Company has options to extend
certain of its leases for additional periods on similar terms. The Company's
Sprink subsidiary occupies a sales office/distribution facility located within
the Brea, California distribution center leased space. In addition, Sprink has a
number of contract manufacturing facilities located in the Far East.
The Company's United Kingdom subsidiary owns a manufacturing plant in
the United Kingdom which contains approximately 12 thousand square feet of floor
space on a parcel of about 1 acre. This facility is also pledged as security for
a loan. The United Kingdom subsidiary also leases a distribution center of
approximately 5 thousand square feet in the United Kingdom under a lease that
expires in 2000 and leases a distribution center of approximately 3 thousand
square feet in Singapore under a lease that expires in 1997.
The Company's manufacturing and assembly facilities operate on a
two-shift per day basis. All of the manufacturing equipment used in the
production process is owned by the Company.
Item 3. Legal Proceedings.
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The Company is engaged in discussions with the Environmental Protection
Agency concerning a claim which may develop in connection with the Company's
primary manufacturing plant in Lansdale, Pennsylvania. This potential claim is
more fully discussed in Item 7, "Environmental Matters". While there are various
other claims pending and threatened against the Company pursuant to the ordinary
conduct of business, these other claims are not expected to have any material
adverse effect on the consolidated financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matters were submitted to a vote of security holders of the Company,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1995.
Item 4(a). Executive Officers of the Registrant.
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The names and ages of the Registrant's executive officers and key
employees, their positions with the Company and with Central Sprinkler, its
primary operating subsidiary, and their principal occupations during the past
five years are as follows:
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Position(s) with the Company, and
where indicated, with Central
Name Age Sprinkler
- -------------------- --- -----------------------------------------
Winston J. Churchill 55 Chairman of the Board and Director
William J. Meyer 75 President and Director, and
Chairman of the Board and Treasurer
of Central Sprinkler
George G. Meyer 46 Chief Executive Officer, Secretary,
Treasurer and Director, and
President and Chief Executive
Officer of Central Sprinkler
Stephen J. Meyer 44 Director, and Executive Vice
President of Central Sprinkler
William J. Pardue 45 Executive Vice President of Central
Sprinkler
Albert T. Sabol 43 Vice President, Finance of the
Company and Central Sprinkler
George S. Polan 45 Vice President, Research and
Development of Central Sprinkler
James R. Buchanan 46 Vice President, Sales of Central
Sprinkler
Albert H. Schoenberger, Jr. 68 Vice President, Manufacturing of
Central Sprinkler
James E. Golinveaux 32 Vice President, Technical Service
and Engineering of Central
Sprinkler
Anthony A. DeGregorio 36 Vice President, SprinkCAD of
Central Sprinkler
Marilyn M. Thomas 36 Vice President, Distribution
Operations of Central Sprinkler
Michael J. Graham 45 Vice President, International
Operations of Central Sprinkler
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WINSTON J. CHURCHILL - Mr. Churchill has been Chairman of the Board and
a director of the Company and a director of Central Sprinkler since 1984. Mr.
Churchill has been President of Churchill Investment Partners, Inc., a private
investment firm, since 1989. He was a partner of Bradford Associates, a private
investment firm, from 1984 to 1989. Mr. Churchill is also a director of IBAH,
Inc., Geotek Industries, Inc. and Tescorp, Inc.
WILLIAM J. MEYER - Mr. Meyer has been President and a director of the
Company and Chairman of the Board of Central Sprinkler since 1984. He has also
served Central Sprinkler as a director and Treasurer since 1975 and as President
from 1975 to 1984.
GEORGE G. MEYER - Mr. Meyer has been Chief Executive Officer since 1987
and Secretary and Treasurer of the Company since 1985, and a director of the
Company and President and a director of Central Sprinkler since 1984. He was
Executive Vice President of the Company from 1985 to 1987.
STEPHEN J. MEYER - Mr. Meyer has been a director of the Company and
Executive Vice President of Central Sprinkler since 1986. He has been a director
of Central Sprinkler since 1983.
WILLIAM J. PARDUE - Mr. Pardue has been Executive Vice President of
Central Sprinkler since 1980.
ALBERT T. SABOL - Mr. Sabol has been Vice President, Finance and Chief
Financial Officer of the Company and Central Sprinkler since 1986.
GEORGE S. POLAN - Mr. Polan has been Vice President, Research and
Development of Central Sprinkler since 1990. He was Vice President, Engineering
of Central Sprinkler from 1986 to 1989.
JAMES R. BUCHANAN - Mr. Buchanan has been Vice President, Sales of
Central Sprinkler since 1984.
ALBERT H. SCHOENBERGER, JR. - Mr. Schoenberger has been Vice President,
Manufacturing of Central Sprinkler since 1977.
JAMES E. GOLINVEAUX - Mr. Golinveaux has been Vice President, Technical
Service and Engineering of Central Sprinkler since 1993 and Vice President,
Technical Service of Central Sprinkler since 1992. He was Director of Technical
Service from 1991 to 1992. From 1986 to 1991 he was the Design Manager for a
large fire protection installation contractor.
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ANTHONY A. DEGREGORIO - Mr. DeGregorio has been Vice President,
SprinkCAD of Central Sprinkler since 1993 and was manager of SprinkCAD sales and
service from 1990 to 1993. From 1986 to 1990 he was General Manager of a
computer aided design services company.
MARILYN M. THOMAS - Ms. Thomas has been Vice President, Distribution
Operations of Central Sprinkler since 1995 and was Director of Warehouse
Operations from 1984 to 1994.
MICHAEL J. GRAHAM - Mr. Graham has been Vice President, International
Operations of Central Sprinkler since 1995 and Managing Director of Spraysafe
Automatic Sprinkler Limited (U.K.) since 1990.
George G., Stephen J. Meyer, and Marilyn M. Thomas are brothers and
sister and are sons and daughter of William J. Meyer. William J. Pardue is
William J. Meyer's son-in-law.
PART II
Item 5. Market for Registrant's Common Stock and Related
------------------------------------------------
Stockholder Matters.
--------------------
The Company's Common Stock is traded on the NASDAQ National Market,
NASDAQ symbol - CNSP. The following table sets forth, for the fiscal years
indicated, the range of high and low price quotations.
Fiscal 1995:
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High Low
---- ---
First Quarter............... $12 $ 8 5/8
Second Quarter.............. 21 10 3/4
Third Quarter............... 29 1/2 18 1/2
Fourth Quarter.............. 37 1/4 26 1/2
Fiscal 1994:
- ------------
First Quarter............... $14 1/4 $12
Second Quarter.............. 14 3/4 11 1/2
Third Quarter............... 12 1/2 10 1/4
Fourth Quarter.............. 11 1/4 9
As of December 31, 1995, there were approximately 1 thousand holders of
record of Common Stock of the Company. The closing price of such stock on the
NASDAQ National Market on December 31, 1995 was $35.50.
The Company has not paid dividends on Common Stock since its
inception in 1984. The Company intends to continue its policy of retaining
earnings to finance future growth.
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Item 6. Selected Financial Data.
- ------ ------------------------
The following summary sets forth selected financial data with respect
to the Company for the last five fiscal years. The selected financial data has
been derived from the consolidated financial statements of the Company.
This data should be read in conjunction with other financial
information of the Company, including the consolidated financial statements of
the Company and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.
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SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share)
The following fiscal year information should be read in conjunction with the
accompanying consolidated financial statements appearing elsewhere in this
report.
<TABLE>
<CAPTION>
Interest
(1) Expense
Net Gross Operating (Income), Net Earnings
CONSOLIDATED OPERATIONS Sales Profit Income Net Income Per Share
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1995 $158,849 $51,684 $15,305 $1,902 $8,458 $2.50
October 31, 1994 116,249 35,237 6,428 678 4,018(2) .80(2)
October 31, 1993 82,481 23,396 2,881 (295) 2,376 .50
October 31, 1992 60,471 17,139 196 (509) 582 .13
October 31, 1991 62,319 19,287 3,946 (725) 2,981 .61
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Long-
CONSOLIDATED FINANCIAL Working Current Total Term Total Shareholders'
POSITION Capital Ratio Assets Debt Debt Equity
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of October 31, 1995 $47,292 2.2:1 $117,360 $27,516 $45,391 $49,550
As of October 31, 1994 53,168 3.0:1 99,061 19,391 30,955 51,101
As of October 31, 1993 38,078 2.4:1 80,303 3,544 19,001 46,563
As of October 31, 1992 34,675 5.6:1 55,415 623 1,131 44,633
As of October 31, 1991 38,544 6.2:1 58,542 952 1,601 47,630
</TABLE>
SELECTED FINANCIAL DATA FOOTNOTES
(1) Operating income represents income before income taxes and interest
expense (income), net.
(2) After favorable cumulative effect of $238 ($.05 per share) due to
accounting change for income taxes.
-16-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
Results of Operations
- ---------------------
The following table shows, for the years indicated, the percentage
relationships to net sales of the items included in the Consolidated Statements
of Income and the percentage changes in the dollar amounts of such items from
year-to-year.
Percentage of Net Sales Percentage Increase
Year Ended October 31, (Decrease)
----------------------- --------------------
Year 1995 Year 1994
1995 1994 1993 Over 1994 Over 1993
----- ----- ----- --------- ---------
Net sales............ 100.0% 100.0% 100.0% 36.6% 40.9%
Cost of sales........ 67.5 69.7 71.6 32.3 37.1
----- ----- -----
Gross profit......... 32.5 30.3 28.4 46.7 50.6
----- ----- -----
Selling, general and
administrative..... 20.0 21.4 21.6 27.5 40.1
Research and
development........ 3.2 3.5 3.4 25.5 44.2
Other income, net.... (.3) (.1) (.1) 154.2 80.0
----- ----- -----
22.9 24.8 24.9 26.3 40.4
----- ----- -----
Operating income..... 9.6 5.5 3.5 138.1 123.1
----- ----- -----
Interest expense..... 1.5 1.1 .5 81.4 208.8
Interest income ..... (.3) (.5) (.9) (26.2) (12.8)
----- ----- -----
1.2 .6 (.4) 180.5 N/M
----- ----- -----
Income before
income taxes....... 8.4 4.9 3.9 133.1 81.0
Income taxes......... 3.1 1.7 1.0 151.0 146.3
----- ----- -----
Income before
cumulative effect
of accounting
change............. 5.3 3.2 2.9 123.8 59.1
Cumulative effect of
accounting change
for income taxes... -- .3 -- N/M N/M
----- ----- -----
Net income........... 5.3 3.5 2.9 110.5 69.1
===== ===== =====
N/M indicates not meaningful.
-17-
<PAGE>
Fiscal 1995 net sales reached a record level of $158.8 million, an
increase of $42.6 million or a 36.6% increase from the net sales recorded in
fiscal 1994. The significant increase in sales was led by the strong demand for
fire sprinklers and related products. Growth in the new construction market and
higher levels of product usage in the retrofit market have driven the strong
market demand for the Company's range of products. The Company's innovation and
expansion of its lines of fire sprinkler's and related products also improved
sales from the prior year. The Company experienced sales gains in virtually all
major product groups. The Company's major product line of fire sprinklers
experienced strong sales gains particularly for its Optima (TM) and Glass Bulb
models which led the Company in setting record sales levels of fire sprinklers.
Significant sales gains were experienced in other product lines including
plastic, steel pipe and pipe fittings. The Company's programs to develop and
expand the production and marketing of pipe and fittings products continued to
significantly increase sales. Sales improvements were realized in all regions
throughout the United States. Foreign and export sales increased 21.2% in fiscal
1995. Late in fiscal 1995, Spraysafe opened a distribution center in Singapore.
Sales prices continued to be very competitive in fiscal 1995. Overall, sales
prices were slightly higher in fiscal 1995 when compared to fiscal 1994. The
Company increased its list prices on most manufactured products by 7% in July
1995. This price increase contributed to the overall sales and gross margin
increase for the year.
Fiscal 1994 net sales were $116.2 million, and increased by $33.8
million and was 40.9% greater than the net sales recorded in fiscal 1993. The
continued growth throughout the year in sales of automatic fire sprinklers was
the primary reason for the sales increase. Sales benefitted from stronger market
demand along with the incremental sales from several of the Company's new lines
of fire sprinkler products. Sales of the Company's new line of Optima (TM) fire
sprinklers had a very significant impact on the overall increase in fire
sprinklers. The Company also had greater increases in sales of its Glass Bulb
line of sprinklers and its Omega (TM) line of sprinklers than other products.
Improved conditions in both the new construction and retrofit markets were the
primary reasons for the stronger market demand. The stronger market demand also
helped the Company realize increased sales in other components used in complete
automatic fire sprinkler systems. In addition, incremental sales arose from new
products in the valve, CPVC plastic, steel pipe and fittings product lines.
Company programs to expand the production and marketing of piping products had a
significant positive impact on sales of these products. Incremental sales were
also realized in fiscal 1994 from several acquisitions, the most significant of
which was the late fiscal 1993 acquisition of Sprink, Inc., a manufacturer and
distributor of pipe couplings, fittings and other products that are used in
automatic fire sprinkler systems. Sales improvements were realized in virtually
-18-
<PAGE>
all regions throughout the United States. Sales gains were also experienced in
foreign sales and foreign markets. Combined foreign and export sales rose 36.0%
in fiscal 1994. Sales prices remained very competitive in fiscal 1994 although
slightly improved when compared to fiscal 1993. The Company implemented a 7%
list price increase in July 1994 on most of its manufactured products. This
price increase did not have a significant impact on the overall sales increase
for fiscal 1994.
Cost of sales for fiscal 1995 increased $26.2 million, or 32.3%, to
$107.2 million from fiscal 1994. The increase is primarily due to the
significantly higher sales volume. The Company's cost of sales decreased to
67.5% of net sales from 69.7% of net sales in fiscal 1994. This resulted in a
gross margin percentage of 32.5% in fiscal 1995 compared to 30.3% in fiscal
1994. This increase in gross profit margin percentage is due primarily to a
stronger sales mix of higher margin product lines. Other factors include
additional contributions from new products, certain price increases that were
put into effect in fiscal 1995 and lower costs of certain products. The increase
in production of manufactured fire sprinkler products to meet market demand has
increased utilization of the Company's production capacity. This has resulted in
a lower unit product cost for certain products. The gross profit margin
percentage for fiscal 1995 was somewhat lower than expected due to the costs
related to the continuing expansion of the foundry and manufacturing facility
for piping products acquired in late fiscal 1994. The gross profit margin was
also negatively impacted by price increases to the Company from suppliers of
certain materials in fiscal 1995.
The total dollar amount of cost of sales for fiscal 1994 increased over
fiscal 1993 primarily due to the increase in the net sales between the periods.
Cost of sales decreased to 69.7% of net sales for fiscal 1994 from 71.6% of net
sales for fiscal 1993. This resulted in gross profit margin percentages of 30.3%
and 28.4% for the 1994 and 1993 fiscal years, respectively. The continued
increase in market demand for fire sprinklers and related product lines had a
significant impact on the improved gross profit margin percentage for fiscal
1994. Higher numbers of production units helped to minimize cost increases and
in some cases even reduced the cost of sprinkler products produced when compared
to fiscal 1993. In addition, the Company's new line of Optima (TM) fire
sprinklers experienced stronger margins than many of the Company's other fire
sprinklers leading to an improvement in the overall sprinkler margin. In
addition, the Company's increased ability to manufacture certain of its CPVC
plastic piping products used in fire sprinkler systems led to certain costs
lower than the costs of such items in fiscal 1993. The higher gross profit
margins on manufactured sprinklers and other products were somewhat offset by
lower margins on the Company's fittings product lines. The gross profit margin
percentages on the fitting products and other piping system components are
-19-
<PAGE>
generally lower than the Company's other product lines and the greater sales of
such products tends to reduce the Company's overall gross margin percentage. In
addition, there were certain initial and continuing costs of upgrading and
expanding the piping system component manufacturing facility acquired in fiscal
1994 as well as the coupling and fitting manufacturing facility acquired in 1993
that also negatively impacted the Company's gross profit for both fiscal 1994
and 1993.
Selling, general and administrative expenses were 20.0% of net sales in
fiscal 1995 compared to 21.4% of net sales in fiscal 1994. The reduced
percentage of such expenses to net sales is due to sales increasing at a faster
rate than the selling, general and administrative expense rate of increase. The
total dollar amount of selling, general and administrative expenses increased by
27.5% or $6.9 million from fiscal 1994. The majority of the increase in expenses
is due directly to the increased sales volume. The expense increases included a
higher amount of sales personnel, fringe benefits, freight, travel and certain
marketing costs. Distribution facility costs increased due to incremental
expenses for personnel, fringe benefits, freight and other costs necessary to
handle the increased sales volume. Distribution costs also increased due to the
opening of three new distribution centers in late 1994 and relocations to larger
facilities. In July 1995, Spraysafe opened a new distribution center in
Singapore. The Company also started a project to increase efficiency of its
distribution centers and to increase service to its customers. Administrative
expenses increased in fiscal 1995 due in part to higher personnel and fringe
benefit costs. In fiscal 1995 as compared to fiscal 1994, increased numbers of
general and administrative personnel were required to provide necessary services
to support the sales growth. Fringe benefit costs increased due to higher costs
of the Employee Stock Ownership Plan ("ESOP") resulting from the significant
increase in the Company's stock price as compared to fiscal 1994. ESOP expense
is recorded based upon the shares allocated to the employees each month using
the Company's average stock price for the period. General and administrative
expenses also increased due to higher legal fees incurred in fiscal 1995 as
compared to fiscal 1994 to protect patents on several new and innovative
products.
Selling, general and administrative expenses were 21.4% of net sales in
fiscal 1994 compared to 21.6% of net sales in fiscal 1993. This reduced
percentage of such expenses was due to the increased amount of sales in fiscal
1994. The total dollar amount of selling, general and administrative expenses
increased by 40.1% or $7.1 million from fiscal 1993. Approximately 20% of this
total increase is from the incremental selling, general and administrative
expenses of the full fiscal 1994 year of operations of Sprink compared to only
two and one-half months of such expenses in fiscal 1993. The balance of the
-20-
<PAGE>
increase was a result of several other factors, the most significant of which
was increased amounts of variable sales expenses related to the increased sales
volume. The Company also increased the size of its warehouse distribution
network in fiscal 1994 and incurred incremental expense to support the opening
of two new distribution facilities - Salt Lake City, Utah and Greensboro, North
Carolina to support increased sales in those regions. A third facility opened in
Portland, Oregon at the end of the period. The Company also expanded several
warehouse facilities and relocated to larger facilities. Additional personnel
were also required to handle the increased sales volume. In addition, shipping
and freight costs, travel expenses and royalties paid on certain product sales
increased during the year along with inflationary increases on wages and fringe
benefits. General and administrative expenses also increased during the year due
to an increased number of administrative personnel along with inflationary
increases in salaries, wages and fringe benefits.
Research and development expenses for fiscal 1995 reached $5.1 million
which was an increase of $1 million or 25.5% over fiscal 1994. Research and
development expenses were 3.2% of net sales in fiscal 1995 as compared to 3.5%
in fiscal 1994. Such expenses increased at a high rate but somewhat lower than
the growth rate in sales. The Company continues its heavy emphasis on research
and development to develop new, improved and innovative products as well as
improving its existing product lines. The Company considers its research and
development programs to be a very important part of the Company's long-term
growth plan. The higher expenses in fiscal 1995 were related to increased
product development and testing, along with increases in the use of outside
services and in the number of personnel. The Company continued to incur
incremental research and development costs associated with the development and
expansion of the piping products line.
Research and development expenses for fiscal 1994 increased by 44.2%
over fiscal 1993 amounts. Such expenses were 3.5% of net sales compared to 3.4%
of net sales for fiscal 1993. The increase in research and development expenses
during fiscal 1994 was primarily related to increased costs for product
development and testing, along with increases in the number of personnel and
their related salaries, wages and fringe benefits. During fiscal 1994, the
Company developed a number of new products for both residential and commercial
applications. A variety of manufactured valves, CPVC plastic fittings and
several new sprinkler models including the Attic (TM) sprinklers and Optima (TM)
concealed sprinkler, were significant 1994 developments. The Company continued
to focus its development efforts on its line of extended coverage sprinklers for
ordinary hazards, along with a new family of dry pendent sprinklers. The Company
also incurred incremental research and development costs associated with the
development and expansion of the piping products line. In addition, the Company
increased the number of developmental personnel which resulted in increases in
salaries, wages and fringe benefits, and along with inflationary increases for
existing personnel, added to the overall increase between fiscal 1994 and 1993.
-21-
<PAGE>
Net interest expense for fiscal 1995 of $1.9 million was 1.2% of net sales
as compared to $678 thousand or .6%, in fiscal 1994. Interest expense was $2.4
million after capitalizing $333 thousand of interest incurred, as compared to
$1.3 million in fiscal 1994. The increase in interest expense was primarily due
to increased levels of debt. At October 31, 1995, total debt was $45.4 million
as compared to $31 million at the end of fiscal 1994. In fiscal 1995, additional
net short-term borrowings totaled $16.6 million and $948 thousand in additional
long-term debt. The additional debt was required to repurchase treasury stock,
to fund the Company's capital expenditures in primarily manufacturing and
distribution expansions and to provide for increased accounts receivable and
inventory. Interest income decreased to $461 thousand in fiscal 1995 from $625
thousand in fiscal 1994. The Company had lower interest income due primarily to
a decline in the investment balance due to the repurchase of 1.2 million shares
of the Company's common stock for the treasury in December 1994.
Net interest expense of $678 thousand was incurred during fiscal 1994
compared to net interest income of $295 thousand for fiscal 1993. Interest
expense in fiscal 1994 was $1.3 million compared to $422 thousand in fiscal
1993, while interest income was $625 thousand and $717 thousand for the fiscal
years 1994 and 1993, respectively. The increase in interest expense is due
primarily to a substantial increase in the Company's total debt. The Company
increased its borrowings in the latter part of fiscal 1993 to provide cash for
acquisitions and increased working capital needs through the issuance of a $5
million term note and $11.6 million in net short-term borrowings. In fiscal
1994, there were $13.9 million in additional net short-term borrowings and $20
million in long-term debt issued to refinance short-term borrowings. These
borrowings were required to support additional working capital needs and to fund
the July 1994 acquisition of a company engaged in the manufacturing of piping
systems components and planned expansions of such facility. The Company had
total debt outstanding at October 31, 1994 of $31 million compared to $19
million at October 31, 1993. The decrease in interest income was due solely to
lower interest rates earned on invested funds in fiscal 1994. Short-term
investment interest rates fell from the levels achieved in fiscal 1993 and
remained at such lower levels throughout most of fiscal 1994.
-22-
<PAGE>
The effective income tax rate for fiscal 1995 was 36.9% as compared to
34.3% in fiscal 1994. The increase in the effective income tax rate includes a
higher effective state income tax rate due to several factors that also
increased the effective U.S. Federal income tax rate. One factor is a
substantial reduction in the nontaxable investment income in fiscal 1995 as
compared to fiscal 1994 resulting from a lower balance in investments. The
Company also had a higher level of pretax income. Income before income taxes
increased by $7.7 million or 133.1%, to $13.4 million. The higher level of
pretax income combined with lower amounts of nontaxable income and tax credits
proportionately reduces the favorable effect on the effective tax rate in fiscal
1995.
The effective income tax rates for fiscal 1994 and 1993 were 34.3% and
25.2%, respectively. The increase in the effective income tax rate for fiscal
1994 was primarily due to a higher effective U.S. Federal income tax rate. The
two major items which contributed to the increased rate were a significantly
higher amount of income before income taxes in fiscal 1994 than fiscal 1993 and
the diminished effect of income tax credits and tax-exempt income in fiscal 1994
on the effective rate. The amount of income before income taxes rose by 81% to
$5.8 million in fiscal 1994 from $3.2 million in fiscal 1993. The gross amounts
of both income tax credits and tax-exempt interest income declined only slightly
in fiscal 1994, but this decline had a much greater impact on the overall
effective U.S. Federal income tax rate due to the higher income before income
taxes amount.
The Company's sales are affected by seasonal factors as well as the
level of new construction activity, remodeling and retrofitting of older
properties in the commercial, industrial, residential and institutional real
estate markets. The Company's sales tend to increase the most when there is a
high level of new construction activity in all such real estate markets. In
addition, as a result of relatively higher levels of new construction during
warmer spring and summer months, the demand for sprinkler system components
tends to be greater during the summer and fall than during other seasons.
Liquidity and Capital Resources
The Company's primary sources of long-term and short-term liquidity are
its current financial resources, projected cash from operations and borrowing
capacity. The Company believes that these sources are sufficient to fund the
programs necessary for future growth and expansion.
The Company's combined cash, cash equivalents and short-term
investments were $12.1 million, 41% or $8.4 million less than fiscal 1994. Total
cash, cash equivalents and short-term investments were $20.5 million at October
31, 1994. Cash, cash equivalents and short-term investments is primarily
comprised of funds on deposit and various tax-exempt securities which provide
adequate liquidity to meet the Company's obligations. The decrease in total
cash, cash equivalents and short-term investments was due principally to the use
of $11.8 million in December 1994 for the repurchase of 1.2 million shares of
the Company's common stock for the treasury.
-23-
<PAGE>
The Company's net short-term borrowings obtained primarily under
lines-of-credit increased by $5.6 million in fiscal 1995 as compared to a net
increase of $13.9 million in fiscal 1994. At October 31, 1995, $11 million of
short-term borrowings have been classified as long-term debt based upon the
Company's issuance of long-term bonds on November 21, 1995. In fiscal 1995,
Spraysafe obtained a $948 thousand five-year term loan. During the second
quarter of fiscal 1994, $20 million of the Company's borrowings under the
lines-of-credit were refinanced in noncash transactions by the issuance of
long-term debt in the form of two $10 million, ten-year term loans. The
increased borrowings in fiscal 1995 and 1994 were primarily a result of the need
to finance the increased growth in the Company's business. The Company
experienced sales growth of 36.6% and 40.9% in fiscal years 1995 and 1994,
respectively. This resulted in increases in both inventories required for these
sales levels as well as accounts receivable resulting from the increased sales.
Accounts payable also increased with the increase in purchasing volume. Cash was
provided by operating activities in fiscal 1995 of $3.9 million whereas cash
was used for operating activities of $1.8 million in fiscal 1994.
In July 1994, the Company purchased substantially all of the business
assets of a foundry in the Southeastern United States engaged in manufacturing
components for piping systems for cash of $1.6 million and a $200 thousand note
payable. The assets acquired were principally property, plant and equipment. The
Company is in the process of substantially expanding this facility's production
capacity to accommodate several additional product lines. In addition to the
cash required for the purchase, substantial amounts of working capital was used
for additional property, plant and equipment after the purchase. Cash used for
property, plant and equipment of $16 million in fiscal 1995 was significantly
higher than the $6.3 million spent in fiscal 1994. Substantially all of the
amount spent in fiscal 1995 and 1994 was for buildings, building improvements
and machinery and equipment to expand the manufacturing capacity for various
product lines. In fiscal 1995, another use of cash was $3.1 million for the
repayment of long-term debt. In fiscal 1994, the Company used $2.2 million for
the repayment of long-term debt. In December 1994, the Company repurchased 1.2
million shares of its common stock that were under the control of one investment
management company for the beneficial interest of various clients for which it
acts as an investment adviser. The shares repurchased represented about 25% of
the outstanding common stock of the Company. The repurchase price was $9.50 per
share for an aggregate purchase price of approximately $11.8 million. These
-24-
<PAGE>
shares are being held in the treasury for possible future issuance. The treasury
stock repurchase was paid for through a reduction of the Company's cash and
investments and further short-term borrowings. The consummation of the
repurchase reduced the Company's net worth by the $11.8 million amount of the
repurchase price. The Company believes that its current cash and investments
along with its future earnings and borrowing capacity will be sufficient to meet
the Company's working capital requirements and anticipated capital expenditures
for fiscal 1996.
The Company purchases property, plant and equipment from time to time
as required to maintain and expand its offices, manufacturing and research
facilities and distribution centers. The Company has expanded and improved its
operations over the years with such purchases and the Company intends to
continue this policy in the future. The Company has commitments in the ordinary
course of business for such expansions of facilities and equipment and for
research and other contracts. The Company intends to meet these requirements for
funds from current cash and investments and cash provided by operations and by
further borrowings. The Company expects that such sources of liquidity will be
sufficient to fund these expenditures as they occur. In addition, the Company
has made certain commitments to expand and improve the foundry and manufacturing
facility for piping system components bought in July 1994. These commitments are
for buildings, building improvements and various machinery and equipment. As of
October 31, 1995, the open commitments relating to this facility approximate
$2.4 million. It is expected that such improvements will be completed prior to
February 1996.
Environmental Matters
The Company and approximately thirty other local businesses were
notified by the Environmental Protection Agency ("EPA") in August 1991 that they
may be potentially responsible parties with respect to groundwater contamination
in the vicinity of the Company's primary manufacturing plant in Lansdale,
Pennsylvania. The Company has entered into an Administrative Order of Consent
for Remedial Investigation/Feasibility study ("AOC") effective May 19, 1995 with
the EPA. Pursuant to the AOC, the Company has agreed to perform certain tests on
the Company's property to determine whether any land owned by the Company or
ground water beneath such land could be a source of contamination at the site.
It currently estimated that the Company's portion of the overall costs related
to this matter will range from $240 thousand to $2.7 million depending upon the
amount of cleanup necessary. Management believes that the Company's operations
did not contribute to this contamination problem. The Company has recorded a
liability for the minimum amount within the range above, which does not assume
any recoveries from insurance or third parties.
-25-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
The financial statements of the Company for the years ended October 31,
1995, 1994, and 1993, together with the report thereon of Arthur Andersen LLP
dated December 13, 1995, are set forth on pages F-1 through F-15 hereof. The
supplementary financial data for the Company is set forth on page F-16 hereof.
The remainder of the financial information required by this report is
set forth on page S-1 which follow the financial statements and supplementary
financial data set forth on pages F-1 through F-16 hereof. Such information is
listed in Item 14(a)(2) hereof.
Item 9. Disagreements on Accounting and Financial Disclosure.
-----------------------------------------------------
There have been no disagreements on any matter of accounting principles
or practices or financial statement disclosure between the Company and its
independent public accountants within the past two fiscal years.
PART III
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
The information called for by this Item regarding the executive
officers of the Registrant is incorporated herein by reference to the material
under the caption "Executive Officers of the Registrant" in Part I - Item 4(a)
hereof.
The remainder of the information called for by this Item is
incorporated herein by reference to Registrant's definitive Proxy Statement for
its 1996 Annual Meeting of Shareholders which Registrant intends to file with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K.
Item 11. Executive Compensation.
-----------------------
The information called for by this Item is incorporated herein by
reference to Registrant's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders which Registrant intends to file with the Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
---------------------------------------------------
The information called for by this Item is incorporated herein by
reference to Registrant's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders which Registrant intends to file with the Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K.
-26-
<PAGE>
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
The information called for by this Item is incorporated herein by
reference to Registrant's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders which Registrant intends to file with the Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K.
-27-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
------------------------------------------------------
(a) The following documents are filed as a part of this report:
(1) The financial statements and supplemental financial data
required by Item 8 of this report are filed below:
FINANCIAL STATEMENTS:
Page(s)
-------
Report of Independent Public Accountants................. F-1
Consolidated Balance Sheets as of October 31, 1995 and
1994................................................... F-2-3
Consolidated Statements of Income for the years ended
October 31, 1995, 1994 and 1993........................ F-4
Consolidated Statements of Cash Flows for the years
ended October 31, 1995, 1994 and 1993.................. F-5-6
Consolidated Statements of Shareholders' Equity for the
years ended October 31, 1995, 1994 and 1993............ F-7
Notes to Consolidated Financial Statements............... F-8-15
Supplementary Financial Data (unaudited):
Page
----
Quarterly Financial Data................................. F-16
(2) The financial statement schedules required by Item 8 of this
report are listed below:
Page
----
Schedule II - Valuation and Qualifying Accounts.......... S-1
Other Schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in the
financial statements or notes thereto.
-28-
<PAGE>
(3) Index of Exhibits
The following is a list of the Exhibits filed as a part of this report:
Footnote to Exhibits:-
* Indicates this is a management contract which is a compensatory plan or
arrangement which is required to be filed as an exhibit to this form
pursuant to Item 14(c) of this report.
The following Exhibit has previously been filed with the Registrant's Annual
Report on Form 10-K for the year ended October 31, 1990 as Exhibit 3(a) and is
incorporated herein by reference thereto:
3(a) Restated Articles of Incorporation of the Registrant
The following Exhibit has been previously filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1987 as Exhibit 3(b) and is
incorporated herein by reference thereto:
3(b) Restated By-Laws of the Registrant
The following Exhibits 10(a) through 10(b) have been previously filed with
Registrant's Form S-1 Registration Statement No. 2-96850 dated April 3, 1985, to
Amendment No. 1 thereto dated May 8, 1985 or to Amendment No. 2 thereto dated
May 17, 1985 as the Exhibit numbers indicated and are incorporated herein by
reference thereto:
10(a) Deferred Compensation Plan (formerly 10(f))*
10(b) Multiemployer Union-Sponsored Pension Plan (formerly 10(i))
The following Exhibit has been previously filed with Registrant's Amendment
No. 1 to S-1 Registration Statement No. 33- 4828 dated April 24, 1986 as the
Exhibit number indicated and is incorporated herein by reference thereto:
10(c) Employment Agreement between Central Sprinkler and Albert H.
Schoenberger, Jr. (formerly 10(t))*
The following Exhibits have been previously filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1986 as the Exhibit numbers
indicated and are incorporated herein by reference thereto:
-29-
<PAGE>
10(d) Form of Indemnification Agreement among Central Sprinkler Corporation,
Central Sprinkler Company, CSC Finance Company and their Executive
Officers and Directors dated September 15, 1986 (formerly 10(t))*
10(e) 1986 Incentive Stock Option Plan, as amended to date (formerly 10(v))*
The following Exhibit has been previously filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1988 as the Exhibit number
indicated and is incorporated herein by reference thereto:
10(f) Incentive Compensation Plan, as amended to date (formerly 10(k))*
The following Exhibits have been previously filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1990 as the Exhibit numbers
indicated and are incorporated herein by reference thereto:
10(g) Employment Agreement with William J. Meyer dated March 19, 1990
(formerly 10(n))*
10(h) Employment Agreement with George G. Meyer dated March 19, 1990
(formerly 10(o))*
10(i) Employment Agreement with Stephen J. Meyer dated March 19, 1990
(formerly 10(p))*
The following Exhibit has been previously filed with Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended April 30, 1992 as the Exhibit
19 and is incorporated herein by reference thereto:
10(j) 1988 Non-Qualified Stock Option Plan, as amended*
The following Exhibits have been previously filed with Registrant's Annual
Report or Form 10-K for the year ended October 31, 1992 as the Exhibit numbers
indicated and are incorporated herein by reference thereto:
10(k) Form of Employment Agreement, Schedule of Compensation and Amendment
thereto dated September 22, 1992 for certain officers (formerly
10(m))*
10(l) Employment Agreement with George S. Polan dated October 1, 1992
(formerly 10(n))*
-30-
<PAGE>
10(m) Central Sprinkler Employee Stock Ownership Plan (formerly 10(o))*
10(n) Central Sprinkler Company Term Loan Agreement dated November 20, 1992
(formerly 10(p))
The following Exhibit has been previously filed with Registrant's Form 8-K
dated August 17, 1993 as the Exhibit number indicated and is incorporated herein
by reference thereto:
10(o) Agreement to Purchase Assets dated August 12, 1993 among Sprink Inc.,
James Hardie Irrigation, Inc., J.H. Industries (U.S.A.) Inc., Central
Sprink Inc., Central Sprinkler Company and Central Sprinkler
Corporation (formerly Exhibit 2.1)
The following Exhibits have been previously filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1993 as the Exhibit numbers
indicated and are incorporated herein by reference thereto:
10(p) Consulting Agreement between the Company and Churchill Investment
Partners, Inc. dated June 21, 1993 (formerly 10(r))
10(q) Consulting Agreement between the Company and Bradford Ventures Ltd.
dated June 21, 1993 (formerly 10(s))
10(r) 1993 Non-Employee Director Stock Option Plan (formerly (10(t))
The following Exhibits have been previously filed with Registrant's Annual
Report on Form 10-K for the year ended October 31, 1994 as the Exhibit numbers
indicated and are incorporated herein by reference thereto:
10(s) Central Sprinkler 401(k) Profit Sharing Plan and Trust, as amended to
date (formerly 10(t))
10(t) Term Loan Agreement between Central Sprinkler Company and First
Fidelity Bank, including exhibits and amendments thereto (formerly
10(u))
10(u) Term Loan Agreement between Central Sprinkler Company and CoreStates
Bank, N.A., including exhibits and amendments thereto (formerly 10(v))
The following Exhibits are filed herewith:
-31-
<PAGE>
10(v) Amendment of Employment Agreement with William J. Meyer dated January
5, 1996) *
10(w) Amendment of Employment Agreement with George G. Meyer dated January
5, 1996 *
10(x) Amendment of Employment Agreement with Stephen J. Meyer dated January
5, 1996 *
10(y) Employment Agreement with James E. Golinveaux dated November 30,
1995 *
10(z) Amendments to Term Loan Agreement between Central Sprinkler Company
and First Fidelity Bank
10(aa) Amendments to Term Loan Agreement between Central Sprinkler Company
and CoreStates Bank, N.A.
10(ab) Loan Agreement between Alabama State Industrial Development Authority
and Central Castings Corporation dated as of November 1, 1995
10(ac) Lease Agreement between Calhoun County Economic Development Council
and Central Castings Corporation dated as of November 1, 1995
10(ad) Letter of Credit and Reimbursement Agreement by and between First
Fidelity Bank, National Association and Central Castings Corporation
dated as of November 1, 1995
11 Statement of Computation of Earnings per Common Share
21 Subsidiaries of Registrant
23 Consent of Independent Public Accountants
(b) No reports on Form 8-K were filed during the quarter ended October 31, 1995.
-32-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CENTRAL SPRINKLER CORPORATION
By: /s/William J. Meyer
-----------------------------------
William J. Meyer
President
Date: January 24, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and as of the date indicated.
Signature Title Date
- ----------------------- --------------- ----------------
/s/Winston J. Churchill Chairman of the January 24, 1996
- ----------------------- Board and Director
Winston J. Churchill
/s/William J. Meyer President and January 24, 1996
- ----------------------- Director
William J. Meyer
/s/George G. Meyer Chief Executive January 24, 1996
- ----------------------- Officer, Treasurer,
George G. Meyer Secretary and
Director
/s/Albert T. Sabol Vice President- January 24, 1996
- ------------------------ Finance(Principal
Albert T. Sabol Financial and
Accounting Officer)
/s/Stephen J. Meyer Director January 24, 1996
- ------------------------
Stephen J. Meyer
/s/Joseph L. Jackson Director January 24, 1996
- ------------------------
Joseph L. Jackson
-33-
<PAGE>
Signature Title Date
- ----------------------- --------------- ----------------
/s/Barbara M. Henagan Director January 24, 1996
- -----------------------
Barbara M. Henagan
/s/Richard P. O'Leary Director January 24, 1996
- ------------------------
Richard P. O'Leary
/s/Thomas J. Sharbaugh Director January 24, 1996
- -----------------------
Thomas J. Sharbaugh
/s/Timothy J. Wagg Director January 24, 1996
- -----------------------
Timothy J. Wagg
-34-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To Central Sprinkler Corporation:
We have audited the accompanying consolidated balance sheets of CENTRAL
SPRINKLER CORPORATION (a Pennsylvania corporation) AND SUBSIDIARIES as of
October 31, 1995 and 1994, and the related consolidated statements of income,
cash flows and shareholders' equity for the years ended October 31, 1995, 1994
and 1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Central Sprinkler Corporation
and subsidiaries as of October 31, 1995 and 1994, and the results of their
operations and their cash flows for the years ended October 31, 1995, 1994 and
1993, in conformity with generally accepted accounting principles.
As explained in Note 2 to the consolidated financial statements, effective
November 1, 1994, the Company adopted the provisions of Statement of Position
No. 93-6 "Employers' Accounting for Employee Stock Ownership Plans". In
addition, as explained in Note 1 to the consolidated financial statements,
effective November 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes".
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Philadelphia, Pa.
December 13, 1995
F-1
<PAGE>
Central Sprinkler Corporation and Subsidiaries
Financial Statements
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
October 31,
-----------------
ASSETS 1995 1994
- ---------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 2,025 $ 2,188
Short-term investments 10,079 18,334
Accounts receivable, less
allowance for doubtful receivables of
$3,813 in 1995 and $3,737 in 1994, respectively 31,686 24,907
Inventories 35,955 28,653
Deferred income taxes 5,038 4,686
Prepaid expenses and other assets 650 902
-------- -------
Total current assets 85,433 79,670
-------- -------
Property, Plant and Equipment:
Land 337 289
Buildings and improvements 6,306 4,592
Machinery and equipment 35,529 21,605
Furniture and fixtures 1,421 1,060
-------- -------
43,593 27,546
Less - Accumulated depreciation 15,567 12,298
-------- -------
28,026 15,248
-------- -------
Goodwill, less accumulated amortization of
$3,012 in 1995 and $2,761 in 1994, respectively 3,010 3,261
-------- -------
Other Assets 891 882
-------- -------
$117,360 $99,061
======== =======
- ---------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
October 31,
-----------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
- --------------------------------------------------------------------------------
Current Liabilities:
Short-term borrowings $ 14,062 $ 8,486
Current portion of long-term debt 3,813 3,078
Accounts payable 12,724 7,731
Accrued expenses 6,896 5,301
Accrued income taxes 646 1,906
-------- -------
Total current liabilities 38,141 26,502
-------- -------
Long-Term Debt 27,516 19,391
-------- -------
Other Noncurrent Liabilities 577 699
-------- -------
Deferred Income Taxes 1,576 1,368
-------- -------
Commitments and Contingent Liabilities (Note 15)
Shareholders' Equity:
Common stock, $.01 par value; shares authorized
- 15,000; issued - 5,472 in 1995 and 5,398
in 1994, respectively 55 54
Additional paid-in capital 29,118 27,674
Retained earnings 42,939 34,481
Cumulative translation adjustments (109) (76)
Deferred cost-Employee Stock Ownership Plan (6,360) (6,679)
Unrealized investment holding gains, net 10 -
-------- -------
65,653 55,454
Less - Common stock in treasury, at cost
- 1,680 shares in 1995 and 444 shares
in 1994 16,103 4,353
-------- -------
49,550 51,101
-------- -------
$117,360 $99,061
======== =======
- ---------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share)
Year Ended October 31,
----------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
Net Sales $158,849 $116,249 $82,481
Cost of Sales 107,165 81,012 59,085
-------- -------- -------
Gross profit 51,684 35,237 23,396
-------- -------- -------
Operating Expenses:
Selling, general and administrative 31,795 24,934 17,797
Research and development 5,133 4,091 2,838
Other income, net (549) (216) (120)
-------- -------- -------
36,379 28,809 20,515
-------- -------- -------
Operating income 15,305 6,428 2,881
-------- -------- -------
Interest Expense (Income):
Interest expense 2,363 1,303 422
Interest income (461) (625) (717)
-------- -------- -------
1,902 678 (295)
-------- -------- -------
Income before income taxes 13,403 5,750 3,176
Income Taxes 4,945 1,970 800
-------- -------- -------
Income Before Cumulative Effect of
Accounting Change 8,458 3,780 2,376
Cumulative Effect of Accounting
Change for Income Taxes - 238 -
-------- -------- -------
Net Income $ 8,458 $ 4,018 $ 2,376
======== ======== =======
Earnings per Common Share:
Before Cumulative Effect of
Accounting Change $2.50 $.75 $.50
Cumulative Effect of Accounting
Change for Income Taxes - .05 -
-------- -------- -------
Earnings Per Common Share $2.50 $.80 $.50
======== ======== =======
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended October 31,
----------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 8,458 $ 4,018 $ 2,376
Noncash items included in income:
Depreciation and amortization 3,520 3,083 2,059
Cumulative effect of accounting change - (238) -
Deferred income taxes (144) (1,708) (573)
Deferred costs 529 183 300
Decrease (increase) in -
Accounts receivable, net (6,779) (4,587) (9,213)
Inventories (7,302) (4,978) (5,594)
Prepaid expenses and other assets 252 (233) (260)
Increase (decrease) in -
Accounts payable 4,993 (386) 4,435
Accrued expenses 1,595 1,381 496
Accrued income taxes (1,260) 1,690 (249)
------- ------- -------
Net cash provided by (used for) operating
activities 3,862 (1,775) (6,223)
------- ------- -------
Cash flows from investing activities:
Acquisition of property, plant and
equipment (16,047) (6,285) (2,660)
Aquisitions of businesses - (1,571) (2,608)
Proceeds from (used for) short-term
investments 8,255 (1,035) (3,817)
Other - net (9) 22 (199)
------- ------- -------
Net cash used for investing activities (7,801) (8,869) (9,284)
------- ------- -------
Cash flows from financing activities:
Purchase of treasury stock (11,750) - (621)
Short-term borrowings, net 16,576 13,908 11,567
Proceeds from exercised stock options 745 17 -
Tax benefits from exercised stock options 368 3 -
Proceeds from long-term debt 948 20 5,000
Repayments of long-term debt (3,088) (2,174) (1,314)
Other - net (23) 158 (122)
------- ------- -------
Net cash provided by financing activities 3,776 11,932 14,510
------- ------- -------
Net (decrease) increase in cash and cash
equivalents (163) 1,288 (997)
Cash and cash equivalents at beginning
of year 2,188 900 1,897
------- ------- -------
Cash and cash equivalents at end of year $ 2,025 $ 2,188 $ 900
======= ======= =======
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
Year Ended October 31,
----------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest expense $ 2,638 $ 1,239 $ 348
======= ======= =======
Income taxes $ 6,061 $ 2,016 $ 1,622
======= ======= =======
Interest income $ (854) $ (928) $ (567)
======= ======= =======
Supplemental schedule of non-cash investing
and financing activities:
Refinancing of short-term borrowings with
long-term debt $11,000 $20,000 $ -
======= ======= =======
Acquisitions:
Fair value of assets acquired $ - $ 1,771 $ 5,687
Liabilities assumed - - (462)
Note payable issued - (200) (2,617)
------- ------- -------
Cash paid for net assets acquired $ - $ 1,571 $ 2,608
======= ======= =======
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
<TABLE>
Unrealized
Common Stock Additional Cumulative Treasury Deferred Investment
------------- Paid-in Retained Translation Stock, Cost- Holding
Shares Amount Capital Earnings Adjustments Common ESOP Gains, Net
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1992 5,396 $54 $27,624 $28,087 $(155) $(10,977) $ - $ -
Sale of 750 shares of
common stock from
treasury to ESOP - - 30 - - 7,245 (7,275) -
Purchase of 58 shares of
common stock for treasury - - - - - (621) - -
Annual ESOP costs - - - - - - 299 -
Translation adjustments - - - - (124) - - -
Net income - - - 2,376 - - - -
----- --- ------ ------ ----- -------- ------- -----
Balance, October 31, 1993 5,396 54 27,654 30,463 (279) (4,353) (6,976) -
Exercise of stock options 2 - 20 - - - - -
Annual ESOP costs - - - - - - 297 -
Translation adjustments - - - - 203 - - -
Net income - - - 4,018 - - - -
----- --- ------ ------ ----- -------- ------- -----
Balance, October 31, 1994 5,398 54 27,674 34,481 (76) (4,353) (6,679) -
Purchase of 1,237 shares
of common stock for treasury - - - - - (11,750) - -
Unrealized investment
holding gains, net - - - - - - - 10
Exercise of stock options 74 1 1,112 - - - - -
Annual ESOP costs - - 332 - - - 319 -
Translation adjustments - - - - (33) - - -
Net income - - - 8,458 - - - -
----- --- ------ ------ ----- -------- ------- -----
Balance, October 31, 1995 5,472 $55 $29,118 $42,939 $(109) $(16,103) $(6,360) $ 10
===== === ====== ====== ===== ======== ======= =====
</TABLE>
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Central Sprinkler Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share)
1. Summary of Significant Accounting Policies:
THE COMPANY - The Company's operations are conducted in one business segment
as a manufacturer and distributor of components used in automatic fire sprinkler
systems. These fire sprinkler system components are used in commercial,
industrial, residential and institutional properties and are sold to over 3
thousand customers, most of which are sprinkler installation contractors.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Central Sprinkler Corporation and its subsidiaries (the
"Company"). All significant intercompany transactions and accounts have been
eliminated.
CASH EQUIVALENTS - The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents for the purpose of determining cash flows.
SHORT-TERM INVESTMENTS - The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115-Accounting for Certain Investments in Debt
and Equity Securities prospectively effective November 1, 1994. At October 31,
1995, the short-term investments have been categorized as available for sale and
as a result are stated at fair value. Unrealized holding gains and losses are
included as a separate component of shareholders' equity until realized. At
October 31, 1994, the short-term investments were stated at cost plus accrued
interest which approximated market value. All of the Company's investment
holdings have been classified in the consolidated balance sheet as current
assets.
INVENTORIES - Inventories are stated at the lower of cost (first-in,
first-out) or market.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost. Depreciation and amortization are being recorded on a straight-line basis
over the estimated lives of the assets which range from 3 to 20 years.
GOODWILL - Goodwill represents the excess of the purchase cost of net assets
acquired over their fair market value and is amortized primarily on a
straight-line basis over 25 years. The Company considers goodwill to be fully
realizable through future operations.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of a foreign
subsidiary are translated into U.S. dollars at the rate of exchange prevailing
at the end of the year. Income statement accounts are translated at the average
exchange rate prevailing during the year. Translation adjustments resulting
from this process are recorded directly in shareholders' equity.
RESEARCH AND DEVELOPMENT COSTS - Costs of research, new product development
and product redesign are expensed as incurred.
INCOME TAXES - Effective November 1, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109-Accounting for Income Taxes. The
cumulative effect of this accounting change resulted in the recognition of a
one-time gain of $238 or $.05 per common share in fiscal 1994. SFAS No. 109
requires deferred tax liabilities and assets be recognized for the tax effects
of differences between the financial reporting and tax bases of assets and
liabilities.
EARNINGS PER COMMON SHARE - Earnings per common share is computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding (dilutive stock options).
RECLASSIFICATIONS - Certain reclassification of previously reported balances
have been made to conform with the current year classification of such balances.
2. Earning Per Common Share:
The weighted average common shares outstanding were 3,382, 5,004, and 4,710
for the years ended October 31, 1995, 1994 and 1993, respectively.
Effective November 1, 1994, the Company adopted Statement of Position No.
93-6, "Employers' Accounting for Employee Stock Ownership Plans" ("SOP"). The
SOP requires that unallocated shares of the Company's stock in the Employee
Stock Ownership Plan ("ESOP") should be excluded from the average number of
common shares outstanding when computing earnings per common share. In
accordance with this SOP, 672 unallocated ESOP shares were excluded from the
average number of common shares outstanding in fiscal year 1995. In accordance
with the provisions of the SOP, prior period information has not been restated.
F-8
<PAGE>
3. Foreign Operations:
The Company owns Spraysafe Automatic Sprinklers Limited ("Spraysafe"), a
Company in the United Kingdom. Spraysafe manufactures sprinkler heads and
distributes these and other products in Europe and other foreign countries.
Significant financial information about Spraysafe's operations consist of
the following -
Year Ended October 31,
---------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
Sales $11,210 $8,800 $6,259
Operating income $ 1,202 $ 702 $ 644
Net income $ 699 $ 440 $ 279
Total assets $ 7,903 $5,065 $3,872
Total liabilities $ 4,862 $2,710 $2,140
- ------------------------------------------------------------------------------
4. Short-Term Investments:
The following is a summary of the estimated fair value of available for sale
securities by balance sheet classification -
October 31,
--------------------
1995 1994
- ------------------------------------------------------------------------------
Cash Equivalents:
U.S. Money Market Funds $ 517 $ 1,303
======= =======
Short-Term Investments:
Tax-Exempt Securities $10,079 $18,334
======= =======
- ------------------------------------------------------------------------------
Gross unrealized holding gains and losses for the year ended October 31,
1995 were not material. The net unrealized holding gains for the year ended
October 31, 1995 have been recorded as a separate component of shareholders'
equity. The gross proceeds from sales and maturities of investments were $22,069
for the year ended October 31, 1995. Gross realized gains and losses for the
year ended October 31, 1995 were not material. For the purpose of determining
gross realized gains and losses, the cost of securities sold is based upon
specific identification.
Short-term investments are generally comprised of variable rate securities
that provide for optional or early redemption within twelve months and the
contractual maturities are generally greater than twelve months.
5. Inventories:
Inventories consist of the following -
October 31,
--------------------
1995 1994
- ------------------------------------------------------------------------------
Raw materials and work
in proccess $11,237 $ 9,179
Finished Goods 24,718 19,474
------- -------
$35,955 $28,653
======= =======
- ------------------------------------------------------------------------------
6. Shareholders' Equity:
REDEEMABLE PREFERRED STOCK - The Company has authorized 2,000 shares of
Redeemable Preferred Stock, $.01 par value. At October 31, 1995, 1994 and 1993,
there were no shares issued and outstanding.
TREASURY STOCK - The Company repurchased 1,237 shares of its common stock on
December 21, 1994 at a cost of $11,750 and repurchased 58 shares of its common
stock at a cost of $621 during fiscal 1993. There were no repurchases in fiscal
1994. All shares are being held in the treasury for possible future issuance.
On April 28, 1993, the Company sold, in a leveraged transaction, 750 shares of
its common stock from the treasury to the ESOP for $9.70 per share in exchange
for a promissory note from the ESOP. The aggregate sale amount of $7,275
resulted in a decrease in treasury stock and increase in additional
paid-in-capital of $7,245 and $30 respectively, as well as a charge to deferred
cost-ESOP for $7,275 on the date of the sale.
F-9
<PAGE>
STOCK OPTIONS - The Company has stock option plans ("Option Plans") which
cover a maximum of 960 shares of common stock which may be granted. The Option
Plans provide for the granting of 187 incentive stock options under a plan
adopted in 1986 and 713 nonqualified or incentive stock options under a plan
adopted in 1988 and amended in fiscal 1991. Under a plan adopted in 1993, the
Company can issue up to 60 nonqualified options under a non-employee director
stock option plan. Options have been granted to officers, other key employees
and non-employee directors at exercise prices not less than 100% of the fair
market value of the Company's common stock on the date of the grant. The options
become exercisable after the date of the grant and expire ten years from the
date of grant.
The following table presents data related to the Option Plans-
- ------------------------------------------------------------------------------
Incentive Nonqualified
Stock Stock Option
Options Options Price
---------------------------------------
October 31, 1992 126 381 $8.60-$13.80
Granted - 12 $ 9.25
---- ----
October 31, 1993 126 393 $8.60-$13.80
Granted - 12 $13.00
Exercised (2) - $ 8.60
---- ----
October 31, 1994 124 405 $8.60-$13.80
Granted - 12 $15.60
Exercised (29) (44) $8.60-$13.80
---- ----
October 31, 1995 95 373 $8.60-$15.60
==== ====
- ------------------------------------------------------------------------------
At October 31, 1995, all of the outstanding options were exercisable and 24
incentive options were available for grant under the 1986 plan and 337
nonqualified or incentive stock options were available for grant under the
1988 plan.
7. Debt:
The Company's long-term debt consists of the following-
October 31,
----------------------
1995 1994
- ------------------------------------------------------------------------------
Term Loan $ 8,417 $ 9,416
Term Loan 8,500 9,500
Term Note 2,000 3,000
Mortgage Loan 464 538
Short-term borrowings
refinanced subsequent
to year end 11,000 -
Foreign Term Loan 948 -
Other Loans - 15
------- -------
31,329 22,469
Less-Current portion 3,813 3,078
------- -------
$27,516 $19,391
======= =======
- ------------------------------------------------------------------------------
The Company obtained two $10,000 ten-year term loans from banks in fiscal
1994. These term loans are unsecured and the proceeds of such loans were used to
refinance borrowings under unsecured lines of credit from such banks. The loan
proceeds were used primarily for working capital purposes and the acquisition
and expansion of facilities to accommodate the growth in the Company's business.
One term loan is payable through 2004 in monthly principal installments of $84
and bears interest at a variable rate which was 6.69% at October 31, 1995. The
other term loan is payable through 2004 in quarterly principal installments of
$250 and bears interest at a variable rate which was 7.04% at October 31, 1995.
The Company must maintain certain tangible net worth, certain financial ratios
and other requirements under the provisions of these term loans.
F-10
<PAGE>
The Company's term note is unsecured and payable through 1997 in semi-annual
payments of $500. The Company must maintain certain tangible net worth, certain
financial ratios and other requirements under the provisions of this term note.
Interest on this note is variable and was 7.04% at October 31, 1995.
The mortgage loan is secured by the Company's primary manufacturing facility
and is payable at $6 monthly through 2002. Interest is also payable monthly at a
variable interest rate which was 7.04% at October 31, 1995.
In fiscal 1995, Spraysafe obtained a $948 five-year term loan. This loan is
unsecured and bears interest at a variable rate which was 8.0% at October 31,
1995. The loan proceeds were used primarily for machinery and equipment and
working capital purposes.
The Company's short-term borrowings are primarily demand loans under lines
of credit. At October 31, 1995, $11,000 of short-term borrowings are classified
as long-term debt based on the Company's issuance of bonds on November 21, 1995.
A principal amount of $8,000 are State of Alabama Industrial Development
Authority Adjustable Convertible Taxable Industrial Revenue Bonds and a
principal amount of $3,000 are Calhoun County (Alabama) Economic Development
Council Adjustable Convertible Taxable Industrial Revenue Bonds ("IRB's"). The
IRB's have a 20 year term and are payable in quarterly installments of $138 and
bear interest at a variable rate which was 6.05% at the date of issuance. The
IRB's are collateralized by a letter of credit and are subject to early
redemption under certain circumstances. After reduction for the refinancing, the
Company has domestic demand loans outstanding at October 31, 1995 of $13,387
which bear interest at a variable interest rate. The weighted average interest
rate on these loans is 6.46% and 5.79% at October 31, 1995 and 1994,
respectively. Spraysafe has short-term borrowings in the form of a demand loan
which is payable in British pounds in the amount of $675 at October 31, 1995.
This loan bears interest at a variable interest rate which was 7.98% and 7.25%
at October 31, 1995 and 1994, respectively.
The Company has lines of credit with banks at variable interest rates which
are generally less than the prime lending rate. After reclassification of
$11,000 of short-term borrowings as long-term, approximately $17,123 of these
lines of credit were unused and available for use at October 31, 1995.
Annual principal payments required under long-term debt obligations are
as follows -
- ------------------------------------------------------------------------------
Fiscal Year
-----------
1996 $ 3,813
1997 3,813
1998 2,813
1999 2,813
2000 2,813
Thereafter 15,264
-------
$31,329
=======
- ------------------------------------------------------------------------------
8. CAPITALIZED INTEREST:
The interest cost incurred by the Company for fiscal year 1995 amounted to
$2,696. The Company capitalized $333 of interest cost in fiscal year 1995 in
connection with the expansion of the foundry and manufacturing facility for
piping system components. No interest was capitalized in fiscal 1994 or 1993.
9. INCOME TAXES:
The following table summarizes the source of income before income taxes and
information concerning the provision for income taxes-
F-11
<PAGE>
Year Ended October 31,
--------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
Income before income taxes -
Domestic $12,284 $5,102 $2,749
Foreign 1,119 648 427
------- ------ ------
Total $13,403 $5,750 $3,176
======= ====== ======
Provision for income taxes: -
Current -
U.S. Federal $ 3,674 $2,774 $1,000
State 1,067 696 222
Foreign 348 208 151
------- ------ ------
Total 5,089 3,678 1,373
------- ------ ------
Deferred -
U.S. Federal 54 (1,328) (460)
State (270) (380) (113)
Foreign 72 - -
------- ------ ------
Total (144) (1,708) (573)
------- ------ ------
Total tax provision $ 4,945 $1,970 $ 800
======= ====== ======
- ------------------------------------------------------------------------------
Income tax expense differs from the amount currently payable because certain
revenues and expenses are reported in the income statement in periods which
differ from those in which they are subject to taxation. The principal
differences in timing between the income statement and taxable income involve
certain accrued expenses and reserves not currently deductible for tax purposes,
tax regulations which limit deductions for bad debt expense, the uniform cost
capitalization rules and different methods used in computing tax and book
depreciation. Such differences are recorded as deferred income taxes in the
accompanying balance sheets under the liability method.
The components of the deferred income tax assets and liabilities, measured
under SFAS No. 109 at the beginning and end of the fiscal year, are listed
below. There is no valuation reserve for deferred tax assets.
10/31/95 10/31/94
- ------------------------------------------------------------------------------
Deferred Tax Assets -
- ---------------------
Accounts receivable $1,813 $1,691
Inventories 1,702 1,643
Pensions 230 277
Patents 466 284
Other 1,095 938
------ ------
Deferred tax assets 5,306 4,833
------ ------
Deferred Tax Liabilities -
- --------------------------
Depreciation (1,105) (919)
Other (739) (596)
------ ------
Deferred tax liabilities (1,844) (1,515)
------ ------
Net Deferred Tax Asset $3,462 $3,318
====== ======
- ------------------------------------------------------------------------------
The adoption of SFAS No. 109 did not result in any significant changes to
the income tax provision components in 1994. The recognition of income taxes in
prior years has not been restated.
F-12
<PAGE>
The effective tax rate is reconciled to the statutory
U.S. Federal Income tax rate as follows -
Year Ended October 31,
---------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
U.S. Federal statutory rate 34.0% 34.0% 34.0%
Amortization of goodwill .6 1.4 2.5
State income taxes, net
of U.S. Federal benefit 3.9 2.3 2.3
Income tax credits utilized (1.6) (1.9) (9.3)
Tax-exempt interest (1.0) (3.5) (7.1)
Market value adjustment of
ESOP shares .8 - -
Other .2 2.0 2.8
----- ----- -----
36.9% 34.3% 25.2%
===== ===== =====
- ------------------------------------------------------------------------------
10. RELATED-PARTY TRANSACTIONS:
The Company has financial consulting agreements with companies affiliated
with certain of its directors/shareholders. These agreements provide for annual
fees of $175 per year plus out-of-pocket expenses. These agreements extend
through October 1996 and automatically renew for an additional year unless
notice of cancellation is given.
The Company leases an aircraft from a business in which a director and
executive officer of the Company is the sole proprietor. For the years ended
October 31, 1995, 1994 and 1993, the Company recorded lease expense of $322,
$270, and $240, respectively.
The Company expensed $594, $97, and $155 in the years ended October 31,
1995, 1994 and 1993, respectively, for legal fees to a firm having a member who
is also a director of the Company.
11. LEASES:
The Company has operating leases for its warehousing facilities and certain
transportation and office equipment. The total rental expense for the years
ended October 31, 1995, 1994 and 1993 was $1,118, $975 and $735, respectively.
The future minimum rental payments required under operating leases that have
initial or remaining lease terms in excess of one year as of October 31, 1995
are as follows -
- ------------------------------------------------------------------------------
Fiscal Year
-----------
1996 $1,066
1997 715
1998 536
1999 464
2000 334
Thereafter 390
- ------------------------------------------------------------------------------
12. INCENTIVE COMPENSATION PLANS:
The Company has an Incentive Compensation Plan which provides awards to
officers and other employees of the Company. Amounts credited to the incentive
compensation fund are 8% of monthly operating income, as defined in the Plan, if
monthly operating income meets specified levels. Another plan provides three
executive officers with a bonus paid on annual net income in excess of the 1985
base income level at a combined rate of 2 1/2% of the increase.
The total amounts charged to expense for all such plans were $1,553, $590
and $296 for the years ended October 31, 1995, 1994 and 1993, respectively.
Awards from the Incentive Compensation Plan are made to officers and other
employees based on both specified percentage participation in the Plan as well
as special awards determined at the discretion of the Company's Chairman.
13. EMPLOYEE BENEFIT PLANS:
Certain of the Company's manufacturing employees are covered by a
union-sponsored, collectively bargained, Multiemployer Pension Plan. The Company
contributed and charged to expense $248, $210 and $122 for the years ended
October 31, 1995, 1994 and 1993, respectively. These contributions are
determined in accordance with the provisions of negotiated labor contracts and
generally are based on the number of hours worked. At October 31, 1995, the
Company had no liability for unfunded vested benefits of this plan.
F-13
<PAGE>
The Company sponsors a 401(K) Profit Sharing Plan which covers certain
employees not covered by collective bargaining agreements and maintains Deferred
Compensation Plans which provide retirement benefits for certain officers. The
expense under these plans was $189, $175 and $154 for the years ended October
31, 1995, 1994 and 1993, respectively.
The Company has an Employee Stock Ownership Plan ("ESOP") which covers
certain employees not covered by collective bargaining agreements. At October
31, 1995, the ESOP holds 780 shares of the Company's common stock. On April 28,
1993, the ESOP purchased 750 shares of the Company's common stock in a leveraged
transaction for $9.70 per share. The future costs of the plan will be amortized
over 15 years and are reported as a deferred cost in the equity section of the
accompanying balance sheets. The ESOP issued a note payable to the Company which
will be repaid over 15 years with interest at a variable rate. This note will be
repaid from cash contributed to the plan by the Company. The stock will be
allocated to the eligible employees over 15 years i n accordance with the ESOP
plan provisions. As described in Note 2, the Company adopted SOP 93-6 effective
November 1, 1994. Compensation expense is recorded for shares allocated to
employees based on the fair market value of those shares in the period in which
they are allocated. The difference between cost and fair market value of such
allocated common shares, which was $332 in 1995, is recorded in additional
paid-in capital. There were 657 and 689 ESOP common shares unallocated as of
October 31, 1995 and 1994, respectively. The ESOP shares are summarized as
follows -
October 31, 1995
- ------------------------------------------------------------------------------
Allocated shares 123
Unreleased shares 657
-------
Total ESOP shares 780
=======
Fair value of unreleased shares
at October 31, 1995 $21,681
=======
- ------------------------------------------------------------------------------
The ESOP expense for the years ended October 31, 1995, 1994 and 1993 was
$651, $297, and $299, respectively.
14. ACQUISITIONS:
The Company purchased substantially all of the business assets of a foundry
in the Southeastern United States engaged in manufacturing components for piping
systems for a purchase price of $1,771 effective July 15, 1994. The assets
consist primarily of property, plant and equipment and were acquired for cash
of $1,571 and a $200 note payable that has reduced the cash payment of the
purchase price.
On August 17, 1993, the Company acquired certain business assets and
assumed certain liabilities of Sprink, Inc., a company engaged in the business
of manufacturing and distributing pipe couplings, fittings and other products
that are used in fire sprinkler systems. The assets acquired included primarily
inventories (excluding selected items) and property and equipment for a purchase
price of $4,100. The liabilities assumed were principally warranty obligations
and obligations under operating leases. A $1,500 portion of the purchase price
was paid in fiscal 1993 and the balance of $2,600 was paid in fiscal 1994.
15. COMMITMENTS AND CONTINGENT LIABILITIES:
AGREEMENTS AND CONTRACTS
The Company is a party to patent licensing agreements to manufacture and
sell certain types of sprinkler devices. Under the terms of the agreements, the
Company is required to pay a royalty on net commissioned sales (as defined in
the agreements) of the licensed product during the terms of the patents. The
expense under these agreements was $417, $380 and $338 for the years ended
October 31, 1995, 1994 and 1993, respectively.
The Company has employment contracts with certain officers under which
their employment could not be terminated without five years prior notice. The
Company also has various purchase commitments for materials, supplies, machinery
and equipment incident to the ordinary conduct of business. Such commitments are
not at prices in excess of current market.
The Company, in the normal course of business, is party to various claims
and lawsuits with regard to its products and other matters. Management believes
that the ultimate resolution of these matters will not have a material impact on
the Company's financial position.
The Company has made certain commitments to expand and improve the
manufacturing facility for piping system components bought in July 1994 (Note
14). These commitments are for buildings, building improvements and various
machinery and equipment. As of October 31, 1995, the open commitments relating
to this facility approximate $2,400. It is expected that such improvements
will be completed in February 1996.
F-14
<PAGE>
ENVIRONMENTAL MATTERS
The Company and approximately thirty other local businesses were notified
by the Environmental Protection Agency ("EPA") in August 1991 that they may be a
potentially responsible party with respect to a groundwater contamination
problem in the vicinity of the Company's primary manufacturing plant in
Lansdale, Pennsylvania. The Company has entered into an Administrative Order of
Consent for Remedial Investigation/Feasibility Study ("AOC") effective May 19,
1995 with the EPA. Pursuant to the AOC, the Company has agreed to perform
certain tests on the Company's property to determine whether any land owned by
the Company or ground water beneath such land could be a source of any of the
contamination at the site. It is currently estimated that the Company's portion
of the overall costs related to this matter will range from $240 to $2,700
depending upon the amount of cleanup necessary. Management believes that the
Company's operations did not contribute to this contamination problem. The
Company has recorded a liability for the minimum amount within the range above,
which does not assume any recoveries from insurance or third parties.
F-15
<PAGE>
SUPPLEMENTARY FINANCIAL DATA
Quarterly Financial Data (Unaudited)
(Amounts in thousands, except per share amounts)
------------------------------------------------
First Second Third Fourth
- ------------------------------------------------------------------------------
1995
Net sales $33,714 $37,990 $42,758 $44,387
Gross profit 10,612 12,258 14,006 14,808
Net income 1,448 1,923 2,389 2,698
Earnings per share .39 .60 .73 .82
1994
Net sales $24,463 $25,766 $30,831 $35,189
Gross profit 7,438 8,339 9,049 10,411
Income before cumulative effect
of accounting change 424 769 1,188 1,399
Net income 662 769 1,188 1,399
Earnings per share before
cumulative effect of
accounting change .08 .15 .24 .28
Earnings per share .13 .15 .24 .28
1993
Net sales $16,008 $18,027 $22,088 $26,358
Gross profit 4,408 5,049 6,410 7,529
Net income 136 467 817 956
Earnings per share .03 .11 .17 .19
Note: The total of the individual quarterly earnings per common share may not
equal the earnings per common share for the year due to changes in the number
of shares outstanding during the year.
F-16
<PAGE>
SCHEDULE II
CENTRAL SPRINKLER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
RESERVE FOR DOUBTFUL RECEIVABLES
(Amounts in thousands)
Balance Charges Balance
Beginning to End of
Year Ended of Period Expense Recoveries Writeoffs Period
---------- --------- ------- ---------- --------- ------
October 31, 1995 $3,737 $ 975 $64 $963 $3,813
====== ====== === ==== ======
October 31, 1994 $2,691 $1,467 $89 $510 $3,737
====== ====== === ==== ======
October 31, 1993 $2,573 $ 941 $11 $834 $2,691
====== ====== === ==== ======
S-1
EXHIBIT 10(v)
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment (the "Amendment") is made as of the 5th day of January,
1996, to that certain Employment Agreement (the "Employment Agreement") dated as
of March 19, 1990, by and among Central Sprinkler Company (the "Company"),
Central Sprinkler Corporation (the "Parent Company") and William J. Meyer (the
"Employee"). Capitalized terms used herein but not defined herein shall have the
meanings assigned to them in the Employment Agreement.
WHEREAS, the parties hereto desire to amend the Employment Agreement to
add a provision relating to bonus payments.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Restatement of Section 4.3. Section 4.3 of the
Employment Agreement is hereby amended and restated in its
entirety as follows:
"4.3 Bonus. In addition to all other compensation payable to the
Employee hereunder, for each fiscal year during the period beginning November 1,
1989 and continuing through October 31, 1994, the Company shall pay to the
Employee an annual bonus in an amount equal to $12.50 for each $1,000 increase
over the Parent Company's consolidated net profits for the 1985 fiscal year. For
each fiscal year during the period beginning November 1, 1994 and continuing
through the end of the Employment Term, the Company shall pay to the Employee an
annual bonus in an amount equal to $10.00 for each $1,000 increase over the
Parent Company's consolidated net profits for the 1985 fiscal year. For purposes
of this Section 4.3, "consolidated net profits" means the Parent Company's
profits, following all deductions made for federal and state taxes, for the
period specified as computed by the Parent Company and then reviewed by its
regularly engaged public accountants in accordance with the Parent Company's
regular accounting policies. The bonus for each such fiscal year shall be paid
to the Employee no later than 30 days after the Parent Company's accountants
deliver final financial statements to the Parent Company for the fiscal year for
which such bonus is paid. For any period for which the Employee's bonus shall be
based on less than a full year, the computation of net profits shall be made in
the same manner as for a full fiscal year, except that it shall be done only for
those full months for which the Employee shall have been employed under this
Agreement."
1
<PAGE>
2. Counterparts. This Amendment may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto upon
the same instrument.
3. Miscellaneous. Except as herein modified and amended, all
terms and conditions of the Employment Agreement shall remain unchanged and in
full force and effect.
IN WITNESS WHEREOF the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
CENTRAL SPRINKLER COMPANY
By: /s/George G. Meyer
---------------------------------
Name: George G. Meyer
Title:
CENTRAL SPRINKLER CORPORATION
By: /s/George G. Meyer
---------------------------------
Name: George G. Meyer
Title:
/s/William J. Meyer
---------------------------------
William J. Meyer
EXHIBIT 10(w)
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment (the "Amendment") is made as of the 5th day of January,
1996, to that certain Employment Agreement (the "Employment Agreement") dated as
of March 19, 1990, by and among Central Sprinkler Company (the "Company"),
Central Sprinkler Corporation (the "Parent Company") and George G. Meyer (the
"Employee"). Capitalized terms used herein but not defined herein shall have the
meanings assigned to them in the Employment Agreement.
WHEREAS, the parties hereto desire to amend the Employment Agreement to
add a provision relating to bonus payments.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Restatement of Section 4.3. Section 4.3 of the
Employment Agreement is hereby amended and restated in its
entirety as follows:
"4.3 Bonus. In addition to all other compensation payable to the
Employee hereunder, for each fiscal year during the period beginning November 1,
1989 and continuing through October 31, 1994, the Company shall pay to the
Employee an annual bonus in an amount equal to $12.50 for each $1,000 increase
over the Parent Company's consolidated net profits for the 1985 fiscal year. For
each fiscal year during the period beginning November 1, 1994 and continuing
through the end of the Employment Term, the Company shall pay to the Employee an
annual bonus in an amount equal to $7.50 for each $1,000 increase over the
Parent Company's consolidated net profits for the 1985 fiscal year. For purposes
of this Section 4.3, "consolidated net profits" means the Parent Company's
profits, following all deductions made for federal and state taxes, for the
period specified as computed by the Parent Company and then reviewed by its
regularly engaged public accountants in accordance with the Parent Company's
regular accounting policies. The bonus for each such fiscal year shall be paid
to the Employee no later than 30 days after the Parent Company's accountants
deliver final financial statements to the Parent Company for the fiscal year for
which such bonus is paid. For any period for which the Employee's bonus shall be
based on less than a full year, the computation of net profits shall be made in
the same manner as for a full fiscal year, except that it shall be done only for
those full months for which the Employee shall have been employed under this
Agreement."
1
<PAGE>
2. Counterparts. This Amendment may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto upon the same
instrument.
3. Miscellaneous. Except as herein modified and amended, all terms and
conditions of the Employment Agreement shall remain unchanged and in full force
and effect.
IN WITNESS WHEREOF the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
CENTRAL SPRINKLER COMPANY
By: /s/William J. Meyer
------------------------
Name: William J. Meyer
Title:
CENTRAL SPRINKLER CORPORATION
By: /s/Winston J. Churchill
------------------------
Name: Winston J. Churchill
Title:
/s/George G. Meyer
------------------------
George G. Meyer
2
EXHIBIT 10(x)
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment (the "Amendment") is made as of the 5th day of January,
1996, to that certain Employment Agreement (the "Employment Agreement") dated as
of March 19, 1990, by and among Central Sprinkler Company (the "Company"),
Central Sprinkler Corporation (the "Parent Company") and Stephen J. Meyer (the
"Employee"). Capitalized terms used herein but not defined herein shall have the
meanings assigned to them in the Employment Agreement.
WHEREAS, the parties hereto desire to amend the Employment Agreement to
add a provision relating to bonus payments.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Addition of New Section 4.3. The following language is
hereby added as Section 4.3 to the Employment Agreement:
"4.3 Bonus. In addition to all other compensation payable to the
Employee hereunder, for each fiscal year during the period beginning November 1,
1994 and continuing through the end of the Employment Term, the Company shall
pay to the Employee an annual bonus in an amount equal to $7.50 for each $1,000
increase over the Parent Company's consolidated net profits for the 1985 fiscal
year. For purposes of this Section 4.3, "consolidated net profits" means the
Parent Company's profits, following all deductions made for federal and state
taxes, for the period specified as computed by the Parent Company and then
reviewed by its regularly engaged public accountants in accordance with the
Parent Company's regular accounting policies. The bonus for each such fiscal
year shall be paid to the Employee no later than 30 days after the Parent
Company's accountants deliver final financial statements to the Parent Company
for the fiscal year for which such bonus is paid. For any period for which the
Employee's bonus shall be based on less than a full year, the computation of net
profits shall be made in the same manner as for a full fiscal year, except that
it shall be done only for those full months for which the Employee shall have
been employed under this Agreement."
2. Counterparts. This Amendment may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto upon
the same instrument.
1
<PAGE>
3. Miscellaneous. Except as herein modified and amended, all terms and
conditions of the Employment Agreement shall remain unchanged and in full force
and effect.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
CENTRAL SPRINKLER COMPANY
By: /s/George G. Meyer
------------------------
Name: George G. Meyer
Title: President
CENTRAL SPRINKLER CORPORATION
By: /s/George G. Meyer
------------------------
Name: George G. Meyer
Title: President
/s/Stephen J. Meyer
------------------------
Stephen J. Meyer
2
EXHIBIT 10(y)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of this
30th day of November 1995, between CENTRAL SPRINKLER COMPANY, a Pennsylvania
corporation with offices at 451 North Cannon Avenue, Lansdale, Pennsylvania
19446 (the "Company"), and JAMES E. GOLINVEAUX, an individual residing at 111
Clover Leaf Lane, North Wales, PA 19454 (the "Employee").
1. Employment. The company hereby employs the Employee in an
executive capacity, and the Employee accepts such employment. During the term of
employment under this Agreement (the "Employment Term"), the Employee shall
perform such duties as shall reasonably be required of an executive-level
employee of the Company.
2. Performance. The Employee shall devote his entire
business efforts to the performance of his duties hereunder.
3. Employment Term. Unless otherwise terminated in accordance
with this Agreement, the Employment Term shall consist of an initial term
commencing on the date hereof and ending on August 31, 1998 (the "Initial Term")
and automatic successive one-year renewal terms.
4. Termination Without Compensation.
(a) The Employment Term may be terminated by either
party hereto at the end of the Initial Term or any one-year renewal term if at
least 90 days prior to the termination of the term then in effect, the party
desiring to terminate the Employment Term shall give the other party written
notice of its or his decision to terminate the Employment Term as of the end of
the term then in effect.
(b) The Employment Term created hereunder may also be
terminated by the Company without written notice upon the occurrence of any of
the following:
(i) the death of the Employee;
(ii) the commission by the Employee of any
deliberate and premeditated act against
the interests of the Company;
(iii) the conviction by the Employee of a
felony;
(iv) the breach by the Employee of any
terms of this Agreement not cured
within 30 days subsequent to
notice in writing from the Company
to the Employee of the breach; or
<PAGE>
(v) the inability of the Employee to
perform his duties hereunder by reason
of any disability for a period of more
than one year if the Company shall have
given the Employee notice of the
Company's desire to terminate at least
30 days prior to the date of
termination. For purposes of this
Section 4(b) (v), "disability" has the
same meaning as set forth in the
Company's current disability insurance
policy. During the one-year period
specified herein, any amounts payable
to the Employee under the Company's
disability insurance policy shall be
deducted from the compensation payable
to the Employee hereunder.
5. Compensation. The basic annual compensation of the Employee
for his employment services hereunder shall be at least $120,000.00 (the
"Salary"), which shall be payable in equal monthly installments. In addition to
the Salary payable pursuant to this Section 5, the Employee shall be entitled to
receive such benefits that are generally available to all employees of the
Company from time to time. However, the Employee's continued eligibility under
any incentive compensation or bonus arrangement in which he currently
participates shall be subject to the sole discretion of the Company.
6. Agreement Not to Compete. The Employee agrees that for a
period equal to (a) the time during which the Employee is employed by the
Company, or if longer, receiving payments from the Company after termination of
his employment, plus (b) an additional one year thereafter, he will not,
directly or indirectly, in any capacity engage in any business, or assist,
render services to or have a financial interest in any person or entity that
engages in any business that competes within the United States with the Company
or with any person or entity controlling, controlled by or under common control
with the Company (each such person or entity is referred to as a "Company
Affiliate"), including any majority-owned subsidiary of the Company's parent
corporation, Central Sprinkler Corporation. Such one-year period is referred to
herein as the "Non-Competition Period." The foregoing restriction prohibits,
among other things, soliciting the employees of the Company or of any Company
Affiliate to become employees of or to otherwise assist any such competing
person or entity. The Employee expressly agrees that upon breach of this Section
6 or Section 7 of this Agreement, the Company, in addition to all other
remedies, shall be entitled as a matter of right to injunctive relief in any
court of competent jurisdiction.
-2-
<PAGE>
7. Secret Processes and Confidential Information. The Employee
agrees that during his Employment Term and thereafter, he will not divulge,
other than in the regular and proper course of business of the Company, any
knowledge or information with respect to the operation or finances of the
Company or any Company Affiliate or with respect to confidential or secret
processes, techniques, machinery, plans, devices or products licensed to or by,
manufactured or sold by the Company or any Company Affiliate; provided, however,
that the Employee has no obligation, expressed or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter
shall become available to the public without breaching this Agreement. All new
processes, techniques, know-how, inventions, plans, products, patents and
devices developed, made or invented by the Employee, alone or with others, while
an employee of the Company shall become and be the sole property of the Company
unless released in writing by the Company.
8. Termination with Compensation.
(a) At any time during the Employment Term, the
Company shall have the right to remove the Employee from the position in which
he is employed hereunder without cause. Under such circumstances, the Employee's
Salary then in effect hereunder shall continue for the remainder of the Initial
Term, or any renewal term then in effect. In addition, during the Non-
Completion Period, the Employee's Salary shall continue pursuant to the
adjustment terms set forth in paragraph (b) of this Section 8. The Employee,
however, may elect not to receive the Salary during the Non-Competition Period,
in which case the Employee will be received of all obligations set forth in
Section 6 of this Agreement.
(b) Upon the commencement of the Non-Competition
Period, and provided the Employee shall not have elected under paragraph (a) of
this Section 8 to forego the Salary during the Non-Competition Period, the
Salary then in effect shall be adjusted annually by the Company in accordance
with the Philadelphia Consumer Price Index for Urban Wage Earners and Clerical
Workers (the "Consumer Price Index") issued by the Bureau of Labor Statistics of
the U.S. Department of Labor, as published for the month of December in the year
in which the Salary is to be adjusted. During this period the Employee will
receive the greater of (i) the Salary in effect at the time of the adjustment or
(ii) the Salary as adjusted by the Consumer Price Index. If the Consumer Price
Index is discontinued, the Company and the Employee shall use a comparable price
index or formula.
-3-
<PAGE>
9. General.
(a) Governing Law. The terms of this Agreement shall be
governed by the laws of the Commonwealth of Pennsylvania.
(b) Assignability. The Employee may not assign his
interest in this Agreement.
(c) Binding Effect. This Agreement shall be binding
upon and insure to the benefit of the Company, its successors and assigns.
(d) Notices. Any notices required hereunder shall be in
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the addresses set
forth on page 1 of this Agreement or to such other address that any party may
designate with respect to itself or himself by notice to the other party.
(e) Entire Agreement; Modification. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and may not be modified or amended in any way expect in
writing by the parties hereto. This Agreement supersedes and cancels any other
Employment Agreements now in effect between the parties, including the
Employment Agreement between the Company and the Employee dated as of
February 8, 1993.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have hereunto duly executed this Agreement the day and year first
written above.
CENTRAL SPRINKLER COMPANY
/s/George G. Meyer
------------------------
George G. Meyer, President
EMPLOYEE
/s/James E. Golinveuax
------------------------
James E. Golinveaux
-4-
EXHIBIT 10(z)
AMENDMENT TO LOAN AGREEMENT
This AMENDMENT TO LOAN AGREEMENT (together with all amendments and
modifications hereto, the "Agreement)", dated as of October 26th, 1995, is by
and among FIRST FIDELITY BANK, N.A., a national banking association with offices
located at Broad and Walnut Streets, Philadelphia, PA 19109-1199 (the "Bank"),
CENTRAL SPRINKLER COMPANY, a Pennsylvania business corporation with offices
located at 451 North Cannon Avenue, Lansdale, PA 19446 (the "Borrower"), CENTRAL
SPRINKLER CORPORATION, a Pennsylvania business corporation with offices located
at 451 North Cannon Avenue, Lansdale, PA 19446 ("Corporation"), and CENTRAL
SPRINK, INC., a California business corporation with offices located at 451
North Cannon Avenue, Lansdale, PA 19446 ("Sprink", and together with
Corporation, the "Guarantors", and together with the Borrower, the "Obligors").
Background
A. The Bank, the Guarantors, and the Borrower entered into that certain
loan agreement, dated as of April 15, 1994 (together with all amendments and
modifications thereto, the "Loan Agreement"), pursuant to which the Bank agreed
to make available to the Borrower a term loan in the original principal amount
of $10,000,000.00 (the "Loan").
B. In connection with the Loan Agreement and in order to evidence the
Loan, the Borrower executed and delivered to the Bank that certain Term Loan
Note, dated as of April 15, 1994 (together with all amendments and modifications
thereto, the "Note"), in favor of the Bank in the original principal amount of
$10,000,000.00.
C. In connection with the execution and delivery of the Loan Agreement
and the Note and in order to secure the prompt payment and performance of the
Borrower's obligations thereunder, Corporation executed and delivered to the
Bank that certain Guaranty, dated as of April 15, 1994 (together with all
amendments and modifications thereto, "Corporation Guaranty").
D. In connection with the execution and delivery of the Loan Agreement
and the Note and in order to secure the prompt payment and performance of the
Borrower's obligations thereunder, Sprink executed and delivered to the Bank
that certain Guaranty, dated as of April 15, 1994 (together with all amendments
and modifications thereto, "Sprink Guaranty", and together with Corporation
Guaranty, the "Guarantees").
E. The Loan Agreement, the Note, the Guarantees, and all of the
documents, instruments and agreements executed and delivered in connection
therewith, together with all amendments and modifications thereto, shall be
referred to hereinafter as the "Loan Documents".
1
<PAGE>
F. The Bank, the Borrower, and the Guarantors, pursuant to the terms
hereof, wish to amend certain of the terms of the Loan Documents.
NOW THEREFORE, incorporating the foregoing Background herein by
reference and for other good and valuable consideration, the receipt and legal
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Defined Terms. Terms used herein which are capitalized but not
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. Amendments.
(a) The defined term "Consolidated Funded Indebtedness" contained
in Section 1.01 of the Loan Agreement is hereby amended and restated in its
entirety as follows:
"Consolidated Funded Indebtedness" means all obligations of the
Company for borrowed money, including, without limitation (and without
duplication): (a) all obligations, contingent or otherwise, of the
Company in connection with all letter of credit facilities (whether or
not drawn), acceptance facilities, or other similar facilities issued
for the account of the Company; (b) all obligations of the Company
evidenced by bonds, debentures, or other similar instruments; (c) all
indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by the
Company; (d) all capital lease obligations of the Company; (e) all
guarantees, endorsements (other than for collection or deposit in the
ordinary course of business); and (f) all debt referred to in clause
(a) through (e) above secured by (or for which the holder of such debt
has existing rights, contingent or otherwise, to be secured by) any
lien, security interest, or other charge or encumbrance upon or in
property (including, without limitation, accounts and contract rights)
owned by such person; provided, however that: (i) trade indebtedness,
tax and other accruals, and deferred compensation occurring in the
ordinary course of the Company's business shall be specifically
excluded from the foregoing definition; and (ii) the greater of: (A)
the aggregate outstanding amount of indebtedness under the bonds
referred to in Section 5.12(i), and (B) the maximum aggregate amount of
indebtedness for which Central Castings Corporation, the Company or the
Guarantors is obligated under the letters of credit which secure such
bonds, shall be used for purposes of calculation Consolidated Funded
Indebtedness.
2
<PAGE>
(b) Section 5.11 of the Loan Agreement is hereby amended by: (i)
deleting the word "or" which appears at the end of Subsection (h) thereof; (ii)
deleting the period at the end of subsection (i) thereof; and (iii) substituting
the following for the period deleted pursuant to clause (ii) above:
; or
(j) Liens created to secure indebtedness permitted pursuant to
Section 5.12(i) hereof.
(c) Section 5.12(h) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
(h) indebtedness under unsecured lines of credit, provided that
such indebtedness shall not exceed $40,000,000 in the aggregate at any
time; and
(d) Section 5.12 of the Loan Agreement is hereby amended by adding
a new subsection (i) which states as follows:
(i) Central Castings Corporation, a Subsidiary of the Company,
shall be permitted to obtain up to approximately $11,440,000 of
financing for the acquisition and improvement of certain foundry assets
located in Calhoun County, Alabama, through the issuance of industrial
revenue bonds supported by a letter or letters of credit issued by the
Bank, subject to the agreement of Central Castings Corporation (which
obligation shall be guaranteed by the Company and the Guarantors), to
reimburse the Bank for any and all draws under such letter(s) of
credit.
(e) Section 5.13 of the Loan Agreement is hereby amended by: (i)
deleting the word "and" which appears at the end of Subsection (d) thereof; (ii)
deleting the period at the end of subsection (e) thereof; and (iii) substituting
the following for the period deleted pursuant to clause (ii) above:
; and
(f) guarantees of the indebtedness permitted pursuant to Section
5.12(i) hereof.
3. Conditions Precedent. The effectiveness of this Agreement and the
Bank's obligations hereunder are conditioned upon the satisfaction of the
following conditions precedent:
3
<PAGE>
(a) The Obligors shall have delivered to the Bank this Agreement
duly executed by each of the Obligors.
(b) All proceedings required to be taken by the Obligors in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Bank and its counsel, and the Bank
shall have received all such counterpart originals or certified or other copies
of such documents as the Bank may reasonably request.
(d) The Obligors shall have executed and delivered to the Bank such
other documents, instruments and agreements as the Bank may reasonably request.
4. Representations and Warranties. In order to induce the Bank to enter
into this Agreement, the Obligors hereby represent and warrant to the Bank as
follows:
(a) The representations and warranties contained in the Loan
Documents are true and correct on and as of the date of this Agreement and after
giving effect hereto, no Event of Default will be in existence or will occur as
a result of giving effect hereto.
(b) The execution, delivery and performance of this Agreement will
not violate any provision of any law or regulation or of any writ or decree of
any court or governmental instrumentality, or any of the Obligors' certificate
or articles of incorporation, by-laws, or other similar organizational
documents.
(c) Each of the Obligors has the power to execute, deliver and
perform this Agreement and each of the documents, instruments and agreements to
be executed and/or delivered in connection herewith and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
and each of the documents, instruments and agreements executed and/or delivered
in connection herewith and the performance of the Loan Agreement as amended
hereby.
(d) The execution, delivery and performance of this Agreement and
each of the documents, instruments and agreements to be executed and/or
delivered in connection herewith does not require the consent of any other party
or the consent, license, approval or authorization of, or registration or
declaration with, any governmental body, authority, bureau or agency and the
Loan Documents, this Agreement and each of the documents, instruments and
agreements executed and/or delivered in connection herewith constitute legal,
valid and binding obligations of each of the Obligors, enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and except as enforcement may be subject to general equitable principles.
4
<PAGE>
5. Reaffirmation. Except as amended hereby, all of the terms, covenants
and conditions of the Loan Agreement and each of the other Loan Documents
(including, but not limited to, provisions relating to any authority granted to
the Bank to confess judgment against the Borrower and any waiver of the right to
trial by jury, if any) are ratified, reaffirmed and confirmed and shall continue
in full force and effect as therein written and are not intended to be
re-enacted as of the above date, but rather to be effective as of the original
date of such documents. Each of the Guarantors hereby reaffirms and ratifies all
of the terms, covenants, and conditions contained in each of their respective
Guarantees and confirms that such Guarantees are binding and enforceable against
the Guarantors as if such Guarantees had been executed as of the date hereof.
6. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Obligors and the Bank and their respective successors and
assigns; provided, however, that the Obligors may not assign any of their
rights, nor delegate any of their obligations, under this Agreement without the
prior written consent of the Bank and any purported assignment or delegation
absent such consent shall be void. The Bank may at any time assign or otherwise
transfer (by participation or otherwise) any or all of its rights, or delegate
any or all of its obligations, hereunder.
7. Counterparts; Effectiveness. This Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts.
Each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute one and the same agreement. This
Agreement shall be deemed to have been executed and delivered when the Bank has
received counterparts hereof executed by all parties listed on the signature
page(s) hereto.
8. Amendment and Waiver. No amendment of this Agreement, and no waiver
of any one or more of the provisions hereof shall be effective unless set forth
in a writing and signed by the parties hereto.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania without
reference to conflict of law principles.
5
<PAGE>
10. Severability. Any provision of this Agreement that is held to be
inoperative, unenforceable, voidable or invalid in any jurisdiction shall, as to
that jurisdiction, be ineffective, unenforceable, void or invalid without
affecting the remaining provisions in that or any other jurisdiction, and to
this end the provisions of this Agreement are declared to be severable.
11. Judicial Proceedings. Each party to this Agreement agrees that any
suit, action or proceeding, whether claim or counterclaim, brought or instituted
by any party hereto or any successor or assign of any party, on or with respect
to this Agreement, the documents, instruments and agreements executed in
connection herewith, the Loan Documents or the dealings of the parties with
respect hereto and thereto, shall be tried only by a court and not by a jury.
EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party waives
any right it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential damages or damages
other than, or in addition to, actual damages. THE OBLIGORS ACKNOWLEDGE AND
AGREE THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND
THAT THE BANK WOULD NOT ENTER INTO THIS AGREEMENT IF THE WAIVERS SET FORTH IN
THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ATTEST: CENTRAL SPRINKLER COMPANY
By: /s/Edna C. Sauers By: /s/Albert T. Sabol
- ---------------------------- ----------------------------------
Name: Edna C. Sauers Name: Albert T. Sabol
Title: Secretary Title: V.P. - Finance
ATTEST: CENTRAL SPRINKLER CORPORATION
By: /s/Edna C. Sauers By: /s/Albert T. Sabol
- ---------------------------- ----------------------------------
Name: Edna C. Sauers Name: Albert T. Sabol
Title: Secretary Title: V.P. - Finance
ATTEST: CENTRAL SPRINK, INC.
By: /s/Edna C. Sauers By: /s/Albert T. Sabol
- ---------------------------- ----------------------------------
Name: Edna C. Sauers Name: Albert T. Sabol
Title: Secretary Title: V.P. - Finance
FIRST FIDELITY BANK, N.A.
By:
----------------------------------
Name:
6
<PAGE>
AMENDMENT TO LOAN AGREEMENT
---------------------------
THIS AMENDMENT TO LOAN AGREEMENT (this "Amendment") made as of March
31, 1995 by and among FIRST FIDELITY BANK, NATIONAL ASSOCIATION (the "Bank") and
CENTRAL SPRINKLER COMPANY, a Pennsylvania corporation (the "Company"), CENTRAL
SPRINKLER CORPORATION, a Pennsylvania corporation ("Parent") and CENTRAL SPRINK,
INC., a California corporation ("CSI; Parent and CSI being hereinafter referred
to collectively as "Guarantors").
BACKGROUND
----------
A. The Company, the Guarantors and the Bank are parties to a loan
agreement dated as of April 15, 1994 (together with all amendments and
modifications thereto, the "Loan Agreement"), pursuant to which the Bank has
made a $10,000,000 term loan to the Company which is guaranteed by each
Guarantor pursuant to a guaranty agreement in favor of the Bank dated April 15,
1994 (together with all amendments and modifications thereto, the "Guaranty
Agreements").
B. Pursuant to the terms hereof, the Company and the Bank have agreed
to modify the terms of the Loan Agreement on the terms and subject to the
conditions set forth herein, and the Guarantors have agreed to ratify and
confirm the Guaranty Agreements.
C. Any capitalized terms used in this Amendment which are not defined
herein, but which are defined in the Loan Agreement, shall have the meanings
given to those terms in the Loan Agreement. The term "Loan Documents" as used in
the Loan Agreement shall be deemed to include this Amendment and the
Subordination Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual promises contained
herein and intending to be legally bound, the parties hereto covenant and agree
as set forth below.
1. Amendments.
(a) The definition of "Subsidiary" in Section 1.01 of the Loan
Agreement is hereby amended and restated to read in its entirety as follows:
"Subsidiary" means, as to any designated corporation, any
other corporation the shares of stock of which, having ordinary
voting power (other than stock having such power only by reason
of the happening of a contingency) to elect a majority of the
board of directors or other managers of such other corporation,
are at the time owned, or the management of which is otherwise
controlled by the designated corporation, directly or indirectly
through one or more intermediaries or both."
<PAGE>
(b) The first paragraph of Section 5.12 of the Loan Agreement is
hereby amended and restated in its entirety to read as follows:
"5.12 Neither the Company nor any Guarantor will, or will
permit any Subsidiary of the Company or any Subsidiary of any
Guarantor to, incur, create or permit to exist any Consolidated
Funded Indebtedness, without the prior written consent of the
Bank, except that the Company and the Guarantors may incur,
create or permit to exist the following:"
(c) The first paragraph of Section 5.13 of the Loan Agreement is
hereby amended and restated in its entirety to read as follows:
"Neither the Company nor any Guarantor will, or will permit
any Subsidiary of the Company or any Subsidiary of any Guarantor
to, guarantee or otherwise become liable or responsible for
Consolidated Funded Indebtedness or other obligations of any
other Person, contingent or otherwise, without the written
consent of the Bank, except that the Company and the Guarantors
may incur, create or permit to exist the following:"
(d) Section 5.15, 5.16, 5.17 and 5.18 of the Loan Agreement are
hereby amended and restated in their entirety to read as follows:
"5.15. The Parent and its consolidated Subsidiaries will
maintain a consolidated Tangible Net Worth of at least
$37,000,000 at March 31, 1995, June 30, 1995, and September 30,
1995 and $41,000,000 at December 31, 1995 and at the end of each
fiscal quarter thereafter, to be tested in connection with the
delivery of quarterly financial statements pursuant to Section
5.01.
5.16. The Parent and its consolidated Subsidiaries will
maintain a ratio of consolidated current assets to consolidated
current liabilities not less than 1.3 to 1.0 at March 31, 1995,
June 30, 1995, and September 30, 1995; 1.5 to 1.0 at December 31,
1995, March 31, 1996, June 30, 1996, and September 30, 1996; and
1.75 to 1.0 at December 31, 1996 and at the end of each fiscal
quarter thereafter, to be tested in connection with the delivery
of quarterly financial statements pursuant to Section 5.01.
- 2 -
<PAGE>
5.17. The Parent and its consolidated Subsidiaries will
maintain at all times (a) a ratio of (i) cash, Investments and
accounts receivable to (ii) current liabilities not less than 0.7
to 1.0 at March 31, 1995, June 30, 1995 and September 30, 1995,
and 0.87 to 1.0 at December 31, 1995 at the end of each fiscal
quarter thereafter, and (b) cash and Investments in an amount not
less than $5,000,000, to be tested on a quarterly basis in
connection with the delivery of financial statements pursuant to
Section 5.01.
5.18 The Parent and its consolidated Subsidiaries will
maintain a ratio of (a) Consolidated Funded Indebtedness, to (b)
consolidated Tangible Net Worth not greater than 1.5 to 1.0 at
March 31, 1995, June 30, 1995, and September 30, 1995; 1.37 to
1.0 at December 31, 1995, March 31, 1996, June 30, 1996 and
September 30, 1996; and 1.2 to 1.0 at December 31, 1996 and at
the end of each fiscal quarter thereafter, to be tested in
connection with the delivery of quarterly financial statements
pursuant to Section 5.01."
(e) In addition to the Indebtedness permitted pursuant to Section
5.12 of the Loan Agreement, the Bank hereby approves the borrowing by the
Company of $11,750,000 from its affiliate, CSC Finance Company, which is
evidenced by a promissory note, a copy of which is attached hereto as Exhibit
"A" (the "Finance Note"), provided that the indebtedness of the Company under
the Finance Note shall at all time be unsecured and shall be subordinated to the
indebtedness of the Company to the Bank under the Loan Agreement pursuant to a
subordination agreement in the form attached hereto as Exhibit "B" (the
"Subordination Agreement").
(f) In addition to the Indebtedness permitted pursuant to Section
5.12 of the Loan Agreement and the Liens permitted pursuant to Section 5.11 of
the Loan Agreement, the Company's wholly-owned Subsidiary, Central Castings
Corporation, an Alabama corporation, shall be permitted to obtain up to
$10,000,000 of financing for the acquisition of and improvement of certain
foundry assets in Calhoun County, Alabama, through the issuance of industrial
revenue bonds supported by a letter of credit issued by the Bank (with another
participating financial institution), subject to the agreement of Central
Castings Corporation (guaranteed by the Company, the Parent and CSI), to
reimburse the Bank for all draws under such letter of credit.
2. Representations and Warranties. In order to induce the Bank to
execute this Amendment, the Company makes the following representations and
warranties to the Bank:
(a) Upon the effectiveness of this Amendment, there will be no
Default or Event of Default existing under the Loan Agreement;
- 3 -
<PAGE>
(b) The Company has the power and authority to execute and deliver
this Amendment and has taken all necessary action to authorize the execution,
delivery and performance thereof; and
(c) The Loan Agreement, as modified and amended by this Amendment,
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights and except as enforcement is
subject to general equitable principles.
3. Conditions. Prior to or concurrently with the execution of this
Amendment, the Company shall deliver to the Bank the Subordination Agreement
duly executed by the Company and CSC Finance Company. In addition, within ten
(10) Business Days after the date of this Amendment, the Company shall deliver
to the Bank the following in form and substance satisfactory to the Bank:
(a) copies of the resolutions of the Board of Directors of the
Company and each Guarantor authorizing the Company's and each Guarantor's
execution and delivery of this Amendment, the performance of the transactions
contemplated hereby and thereby, and all such other and further actions in
connection herewith as may be necessary and proper, which copies shall be
certified as of the date hereof, by the Company's and each Guarantor's secretary
or assistant secretary as being true, correct and complete;
(b) certificate, as of the date hereof, by the Company's and each
Guarantor's secretary or assistant secretary as to the incumbency and signatures
of the officers signing this Amendment; and
(c) the items required under (a) and (b) above with respect to the
execution of the Subordination Agreement by CSC Finance Company.
4. Ratification and Confirmation. Except as amended hereby, the
Company ratifies and confirms all of the terms and provisions of the Loan
Agreement and the documents executed by the Company in accordance therewith, all
of which shall remain in full force and effect. The Guarantors, by executing
this Amendment below, hereby ratify and confirm the Guaranty dated April 15,
1994 executed by a each of them in favor of the Bank with respect to the Loan
Agreement as amended by this Amendment.
- 4 -
<PAGE>
5. Miscellaneous.
(a) Expenses. The Company agrees to pay all out-of-pocket costs
and expenses of the Bank, including, without limitation, all attorneys' fees and
expenses in connection with the negotiation and preparation of this Amendment
and the completion of the transactions contemplated hereby.
(b) Binding Effect. This Amendment shall be binding upon and shall
inure to the benefit of the Bank, the Company and the Guarantors, and their
respective successors and assigns, subject, however, to the restrictions set
forth in Section 8.06 of the Loan Agreement.
(c) Counterparts. This Amendment may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument, but all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their authorized officers as of the day and year first above
written.
ATTEST CENTRAL SPRINKLER COMPANY
/s/Rebecca S. Dahn By: /s/Albert T. Sabol
- ---------------------------- ----------------------------------
Name: Albert T. Sabol
Title: V.P. Finance
ATTEST CENTRAL SPRINKLER CORPORATION, as
Guarantor
/s/Rebecca S. Dahn By: /s/Albert T. Sabol
- ---------------------------- ----------------------------------
Name: Albert T. Sabol
Title: V.P. Finance
ATTEST CENTRAL SPRINK, INC., as
Guarantor
/s/Rebecca S. Dahn By: /s/Albert T. Sabol
- ---------------------------- ----------------------------------
Name: Albert T. Sabol
Title: V.P.
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION
By:
----------------------------------
Name:
Title:
- 6 -
<PAGE>
EXHIBIT A
---------
$11,750,000.00 December 21, 1994
FOR VALUE RECEIVED, Central Sprinkler Company, a Pennsylvania
corporation ("Maker"), hereby promises to pay to the order of CSC Finance
Company, a Delaware corporation ("Payee"), the amount of ELEVEN MILLION SEVEN
HUNDRED FIFTY THOUSAND DOLLARS ($11,750,000), with interest thereon at the rate
per annum equal to the prime rate charged by CoreStates Bank, N.A. or its
successor.
Interest accruing on this Note shall be paid quarterly in arrears
beginning January 31, 1995. The principal amount of this Note, together with all
interest that has then accrued thereon, shall be payable ON DEMAND upon the
holder of this Note providing the Maker fifteen days' written notice.
This Note may be prepaid in whole or in part at any time and from time
to time without premium or penalty.
Payment received hereunder shall be applied first to the payment of
interest and then to the payment of principal, unless otherwise agreed by the
holder of this Note.
Both principal and interest payments shall be made in lawful money of
the United States at such place as the holder of this Note may from time to time
direct.
This Note may be assigned by Payee or any subsequent holder hereof at
any time.
In addition to and not in limitation of the foregoing, Maker further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due.
Presentment for payment, demand, protest, dishonor and notice of
dishonor are hereby waived.
This Note shall be governed by and construed and enforced in accordance
with the laws of Delaware.
CENTRAL SPRINKLER COMPANY
Attest:
By: /s/Thomas J. Sharbaugh By: /s/George G. Meyer
- ----------------------------- --------------------------
Title: Assistant Secretary Title: President
<PAGE>
EXHIBIT B
---------
SUBORDINATION AGREEMENT
-----------------------
THIS SUBORDINATION AGREEMENT, dated as of March 31, 1995, is among
CENTRAL SPRINKLER COMPANY, a Pennsylvania corporation (the "Borrower"),
FIRST FIDELITY BANK, NATIONAL ASSOCIATION, a national banking association (the
"Bank"), and CSC FINANCE COMPANY, a Delaware corporation ("Subordinated
Creditor").
BACKGROUND
----------
WHEREAS, the Bank and the Borrower are parties to a Loan Agreement,
dated as of April 15, 1994 (together with all amendments and modifications
thereto, the "Loan Agreement"), providing, subject to the terms and conditions
thereof, for a loan made by the Bank to the Borrower in the amount of
$10,000,000 (the "Loan"), which indebtedness is further evidenced by a Term
Loan Note in the principal amount of $10,000,000 dated April 15, 1994 (the
"Note"); and
WHEREAS, except as otherwise herein expressly provided terms defined
in the Note and Loan Agreement and used herein shall have the same meaning
when used herein; and
WHEREAS, the Bank has agreed to enter into that certain amendment to
Loan Agreement dated as of the date hereof and to continue the extension of
credit provided for in the Loan Agreement, and the Subordinated Creditor has
agreed as required by the Loan Agreement to subordinate the Subordinated Debt
to the Bank Debt (as each of such terms is hereinafter defined) in the manner
and to the extent hereinafter provided.
NOW, THEREFORE, incorporating the foregoing by reference, and for
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Subordination. The Subordinated Creditor hereby agrees that, except
as and to the extent hereinafter provided, all Subordinated Debt is and shall
be subordinate and subject in right of payment to the prior payment in full of
the following obligations to the Bank (all such obligations to the Bank being
referred to herein as the "Bank Debt"): (i) the Loan and other obligations of
the Borrower to the Bank under the Loan Agreement and the Note, and (ii) all
reimbursement obligations of Central Castings Corporation, a wholly-owned
subsidiary of the Borrower, and the Borrower, with respect to any letter of
credit which may be issued by the Bank to support a bond issue, including,
without limitation, all obligations of the Borrower or Central Castings
Corporation in respect of interest, fees and/or expenses accruing before or
after the commencement of any bankruptcy, insolvency, or similar proceedings
with respect to the Borrower or Central Castings Corporation. The Subordinated
<PAGE>
Creditor further agrees that it will not ask, demand, sue for, take or receive
from the Borrower, or from any guarantor or surety of the Subordinated Debt or
any portion thereof, by set-off or in any other manner, payment of, and the
Borrower hereby agres that it will not pay or give, the whole or any part of the
Subordinated Debt, or any security therefor, unless or until all the Bank Debt
shall have been fully paid. The Subordinated Creditor hereby directs the
Borrower to, and the Borrower agrees that it will, make such prior payment of
the Bank Debt to Bank. As used herein, "Subordinated Debt" shall mean all
obligations for borrowed money of the Borrower or any subsidiary or affiliate
thereof to the Subordinated Creditor, whether now existing or hereafter
arising, including without limitation, all such obligations in respect of (1)
the note dated December 21, 1994 payable by the Borrower to the Subordinated
Creditor in the amount of $11,750,000 and any documents in connection therewith
between the Borrower and the Subordinated Creditor (the "Subordinated Note");
(ii) interest accruing on any such obligations before or after the commencement
of any bankruptcy, insolvency, or similar proceeding with respect to the
Borrower. The obligations of the Borrower to the Subordinated Creditor shall
remain Subordinated Debt notwithstanding any increase or decrease in the Bank
Debt. Subordinated Debt shall include any obligations of the Borrower to the
Subordinated Creditor which are modifications, renewals or refinancings of
obligations which constitute Debt.
2. Payments Permitted on Subordinated Debt. Anything in this
Subordination Agreement to the contrary notwithstanding, the Borrower may make
the following payments on the Subordinated Note: regularly scheduled payments of
interest not in excess of the rate presently provided for in the Subordinated
Note so long as no Event of Default, as defined in the Note or the Loan
Agreement, has occurred, will occur with the passage of time or giving of notice
or both.
Except as provided in this Paragraph 2, the Borrower shall make no
other or additional payments on the Subordinated Debt.
3. Liens and Security Interests. The Borrower and the Subordinated
Creditor represent, warrant and covenant that the Subordinated Debt is unsecured
and shall at all times remain unsecured.
4. Distributions. In furtherance of, and to make effective, the
subordination provided for herein, the Subordinated Creditor further agrees as
follows:
(a) In the event of any distribution, division, or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all
or any part of the assets of the Borrower or the proceeds thereof, to creditors
of the Borrower, or upon any indebtedness of the Borrower, by reason of the
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<PAGE>
liquidation, dissolution or other winding up, partial or complete, of the
Borrower or its business, or any sale, receivership, insolvency or bankruptcy
proceedings, or assignment for the benefit of creditors, or any proceeding by or
against the Borrower for any relief under any bankruptcy or insolvency law or
laws related to the relief of debtors, the adjustment of indebtedness,
arrangements, reorganizations, compositions, or extensions, then and in any such
event:
(1) Any payment or distribution of any kind or character, whether in
cash, securities or any other property which but for this Subordination
Agreement would be payable or deliverable upon or with respect to any or all of
the Subordinated Debt, shall instead be paid or delivered directly to Bank for
application on the Bank Debt, whether then due or not due, until the Bank Debt
shall have first been fully paid and satisfied; and
(2) The Subordinated Creditor hereby irrevocably authorizes and
empowers Bank to take any and all actions necessary or appropriate, in its name
or in the name of the Subordinated Creditor, to enforce any and all claims upon
or with respect to the Subordinated Debt, including without limitation, voting
claims and filing appropriate proof of claims, and to demand, sue for, collect
and receive any and all payments or distributions that may be payable or
deliverable at any time upon or with respect to the Subordinated Debt.
Notwithstanding the foregoing, this provision shall not serve to impose any
affirmative obligation on the part of the Bank or its successors and assigns to
take any action or pursue any claim on behalf of the Subordinated Creditor.
Subordinated Creditor shall not attempt to hold the Bank liable and hereby
waives any claims or cause of action it may otherwise have against the Bank as a
result of any action taken or not taken by the Bank to enforce any and all
claims in respect of the Subordinated Debt.
(b) Should any payment not permitted under Section 2 hereof or
distribution of security or proceeds of any security by received by the
Subordinated Creditor upon or in respect of the Subordinated Debt prior to the
payment in full of the Bank Debt, the Subordinated Creditor will forthwith
deliver the same to Bank in precisely the form received (except for the
endorsement or assignment of the Subordinated Creditor where necessary) for
application on the Bank Debt, whether then due or not due, and, until so
delivered, the same shall be held in trust by the Subordinated Creditor as
property of Bank. In the event of the failure of the Subordinated Creditor to
make any such endorsement or assignment, Bank, or any of its officers or
employees, are hereby irrevocably appointed as attorney-in-fact for Subordinated
Creditor and is authorized to make such endorsement or assignment on behalf of
Subordinated Creditor.
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<PAGE>
(c) The Subordinated Creditor agrees that it will not transfer, assign,
pledge or encumber the Subordinated Debt or any part thereof or any instrument
evidencing the same unless such instruments evidencing the same and the
instrument of assignment specifically provide that the holder or assignee takes
the Subordinated Debt subject to the provisions of this Subordination Agreement.
5. Continuing Subordination, etc. The subordination effected by this
Subordination Agreement is a continuing subordination, and the Subordinated
Creditor hereby agrees that at any time and from time to time, without notice to
and without impairing or affecting the subordination provisions of this
Subordination Agreement or the obligations of the Subordinated Creditor
hereunder:
(a) The time for the Borrower's performance of or compliance with any
of its obligations, covenants or agreements contained in the Note, the Loan
Agreement and any other documents provided for thereby may be extended or such
performance or compliance may be waived by Bank;
(b) Any of the acts mentioned in the Note, the Loan Agreement and any
other documents provided for thereby may be done;
(c) The Note, the Loan Agreement and any other documents provided for
thereby may be amended for the purpose of adding any provisions thereto or
changing in any manner the rights of Bank or the Borrower thereunder;
(d) Payment of the Bank Debt or any portion thereof may be extended or
the Note may be renewed in whole or in part; and
(e) The maturity of any of the Bank Debt may be accelerated, and any
collateral security, guarantee or surety therefor may be exchanged, sold,
surrendered, released, modified or otherwise dealt with in accordance with the
terms of any present or future agreement between the Borrower or any guarantor
or surety and Bank, including any agreement permitting the Bank to take
unilateral action with respect thereto; and
(f) The amount of the Bank Debt to which the Subordinated Debt is
subordinated may be increased.
6. Waiver of Notice. The Subordinated Creditor hereby unconditionally
waives notice of the incurring of the Bank Debt or any part thereof in reliance
by the Bank upon the subordination of the Subordinated Debt to the Bank Debt.
7. Representations and Warranties. The Subordinated Creditor hereby
represents and warrants that: (i) it has the necessary power and capacity to
make and perform this Subordination Agreement and such making and performance
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<PAGE>
have been duly authorized by all necessary action on the part of the
Subordinated Creditor; (ii) the making and performance by the Subordinated
Creditor of this Subordination Agreement does not and will not violate any
provision of law or regulation or result in the breach of, or constitute a
default or require any consent under, or result in the creation of any lien,
charge or encumbrance upon any of its properties, revenues or assets pursuant to
any indenture or other agreement or instrument to which it is a party or by
which any of its properties amy be bound; and (iii) this Subordination Agreement
is the legal, valid and binding obligation of the Subordinated Creditor in
accordance with its terms.
8. Default under Agreement. In the event of a breach of this Agreement
by the Borrower or the Subordinated Creditor, the Bank, at its option, may
accelerate the maturity of any or all of the Bank Debt.
9. No Waiver and Counterparts.
(a) No failure on the part of Bank to exercise, no delay in exercising,
and no course of dealing with respect to, any right or remedy hereunder will
operate as a waiver thereof; nor will any single or partial exercise of any
right or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy. This Subordination Agreement may not be
amended or modified except by written agreement of the Subordinated Creditor,
the Borrower and the Bank. No consent or waiver hereunder shall be valid unless
in writing and signed by Bank.
(b) This Subordination Agreement may be executed in any number of
identical counterparts each of which, when executed by one of the parties
hereto, shall be considered to be an original.
10. Successors and Assigns. This Subordination Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and their respective heirs, executors,
administrators, successors and assigns.
11. Governing Law. This Subordination Agreement shall be construed in
accordance with and governed by the internal laws of the Commonwealth of
Pennsylvania.
12. Entire Agreement. This subordination Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporary agreements, commitments and
understandings between the parties with respect to the subject matter hereof.
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<PAGE>
13. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceabiality of any other
provision.
14. Notices. Every notice and communication under this Agreement shall
be in writing and shall be given bya either (i) hand-delivry, (ii) first class
mail (postage prepaid), (iii) reliable overnight commercial courier (charges
prepaid), or (iv) telecopy or other means of electronic transmission, if
confirmed promptly bya any of the methods specified in clauses (i), (ii) and
(iii) of this sentence, to the following addresses:
If to the Subordinated Creditor:
CSC Finance Company
1105 N. Market St., Suite 1300
Wilmington, DE 19809
Attn: Edward Jones
Fax: 302-427-7663
If to the Borrower:
Central Sprinkler Company
451 N. Cannon Ave.
Lansdale, PA 19446
Attn: Albert T. Sabol
Fax: 215-362-5385
If to the Bank:
First Fidelity Bank, National Association
Broad & Walnut Streets
Philadelphia, PA 19109
Attn: Thomas Saunders, Vice President
Fax: 215-985-3719
Notice given by telecopy or other means of electronic transmission
shall be deemed to have been given and received when sent. Notice by overnight
courier shall be deemed to have been given and received on the date scheduled
for delivery. Notice by mail shall be deemed to have been given and received
three (3) calendar days after the date first deposited in the United States
Mail. Notice by hand delivery shall be deemed to have been given and received
upon delivery.
A party may change its address by giving written notice to the other
parties as specified herein.
IN WITNESS WHEREOF, this Subordination Agreement has been duly
executed as of the day and year first above written.
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<PAGE>
CSC FINANCE COMPANY, as
Subordinated Creditor
By: /s/Albert T. Sabol
------------------------------
Title: Vice President
---------------------------
CENTRAL SPRINKLER COMPANY, as
Borrower
By: /s/Albert T. Sabol
------------------------------
Title: Vice President
---------------------------
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
By: /s/Thomas J. Saunders
----------------------
Title: Executive V.P.
-------------------
Exhibit 10(aa)
THIRD AMENDMENT TO 1994 TERM LOAN AGREEMENT
This THIRD AMENDMENT TO 1994 TERM LOAN AGREEMENT ("Amendment"), dated
as of March 31, 1995, is by and among CENTRAL SPRINKLER COMPANY, a Pennsylvania
corporation, as the Company (the "Company"), CENTRAL SPRINKLER CORPORATION, a
Pennsylvania corporation, CENTRAL SPRINK, INC., a California corporation and
CENTRAL CASTINGS CORPORATION, an Alabama corporation, as the guarantors
(collectively the "Guarantors"), and CORESTATES BANK, N.A., a national banking
association, as the lender (the "Bank"), with reference to the following
BACKGROUND:
A. The Company, the Guarantors and the Bank have entered into a Letter
Agreement dated as of April 29, 1994, as amended by an Amendment to 1994 Term
Loan Agreement dated as of June 30, 1994, and a Second Amendment to and Consent
Under 1994 Term Loan Agreement dated as of October 24, 1994 (said Letter
Agreement, as so amended, the "Agreement") pursuant to which the Bank has made a
$10,000,000 term loan to the Company guarantied by each Guarantor.
B. The Company, the Guarantors and the Bank desire to amend
the Agreement all as more particularly hereinafter set forth.
C. All capitalized terms used herein and not otherwise defined herein
shall have the meaning assigned to them in the Agreement.
<PAGE>
THEREFORE, in consideration of the premises contained herein and
intending to be legally bound, the Company, the Guarantors, and the Bank agree
as follows:
1. Amendments.
(a) The definition of "Subsidiary" in Section 1.01 of the
Agreement is hereby amended and restated to read in its entirety as follows:
"Subsidiary" means, as to any designated corporation, any
other corporation the shares of stock of which, having ordinary voting power
(other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such other corporation, are at the time owned, or the management of which is
otherwise controlled by the designated corporation, directly or indirectly
through one or more intermediaries or both."
(b) The first paragraph of Section 5.07 of the Agreement is
hereby amended and restated in its entirety to read as follows:
"Neither the Company nor any Guarantor will, or will
permit any Subsidiary of the Company or any Subsidiary of any Guarantor to,
incur, create or permit to exist any consolidated Funded Indebtedness, without
the prior written consent of the Bank, except that the Company and the
Guarantors may incur, create or permit to exist the following:"
(c) The first paragraph of Section 5.11 of the Agreement is
hereby amended and restated in its entirety to read as follows:
"Neither the Company nor any Guarantor will, or will
permit any Subsidiary of the Company or any Subsidiary of any Guarantor to,
guarantee or otherwise become liable or responsible for consolidated Funded
Indebtedness or other obligations of any other Person, contingent or otherwise,
without the written consent of the Bank, except that the Company and the
Guarantors may incur, create or permit to exist the following:"
(d) Sections 5.12, 5.13, 5.14 and 5.15 of the Agreement are
hereby amended and restated in their entirety to read as follows:
"5.12. CSC and its consolidated Subsidiaries will
maintain a consolidated Tangible Net Worth of at least
$37,000,000 at March 31, 1995, June 30, 1995 and September 30,
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<PAGE>
1995 and $41,000,000 at December 31, 1995 and at the end of
each fiscal quarter thereafter, to be tested in connection
with the delivery of quarterly financial statements pursuant
to Section 5.01.
"5.13. CSC and its consolidated Subsidiaries will
maintain a ratio of consolidated current assets to
consolidated current liabilities not less than 1.3 to 1.0 at
March 31, 1995, and September 30, 1995; 1.5 to 1.0 at December
31, 1995; March 31, 1996, June 30, 1996, and September 30,
1996; and 1.75 to 1.0 at December 31, 1996 and at the end of
each fiscal quarter thereafter, to be tested in connection
with the delivery of quarterly financial statements pursuant
to Section 5.01.
"5.14. CSC and its consolidated Subsidiaries will
maintain a ratio of consolidated Funded Indebtedness, to
consolidated Tangible Net Worth not greater than 1.5 to 1.0 at
March 31, 1995, June 30, 1995, and September 30, 1995; 1.37 to
1.0 at December 31, 1995, March 31, 1996, June 30, 1996 and
September 30, 1996; and 1.2 to 1.0 at December 31, 1996 and at
the end of each fiscal quarter thereafter, to be tested in
connection with the delivery of quarterly financial statements
pursuant to Section 5.01.
"5.15. CSC and its consolidated Subsidiaries will
maintain at all times a ratio of (1) the sum of (a) cash, (b)
Investments and (c) accounts receivable to (2) current
liabilities not less than 0.7 to 1.0 at March 31, 1995, June
30, 1995 and September 30, 1995, and 0.87 to 1.0 at December
31, 1995 at the end of each fiscal quarter thereafter, to be
tested on a quarterly basis in connection with the delivery of
financial statements pursuant to Section 5.01."
(e) In addition to the Funded Indebtedness permitted pursuant
to Section 5.07 of the Agreement, the Bank hereby approves the borrowing by the
Company of $11,750,000 from its affiliate, CSC Finance Company, which is
evidenced by a promissory note, a copy of which is attached hereto as Exhibit
"A" (the "Finance Note"), provided that the indebtedness of the Company under
the Finance Note shall at all times be unsecured and shall be subordinated to
the indebtedness of the Company to the Bank under the Agreement pursuant to a
subordination agreement in the form attached hereto as Exhibit "B" (the
"Subordination Agreement").
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<PAGE>
2. Conditions Precedent. The effectiveness of this Amendment and the
amendments and approval contained herein and the Bank's obligations hereunder
are conditioned upon receipt by the Bank of the following prior to or
concurrently with the execution of this Amendment:
(a) the Subordination Agreement duly executed by the
Company;
(b) copies of the resolutions of the Board of Directors of the
Company and each Guarantor, in form and substance satisfactory to the Bank,
authorizing the Company's and each Guarantor's execution and delivery of this
Amendment, the performance of the transactions contemplated hereby and thereby,
and all such other and further actions in connection herewith as may be
necessary and proper, which copies shall be certified as of the date hereof, by
the Company's and each Guarantor's secretary or assistant secretary as being
true, correct and complete;
(c) certificate, as of the date hereof, by the Company's and
each Guarantor's secretary or assistant secretary as to the incumbency and
signatures of the officers signing this Amendment; and
(d) the items required under (b) and (c) above with respect to
the execution of the Subordination Agreement by CSC Finance Company.
3. Representations and Warranties. The Company and the Guarantors
hereby represent and warrant to the Bank that they have taken all corporate
action necessary to authorize the execution, delivery and performance of this
Amendment. This Amendment has been duly executed and constitutes the valid and
legally binding obligation of the Company and the Guarantors, enforceable
against the Company and the Guarantors in accordance with its terms. The Company
and the Guarantors hereby ratify and confirm the representations and warranties
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<PAGE>
of the Company and the Guarantors set forth in Article 4 of the Agreement as
being true and correct on the date hereof and certify that no Event of Default
or event which with the giving of any required notice or the expiration of any
applicable grace or cure period would become an Event of Default has occurred
and is continuing under the Loan Documents.
4. Ratification. Except as amended by this Amendment, all of the terms
and conditions of the Agreement and all of the other Loan Documents are ratified
and confirmed, and the Agreement and all of the other Loan Documents shall
continue in full force and effect in accordance with the terms thereof.
5. Miscellaneous.
(a) Expenses. The Company agrees to pay all out-of-pocket
costs and expenses of the Bank, including, without limitation, all attorney's
fees and expenses in connection with the negotiation and preparation of this
Amendment and the completion of the transactions contemplated hereby.
(b) Binding Effect. This Amendment shall be binding
upon and shall inure to the benefit of the Bank, the Company and
the Guarantors, and their respective successors and assigns.
(c) Counterparts. This Amendment may be executed in any number
of counterparts with the same effect as if the signatures thereto and hereto
were upon the same instrument, but all of such counterparts taken together shall
be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be executed by their duly authorized officers as of the date
first written above.
Attest: CENTRAL SPRINKLER COMPANY
By: /s/Edna C. Sauers By: /s/Albert T. Sabol
-------------------------- ----------------------------------
Edna C. Sauers, Albert T. Sabol,
Secretary Vice President Finance
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<PAGE>
CENTRAL SPRINKLER CORPORATION
By: /s/Edna C. Sauers By: /s/Albert T. Sabol
-------------------------- ----------------------------------
Edna C. Sauers, Albert T. Sabol,
Secretary Vice President Finance
CENTRAL SPRINK INC.
By: /s/Edna C. Sauers By: /s/Albert T. Sabol
-------------------------- ----------------------------------
Edna C. Sauers, Albert T. Sabol,
Secretary Vice President Finance
CENTRAL CASTINGS CORPORATION
By: /s/Edna C. Sauers By: /s/Albert T. Sabol
-------------------------- ----------------------------------
Edna C. Sauers, Albert T. Sabol,
Secretary Vice President Finance
CORESTATES BANK, N.A.
By: /s/Paul S. Phillips
----------------------------------
Paul S. Phillips,
Vice President
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<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, dated as of March 31, 1995, is among
CENTRAL SPRINKLER COMPANY, a Pennsylvania corporation (the "Borrower"),
CORESTATES BANK, N.A., a national banking association (the "Bank"), and CSC
FINANCE COMPANY, a Delaware corporation ("Subordinated Creditor").
BACKGROUND
WHEREAS, the Bank and the Borrower are parties to a Letter Agreement,
dated as of April 29, 1994 (together with all amendments and modifications
thereto, the "Loan Agreement"), providing, subject to the terms and conditions
thereof, for a loan made by the Bank to the Borrower in the amount of
$10,000,000 (the "Loan"), which indebtedness is further evidenced by a Term Note
in the principal amount of $10,000,000 dated April 29, 1994 (the "Note"); and
WHEREAS, except as otherwise herein expressly provided, terms defined
in the Note and the Loan Agreement and used herein shall have the same meaning
when used herein; and
WHEREAS, the Bank has agreed to enter into that certain amendment to
the Loan Agreement dated as of the date hereof and to continue the extension of
credit provided for in the Loan Agreement, and the Subordinated Creditor has
agreed as required by the Loan Agreement to subordinate the Subordinated Debt to
the Bank Debt (as each of such terms is hereinafter defined) in the manner and
to the extent hereinafter provided.
NOW, THEREFORE, incorporating the foregoing by reference, and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Subordination. The Subordinated Creditor hereby agrees that, except
as and to the extent hereinafter provided, all Subordinated Debt is and shall be
subordinate and subject in right of payment to the prior payment in full of the
following obligations to the Bank (all such obligations to the Bank being
referred to herein as the "Bank Debt"): (i) the Loan and other obligations of
the Borrower to the Bank under the Loan Agreement and the Note, and (ii) all
reimbursement obligations of Central Castings Corporation, a wholly-owned
subsidiary of the Borrower, and the Borrower, with respect to any letter of
credit which may be issued by the Bank to support a bond issue, including,
without limitation, all obligations of the Borrower or Central Castings
Corporation in respect of interest, fees and/or expenses accruing before or
after the commencement of any bankruptcy, insolvency, or similar proceedings
with respect to the Borrower or Central Castings Corporation. The Subordinated
Creditor further agrees that it will not ask, demand, sue for, take or receive
<PAGE>
from the Borrower, or from any guarantor or surety of the Subordinated Debt or
any portion thereof, by set-off or in any other manner, payment of, and the
Borrower hereby agrees that it will not pay or give, the whole or any part of
the Subordinated Debt, or any security therefor, unless or until all the Bank
Debt shall have been fully paid. The Subordinated Creditor hereby directs the
Borrower to, and the Borrower agrees that it will, make such prior payment of
the Bank Debt to Bank. As used herein, "Subordinated Debt" shall mean all
obligations for borrowed money of the Borrower or any subsidiary or affiliate
thereof to the Subordinated Creditor, whether now existing or hereafter arising,
including without limitation, all such obligations in respect of (i) the note
dated December 21, 1994 payable by the Borrower to the Subordinated Creditor in
the amount of $11,750,000 and any documents in connection therewith between the
Borrower and the Subordinated Creditor (the "Subordinated Note"); (ii) interest
accruing on any such obligations before or after the commencement of any
bankruptcy, insolvency, or similar proceeding with respect to the Borrower. The
obligations of the Borrower to the Subordinated Creditor shall remain
Subordinated Debt notwithstanding any increase or decrease in the Bank Debt.
Subordinated Debt shall include any obligations of the Borrower to the
Subordinated Creditor which are modifications, renewals or refinancings of
obligations which constitute Subordinated Debt.
2. Payments Permitted on Subordinated Debt. Anything in this
Subordination Agreement to the contrary notwithstanding, the Borrower may make
the following payments on the Subordinated Note: regularly scheduled payments of
interest not in excess of the rate presently provided for in the Subordinated
Note so long as no Event of Default, as defined in the Note or the Loan
Agreement, has occurred, will occur as a result of such payment of interest, or
will occur with the passage of time or giving of notice or both.
Except as provided in this Paragraph 2, the Borrower shall
make no other or additional payments on the Subordinated Debt.
3. Liens and Security Interests. The Borrower and the Subordinated
Creditor represent, warrant and covenant that the Subordinated Debt is unsecured
and shall at all times remain unsecured.
4. Distribution. In the furtherance of, and to make effective, the
subordination provided for herein, the Subordinated Creditor further agrees as
follows:
(a) In the event of any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of
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<PAGE>
law or otherwise, of all or any part of the assets of the Borrower or the
proceeds thereof, to creditors of the Borrower, or upon any indebtedness of the
Borrower, by reason of the liquidation, dissolution or other winding up, partial
or complete, of the Borrower or its business, or any sale, receivership,
insolvency or bankruptcy proceedings, or assignment for the benefit of
creditors, or any proceeding by or against the Borrower for any relief under any
bankruptcy or insolvency law or laws related to the relief of debtors, the
adjustment of indebtedness, arrangements, reorganizations, compositions, or
extensions, then and in any such event:
(1) Any payment or distribution of any kind or character,
whether in cash, securities or any other property which but for this
Subordination Agreement would be payable or deliverable upon or with respect to
any or all of the Subordinated Debt, shall instead be paid or delivered directly
to Bank for application on the Bank Debt, whether then due or not due, until the
Bank Debt shall have first been fully paid and satisfied; and
(2) The Subordinated Creditor hereby irrevocably authorizes
and empowers Bank to take any and all actions necessary or appropriate, in its
name or in the name of the Subordinated Creditor, to enforce any and all claims
upon or with respect to the Subordinated Debt, including without limitation,
voting claims and filing appropriate proof of claims, and to demand, sue for,
collect and receive any and all payments or distributions that may be payable or
deliverable at any time upon or with respect to the Subordinated Debt.
Notwithstanding the foregoing, this provision shall not serve to impose any
affirmative obligation on the part of the Bank or its successors and assigns to
take any action or pursue any claim on behalf of the Subordinated Creditor.
Subordinated Creditor shall not attempt to hold the Bank liable and hereby
waives any claims or cause of action it may otherwise have against the Bank as a
result of any action taken or not taken by the Bank to enforce any and all
claims in respect of the Subordinated Debt.
(b) Should any payment not permitted under Section 2 hereof or
distribution of security or proceeds of any security be received by the
Subordinated Creditor upon or in respect of the Subordinated Debt prior to the
payment in full of the Bank Debt, the Subordinated Creditor will forthwith
deliver the same to Bank in precisely the form received (except for the
endorsement or assignment of the Subordinated Creditor where necessary) for
application on the Bank Debt, whether then due or not due, and, until so
delivered, the same shall be held in trust by the Subordinated Creditor as
property of Bank. In the event of the failure of the Subordinated Creditor to
make any such endorsement or assignment, Bank, or any of its officers or
employees, are hereby irrevocably appointed as attorney-in-fact for Subordinated
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<PAGE>
Creditor and is authorized to make such endorsement or assignment on behalf of
Subordinated Creditor.
(c) The Subordinated Creditor agrees that it will not
transfer, assign, pledge or encumber the Subordinated Debt or any part thereof
or any instrument evidencing the same unless such instruments evidencing the
same and the instrument of assignment specifically provide that the holder or
assignee takes the Subordinated Debt subject to the provisions of this
Subordination Agreement.
5. Continuing Subordination, etc. The subordination effected by this
Subordination Agreement is a continuing subordination, and the Subordinated
Creditor hereby agrees that at any time and from time to time, without notice to
and without impairing or affecting the subordination provisions of this
Subordination Agreement or the obligations of the Subordinated Creditor
hereunder:
(a) The time for the Borrower's performance of or compliance
with any of its obligations, covenants or agreements contained in the Note, the
Loan Agreement and any other documents provided for thereby may be extended or
such performance or compliance may be waived by Bank;
(b) Any of the acts mentioned in the note, the Loan Agreement
and any other documents provided for thereby may be done;
(c) The Note, the Loan Agreement and any other documents
provided for thereby may be amended for the purpose of adding any provisions
thereto or changing in any manner the rights of Bank or the Borrower thereunder;
(d) Payment of the Bank Debt or any portion thereof may be
extended or the Note may be renewed in whole or in part; and
(e) The maturity of any of the Bank Debt may be accelerated,
and any collateral security, guarantee or surety therefor may be exchanged,
sold, surrendered, released, modified or otherwise dealt with in accordance with
the terms of any present or future agreement between the Borrower or any
guarantor or surety and Bank, including any agreement permitting the Bank to
take unilateral action with respect thereto; and
(f) The amount of the Bank Debt to which the Subordinated Debt
is subordinated may be increased.
6. Waiver of Notice. The Subordinated Creditor hereby unconditionally
waives notice of the incurring of the Bank Debt or any part thereof in reliance
by the Bank upon the subordination of the Subordinated Debt to the Bank Debt.
-4-
<PAGE>
7. Representations and Warranties. The Subordinated Creditor hereby
represents and warrants that: (i) it has the necessary power and capacity to
make and perform this Subordination Agreement and such making and performance
have been duly authorized by all necessary action on the part of the
Subordinated Creditor; (ii) the making and performance by the Subordinated
Creditor of this Subordination Agreement does not and will not violate any
provision of law or regulation or result in the breach of, or constitute a
default or require any consent under, or result in the creation of any lien,
charge or encumbrance upon any of its properties, revenues or assets pursuant to
any indenture or other agreement or instrument to which it is a party or by
which any of its properties may be bound; and (iii) this Subordination Agreement
is the legal, valid and binding obligation of the Subordinated Creditor,
enforceable against the Subordinated Creditor in accordance with its terms.
8. Default under Agreement. In the event of a breach of this Agreement
by the Borrower or the Subordinated Creditor, the Bank, at its option, may
accelerate the maturity of any or all of the Bank Debt.
9. No Waiver and Counterparts.
(a) No failure on the part of Bank to exercise, no delay in
exercising, and no course of dealing with respect to, any right or remedy
hereunder will operate as a waiver thereof; nor will any single or partial
exercise of any right or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right or remedy. This Subordination
Agreement may not be amended or modified except by written agreement of the
Subordinated Creditor, the Borrower and the Bank. No consent or waiver hereunder
shall be valid unless in writing and signed by Bank.
(b) This Subordination Agreement may be executed in any number
of identical counterparts each of which, when executed by one of the parties
hereto, shall be considered to be an original.
10. Successors and Assigns. This Subordination Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and their respective heirs, executors,
administrators, successors and assigns.
11. Governing Law. This Subordination Agreement shall be construed in
accordance with and governed by the internal laws of the Commonwealth of
Pennsylvania.
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<PAGE>
12. Entire Agreement. This Subordination Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and superseded all prior and contemporary agreements, commitments and
understandings between the parties with respect to the subject matter hereof.
13. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceabiality of any other
provision.
14. Notices. Every notice and communication under this Agreement shall
be in writing and shall be given by either (i) hand-delivery, (ii) first class
mail (postage prepaid), (iii) reliable overnight commercial courier (charges
prepaid), or (iv) telecopy or other means of electronic transmission, if
confirmed promptly by any of the methods specified in clauses (i), (ii) and
(iii) of this sentence, to the following addresses:
If to the Subordinated Creditor:
CSC Finance Company
1105 N. Market Street, Suite 1300
Wilmington, DE 19809
Attn: Edward Jones
FAX: 302-427-7663
If to the Borrower:
Central Sprinkler Company
451 N. Cannon Avenue
Lansdale, PA 19446
Attn: Albert T. Sabol
FAX: 215-362-5385
If to the Bank:
CoreStates Bank, N.A.
1345 Chestnut Street
Philadelphia, PA 19107
Attn: Paul S. Phillips, Vice President
F.C. 3-90-1-1
FAX: 610-834-2069
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<PAGE>
Notice given by telecopy or other means of electronic transmission
shall be deemed to have been given and received when received. Notice by
overnight courier shall be deemed to have been given and received on the date
scheduled for delivery. Notice by mail shall be deemed to have been given and
received three (3) calendar days after the date first deposited in the United
States Mail. Notice by hand delivery shall be deemed to have been given and
received upon delivery.
A party may change its address by giving written notice to the other
parties as specified herein.
IN WITNESS WHEREOF, this Subordination Agreement has been duly executed
as of the day and year first above written.
CSC FINANCE COMPANY, as
Subordinated Creditor
By /s/Albert T. Sabol
Albert T. Sabol,
Vice President
CENTRAL SPRINKLER COMPANY, as
Borrower
By /s/Albert T. Sabol
-----------------------------------
Albert T. Sabol,
Vice President
CORESTATES BANK, N.A.
By /s/Paul S. Phillips
-----------------------------------
Paul S. Phillips,
Vice President
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<PAGE>
================================================================================
LOAN AGREEMENT
between
STATE INDUSTRIAL DEVELOPMENT AUTHORITY
and
CENTRAL CASTINGS CORPORATION
Dated as of November 1, 1995
______________________________
Relating to
$8,000,000
STATE INDUSTRIAL DEVELOPMENT AUTHORITY
Adjustable Convertible Taxable Industrial Revenue Bonds
(Central Castings Corporation Project)
Series 1995
================================================================================
<PAGE>
TABLE OF CONTENTS*
to
LOAN AGREEMENT
between
STATE INDUSTRIAL DEVELOPMENT AUTHORITY
and
CENTRAL CASTINGS CORPORATION
================================================================================
Page
----
Parties...................................................................... 1
Recitals..................................................................... 1
ARTICLE I
DEFINITIONS AND USE OF PHRASES
Section 1.1 Definitions..................................................... 2
Section 1.2 Definitions Contained in the Indenture.......................... 8
Section 1.3 Use of Phrases.................................................. 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties by the Authority................. 9
Section 2.2 Representations and Warranties by the Company................... 10
- --------
*This Table of Contents appears here for reference only and should not be
considered a part of this Loan Agreement.
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<PAGE>
ARTICLE III
ISSUANCE OF THE BONDS;
LOAN OF PROCEEDS TO THE COMPANY
Section 3.1 Agreement to Issue the Bonds.................................... 14
Section 3.2 Loan to the Company............................................. 14
Section 3.3 No Warranty of Sufficiency of Loan.............................. 14
Section 3.4 Payment of the Loan............................................. 15
Section 3.5 Expenses of the Authority....................................... 17
Section 3.6 Obligations of the Company Unconditional........................ 17
Section 3.7 Assignment of Loan Agreement and Company Note by the
Authority..................................................... 18
Section 3.8 Assignment of the Loan Agreement by the Company................. 19
Section 3.9 Bonds are Limited Obligations................................... 19
Section 3.10 No Warranty of Project or Facilities............................ 19
ARTICLE IV
PROVISIONS CONCERNING MAINTENANCE,
INSURANCE AND TAXES
Section 4.1 Maintenance of the Project...................................... 20
Section 4.2 Prohibition Against Sale of Project; Protection Against
Encumbrances.................................................. 20
Section 4.3 Insurance Required.............................................. 21
Section 4.4 Performance by the Authority or Trustee of Certain
Company Obligations; Reimbursement of
Expenses...................................................... 22
ARTICLE V
PROVISIONS RESPECTING DAMAGE,
DESTRUCTION AND CONDEMNATION
Section 5.1 Damage and Destruction Provisions............................... 23
Section 5.2 Condemnation Provisions......................................... 24
Section 5.3 Condemnation of Right to Use of the Project for Limited
Period........................................................ 26
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<PAGE>
Section 5.4 Cooperation of the Authority in the Conduct of Condemna-
tion Proceedings.............................................. 26
Section 5.5 Relationship to Reimbursement Agreement and Bank
Mortgage...................................................... 26
ARTICLE VI
SPECIAL COVENANTS OF THE COMPANY
Section 6.1 General......................................................... 26
Section 6.2 Performance by the Authority, the Bank or the Trustee of
Certain Company Obligations; Reimbursement of
Expenses...................................................... 26
Section 6.3 Release and Indemnification Covenants........................... 27
Section 6.4 Agreement to Maintain Corporate Existence....................... 29
Section 6.5 Qualification in Alabama........................................ 30
Section 6.6 Notice of Adjudication of Invalidity............................ 31
Section 6.7 Protection of Security.......................................... 31
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default Defined..... ................................. 31
Section 7.2 Remedies on Default............................................. 33
Section 7.3 Agreement to Pay Attorneys' Fees................................ 34
Section 7.4 No Remedy Exclusive............................................. 34
Section 7.5 No Additional Waiver Implied by One Waiver...................... 34
Section 7.6 Restoration of Rights Upon Abandonment of Proceedings........... 35
Section 7.7 Effect of Intercreditor Agreement............................... 35
iii
<PAGE>
ARTICLE VIII
PREPAYMENT OF LOAN
Section 8.1 Options to Prepay All or Part of the Loan Prior to
Conversion Date............................................... 35
Section 8.2 Option to Prepay Loan After Conversion Date Upon the
Occurrence of Certain Events.................................. 36
ARTICLE IX
MISCELLANEOUS
Section 9.1 Term of Loan Agreement.......................................... 38
Section 9.2 Disposition of Trust Fund Moneys after Payment of Inden-
ture Indebtedness............................................. 38
Section 9.3 Certification of Completion Date................................ 38
Section 9.4 Notices......................................................... 39
Section 9.5 Certain Prior and Contemporaneous Agreements
Cancelled..................................................... 40
Section 9.6 Limited Liability of Authority.................................. 40
Section 9.7 Trustee Actions Requested by Company............................ 40
Section 9.8 Binding Effect.................................................. 40
Section 9.9 Severability.................................................... 40
Section 9.10 Article and Section Captions.................................... 41
Section 9.11 Governing Law................................................... 41
Testimonium.................................................................. 41
Signatures................................................................... 41
Acknowledgments.............................................................. 42
iv
<PAGE>
LOAN AGREEMENT between the STATE INDUSTRIAL DEVELOPMENT AUTHORITY, a
public corporation organized and existing under the laws of the State of Alabama
(herein called the "Authority"), and CENTRAL CASTINGS CORPORATION, a corporation
organized and existing under the laws of the State of Alabama (herein called the
"Company");
R E C I T A L S
The Company has heretofore provided for the acquisition, construction
and installation of certain industrial facilities located in Calhoun County,
Alabama (such facilities being herein together called the "Project"). In order
to finance a portion of the costs of acquiring, constructing and installing the
Project, the Authority is selling and issuing, simultaneously with the delivery
of this Loan Agreement, $8,000,000 principal amount of its Adjustable
Convertible Taxable Industrial Revenue Bonds (Central Castings Corporation
Project), Series 1995 (herein called the "Bonds"), under a Trust Indenture dated
as of November 1, 1995 (herein called the "Indenture"), between the Authority
and Chemical Bank, as trustee (herein, together with its successors in trust,
called the "Trustee"). The Authority is lending the proceeds of the Bonds to the
Company pursuant to this Loan Agreement. The obligation of the Company to repay
such loan shall be evidenced by its promissory note (herein called the "Company
Note") payable to the Authority or registered assigns.
In order to secure the payment of the principal of and the interest and
premium (if any) on the Bonds, the Authority will pledge and assign under the
Indenture the Authority's interest in this Loan Agreement (other than certain
expense payment and indemnification rights and certain rights which are herein
expressly provided to be exercised by the Authority), including particularly the
"Basic Loan Payments" payable hereunder by the Company. In addition,
simultaneously with the delivery of this Loan Agreement, the Company and First
Fidelity Bank, National Association (herein called the "Bank"), will enter into
a Letter of Credit and Reimbursement Agreement dated as of November 1, 1995,
pursuant to which the Bank will issue to the Trustee its irrevocable letter of
credit in an amount sufficient to provide for the payment of the principal of
and up to forty-five (45) days' accrued interest on the Bonds, as well as the
purchase price of any Bonds tendered (or deemed to be tendered) for purchase in
accordance with the provisions of the Indenture.
NOW THEREFORE, THIS LOAN AGREEMENT
W I T N E S S E T H:
That in consideration of the respective representations, warranties and
agreements herein contained, the parties hereto agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS AND USE OF PHRASES
Section 1.1 Definitions. Unless the context clearly indicates a
different meaning, the following words and phrases, as used herein, shall have
the following respective meanings:
"Act" means the statutes codified as Code of Alabama 1975, Title 41,
Chapter 10, Articles 2 and 2A, as amended and supplemented and at the time in
force and effect.
"Affiliate" of any designated Person means any Person which, directly
or indirectly, controls, or is controlled by, or is under common control with,
such designated Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the posses-
sion, directly or indirectly, of the power to direct or cause the direction of
the management and policies of such Person whether through the ownership of
voting securities or by contract or otherwise.
"Authority" means the party of the first part hereto and, subject to
the provisions of Section 9.4 of the Indenture, includes its successors and
assigns and any public corporation resulting from or surviving any consolidation
or merger to which it or its successors may be a party.
"Authorized Authority Representative" means the person or persons at
the time designated as such by written certificate furnished to the Company and
the Trustee, containing the specimen signature or signatures of such person or
persons and signed on behalf of the Authority by its President or Vice
President.
"Authorized Company Representative" means any person authorized to act
on behalf of the Company and designated as an authorized representative thereof
in a written certificate furnished to the Authority and the Trustee, containing
the specimen signature of such person and signed on behalf of the Company by its
President or any Vice President thereof.
"Bank" means First Fidelity Bank, National Association, a national
banking association having its principal office in Philadelphia, Pennsylvania,
in its capacity as issuer of the Letter of Credit, its successors in such
capacity and their assigns. If a Substitute Letter of Credit has been provided
to the Trustee in accordance with Section 3.14 of the Indenture, any reference
to the Bank shall, unless the context requires otherwise, include reference to
the bank or other institution that provides such Substitute Letter of Credit
and its successors and assigns.
"Bank Mortgage" means that certain Mortgage and Security Agreement
dated as of November 1, 1995, which will cover the Mortgaged Property and which
2
<PAGE>
is to be given by the Council and the Company to the Bank in order to secure the
payment by the Company of any amounts which it may be required to pay under the
Reimbursement Agreement.
"Basic Agreements" means the Loan Agreement, the Company Note, the
Letter of Credit, the Reimbursement Agreement, the Bank Mortgage, the
Intercreditor Agreement and the Indenture, as such instruments may from time to
time be amended or supplemented in accordance with their respective terms or the
terms of the Indenture, as in the case may be applicable.
"Basic Loan Payments" means (i) the payments made by the Company
pursuant to the provisions of Section 3.4 of the Loan Agreement, (ii) any other
payments made by the Company pursuant to the Loan Agreement to provide for the
payment of the principal of and the interest and premium (if any) on the Bonds
(other than the aforesaid moneys payable pursuant to Section 3.4 of the Loan
Agreement), and (iii) any other payments made by the Company pursuant to the
Loan Agreement that are referred to herein as Basic Loan Payments.
"Bond Fund" means the Central Castings Corporation Project Bond
Principal and Interest Fund created in Section 8.1 of the Indenture.
"Bondholder" means the Holder of any Bonds.
"Bonds" means those certain Adjustable Convertible Taxable Industrial
Revenue Bonds (Central Castings Corporation Project), Series 1995, authorized to
be issued under the Indenture in the aggregate principal amount of $8,000,000.
"Business Day" means any day other than (a) a Saturday or a Sunday, (b)
a day on which banking institutions in New York, New York, in Philadelphia,
Pennsylvania, in Dallas, Texas, in Houston, Texas, or in any other city where
either the principal office of the Bank, the Trustee (including the office of
the Trustee from which payments of the principal of or interest on the Bonds are
made), the Remarketing Agent, or the Tender Agent is located are required or
autho- rized by law (including executive order) to close or on which the
principal office of the Bank, the Trustee (including the office of the Trustee
from which payments of the principal of or interest on the Bonds are made),
the Remarketing Agent or the Tender Agent is closed for a reason not related to
financial condition, or (c) a day on which the New York Stock Exchange is
closed.
"Code" means the Internal Revenue Code of 1986, as amended and at the
time in force and effect.
"Company" means Central Castings Corporation, an Alabama corporation,
and, subject to the provisions of Section 6.4 hereof, includes its successors
and assigns and any corporation resulting from or surviving any consolidation or
merger to which it or its successors may be a party.
"Company Note" means that certain promissory note of the Company, dated
the date of initial issuance of the Bonds, to be given to the Authority in order
3
<PAGE>
to evidence the obligation of the Company to pay the Basic Loan Payments
pursuant to the Loan Agreement, which note shall be in substantially the form
described in Section 3.4 hereof.
"Completion Date" means the date on which the completion of the Project
Development Work and the satisfaction of the other conditions referred to in
Section 9.3 hereof are certified to the Trustee and the Authority in accordance
with the provisions of said Section 9.3.
"Construction Fund" means the Central Castings Corporation Project
Construction Fund created in Section 7.1 of the Indenture.
"Conversion Date" means the day on which the interest payable with
respect to the Bonds shall be converted from a variable interest rate to a fixed
interest rate pursuant to the provisions of Section 3.4 of the Indenture.
"Council" means the Calhoun County Economic Development Council, an
Alabama public corporation, and its successors and assigns.
"Council Bonds" means any bonds of the Council issued pursuant to the
Council Indenture.
"Council Indenture" means that certain Trust Indenture dated as of
November 1, 1995, between the Council and Chemical Bank, as trustee, as said
agreement now exists and as it may from time to time be modified, supplemented
or amended in accordance with the provisions thereof.
"Council Indenture Trustee" means Chemical Bank, in its capacity as
trustee under the Council Indenture, and any successor thereto in such capacity.
"Council Lease" means that certain Lease Agreement dated as of
November 1, 1995, between the Council and the Company, as said agreement now
exists and as it may from time to time be modified, supplemented or amended in
accordance with the provisions thereof.
"Counsel" means any attorney duly admitted to practice before the
highest court of any state of the United States of America or the District of
Columbia (including any officer or full-time employee of the Authority or an
Affiliate thereof who is so admitted to practice), it being understood that
Counsel may also mean a firm of attorneys whose members are so admitted to
practice.
"Eminent Domain", when used herein with reference to any taking of
property, means the power (actual or claimed) of any governmental authority or
any Person acting under governmental authority (actual or claimed) to take such
property; and, for purposes of the Loan Agreement, a taking of property under
the exercise of the power of Eminent Domain shall include a conveyance made, or
a use granted or taken, under either the threat or the fact of the exercise of
governmental authority.
4
<PAGE>
"Event of Default" means an "Event of Default" as specified in Section
7.1 hereof.
"Holder" means the Person in whose name a Bond is registered on the
registry books of the Trustee pertaining to the Bonds.
"Indenture" means that certain Trust Indenture dated as of November 1,
1995, between the Authority and Chemical Bank, a New York corporation having its
principal corporate trust office in the City of New York, New York, under which
(i) the Bonds are authorized to be issued, and (ii) the Authority's interests in
the Company Note and the Loan Agreement are to be assigned and pledged as
security for payment of the principal of and the interest and premium (if any)
on the Bonds, as the said Trust Indenture now exists and as it may hereafter be
supplemented and amended.
"Indenture Indebtedness" means all indebtedness of the Authority at the
time secured by the Indenture, including, without limitation, all principal of
and interest and premium (if any) on the Bonds, and all reasonable and proper
fees, charges and disbursements of the Trustee (including its agents and
counsel) for services performed under the Indenture.
"Independent Counsel" means Counsel having no continuing employment or
business relationship or other connection with the Authority or the Company or
an Affiliate of either thereof which, in the opinion of the Trustee, might
compromise or interfere with the independent judgment of such Counsel in the
performance of any services to be performed hereunder as Independent Counsel.
"Intercreditor Agreement" means that certain Intercreditor Agreement
dated as of November 1, 1995, among the Company, the Authority, the Council, the
Trustee and the Council Indenture Trustee, as said agreement now exists and as
it may from time to time be modified, supplemented or amended in accordance with
the provisions thereof.
"Interest Payment Date" means (i) during the period from the date of
the issuance of the Bonds to and including the Conversion Date (if any), the
first Business Day of each calendar month falling within such period and the
Conversion Date (if any) on which such period ends, and (ii) during the period
from, but not including, the Conversion Date (if any) to and including the date
of the final payment of the Bonds, each May 1 and November 1 falling within such
period.
"Letter of Credit" means the direct pay irrevocable letter of credit
issued by the Bank to the Trustee contemporaneously with the original issuance
of the Bonds, together with any letter of credit issued in substitution or
exchange therefor pursuant to the Reimbursement Agreement. In the event that a
Substitute Letter of Credit is provided to the Trustee pursuant to Section 3.14
of the Indenture, any reference to the Letter of Credit shall, unless the
context requires otherwise, include reference to such Substitute Letter of
Credit, and any reference to the Bank under such circumstances shall include
reference to the bank or other institution providing such Substitute Letter of
Credit.
5
<PAGE>
"Loan" means the loan made hereunder by the Authority to the Company of
the proceeds derived from the sale of the Bonds.
"Loan Agreement" or "this Loan Agreement" means this Loan Agreement, as
it now exists and as it may from time to time be modified, supplemented or
amended in accordance with the provisions of Section 13.4 of the Indenture.
"Mortgaged Property" means, at any particular time, all of the property
(whether real, personal or mixed) that is at such time subject to the lien of
the Bank Mortgage.
"Net Condemnation Award" means the total amount received as
compensation for any part of the Mortgaged Property taken under the exercise of
the power of Eminent Domain, plus damages to any part of the Mortgaged Property
not taken, which compensation shall consist of (i) all awards received pursuant
to administrative or judicial proceedings conducted in connection with the
exercise of the power of Eminent Domain, plus (ii) all amounts received as a
result of any settlement of compensation claims (whether in whole or in part)
negotiated with the condemning authority, less (iii) all attorneys' fees and
other expenses incurred in connection with the receipt of such compensation,
including attorneys' fees and expenses relating to such administrative or
judicial proceedings and to such settlement negotiations.
"Net Insurance Proceeds" means the total insurance proceeds recovered
by the Authority, the Company and the Trustee on account of any damage to or
destruction of the Mortgaged Property or any part thereof, less all expenses
(including attorneys' fees and any extraordinary expenses of the Trustee)
incurred in the collection of such proceeds.
"Offering Memorandum" means the Limited Offering Memorandum pertaining
to the Bonds.
"Permitted Encumbrances" means, with respect to any of the Mortgaged
Property, as of any particular time, any of the following: (i) the lien of the
Bank Mortgage and any liens or other encumbrances permitted by the provisions of
the Bank Mortgage; (ii) the Council Lease; (iii) liens for ad valorem taxes and
general and special assessments not then delinquent; (iv) utility, access,
drainage and other easements and rights-of-way, mineral rights, covenants
running with the land, zoning restrictions, environmental regulations and other
restrictions and encumbrances affecting the use of real property, and minor
defects and irregularities in title to real property, none of the foregoing of
which, individually or in the aggregate, materially impair the title of the
Company to the real property affected thereby or interfere with the use of such
prop- erty for the purpose for which it was acquired or is held by the Company;
and (v) any inchoate mechanic's materialman's, supplier's or vendor's lien or
other right to a purchase money security interest if payment if not yet due and
payable under the contract giving rise to such lien or right.
"Person" means any natural person, corporation, partnership, trust,
joint venture, government or governmental body, political subdivision or other
legal entity as in the context may be possible or appropriate.
6
<PAGE>
"Placement Agents" means First Fidelity Bank, N.A., Newark, New Jersey,
and Blount, Parrish & Roton, Montgomery, Alabama.
"Preliminary Agreement" means that certain Preliminary Agreement dated
as of November 29, 1994, between the Authority and the Company, in which the
Authority agreed, among other things, to issue the Bonds to finance a portion of
the costs of acquiring, constructing and installing the Project.
"Project" means the Project Site, the Project Building and the Project
Equipment, as they may at any time exist, and all other property and rights of
every kind that are or become subject to the lien of the Bank Mortgage.
"Project Building" means the foundry building and related improvements
situated on the Project Site, as such building and related improvements may at
any time exist.
"Project Development Costs" means the following: (i) all costs and
expenses incurred in connection with the planning, development and design of the
Project, including the costs of preliminary investigations, surveys, estimates
and plans and specifications; (ii) all costs and expenses of acquiring,
constructing and installing the various facilities that constitute the Project,
including the cost to the Company of supervising construction and installation,
payments to contractors and materialmen and fees for professional or other
specialized services; (iii) the costs of contract bonds and of insurance of all
kinds which may be necessary or desirable in connection with the Project
Development Work and which are not paid by any contractor or otherwise provided
for; (iv) all expenses incurred in connection with the issuance and sale of the
Bonds, including (without limitation) the fees and expenses of Bond Counsel to
the Authority, the acceptance fee of the Trustee, the fees and expenses of
counsel to the Authority, the fees and expenses of Counsel to the Trustee, the
initial fees (if any) of the Tender Agent and the Remarketing Agent, the fees
payable to the Bank in respect of the Letter of Credit and the Reimbursement
Agreement prior to the Completion Date, the fees and expenses of Counsel to the
Bank, the costs of printing the Bonds, the fees of any Rating Agency rating the
Bonds, accounting fees, financial advisory fees, and other usual and customary
expenses; (v) the charges of the Trustee for the disbursement of moneys from the
Construction Fund; (vi) all other costs which the Authority shall be required to
pay, under the terms of any contract or contracts, in connection with the
Project Development Work; (vii) interest on the Bonds to the extent that the
cumulative amount thereof paid out of the proceeds of the Bonds does not exceed
the total interest that will accrue on the Bonds from their date until and
including the Completion Date; and (viii) the reimbursement to the Company of
all amounts paid directly by the Company in respect of any of the aforesaid
costs and expenses and of all amounts advanced by the Company to the Authority
for the payment of such costs and expenses.
"Project Development Work" means the construction, expansion and
improvement of the Project Building and the acquisition of the Project Equipment
and the installation thereof in or around the Project Building.
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"Project Equipment" means (i) all items (whether or not fixtures) of
furniture, furnishings, fixtures, machinery, equipment or other personal
property the costs of which, in whole or in part, have been or are to be paid by
the Company out of the proceeds of the Bonds or the Council Bonds and (ii) all
items (whether or not fixtures) of furniture, furnishings, fixtures, machinery,
equipment or other personal property that are acquired by the Company in
substitution for or replacement of items of machinery, equipment or other
personal property theretofore constituting part of the Project Equipment.
"Project Site" means (i) the parcel of land specifically described in
Exhibit A to the Council Lease (to the extent that such parcel is at the time
subject to the lien thereof) and (ii) any other land that, at the time and under
the terms of the Council Lease, constitutes a part of the Project Site.
"Rating Agency" means any nationally recognized securities rating
agency which shall have outstanding a rating respecting the Bonds.
"Reimbursement Agreement" means the Letter of Credit and Reimbursement
Agreement between the Company and the Bank dated as of November 1, 1995,
pursuant to which the Letter of Credit is being issued by the Bank and delivered
to the Trustee, and any and all modifications, alterations, amendments and
supplements thereto, and, with respect to any Substitute Letter of Credit, the
agreement specifying the terms of such facility with the bank or other
institution providing the same.
"Remarketing Agent" means First Fidelity Bank, N.A., Newark, New
Jersey, or any successor remarketing agent appointed in accordance with Section
12.1 of the Indenture.
"Substitute Letter of Credit" means a credit facility other than the
original Letter of Credit that complies with the requirements of Section 3.14 of
the Indenture, including, without limitation, a letter of credit or an insurance
policy which provides security for payment of the principal of and interest and
premium (if any) on the Bonds, it being understood that any Substi- tute Letter
of Credit shall also provide security for the payment of the purchase price of
Bonds tendered (or deemed to be tendered) to the Tender Agent pursuant to
Section 3.5 or 3.6 of the Indenture.
"Tender Agent" means Chemical Bank or any successor tender agent
appointed in accordance with Section 12.3 of the Indenture.
"Trustee" means the Trustee at the time serving as such under the
Indenture.
Section 1.2 Definitions Contained in the Indenture. Unless the context
clearly indicates a different meaning, any words, terms or phrases that are used
in this Loan Agreement as defined terms without being herein defined and that
are defined in the Indenture shall have the meanings respectively given them in
the Indenture.
8
<PAGE>
Section 1.3 Use of Phrases. "Herein", "hereby", "hereunder", "hereof",
"hereinbefore", "hereinafter", and other equivalent words refer to this Loan
Agreement as an entirety and not solely to the particular portion thereof in
which any such word is used. The definitions set forth in Section 1.1 hereof
include both singular and plural. Whenever used herein, any pronoun shall be
deemed to include both singular and plural and to cover all genders. Any
percentage or fractional amount of all the Bonds, specified herein for any
purpose, is to be figured on the aggregate principal amount of all the Bonds
then outstanding.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties by the Authority. The
Authority makes the following representations and warranties as the basis for
the undertakings on its part herein contained:
(a) Organization. The Authority is a public corporation duly organized
and validly existing under the provisions of the Act, as now existing, by reason
of an application duly filed for record in the office of the Secretary of State
of Alabama and by a Certificate of Incorporation issued by said Secretary of
State. The Certificate of Incorporation has not been amended or revoked and is
in full force and effect. The Authority is not in default under any of the
provisions contained in said Certificate of Incorporation or its Bylaws or in
the laws of the State of Alabama. The Authority has not initiated any
proceedings or taken any action for its dissolution.
(b) Litigation. Except for that certain civil action pending in the
Circuit Court for Montgomery County, Alabama, and styled Gulf States Steel, Inc.
of Alabama v. State Industrial Development Authority, et al., there are no
actions, suits or proceedings pending (nor, to the knowledge of the Authority,
are any actions, suits or proceedings threatened) against or affecting the
Authority or any property of the Authority in any court, or before an arbitrator
of any kind, or before or by any governmental body, which might materially and
adversely affect the transactions contemplated by this Loan Agreement or which
might adversely affect the validity or enforceability of this Loan Agreement or
any other agreement or instrument to which the Author- ity is or is to be a
party relating to the transactions contemplated by this Loan Agreement.
(c) Sale and Other Transactions are Legal and Authorized. The sale and
issuance of the Bonds, the execution and delivery of this Loan Agreement and the
Indenture, and the compliance with all the provisions of each thereof and of the
Bonds by the Authority (i) are within the power and authority of the Authority,
(ii) will not conflict with or result in a breach of any of the provisions of,
or constitute a default under, the Act, the Certificate of Incorporation or the
Bylaws of the Authority, and (iii) have been duly authorized by all necessary
corporate action on the part of the Authority.
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(d) The Bonds. The Bonds, when issued and paid for in accordance with
this Loan Agreement and the Indenture and when duly authenticated by the
Trustee, will constitute legal, valid and binding special obligations of the
Authority payable solely from the sources provided in the Indenture, except to
the extent that the enforceability thereof may be limited by (i) bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding at equity or in law).
(e) Designation as Approved Company. The Authority has heretofore
designated, and does hereby designate, the Company as an "Approved Company"
under the Act.
(f) Fulfillment of Purposes of Act. The Authority has determined that
the issuance of the Bonds, the loan of the proceeds from the sale of the Bonds
to the Company and the acquisition, construction, equipping and installation of
the Project will fulfill the purposes of the Act.
Section 2.2 Representations and Warranties by the Company. The Company
makes the following representations and warranties as the basis for the
undertakings on its part herein contained:
(a) Organization and Qualification of Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Alabama. The Company has the power and authority to own its
properties and assets and to carry on its business as now being conducted and is
duly qualified to do business and is in good standing in the State of Alabama
and in every jurisdiction in addition to the State of Alabama wherein the
failure so to qualify and to maintain its standing would have a material adverse
effect on its business. The Company has all requisite power to enter into this
Loan Agreement and to consummate the transactions contemplated hereby,
including, without limitation, the execution, delivery and performance of each
of the Basic Agreements to which it is a party.
(b) Authorization and Validity of the Basic Agreements. The Company
has, by all necessary corporate action, duly authorized the execution, delivery
and performance of each of the Basic Agreements to which it is a party. When
duly executed and delivered by the respective parties thereto, each of the Basic
Agreements will constitute legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, except to the extent that
enforceability may be limited by (i) bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at equity or in law).
(c) Burdensome and Conflicting Agreements and Charter Provisions. The
Company is not subject to any charter or other restriction or to any judgment,
order, rule or regulation of any court or government body which materially and
adversely affects, or in the future may (so far as the Company can now foresee)
materially and adversely affect, the business, prospects, operations,
properties, assets or condition (financial or otherwise) of the Company, nor is
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it a party to any instrument or agreement which in its reasonable
business judgment materially and adversely affects, or in the future may (so far
as the Company can now foresee) materially and adversely affect, the business,
prospects, operations, properties, assets or condition (financial or otherwise)
of the Company. Neither the execution and delivery of any of the Basic
Agreements to which the Company is a party, nor the offering, sale and issuance
of any of the Bonds, nor the consummation of the transactions herein or therein
contemplated, nor the fulfillment of or compliance with the terms and provisions
hereof or thereof conflicts with, or results in a breach of, or constitutes a
default under, or results in or requires the creation of any lien (other than
that created by the Bank Mortgage or by any other security agreements or
comparable instruments delivered to the Bank in connection with the issuance of
the Letter of Credit) in respect of any properties or assets of the Company
pursuant to, or requires any authorization, consent, approval, exemption or
other action by, or any notice to, or registration, qualification or filing
with, or any other action with respect to, any court, governmental body or any
other Person (other than those already obtained, taken or made, and other than
as contemplated by the Basic Agreements) pursuant to the terms, conditions or
provisions of any applicable law (including any securities or Blue Sky law),
rule, regulation, charter, bylaw, agreement, instrument, judgment or order by
which the Company is bound or to which the Company or any of its properties is
subject.
(d) Governmental Consents. Neither the nature of the business or
property of the Company, nor any relationship between the Company and any other
Person nor any circumstance in connection with the offering, sale, issuance or
delivery of any of the Bonds is such as to require on the part of the Company
any consent, approval, permit, exemption, action, order or authorization of, or
filing, registration or qualification with, or with respect to, any court, regu-
latory agency or other governmental body in connection with the execution and
delivery of this Loan Agreement or the offering, sale, issuance or delivery of
any of the Bonds (other than those already obtained, taken or made and which
continue in full force and effect).
(e) Litigation. There is no action, suit, inquiry, investigation or
proceeding pending or overtly threatened against or affecting the Company at law
or in equity or before or by any court or governmental body (nor, to the best
knowledge and belief of the Company, is there any basis therefor) which might
result in any material adverse change in the business, prospects, operations,
properties or assets or in the financial condition of the Company, or which
might ma- terially and adversely affect the transactions contemplated by this
Loan Agreement, or which might impair the ability of the Company to comply with
its obligations hereunder.
(f) No Defaults. No event has occurred and no condition exists which,
upon the issuance of any of the Bonds, would constitute an Event of Default or
which would become such an Event of Default with the passage of time or with the
giving of notice or both. To the best of the knowledge of the Company, no event
has occurred and no condition exists which would constitute an "Event of
Default" under the Indenture, as "Event of Default" is therein defined, or which
would become such an "Event of Default" with the passage of time or with the
giving of notice or both. The Company is not in default in any respect under any
agreement or other instrument to which it is a party or by which it is bound, or
any judgment, order, rule or regulation of any court or other governmental body
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applicable to it, to the extent in any such case that the default in question
would materially and adversely affect the transactions contemplated by this Loan
Agreement or would impair the ability of the Company to comply with its obliga-
tions hereunder. The Company is not in default in the payment of the principal
of or the interest on any of its indebtedness and is not in default under any
instrument or agreement under and subject to which any of such indebtedness has
been incurred, and no event has occurred or is continuing under the provisions
of any such instrument or agreement which constitutes or will constitute an
event of default thereunder.
(g) Licenses, Permits, Etc. In the event that the Company is required
to obtain any licenses, permits or other approvals in connection with the
acquisition, construction, installation and operation of the Project, such
licenses, permits or other approvals will be duly obtained not later than the
time required.
(h) Project's Compliance with Statutes and Regulations. To the best of
the knowledge and judgment of the Company, the operation of the Project for the
purpose for which it was designed and acquired will not conflict with any
zoning, planning or similar regulations applicable thereto and will comply in
all material respects with all applicable statutes, regulations, orders and
restrictions.
(i) Full Disclosure. Neither any information furnished by the Company
to the Placement Agents in connection with the sale and issuance of the Bonds
and the other transactions contemplated by this Loan Agreement, nor the
representations and warranties made by the Company in this Loan Agreement or in
any document in writing furnished by the Company to the Placement Agents in
connection with the transactions contemplated hereby, contain (except to the
extent, as to any such representation or warranty not made in this Loan
Agreement or in a document required to be furnished pursuant to this Loan
Agreement, corrected in any other written communication subsequently furnished
by the Company to the Placement Agents prior to the execution and delivery of
this Loan Agreement) any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein, in light of
the cir- cumstances in which they were made, not misleading at the times they
were made. There is no fact known to the Company or which in the exercise of
reasonable diligence should have been known to the Company which the Company has
not disclosed to the Placement Agents in writing prior to the execution and
delivery of this Loan Agreement which materially adversely affects or, so far as
the Company can now in the exercise of its reasonable business judgment foresee,
will materially adversely affect the Project, the financial condition of the
Company or the ability of the Company to perform its obligations hereunder or
under any agreement contemplated hereby.
(j) Date of Acquisition of Project. None of the property which
constitutes part of the Project and the costs of which are to be paid, directly
or indirectly, with proceeds of the Bonds was acquired by the Company prior to
the effective date of the Preliminary Agreement, nor did the Company enter into
any binding commitment for the acquisition of any such property prior to such
date.
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(k) Nature and Location of Project. The Project will constitute a
"project" within the meaning of the Act, as now existing. As of the delivery of
this Loan Agreement, the Project is located wholly within Calhoun County,
Alabama.
(l) Eligibility Under the Act. The Company makes the following
representations and warranties regarding the eligibility of the Project for
financing under the Act:
(1) The Company will operate the Project as a trade or business
described in SIC Code No. 3221.
(2) Either (A) the average hourly wage for full-time hourly paid
employees at the Project will be at least $8.00 per hour or (B) the
average total compensation (including benefits) for full-time paid
employees at the Project will be at least equivalent to $10.00 per
hour.
(3) The Company expects and agrees to invest not less than
$11,000,000 in the Project on or before January 1, 1996.
(4) The Company expects and agrees to employ at least 50 full-time
new employees at the Project within 18 months after the date that the
Project is placed in serviced. For purposes of this paragraph, the
Company will subtract from the number of new employees employed at the
Project the total number of employees who have been laid off by the
Company in Alabama during the two years preceding the date of delivery
of this Loan Agreement. The term "new employees" includes only those
individuals (A) who have not been previously employed by the Company in
Alabama; (B) will be employed at the Project; and (C) will be subject
to the personal income tax imposed by Section 40-18-2 of the Code of
Alabama (1975) upon commencement of employment at the Project.
(5) The amount of Job Development Fees (as defined in the Act)
assessed by the Company and withheld from the gross wages of its new
employees at the Project shall not exceed the amount permitted by the
Act and the rules and regulations of the Authority in existence on the
date of delivery of this Loan Agreement.
(6) The Company has complied and will comply with all of the
provisions of the Act and the Authority's rules and regulations applic-
able to the Company.
The sole remedy for the failure of the Company to comply with the covenants
stated in this Section 2.2(l) shall be under Section 41-10-44.8 of the Code of
Alabama (1975). Such failure of the Company shall not constitute a default
under Section 7.1 hereof.
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ARTICLE III
ISSUANCE OF THE BONDS;
LOAN OF PROCEEDS TO THE COMPANY
Section 3.1 Agreement to Issue the Bonds. Simultaneously with the
delivery of this Loan Agreement, the Company will execute and deliver the
Company Note to the Authority, will execute and deliver the Reimbursement
Agreement to the Bank and will cause the Bank to execute and deliver the Letter
of Credit to the Trustee. In order to finance a portion of the costs of
acquiring, constructing and installing the Project, the Authority will,
simultaneously with the delivery of this Loan Agreement, issue and sell the
Bonds to the Placement Agents and, as security therefor, execute and deliver the
Indenture. Simultaneously with the lending of the proceeds of the Bonds to the
Company, the Company will pay the costs of issuing the Bonds and of obtaining
the Letter of Credit. All the terms and conditions of the Indenture (including,
without limitation, those relating to the amounts and maturity date or dates of
the principal of the Bonds, the interest rate or rates thereof and the
provisions for redemption thereof prior to their maturity) are hereby approved
by the Company, and to the extent that any provision of the Indenture is
relevant to the calculation of any amount which the Company is obligated to pay
pursuant to the Company Note or the Loan Agreement, or to the determination of
any other obligation of the Company under the Loan Agreement, the Company Note
or the Reimbursement Agreement, or to the determination of any obligation of the
Authority under the Loan Agreement, the Authority and the Company hereby agree
that such provision of the Indenture shall be deemed a part hereof as fully and
completely as if set out herein.
Section 3.2 Loan to the Company. Simultaneously with the issuance and
delivery of the Bonds to the Placement Agents and the delivery of the Basic
Agreements, all as provided in Section 3.1 hereof, the Authority will lend to
the Company the entire proceeds of the Bonds (exclusive of accrued interest
thereon, if any) by depositing such proceeds with the Trustee and causing the
Trustee to apply such proceeds as provided in Section 3.13 of the Indenture.
Moneys held in the Construction Fund may be disbursed by the Trustee to pay such
reasonable costs and expenses of issuance as the Company may direct by requests
complying with the provisions of Section 7.1 of the Indenture.
Section 3.3 No Warranty of Sufficiency of Loan. The Authority shall
have no obligation to pay any Project Development Costs or to lend the Company
any moneys for the payment of Project Development Costs other than the proceeds
of the Bonds. The Authority makes no warranty, either express or implied, that
the proceeds of the Bonds will be sufficient to provide for the payment of all
or any Project Development Costs which the Company may desire to pay out of the
Loan. The Company hereby covenants that it will pay out of its own funds
(including proceeds of the Council Bonds borrowed by the Company) any such
Project Development Costs in excess of the amount available for the payment
thereof from the Loan. If the Company shall pay from its own funds any portion
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portion of any Project Development Costs, it shall not be entitled to any reim-
bursement therefor (except from moneys in the Construction Fund) from the
Authority, the Trustee or the Holders of any of the Bonds, nor shall it be
entitled to any diminution or postponement of the payments due from the Company
under the Loan Agreement.
Section 3.4 Payment of the Loan. Simultaneously with the issuance of
the Bonds and the lending of the proceeds thereof to the Company, the Company
will evidence its indebtedness for the Loan by executing and delivering the
Company Note to the Authority. The Company Note shall
(a) be issued in a form registered as to both principal and
interest;
(b) be immediately pledged, assigned and delivered by the Auth-
ority to the Trustee and registered in the name of the Trustee;
(c) be nontransferable except as required to effect the assignment
thereof to the Trustee or any successor Trustee;
(d) be dated the date of the initial issuance of the Bonds;
(e) be issued in a principal amount equal to the aggregate princi-
pal amount of the Bonds and bear interest on the unpaid principal amount
thereof at the same rates as those borne by the principal of the Bonds,
which interest on the Company Note shall be payable on the same dates as
the interest payable with respect to the Bonds;
(f) mature or be subject to mandatory prepayment on the same
dates, on the same terms and in the same amounts as the principal of
the Bonds shall mature or be subject to mandatory redemption; and
(g) be subject to optional prepayment on the same dates and on the
same terms as the Bonds shall be subject to optional redemption.
The Company will repay the Loan, together with the interest thereon, in
accordance with the terms of the Company Note. Anything to the contrary
contained in the Loan Agreement or the Company Note notwithstanding, there shall
be credited against any payment due on the Company Note (including components of
principal and interest) any amount then held in the Bond Fund Primary Account to
the extent that such amount does not itself consist of prior payments due on the
Company Note and has not theretofore been credited against a previous payment
due on the Company Note; provided, however, that moneys held in the Bond Fund
Primary Account shall not be credited against any payment due on the Company
Note or any such other payment required by the Loan Agreement if such moneys (i)
are held therein for payment of matured but unpaid interest on or principal of
the Bonds, (ii) are held therein pursuant to instructions from
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the Company for the future payment or purchase of Bonds or (iii) are held
therein for the payment of unmatured Bonds if such Bonds are considered fully
paid pursuant to the provisions of Section 14.1 of the Indenture by reason of
the fact that such moneys are so held in the Bond Fund Primary Account. The
payment (whether at maturity, by acceleration or upon redemption) of any
principal of or interest on the Bonds pursuant to the provisions of the
Indenture shall constitute a payment or prepayment of the principal of or
interest on the Company Note in the same amount and at the same time,
irrespective of whether the moneys used to effect such payment with respect to
the Bonds constitute payments by the Company on the Company Note or are made
available from other sources provided in the Indenture, except for moneys drawn
under the Letter of Credit. So long as the Letter of Credit remains in effect,
any moneys payable by the Company under the Company Note will be applied for the
reimbursement to the Bank of the corresponding amounts drawn under the Letter of
Credit to provide for the payment of the principal of and the interest and
premium (if any) on the Bonds.
Anything to the contrary contained in the Loan Agreement or the Company
Note notwithstanding, if for any reason, after the payment by the Company of
such amounts as are required to be paid by it pursuant to the Company Note, the
moneys then held by and available to the Trustee for payment or redemption of
the principal of and the interest and premium (if any) on the Bonds are not
sufficient to pay, on the due or required redemption date thereof, the principal
maturing or required to be redeemed with respect to the Bonds plus the interest
and premium (if any) due with respect to the Bonds, the Company will promptly
pay to the Trustee (for the account of the Authority) such additional amounts,
as, when added to the aforesaid moneys held by and available to the Trustee,
will equal an amount sufficient to pay such principal, interest and premium (if
any).
Nothing herein contained shall be construed as imposing on the
Authority or on the Trustee any duty or responsibility of giving any notice to
the Company of the amount on deposit in any of the funds established under the
Indenture or of the amount of any credits against payments on the Company Note
available to the Company, as of any payment date with respect to the Company
Note, but the Authority will cause the Trustee to respond to any reasonable
requests that the Company may make for such information. Neither the Authority
nor the Trustee shall be obligated to give any prior notice to the Company of
the due date or amount of any payment on the Company Note; and failure to
receive any such prior notice, even if customarily given by the Authority or the
Trustee, shall not relieve the Company of its obligation to make such payment on
the Company Note when it is due and payable.
If any payment on the Company Note or any other payment required by the
Loan Agree- ment to provide for the payment of the principal of or the interest
and premium (if any) on the Bonds is not paid on or before the Interest Payment
Date on which such payment is due, then such overdue amount shall bear interest
from such Interest Payment Date until paid at the rate of interest per annum
borne by the principal of the Bonds or the highest non-usurious per annum rate
of interest then permitted by applicable law, whichever of the foregoing rates
of interest is the lesser.
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In addition to payments with respect to the Loan and the Company Note,
the Company will also pay (i) the annual fee of the Trustee for the ordinary
services by it and the Trustee's ordinary expenses incurred under the Indenture
(including the fees and expenses of the Trustee's agents and counsel), (ii) the
reasonable fees and charges of the Trustee as registrar, transfer agent and
paying agent with respect to the Bonds, as well as the fees and charges of any
other paying agent with respect to the Bonds who shall act as such agent in
accordance with the provisions of the Indenture, (iii) the reasonable fees and
expenses of the Authority and the Trustee in connection with any registration,
transfer or exchange of any of the Bonds if the Authority and the Trustee are
not permitted by Section 5.4 of the Indenture to charge the holder of such Bonds
for such fees and expenses, and (iv) the reasonable fees, charges and expenses
of the Trustee for necessary extraordinary services rendered by it and necessary
extraordinary expenses incurred by it under the Indenture. All such fees,
charges and expenses shall be paid directly to the Trustee, for its own account
upon presentation of its statements therefor.
In addition to payments with respect to the Loan and the Company Note
and the aforesaid payments to the Trustee, the Company will also pay (i) to the
Bank such fees and expenses as it shall be required to pay from time to time in
accordance with the Reimbursement Agreement and (ii) to the Trustee such amounts
as may be needed to pay the purchase price of any Bonds to be purchased pursuant
to Section 3.5 or 3.6 of the Indenture, on the date or dates on which any such
Bonds are due to be purchased pursuant to either of said sections, but only to
the extent that Eligible Remarketing Proceeds (as defined in the Indenture) or
moneys drawn under the Letter of Credit, or a combination thereof, are not
available for the payment of such purchase price.
Section 3.5 Expenses of the Authority. In addition to all payments
required by Section 3.4 hereof, the Company will also pay the reasonable and
necessary expenses, not otherwise provided for, which may be incurred by the
Authority, or for which the Authority may in any way become liable, as a result
of issuing any of the Bonds, making the Loan to the Company, or being a party to
the Loan Agreement or the Indenture; provided, however, that for so long as no
Event of Default shall have occurred and be continuing, the Company's liability
under this section shall not include expenses voluntarily incurred by the
Authority without prior request or approval by the Company, unless such expenses
are necessary to enable the Authority to perform its obligations under the Loan
Agreement and the Indenture.
Section 3.6 Obligations of the Company Unconditional. The obligation of
the Company to make all payments due on the Company Note, to make all other
payments provided for in the Loan Agreement and to perform and observe the other
agreements and covenants on its part contained in the Loan Agreement shall be
absolute and unconditional, irrespective of any rights of set-off, recoupment or
counterclaim it might otherwise have against the Authority. The Company will not
suspend, discontinue, reduce or defer any such payment or fail to perform and
observe any of its other agreements and covenants contained herein or (except as
expressly authorized herein) terminate the Loan Agreement for any cause,
including, without limitation, any acts
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or circumstances that may deprive the Company of the use and enjoyment of the
Project, failure of consideration or commercial frustration of purpose, any
damage to or destruction of the Project or any part thereof, any change in the
tax or other laws of the United States of America, the State of Alabama or any
political or taxing subdivision of either thereof, the outcome of any pending or
future legal or regulatory proceedings or legislative action, or any failure of
the Authority to perform and observe any agreement or covenant, whether express
or implied, or any duty, liability or obligation arising out of or connected
with the Loan Agreement.
Nothing contained in this section shall be construed to prevent the
Company at its own cost and expense and in its own name or in the name of the
Authority, from prosecuting or defending any action or proceeding or taking any
other action involving third persons which the Company deems reasonably
necessary in order to secure or protect its rights hereunder, and in such event
the Authority will cooperate fully with the Company in any such action or
proceeding. Further, nothing contained in this section shall be construed to
release the Authority from the performance of any of the agreements on its part
herein contained or to preclude the Company from instituting such action against
the Authority as the Company may deem necessary to compel such performance, it
being understood and agreed, however, that no such action on the part of the
Company shall in any way affect the agreements on the part of the Company
contained in the first paragraph of this section or in any way relieve the
Company from performing any such agreements.
Section 3.7 Assignment of Loan Agreement and Company Note by the
Authority. It is understood and agreed that the Authority will assign its right,
title and interest in and to the Loan Agreement (other than the right to require
the Company to pay certain expenses incurred by the Authority as provided in
Sections 3.5 and 7.3 hereof and the indemnification rights contained in Section
6.3 hereof) and the Company Note and will pledge any moneys received under the
Company Note and the Loan Agreement, together with the rights to receive the
same, to the Trustee as security for payment of the principal of and the
interest and premium (if any) on the Bonds, but no such assignment or pledge
shall in any way relieve the Authority from the performance and observance of
the agreements and covenants on its part herein contained. It is further
understood and agreed that in the Indenture the Authority will obligate itself
to follow the instructions of the Bank or the Trustee or the holders of the
Bonds or a certain percentage thereof in the election or pursuit of any remedies
herein vested in it. Upon the assignment and pledge to the Trustee of the
Authority's right, title and interest in and to the Company Note and the Loan
Agreement, the Trustee shall have all rights and remedies therein and herein
accorded the Authority (other than the aforesaid expense payment and
indemnification rights) and any reference therein or herein to the Authority
(except as stated above) shall be deemed, with the necessary changes in detail,
to include the Trustee; and the Trustee, the Bank and the holders of the Bonds
shall be deemed to be third party beneficiaries of the covenants and agreements
on the part of the Company contained in the Company Note and the Loan Agreement
(other than those covenants and agreements respecting payment of the Authority's
expenses contained in Sections 3.5 and 7.3 hereof and those agreements and
covenants respecting indemnification of the Authority contained in Section 6.3
hereof) and shall, to the extent contemplated by the Indenture, be entitled to
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enforce performance and observance of the agreements and covenants on the part
of the Company contained therein and herein to the same extent as if they were
parties to all such instruments. Subsequent to the issuance of the Bonds, the
Authority and the Company shall have no power to modify, alter, amend, release
or terminate the Company Note or the Loan Agreement without the prior written
consent of the Trustee and then only as provided in the Indenture. The Authority
will not, so long as no Event of Default shall have occurred and be continuing,
amend the Indenture or any indenture supplemental thereto without the prior
written consent of the Company.
Without the prior written consent of the Company and the Bank, the
Authority will not hereafter issue any bonds, notes or other securities
(including refunding securities), other than the Bonds, that are payable out of
or secured by a pledge of any moneys payable by the Com- pany under the Company
Note or the Loan Agreement. Further, the Authority, subject to the provisions of
Section 9.4 of the Indenture, will preserve its corporate existence and will not
dis- solve or do anything that will result in the termination of its corporate
existence.
Section 3.8 Assignment of the Loan Agreement by the Company. The
Company will not assign its rights under the Loan Agreement without the prior
written consent of the Authority and the Trustee, which consent shall not be
unreasonably withheld; provided, however, that no such assignment nor any
dealing or transactions between the Authority or the Trustee and any assignee
shall in any way relieve the Company from primary liability for any of its
obliga- tions under the Loan Agreement and the Company Note. The Company will,
promptly following the delivery of any such assignment, furnish to the Authority
and to the Trustee fully executed or appropriately certified copies thereof.
Section 3.9 Bonds are Limited Obligations. The Bonds shall be limited
obligations of the Authority and shall be payable solely from the payments made
by the Company under the Loan Agreement and the Company Note and the moneys
drawn by the Trustee or the Tender Agent under the Letter of Credit. The Bonds
shall never be paid out of any other funds of the Authority except such
revenues.
Section 3.10 No Warranty of Project or Facilities. The Company
recognizes that the plans and specifications for the Project will be furnished,
prepared, revised or implemented substantially to its requirements; therefore,
THE AUTHORITY MAKES NO EXPRESS OR IMPLIED WARRANTY OF ANY KIND WHATSOEVER WITH
RESPECT TO THE PROJECT OR ANY ONE OR MORE OF THE FACILITIES, INCLUDING, BUT NOT
LIMITED TO: THE MERCHANTABILITY THEREOF OR THE FITNESS THEREOF FOR ANY PAR-
TICULAR PURPOSES; THE DESIGN OR CONDITION THEREOF; THE WORKMANSHIP, QUALITY OR
CAPACITY THEREOF; COMPLIANCE THEREOF WITH THE REQUIREMENTS OF ANY LAW, RULE,
SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT INFRINGEMENT; LATENT
DEFECTS; OR THAT THE PROCEEDS DERIVED FROM THE SALE OF THE BONDS WILL BE
SUFFICIENT TO PAY IN FULL FOR SAME.
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ARTICLE IV
PROVISIONS CONCERNING MAINTENANCE,
INSURANCE AND TAXES
Section 4.1 Maintenance of the Project. The Company will, at its own
expense, keep the Project in reasonably safe condition and keep all buildings,
equipment and other facilities at any time forming part of the Project habitable
and in good repair and operating condition (reasonable wear and tear excepted),
making from time to time all necessary and proper repairs thereto (including,
without limitation, exterior and structural repairs).
The Company will not permit any mechanics' or other liens to stand
against the Project for labor, materials, equipment or supplies furnished in
connection with any additions, alterations, improvements, modifications, repairs
or renewals that may be made to the Project. The Company may, however, at its
own expense and in good faith, contest any such mechanics' or other liens and,
in the event of any such contest, may, if it so notifies the Trustee, permit any
such liens to remain unsatisfied and undischarged during the period of such
contest and any appeal therefrom unless the Trustee notifies the Company that,
in the opinion of Independent Counsel, such action by the Company will cause any
part of the Project to be subject to a material risk of loss or forfeiture, in
which case such mechanics' or other liens shall (unless they are bonded or
superseded in a manner satisfactory to the Trustee) be promptly satisfied.
Section 4.2 Prohibition Against Sale of Project; Protection Against
Encumbrances. Except as permitted by the provisions of the Bank Mortgage, the
Company will not sell, lease, transfer or otherwise dispose of all or any part
of the Project, either in a single transaction or in a series of related
transactions.
The Company will not create, or knowingly suffer to exist, any liens or
encumbrances on the Project other than Permitted Encumbrances, and, subject to
the provisions of the succeeding paragraph respecting contest rights, it will
duly pay and discharge, or cause to be paid and discharged, as the same
respectively become due,
(a) all claims or judgments giving rise to a lien on the Project
which, if not paid, would not constitute a Permitted Encumbrance,
(b) all taxes and governmental charges of any kind whatsoever
that may lawfully be assessed or levied against or with respect to the
Project, including, without limitation, any taxes levied upon or with
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respect to any moneys payable to or for the account of the Authority
under the Company Note or the Loan Agreement, which, if not paid, would
become a lien on the Project that would not constitute a Permitted
Encumbrance, and
(c) all assessments and charges lawfully made by any governmental
body for public improvements that may be secured by a lien on the
Project; provided that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a
period of years, the Company shall be obligated to pay only such
installments as are required to be paid during any period while the
Loan Agreement shall be in effect.
The Company may, at its own expense, in good faith contest any such
claims, judgments, taxes, assessments and other charges and, in the event of any
such contest, may, if it so notifies the Authority and the Trustee, permit such
claims, judgments, taxes, assessments or other charges so contested to remain
unpaid during the period of such contest and any appeal therefrom, unless the
Trustee notifies the Company that, in the opinion of Independent Counsel, such
action by the Company will cause the Project or any part thereof to become
subject to a material risk of loss or forfeiture, or will cause any moneys
payable to or for the account of the Authority under the Company Note or the
Loan Agreement to become subject to a lien or charge thereon prior to or on a
parity with the pledge and assignment thereof made in the Indenture, in which
case such claims, judgments, taxes, assessments or charges shall (unless they
are bonded or are superseded in a manner satisfactory to the Trustee) be paid
prior to their becoming delinquent. The Authority will cooperate fully with the
Company in any such contest.
Section 4.3 Insurance Required. The Company will take out not later
than the effective date of the Loan Agreement and thereafter continuously
maintain in effect or cause to be so taken out and maintained in effect the
following insurance:
(a) insurance against loss or damage to all of the improvements
and items of personal property that constitute part of the Project by
fire, lightning, vandalism and malicious mischief, with uniform
standard extended coverage endorsement limited only as may be provided
in the standard form of extended coverage endorsement at the time in
use in the State of Alabama, to such extent as is necessary to provide
(i) for full payment of the costs of repairing, restoring or replacing
the property damaged or destroyed or, if insurance to such extent is
not available, to the extent of the full insurable value (as determined
by a recognized insurer) of such improvements and personal property or
(ii) for the recovery of such lesser amount as may be required for the
full payment of the Indenture Indebtedness then outstanding; and
(b) comprehensive general liability insurance against liability
for personal or bodily injury to or death of persons and for damage to
or loss of property occurring on or about the Project or in any way
related to the use or occupancy of the Project in the minimum amounts
of $1,000,000 per person per occurrence and $2,000,000 aggregate per
occurrence.
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All policies providing the insurance required by this section shall be
taken out and maintained in generally recognized responsible insurance
companies, qualified under the laws of the State of Alabama to assume the
respective risks undertaken. All such policies may be written with deductible
amounts comparable to those on similar policies carried by organizations owning
or occupying similar properties. All policies providing the insurance required
to be carried by this section shall be deposited with the Trustee, provided,
however, in lieu thereof the Company may deposit with the Trustee a certificate
or certificates of the respective insurers attesting the fact that such
insurance is in force and effect. At least thirty (30) days prior to the
expiration date of any such policy, the Company will furnish to the Trustee
evidence reasonably satisfactory to the Trustee that such policy has been
renewed or replaced by another policy or that there is no necessity therefor
under the Loan Agreement. Anything herein to the contrary notwithstanding, any
insurance required by the provisions hereof may be evidenced by a blanket policy
covering risks in addition to those hereby required to be covered, but if and
only if appropriate allocation certificates and loss payable endorsements are
furnished to the Trustee.
Section 4.4 Performance by the Authority or Trustee of Certain Company
Obliga- tions; Reimbursement of Expenses. In the event the Company fails to take
out or maintain the full insurance coverage required by the Loan Agreement, or
fails to pay, in accordance with the provisions of Section 4.2 hereof, any
indebtedness, obligation, tax, assessment, charge, levy or claim which it is
obligated to pay under the provisions of said Section 4.2, or fails to keep
those parts of the Project requiring maintenance in good repair, or fails to
satisfy any other provision of the Loan Agreement, the Authority or the Trustee,
after first notifying the Company in writing of any such failure on its part and
after the subsequent failure by the Company to perform the obligation with
respect to which it is delinquent within thirty (30) days of the date of
delivery of such notice, may (but shall not be obligated to) perform any such
obligation on behalf of the Company. Any expense incurred by the Authority or
the Trustee in performing any of such obligations of the Company shall become an
additional obligation of the Company hereunder and shall be repaid by the
Company, together with interest thereon, from the date such expense was actually
paid by the Authority or the Trustee, as the case may be, until the date of its
repayment by the Company, at a per annum rate equal to two percent (2%) above
the prime lending rate of the Trustee from time to time in effect until such
amount is repaid or at the maximum applicable non-usurious per annum rate of
interest then permitted by the laws of the State of Alabama, whichever of the
foregoing rates of interest is the lesser. Any remedy vested in the Authority or
the Trustee by the Loan Agreement or the Indenture for the collection of
payments on the Loan shall also be available to the Authority or the Trustee for
the collection of all expenses so paid by the Authority or the Trustee in
performing any of such obligations of the Company.
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ARTICLE V
PROVISIONS RESPECTING DAMAGE,
DESTRUCTION AND CONDEMNATION
Section 5.1 Damage and Destruction Provisions. If the Project is
destroyed, in whole or in part, or is damaged, by fire or other casualty, all
obligations of the Company and the Authority under the Loan Agreement and the
Company Note shall continue in full force and effect. The Company will promptly
notify the Authority and the Trustee of such damage or destruction, and all Net
Insurance Proceeds referable to such damage or destruction, whether or not
initially recovered by the Authority or the Company, shall be paid to and held
by the Trustee in a separate trust account until applied in accordance with the
provisions hereof. Pursuant to directions to be given to the Trustee by the
Company in a written certificate which shall be delivered to the Trustee not
more than ninety (90) days following the event causing such damage or
destruction, the Net Insurance Proceeds referable to such damage or destruction
and held by the Trustee shall be applied by the Trustee for one or both of the
following purposes:
(a) payment of the costs of repairing, replacing or restoring the
property damaged or destroyed to the extent necessary for it to have
substantially the same functional value that it had (or would have had
if the Company had theretofore complied with all of its obligations
hereunder) prior to the event causing such damage or destruction, with
such changes, alterations or modifications as shall be specified by the
Company; or
(b) the redemption of Bonds prior to maturity in accordance with
the terms of the Indenture and on the earliest practicable date per-
mitted thereby (or, prior to the termination of the Letter of Credit,
the reimbursement of the Bank for moneys advanced under the Letter of
Credit to redeem Bonds), or the purchase of Bonds for retirement, in
which case such portion of the Net Insurance Proceeds to be used there-
for shall be deposited in the Redemption Fund, provided that no part of
any such portion of the Net Insurance Proceeds shall be so deposited in
the Redemption Fund and so applied for any such purpose unless the Bank
shall consent in writing to such deposit and application.
In the event that the Bank does not consent to the redemption of Bonds as
required by the provisions of subparagraph (b) of this paragraph, then the Net
Insurance Proceeds shall be applied in accordance with the provisions of
subparagraph (a) of this paragraph.
In the event that the Net Insurance Proceeds held by the Trustee (or
any specified portion thereof) are to be applied for payment of the costs of
repairing, replacing or restoring the property damaged or destroyed, a special
construction fund shall be established with the Trustee and such proceeds (or
specified portion thereof) shall be deposited therein, and the Trustee will
provide for such proceeds (or specified portion thereof) to be disbursed as
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needed for the payment of such costs pursuant to procedures comparable to those
provided in Section 7.1 of the Indenture for the disbursement of moneys from the
Construction Fund. Any balance of the Net Insurance Proceeds (or any balance of
the portion thereof specified for the payment of such costs) remaining after the
payment of all such costs shall be paid into the Redemption Fund. In the event
that the Net Insurance Proceeds (or the portion thereof specified for the
payment of such costs) are not sufficient to pay in full the costs of such
repair, replacement or restoration, the Company will nonetheless complete the
work thereof and will pay that portion of the costs thereof in excess of the Net
Insurance Proceeds (or specified portion thereof) available for the payment of
such costs.
All property acquired in connection with the repair, replacement or
restoration of any part of the Project pursuant to the provisions of this
section shall be and become part of the Project for purposes of the Loan
Agreement and the Indenture and shall be held by the Company on the same terms
and conditions as the property originally constituting the Project.
Section 5.2 Condemnation Provisions. If title to the Project or any
part thereof is taken under the exercise of the power of Eminent Domain, all
obligations of the Company under the Loan Agreement and the Company Note shall
continue in full force and effect and the entire condemnation award in respect
of such taking shall be paid to the Trustee, whereupon such award shall be
applied and certain related actions shall be taken in accordance with the
succeeding provisions of this section:
(1) If none of the improvements constituting part of the Project
are taken or damaged and if in the Company's opinion, expressed in a
written certificate delivered to the Authority and the Trustee, such
taking does not significantly impair the utility of the Project or
interfere with ingress and egress to and from the Project, the Net
Condemnation Award in respect of the part of the Project so taken shall
be paid into the Redemption Fund.
(2) If any of the improvements constituting part of the Project
are taken or damaged, or if in the Company's opinion, expressed in a
written certificate delivered to the Authority and the Trustee, such
taking significantly impairs the utility of the Project, the Net Con-
demnation Award in respect of such taking shall be applied in one or
more of the following ways as directed by the Company with the approval
of the Bank:
(I) payment of the costs of making such repairs, replacements,
modifications and rearrangements with respect to the remainder of
the Project (i.e., the portion thereof not taken but damaged or
adversely affected by such taking) as shall be deemed necessary or
desirable by the Company;
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(II) payment of the costs of purchasing such additional land
and of acquiring (by construction or otherwise) such additional
buildings, equipment and other facilities as the Company may deem
necessary or desirable in connection with the use and occupancy of
the Project; provided that such additional land, buildings, equip-
ment and other facilities (i) shall be acquired by the Company free
of liens and encumbrances other than Permitted Encumbrances and (ii)
shall be deemed a part of the Project to the same extent as if such
land, buildings, equipment and other facilities had originally con-
stituted part of the Project; or
(III) the redemption of Bonds prior to maturity in accordance
with the terms of the Indenture and on the earliest practicable date
permitted thereby (or, prior to the termination of the Letter of
Credit, the reimbursement of the Bank for moneys advanced under the
Letter of Credit to redeem Bonds), or the purchase of Bonds for re-
tirement, in which case such portion of the Net Condemnation Award
to be used for such purpose shall be deposited in the Redemption
Fund.
Within ninety (90) days following such taking, the Company will furnish
to the Trustee a written certificate directing the application of the
Net Condemnation Award for one or more of the foregoing purposes.
In the event that the Net Condemnation Award held by the Trustee (or
any specified portion thereof) is to be applied, pursuant to the provisions of
subparagraph (I) or (II) of subsection (2) of this section, for payment of the
costs of repairing, restoring, modifying, relocating or rearranging any part of
the Project or for payment of the costs of acquiring additional property to
become part of the Project, as the case may be, a special trust fund shall be
established with the Trustee and such award (or specified portion thereof) shall
be deposited therein, and the Trustee will provide for such award (or specified
portion thereof) to be disbursed as needed for the payment of such costs
pursuant to procedures comparable to those provided in Section 7.1 of the
Indenture for the disbursement of moneys from the Construction Fund. Any balance
of the Net Condemnation Award (or any balance of the portion thereof specified
for the payment of such costs) remaining after payment of all such costs shall
be paid into the Redemption Fund. In the event that the Net Condemnation Award
(or the portion thereof specified for the payment of such costs) is not
sufficient to pay in full the costs of such repair, restoration, modification,
relocation or rearrangement, or the costs of acquiring such additional property,
as the case may be, the Company will nonetheless complete such repair,
restoration, modification, relocation or rearrangement, or the acquisition of
such additional property, as the case may be, and will pay that portion of the
costs thereof in excess of the amount of the Net Condemnation Award (or
specified portion thereof) available for the payment of such costs.
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Section 5.3 Condemnation of Right to Use of the Project for Limited
Period. If the use, for a limited period, of all or part of the Project is taken
under the exercise of the power of Eminent Domain, all obligations of the
parties hereto (including, without limitation, the payment by the Company of all
amounts due on the Company Note) shall continue in full force and effect. The
Company shall be entitled to receive the entire condemnation award referable to
such taking, whether by way of damages, rent or otherwise.
Section 5.4 Cooperation of the Authority in the Conduct of Condemnation
Proceed- ings. The Authority will cooperate fully with the Company in the
handling and conduct of any prospective or pending condemnation proceeding with
respect to the Project or any part thereof and will follow all reasonable
directions given to it by the Company in connection with such proceeding.
Section 5.5 Relationship to Reimbursement Agreement and Bank Mortgage.
So long as the Letter of Credit remains in effect, to the extent that any
provision of the Reimbursement Agreement or the Bank Mortgage is inconsistent
with any provision of Article IV or V of this Loan Agreement, such provision of
the Reimbursement Agreement or the Bank Mortgage shall govern and control.
ARTICLE VI
SPECIAL COVENANTS OF THE COMPANY
Section 6.1 General. Until all Indenture Indebtedness shall have been
paid in full, the Company will faithfully perform and comply with all applicable
covenants and agreements con- tained in this Loan Agreement.
Section 6.2 Performance by the Authority, the Bank or the Trustee of
Certain Company Obligations; Reimbursement of Expenses. In the event the Company
fails to pay any indebtedness or other obligation which it has herein covenanted
to pay, the Authority, the Bank or the Trustee, after first notifying the
Company in writing of any such failure on its part and after the subsequent
failure by the Company to perform the obligation with respect to which it is
delinquent within thirty (30) days of the date of its receipt of such notice,
may (but shall not be obligated to) perform any such obligation on behalf of the
Company. Any expense incurred by the Authority, the Bank or the Trustee in
performing any of such obligations of the Company shall become an additional
obligation of the Company secured by the Indenture and shall be repaid by the
Company, together with interest thereon, from the date such expense was actually
paid by the Authority, the Bank or the Trustee, as the case may be, until the
date of its repayment by the Company, at a per annum rate equal to two percent
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(2%) above the Prime Rate from time to time in effect until such amount is
repaid or at the maximum applicable non-usurious per annum rate of interest then
permitted by law, whichever of the foregoing rates of interest is the lesser.
Any remedy vested in the Authority or the Trustee by the Loan Agreement for the
collection of payments on the Loan shall also be available to the Authority or
the Trustee for the collection of all expenses so paid by the Authority or the
Trustee in performing any of such obligations of the Company.
Section 6.3 Release and Indemnification Covenants. The Company releases
the Authority (and each director, officer, employee and agent thereof) and the
Trustee (and each director, officer, employee and agent thereof) from, and will
indemnify and hold the Authority (and each director, officer, employee and agent
thereof) and the Trustee (and each director, officer, employee and agent
thereof) harmless against, any and all claims and liabilities of any character
or nature whatsoever, regardless of by whom asserted or imposed, and losses of
every conceivable kind, character and nature whatsoever claimed by or on behalf
of any Person arising out of, resulting from, or in any way connected with the
Project; provided, however, that the Company shall not be obligated to indemnify
any director, officer, employee or agent of the Authority against any claim,
liability or loss in any way connected with the Project unless such claim,
liability or loss arises out of or results from action taken in the name and
behalf of the Authority by such director, officer, employee or agent. Without
limiting the generality of the foregoing, the Company will indemnify the Trustee
(and each director, officer, employee and agent thereof) for, and hold it
harmless against, any loss, liability or expense incurred without gross
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust established by the Indenture,
including the reasonable costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties under the Indenture.
The Company acknowledges that it has sought and received the assistance
and cooperation of the Authority in connection with the offering and sale of the
Bonds. The Company will indemnify, hold harmless and defend the Authority (and
each director, officer, employee or agent thereof) against
(a) any claim or liability whatsoever arising out of or based
upon any untrue or misleading statement or alleged untrue or misleading
statement of any material fact contained in the Offering Memorandum or
in any of the information furnished by the Company or the Placement
Agents to any prospective purchaser of the Bonds, or the omission or
alleged omission to state in the Offering Memorandum or in any such
information any material fact necessary to make the statements con-
tained therein not misleading in the light of the circumstances under
which such statements were made, and
(b) any claim or liability arising out of any action taken by the
Authority at the request of the Company (or any other Person authorized
to act on behalf of the Company) in connection with the offering and
sale of the Bonds.
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The Company will pay or reimburse all legal or other expenses
reasonably incurred by the Authority (and each director, officer, employee and
agent thereof), or the Trustee (and each director, officer, employee and agent
thereof), as the case may be, in connection with the investigation or defense of
any action or proceeding, whether or not resulting in liability, with respect to
any claim, liability or loss in respect of which indemnity may be sought against
the Company under the provisions of this section.
In the event that any action or proceeding is brought against any
indemnifiable party (whether the Authority, or any of the Authority's directors,
officers, employees or agents, or the Trustee or any of the Trustee's directors,
officers, employees or agents), in respect of which indemnity may be sought
against the Company under the provisions of this section, such indemnifiable
party shall, as a condition of the Company's liability under the provisions of
this section, be obligated to notify promptly the Company in writing of the
commencement of such action or proceeding and shall thereafter forward to the
Company a copy of every summons, complaint, pleading, motion or other process
received with respect to such action or proceeding; provided, however, that any
failure to so notify the Company shall not release the Company from its
obligations under this Section 6.3 unless the Company's ability to defend any
such action or proceeding is materially prejudiced by such failure. The Company
may (and, if so requested by such indemnifiable party, shall) at any time assume
the defense of such indemnifiable party in connection with any such action or
proceeding, and in such case the Company shall pay all expenses of such defense
and shall have full and complete control of the conduct on the part of such
party of any such action or proceeding, including, without limitation, the right
to settle or compromise any claim giving rise to such action or proceeding upon
such terms and conditions as the Company, in its sole discretion, shall
determine and the right to select Counsel for such party. The Authority (or any
director, officer, employee or agent thereof) or the Trustee (or any director,
officer, employee or agent thereof) shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Authority or the
Trustee, as the case may be, unless (i) the employment of such separate counsel
has been specifically authorized by the Company in writing prior to the
employment of such counsel, or (ii) the named parties to any such action
(including any impleaded parties) included both the Authority (or any director,
officer, employee or agent thereof) or the Trustee (or any director, officer,
employee or agent thereof) and the Company, and an indemnified party or parties
shall have been advised by counsel or shall have otherwise determined in good
faith that there may be one or more legal defenses available to it or them which
are different from or additional to those available to the Company and that
joint representation may be inappropriate under professional standards, in which
case the Company shall not have the right to assume the defense of such action
on behalf of the Authority (or any director, officer, employee or agent thereof)
or the Trustee (or any director, officer, employee or agent thereof), as the
case may be, it being understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for the Authority (including all
directors, officers, employees and agents thereof), and one separate firm of
attorneys for the Trustee (including all directors, officers, employees and
agents thereof), and any such firm shall be designated in writing by the
Authority and/or the Trustee, subject in each case to the approval of the
Company, which approval shall not be unreasonably withheld.
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Any other provision of this section to the contrary notwithstanding,
the Company shall not be obligated to indemnify any such indemnifiable party for
any liability resulting from the settlement of any action or proceeding if such
settlement was made without the Company's consent (unless such consent was
unreasonably withheld by the Company), irrespective of whether the Company had,
prior to such settlement, exercised its right to assume the defense of such in-
demnifiable party in connection with such action or proceeding. The Company
agrees that it will not unreasonably withhold its consent with respect to any
proposed settlement of any such action or proceeding.
Nothing contained in this section shall be construed to indemnify the
Authority, or any of the Authority's directors, officers, employees or agents,
against, or to release any of such parties from liability for, any claim,
liability or loss that may result from intentional or wanton misconduct on the
part of such parties, nor shall anything contained in this section be construed
to indemnify the Trustee against, or to release the Trustee from liability for,
any claim, liability or loss that may result from bad faith or gross negligence
on the part of the Trustee.
Anything to the contrary in this Loan Agreement notwithstanding, the
covenants of the Company contained in this section shall, with respect to any
claim, liability or loss for which the Company is obligated to provide
indemnity, remain in full force and effect after the termination of the Loan
Agreement until (i) any cause of action brought in respect of such claim,
liability or loss shall be barred by the applicable statute of limitation or
(ii) the payment in full or the satisfaction of such claim, liability or loss,
including all reasonable expenses incurred by the indemnifiable party or parties
in defending against such claim, liability or loss; provided, however, that in
the event any action or proceeding arguably barred by the applicable statute of
limitation is brought against any indemnifiable party hereunder, the Company
shall be obligated to defend such indemnifiable party with respect to such
action or proceeding, all to the end that the bar of the statute of limitation
may be asserted by the Company against the party bringing such action or
proceeding but may not be asserted by the Company against the indemnifiable
party in order to avoid performing any of its obligations under this section.
Section 6.4 Agreement to Maintain Corporate Existence. So long as any
of the Indenture Indebtedness shall be outstanding and unpaid, the Company will
maintain its corporate existence, will not dissolve or sell, lease, transfer or
otherwise dispose of all or substantially all its assets (either in a single
transaction or in a series of related transactions), and will not consolidate
with or merger into another corporation or permit one or more other corporations
to consolidate with or merge into it; provided that it may, without violating
the agreements contained in this section, consolidate with or merge into another
corporation, permit one or more other corporations to consolidate with or merge
into it, or sell, lease, transfer or otherwise dispose of all or substantially
all its assets to another corporation, but if and only if the following
conditions are met:
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(a) the corporation surviving or resulting from such consolida-
tion or merger (if it be one other than the Company) or the corporation
to which such sale, lease, transfer or other disposition shall be made,
as the case may be (the "Successor Corporation"), (i) expressly
assumes in writing all the obligations of the Company contained in the
Loan Agreement, with the same effect as if the Successor Corporation
had been named herein as a party hereto in lieu of the original
Company, (ii) furnishes to the Authority and the Trustee, promptly
following such consolidation or merger or such sale, lease, transfer
or other disposition, appropriately certified or fully executed
copies of the writing by which the Successor Corporation so assumes
such obligations and (iii) furnishes to the Authority and the Trustee
the opinions of one or more Counsel (who, although selected by the
Company, shall be reasonably satisfactory to the Trustee) which,
taken together, state in substance that the Successor Corporation is a
duly organized and existing corporation and has by such writing duly
and validly assumed, and is bound by, all the obligations of the
Company contained in the Loan Agreement;
(b) at the time of such consolidation or merger or such sale,
lease, transfer or other disposition and immediately upon giving
effect thereto, the Successor Corporation shall be a solvent
corporation;
(c) immediately after giving effect to such merger or consolida-
tion or such sale, lease, transfer or other disposition, no event
which constitutes an Event of Default, or which would become an
Event of Default with the passage of time or the giving of notice or
both, shall have occurred and be continuing; and
(d) there shall have been delivered to the Authority and to the
Trustee a certificate signed by the Chairman of the Board, the
President or any Vice President of the Company or the Successor
Corporation, as the case may be, and stating that such merger,
consolidation, sale, lease, transfer or other disposition complies
with the provisions of this section and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
Upon any merger or consolidation or any sale, lease, transfer or other
disposition complying with the provisions of this section, the Successor
Corporation shall succeed to, and be substituted for, the Company for all
purposes under the Loan Agreement with the same effect as if the Successor
Corporation had been named as the Company herein. If, after a sale or transfer
by the Company of all or substantially all its assets to another corporation
under the circumstances described in the preceding provisions of this section,
the Company does not thereafter dissolve, it shall not have any further rights
or obligations hereunder.
Section 6.5 Qualification in Alabama. So long as the Loan Agreement
shall be in effect, the Company will continuously remain qualified to do
business in the State of Alabama. If, in accordance with the permissive
provisions of Section 6.4 hereof, the Company should merge into a corporation
not organized and existing under the laws of the State of Alabama, should
consolidate with one or more corporations under circumstances wherein the
consolidated
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corporation is not a corporation organized and existing under the laws of the
State of Alabama or should transfer all or substantially all its assets to a
corporation not organized under the laws of the State of Alabama, it will cause
the corporation into which it merged, the corporation resulting from such
consolidation or the corporation to which all or substantially all its assets
are transferred, as the case may be, to qualify to do business in the State of
Alabama and to remain so qualified at all times while the Loan Agreement shall
be in effect.
Section 6.6 Notice of Adjudication of Invalidity. The Company will
promptly notify the Trustee, the Tender Agent, the Authority and the Bank in
writing of the occurrence of an Adjudication of Invalidity, provided that the
Company has knowledge thereof.
Section 6.7 Protection of Security. The Company will use its best
efforts to cause to be filed or recorded, or re-filed or re-recorded, any
instruments (including, without limitation, Uniform Commercial Code financing
statements) that are at the time necessary to preserve or protect any interest
of the Council or the Trustee in the Trust Estate. The Company will cause to
be delivered to the Trustee no less frequently than once every five years, an
opinion of Counsel stating either that all appropriate actions to so preserve
and protect the Trust Estate have been taken or that no such action is
necessary.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default Defined. The following shall be "Events
of Default" under the Loan Agreement, and the term "Event of Default" shall
mean, whenever it is used in the Loan Agreement, any one or more of the
following conditions or events:
(a) failure by the Company to pay in full on the due date thereof
(i) any principal of or interest on the Company Note or (ii) any other
amount due under the Loan Agreement which if not paid would cause a
default in the payment of any principal of or interest or premium (if
any) on the Bonds when and as the same shall be due and payable
(whether at maturity, upon redemption or otherwise);
(b) failure by the Company to pay any amount due the Trustee
under Section 9.5 of the Indenture for its reasonable fees, charges and
disbursements within thirty (30) days after written demand for such
payment by the Trustee, which demand shall not be made earlier than the
date on which such amount is due and payable;
31
<PAGE>
(c) failure by the Company to perform or observe any agreement or
covenant on its part contained in the Loan Agreement [other than the
covenants and agreements referred to in the preceding clauses (a) or
(b) of this section], which failure shall have continued for a period
of forty-five (45) days after written notice specifying, in reasonable
detail, the nature of such failure and requiring the Company to perform
or observe the agreement or covenant with respect to which it is
delinquent shall have been given to the Company by the Authority or the
Trustee, unless (i) the Authority and the Trustee shall agree in
writing to an exten- sion of such period prior to its expiration, or
(ii) during such forty-five (45) day period or any extension thereof,
the Company has commenced and is diligently pursuing appropriate
corrective action, or (iii) the Company is by reason of force majeure
at the time prevented from performing or observing the agreement or
covenant with respect to which it is delinquent;
(d) any warranty, representation or other statement by or on be-
half of the Company contained in the Loan Agreement or in any other
document furnished by the Company in connection with the issuance of
the Letter of Credit or the issuance and sale of any of the Bonds being
false or misleading in any material respect at the time made, but only
if the inaccuracy of such warranty, representation or other statement
is not remedied in a manner satisfactory to the Authority, the Trustee
and the Bank within five Business Days after the Company first receives
notice thereof; provided that the Authority and the Trustee may, with
the Bank's consent, grant to the Company an extension of said period of
five Business Days if during such period the Company has commenced and
is diligently pursuing appropriate corrective action;
(e) the receipt by the Trustee of written notice from the Bank
(i) stating that an Event of Default has occurred and is continuing
under the terms of the Reimbursement Agreement (as the term "Event of
Default" is defined and used in said agreement) and (ii) directing that
the Bonds be declared due and payable pursuant to Section 10.2 of the
Indenture;
(f) institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or consent by the Company to the filing of a
bankruptcy or insolvency proceeding against it, or the filing by the
Company of a petition or answer or consent seeking relief under the
United States Bankruptcy Code, as now constituted or as amended, or any
other applicable federal or state bankruptcy or other similar law, or
consent by the Company to the institution of proceedings thereunder or
to the filing of any such petition, or consent by the Company to the
appointment of, or the taking of possession of any of its property by,
a receiver, liquidator, trustee, custodian or assignee in bankruptcy or
insolvency for the Company or for all or a major part of its property,
or an assignment by the Company for the benefit of its creditors, or a
written admission by the Company of its inability to pay its debts
generally as they become due;
32
<PAGE>
(g) the entry of a decree or order by a court of competent
jurisdiction for relief in respect of the Company or adjudging the
Company to be a bankrupt or insolvent or approving as properly filed a
petition seeking the arrangement, adjustment or composition of the
obligations of the Company under the United States Bankruptcy Code, as
now constituted or as amended, or any other applicable federal or
state bankruptcy or other similar law, which decree or order shall have
continued undischarged or unstayed for a period of sixty (60) days, or
the entry of a decree or order of a court of competent jurisdiction for
the appointment of a receiver, liquidator, trustee, custodian or
assignee in bankruptcy or insolvency for the Company or for all or a
major part of its property, or for the winding up or liquidation of its
affairs, which decree or order shall have remained in force
undischarged or unstayed for a period of sixty (60) days; or
(h) the dissolution or liquidation of the Company under
circumstances other than those permitted by the provisions of Section
6.4 hereof in the case of the merger of the Company into another
corporation, the consolidation of the Company with another corporation
or the dissolution of the Company following a transfer of all or
substantially all its assets to another legal entity.
The term "force majeure" as used herein means acts of God or the public enemy,
strikes, lockouts, work slowdowns or stoppages or other labor disputes,
insurrections, riots or other civil disturbances, orders of the government of
the United States of America or of any state of the United States of America or
of any of the departments, agencies, political subdivisions or officials of the
United States of America or of any state thereof, or orders of any other civil
or military authority, or partial or entire failure of public utilities, or any
other condition or event beyond the reasonable control of the Company. The
Company will, to the extent that it may lawfully do so, use its best efforts to
remedy, alleviate or circumvent any cause or causes preventing it from
performing its agreements and covenants hereunder; provided, however, that the
settlement of strikes, lockouts and other labor disputes shall be entirely
within the discretion of the Company, and the Company shall not be required to
settle strikes, lockouts and other labor disputes by acceding to the demands of
the opposing party or parties when such course is in its judgment against its
best interests.
Section 7.2 Remedies on Default. Whenever any Event of Default shall
have happened and be continuing, the Authority and the Trustee (or the Trustee
as assignee and successor of the Authority) may take any one or more of the
following remedial actions:
(a) declare the obligations of the Company under the Company Note
and the Loan Agreement immediately due and payable in an amount equal
to the principal amount of all outstanding Bonds plus interest accrued
on such Bonds to the date of such declaration, but only if,
concurrently with such declaration, the principal of and accrued
interest on the Bonds are also declared due and payable pursuant to
subsection (a) of Section 10.2 of the Indenture;
33
<PAGE>
(b) have access to, and inspect, examine and make copies of, the
books, records and accounts of the Company; and
(c) take whatever legal proceedings may appear necessary or
desirable to collect any amount due from the Company under the Company
Note or the Loan Agreement or to enforce any covenant, agreement or
obligation of the Company under any of the Basic Agreements to which
it is a party or any obligation of the Company imposed by any
applicable law.
Section 7.3 Agreement to Pay Attorneys' Fees. In the event that, as a
result of an Event of Default or a threatened Event of Default by the Company,
the Authority or the Trustee should employ attorneys at law or incur other
expenses in or about the collection of amounts due from the Company under the
Company Note or the Loan Agreement or the enforcement of any other obligation,
covenant or agreement of the Company contained in any of the Basic Agreements to
which the Company is a party, the Company will, if the Authority or the Trustee
is successful in such efforts or if a final judgment for either is rendered by a
court of competent jurisdiction, pay to the Authority, the Trustee or both, as
the case may be, reasonable attorneys' fees and other reasonable expenses so
incurred by the Authority and the Trustee.
Section 7.4 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Authority or the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under the Loan
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any Event of
Default shall impair any such right or power or shall be construed to be a
waiver thereof but any such right or power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Authority or
the Trustee to exercise any remedy reserved to it in this article, it shall not
be necessary to give any notice, other than such notice as is herein expressly
required.
Section 7.5 No Additional Waiver Implied by One Waiver. In the event
any agreement contained in the Loan Agreement should be breached by either party
and thereafter waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. Further, neither the receipt nor the acceptance by the Authority, or
by the Trustee on its behalf, of any payment due under the Company Note or the
Loan Agreement shall be deemed to be a waiver of any breach of any covenant,
condition or obligation herein contained or a waiver of any Event of Default
even though at the time of such receipt or acceptance there has been a breach of
one or more covenants, conditions or obligations on the part of the Company
herein contained or an Event of Default (or both) and the Authority or the
Trustee (or both) have knowledge thereof.
34
<PAGE>
Section 7.6 Restoration of Rights Upon Abandonment of Proceedings. In
case any proceeding taken by the Authority or the Trustee on account of any
Event of Default shall have been discontinued or abandoned for any reason, or
shall have been determined adversely to the Authority or the Trustee, then and
in every case the Authority and the Trustee shall be restored to their former
positions and rights under all of the Basic Agreements, respectively, and all
rights, remedies and powers of the Authority and the Trustee shall continue as
though no such proceeding had been taken.
Section 7.7 Effect of Intercreditor Agreement. Notwithstanding anything
to the contrary contained herein or in the Indenture, so long as any of the
Council Bonds remain outstanding and unpaid, all rights, remedies and powers
granted to the Authority or the Trustee pursuant to this Loan Agreement
(including, without limitation, those so granted in this Article VII) or the
Indenture shall be governed by, and shall be exercised in accordance with, the
provisions of the Intercreditor Agreement.
ARTICLE VIII
PREPAYMENT OF LOAN
Section 8.1 Options to Prepay All or Part of the Loan Prior to
Conversion Date. The Company may, at its option at any time and from time to
time prior to the Conversion Date and prior to full payment of the Indenture
Indebtedness, make prepayments with respect to the Loan. The Authority will
cause such prepayments to be applied to the redemption and retirement of the
Bonds on the earliest practicable date after receipt of such prepayments on
which, in accordance with their terms and the terms of the Indenture, such Bonds
may be redeemed. As provided in Section 3.8 of the Indenture, the Company shall
have the right to request the optional redemption of the Bonds under the
circumstances described therein; and upon being notified by the Company in
writing of the Company's intentions in this respect and without the necessity of
the moneys therefor being deposited with the Trustee, the Authority will take,
or cause the Trustee to take, all preliminary action necessary under the
provisions of the Indenture to effect such redemption. The Bonds to be redeemed
with any prepayments of the Loan shall be redeemed at and for such redemption
price or prices as shall be specified in Section 3.8 of the Indenture. The
principal amount of the Loan deemed paid by any such prepayment shall equal the
principal or face amount of the Bonds redeemed with such prepayment. Any such
prepaid principal of the Loan in respect of the Bonds so redeemed shall cease to
bear interest at such time as the corresponding Bonds called for redemption
cease to bear interest in accordance with the provisions of Section 6.2 of the
Indenture. Such prepayment of principal of the Loan will result in the abatement
of payments of principal and interest that would have become due with respect to
the Loan had it not been for such prepayment. The Loan shall be deemed paid and
the Company discharged from all obligations thereunder if at any time provision
35
<PAGE>
for the redemption and payment of the outstanding Bonds is made to such extent
and under such conditions that all thereof shall be deemed fully paid pursuant
to the provisions of Section 14.1 of the Indenture.
Section 8.2 Option to Prepay Loan After Conversion Date Upon the
Occurrence of Certain Events. The Company shall have the right and option,
hereby granted by the Authority, to prepay the entire Loan after the Conversion
Date in an amount sufficient to redeem and retire all the Bonds if
(a) any part of the Project is damaged or destroyed, by fire or
other casualty, to such extent that, in the opinion of the Company
expressed in a certified resolution of the Board of Directors of the
Company filed with the Authority and the Trustee, the restoration or
repair of the property damaged or destroyed would not be economically
practicable or desirable, or
(b) under the exercise of the power of eminent domain by any
governmental authority or person, firm or corporation acting under
governmental authority, (i) title to all or substantially all the
Project is taken, or (ii) the temporary use of all or part of the
Project, or title to part of the Project, is taken to such extent that,
in the opinion of the Company expressed in a certified resolution of
the Board of Directors of the Company filed with the Authority and the
Trustee, the Company will thereby be prevented, or is likely to be
thereby prevented, from making normal use of the Project, or
(c) as a result of any changes in the Constitution of the State
of Alabama or the Constitution of the United States of America or of
legislative or administrative action (whether state or federal) or by
final decree, judgment or order of any court or administrative body
(whether state or federal), entered after the contest thereof by the
Company in good faith, the Loan Agreement becomes void or unenforceable
or impossible of performance in accordance with the intent and purposes
of the parties as expressed herein or unreasonable burdens or exces-
sive liabilities are imposed on the Authority or the Company, including
(without limiting the generality of the foregoing) any changes in
federal or state tax laws that will render the operation of the Project
significantly less advantageous economically to the Company, or
(d) the use and occupancy of the Project by the Company is
legally curtailed for any reason other than circumstances or conditions
described in the preceding clauses (b) or (c), or
(e) as a result of any change in the economic viability of the
Project, the continued operation of the Project, in the opinion of the
Company expressed in a certified resolution of the Board of Directors
of the Company filed with the Authority and the Trustee, would not be
economic for the Company's purposes.
36
<PAGE>
To exercise such option, the Company
(1) shall, within sixty (60) days following the event authorizing
the exercise of such option, give to the Authority and the Trustee
written notice, signed by the President or any Vice President of the
Company, which shall contain a description of such event and shall
state the reason why it authorizes the exercise of such option,
(2) shall specify in such notice the date on which the Loan is to
be prepaid, which shall be not less than forty-five (45) nor more than
ninety (90) days after the date such notice is mailed or otherwise
delivered,
(3) shall direct the Trustee in such notice to call for redemp-
tion all the outstanding Bonds on the Business Day next succeeding the
date of the Loan prepayment specified by the Company in such notice,
(4) in the case of an authorizing event described in any of the
preceding clauses (a), (b), (d) or (e), shall certify in such notice
that the Company has discontinued, or will discontinue at the earliest
practicable date, its operation of the Project, and
(5) shall, on the date specified for the prepayment of the Loan,
pay to the Trustee (for the account of the Authority), as and for the
outstanding balance of the Loan, an amount which, when added to the
total of the amounts then held in the Bond Fund (exclusive of any
amount held therein for payment of matured but unpaid Bonds, Bonds
called for redemption but not yet redeemed and matured but unpaid
interest) and the Redemption Fund, will be sufficient to pay, redeem
and retire all the outstanding Bonds on the Business Day next
succeeding the date of such prepayment, including, without limitation,
principal, premium (if any), all interest to mature until and on such
payment or redemption date, expenses of redemption and all other
Indenture Indebtedness.
37
<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.1 Term of Loan Agreement. The Loan Agreement shall remain in
full force and effect from the date of its delivery until such time as (i) all
the Bonds have been fully paid or provision therefor made as specified in
Section 14.1 of the Indenture, (ii) all reasonable fees, charges, disbursements
and advances of the Trustee, accrued and to accrue until full payment of the
Bonds, have been paid or provision therefor satisfactory to the Trustee has been
made, and (iii) all obligations of the Company to the Authority pursuant to
Sections 3.5, 6.3 and 7.3 hereof have been paid or provision therefor
satisfactory to the Authority has been made.
Section 9.2 Disposition of Trust Fund Moneys after Payment of Indenture
Indebtedness. The Authority hereby assigns to the Company all moneys (if any)
that may remain in the Construction Fund, the Bond Fund and the Redemption Fund
or that may otherwise be held by the Trustee after the Indenture Indebtedness
has been fully paid, such assignment to be subject to the condition that the
Indenture Indebtedness shall have been fully paid with moneys paid by or on
behalf of the Company to or for the account of the Authority or with moneys
drawn by the Trustee under the Letter of Credit. The Authority will provide in
the Indenture for such moneys to be paid by the Trustee to the Company in
accordance with such assignment. It is understood and agreed that surplus moneys
remaining in the Bond Fund or otherwise held by the Trustee shall not include
(i) any amounts so held for payment of matured but unpresented Bonds, Bonds
called for redemption but not yet presented for payment and matured but unpaid
interest, (ii) any amounts held therein which are referable to unmatured Bonds
if such bonds are considered fully paid pursuant to the provisions of Section
14.1 of the Indenture by reason of the fact that such amounts are so held by the
Trustee and (iii) any amounts which shall be required to reimburse the Bank for
any amounts owed to it by the Company in respect of the Bonds or the Letter of
Credit or under the Reimbursement Agreement. The provisions of this section
shall survive the expiration or prior termination of the Loan Agreement.
Section 9.3 Certification of Completion Date. The Completion Date shall
be evidenced to the Trustee and the Authority by a certificate signed by an
Authorized Company Representative stating that
(a) the acquisition, construction and installation of the Project
and all other Project Development Work have been completed in
accordance with the applicable plans, specifications and directions
furnished by the Company,
(b) all the Project Development Costs have been paid in full,
except for amounts retained by the Trustee at the Company's direction
for any such costs not then due and payable or the liability for
payment of which is being contested or disputed by the Company, and
(c) the Project is operational for the purpose for which it was
designed.
38
<PAGE>
Section 9.4 Notices. All notices, demands, requests and other
communications hereunder shall be deemed sufficient or properly given if in
writing and delivered in person to the following addresses or received by
certified or registered mail, postage prepaid, with return receipt requested at
such addresses:
(a) If to the Authority:
State Industrial Development Authority
401 Adams Avenue
Montgomery, Alabama 36130
Attention: President
(b) If to the Company:
Central Castings Corporation
451 North Cannon Avenue
Lansdale, Pennsylvania 19446
Attention: Vice President-Finance
(c) If to the Trustee:
Chemical Bank
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
Attention: Josiane De Sousa, Corporate Trust Department
(d) If to the Bank:
First Fidelity Bank, National Association
123 South Broad Street
Philadelphia, Pennsylvania 19109-1199
Attention: Thomas J. Saunders, Vice President
Any of the above-mentioned parties may, by like notice, designate any further or
different addresses to which subsequent notices shall be sent. A copy of any
notice given to the Authority, the Company, the Trustee or the Bank pursuant to
the provisions of the Loan Agreement shall also be given to any of the foregoing
four parties to whom notice is not herein otherwise required to be given, but
the failure to give a copy of such notice to any such other party shall not
invalidate such notice or render it ineffective unless notice to such other
party is otherwise herein expressly required. Any notice hereunder signed on
behalf of the notifying party by a duly authorized attorney at law shall be
valid and effective to the same extent as if signed on behalf of such party by a
duly authorized officer or employee.
39
<PAGE>
Section 9.5 Certain Prior and Contemporaneous Agreements Cancelled.
Except for the Preliminary Agreement, the Loan Agreement shall completely and
fully supersede all other prior or contemporaneous agreements, both written and
oral, between the Authority and the Company relating to the acquisition,
construction and installation of the Project, the issuance of any of the Bonds
and the making of the Loan by the Authority to the Company, and if any provision
of the Preliminary Agreement is in conflict with any provision of the Loan
Agreement, such provision of the Preliminary Agreement shall be deemed amended
or modified to the extent necessary to avoid such conflict, all to the end that
the Authority and the Company shall look to the Loan Agreement for the ultimate
definition and determination of their respective rights, liabilities and
responsibilities respecting the Project, the Bonds and the Loan.
Section 9.6 Limited Liability of Authority. The Authority is entering
into the Loan Agreement pursuant to the authority conferred upon it by the Act.
No provision hereof shall be construed to impose a charge against the general
credit of the Authority or any personal or pecuniary liability upon the
Authority, except with respect to the proper application of the proceeds to be
derived from the sale of the Bonds, moneys made available by the Company to the
Authority pursuant to the provisions of the Loan Agreement and the revenues and
receipts to be derived from the payment of the Loan. Further, none of the
directors, officers, employees or agents of the Authority shall have any
personal or pecuniary liability whatever hereunder or any liability for the
breach by the Authority of any of the agreements on its part herein contained.
Nothing contained in this section, however, shall relieve the Authority from the
observance and performance of the several covenants and agreements on its part
herein contained or relieve any director, officer, employee or agent of the
Authority from performing all duties of their respective offices that may be
necessary to enable the Authority to perform the covenants and agreements on its
part herein contained.
Section 9.7 Trustee Actions Requested by Company. The Company hereby
agrees that, in any instance in which the Company requests the Trustee to take
any discretionary, non-ministerial action pursuant to the Indenture, the
Trustee may require, as a condition precedent to the taking of such requested
action, the delivery to the Trustee of an opinion of Counsel stating that the
taking of such requested action by the Trustee is not inconsistent with the
provisions of the Indenture and that all conditions precedent, if any, to the
taking of such action that are specified or contained in the Indenture have been
satisfied.
Section 9.8 Binding Effect. The Loan Agreement shall inure to the
benefit of, and shall be binding upon, the Authority, the Company and their
respective successors and assigns. To the extent provided herein and in the
Indenture, the Trustee, the Holders of the Bonds and the Bank shall be deemed to
be third party beneficiaries hereof, but nothing herein contained shall be
deemed to create any right in, or to be for the benefit of, any other Person who
is not a party hereto.
Section 9.9 Severability. In the event any provision of the Loan
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
40
<PAGE>
Section 9.10 Article and Section Captions. The article, section and
subsection headings and captions contained herein are included for convenience
only and shall not be considered a part hereof or affect in any manner the
construction or interpretation hereof.
Section 9.11 Governing Law. The Loan Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Alabama.
IN WITNESS WHEREOF, the Authority and the Company have caused this Loan
Agreement to be duly executed in their respective corporate names and to be
attested, all by their duly authorized officers, in ten (10) counterparts, each
of which shall be deemed an original, and the parties hereto have caused this
Loan Agreement to be dated as of November 1, 1995, although actually executed
and delivered on November _____, 1995.
STATE INDUSTRIAL DEVELOPMENT
AUTHORITY
By: /s/ Ira J. Silberman
--------------------------------
President
ATTEST:
By: /s/ Jimmy H. Baker
----------------------------------
Its Secretary
[ S E A L ]
CENTRAL CASTINGS CORPORATION
By: /s/ Albert T. Sabol
-------------------------------
Its Vice President
--------------------------------
ATTEST:
By: /s/ George D. Pelose
----------------------------------
Its Assistant Secretary
-------------------------------
[ S E A L ]
41
<PAGE>
STATE OF ALABAMA )
:
Montgomery COUNTY )
I, the undersigned authority, a Notary Public in and for said County in
said State, hereby certify that Ira J. Silberman, whose name as President of the
STATE INDUSTRIAL DEVELOPMENT AUTHORITY, a public corporation and instrumentality
under the laws of the State of Alabama, is signed to the foregoing instrument
and who is known to me, acknowledged before me on this day that, being informed
of the contents of the said instrument, he, as such officer and with full
authority, executed the same voluntarily for and as the act of said public
corporation.
GIVEN under my hand and seal, this 15h day of November, 1995.
[NOTARIAL SEAL] By: /s/ James K. Noll II
---------------------------------
Notary Public
My Commission Expires: 02-17-99
-----------
STATE OF Pennsylvania)
:
Philadelphia COUNTY )
I, the undersigned authority, a Notary Public in and for said county in
said state, hereby certify that Albert T. Sabol, whose name as Vice President of
CENTRAL CASTINGS CORPORATION, a corporation organized and existing under the
laws of the State of Alabama, is signed to the foregoing instrument and who is
known to me, acknowledged before me on this day that, being informed of the
contents of the said instrument, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation.
GIVEN under my hand and official seal of office, this 21st day of
November, 1995.
By: /s/ Carol L. O'Neal
[NOTARIAL SEAL] ----------------------------------
Notary Public
My Commission Expires: 11-28-98
-----------
42
<PAGE>
Exhibit 10(ac)
==============================================================================
LEASE AGREEMENT
between
CALHOUN COUNTY
ECONOMIC DEVELOPMENT COUNCIL
and
CENTRAL CASTINGS CORPORATION
Dated as of November 1, 1995
______________________________
Relating to
$3,000,000
CALHOUN COUNTY
ECONOMIC DEVELOPMENT COUNCIL
Adjustable Convertible Taxable Industrial Revenue Bonds
(Central Castings Corporation Project)
Series 1995
===============================================================================
<PAGE>
TABLE OF CONTENTS*
to
LEASE AGREEMENT
between the
CALHOUN COUNTY
ECONOMIC DEVELOPMENT COUNCIL
and
CENTRAL CASTINGS CORPORATION
==============================================================================
Page
----
Parties................................................................ 1
Recitals............................................................... 1
ARTICLE I
DEFINITIONS AND USE OF PHRASES
Section 1.1 Definitions.............................................. 2
Section 1.2 Definitions Contained in the Indenture................... 8
Section 1.3 Use of Phrases........................................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties by the Council............ 9
Section 2.2 Representations and Warranties by the Company............ 10
- --------
*This Table of Contents appears here for reference only and should not be
considered a part of this Lease Agreement.
i
<PAGE>
ARTICLE III
DEMISING CLAUSES
Section 3.1 Demising Clauses......................................... 13
ARTICLE IV
CONCERNING THE PROJECT DEVELOPMENT WORK;
ISSUANCE OF THE BONDS
Section 4.1 Performance of the Project Development Work.............. 14
Section 4.2 Agreement to Issue Bonds................................. 16
Section 4.3 Disbursement of Moneys from Construction Fund............ 16
Section 4.4 No Warranty of Suitability by the Council. Company
Required to Make Arrangements for Payment of
Project Development Costs............................. 17
Section 4.5 Council to Pursue Rights Against Suppliers and
Contractors, etc...................................... 18
Section 4.6 Certification of Completion Date......................... 19
ARTICLE V
DURATION OF LEASE TERM AND RENTAL PROVISIONS
Section 5.1 Duration of Lease Term................................... 19
Section 5.2 Basic Rent; Additional Rent; Absolute and Unconditional
Obligation to Pay Basic Rent and Additional Rent...... 20
Section 5.3 Method of Payment of Basic Rent and Additional Rent...... 21
Section 5.4 Optional Prepayment of Basic Rent........................ 22
Section 5.5 General Provisions Concerning Prepayment of Basic Rent... 22
Section 5.6 Obligations of Company Unconditional..................... 22
ii
<PAGE>
ARTICLE VI
PROVISIONS CONCERNING MAINTENANCE,
ADDITIONS, REMOVAL OF PROJECT EQUIPMENT,
INSURANCE AND TAXES
Section 6.1 Maintenance, Additions, Alterations, Improvements and
Modifications......................................... 23
Section 6.2 Removal of Project Equipment............................. 25
Section 6.3 Taxes, Other Governmental Charges and Utility Charges.... 26
Section 6.4 Insurance with Respect to Project........................ 27
ARTICLE VII
PROVISIONS RESPECTING DAMAGE,
DESTRUCTION AND CONDEMNATION
Section 7.1 Damage and Destruction Provisions........................ 28
Section 7.2 Condemnation Provisions.................................. 30
Section 7.3 Condemnation of Right to Use of the Project for Limited
Period................................................ 34
Section 7.4 Condemnation of Company-Owned Property................... 35
Section 7.5 Cooperation of the Council in the Conduct of
Condemnation Proceedings.............................. 35
Section 7.6 Cooperation of the Council with respect to Restoration of
the Project in the Event of Casualty or
Condemnation.......................................... 35
Section 7.7 Relationship to Reimbursement Agreement and Bank
Mortgage.............................................. 36
ARTICLE VIII
PARTICULAR COVENANTS OF THE COMPANY
Section 8.1 General Covenants........................................ 36
Section 8.2 Performance by the Council, the Bank or the Trustee of
Certain Company Obligations; Reimbursement of
Expenses.............................................. 36
Section 8.3 Release and Indemnification Covenants.................... 37
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Section 8.4 Inspection of the Project................................ 39
Section 8.5 Agreement to Maintain Corporate Existence................ 40
Section 8.6 Qualification in Alabama................................. 41
Section 8.7 Further Assurances....................................... 41
Section 8.8 Protection of Security................................... 41
ARTICLE IX
CERTAIN PROVISIONS RELATING TO
THE PROJECT AND THE BONDS
Section 9.1 Provisions Relating to Assignment and Subleasing by
Company................................................ 42
Section 9.2 References to Bonds Ineffective after Indenture
Indebtedness Paid...................................... 42
Section 9.3 Disposition of Trust Fund Moneys after Full Payment of
Indenture Indebtedness................................. 43
Section 9.4 Assignment of Lease by Council; Amendment of Lease........ 43
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default Defined................................. 44
Section 10.2 Remedies on Default....................................... 46
Section 10.3 No Remedy Exclusive....................................... 47
Section 10.4 Agreement to Pay Attorneys' Fees.......................... 48
Section 10.5 No Additional Waiver Implied by One Waiver................ 48
Section 10.6 Effect of Intercreditor Agreement......................... 48
ARTICLE XI
OPTIONS
Section 11.1 Options to Terminate the Lease During the Lease Term..... 48
Section 11.2 Option to Purchase Casualties............................ 49
Section 11.3 Option to Purchase....................................... 51
Section 11.4 Options In General....................................... 52
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ARTICLE XII
MISCELLANEOUS
Section 12.1 Covenant of Quiet Enjoyment. Surrender.................. 53
Section 12.2 Retention of Title to Project by Council. Granting of
Easements............................................. 53
Section 12.3 This Lease a Net Lease................................... 53
Section 12.4 Statement of Intention Regarding Certain Tax Matters..... 54
Section 12.5 Notices.................................................. 54
Section 12.6 Certain Prior and Contemporaneous Agreements
Cancelled............................................. 55
Section 12.7 Limited Liability of Council............................. 55
Section 12.8 Trustee Actions Requested by Company..................... 55
Section 12.9 Binding Effect........................................... 56
Section 12.10 Severability............................................. 56
Section 12.11 Article and Section Captions............................. 56
Section 12.12 Governing Law............................................ 56
Testimonium............................................................
Signatures.............................................................
Acknowledgments........................................................
Exhibit A
Exhibit B
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LEASE AGREEMENT between the CALHOUN COUNTY ECONOMIC DEVELOPMENT
COUNCIL, a public corporation organized and existing under the laws of the State
of Alabama (herein called the "Council"), and CENTRAL CASTINGS CORPORATION, a
corporation organized and existing under the laws of the State of Alabama
(herein called the "Company");
R E C I T A L S
Pursuant to this Lease Agreement, the Company is undertaking to lease
the "Project" hereinafter defined from the Council. In order to finance a
portion of the costs of acquiring, improving, enlarging and equipping said
Project, the Council will issue $3,000,000 principal amount of its Adjustable
Convertible Taxable Industrial Revenue Bonds (Central Castings Corporation
Project), Series 1995, dated the date of their issuance (herein called the
"Bonds"), under a Trust Indenture dated as of November 1, 1995 (herein called
the "Indenture"), between the Council and Chemical Bank, as Trustee (herein
called the "Trustee"). In order to secure the payment of the principal of and
the interest and premium (if any) on the Bonds, the Council will pledge and
assign under the Indenture the Council's interest in this Lease Agreement (other
than certain expense payment and indemnification rights and certain rights which
are herein expressly provided to be exercised by the Council), including
particularly the "Basic Rent" payable hereunder by the Company for the use of
said Project.
Simultaneously with the delivery of this Lease Agreement, the Company
and First Fidelity Bank, National Association (herein called the "Bank"), will
enter into a Letter of Credit and Reimbursement Agreement dated as of
November 1, 1995 (herein called the "Reimbursement Agreement"), pursuant to
which the Bank will issue to the Trustee its irrevocable letter of credit in an
amount sufficient to provide for the payment of the principal of and up to 45
days' accrued interest on the Bonds, as well as the purchase price of any Bonds
tendered (or deemed to be tendered) for purchase in accordance with the
provisions of the Indenture. The Council and the Company will enter into a
Mortgage and Security Agreement dated as of November 1, 1995 (herein called the
"Bank Mortgage"), with the Bank in order to secure the undertakings of the
Company under the Reimbursement Agreement.
NOW, THEREFORE, THIS LEASE AGREEMENT
W I T N E S S E T H:
That in consideration of the respective representations, warranties and
agreements herein contained, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS AND USE OF PHRASES
Section 1.1 Definitions. Unless the context clearly indicates a
different meaning, the following words and phrases, as used herein, shall have
the following respective meanings:
"Act" means Act No. 82-222 of the 1982 Regular Session of the
Legislature of Alabama, as amended and supplemented and at the time in force and
effect.
"Additional Rent" means (i) the moneys payable by the Company pursuant
to the provisions of Section 5.2(b) hereof and (ii) any other moneys payable by
the Company pursuant to this Lease Agreement that are referred to herein as
Additional Rent.
"Affiliate" of any designated Person means any Person which, directly
or indirectly, controls, or is controlled by, or is under common control with,
such designated Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person whether through the ownership of voting
securities or by contract or otherwise.
"Authority" means the State Industrial Development Authority, an
Alabama public corporation, and its successors and assigns.
"Authority Bonds" means any bonds of the Authority issued pursuant to
the Authority Indenture.
"Authority Indenture" means that certain Trust Indenture dated as
of November 1, 1995, between the Authority and Chemical Bank, as trustee, as
said agreement now exists and as it may from time to time be modified,
supplemented or amended in accordance with the provisions thereof.
"Authority Indenture Trustee" means Chemical Bank, in its capacity as
trustee under the Authority Indenture, and any successor thereto in such
capacity.
"Authority Loan Agreement" means that certain Loan Agreement dated as
of November 1, 1995, between the Authority and the Company, as said agreement
now exists and as it may from time to time be modified, supplemented or amended
in accordance with the provisions thereof.
"Authorized Council Representative" means the person or persons at the
time designated as such by written certificate furnished to the Company and the
Trustee, containing the specimen signature or signatures of such person or
persons and signed on behalf of the Council by the Chairman or Vice Chairman of
its Board of Directors.
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"Authorized Company Representative" means any person authorized to act
on behalf of the Company and designated as an authorized representative thereof
in a written certificate furnished to the Council and the Trustee, containing
the specimen signature of such person and signed on behalf of the Company by its
President or any Vice President thereof.
"Bank" means First Fidelity Bank, National Association, a national
banking association having its principal office in Philadelphia, Pennsylvania,
in its capacity as issuer of the Letter of Credit, its successors in such
capacity and their assigns. If a Substitute Letter of Credit has been provided
to the Trustee in accordance with Section 3.14 of the Indenture, any reference
to the Bank shall, unless the context requires otherwise, include reference to
the bank or other institution that provides such Substitute Letter of Credit and
its successors and assigns.
"Bank Mortgage" means that certain Mortgage and Security Agreement
dated as of November 1, 1995, which will cover the Project and which is to be
given by the Council and the Company to the Bank in order to secure the payment
by the Company of any amounts which it may be required to pay under the
Reimbursement Agreement.
"Basic Agreements" means the Lease, the Letter of Credit, the
Reimbursement Agreement, the Bank Mortgage, the Intercreditor Agreement and the
Indenture, as such instruments may from time to time be amended or supplemented
in accordance with their respective terms or the terms of the Indenture, as in
the case may be applicable.
"Basic Rent" means (i) the moneys payable by the Company pursuant to
the provisions of Section 5.2(a) hereof, (ii) any other moneys payable by the
Company pursuant to the Lease to provide for the payment of principal of or
interest or premium (if any) on the Bonds (other than the aforesaid moneys
payable pursuant to Section 5.2 hereof), and (iii) any other moneys payable by
the Company pursuant to the Lease that are therein referred to as Basic Rent.
"Bond Fund" means the Central Castings Corporation Project Bond
Principal and Interest Fund created in Section 8.1 of the Indenture.
"Bond Payment Date" means any date on which any principal or interest
with respect to the Bonds shall mature and be due and payable or on which any
principal amount of the Bonds shall be required to be redeemed prior to the
stated maturity thereof.
"Bondholder" means the Holder of any Bonds.
"Bonds" means those certain Adjustable Convertible Taxable Industrial
Revenue Bonds (Central Castings Corporation Project), Series 1995, authorized to
be issued under the Indenture initially in the aggregate principal amount of
$3,000,000.
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"Business Day" means any day other than (a) a Saturday or a Sunday, (b)
a day on which banking institutions in New York, New York, in Philadelphia,
Pennsylvania, in Dallas, Texas, in Houston, Texas, or in any other city where
either the principal office of the Bank, the Trustee (including the office of
the Trustee from which payments of the principal of or interest on the Bonds are
made), the Remarketing Agent, or the Tender Agent is located are required or
authorized by law (including executive order) to close or on which the principal
office of the Bank, the Trustee (including the office of the Trustee from which
payments of the principal of or interest on the Bonds are made), the Remarketing
Agent or the Tender Agent is closed for a reason not related to financial
condition, or (c) a day on which the New York Stock Exchange is closed.
"Code" means the Internal Revenue Code of 1986, as amended and at the
time in force and effect.
"Company" means Central Castings Corporation, an Alabama corporation,
and, subject to the provisions of Section 8.4 hereof, includes its successors
and assigns and any corporation resulting from or surviving any consolidation or
merger to which it or its successors may be a party.
"Completion Date" means the date on which the completion of the Project
Development Work and the satisfaction of the other conditions referred to in
Section 4.6 hereof are certified to the Trustee and the Council in accordance
with the provisions of said Section 4.6.
"Construction Fund" means the Central Castings Corporation Project
Construction Fund created in Section 7.1 of the Indenture.
"Conversion Date" means the day on which the interest payable with
respect to the Bonds shall be converted from a variable interest rate to a fixed
interest rate pursuant to the provisions of Section 3.4 of the Indenture.
"Council" means the party of the first part hereto and, subject to the
provisions of Section 9.4 of the Indenture, includes its successors and assigns
and any public corporation resulting from or surviving any consolidation or
merger to which it or its successors may be a party.
"Counsel" means any attorney duly admitted to practice before the
highest court of any state of the United States of America or the District of
Columbia (including any officer or full-time employee of the Council or an
Affiliate thereof who is so admitted to practice), it being understood that
Counsel may also mean a firm of attorneys whose members are so admitted to
practice.
"Eminent Domain", when used herein with reference to any taking of
property, means the power (actual or claimed) of any governmental authority or
any Person acting under governmental authority (actual or claimed) to take such
property; and, for purposes of the Lease, a taking of property under the
exercise of the power of Eminent Domain shall include a 4 conveyance made, or a
use granted or taken, under either the threat or the fact of the exercise of
governmental authority.
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"Event of Default" means an "Event of Default" as specified in Section
10.1 hereof.
"Holder" means the Person in whose name a Bond is registered on the
registry books of the Trustee pertaining to the Bonds.
"Indenture" means that certain Trust Indenture dated as of November 1,
1995, between the Council and Chemical Bank, a New York corporation having its
principal office in the City of New York, New York, under which (i) the Bonds
are authorized to be issued, and (ii) the Council's interests in this Lease
Agreement are to be assigned and pledged as security for payment of the
principal of and the interest and premium (if any) on the Bonds, as the said
Trust Indenture now exists and as it may hereafter be supplemented and amended.
"Indenture Indebtedness" means all indebtedness of the Council at the
time secured by the Indenture, including, without limitation, all principal of
and interest and premium (if any) on the Bonds, and all reasonable and proper
fees, charges and disbursements of the Trustee for services performed under the
Indenture.
"Independent Counsel" means Counsel having no continuing employment or
business relationship or other connection with the Council or the Company or an
Affiliate of either thereof which, in the opinion of the Trustee, might
compromise or interfere with the independent judgment of such Counsel in the
performance of any services to be performed hereunder as Independent Counsel.
"Inducement Resolution" means that certain resolution adopted by the
Council on August 23, 1994, in which the Council agreed, among other things, to
issue the Bonds to finance a portion of the costs of acquiring, improving,
enlarging and installing the Project.
"Intercreditor Agreement" means that certain Intercreditor Agreement
dated as of November 1, 1995, among the Company, the Council, the Authority, the
Trustee and the Authority Indenture Trustee, as said agreement now exists and as
it may from time to time be modified, supplemented or amended in accordance with
the provisions thereof.
"Interest Payment Date" means (i) during the period from the date of
the issuance of the Bonds to and including the Conversion Date (if any), the
first Business Day of each calendar month falling within such period and the
Conversion Date (if any) on which such period ends, and (ii) during the period
from, but not including, the Conversion Date (if any) to and including the date
of the final payment of the Bonds, each May 1 and November 1 falling within such
period.
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"Lease" or "this Lease Agreement" means this Lease Agreement, as it now
exists and as it may from time to time be modified, supplemented or amended in
accordance with the provisions of Section 13.4 of the Indenture.
"Lease Term" means the period beginning on the date of delivery of this
Lease Agreement and continuing until 11:59 o'clock, P.M., on November 1, 2015.
"Letter of Credit" means the direct pay irrevocable letter of credit
issued by the Bank to the Trustee contemporaneously with the original issuance
of the Bonds, together with any letter of credit issued in substitution or
exchange therefor pursuant to the Reimbursement Agreement. In the event that a
Substitute Letter of Credit is provided to the Trustee pursuant to Section 3.14
of the Indenture, any reference to the Letter of Credit shall, unless the
context requires otherwise, include reference to such Substitute Letter of
Credit, and any reference to the Bank under such circumstances shall include
reference to the bank or other institution providing such Substitute Letter of
Credit.
"Net Condemnation Award" means the total amount received as
compensation for any part of the Project taken under the exercise of the power
of Eminent Domain, plus damages to any part of the Project not taken, which
compensation shall consist of (i) all awards received pursuant to administrative
or judicial proceedings conducted in connection with the exercise of the power
of Eminent Domain, plus (ii) all amounts received as a result of any settlement
of compensation claims (whether in whole or in part) negotiated with the
condemning authority, less (iii) all attorneys' fees and other expenses incurred
in connection with the receipt of such compensation, including attorneys' fees
and expenses relating to such administrative or judicial proceedings and to such
settlement negotiations.
"Net Insurance Proceeds" means the total insurance proceeds recovered
by the Council, the Company and the Trustee on account of any damage to or
destruction of the Project or any part thereof, less all expenses (including
attorneys' fees and any extraordinary expenses of the Trustee) incurred in the
collection of such proceeds.
"Offering Memorandum" means the Private Placement Memorandum pertaining
to the Bonds.
"Permitted Encumbrances" means, with respect to any of the Project, as
of any particular time, any of the following: (i) the lien of the Bank Mortgage
and any liens or other encumbrances permitted by the provisions of the Bank
Mortgage; (ii) the Lease; (iii) liens for ad valorem taxes and general and
special assessments not then delinquent; (iv) utility, access, drainage and
other easements and rights-of-way, mineral rights, covenants running with the
land, zoning restrictions, environmental regulations and other restrictions and
encumbrances affecting the use of real property, and minor defects and
irregularities in title to real property, none of the foregoing of which,
individually or in the aggregate, materially impair the title of the Company to
the real property affected thereby or interfere with the use of such property
for the purpose for which it was acquired or is held by the Company; and (v) any
inchoate mechanic's material-man's, supplier's or vendor's lien or other right
to a purchase money security interest if payment if not yet due and payable
under the contract giving rise to such lien or right.
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"Person" means any natural person, corporation, partnership, trust,
joint venture, government or governmental body, political subdivision or other
legal entity as in the context may be possible or appropriate.
"Placement Agent" means First Fidelity Bank, N.A., Newark, New Jersey.
"Project" means the Project Site, the Project Building and the Project
Equipment, as they may at any time exist, and all other property and rights of
every kind that are or become subject to the demise of the Lease.
"Project Building" means the foundry building and related improvements
situated on the Project Site, as such building and related improvements may at
any time exist.
"Project Development Costs" means the following: (i) all costs and
expenses incurred in connection with the planning, development and design of the
Project, including the costs of preliminary investigations, surveys, estimates
and plans and specifications; (ii) all costs and expenses of acquiring,
constructing and installing the various facilities that constitute the Project,
including the cost to the Company of supervising construction and installation,
payments to contractors and materialmen and fees for professional or other
specialized services; (iii) the costs of contract bonds and of insurance of all
kinds which may be necessary or desirable in connection with the Project
Development Work and which are not paid by any contractor or otherwise provided
for; (iv) all expenses incurred in connection with the issuance and sale of the
Bonds, including (without limitation) the fees and expenses of Bond Counsel to
the Council, the acceptance fee of the Trustee, the fees and expenses of Counsel
to the Trustee, the initial fees (if any) of the Tender Agent and the
Remarketing Agent, the fees payable to the Bank in respect of the Letter of
Credit and the Reimbursement Agreement prior to the Completion Date, the fees
and expenses of Counsel to the Bank, the costs of printing the Bonds, the fees
of any Rating Agency rating the Bonds, accounting fees, financial advisory fees,
and other usual and customary expenses; (v) the charges of the Trustee for the
disbursement of moneys from the Construction Fund; (vi) all other costs which
the Council shall be required to pay, under the terms of any contract or
contracts, in connection with the Project Development Work; (vii) interest on
the Bonds to the extent that the cumulative amount thereof paid out of the
proceeds of the Bonds does not exceed the total interest that will accrue on the
Bonds from their date until and including the Completion Date; and (viii) the
reimbursement to the Company of all amounts paid directly by the Company in
respect of any of the aforesaid costs and expenses and of all amounts advanced
by the Company to the Council for the payment of such costs and expenses.
"Project Development Work" means the acquisition, improvement and
enlargement of the Project Building and the acquisition of the Project Equipment
and the installation thereof in or around the Project Building.
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"Project Equipment" means (i) all items (whether or not fixtures) of
furniture, furnishings, fixtures, machinery, equipment or other personal
property the costs of which, in whole or in part, have been or are to be paid by
the Company out of the proceeds of the Bonds and (ii) all items (whether or not
fixtures) of furniture, furnishings, fixtures, machinery, equipment or other
personal property that are acquired by the Company in substitution for or
replacement of items of machinery, equipment or other personal property
theretofore constituting part of the Project Equipment.
"Project Site" means (i) the parcel of land specifically described in
Exhibit A attached hereto and made a part hereof and (ii) any other land that,
at the time and under the terms hereof, constitutes a part of the Project Site.
"Rating Agency" means any nationally recognized securities rating
agency which shall have outstanding a rating respecting the Bonds.
"Reimbursement Agreement" means the Letter of Credit and Reimbursement
Agreement between the Company and the Bank dated as of November 1, 1995,
pursuant to which the Letter of Credit is being issued by the Bank and delivered
to the Trustee, and any and all modifications, alterations, amendments and
supplements thereto, and, with respect to any Substitute Letter of Credit, the
agreement specifying the terms of such facility with the bank or other
institution providing the same.
"Remarketing Agent" means First Fidelity Bank, N.A., Newark, New
Jersey, or any successor remarketing agent appointed in accordance with Section
12.1 of the Indenture.
"Substitute Letter of Credit" means a credit facility other than the
original Letter of Credit that complies with the requirements of Section 3.14 of
the Indenture, including, without limitation, a letter of credit or an insurance
policy which provides security for payment of the principal of and interest and
premium (if any) on the Bonds, it being understood that any Substitute Letter of
Credit shall also provide security for the payment of the purchase price of
Bonds tendered (or deemed to be tendered) to the Tender Agent pursuant to
Section 3.5 or 3.6 of the Indenture.
"Tender Agent" means the Trustee or any successor tender agent
appointed in accordance with Section 12.3 of the Indenture.
"Trustee" means the Trustee at the time serving as such under the
Indenture.
Section 1.2 Definitions Contained in the Indenture. Unless the context
clearly indicates a different meaning, any words, terms or phrases that are used
in this Lease as defined terms without being herein defined and that are defined
in the Indenture shall have the meanings respectively given them in the
Indenture.
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Section 1.3 Use of Phrases. "Herein", "hereby", "hereunder", "hereof",
"hereinbefore", "hereinafter", and other equivalent words refer to this Lease as
an entirety and not solely to the particular portion thereof in which any such
word is used. The definitions set forth in Section 1.1 hereof include both
singular and plural. Whenever used herein, any pronoun shall be deemed to
include both singular and plural and to cover all genders. Any percentage or
fractional amount of all the Bonds, specified herein for any purpose, is to be
figured on the aggregate principal amount of all the Bonds then outstanding.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties by the Council. The Council
makes the following representations and warranties as the basis for the
undertakings on its part herein contained:
(a) Organization. The Council is a public corporation validly existing
under the provisions of the Act, as now existing. The Council is not in default
under any of the provisions contained in its Bylaws or in the laws of the State
of Alabama. The Council has not initiated any proceedings or taken any action
for its dissolution.
(b) Litigation. There are no actions, suits or proceedings pending
(nor, to the knowledge of the Council, are any actions, suits or proceedings
threatened) against or affecting the Council or any property of the Council in
any court, or before an arbitrator of any kind, or before or by any governmental
body, which might materially and adversely affect the transactions contemplated
by this Lease or which might adversely affect the validity or enforceability of
this Lease or any other agreement or instrument to which the Council is or is to
be a party relating to the transactions contemplated by this Lease.
(c) Sale and Other Transactions are Legal and Authorized. The sale and
issuance of the Bonds, the execution and delivery of this Lease and the
Indenture, and the compliance with all the provisions of each thereof and of the
Bonds by the Council (i) are within the power and authority of the Council, (ii)
will not conflict with or result in a breach of any of the provisions of, or
constitute a default under, the Act or the Bylaws of the Council, any agreement
or other instrument to which the Council is a party or by which it may be bound,
or any license, judgment, decree, order, law, statute, ordinance or governmental
regulation applicable to the Council, and (iii) have been duly authorized by all
necessary corporate action on the part of the Council.
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(d) Governmental Consents. Neither the nature of the Council, nor any
of its activities or properties, nor any relationship between the Council and
any other Person, nor any circumstance in connection with the offering, sale,
issuance or delivery of any of the Bonds is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental body on the part of the Council in connection with the execution,
delivery and performance of either this Lease or the Indenture or the offering,
sale, issuance or delivery of any of the Bonds, other than (i) the due filing
and/or recording of the Lease and the Indenture and (ii) the due filing of
requisite Uniform Commercial Code financing statements.
(e) No Default. No event has occurred and no condition exists which
would constitute an "Event of Default" under the Indenture, as "Event of
Default" is therein defined, or which would become such an "Event of Default"
with the passage of time or with the giving of notice or both. The Council is
not in default under the Act, its Bylaws, or any agreement or instrument to
which it is a party or by which it is bound, or any judgment, order, rule or
regulation of any court or other governmental body applicable to it, to the
extent in any such case that the default in question would adversely affect the
existence of the Council, its corporate power to carry out the transactions
contemplated by this Lease or the validity of any of the Bonds or the security
therefor.
(f) The Bonds. The Bonds, when issued and paid for in accordance with
this Lease and the Indenture and when duly authenticated by the Trustee, will
constitute legal, valid and binding special obligations of the Council payable
solely from the sources provided in the Indenture.
(g) Location of Project. As of the delivery of this Lease all of the
components of the Project are located wholly within Calhoun County, Alabama.
(h) Full Disclosure. The representations and warranties made by the
Council in this Lease or in any written document furnished by the Council in
connection with the transactions contemplated by any of the Basic Agreements do
not contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein, in light of the
circumstances under which they were made, not misleading at the times they were
made. There is no fact which the Council has not disclosed which materially
adversely affects or, so far as the Council can now foresee, will materially
adversely affect, the Project or the financial condition of the Company or the
ability of the Company to perform its obligations under any of the Basic
Agreements to which it is a party.
(i) Fulfillment of Purposes of Act. The Council has determined that the
issuance of the Bonds, the performance of the Project Development Work and the
leasing of the Project to the Company will fulfill the purposes of the Act.
Section 2.2 Representations and Warranties by the Company. The Company
makes the following representations and warranties as the basis for the
undertakings on its part herein contained:
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(a) Organization and Qualification of Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Alabama. The Company has the power and authority to own its
properties and assets and to carry on its business as now being conducted and is
duly qualified to do business and is in good standing in the State of Alabama
and in every jurisdiction in addition to the State of Alabama wherein the
failure so to qualify and to maintain its standing would have a material adverse
effect on its business. The Company has all requisite power to enter into this
Lease and to consummate the transactions contemplated hereby, including, without
limitation, the execution, delivery and performance of each of the Basic
Agreements to which it is a party.
(b) Authorization and Validity of the Basic Agreements. The Company
has, by all necessary corporate action, duly authorized the execution, delivery
and performance of each of the Basic Agreements to which it is a party. When
duly executed and delivered by the respective parties thereto, each of the Basic
Agreements will constitute legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, except to the extent that
enforceability may be limited by (i) bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at equity or in law).
(c) Burdensome and Conflicting Agreements and Charter Provisions. The
Company is not subject to any charter or other restriction or to any judgment,
order, rule or regulation of any court or government body which materially and
adversely affects, or in the future may (so far as the Company can now foresee)
materially and adversely affect, the business, prospects, operations,
properties, assets or condition (financial or otherwise) of the Company, nor is
it a party to any instrument or agreement which in its reasonable business
judgment materially and adversely affects, or in the future may (so far as the
Company can now foresee) materially and adversely affect, the business,
prospects, operations, properties, assets or condition (financial or otherwise)
of the Company. Neither the execution and delivery of any of the Basic
Agreements to which the Company is a party, nor the offering, sale and issuance
of any of the Bonds, nor the consummation of the transactions herein or therein
contemplated, nor the fulfillment of or compliance with the terms and provisions
hereof or thereof conflicts with, or results in a breach of, or constitutes a
default under, or results in or requires the creation of any lien (other than
that created by the Bank Mortgage or by any other security agreements or
comparable instruments delivered to the Bank in connection with the issuance of
the Letter of Credit) in respect of any properties or assets of the Company
pursuant to, or requires any authorization, consent, approval, exemption or
other action by, or any notice to, or registration, qualification or filing
with, or any other action with respect to, any court, governmental body or any
other Person (other than those already obtained, taken or made, and other than
as contemplated by the Basic Agreements) pursuant to the terms, conditions or
provisions of any applicable law (including any securities or Blue Sky law),
rule, regulation, charter, bylaw, agreement, instrument, judgment or order by
which the Company is bound or to which the Company or any of its properties is
subject.
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(d) Governmental Consents. Neither the nature of the business or
property of the Company, nor any relationship between the Company and any other
Person nor any circumstance in connection with the offering, sale, issuance or
delivery of any of the Bonds is such as to require on the part of the Company
any consent, approval, permit, exemption, action, order or authorization of, or
filing, registration or qualification with, or with respect to, any court,
regulatory agency or other governmental body in connection with the execution
and delivery of this Lease or the offering, sale, issuance or delivery of any of
the Bonds (other than those already obtained, taken or made and which continue
in full force and effect).
(e) Litigation. There is no action, suit, inquiry, investigation or
proceeding pending or overtly threatened against or affecting the Company at law
or in equity or before or by any court or governmental body (nor, to the best
knowledge and belief of the Company, is there any basis therefor) which might
result in any material adverse change in the business, prospects, operations,
properties or assets or in the financial condition of the Company, or which
might materially and adversely affect the transactions contemplated by this
Lease, or which might impair the ability of the Company to comply with its
obligations hereunder.
(f) No Defaults. No event has occurred and no condition exists which,
upon the issuance of any of the Bonds, would constitute an Event of Default or
which would become such an Event of Default with the passage of time or with the
giving of notice or both. To the best of the knowledge of the Company, no event
has occurred and no condition exists which would constitute an "Event of
Default" under the Indenture, as "Event of Default" is therein defined, or which
would become such an "Event of Default" with the passage of time or with the
giving of notice or both. The Company is not in default in any respect under any
agreement or other instrument to which it is a party or by which it is bound, or
any judgment, order, rule or regulation of any court or other governmental body
applicable to it, to the extent in any such case that the default in question
would materially and adversely affect the transactions contemplated by this
Lease or would impair the ability of the Company to comply with its obligations
hereunder. The Company is not in default in the payment of the principal of or
the interest on any of its indebtedness and is not in default under any
instrument or agreement under and subject to which any of such indebtedness has
been incurred, and no event has occurred or is continuing under the provisions
of any such instrument or agreement which constitutes or will constitute an
event of default thereunder.
(g) Licenses, Permits, Etc. In the event that the Company is required
to obtain any licenses, permits or other approvals in connection with the
acquisition, construction, installation and operation of the Project, such
licenses, permits or other approvals will be duly obtained not later than the
time required.
(h) Project's Compliance with Statutes and Regulations. To the best of
the knowledge and judgment of the Company, the operation of the Project for the
purpose for which it was designed and acquired will not conflict with any
zoning, planning or similar regulations applicable thereto and will comply in
all material respects with all applicable statutes, regulations, orders and
restrictions.
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(i) Full Disclosure. Neither any information furnished by the Company
to the Placement Agent in connection with the sale and issuance of the Bonds and
the other transactions contemplated by this Lease, nor the representations and
warranties made by the Company in this Lease or in any document in writing
furnished by the Company to the Placement Agent in connection with the
transactions contemplated hereby, contain (except to the extent, as to any such
representation or warranty not made in this Lease or in a document required to
be furnished pursuant to this Lease, corrected in any other written
communication subsequently furnished by the Company to the Placement Agent prior
to the execution and delivery of this Lease) any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein, in light of the circumstances in which they were made, not misleading
at the times they were made. There is no fact known to the Company or which in
the exercise of reasonable diligence should have been known to the Company which
the Company has not disclosed to the Placement Agent in writing prior to the
execution and delivery of this Lease which materially adversely affects or, so
far as the Company can now in the exercise of its reasonable business judgment
foresee, will materially adversely affect the Project, the financial condition
of the Company or the ability of the Company to perform its obligations
hereunder or under any agreement contemplated hereby.
(j) Date of Acquisition of Project. None of the property which
constitutes part of the Project and the costs of which are to be paid, directly
or indirectly, with proceeds of the Bonds was acquired by the Company prior to
the effective date of the Inducement Resolution, nor did the Company enter into
any binding commitment for the acquisition of any such property prior to such
date.
(k) Location of Project. As of the delivery of this Lease, the Project
is located wholly within Calhoun County, Alabama.
ARTICLE III
DEMISING CLAUSES
Section 3.1 Demising Clauses. For and during the Lease Term, the
Council hereby demises and leases to the Company, subject to Permitted
Encumbrances, and the Company hereby rents from the Council, subject to
Permitted Encumbrances, the following described properties and related rights:
I
The parcel of land specifically described in Exhibit A attached hereto
and made a part hereof.
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II
The Project Building and all other buildings, structures and other
improvements now or hereafter situated on the Project Site, all permits,
easements, licenses, rights-of-way, contracts, leases, privileges, immunities
and hereditaments pertaining or applicable to the Project Site and all fixtures
now or hereafter owned by the Council and installed on the Project Site or in
the Project Building or in any of such other buildings, structures and
improvements now or hereafter located on the Project Site, it being the
intention hereof that all property, rights and privileges hereafter acquired for
use as a part of or in connection with or as an improvement to the Project Site
shall be as fully covered hereby as if such property, rights and privileges were
now owned by the Council and were specifically described herein.
III
All items (whether or not fixtures) of furniture, furnishings,
fixtures, machinery, equipment and other personal property that at any time,
under the provisions of the Lease, constitute the Project Equipment, including,
without limitation, the items (whether or not fixtures) of furniture,
furnishings, fixtures, machinery, equipment and other personal property
generally described in Exhibit B attached hereto and made a part hereof,
excluding, however, any such personal property that, under the provisions of the
Lease, is, or is to become (prior to the termination of the Lease), the sole
property of the Company or third parties.
ARTICLE IV
CONCERNING THE PROJECT DEVELOPMENT WORK;
ISSUANCE OF THE BONDS
Section 4.1 Performance of the Project Development Work. The Council
and the Company will undertake and complete, or will cause to be undertaken and
completed, the following work with respect to the Project:
(a) the improvement of the Project Site in such manner and to
such extent as the Company deems necessary or desirable,
(b) the improvement and enlargement of the Project Building,
which shall be improved and enlarged in accordance with detailed plans
and specifications to be prepared by the Company and its agents, and
(c) the acquisition and installation in or about the Project
Building or elsewhere on the Project Site of such items of furniture,
furnishings, fixtures, machinery, equipment and other personal property
necessary for or useful in the operation of the Project as shall be
specified by the Company (said furniture, furnishings, fixtures,
machinery, equipment and other personal property, as presently
envisioned by the Company, being generally described on Exhibit B
attached hereto and made a part hereof).
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The Council and the Company will use their best efforts to complete the Project
Development Work, or to cause the same to be completed, as promptly as
practicable, delays incident to strikes, riots, acts of God or the public enemy
or other acts beyond the reasonable control of the Council or the Company only
excepted; provided, however, that no liability on the part of the Council nor
any reduction in or postponement of any rentals payable by the Company hereunder
shall result from any delay in the completion of any of the Project Development
Work or from the failure of such work to be completed in accordance with the
plans, specifications and directions furnished by the Company.
The Council acknowledges that the Project is to be acquired, improved,
enlarged and installed in accordance with the requirements of the Company, and
it is therefore agreed and understood that the Company, at any time and from
time to time after the delivery of this Lease Agreement, may cause such changes
to be made in the design of the Project Building as it, in the exercise of its
sole judgment, may deem necessary or desirable; provided however, that (i) the
Project Building, as finally improved and enlarged in accordance with the
requirements of the Company, shall be of a size and quality substantially
equivalent to that contemplated by the Company at the time of the delivery of
this Lease Agreement and (ii) the character of the Project Building shall be
such as is necessary for the Project to qualify for financing under the Act.
Further, the Company may, after the delivery of this Lease Agreement, cause such
changes to be made in the Project Equipment described in Exhibit B hereto,
including additions thereto, deletions therefrom and substitutions therefor, as
it may desire and as will not cause the Project Equipment, as altered by such
changes, to be, in the reasonable judgment of the Company, functionally inferior
(insofar as the operation of the Project by the Company is concerned) to the
Project Equipment described in said Exhibit B. Except as provided in the
foregoing provisions of this paragraph, neither the Company nor the Council will
cause or permit any changes to be made in the design of the Project Building or
in the composition of the Project Equipment. The rights of the Company under
this paragraph to cause changes to be made in the Project Equipment described in
said Exhibit B shall apply only to the selection of such equipment prior to its
installation in or about the Project Building, and nothing herein contained
shall be construed to enlarge, restrict or otherwise alter the terms and
conditions contained in Section 6.2 of this Lease Agreement respecting the
removal of any item of the Project Equipment.
The Council will execute and deliver, or cause to be executed and
delivered, all contracts, orders, requisitions, instructions and other written
instruments and do, or cause to be done, all other acts or things that may be
necessary or proper to carry out the Project Development Work and to perform
fully its obligations under this Lease Agreement. In no event, however, will the
Council hereafter enter into any contract with respect to the Project
Development Work or any part thereof unless there is endorsed thereon a legend
indicating that the Company has approved both the form and substance of such
contract and such legend is signed on behalf of the Company by an Authorized
Company Representative.
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The Council hereby ratifies and confirms all actions heretofore taken
by it pursuant to the Inducement Resolution and assumes and adopts all contracts
heretofore entered into by the Company, whether in the name and behalf of the
Council or in the name and behalf of the Company, with respect to the Project
Development Work; provided, however, that any obligation for the payment of
money incurred or assumed by the Council with respect to any such contract shall
be payable solely from the proceeds derived by the Council from the sale of any
of the Bonds, from income earned by the Council from the investment of such
proceeds or from any moneys made available to the Council by the Company for the
payment of such obligation.
The Council and the Company shall each appoint by written instrument an
agent or agents authorized to act for each respectively in any or all matters
arising under the Lease or the Indenture which, by the specific terms of the
Lease or the Indenture, require action by such agents. Each agent so appointed
to act for the Council shall be designated an Authorized Council Representative,
and each agent so appointed to act for the Company shall be designated an
Authorized Company Representative. Either the Council or the Company may from
time to time, by written notice to the other party hereto and to the Trustee,
revoke, amend or otherwise limit the authorization of any agent appointed by it
to act on its behalf or designate another agent or agents to act on its behalf,
provided that with reference to all the foregoing matters there shall be at all
times at least one Authorized Council Representative authorized to act on behalf
of the Council and at least one Authorized Company Representative authorized to
act on behalf of the Company.
Section 4.2 Agreement to Issue Bonds. In order to finance a portion of
the Project Development Costs, the Council will, simultaneously with the
delivery hereof, issue and sell the Bonds and, as security therefor, execute and
deliver the Indenture. In the Indenture, the Council has agreed, upon the
occurrence of an Adjudication of Invalidity with respect to the Authority Bonds
and the satisfaction of certain conditions precedent, to issue a second
installment of bonds pursuant to the Indenture. The Council acknowledges that,
for the further security of the Holders of the Bonds, the Bank has issued the
Letter of Credit and that in connection therewith the Company and the Bank have
entered into the Reimbursement Agreement and the Council, the Company and the
Bank have entered into the Bank Mortgage. All the terms and conditions of the
Indenture (including, without limitation, those relating to the amounts and
maturity date or dates of the principal of the Bonds, the interest rate or rates
thereof and the provisions for redemption thereof prior to their respective
maturities) are hereby approved by the Company, and to the extent that any
provision of the Indenture, the Reimbursement Agreement or the Bank Mortgage is
relevant to the calculation of any rental or other amount payable by the Company
hereunder or to the determination of any other obligation of the Company
hereunder, the Company hereby agrees that such provision of such instrument
shall be deemed a part hereof as fully and completely as if set out herein.
Section 4.3 Disbursement of Moneys from Construction Fund. Subject to
the conditions of Section 4.4 hereof, the Council will pay, or cause to be paid,
all Project Development Costs (other than those paid with proceeds of the
Authority Bonds), but such costs shall be paid solely out of the principal
proceeds from the sale of the Bonds, income earned from the investment of such
proceeds and any other moneys which the Company may cause to be deposited in the
Construction Fund. The Company, as agent for the Council, will cause such
requisitions to be prepared and submitted to the Trustee as shall be necessary
to enable the Trustee to pay, out of moneys held in the Construction Fund in
accordance with the provisions of Section 7.1 of the Indenture, the Project
Development Costs. The Company, upon request, will furnish a copy of each such
requisition to the Council.
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The Council will, simultaneously with the issuance of the Bonds or as
soon thereafter as may be practicable, cause the Trustee, upon submission of
requisitions satisfying the requirements of the Indenture, to reimburse the
Company, out of the proceeds of the Bonds deposited in the Construction Fund,
for (i) all costs and expenses that the Company may have heretofore paid or
incurred in connection with the Project Development Work, and (ii) all advances
and loans to the Council heretofore made by the Company in order to enable the
Council to pay Project Development Costs. The Company hereby acknowledges and
agrees that the failure by the Council to reimburse the Company, or to cause the
Company to be reimbursed, in full for all such costs and expenses and all such
advances [whether such failure results from insufficient moneys being available
in the Construction Fund for such purpose, a decision by the Company not to
request such reimbursement or any other cause (other than a willful refusal by
the Council to perform its obligations hereunder)] shall not result in any
diminution or postponement of any rentals payable by the Company hereunder, or
in the acquisition of title to any part of the Project by the Company, or in the
imposition of a lien in favor of the Company upon any part of the Project.
Section 4.4 No Warranty of Suitability by the Council. Company Required
to Make Arrangements for Payment of Project Development Costs. The Company
recognizes that the Project Development Work has been or is to be planned and
carried out under its control and in accordance with its requirements, and the
Council can, therefore, make no warranty, either express or implied, or offer
any assurances that such work, when completed, will be suitable for the
Company's purposes or needs or that the proceeds derived from the sale of the
Bonds, together with the income (if any) earned from the investment of such
proceeds, will be sufficient to pay in full all the Project Development Costs.
In the event such proceeds and investment income (if any) are insufficient to
pay all the Project Development Costs, the Company
(a) will cause such changes to be made in the scope of the
Project Development Work (including changes in the design of the
Project Building or in the composition of the Project Equipment) as
will result in the aggregate Project Development Costs not exceeding
such proceeds and investment income, or
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(b) will itself complete the Project Development Work as
originally planned and will pay that portion of the Project Development
Costs in excess of such proceeds and investment income, or
(c) will pay into the Construction Fund such moneys as are
necessary for the payment of all Project Development Costs, in which
case the Council will complete the Project Development Work, or
(d) will take action pursuant to any two or more of the
courses of action described in the preceding clauses (a), (b) or (c),
all to the end that all obligations incurred by the Council in connection with
the Project Development Work shall be paid in full and that the acquisition,
improvement, enlargement and installation of the Project shall be completed. The
Company shall not, by reason of (1) its direct payment of any excess Project
Development Costs, (2) its payment of any moneys into the Construction Fund for
the payment of any such costs or (3) any other arrangements made by it for the
payment of such costs, be entitled to any reimbursement from the Council or to
any diminution or postponement of any rentals payable by the Company hereunder.
Further, the fact that the Company directly pays, or directly or indirectly
furnishes money to the Council for the payment of, any part of the Project
Development Costs shall not result in the Company's acquisition of title to any
part of the Project or in the imposition of a lien in favor of the Company upon
any part of the Project, it being understood and agreed (A) that title to all
the Project shall, as between the Council and the Company, be fully and solely
vested in the Council and (B) that any such lien in favor of the Company that
might so result is hereby expressly waived and released by the Company.
Section 4.5 Council to Pursue Rights Against Suppliers and Contractors,
etc. In the event of default by any supplier, contractor or subcontractor under
any contract with the Council for the performance of the Project Development
Work or any part thereof, the Council will, upon written request made to it by
the Company, proceed, either separately or in conjunction with others, to
exhaust all remedies the Council may have against such supplier, contractor or
subcontractor so in default and against each surety (if any) for the performance
of such contract, but all actions taken by the Council to exhaust such remedies
shall be at the expense of the Company. Further, in the event the Council
proceeds in an arbitration proceeding or by an action at law or in equity
against any such supplier, contractor, subcontractor or surety pursuant to the
provisions of this section or in the event any such supplier, contractor,
subcontractor or surety brings any such proceeding or action against the Council
in connection with or relating to the Project Development Work, the Council will
follow all reasonable directions given to it by the Company in connection with
such proceeding or action, and the Company shall have full and complete control
thereof, but any Counsel selected by the Company for the Council shall be
subject to the approval of the Council. The net amount recovered by the Council
in any such proceeding or action shall be paid into the Construction Fund or, if
such amount is recovered after the Completion Date, to the Company, unless an
Event of Default shall have occurred and be continuing, in which case such
amount shall be paid into the Bond Fund.
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The Council hereby transfers and assigns to the Company all the
Council's rights and interests in, to and under any maintenance or surety bonds
or warranties respecting quality, durability or workmanship obtained by or
vested in the Council in connection with the Project Development Work, and
grants to the Company the right to take action, in the name of either the
Council or the Company, but at the Company's sole cost and expense, for the
enforcement of such bonds and warranties. The net amount recovered in any such
action shall be paid into the Construction Fund or, if such amount is recovered
after the Completion Date, to the Company, unless an Event of Default shall have
occurred and be continuing, in which case such amount shall be paid into the
Bond Fund.
Section 4.6 Certification of Completion Date. The Completion Date shall
be evidenced to the Trustee and the Council by a certificate signed by an
Authorized Company Representative stating that
(a) the acquisition, improvement, enlargement and installation
of the Project and all other Project Development Work have been
completed in accordance with the applicable plans, specifications and
directions furnished by the Company,
(b) all the Project Development Costs have been paid in full,
except for amounts retained by the Company or by the Trustee at the
Company's direction for any such costs not then due and payable or the
liability for payment of which is being contested or disputed by the
Company or by the Council at the Company's direction, and
(c) the Project is operational for the purpose for which it
was designed.
ARTICLE V
DURATION OF LEASE TERM AND RENTAL PROVISIONS
Section 5.1 Duration of Lease Term. The Lease Term shall begin on the
date of the delivery of this Lease Agreement and, subject to the provisions
hereof, shall continue until 11:59 o'clock, P.M., on November 1, 2015. The
Council will deliver to the Company sole and exclusive possession of the Project
(or such portion or portions thereof as are then in existence) on the
commencement date of the Lease Term, subject to the inspection and other rights
reserved in Section 8.4 hereof, and the Company will accept possession thereof
at such time; provided, however, that the Council will be permitted such access
to the Project as shall be necessary and convenient for it to accomplish the
undertakings on its part contained in Section 4.1 hereof; and provided further,
that the Council will be permitted such possession of the Project as shall be
necessary and convenient for it to make any repairs, restorations, additions or
improvements required or permitted to be made by the Council pursuant to the
provisions of the Lease.
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Section 5.2 Basic Rent; Additional Rent; Absolute and Unconditional
Obligation to Pay Basic Rent and Additional Rent. In addition to any other
rentals payable under the Lease, the Company shall pay:
(a) Basic Rent.
(1) The Company shall make Basic Rent payments to the Trustee
or the Tender Agent, for the account of the Council, in installments as
follows:
(a) at or before 11:00 a.m. (New York City time) on each Bond
Payment Date, the Company shall pay to the Trustee, in immediately
available funds, an amount equal to the principal of and the interest
and premium (if any) on the Bonds due on such Bond Payment Date;
provided, however, that any amount already on deposit in the Bond Fund
on the due date of such Basic Rent payment and available for the
payment of debt service on the Bonds on such Bond Payment Date or any
moneys drawn under the Letter of Credit and available for such payment
shall be credited against the amount of such Basic Rent payment; and
(b) at or before 11:00 a.m. (New York City time) on each
Tender Date with respect to the Bonds, the Company shall pay to the
Tender Agent, in immediately available funds, an amount equal to the
purchase price of Bonds tendered (or deemed tendered) for purchase on
such Tender Date; provided, however, that any amount already on deposit
in the Bond Purchase Fund on such Tender Date that is available for the
payment of the purchase price of Bonds to be tendered on such Tender
Date or any moneys drawn under the Letter of Credit and available for
such payment shall be credited against the amount of such Basic Rent
payment.
(2) If, during any year while any of the Bonds shall be
outstanding, the Basic Rent shall be insufficient to pay the principal
of and the interest and premium (if any) on the Bonds as the same
become due, the amount of the insufficiency shall be paid by the
Company as additional Basic Rent. If at any time the amount in the Bond
Fund is sufficient to pay in full the debt service on all outstanding
Bonds, then no further Basic Rent shall be payable hereunder. If any
moneys remain in the Bond Fund after payment or the making of provision
for payment in accordance with the provisions of the Indenture of the
principal of, premium, if any, interest on, and, if redemption is
involved, redemption expenses in connection with, all outstanding
Bonds, such remaining moneys shall be transmitted to the Bank to the
extent that funds are owed to the Bank under the Reimbursement
Agreement and otherwise shall be refunded to the Company as excess
Basic Rent.
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(b) Additional Rent. The Company shall pay Additional Rent to the
Council or to the Trustee, as the case may be, as follows:
(1) the acceptance fee of the Trustee and the annual (or other
regular) fees, charges and expenses of the Trustee, the Tender Agent
and the Remarketing Agent (including the fees of their respective
counsel and agents) designated under the Indenture;
(2) any other amount to which the Trustee may be entitled
under the Indenture;
(3) the reasonable expenses of the Council incurred at the
request of the Company, or in the performance of its duties under the
Lease, the Indenture, the Bank Mortgage or the Bonds, or in connection
with any litigation which may at any time be instituted involving the
Project, the Lease, the Indenture, the Bank Mortgage or the Bonds or in
the pursuit of any remedies under the Lease, the Indenture, the Bank
Mortgage or the Bonds.
(c) All Additional Rent payments shall be due and payable within 10
Business Days after receipt by the Company of a reasonably detailed invoice
therefor.
(d) Any overdue Basic Rent payment shall bear interest from the related
Bond Payment Date or Tender Date until paid at a per annum rate which is one
percent (1%) greater than the interest rate borne by the Bonds during the
applicable period. Any overdue Additional Rent payment shall bear interest from
the date due until paid at a per annum rate which is two percent (2%) greater
than the Prime Rate in effect from time to time.
Section 5.3 Method of Payment of Basic Rent and Additional Rent.
Payments of Basic Rent shall be made to the Council by the Company's remitting
the same directly to the Trustee or the Tender Agent, for the account of the
Council, and shall be deposited by the Trustee in the Bond Fund or by the Tender
Agent in the Bond Purchase Fund. The Council agrees at the Company's request to
cause the Trustee to furnish to the Company at reasonable intervals an
accounting of the funds in the Bond Fund, including the amount of Bonds paid and
outstanding. Additional Rent specified in Section 5.2 shall be paid by the
Company's remitting the same directly to the Trustee, for the account of the
Council, in the case of the Trustee's fees, expenses and charges and either
making direct payment in the case of impositions and other costs, expenses,
liabilities and payments assumed and agreed to be paid by the Company under the
Lease, or reimbursing the Council or the Trustee, if, pursuant to the provisions
of the Lease, the Council or the Trustee shall make payment thereof.
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Section 5.4 Optional Prepayment of Basic Rent. The Company may, at its
option at any time and from time to time, prepay directly to the Trustee, for
the account of the Council, such amount of Basic Rent as shall be sufficient to
enable the Council to redeem and retire, in advance of maturity, any or all of
the Bonds in accordance with their terms and the terms of the Indenture. In the
event of such prepayment, the Council will cause the amount of Basic Rent so
prepaid to be applied to redemption and retirement of Bonds, in accordance with
the provisions of the Indenture, on the earliest practicable date after receipt
of such prepaid Basic Rent on which, under their terms and the terms of the
Indenture, such Bonds may be redeemed, and will (upon being notified by the
Company in writing of the Company's intention in this respect and without the
necessity of the moneys therefor being deposited with the Trustee) take all
action necessary under the provisions of the Indenture to effect such
redemption. Prepayments of Basic Rent referable to the Bonds shall be applied to
the redemption of Bonds at the redemption prices and in accordance with the
other terms and conditions set forth in Section 3.8 of the Indenture or to
reimburse the Bank for moneys advanced under the Letter of Credit to effect the
redemption of Bonds.
Section 5.5 General Provisions Concerning Prepayment of Basic Rent. The
prepayment of Basic Rent pursuant to any provision of the Lease will result in a
total or partial abatement of the Basic Rent that would thereafter have come due
had it not been for such prepayment. After the prepayment of Basic Rent
sufficient to pay, redeem and retire all the outstanding Bonds, the Company
shall be entitled to the use and possession of the Project without the payment
of any further Basic Rent but otherwise on all the same terms and conditions of
the Lease.
Section 5.6 Obligations of Company Unconditional. The obligation of the
Company to pay the Basic Rent, to make all other payments provided for herein
and to perform and observe the other agreements and covenants on its part herein
contained shall be absolute and unconditional, irrespective of any rights of
set-off, recoupment or counterclaim it might otherwise have against the Council.
The Company will not suspend, discontinue, reduce or defer any such payment or
fail to perform and observe any of its other agreements and covenants contained
herein or (except as expressly authorized herein) terminate the Lease for any
cause, including, without limiting the generality of the foregoing, the failure
of the Council to complete the acquisition, improvement, enlargement and
installation of the Project or any other part of the Project Development Work,
any acts or circumstances that may deprive the Company of the use and enjoyment
of the Project, failure of consideration or commercial frustration of purpose,
or any damage to or destruction of the Project or any part thereof, or the
taking by Eminent Domain of title to or the right to temporary use of all or any
part of the Project, or any change in the tax or other laws, rules and
regulations of the United States of America, the State of Alabama or any
political or taxing subdivision or any department or agency of either thereof,
or any change in the cost or availability of labor or energy adversely affecting
the profitable operation of the Project by the Company, or any failure of the
Council to perform and observe any agreement or covenant, whether express or
implied, or any duty, liability or obligation arising out of or connected with
the Lease.
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The provisions of the first paragraph of this section shall remain in
effect only so long as any of the Indenture Indebtedness remains outstanding and
unpaid. Nothing contained in this section shall be construed to prevent the
Company, at its own cost and expense and in its own name or in the name of the
Council, from prosecuting or defending any action or proceeding or taking any
other action involving third persons which the Company deems reasonably
necessary in order to secure or protect its rights hereunder, including, without
limitation, such actions as may be necessary to insure that the Project
Development Work will be completed in accordance with the directions and
requirements of the Company, and in such event the Council will cooperate fully
with the Company in any such action or proceeding. Further, nothing contained in
this section shall be construed to release the Council from the performance of
any of the agreements on its part herein contained or to preclude the Company
from instituting such action against the Council as the Company may deem
necessary to compel such performance, it being understood and agreed, however,
that no such action on the part of the Company shall in any way affect the
agreements on the part of the Company contained in the first paragraph of this
section or in any way relieve the Company from performing any such agreements.
ARTICLE VI
PROVISIONS CONCERNING MAINTENANCE,
ADDITIONS, REMOVAL OF PROJECT EQUIPMENT,
INSURANCE AND TAXES
Section 6.1 Maintenance, Additions, Alterations, Improvements and
Modifications. The Company will, at its own expense, keep the Project in
reasonably safe condition and keep all improvements, equipment and other
facilities at any time forming part of the Project in good repair and operating
condition (reasonable wear and tear excepted), making from time to time all
necessary and proper repairs thereto (including, without limitation, exterior
and structural repairs); provided, however, that the Company shall have no
obligation hereunder to repair or maintain the Project after full payment of the
Indenture Indebtedness. The Council and the Company recognize that, as a result
of reasonable wear and tear, technological obsolescence or other causes, various
items of the Project Equipment may become inadequate, obsolete, worn-out or
unsuitable in the use and operation of the Project by the Company, but neither
the Council nor the Company shall be obligated to replace or renew any such
items of the Project Equipment.
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The Company may, at its own cost and expense, make, or cause to be
made, any additions, alterations, improvements or modifications to the Project
that it may deem desirable for its business purposes, provided that such
additions, alterations, improvements or modifications do not change the
character of the Project to such extent that it no longer constitutes an
industrial project of the type that the Council is empowered to own under the
provisions of the Act. All such additions, alterations, improvements and
modifications to the Project so made, or caused to be made, by the Company shall
be and become a part of the Project subject to the demise hereof and shall be
held by the Company on the same terms and conditions as the property originally
constituting the Project.
All additions, alterations, improvements or modifications to the
Project made, or caused to be made, by the Company shall
(a) be located wholly within the boundaries of the Project
Site,
(b) be located wholly within the boundaries of other adjacent
land hereafter acquired by the Council that has been subjected to the
demise of the Lease, or
(c) be located wholly within the boundaries of the Project
Site and such other adjacent land.
Any such adjacent land so subjected to the demise hereof shall thenceforth be
considered, for purposes of the Lease, as part of the Project Site. All such
additions, alterations, improvements and modifications to the Project so made,
or caused to be made, by the Company shall become a part of the Project.
The Company will not permit any mechanics' or other liens to stand
against the Project for labor, materials, equipment or supplies furnished in
connection with the original acquisition, improvement, enlargement and equipment
of the Project or in connection with any additions, alterations, improvements,
modifications, repairs or renewals that may subsequently be made thereto. The
Company may, however, at its own expense and in good faith, contest any such
mechanics' or other liens and in the event of any such contest may permit any
such liens to remain unsatisfied and undischarged during the period of such
contest and any appeal therefrom unless by such action any part of the Project
shall be subject to loss or forfeiture, in which event such mechanics' or other
liens shall (unless they are bonded or superseded in a manner satisfactory to
the Trustee) be satisfied promptly.
At any time and from time to time, the Company may, at its own cost and
expense, install in or around the Project Building any equipment or other
personal property which does not constitute part of the Project Equipment and
which in the Company's judgment is necessary or convenient for its use and
operation of the Project, provided that the installation of such equipment or
other personal property does not significantly impair the value or utility of
the Project. Any such equipment or personal property owned (or leased pursuant
to any lease contract other than the Lease) by the Company may be removed by the
Company at any time and from time to time without responsibility or
accountability to the Council or the Trustee, but the Company shall promptly
repair at its own expense any damage to the Project caused by the removal of any
such equipment or other personal property.
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Section 6.2 Removal of Project Equipment. In any instance where the
Company in its sole discretion determines that any item of the Project Equipment
has become inadequate, obsolete, unsuitable, undesirable or unnecessary in the
use and operation of the Project, the Company may remove such item of Project
Equipment from the Project and (on behalf of the Council) sell, trade in,
exchange or otherwise dispose of it without any responsibility or accountability
to the Council or the Trustee therefor. In any instance not described in the
preceding sentence, the Company may so remove and dispose of items of Project
Equipment, provided that the Company thereafter substitutes and installs in or
about the Project Building other equipment or other personal property having
equal or greater utility (but not necessarily the same value or function) in the
operation of the Project, which such substituted equipment or other property
shall be free of all liens and encumbrances (other than Permitted Encumbrances),
shall be the sole property of the Council, shall become a part of the Project
Equipment subject to the demise hereof and shall be held by the Company on the
same terms and conditions as the items originally constituting the Project
Equipment.
If as a result of the removal of any item of the Project Equipment
pursuant to the provisions of the first paragraph of this Section 6.2, the
Company becomes obligated to substitute other equipment or other personal
property for the Project Equipment so removed, it may, so long as it is not in
default with respect to the payment of any installment of Basic Rent, defer the
substitution of such other equipment or other personal property for any
reasonable period, taking into account (without limitation thereto) such causes
for delay as strikes or labor disputes, disruption of operations at the Project
due to the construction of improvements thereto, and delays in the delivery of
purchased equipment or other personal property to be substituted for the Project
Equipment so removed. Upon the substitution of any equipment or other personal
property for any item of the Project Equipment removed pursuant to the
provisions of the first paragraph of this Section 6.2, the Company will furnish
the Council with a certificate signed by an Authorized Company Representative
describing such equipment or other personal property and identifying the Project
Equipment for which it is to be substituted. Anything herein contained to the
contrary notwithstanding, the Company shall not be in default under this Lease
Agreement because of any failure to substitute equipment or other personal
property for any Project Equipment theretofore removed from the Project unless
such failure shall have continued for at least ninety (90) days after the
Council or the Trustee shall have given the Company written notice specifying
the Project Equipment theretofore removed for which no substitution has been
made and requesting the Company to make an appropriate substitution therefor.
In any case where the Company does not then own any equipment or other
personal property suitable for substitution for any of the Project Equipment
removed from the Project pursuant to the provisions of the first paragraph of
this Section 6.2, or in any case where the Company desires to purchase the
equipment or other personal property to be substituted for any of the Project
Equipment so removed, the Company may, in lieu of purchasing and installing such
equipment or other personal property, advance to the Council the funds necessary
therefor, whereupon the Council will purchase and install such equipment or
other personal property.
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The Council will, by bill of sale or other appropriate conveyance,
convey to the Company any item of the Project Equipment which, as a result of
compliance with the provisions of this Section 6.2, the Company is entitled to
have released from the demise of this Lease Agreement. The Company will
reimburse the Council for its reasonable expenses and disbursements incurred in
connection with such conveyance and the execution and delivery of such
instrument.
The preceding provisions of this section shall apply only so long as
any of the Indenture Indebtedness remains unpaid. After full payment of the
Indenture Indebtedness and the cancellation and satisfaction of the Indenture in
accordance with the provisions thereof, the Company may, if in its sole
discretion it determines that any or all items of the Project Equipment have
become unsuitable or unnecessary for its use and operation of the Project,
remove such items of the Project Equipment from the Project Building and (on
behalf of the Council) sell or otherwise dispose of such items, without any
responsibility or accountability to the Council therefor and without being
required to install in or around the Project Building equipment or other
personal property in substitution therefor, and may retain any money or other
consideration received by it upon any disposition of such items of Project
Equipment.
Nothing contained herein shall prohibit the Company, at any time during
which no Event of Default shall have occurred and be continuing, from removing
from the Project Building any equipment or other personal property that is owned
by it or leased by it from third parties and that does not constitute part of
the Project Equipment; provided, however, that if any such equipment or other
personal property owned by the Company or leased by it from third parties is
removed from the Project Building prior to full payment of the Indenture
Indebtedness, the Company will promptly repair at its own expense any damage to
the Project caused by such removal.
Section 6.3 Taxes, Other Governmental Charges and Utility Charges. The
Company will pay
(a) all taxes and governmental charges of any kind whatsoever
that may lawfully be assessed or levied against or with respect to the
Project, including, without limiting the generality of the foregoing,
any taxes levied upon or with respect to any part of the receipts,
income or profits of the Council from the Project and any other taxes
levied upon or with respect to the Project which, if not paid, would
become a lien on the Project or a charge on the revenues and receipts
therefrom prior to or on a parity with the pledge and assignment
thereof made in the Indenture,
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(b) all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by a lien
on the Project; provided that with respect to special assessments or
other governmental charges that may lawfully be paid in installments
over a period of years, the Company shall be obligated to pay only such
installments as are required to be paid during any period while the
Lease shall be in effect, and
(c) all claims or judgments which, if not paid or discharged,
would give rise to a lien on the Project, or a charge on the revenues
of the Council from the Project prior to, or on a parity with, the
pledge and assignment of such revenues made in the Indenture.
The Council will forward to the Company, promptly following its receipt thereof,
any bills, statements, assessments, notices or other instruments asserting or
otherwise relating to any such taxes, assessments or charges.
The Company may, at its own expense and in its own name and behalf or
in the name and behalf of the Council, in good faith contest any such taxes,
assessments and other charges and, in the event of any such contest, may, if it
so notifies the Council and the Trustee in writing, permit the taxes,
assessments or other charges so contested to remain unpaid during the period of
such contest and any appeal therefrom. The Council will cooperate fully with the
Company in any such contest.
The Company will also pay, as the same respectively become due, all
utility and other similar charges incurred in the operation, maintenance, use
and upkeep of the Project.
Section 6.4 Insurance with Respect to Project. The Company will take
out not later than the effective date of this Lease Agreement and thereafter
continuously maintain in effect or cause to be so taken out and maintained in
effect the following insurance:
(a) insurance against loss or damage to all of the
improvements and items of personal property that constitute part of the
Project by fire, lightning, vandalism and malicious mischief, with
uniform standard extended coverage endorsement limited only as may be
provided in the standard form of extended coverage endorsement at the
time in use in the State of Alabama, to such extent as is necessary to
provide (i) for full payment of the costs of repairing, restoring or
replacing the property damaged or destroyed or, if insurance to such
extent is not available, to the extent of the full insurable value (as
determined by a recognized insurer) of such improvements and personal
property or (ii) for the recovery of such lesser amount as may be
required for the full payment of the Indenture Indebtedness then
outstanding; and
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(b) comprehensive general liability insurance against
liability for personal or bodily injury to or death of persons and for
damage to or loss of property occurring on or about the Project or in
any way related to the use or occupancy of the Project in the minimum
amounts of $1,000,000 per person per occurrence and $2,000,000
aggregate per occurrence.
All policies providing the insurance required by this section shall be
taken out and maintained in generally recognized responsible insurance
companies, qualified under the laws of the State of Alabama to assume the
respective risks undertaken. All such policies may be written with deductible
amounts comparable to those on similar policies carried by organizations owning
or occupying similar properties. All policies providing the insurance required
to be carried by this section shall be deposited with the Trustee, provided,
however, in lieu thereof the Company may deposit with the Trustee a certificate
or certificates of the respective insurers attesting the fact that such
insurance is in force and effect. At least thirty (30) days prior to the
expiration date of any such policy, the Company will furnish to the Trustee
evidence reasonably satisfactory to the Trustee that such policy has been
renewed or replaced by another policy or that there is no necessity therefor
under the Lease. Anything herein to the contrary notwithstanding, any insurance
required by the provisions hereof may be evidenced by a blanket policy covering
risks in addition to those hereby required to be covered, but if and only if
appropriate allocation certificates and loss payable endorsements are furnished
to the Trustee.
ARTICLE VII
PROVISIONS RESPECTING DAMAGE,
DESTRUCTION AND CONDEMNATION
Section 7.1 Damage and Destruction Provisions. If, prior to full
payment of the Indenture Indebtedness, the Project is destroyed, in whole or in
part, or is damaged, by fire or other casualty, the Company will promptly so
notify the Council and the Trustee in writing. All obligations of the Company
and the Council under the Lease which are still capable of performance
(including, without limitation, the obligation of the Company to pay the Basic
Rent and all Additional Rent due hereunder) shall continue in full force and
effect. If, in such event, the Company is not entitled to exercise the option to
purchase the Project granted in Section 11.2 hereof or if, in such event, being
entitled to, it does not exercise such option, the Net Insurance Proceeds
recovered by the Council, the Company and the Trustee on account of such damage
or destruction shall be paid to and held by the Trustee. Pursuant to directions
to be given the Council and the Trustee by the Company in a written statement to
be forwarded to the Council and the Trustee not more than ninety (90) days
following the event causing such damage or destruction, such proceeds shall be
applied by the Trustee in one or both of the following ways (the amount, if any,
to be applied in each such way to be specified in such written statement):
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(a) payment of the costs of repairing, replacing or restoring
the property damaged or destroyed to the extent necessary for it to
have substantially the same functional value that it had (or would have
had if the Company had theretofore complied with all of its obligations
hereunder) prior to the event causing such damage or destruction, with
such changes, alterations or modifications as shall be specified by the
Company; or
(b) the redemption of Bonds prior to maturity in accordance
with the terms of the Indenture and on the earliest practicable date
permitted thereby (or, prior to the termination of the Letter of
Credit, the reimbursement of the Bank for moneys advanced under the
Letter of Credit to redeem Bonds), or the purchase of Bonds for
retirement, in which case such portion of the Net Insurance Proceeds to
be used therefor shall be deposited in the Redemption Fund, provided
that no part of any such portion of the Net Insurance Proceeds shall be
so deposited in the Redemption Fund and so applied for any such purpose
unless the Bank shall consent in writing to such deposit and
application.
In the event that the Bank does not consent to the redemption of Bonds as
required by the provisions of subparagraph (b) of this paragraph, then the Net
Insurance Proceeds shall be applied in accordance with the provisions of
subparagraph (a) of this paragraph.
In the event that the Net Insurance Proceeds held by the Trustee (or
any specified portion thereof) are to be applied for payment of the costs of
repairing, replacing or restoring the property damaged or destroyed, the
Construction Fund shall be reestablished and such proceeds (or specified portion
thereof) shall be deposited therein, and the Council will cause disbursements to
be made from such fund to pay such costs in the same manner (with the necessary
changes in detail) as provided in the Indenture for the disbursement of proceeds
of the Bonds originally deposited in such fund. Any balance of the Net Insurance
Proceeds (or any balance of the portion thereof specified for the payment of
such costs) remaining after the payment of all such costs shall be paid into the
Redemption Fund.
In the event that the Net Insurance Proceeds (or the portion thereof
specified for the payment of such costs) are not sufficient to pay in full the
costs of such repair, replacement or restoration, the Company (i) will
nonetheless complete the work thereof and will pay that portion of the costs
thereof in excess of the Net Insurance Proceeds (or specified portion thereof)
available for the payment of such costs, or (ii) will pay to the Trustee, for
the account of the Council, the moneys necessary to complete such work, in which
case the Council will cause such work to be so completed, and the Council and
the Trustee will, upon completion of such work and payment in full of the costs
thereof, return to the Company any portion of such payment that is not needed
therefor. The Company shall not, by reason of the payment of such excess costs
(whether by direct payment thereof or payment to the Trustee therefor), be
entitled to any reimbursement from the Council or to any abatement or diminution
of the rent provided for herein.
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In no event shall any of the Net Insurance Proceeds held by the Trustee
be applied for payment of any costs of repair, replacement or restoration unless
and until (i) the Council and the Trustee have been notified in writing by the
Company that the Company irrevocably relinquishes any right it may have, on
account of such damage or destruction, to exercise the option to purchase the
Project granted in Section 11.2 hereof, or (ii) the time within which the
Company must exercise such option has expired without the Company having
exercised such option. If, however, as a result of such damage or destruction,
the Company is entitled to exercise such option and duly does so in accordance
with the applicable provisions of said Section 11.2, then neither the Company
nor the Council shall have any obligation to repair, replace or restore the
property damaged or destroyed, in which case so much (which may be all) of such
Net Insurance Proceeds then held by the Trustee as shall be necessary to provide
for full retirement of the Bonds (as specified in Section 11.2 hereof) shall be
paid or credited by the Trustee into the Bond Fund Primary Account and so much
of the excess thereafter remaining (if any) as shall be necessary for the
payment of any other Indenture Indebtedness shall be applied by the Trustee to
the payment of such other Indenture Indebtedness. Any portion of such Net
Insurance Proceeds remaining after payment in full of the entire Indenture
Indebtedness and payment to the Bank of any amounts owed to it under the
Reimbursement Agreement shall be paid to the Company after or simultaneously
with the exercise by the Company of such option.
If the Project is destroyed, in whole or in part, or is damaged after
the Indenture Indebtedness has been paid in full, neither the Company nor the
Council shall be obligated to repair, replace or restore the property damaged or
destroyed, and any Net Insurance Proceeds referable to such damage or
destruction shall be paid to the Company; provided, however, that the Council
will, to the extent and in the manner provided in Section 7.6 hereof, cooperate
fully with the Company in carrying out such repair, replacement and restoration
as the Company may, in its sole discretion, decide to undertake.
All property acquired in connection with the repair, replacement or
restoration of any part of the Project pursuant to the provisions of this
Section 7.1 shall be and become part of the Project subject to the demise hereof
and shall be held by the Company on the same terms and conditions as the
property originally constituting the Project.
Section 7.2 Condemnation Provisions. If title to the Project or any
part thereof is taken under the exercise of the power of Eminent Domain, the
entire condemnation award in respect of such taking [including, without
limitation, (i) all amounts received as the result of any settlement of
compensation claims negotiated with the condemning authority, and (ii) any
amount awarded as compensation for the interest of the Company in the part of
the Project taken and as damages to the interest of the Company in any part
thereof not taken, but not including any condemnation award belonging to the
Company pursuant to the provisions of Section 7.4 hereof] shall be applied and
certain related actions shall be taken in accordance with the succeeding
provisions of this Section 7.2:
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(a) Taking of All or Substantially All the Project Prior to
Full Payment of the Indenture Indebtedness. If all or substantially all
the Project is so taken by such exercise of the power of Eminent
Domain, prior to full payment of the Indenture Indebtedness, the entire
condemnation award in respect of such taking shall be paid to the
Trustee and the Lease shall terminate [except as to the provisions of
this subsection (a) and any other provisions hereof which are expressly
stated herein to survive the termination of the Lease] as of the
forty-fifth (45th) day after the receipt by the Trustee of the final
installment of the entire condemnation award in respect of such taking,
unless the Company has theretofore exercised the option to purchase the
Project granted in Section 11.2 hereof. The Council will cause the
Company to be notified in writing, as promptly as practicable following
such receipt by the Trustee of such final installment of the entire
condemnation award, of the date on which such final installment was so
received by the Trustee and the amount of the Net Condemnation Award in
respect of such taking then held by the Trustee. On or before the close
of business on the business day next preceding the date on which the
Lease shall terminate pursuant to this subsection (a), the Company will
pay to the Trustee, for the account of the Council, such additional
Basic Rent as, when added to the total of the amounts then held in the
Construction Fund, the Bond Fund (exclusive of any amount held therein
for payment of matured but unpaid Bonds, Bonds called for redemption
but not yet redeemed and matured but unpaid interest) and the
Redemption Fund plus the full amount of the Net Condemnation Award then
held by the Trustee, will be sufficient to pay, redeem and retire all
the then outstanding Bonds (or, in the case of the Bonds prior to the
termination of the Letter of Credit, to reimburse the Bank for moneys
advanced under the Letter of Credit to redeem the Bonds) on the
aforesaid date on which the Lease shall terminate, including, without
limitation, principal, premium (if any), interest to maturity or
earliest practicable redemption date, as the case may be, expenses of
redemption and all other Indenture Indebtedness. Simultaneously with or
promptly after the termination of the Lease, any portion of the Net
Condemnation Award not needed for payment of the Indenture Indebtedness
shall be applied to the payment of any obligations then owed to the
Bank under the Reimbursement Agreement, and any such moneys remaining
after the payment of all such obligations then owed to the Bank shall
be paid to the Company.
(b) Taking of Less than Substantially All the Project Prior to
Full Payment of the Indenture Indebtedness. If less than substantially
all the Project is taken by such exercise of the power of Eminent
Domain, prior to full payment of the Indenture Indebtedness, all
obligations of the Company under the Lease which are still capable of
performance (including, without limitation, the obligation of the
Company to pay the Basic Rent and all other amounts payable hereunder)
shall continue in full force and effect. The Company shall be entitled
to collect, hold and apply all of the Net Condemnation Award in respect
of any such taking, regardless of the amount thereof, and any part of
such award initially paid to the Council or the Trustee shall be paid
over to the Company or applied as the Company may direct in accordance
with the provisions hereof. The Net Condemnation Award in respect of
any such taking shall be applied by the Company, or at its direction,
for one or more of the following purposes, with the amount, if any, to
be applied to each such purpose to be determined by the Company
(subject to the approval of the Bank):
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(1) payment of the costs of repairing, restoring, modifying,
relocating or rearranging any portions of the Project not taken but
damaged or adversely affected by such taking, all under such
circumstances and upon such terms as shall be specified by the Company;
(2) payment of the costs of acquiring (by construction,
purchase or otherwise) such additional facilities and equipment as the
Company may direct, which facilities and equipment (i) shall be
acquired by the Council and made subject to the demise of the Lease
free of liens and encumbrance other than Permitted Encumbrances, and
(ii) shall be deemed a part of the Project and made available for use
by the Company, without the payment of additional rent hereunder, to
the same extent as if such facilities and equipment had originally
constituted part of the Project and had been specifically demised
hereby;
(3) the redemption of Bonds prior to maturity in accordance
with the terms of the Indenture and on the earliest practicable date
permitted thereby (or, in the case of the Bonds prior to the
termination of the Letter of Credit, the reimbursement of the Bank for
moneys advanced under the Letter of Credit to redeem Bonds), or the
purchase of Bonds for retirement, in which case such portion of the Net
Condemnation Award to be used for such redemption or purchase shall be
paid by the Company to the Trustee and deposited in the Redemption
Fund.
In the event that the Company determines to apply the Net Condemnation Award (or
any specified portion thereof), pursuant to the provisions of subparagraphs (1)
or (2) of this subsection, for payment of the costs of repairing, restoring,
modifying, relocating or rearranging any part of the Project or for payment of
the costs of acquiring additional property to become part of the Project, as the
case may be, the Council, at the request of the Company, will undertake in its
own name such repair, restoration, modification, relocation or rearrangement or
such acquisition of additional property, and in such case the Company shall pay
such award (or specified portion thereof) to the Trustee for the account of the
Council. The Trustee shall use the Construction Fund (which shall be
reestablished if necessary) to apply the Net Condemnation Award (or specified
portion thereof) for the payment of the costs of repairing, restoring,
modifying, relocating or rearranging any part of the Project or for payment of
the costs of acquiring additional property, as the case may be, and such award
(or specified portion thereof) shall be deposited in such fund and held therein,
invested to the extent not immediately required for the payment of such costs,
and disbursed pursuant to requisitions submitted by the Company, all on the same
terms and conditions (with the necessary changes in detail) as provided in the
Indenture with respect to the proceeds of the Bonds deposited in such fund.
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Any balance of the Net Condemnation Award (or any balance of the
portion thereof specified for the payment of such costs) remaining after payment
of all such costs, whether at the time held by the Company or the Trustee, shall
be paid into the Bond Fund or, if the Indenture Indebtedness has been paid in
full and no Event of Default shall have occurred and be continuing, such moneys
shall be applied to the payment of any obligations then owed to the Bank under
the Reimbursement Agreement, and any such moneys remaining after the payment of
all such obligations then owed to the Bank shall be paid to the Company. In the
event that the Net Condemnation Award (or the portion thereof specified for the
payment of such costs) is not sufficient to pay in full the costs of such
repair, restoration, modification, relocation or rearrangement, or the costs of
acquiring such additional property, as the case may be, the Company (i) will
nonetheless complete such repair, restoration, modification, relocation or
rearrangement or the acquisition of such additional property, as the case may
be, and will pay that portion of the costs thereof in excess of the amount of
the Net Condemnation Award (or specified portion thereof) available for the
payment of such costs, or (ii) will pay to the Trustee, for the account of the
Council, the moneys necessary to complete such repair, restoration,
modification, relocation or rearrangement or the acquisition of such additional
property, as the case may be, in which case the Council will cause such
undertakings to be so completed, and the Trustee will, upon completion of such
undertakings and payment in full of the costs thereof, return to the Company any
portion of such payment by the Company that is not needed therefor. The Company
shall not, by reason of the payment of such excess costs (whether by direct
payment thereof or payments to Trustee therefor), be entitled to any
reimbursement from the Council or to any reduction or abatement of the rentals
and other payments due from the Company hereunder.
(c) Taking of All or Substantially All the Project After Full
Payment of the Indenture Indebtedness. If, after full payment of the
Indenture Indebtedness, title to all or substantially all the Project
is taken by such exercise of the power of Eminent Domain, the Net
Condemnation Award referable to such taking shall be paid to the Bank
to the extent that any amounts are then owed to it under the
Reimbursement Agreement, and any such moneys remaining after the
payment of all such amounts then owed to the Bank shall be paid to the
Company. The Lease shall terminate as of the date on which the final
condemnation award is received by the Company or the Bank, as the case
may be, and the Council and the Company shall have no further rights or
obligations hereunder except those which may theretofore have vested.
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(d) Taking of Less Than Substantially All the Project After
Full Payment of Indenture Indebtedness. If, after full payment of the
Indenture Indebtedness, title to less than substantially all the
Project is taken by such exercise of the power of Eminent Domain, the
Lease shall continue in full force and effect, but neither the Company
nor the Council shall be obligated to correct or ameliorate in any way
the condition of the Project caused by such taking, and the Net
Condemnation Award referable to such taking shall be paid to the Bank
to the extent that any amounts are then owed to it under the
Reimbursement Agreement, and any such moneys remaining after the
payment of all such amounts then owed to the Bank shall be paid to the
Company; provided, however, that the Council will, to the extent and in
the manner provided in Section 7.6 hereof, cooperate fully with the
Company in carrying out such work of repairing, restoring, modifying,
relocating or rearranging the Project or in acquiring such additional
property to form part of the Project as the Company may, in its sole
discretion, deem necessary or desirable.
If the Company duly exercises the option to purchase the Project
granted in Section 11.2 hereof in accordance with the applicable provisions of
said section, then neither the Company nor the Council shall be obligated to
correct or ameliorate in any way the condition of the Project caused by such
taking, in which case so much (which may be all) of any part of the Net
Condemnation Award then held by the Trustee as shall be necessary to provide for
full retirement of the Bonds (as specified in Section 11.2 hereof), or to
reimburse the Bank for moneys advanced under the Letter of Credit to provide for
the retirement of Bonds, shall be paid or credited by the Trustee into the Bond
Fund and so much of the excess thereafter remaining (if any) as shall be
necessary for the payment of any other Indenture Indebtedness shall be applied
by the Trustee to the payment of such other Indenture Indebtedness.
Simultaneously with the exercise by the Company of such option, any portion of
such Net Condemnation Award remaining after payment in full of the entire
Indenture Indebtedness shall be paid to the Bank to the extent that any amounts
are then owed to it under the Reimbursement Agreement, and any such moneys
remaining after the payment of all such amounts then owed to the Bank shall be
paid to the Company.
Section 7.3 Condemnation of Right to Use of the Project for Limited
Period. If the use, for a limited period, of all or part of the Project is taken
under the exercise of the power of Eminent Domain, the Lease (including, without
limitation, the provisions hereof relating to the payment of Basic Rent) shall,
unless as a result thereof the Company is entitled to exercise the option to
purchase the Project granted in Section 11.2 hereof and duly does so in
accordance with the provisions of said Section 11.2, continue in full force and
effect, but with the consequences specified in the succeeding provisions of this
section. If the period of such taking expires on or before the expiration of the
Lease Term, the Company shall be entitled to receive the entire condemnation
award made therefor, whether by way of damages, rent or otherwise, and shall
upon being restored to possession restore the Project to substantially the same
condition as prior to such taking, with such changes, alterations and
modifications as will not significantly impair the operating utility of the
Project. If such taking occurs during the Lease Term but the period of such
taking expires after the expiration of the Lease Term, the Company shall be
entitled to receive that portion of the award allocable to the period from the
date of such taking to the end of the Lease Term, and the Council shall be
entitled to the remainder thereof; provided that if prior to the end of the
Lease Term, the Company exercises either of the options to purchase the Project
granted in Sections 11.2 and 11.3 hereof, the Company (rather than the Council)
shall be entitled to receive the remainder of such award.
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Section 7.4 Condemnation of Company-Owned Property. The Company shall
be entitled to any condemnation award or portion thereof made for damages to or
the taking of its own property not included in the Project, but any condemnation
award resulting from damages to or the taking of all or any part of the
leasehold estate or other interest of the Company in the Project created by the
Lease shall be applied in accordance with the provisions of Section 7.2 or 7.3
hereof, whichever may be applicable. In the event of any taking which involves
both the Project and property of the Company, the Company shall be responsible
for all attorney's fees and other expenses properly allocable to the taking of
its own property.
Section 7.5 Cooperation of the Council in the Conduct of Condemnation
Proceedings. The Council will cooperate fully with the Company in the handling
and conduct of any prospective or pending condemnation proceeding with respect
to the Project or any part thereof and will follow all reasonable directions
given to it by the Company in connection with such proceeding. In no event will
the Council settle, or consent to the settlement of, any prospective or pending
condemnation proceeding with respect to the Project or any part thereof without
the prior written consent of the Company.
Section 7.6 Cooperation of the Council with respect to Restoration of
the Project in the Event of Casualty or Condemnation. If, as a result of the
taking of title to less than substantially all the Project or the taking of the
temporary use of all or any part of the Project through the exercise of the
power of Eminent Domain, or if, as a result of any event causing destruction or
damage to the Project or any part thereof, the Company determines, in accordance
with any applicable provision of this article, to acquire (by purchase,
construction or otherwise) any additional property to replace any part of the
Project so taken, or to have the Project repaired, replaced, restored, modified,
relocated or rearranged in order to correct or ameliorate any condition caused
by such taking, damage or destruction, as the case may be, then the Council will
execute and deliver, or cause to be executed and delivered, all contracts,
orders, requisitions, instructions and other written instruments and do, or
cause to be done, all other acts that may be necessary or proper in carrying out
all such undertakings with respect to the Project. In no event, however, will
the Council hereafter enter into any contract with respect to any part of such
undertakings unless there is endorsed thereon a legend indicating that the
Company has approved both the form and substance of such contract and such
legend is signed on behalf of the Company by an Authorized Company
Representative at the time acting as such under the provisions hereof. Any
obligation for the payment of money incurred or assumed by the Council in
connection with such undertakings shall be payable solely out of any Net
Condemnation Award held by the Trustee or from any other moneys made available
to the Council by the Company under the provisions of the Lease.
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Section 7.7 Relationship to Reimbursement Agreement and Bank Mortgage.
So long as the Letter of Credit remains in effect, to the extent that any
provision of the Reimbursement Agreement or the Bank Mortgage is inconsistent
with any provision of Article VI or VII of this Lease, such provision of the
Reimbursement Agreement or the Bank Mortgage shall govern and control.
ARTICLE VIII
PARTICULAR COVENANTS OF THE COMPANY
Section 8.1 General Covenants. The Company will, in the use of the
Project, comply in all material respects with all valid and applicable laws,
ordinances, rules, regulations and orders of all governmental authorities or
agencies; provided, however, that the Company may in good faith contest the
validity of any such laws, ordinances, rules, regulations and orders or the
application thereof to the Project and in the event of any such contest defer
compliance therewith during the period of such contest and the pendency of any
appeal in connection therewith, unless by such action the rights or interests of
the Council or the Trustee with respect to the Project or any part thereof shall
be materially endangered or impaired.
Section 8.2 Performance by the Council, the Bank or the Trustee of
Certain Company Obligations; Reimbursement of Expenses. In the event the Company
fails to pay any obligation which it has herein covenanted to pay, the Council,
the Bank or the Trustee, after first notifying the Company in writing of any
such failure on its part and after the subsequent failure by the Company to
perform the obligation with respect to which it is delinquent within thirty (30)
days of the date of its receipt of such notice, may (but shall not be obligated
to) perform any such obligation on behalf of the Company. Any expense incurred
by the Council, the Bank or the Trustee in performing any of such obligations of
the Company shall become an additional obligation of the Company secured by the
Indenture and shall be repaid by the Company, together with interest thereon,
from the date such expense was actually paid by the Council, the Bank or the
Trustee, as the case may be, until the date of its repayment by the Company, at
a per annum rate equal to two percent (2%) above the Prime Rate from time to
time in effect until such amount is repaid or at the maximum applicable
non-usurious per annum rate of interest then permitted by law, whichever of the
foregoing rates of interest is the lesser. Any remedy vested in the Council or
the Trustee by this Lease Agreement for the collection of Basic Rent or
Additional Rent shall also be available to the Council or the Trustee for the
collection of all expenses so paid by the Council or the Trustee in performing
any of such obligations of the Company.
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Section 8.3 Release and Indemnification Covenants. The Company releases
the Council (and each director, officer, employee or agent thereof) and the
Trustee (and each director, officer, employee or agent thereof) from, and will
indemnify and hold the Council (and each director, officer, employee or agent
thereof) and the Trustee (and each director, officer, employee, or agent
thereof) harmless against, any and all claims and liabilities of any character
or nature whatsoever, regardless of by whom asserted or imposed, and losses of
every conceivable kind, character and nature whatsoever claimed by or on behalf
of any Person arising out of, resulting from, or in any way connected with the
Project; provided, however, that the Company shall not be obligated to indemnify
any director, officer, employee or agent of the Council against any claim,
liability or loss in any way connected with the Project unless such claim,
liability or loss arises out of or results from official action taken in the
name and behalf of the Council by such director, officer, employee or agent.
Without limiting the generality of the foregoing, the Company will indemnify the
Trustee (and each director, officer, employee or agent thereof) for, and hold it
harmless against, any loss, liability or expense incurred without gross
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust established by the Indenture,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties under the Indenture.
The Company acknowledges that it has sought and received the assistance
and cooperation of the Council in connection with the offering and sale of the
Bonds. The Company will indemnify, hold harmless and defend the Council (and
each director, officer, employee or agent thereof) against
(a) any claim or liability whatsoever arising out of or based
upon any untrue or misleading statement or alleged untrue or misleading
statement of any material fact contained in the Offering Memorandum or
in any of the information furnished by the Company or the Placement
Agent to any prospective purchaser of the Bonds, or the omission or
alleged omission to state in the Offering Memorandum or in any such
information any material fact necessary to make the statements
contained therein not misleading in the light of the circumstances
under which such statements were made, and
(b) any claim or liability arising out of any action taken by
the Council at the request of the Company (or any other Person
authorized to act on behalf of the Company) in connection with the
offering and sale of the Bonds.
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The Company will pay or reimburse all legal or other expenses
reasonably incurred by the Council (and each director, officer, employee or
agent thereof), or the Trustee (and each director, officer, employee or agent
thereof), as the case may be, in connection with the investigation or defense of
any action or proceeding, whether or not resulting in liability, with respect to
any claim, liability or loss in respect of which indemnity may be sought against
the Company under the provisions of this section.
In the event that any action or proceeding is brought against any
indemnifiable party (whether the Council, or any of the Council's directors,
officers, employees or agents, or the Trustee, or any of the Trustee's
directors, officers, employees, or agents), in respect of which indemnity may be
sought against the Company under the provisions of this section, such
indemnifiable party shall, as a condition of the Company's liability under the
provisions of this section, be obligated to notify promptly the Company in
writing of the commencement of such action or proceeding and shall thereafter
forward to the Company a copy of every summons, complaint, pleading, motion or
other process received with respect to such action or proceeding; provided,
however, that any failure to so notify the Company shall not release the Company
from its obligations under this Section 8.3 unless the Company's ability to
defend any such action or proceeding is materially prejudiced by such failure.
The Company may (and, if so requested by such indemnifiable party, shall) at any
time assume the defense of such indemnifiable party in connection with any such
action or proceeding, and in such case the Company shall pay all expenses of
such defense and shall have full and complete control of the conduct on the part
of such party of any such action or proceeding, including, without limitation,
the right to settle or compromise any claim giving rise to such action or
proceeding upon such terms and conditions as the Company, in its sole
discretion, shall determine and the right to select Counsel for such party.
The Council (or any director, officer, employee or agent thereof) or
the Trustee (or any director, officer, employee or agent thereof) shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Council or the Trustee, as the case may be, unless (i) the
employment of such separate counsel has been specifically authorized by the
Company in writing prior to the employment of such counsel, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Council (or any director, officer, employee or agent thereof) or the Trustee (or
any director, officer, employee or agent thereof) and the Company, and an
indemnified party or parties shall have been advised by counsel or shall have
otherwise determined in good faith that there may be one or more legal defenses
available to it or them which are different from or additional to those
available to the Company and that joint representation may be inappropriate
under professional standards, in which case the Company shall not have the right
to assume the defense of such action on behalf of the Council (or any director,
officer, employee or agent thereof) or the Trustee (or any director, officer,
employee or agent thereof), as the case may be, it being understood, however,
that the Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
Council (including all directors, officers, employees and agents thereof), and
one separate firm of attorneys for the Trustee (including all directors,
officers, employees and agents thereof), and any such firm shall be designated
in writing by the Council and/or the Trustee, subject in each case to the
approval of the Company, which approval shall not be unreasonably withheld.
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Any other provision of this section to the contrary notwithstanding,
the Company shall not be obligated to indemnify any such indemnifiable party for
any liability resulting from the settlement of any action or proceeding if such
settlement was made without the Company's consent (unless such consent was
unreasonably withheld by the Company), irrespective of whether the Company had,
prior to such settlement, exercised its right to assume the defense of such
indemnifiable party in connection with such action or proceeding. The Company
agrees that it will not unreasonably withhold its consent with respect to any
proposed settlement of any such action or proceeding.
Nothing contained in this section shall be construed to indemnify the
Council, or any of the Council's directors, officers, employees or agents,
against, or to release any of such parties from liability for, any claim,
liability or loss that may result from willful misconduct or gross negligence on
the part of such parties, nor shall anything contained in this section be
construed to indemnify the Trustee against, or to release the Trustee, or any of
the Trustee's directors, officers, employees or agents from liability for, any
claim, liability or loss that may result from bad faith or gross negligence on
the part of such parties.
Anything to the contrary in this Lease Agreement notwithstanding, the
covenants of the Company contained in this section shall, with respect to any
claim, liability or loss for which the Company is obligated to provide
indemnity, remain in full force and effect after the termination of the Lease
until (i) any cause of action brought in respect of such claim, liability or
loss shall be barred by the applicable statute of limitation or (ii) the payment
in full or the satisfaction of such claim, liability or loss, including all
reasonable expenses incurred by the indemnifiable party or parties in defending
against such claim, liability or loss; provided, however, that in the event any
action or proceeding arguably barred by the applicable statute of limitation is
brought against any indemnifiable party hereunder, the Company shall be
obligated to defend such indemnifiable party with respect to such action or
proceeding, all to the end that the bar of the statute of limitation may be
asserted by the Company against the party bringing such action or proceeding but
may not be asserted by the Company against the indemnifiable party in order to
avoid performing any of its obligations under this section.
Section 8.4 Inspection of the Project. So long as any of the Indenture
Indebtedness is outstanding, the Company will permit the Council and the Trustee
and their duly authorized representatives at all reasonable times to examine and
inspect the Project or any part thereof. So long as no Event of Default shall
have occurred and be continuing, the rights of access hereby reserved to the
Council and the Trustee may be exercised only after their authorized
representatives shall have executed such release of liability and secrecy
agreements as the Company then regularly requires to be executed by independent
contractors or other persons as a condition of permitting such contractors or
other persons access to manufacturing plants and other comparable facilities of
the Company.
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Section 8.5 Agreement to Maintain Corporate Existence. So long as any
of the Indenture Indebtedness shall be outstanding and unpaid, the Company will
maintain its corporate existence, will not dissolve or sell, lease, transfer or
otherwise dispose of all or substantially all its assets (either in a single
transaction or in a series of related transactions), and will not consolidate
with or merger into another corporation or permit one or more other corporations
to consolidate with or merge into it; provided that it may, without violating
the agreements contained in this section, consolidate with or merge into another
corporation, permit one or more other corporations to consolidate with or merge
into it, or sell, lease, transfer or otherwise dispose of all or substantially
all its assets to another corporation, but if and only if the following
conditions are met:
(a) the corporation surviving or resulting from such
consolidation or merger (if it be one other than the Company) or the
corporation to which such sale, lease, transfer or other disposition
shall be made, as the case may be (the "Successor Corporation"), (i)
expressly assumes in writing all the obligations of the Company
contained in the Lease, with the same effect as if the Successor
Corporation had been named herein as a party hereto in lieu of the
original Company, (ii) furnishes to the Council and the Trustee,
promptly following such consolidation or merger or such sale, lease,
transfer or other disposition, appropriately certified or fully
executed copies of the writing by which the Successor Corporation so
assumes such obligations and (iii) furnishes to the Council and the
Trustee the opinions of one or more Counsel (who, although selected by
the Company, shall be reasonably satisfactory to the Trustee) which,
taken together, state in substance that the Successor Corporation is a
duly organized and existing corporation and has by such writing duly
and validly assumed, and is bound by, all the obligations of the
Company contained in the Lease;
(b) at the time of such consolidation or merger or such sale,
lease, transfer or other disposition and immediately upon giving effect
thereto, the Successor Corporation shall be a solvent corporation;
(c) immediately after giving effect to such merger or
consolidation or such sale, lease, transfer or other disposition, no
event which constitutes an Event of Default, or which would become an
Event of Default with the passage of time or the giving of notice or
both, shall have occurred and be continuing; and
(d) there shall have been delivered to the Council and to the
Trustee a certificate signed by the Chairman of the Board, the
President or any Vice President of the Company or the Successor
Corporation, as the case may be, and stating that such merger,
consolidation, sale, lease, transfer or other disposition complies with
the provisions of this section and that all conditions precedent herein
provided for relating to such transaction have been complied with.
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Upon any merger or consolidation or any sale, lease, transfer or other
disposition complying with the provisions of this section, the Successor
Corporation shall succeed to, and be substituted for, the Company for all
purposes under the Lease with the same effect as if the Successor Corporation
had been named as the Company herein. If, after a sale or transfer by the
Company of all or substantially all its assets to another corporation under the
circumstances described in the preceding provisions of this section, the Company
does not thereafter dissolve, it shall not have any further rights or
obligations hereunder.
Section 8.6 Qualification in Alabama. So long as the Lease shall be in
effect, the Company will continuously remain qualified to do business in the
State of Alabama. If, in accordance with the permissive provisions of Section
8.5 hereof, the Company should merge into a corporation not organized and
existing under the laws of the State of Alabama, should consolidate with one or
more corporations under circumstances wherein the consolidated corporation is
not a corporation organized and existing under the laws of the State of Alabama
or should transfer all or substantially all its assets to a corporation not
organized under the laws of the State of Alabama, it will cause the corporation
into which it merged, the corporation resulting from such consolidation or the
corporation to which all or substantially all its assets were transferred, as
the case may be, to qualify to do business in the State of Alabama and to remain
so qualified at all times while the Lease shall be in effect.
Section 8.7 Further Assurances. The Company will, at its own cost and
expense, take all actions that may at the time and from time to time be
necessary to perfect, preserve, protect and secure the interests of the Council
and the Trustee, or either, in and to the Project and the revenues therefrom
pledged and assigned in the Indenture, including, without limitation, the filing
of all financing and continuation statements that may at the time be required
under the Alabama Uniform Commercial Code.
Section 8.8 Protection of Security. The Company will use its best
efforts to cause to be filed or recorded, or re-filed or re-recorded, any
instruments (including, without limitation, Uniform Commercial Code financing
statements) that are at the time necessary to preserve or protect any interest
of the Council or the Trustee in the Trust Estate. The Company will cause to be
delivered to the Trustee, no less frequently than once every five years, an
opinion of Counsel stating either that all appropriate actions to so preserve
and protect the Trust Estate have been taken or that no such action is
necessary.
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ARTICLE IX
CERTAIN PROVISIONS RELATING TO
THE PROJECT AND THE BONDS
Section 9.1 Provisions Relating to Assignment and Subleasing by
Company. The Company may assign the Lease and the leasehold interest created
thereby, or sublease the Project, in whole or in part, without the necessity of
obtaining the consent of the Council or the Trustee; provided, however, that no
assignee of the Lease or sublessee of the Project or any part thereof or anyone
claiming by, through or under any such assignment or sublease shall acquire by
virtue thereof any greater rights in the Project than the Company then has under
the Lease, nor shall any such assignment (except an assignment resulting from or
incident to a consolidation, merger or transfer under the conditions specified
in and meeting the requirements of Section 8.4 hereof) or subleasing or any
dealings or transactions between the Council or the Trustee and any sublessee or
assignee in any way relieve the Company from primary liability for any of its
obligations hereunder. Thus, in the event of any such assignment or subleasing,
the Company shall, unless such assignment results from or is incident to a
consolidation, merger or transfer under the conditions specified in and meeting
the requirements of Section 8.4 hereof, continue to remain primarily liable for
payment of the rentals herein provided to be paid by it and for performance and
observance of the other agreements and covenants on its part herein provided to
be performed and observed by it. Anything contained herein to the contrary
notwithstanding, the Company may mortgage and assign to the Bank, under the
terms and provisions of the Bank Mortgage, all of the Company's leasehold estate
and all other rights, title and interest of the Company under and pursuant to
this Lease, together with all the rights, privileges and options set forth
herein (including, but not limited to, the options set forth in Article XI
hereof).
Section 9.2 References to Bonds Ineffective after Indenture
Indebtedness Paid. Whenever (i) the entire Indenture Indebtedness shall have
been paid and the Indenture shall have been cancelled, satisfied and discharged
in accordance with the provisions of Section 14.1 thereof and (ii) the Letter of
Credit shall have been terminated and all amounts drawn thereunder, together
with the interest (if any) accrued thereon under the terms of the Reimbursement
Agreement, shall have been reimbursed to the Bank, then and in that case all
references in the Lease to the Bonds and the Trustee and the Bank shall be
ineffective and neither the Trustee nor the Bank nor the holders of any of the
Bonds shall thereafter have any rights hereunder, saving and excepting any that
shall have theretofore vested. For purposes of the Lease, any of the Bonds shall
be deemed fully paid if there exists, with respect thereto, the applicable
conditions specified in Section 14.1 of the Indenture.
If, prior to the end of the Lease Term, the Indenture Indebtedness is
fully paid, the Letter of Credit is terminated and all amounts owed to the Bank
under the Reimbursement Agreement are paid in full, then the Company shall be
entitled to use of the Project for the remainder of the Lease Term without the
payment of any further Basic Rent and Additional Rent (other than amounts
payable to the Council) but otherwise on all the same terms and conditions
hereof.
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Section 9.3 Disposition of Trust Fund Moneys after Full Payment of
Indenture Indebtedness. The Council hereby assigns to the Company all surplus
moneys (if any) that may remain in the Construction Fund, the Bond Fund, the
Bond Purchase Fund or the Redemption Fund or that may otherwise be held by the
Trustee after the Indenture Indebtedness and all amounts owed to the Bank under
the Reimbursement Agreement have been fully paid, such assignment to be subject
to the condition that the Lease shall not have been terminated prior to full
payment of the Indenture Indebtedness and such other amounts as a result of the
occurrence of an Event of Default. The Council will provide in the Indenture for
such surplus moneys to be paid to the Company in accordance with such
assignment. It is understood and agreed that surplus moneys remaining in the
Bond Fund or otherwise held by the Trustee shall not include (i) any amounts so
held for payment of matured but unpaid Bonds, Bonds called for redemption but
not yet redeemed and matured but unpaid interest and (ii) any amounts held
therein which are referable to unmatured Bonds if such Bonds are considered
fully paid pursuant to the provisions of Section 14.1 of the Indenture by reason
of the fact that such amounts are so held by the Trustee. The provisions of this
section shall survive the expiration or prior termination of the Lease.
Section 9.4 Assignment of Lease by Council; Amendment of Lease. It is
understood and agreed that the Council will assign its interest (other than its
right to require the Company to pay certain expenses as provided in Sections 5.2
and 10.4 hereof, the indemnification rights contained in Section 8.2 hereof and
certain other rights which are herein expressly provided to be exercised by the
Council) in the Lease and pledge any moneys receivable hereunder to the Trustee
as security for payment of the principal of and the interest and premium (if
any) on the Bonds. It is further understood and agreed that in the Indenture the
Council will obligate itself to follow the instructions of the Bank or the
Trustee or the holders of the Bonds or a certain percentage of the latter in the
election or pursuit of any remedies herein vested in it, as in the case may be
applicable. Upon the assignment and pledge to the Trustee of the Council's
interest in the Lease, the Trustee shall have all rights and remedies herein
accorded the Council (other than the aforesaid rights reserved to the Council),
and any reference herein to the Council shall be deemed, with the necessary
changes in detail, to include the Trustee; and the Trustee and the holders of
the Bonds shall be deemed to be third party beneficiaries of the covenants and
agreements on the part of the Company contained in the Lease and shall, to the
extent provided in the Indenture, be entitled to enforce performance and
observance of the agreements and covenants on the part of the Company contained
in the Lease to the same extent as if they were parties hereto. Subsequent to
the issuance of the Bonds and prior to the payment of the Indenture Indebtedness
in full, the Council and the Company shall have no power to modify, alter, amend
or (except as specifically authorized herein) terminate the Lease without the
prior written consent of the Trustee and then only as provided in the Indenture.
The Council will not, so long as no Event of Default shall have occurred and be
continuing, amend the Indenture or any indenture supplemental thereto without
the prior written consent of the Company.
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Without the prior written request or consent of the Company, the
Council will not, so long as no Event of Default shall have occurred and be
continuing, hereafter issue any Bonds or other securities (including refunding
securities), other than the Bonds and the Authority Bonds, that are payable out
of or secured by a pledge of the revenues and receipts derived by the Council
from the leasing or sale of the Project, nor, without such consent, will the
Council, so long as no Event of Default shall have occurred and be continuing,
hereafter place any mortgage or other encumbrance (other than the Bank Mortgage)
on the Project or any part thereof.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default Defined. The following shall be "Events
of Default" under the Lease, and the term "Event of Default" shall mean,
whenever it is used in the Lease, any one or more of the following events:
(a) failure by the Company to pay any installment of Basic
Rent, or to make any other payment required under the terms hereof
which, if not paid, would cause a default in the payment of any
principal of or interest or premium on the Bonds, on the date that such
installment or such payment shall become due and payable by the terms
of the Lease;
(b) failure by the Company to pay any amount due the Trustee
under Section 9.5 of the Indenture for its reasonable fees, charges and
disbursements within thirty (30) days after written demand for such
payment by the Trustee, which demand shall not be made earlier than the
date on which such amount is due and payable;
(c) failure by the Company to perform or observe any
agreement, covenant or condition required by the Lease to be performed
or observed by it [other than the agreements and covenants referred to
in the preceding clauses (a) and (b) of this section], which failure
shall have continued for a period of forty-five (45) days after written
notice specifying, in reasonable detail, the nature of such failure and
requiring the Company to perform or observe the agreement, covenant or
condition with respect to which it is delinquent shall have been given
to the Company by the Council or the Trustee, unless (i) the Council
and the Trustee shall agree in writing to an extension of such period
prior to its expiration, or (ii) during such forty-five (45) day period
or any extension thereof, the Company has commenced and is diligently
pursuing appropriate corrective action, or (iii) the Company is by
reason of force majeure at the time prevented from performing or
observing the agreement, covenant or condition with respect to which it
is delinquent;
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(d) any warranty, representation or other statement by or on
behalf of the Company contained in the Lease, or in any other document
furnished by the Company in connection with the issuance of the Letter
of Credit or the issuance and sale of any of the Bonds, being false or
misleading in any material respect at the time made, but only if the
inaccuracy of such warranty, representation or other statement is not
remedied in a manner satisfactory to the Council, the Trustee and the
Bank within five Business Days after the Company first receives notice
thereof; provided that the Council and the Trustee may, with the Bank's
consent, grant to the Company an extension of said period of five
Business Days if during such period the Company has commenced and is
diligently pursuing appropriate corrective action;
(e) the receipt by the Trustee of written notice from the Bank
(i) stating that an Event of Default has occurred and is continuing
under the terms of the Reimbursement Agreement (as the term "Event of
Default" is defined and used in said agreement) and (ii) directing that
the Bonds be declared due and payable pursuant to Section 10.2 of the
Indenture;
(f) institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or consent by the Company to the
filing of a bankruptcy or insolvency proceeding against it, or the
filing by the Company of a petition or answer or consent seeking relief
under the United States Bankruptcy Code, as now constituted or as
amended, or any other applicable federal or state bankruptcy or other
similar law, or consent by the Company to the institution of
proceedings thereunder or to the filing of any such petition, or
consent by the Company to the appointment of, or the taking of
possession of any of its property by, a receiver, liquidator, trustee,
custodian or assignee in bankruptcy or insolvency for the Company or
for all or a major part of its property, or an assignment by the
Company for the benefit of its creditors, or a written admission by the
Company of its inability to pay its debts generally as they become due;
(g) the entry of a decree or order by a court of competent
jurisdiction for relief in respect of the Company or adjudging the
Company to be a bankrupt or insolvent or approving as properly filed a
petition seeking the arrangement, adjustment or composition of the
obligations of the Company under the United States Bankruptcy Code, as
now constituted or as amended, or any other applicable federal or state
bankruptcy or other similar law, which decree or order shall have
continued undischarged or unstayed for a period of sixty (60) days, or
the entry of a decree or order of a court of competent jurisdiction for
the appointment of a receiver, liquidator, trustee, custodian or
assignee in bankruptcy or insolvency for the Company or for all or a
major part of its property, or for the winding up or liquidation of its
affairs, which decree or order shall have remained in force
undischarged or unstayed for a period of sixty (60) days; or
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(h) the dissolution or liquidation of the Company under
circumstances other than those permitted by the provisions of Section
8.5 hereof in the case of the merger of the Company into another
corporation, the consolidation of the Company with another corporation
or the dissolution of the Company following a transfer of all or
substantially all its assets to another legal entity.
The term "force majeure" as used herein means acts of God or the public enemy,
strikes, lockouts, work slowdowns or stoppages or other labor disputes,
insurrections, riots or other civil disturbances, orders of the government of
the United States of America or of any state of the United States of America or
of any of the departments, agencies, political subdivisions or officials of the
United States of America or of any state thereof, or orders of any other civil
or military authority, or partial or entire failure of public utilities, or any
other condition or event beyond the reasonable control of the Company. The
Company will, to the extent that it may lawfully do so, use its best efforts to
remedy, alleviate or circumvent any cause or causes preventing it from
performing its agreements and covenants hereunder; provided, however, that the
settlement of strikes, lockouts and other labor disputes shall be entirely
within the discretion of the Company, and the Company shall not be required to
settle strikes, lockouts and other labor disputes by acceding to the demands of
the opposing party or parties when such course is in its judgment against its
best interests.
Section 10.2 Remedies on Default. The Council acknowledges that this
Lease Agreement constitutes part of a financing transaction with respect to the
Project Development Work and that, as a result of the options in favor of the
Company contained in Article XI hereof, the full economic value of the Project
will accrue to the Company in the event that the Bonds are paid in full. In view
of the character of this Lease Agreement as part of a financing transaction with
respect to the Project, it is the intention of the parties hereto that, upon the
occurrence and during the continuation of an Event of Default, the Company shall
have rights as herein described with respect to the Project which, in the
absence of express agreements to the contrary herein contained, would not be
accorded the Company under the general laws now applicable to the relationship
between the Council, as owner and lessor of the Project, and the Company, as
lessee of the Project. In order that such rights of the Company may be preserved
and protected from the adverse effect of any present or future law applicable
thereto, the Council hereby expressly waives and relinquishes, to the extent it
may lawfully do so, all rights and remedies with respect to the termination of
this Lease Agreement and the repossession and disposition of the Project which
are not consistent with the express provisions hereof, even though such rights
and remedies are generally available to lessors as a matter of law.
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Whenever any Event of Default shall have occurred and be continuing,
the Council and the Trustee, or the Trustee on behalf of the Council, may take
any one or more of the following remedial actions:
(a) take possession of the Project, exclude the Company from
possession thereof and rent the same for the account of the Company,
holding the Company liable for the balance of all rent and other
amounts due under the Lease;
(b) terminate the Lease, take possession of the Project,
exclude the Company from possession thereof and lease the same for the
account of the Council and the Trustee, holding the Company liable for
all rent and other amounts due under the Lease until the date such
other lease is made for the account of the Council and the Trustee;
(c) declare immediately due and payable Basic Rent in an
amount equal to the principal amount of all outstanding Bonds plus
interest accrued on such Bonds to the date of such declaration,
whereupon such Basic Rent shall become immediately due and payable, but
only if, concurrently with such declaration, the principal of and
accrued interest on the Bonds are also declared due and payable
pursuant to subsection (a) of Section 10.2 of the Indenture;
(d) have access to, and inspect, examine and make copies of,
the books, records and accounts of the Company respecting the Project,
but if and only if any of the Bonds are then outstanding; and
(e) take whatever legal proceedings may appear necessary or
desirable to collect the rent then due, whether by declaration or
otherwise, or to enforce any obligation, covenant or agreement of the
Company under the Lease or any obligation of the Company imposed by any
applicable law;
provided, however, that neither the Council nor the Trustee, nor the Trustee on
behalf of the Council, shall take any remedial action described in either of
subparagraphs (a) and (b) of this Section 10.2 unless the Event of Default is
described in subparagraph (a) of of Section 10.1.
Section 10.3 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Council or the Trustee is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under the Lease or now or
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any Event of Default shall impair any
such right or power or shall be construed to be a waiver thereof but any such
right or power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Council or the Trustee to exercise any remedy
reserved to it in this article, it shall not be necessary to give any notice,
other than such notice as is herein expressly required.
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Section 10.4 Agreement to Pay Attorneys' Fees. In the event that, as a
result of an Event of Default or a threatened Event of Default by the Company,
the Council or the Trustee should employ attorneys at law or incur other
expenses in or about the collection of rent or the enforcement of any other
obligation, covenant, agreement, term or condition of the Lease, the Company
will, if the Council or the Trustee is successful in such efforts or if a final
judgment for either is rendered by a court of competent jurisdiction, pay to the
Council or to the Trustee or both, as the case may be, reasonable attorneys'
fees and other reasonable expenses so incurred by the Council and the Trustee.
Section 10.5 No Additional Waiver Implied by One Waiver. In the event
any agreement contained in the Lease should be breached by either party and
thereafter waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. Further, neither the receipt nor the acceptance of any rent hereunder
by the Council, or by the Trustee on its behalf, shall be deemed to be a waiver
of any breach of any covenant, condition or obligation herein contained or a
waiver of any Event of Default even though at the time of such receipt or
acceptance there has been a breach of one or more covenants, conditions or
obligations on the part of the Company herein contained or an Event of Default
(or both) and the Council or the Trustee (or both) have knowledge thereof.
Section 10.6 Effect of Intercreditor Agreement. Notwithstanding
anything to the contrary contained herein or in the Indenture, so long as any of
the Authority Bonds remain outstanding and unpaid, all rights, remedies and
powers granted to the Council or the Trustee pursuant to this Lease Agreement
(including, without limitation, those so granted in this Article X) or the
Indenture shall be governed by, and shall be exercised in accordance with, the
provisions of the Intercreditor Agreement.
ARTICLE XI
OPTIONS
Section 11.1 Options to Terminate the Lease During the Lease Term. The
Company shall have the right, exercisable at its option, to cancel or terminate
the Lease during the Lease Term upon compliance with the conditions specified in
the succeeding provisions of this section:
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(a) At any time prior to full payment of the entire Indenture
Indebtedness, the Company may cancel or terminate the Lease by (i)
giving the Council and the Trustee written notice of such termination
and specifying in such notice the date on which such termination is to
be effective and (ii) paying to the Trustee for the account of the
Council, on or before the effective date of such termination, an amount
which, when added to the total of the amounts then held in the
Construction Fund, the Bond Fund (exclusive of any amount held therein
for payment of matured but unpaid Bonds, Bonds called for redemption
but not yet redeemed and matured but unpaid interest) and the
Redemption Fund, will be sufficient to pay, redeem and retire all the
outstanding Bonds (or, in the case of the Bonds prior to the
termination of the Letter of Credit, to reimburse the Bank for moneys
drawn under the Letter of Credit to effect such payment, redemption and
retirement) on the earliest practicable date next succeeding the
effective date of such termination on which under their terms and the
terms of the Indenture they may be paid or redeemed, including, without
limitation, principal, premium (if any), all interest to mature until
and on such payment or redemption date, the expenses of redemption and
all other Indenture Indebtedness then owed and that will accrue until
the payment, redemption and retirement of all the outstanding Bonds.
(b) At any time after the entire Indenture Indebtedness has
been fully paid, the Letter of Credit has been terminated and all
amounts owed to the Bank under the Reimbursement Agreement have been
paid in full, the Company may cancel or terminate the Lease by giving
the Council written notice of such termination not less than ten (10)
days prior to the date on which such termination is to be effective.
Any cancellation or termination of the Lease as aforesaid notwithstanding, any
obligations or liabilities of the Company hereunder, actual or contingent, which
have arisen on or before the effective date of such cancellation or termination
shall remain in full force and effect.
Section 11.2 Option to Purchase Casualties. While any of the Indenture
Indebtedness is outstanding and unpaid, the Company shall have the right and
option, hereby granted by the Council, to purchase the Project if
(a) any part of the Project is damaged or destroyed, by fire
or other casualty, to such extent that, in the opinion of the Company
expressed in a certified resolution of the Board of Directors of the
Company filed with the Council and the Trustee, the restoration or
repair of the property damaged or destroyed to the condition thereof
immediately preceding such damage or destruction would not be
economically practicable or desirable, or
(b) under the exercise of the power of Eminent Domain, (i)
title to all or substantially all the Project is taken, or (ii) the
temporary use of all or part of the Project, or title to part of the
Project, is taken to such extent that, in the opinion of the Company
expressed in a certified resolution of the Board of Directors of the
Company filed with the Council and the Trustee, the Company will
thereby be prevented, or is likely to be thereby prevented, from making
normal use of the Project, or
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(c) as a result of (i) any changes in the Constitution of the
State of Alabama or the Constitution of the United States of America,
(ii) any legislative or administrative action (whether state or
federal) or (iii) any final decree, judgment or order of any court or
administrative body (whether state or federal) entered after the
contest thereof by the Company in good faith, the Lease becomes void or
unenforceable or impossible of performance in accordance with the
intent and purposes of the parties as expressed herein or unreasonable
burdens or excessive liabilities are imposed on the Council or the
Company, including (without limiting the generality of the foregoing)
any changes in federal or state tax laws that will render the operation
of the Project significantly less economically advantageous to the
Company, or
(d) the use and occupancy of the Project by the Company is
legally curtailed for any reason other than circumstances or conditions
described in the preceding clauses (b) and (c), or
(e) as a result of any change in the economic viability of the
Project, the continued operation of the Project, in the opinion of the
Company expressed in a certified resolution of the Board of Directors
of the Company filed with the Council and the Trustee, would not be
economic for the Company's purposes.
To exercise such option, the Company
(1) shall, within sixty (60) days following the event
authorizing the exercise of such option, give to the Council and the
Trustee written notice, signed by an Authorized Company Representative,
which shall contain a description of such event and shall state the
reason why it authorizes the exercise of such option,
(2) shall specify in such notice the date of purchase, which
(subject to the provisions of the last paragraph of this Section 11.2)
shall be not less than forty-five (45) nor more than ninety (90) days
after the date such notice is mailed or otherwise delivered,
(3) shall direct the Trustee in such notice to call for
redemption all the outstanding Bonds on the Business Day next
succeeding the date of purchase specified by the Company in such
notice,
(4) in the case of an authorizing event described in any of
the preceding clauses (a), (b), (d) or (e), shall certify in such
notice that the Company has discontinued, or will discontinue at the
earliest practicable date, its operation of the Project, and
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(5) shall on the date of purchase pay to the Trustee in
immediately available funds (for the account of the Council), as and
for the purchase price of the Project, an amount which, when added to
the total of the amounts then held in the Construction Fund, the Bond
Fund (exclusive of any amount held therein for payment of matured but
unpaid Bonds, Bonds called for redemption but not yet redeemed and
matured but unpaid interest) and the Redemption Fund, plus the amount
of any Net Condemnation Award then held by the Trustee and referable to
any condemnation authorizing the exercise of such option, will be
sufficient to pay, redeem and retire all the outstanding Bonds (or, in
the case of the Bonds prior to the termination of the Letter of Credit,
to reimburse the Bank for moneys drawn under the Letter of Credit to
effect such payment, redemption and retirement) on the Business Day
next succeeding the date of purchase, including, without limitation,
principal, premium (if any), all interest to mature until and on such
payment or redemption date, expenses of redemption and all other
Indenture Indebtedness; provided, however, that if on the date of
purchase the entire Indenture Indebtedness has been paid in full, the
Company shall not be required to pay any such amount in order to
entitle it to exercise such option, in which event (any provision
herein to the contrary notwithstanding) any Net Condemnation Award
referable to any condemnation authorizing the exercise of such option
shall be paid to the Company simultaneously with or promptly after the
exercise of such option.
Upon receipt of the amount required by this Section 11.2 to be paid by the
Company as the purchase price of the Project (if payment of any such amount is
required), and if at such time the Company is not in default in payment of the
rent or any other amounts due hereunder, the Council will, by deed or other
appropriate instrument complying with the provisions of Section 11.4 hereof,
transfer and convey the Project (or such portion thereof which may be none as is
then in existence and is owned by the Council) in its then condition, whatever
that may be, to the Company.
In the event that the option granted by this Section 11.2 is exercised
by the Company as a result of the taking of all or substantially all the Project
under the exercise of the power of Eminent Domain, the date of purchase of the
Project pursuant to such option shall not, irrespective of the date specified
therefor pursuant to clause (2) of the first paragraph of this Section 11.2, be
later than the date on which the Lease terminates in accordance with the
provisions of Section 7.2(a) hereof, which date of termination is the
forty-fifth (45th) day after the receipt by the Trustee of the final installment
of the entire condemnation award in respect of such taking.
Section 11.3 Option to Purchase. If the Company pays all rent and other
amounts due hereunder, it shall have the right and option, hereby granted by the
Council, to purchase the Project from the Council at any time during the Lease
Term after the payment in full of the Indenture Indebtedness, the termination of
the Letter of Credit and the reimbursement to the Bank of all amounts drawn
under the Letter of Credit, together with the interest (if any) accrued thereon
under the terms of the Reimbursement Agreement, at and for a purchase price
equal to the sum of $100. To exercise any such purchase option, the Company
shall notify the Council in writing not less than fifteen (15) days prior to the
date on which it proposes to effect such purchase and, on the date of such
purchase, shall pay the aforesaid purchase price to the Council in cash or
bankable funds, whereupon the Council will, by deed or other instrument
complying with the provisions of Section 11.4 hereof, transfer and convey the
Project (in its then condition, whatever that may be) to the Company. If at the
end of the Lease Term no Event of Default shall have occurred and be continuing,
the Company shall be deemed to have exercised such purchase option unless it
notifies the Council in writing to the contrary at least fifteen (15) days
before the end of the Lease Term, and, in the event of such automatic exercise
by the Company of its option to purchase the Project, the date of purchase shall
be the last day of the Lease Term or such other date within one hundred eighty
(180) days thereafter as shall be designated by the Company. Nothing herein
contained shall be construed to give the Company any right to any rebate to or
refund of any rent paid by it hereunder prior to the exercise by it of the
purchase option hereinabove granted, even though such rent may have been wholly
or partially prepaid.
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Section 11.4 Options In General. Each of the options herein granted to
the Company may be exercised by it even though an Event of Default shall have
occurred and be continuing, it being understood and agreed, however, that all
other applicable conditions specified herein to the exercise of such option
(including payment of any amounts of money herein required to be paid by the
Company) must be met.
In the event of the exercise by the Company of either of the options to
purchase the Project or any part thereof granted in Sections 11.2 and 11.3
hereof, the Council will convey to the Company, after compliance by the Company
with the conditions to purchase specified in the respectively applicable
sections hereof, the property with respect to which such option was exercised by
statutory warranty deed, bill of sale (in the case of personal property) or
other appropriate instrument, subject only to Permitted Encumbrances, such
liens, encumbrances and exceptions to which title to such property was subject
when this Lease Agreement was delivered or such property was acquired by the
Council (whichever occurred last), those to the creation or suffering of which
the Company consented and those resulting from the failure of the Company to
perform or observe any of the agreements or covenants on its part herein
contained.
In case that, at the time of the exercise by the Company of either of
the options to purchase the Project granted in Sections 11.2 and 11.3 hereof,
there shall not have been collected by the Council, the Trustee or the Company
the entire condemnation award referable to any condemnation with respect to the
Project which may have theretofore occurred, then in such case all Net
Condemnation Awards thereafter collected and referable to such condemnation
shall be applied to the payment of any obligations then owed to the Bank under
the Reimbursement Agreement, and any such moneys remaining after the payment of
all such obligations then owed to the Bank shall be paid to the Company. The
Council will take all actions necessary to cause the amount of any such awards
to be paid to the Company or the Bank, as the case may be. The provisions of
this paragraph shall survive the expiration of the term of the Lease or any
prior termination of the Lease unless at the time of such expiration or
termination the Company is in default in the payment of any amounts of money
herein required to be paid by it, in which event any moneys described in this
paragraph would be applied first to cure such default, with any remaining
balance applied in accordance with the preceding provisions of this paragraph.
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ARTICLE XII
MISCELLANEOUS
Section 12.1 Covenant of Quiet Enjoyment. Surrender. So long as the
Company performs and observes all the covenants and agreements on its part
herein contained, it shall peaceably and quietly have, hold and enjoy the
Project during the Lease Term subject to all the terms and provisions hereof. At
the end of the Lease Term, or upon any prior termination of the Lease, the
Company will surrender to the Council possession of all property then subject to
the demise of the Lease (unless it is simultaneously purchasing such property
from the Council) in its then condition, whatever that may be.
Section 12.2 Retention of Title to Project by Council. Granting of
Easements. Without the prior written consent of the Company, the Council will
not itself, so long as no Event of Default shall have occurred and be
continuing, (i) sell, convey or otherwise dispose of all or any part of the
Project (except as provided in Section 9.4 of the Indenture or to the Company as
provided in Article XI hereof), (ii) mortgage or otherwise encumber the Project
or any part thereof (except as provided in the Bank Mortgage), or (iii) dissolve
or do anything that will result in the termination of its corporate existence
(except as provided in Section 9.4 of the Indenture). The Council will, however,
grant such utility, access and other similar easements, permits and
rights-of-way over, across or under the Project Site as shall be requested in
writing by the Company, provided that in connection with the grant of each such
easement, permit or right-of-way the Company furnishes to the Council and the
Trustee a certificate signed by an Authorized Company Representative stating
that such easement, permit or right-of-way is, or will be, useful or necessary
in the operation of the Project and will not materially interfere with or impair
the use of the Project for the purpose for which it was acquired or is held by
the Council. The Company will pay all reasonable expenses incurred by the
Council in connection with the granting of all such easements, permits and
rights-of-way.
Section 12.3 This Lease a Net Lease. The Company recognizes and
understands that it is the intention hereof that the lease herein made shall be
a net lease and that until the Bonds are fully paid all Basic Rent shall be
available for payment of the principal of and the interest and premium (if any)
on the Bonds. The Lease shall be construed to effectuate such intent.
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Section 12.4 Statement of Intention Regarding Certain Tax Matters. The
Council and the Company acknowledge and agree that it is their mutual intention
that the Company, for federal and state income tax purposes, will be entitled to
all deductions and credits with respect to the Project (including, but not
limited to, depreciation and investment credits) and that for such purposes the
Lease will be deemed to be a financing of the Project.
Section 12.5 Notices. All notices, demands, requests and other
communications hereunder shall be deemed sufficient and properly given if in
writing and delivered in person to the following addresses or received by
certified or registered mail, postage prepaid with return receipt requested, at
such addresses:
(a) If to the Council:
Calhoun County Economic Development Council
Post Office Box 944
Anniston, Alabama 36202
Attention: Chairman of the Board of Directors
(b) If to the Company:
Central Castings Corporation
451 North Cannon Avenue
Lansdale, Pennsylvania 19446
Attention: Vice President Finance
(c) If to the Trustee:
Chemical Bank
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
Attention: Josiane De Sousa, Corporate Trust Administration
(d) If to the Bank:
First Fidelity Bank, National Association
123 South Broad Street
Philadelphia, Pennsylvania 19109-1199
Attention: Thomas J. Saunders, Vice President
Any of the above-mentioned parties may, by like notice, designate any further or
different addresses to which subsequent notices shall be sent. The Company and
the Council will send a copy of each notice that either thereof gives to the
other pursuant to the provisions hereof to the Trustee and the Bank; provided,
however, that the failure of either the Council or the Company to send a copy of
any such notice to the Trustee and the Bank shall not invalidate such notice or
render it ineffective unless notice to the Trustee and the Bank is otherwise
expressly required herein. Any notice hereunder signed on behalf of the
notifying party by a duly authorized attorney at law shall be valid and
effective to the same extent as if signed on behalf of such party by a duly
authorized officer or employee.
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Whenever, under the provisions hereof, any request, consent or approval
of the Council or the Company is required or authorized, such request, consent
or approval shall (unless otherwise expressly provided herein) be signed on
behalf of the Council by an Authorized Council Representative and on behalf of
the Company by an Authorized Company Representative; and each of the parties and
the Trustee are authorized to act and rely upon any such requests, consents or
approvals so signed.
Section 12.6 Certain Prior and Contemporaneous Agreements Cancelled.
The Lease shall completely and fully supersede all other prior or
contemporaneous agreements, both written and oral, between the Council and the
Company relating to the Project Development Work and the leasing of the Project,
all to the end that the Council and the Company shall look to the Lease for
ultimate definition and determination of their respective rights, liabilities
and responsibilities respecting the Project Development Work and the Project.
The Company and the Council acknowledge that they have no outstanding agreement,
commitment or understanding, either express or implied, for the grant to the
Company of any option to purchase the Project or any part thereof or of any
option to renew the term of the Lease, other than those options contained in
Article XI hereof.
Section 12.7 Limited Liability of Council. The Council is entering into
this Lease Agreement pursuant to the authority conferred upon it by the Act. No
provision hereof shall be construed to impose a charge against the general
credit of the Council or any personal or pecuniary liability upon the Council
except with respect to the proper application of the proceeds to be derived from
the sale of the Bonds, moneys made available by the Company to the Council
pursuant to the provisions hereof, and the revenues and receipts to be derived
from any leasing or sale of the Project, including insurance proceeds and
condemnation awards. Further, none of the directors, officers, employees or
agents of the Council shall have any personal or pecuniary liability whatever
hereunder or any liability for the breach by the Council of any of the
agreements on its part herein contained. Nothing contained in this section,
however, shall relieve the Council from the observance and performance of the
several covenants and agreements on its part herein contained or relieve any
director, officer, employee or agent of the Council from performing all duties
of his respective offices that may be necessary to enable the Council to perform
the covenants and agreements on its part herein contained.
Section 12.8 Trustee Actions Requested by Company. The Company hereby
agrees that, in any instance in which the Company requests the Trustee to take
any discretionary, non-ministerial action pursuant to the Indenture, the Trustee
may require, as a condition precedent to the taking of such requested action,
the delivery to the Trustee of an opinion of Counsel stating that the taking of
such requested action by the Trustee is not inconsistent with the provisions of
the Indenture and that all conditions precedent, if any, to the taking of such
action that are specified or contained in the Indenture have been satisfied.
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The Company further agrees that, in each instance in which moneys are
to be paid, under the provisions of this Lease Agreement or the Indenture, by
the Trustee to the Bank, the Trustee shall make such payments pursuant to
written directions received from the Company.
Section 12.9 Binding Effect. The Lease shall inure to the benefit of,
and shall be binding upon, the Council, the Company and their respective
successors and assigns. To the extent provided herein and in the Indenture, the
Trustee, the holders of the Bonds and the Bank shall be deemed to be third party
beneficiaries hereof, but nothing herein contained shall be deemed to create any
right in, or to be for the benefit of, any other person who is not a party
hereto.
Upon the termination of the Letter of Credit and the payment in full of
all amounts owed to the Bank under the Reimbursement Agreement, all references
herein to the Bank shall be ineffective and the Bank shall thereafter have no
rights hereunder.
Section 12.10 Severability. In the event any provision of the Lease
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof. Without in any way limiting the generality of the foregoing, the Company
specifically acknowledges and agrees that the several purchase options granted
it in Article XI hereof are fully severable from and independent of the other
provisions hereof and that the invalidity or unenforceability of any of such
purchase options shall neither invalidate or render unenforceable any other
provision hereof nor excuse the Company from fully performing and observing any
of the agreements and covenants on its part herein contained.
Section 12.11 Article and Section Captions. The article and section
headings and captions contained herein are included for convenience only and
shall not be considered a part hereof or affect in any manner the construction
or interpretation hereof.
Section 12.12 Governing Law. The Lease shall in all respects be
governed by and construed in accordance with the laws of the State of Alabama.
56
<PAGE>
IN WITNESS WHEREOF, the Council and the Company have caused this Lease
Agreement to be executed in their respective corporate names, have caused their
respective corporate seals to be hereunder affixed, and have caused this Lease
Agreement to be attested, all by their duly authorized officers, in ten (10)
counterparts, each of which shall be deemed an original, and the parties hereto
have caused this Lease Agreement to be dated as of November 1, 1995, although
executed and delivered on November 21, 1995.
CALHOUN COUNTY
ECONOMIC DEVELOPMENT COUNCIL
By: /s/ William R. Trammell
-----------------------------------
Chairman of its Board of Directors
ATTEST:
/s/ George G. Faceton
- --------------------------------------
Its Secretary
[ S E A L ]
CENTRAL CASTINGS CORPORATION
By: /s/ Albert T. Sabol
-----------------------------------
Its Vice President
---------------------------------
ATTEST:
/s/ George D. Pelose
- --------------------------------------
Its Assistant Secretary
---------------------------------
[ S E A L ]
57
<PAGE>
STATE OF ALABAMA )
:
Calhoun COUNTY )
I, the undersigned authority, a Notary Public in and for said county in
said state, hereby certify that William R. Trammel, whose name as Chairman of
the Board of Directors of the CALHOUN COUNTY ECONOMIC DEVELOPMENT COUNCIL, a
public corporation and instrumentality under the laws of the State of Alabama,
is signed to the foregoing instrument and who is known to me, acknowledged
before me on this day that, being informed of the contents of the said
instrument, he, as such officer and with full authority, executed the same
voluntarily for and as the act of said public corporation.
GIVEN under my hand and official seal of office, this 16th day of
November, 1995.
/s/ James M. Campbell
[ NOTARIAL SEAL ] -----------------------------------------
Notary Public
My Commission Expires: 8-15-98
------------------
STATE OF Pennsylvania )
:
Philadelphia COUNTY )
I, the undersigned authority, a Notary Public in and for said county in
said state, hereby certify that Albert T. Sabol, whose name as Vice President of
CENTRAL CASTINGS CORPORATION, an Alabama corporation, is signed to the foregoing
instrument and who is known to me, acknowledged before me on this day that,
being informed of the contents of the said instrument, he, as such officer and
with full authority, executed the same voluntarily for and as the act of said
corporation.
GIVEN under my hand and official seal of office, this 21st day of
November, 1995.
/s/ Carol L. O'Neal
[ NOTARIAL SEAL ] -----------------------------------------
Notary Public
My Commission Expires: 11-28-98
------------------
58
<PAGE>
EXHIBIT A
to
LEASE AGREEMENT
between
CALHOUN COUNTY
ECONOMIC DEVELOPMENT COUNCIL
and
CENTRAL CASTINGS CORPORATION
dated as of November 1, 1995
The Project Site consists of the following described parcel of land:
A certain parcel of land located in the SW 1/4 of the NW 1/4, the W 1/2 of the
SE 1/4 of the NW 1/4, and a portion of the NE 1/4 of the NW 1/4 of Section 23,
Township 15 South, Range 7 East; said parcel being more particularly described
as follows:
Beginning at the Southwest corner of the SW 1/4 of the NW 1/4 of
Section 23, Township 15 South, Range 7 East; thence Northerly along
the West line of said quarter 1347.86 feet; thence Easterly with an
interior angle of 90 degrees 20 minutes 24 seconds to the left along
the North line of said quarter, if extended, 2062.84 feet; thence
Southerly with an interior angle of 88 degrees 53 minutes 58 seconds
to the left 1309.80 feet; thence Westerly with an interior angle of 92
degrees 10 minutes 22 seconds to the left along the South line of said
quarter, if extended, 2046.04 feet to the point of beginning.
ALSO: Beginning at the Southwest corner of the SW 1/4 of the NW 1/4 of
Section 23, Township 15 South, Range 7 East; thence Northerly along
the West line of said quarter 1347.86 feet; thence Easterly with an
interior angle of 90 degrees 20 minutes 24 seconds to the left along
the North line of said quarter, if extended, 1408.46 feet to the
intersection of said North line, if extended with the centerline of a
County Road; said point also being the true point of beginning of the
hereafter described parcel; thence continue Easterly along the
previous course 654.38 feet; thence Northerly with an interior angle
of 91 degrees 06 minutes 02 seconds to the right 399.35 feet to the
centerline of said County Road; thence Southwesterly along said
centerline as follows: with an interior angle of 44 degrees 38 minutes
to the right 91.13 feet; with an interior angle of 169 degrees 58
minutes 20 seconds to the left 146.47 feet; with an interior angle of
169 degrees 37 minutes to the left 90.55 feet; with an interior angle
A-1
<PAGE>
of 174 degrees 48 minutes 04 seconds to the left 105.62 feet; with an
interior angle of 176 degrees 24 minutes 34 seconds to the right 90.72
feet; with an interior angle of 174 degrees 13 minutes 22 seconds to
the right 76.63 feet; with an interior angle of 174 degrees 23 minutes
04 seconds to the right 76.44 feet; with an interior angle of 173
degrees 23 minutes 22 seconds to the right 69.32 feet; with an
interior angle of 174 degrees 26 minutes 20 seconds to the right 35.37
feet to the true point of beginning.
Containing a total of 65.16 acres, more or less, less and except any
right-of-way assigned to Alabama Power Company; and less and except
road right-of-way as deeded to Calhoun County, Alabama.
The above parcel of land is located in the County of Calhoun, State of
Alabama.
A-2
<PAGE>
EXHIBIT B
to
LEASE AGREEMENT
between
CALHOUN COUNTY
ECONOMIC DEVELOPMENT COUNCIL
and
CENTRAL CASTINGS CORPORATION
dated as of November 1, 1995
The Project Equipment referred to in the Lease Agreement of which this
Exhibit B constitutes a part initially consists of the following items:
B-1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
QUANTITY DESCRIPTION IDENTIFICATION NOTES VALUE IN USE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Dissmatic 2013 Serial Number 71.645 1964 $ 150,000
- --------------------------------------------------------------------------------------------------------------------
Automatic Molding Machine (1964)
====================================================================================================================
1 Dissmatic 2013 Serial Number 71.604 Doesn't Run $ 5,000
- --------------------------------------------------------------------------------------------------------------------
Automatic Molding Machine (1964)
====================================================================================================================
1 42" Wide Conveyor Belt - 16' Long $ 4,500
====================================================================================================================
1 48" Wide Conveyor Belt - 50' in 3 Sections $ 16,750
====================================================================================================================
2 1250 KW 180 KZ Tri-Line Inductotherm $ 175,000
- --------------------------------------------------------------------------------------------------------------------
with Power Supplies Serial Number 02-58730
- --------------------------------------------------------------------------------------------------------------------
Includes (3) 3.5 Ton Melting Pots Serial Number 03-75375
- --------------------------------------------------------------------------------------------------------------------
(2) Spare 3.5 Ton Coils
====================================================================================================================
1 Didion Rotary Shakeout System Model RS-40 $ 15,400
====================================================================================================================
1 Wheelabator Turnblast Super 28 Serial Number A1235440 $ 25,000
====================================================================================================================
1 Cleveland Tramrail Crane System Serial Number 2-02100-000 $ 11,500
====================================================================================================================
1 Carborundum Dust Collector Serial Number 1-721175-I $ 12,500
====================================================================================================================
1 Wheelabrator Dust Collector 3500 CFM $ 8,000
====================================================================================================================
1 Pagborn Dust Collector 7500 CFM $ 13,500
====================================================================================================================
1 Simpson 2F Muller Serial Number E7301001 $ 5,000
====================================================================================================================
1 3 Ton Yale Electric Hoists $ 5,000
====================================================================================================================
1 Overhand Sand Control System $ 18,750
====================================================================================================================
1 Sand Storage Hopper $ 5,000
====================================================================================================================
1 Bradford Lathe Serial Number 5324-124 $ 1,000
====================================================================================================================
1 Automatic Stapler Machine Not in use $ 100
====================================================================================================================
1 Lathern Time Recorder $ 100
====================================================================================================================
1 Electrical System $ 32,500
- --------------------------------------------------------------------------------------------------------------------
480V Transformer
- --------------------------------------------------------------------------------------------------------------------
240V Transformer
- --------------------------------------------------------------------------------------------------------------------
4 KV Disconnect System
====================================================================================================================
3 333 KW Transformers $ 12,000
====================================================================================================================
1 Dietert Scrubber & Wash Basin Serial Number 38180 $ 1,250
====================================================================================================================
1 Metler H-13 Analytical Balance Scale Serial Number 610344 $ 375
====================================================================================================================
1 Dietert M.B. Clay Tester Serial Number 535A-338 $ 750
====================================================================================================================
1 Combs Laboratory Sifter w/Screens $ 875
====================================================================================================================
1 Blue M Muffle Furnace Serial Number HE-1527 $ 250
====================================================================================================================
1 Dietert 401 Compression Tester Serial Number 30575 $ 1,575
====================================================================================================================
1 2 Ton Chislom-Moore Cornet Hoist w/bucket $ 8,000
====================================================================================================================
2 Portable Office Buildings $ 500
====================================================================================================================
1 Pattern Heater Enclosure $ 3,750
- --------------------------------------------------------------------------------------------------------------------
Complete with Temperature Controls
====================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
QUANTITY DESCRIPTION IDENTIFICATION NOTES VALUE IN USE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
===================================================================================================================
1 Spare Gear Reducer for 85-B Muller $ 15,000
====================================================================================================================
1 Gogan Automatic Brinell Hardness Tester $ 3,750
====================================================================================================================
1 IBM Computer Model PS2/55SX $ 1,500
====================================================================================================================
1 IBM Typewriter Serial Number 26-2338836 $ 400
====================================================================================================================
1 Sharp SF3700 Copy Machine Serial Number 96611788 $ 5,000
====================================================================================================================
1 Harris/Lanier Telephone System (6) Stations Serial Number 561346 $ 6,000
====================================================================================================================
1 Ricoh Fax 60 Serial Number 71202773 $ 1,000
====================================================================================================================
3 Office Desks & Chairs $ 15,000
====================================================================================================================
2 Computer Desks $ 800
====================================================================================================================
4 File Cabinets Serial Number 561346 $ 800
====================================================================================================================
Various Tools, Dies and Patterns $ 120,000
====================================================================================================================
$1,199,485
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
============================================================================
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
by and between
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
and
CENTRAL CASTINGS CORPORATION
Relating to:
$8,000,000
Alabama State Industrial Development Authority
Adjustable Convertible Taxable Industrial Revenue Bonds
(Central Castings Corporation Project) Series 1995
$3,000,000
Calhoun County Economic Development Council
Adjustable Convertible Taxable Industrial Revenue Bonds
(Central Castings Corporation Project) Series 1995
Dated as of November 1, 1995
============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - DEFINITIONS..................................................... 3
Section 1.1. Definitions.............................................. 3
Section 1.2. Rules of Construction. ................................. 20
ARTICLE 2 - THE LETTER OF CREDIT............................................ 20
Section 2.1. Agreement of the Bank to Issue the Letters of Credit..... 20
Section 2.2. Term of Letters of Credit................................ 21
Section 2.3. Draws and Other Fees and Expenses Under the
Letters of Credit...................................... 22
Section 2.4. Permitted Drawings and Repayments.........................24
Section 2.5. Debt Service Fund........................................ 25
Section 2.6. Security for Obligations................................. 26
Section 2.7. Place and Method of Payment; Computation of Interest..... 26
Section 2.8. Evidence of Debt......................................... 26
Section 2.9. Applicable Standards..................................... 27
ARTICLE 3 - TERM LOAN....................................................... 27
Section 3.1. The Term Loan............................................ 27
Section 3.2. Promissory Note.......................................... 27
Section 3.3. Use of Proceeds.......................................... 27
Section 3.4. Principal Repayments..................................... 27
Section 3.5. Interest................................................. 27
Section 3.6. Conversion to Term Loan.................................. 28
Section 3.7. Payments................................................. 28
Section 3.8. Prepayment............................................... 29
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES................................. 29
Section 4.1. Borrower and Guarantor Representations................... 29
Section 4.2. Representations and Warranties as to the Acquisition
of Project Facilities.................................. 34
ARTICLE 5 - CONDITIONS PRECEDENT............................................ 35
Section 5.1. Conditions to Issuance of the Letters of Credit.......... 35
Section 5.2. Conditions to Term Loan.................................. 39
Section 5.3. Conditions to Issuance of Replacement Letter of Credit... 40
-i-
<PAGE>
Page
ARTICLE 6 - COVENANTS OF THE BORROWER....................................... 41
Section 6.1. Financial Statements..................................... 41
Section 6.2. Preservation of Corporate Existence and Qualification.... 42
Section 6.3. Records and Books of Account............................. 42
Section 6.4. Maintenance of Properties................................ 42
Section 6.5. Maintenance of Licenses.................................. 42
Section 6.6. Further Assurances....................................... 42
Section 6.7. Maintenance of Insurance................................. 42
Section 6.8. Payment of Taxes and Other Indebtedness.................. 44
Section 6.9. Payment of Indebtedness.................................. 44
Section 6.10. Compliance with Applicable Laws.......................... 44
Section 6.11. Environmental Covenant................................... 44
Section 6.12. Mergers, Etc............................................. 45
Section 6.13. Lease or Transfer of Project Facilities.................. 45
Section 6.14. Inspection of the Project Facility....................... 45
Section 6.15. Relocation of the Project Facilities..................... 45
Section 6.16. Costs and Expenses; Indemnity............................ 46
Section 6.17. Damage to or Condemnation of Project Facilities.......... 46
Section 6.18. Prohibition of Liens..................................... 47
Section 6.19. Additional Indebtedness.................................. 49
Section 6.20. Financing Statements..................................... 50
Section 6.21. Change in Nature of Corporate Activities................. 50
Section 6.22. Notice and Certification With Respect to Bankruptcy
Proceedings............................................ 50
Section 6.23. Other Notices; Litigation; Event of Default.............. 51
Section 6.24. Continuing Disclosure.................................... 51
ARTICLE 7 - FINANCIAL COVENANTS............................................. 51
Section 7.1. Consolidated Tangible Net Worth.......................... 51
Section 7.2. Consolidated Current Ratio............................... 52
Section 7.3. Consolidated Quick Ratio................................. 52
Section 7.4. Ratio of Consolidated Funded Indebtedness to
Consolidated Tangible Net Worth....................... 52
Section 7.5. Cash Equivalents......................................... 53
ARTICLE 8 - EVENTS OF DEFAULT AND REMEDIES.................................. 53
Section 8.1. Events of Default: Acceleration.......................... 53
Section 8.2. Remedies................................................. 55
Section 8.3. No Remedy Exclusive...................................... 57
Section 8.4. Agreement to Pay Attorneys Fees and Expenses............. 57
Section 8.5. No Additional Waiver Implied by One Waiver............... 58
Section 8.6. Additional Rights of the Bank............................ 58
-ii-
<PAGE>
Page
ARTICLE 9 - MISCELLANEOUS................................................... 58
Section 9.1. Indemnity Against Claims................................. 58
Section 9.2. Severability............................................. 59
Section 9.3. Successors and Assigns................................... 59
Section 9.4. Amendments, Etc.......................................... 60
Section 9.5. Execution in Counterparts................................ 60
Section 9.6. Governing Law............................................ 60
Section 9.7. Consent to Jurisdiction.................................. 60
Section 9.8. Reasonable Consent....................................... 60
Section 9.9. Amounts Remaining in Bond Fund........................... 60
Section 9.10. Receipt of Indenture..................................... 61
Section 9.11. Headings................................................. 61
Section 9.12. Integration: Entire Agreement........................... 61
Section 9.13. Survival of Agreements................................... 61
Section 9.14. Addresses for Notices, Etc............................... 61
Section 9.15. JUDICIAL PROCEEDINGS; WAIVERS............................ 63
List of Schedules and Exhibits
Schedule I: Real Property Description
Schedule II: Subordinated Debt
Schedule III: Disclosure Pursuant to Representations and Warranties
Exhibit A-1: Form of Letter of Credit in favor of the Authority
Exhibit A-2: Form of Letter of Credit in favor of the Council
Exhibit B: Form of Bank Mortgage
Exhibit C: Form of Borrowing Certificate
Exhibit D: Form of General Security Agreement
Exhibit E: Form of Guaranty and Suretyship Agreement
Exhibit F: Form of Guarantor Security Agreement
Exhibit G: Form of Risk Participation Agreement
Exhibit H: Form of Tender Agent Agreement
Exhibit I: Form of Subordination Agreement
Exhibit J: Form of Term Loan Note
-iii-
<PAGE>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
THIS LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of
the first day of November, 1995, is by and between FIRST FIDELITY BANK, NATIONAL
ASSOCIATION (the "Bank"), a national banking association, and CENTRAL CASTINGS
CORPORATION (the "Borrower"), a corporation organized and existing under the
laws of the State of Alabama; and CENTRAL SPRINKLER CORPORATION, a corporation
organized and existing under the laws of the Commonwealth of Pennsylvania, in
its capacity as a Guarantor hereunder, CENTRAL SPRINKLER COMPANY, a corporation
organized and existing under the laws of the Commonwealth of Pennsylvania, in
its capacity as a Guarantor hereunder, and CENTRAL SPRINK INC., a corporation
organized and existing under the laws of the State of California, in its
capacity as a Guarantor hereunder.
WHEREAS, the statutes codified as Code of Alabama 1975, Title
41, Chapter 10, Articles 2 and 2A, as amended and supplemented (the "Act"),
declares it to be in the public interest and to be the policy of the State of
Alabama (the "State") to foster and promote the economy of the State, increase
opportunities for gainful employment and improve living conditions, assist in
the economic development or redevelopment of political subdivisions within the
State, and otherwise contribute to the prosperity, health and general welfare of
the State and its inhabitants by inducing manufacturing, industrial, commercial,
recreational, retail, service and other employment promoting enterprises to
locate, remain or expand within the State by making available financial
assistance; and
WHEREAS, the State Industrial Development Authority (the
"Authority"), a public corporation and instrumentality under the laws of the
State, to accomplish the purposes of the Act, is empowered to extend credit in
the name of the Authority on such terms and conditions and in such manner as it
may deem proper for such consideration and upon such terms and conditions as the
Authority may determine to be reasonable; and
WHEREAS, the Borrower submitted an application (the "Authority
Application") to the Authority for financial assistance in the principal amount
of $8,000,000 for financing and refinancing a portion of the costs of a project
(the "Project") consisting of the acquisition of and construction of
improvements with respect to a foundry located in Anniston, Calhoun County,
Alabama, and the Authority, by resolution duly adopted on November 11, 1994 in
accordance with the Act, accepted the application of the Borrower for assistance
in financing the Project; and
WHEREAS, on October 23, 1995, the Authority, by resolution
duly adopted (the "Authority Resolution"), authorized the issuance of its
Adjustable Convertible Taxable Industrial Revenue Bonds (Central Castings
Corporation Project) Series 1995 (the "Authority Bonds") for the purpose of
providing funds for the Borrower to finance the Project; and
WHEREAS, the Authority has determined to issue the Authority
Bonds concurrently herewith pursuant to the Act, the Authority Resolution and
the Authority Indenture (as hereinafter defined); and
WHEREAS, the Calhoun County Economic Development Council (the
"Council"), a public corporation and instrumentality under the laws of the
State, to accomplish the purposes of the Act, is empowered pursuant to Act No.
82-222 of the 1982 Regular Session of the Legislature of the State, as amended
and supplemented (the "1982 Act") to extend credit in the name of the Council on
such terms and conditions and in such manner as it may deem proper for such
consideration and upon such terms and conditions as the Council may determine to
be reasonable; and
<PAGE>
WHEREAS, the Borrower submitted an application (the "Council
Application") to the Council for financial assistance in the principal amount of
$3,000,000 for financing and refinancing a portion of the costs of the Project
and the Council, by resolution duly adopted on May 24, 1994, in accordance with
the Act, accepted the application of the Borrower for assistance in financing
the Project; and
WHEREAS, on October 24, 1995, the Council, by resolution duly
adopted (the "Council Resolution"), authorized the issuance of its Adjustable
Convertible Taxable Industrial Revenue Bonds (Central Castings Corporation
Project) Series 1995 (the "Council Bonds" and, together with the Authority
Bonds, the "Bonds") for the purpose of providing additional funds for the
Borrower to finance the Project; and
WHEREAS, the Council has determined to issue the first
installment of the Council Bonds concurrently herewith pursuant to the Act, the
Council Resolution and the Council Indenture (as hereinafter defined); and
WHEREAS, in connection with the issuance by the Council of the
Council Bonds, the Council has required the Borrower to transfer to the Council
fee simple title to the Project Facilities and to enter into a Lease Agreement
with the Council dated of even date herewith (the "Lease Agreement") under the
terms and conditions set forth therein; and
WHEREAS, the Obligations under the Letters of Credit, the
Reimbursement Agreement and certain of the other Credit Documents (in each case,
as hereinafter defined) shall be secured by a first mortgage lien on the Project
Facilities (as hereinafter defined), a first priority security interest in the
Machinery and Equipment (as hereinafter defined), and such other security
granted by the Borrower in connection with this transaction; and
WHEREAS, the Authority, contemporaneously with the execution
and delivery of this Agreement, shall enter into a Loan Agreement with the
Borrower (the "Loan Agreement" and together with the Lease Agreement, the
"Financing Agreements"), and each of the Authority and the Council shall enter
into an Indenture of Trust, each dated as of November 1, 1995 wherein such
Authority and Council, respectively, have assigned certain of their rights under
the applicable Financing Agreement to the Trustee (as hereinafter defined) for
the benefit of the Holders of the Bonds issued thereunder from time to time;
WHEREAS, to facilitate the issuance and sale of the Bonds and
to enhance the marketability of the Bonds, the Borrower has requested the Bank
to issue (a) an irrevocable direct pay letter of credit in favor of the Trustee
with respect to the Authority Bonds substantially in the form of Exhibit A-1
attached hereto, in an amount up to an aggregate amount of $8,150,000 (as
reduced and reinstated from time to time in accordance with the provisions
hereof and of the Letter of Credit), of which (i) the sum of $8,000,000 shall be
available to pay the principal amount of the Authority Bonds either at maturity
(whether at the stated maturity date or by acceleration) or upon tender or
redemption thereof, and (ii) the remainder shall be available to pay up to 45
days' interest on the outstanding Authority Bonds computed at the rate of
fifteen percent (15%) per annum accrued on the outstanding Authority Bonds, as
such interest becomes due; and (b) an irrevocable direct pay letter of credit in
favor of the Trustee with respect to Council Bonds substantially in the form of
Exhibit A-2 attached hereto, in an amount up to an aggregate amount of
$3,056,250 (as reduced and reinstated from time to time in accordance with the
provisions hereof and of the Letter of Credit), of which (i) the sum of
$3,000,000 shall be available to pay the principal amount of the Council Bonds
either at maturity (whether at the stated maturity date or by acceleration) or
upon tender or redemption thereof, and (ii) the remainder shall be available to
pay up to 45 days' interest on the outstanding Council Bonds computed at the
rate of fifteen percent (15%) per annum accrued on the outstanding Council
Bonds, as such interest becomes due; and
-2-
<PAGE>
WHEREAS, as a condition, among others, to its issuance of the
Letters of Credit, the Bank has required that the Borrower enter into this
Letter of Credit Reimbursement Agreement;
NOW, THEREFORE, for and in consideration of the premises and
of the mutual representations, covenants and agreements herein set forth (each
of which is incorporated herein by reference), intending to be legally bound
hereby, and in order to induce the Bank to issue the Letters of Credit, the
Borrower and the Bank hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. The following words and terms as used herein
shall have the following meanings unless the context or use indicates another or
different meaning or intent.
(a) "Account" means any account established by the Borrower
and maintained by the Bank pursuant to and in accordance with this Agreement;
(b) "Act" means the Code of Alabama 1975, Title 41, Chapter
10, Articles 2 and 2A, as amended and supplemented and at the time in force and
effect, or any successor legislation, and the regulations promulgated
thereunder;
(c) "Act of Bankruptcy" means the filing of a petition in
bankruptcy (or other commencement of a bankruptcy or similar proceeding) by or
against the Borrower, or the applicable Authority under any applicable
bankruptcy, insolvency, reorganization or similar law, now or hereafter in
effect;
(d) "Adjudication of Invalidity" means a final, non-appealable
adjudication by a court of competent jurisdiction, binding upon the Borrower or
the Authority or, if not binding upon the Borrower or Authority, applicable to
the Authority Bonds in the opinion of Bond Counsel, to the effect that (i) the
Authority Bonds are not the legal, valid and binding obligation of the
Authority; (ii) the Authority Indenture is not the legal valid and binding
obligation of the Authority; or (iii) the Authority Bonds, Authority Indenture,
or the Authority Loan Agreement is not otherwise enforceable against the
Authority in accordance with its terms;
-3-
<PAGE>
(e) "Affiliate" of any designated Person means any Person
which, directly or indirectly, controls, or is controlled by, or is under common
control with, such designated Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities or by contract or otherwise;
(f) "Agreement" or "Reimbursement Agreement" means this Letter
of Credit and Reimbursement Agreement dated as of November 1, 1995 between the
Borrower, the Guarantors and the Bank, as the same may be amended from time to
time and filed with the Trustee, under which terms the Bank agrees to issue the
Letters of Credit, and any successor agreement of the Borrower with a Letter of
Credit Issuer under which terms the Borrower and such Letter of Credit Issuer
agree to issue an Alternate Letter of Credit;
(g) "Alternate Letter of Credit" means any letter of credit
substituted for one or both of the Letters of Credit, including any renewals or
extensions of such Letters of Credit by a Letter of Credit Issuer other than the
Bank, pursuant to and meeting the requirements of Section 3.14(d) of the
Authority Indenture or Council Indenture, as applicable;
(h) "Alternate Letter of Credit Issuer" means the issuer of an
Alternate Letter of Credit which meets the standards set forth in Section
3.14(d) of the Authority Indenture or Council Indenture, as applicable;
(i) "Application" means individually, and "Applications" means
collectively, the Borrower's letters to the Authority, dated November 8, 1994
and to the Council, dated May 24, 1994, with respect to the Project, and all
attachments, exhibits, correspondence and modifications submitted in writing to
each such Issuer in connection with said Application;
(j) "Article" means a specified article hereof, unless
otherwise indicated;
(k) "Authority" means the Alabama State Industrial Development
Authority, an Alabama public corporation, and its successors and assigns;
(l) "Authority Bonds" means those certain Alabama State
Industrial Development Authority Adjustable Convertible Taxable Industrial
Revenue Bonds (Central Castings Corporation) Series 1995;
(m) "Authority Indenture" means that certain Trust Indenture
dated as of November 1, 1995, by and between the Authority and the Trustee with
respect to the Authority Bonds, as the same may from time to time be amended,
modified or supplemented in accordance with the provisions thereof;
(n) "Authority Letter of Credit" means the irrevocable direct
pay Letter of Credit issued by the Bank in favor of the Trustee in connection
with the Authority Bonds and dated the Issue Date, in the form of Exhibit A-1
attached hereto;
-4-
<PAGE>
(o) "Authority Loan" means the loan from the Authority to the
Borrower in the aggregate principal amount not to exceed $8,000,000, being an
amount equal to the principal amount of the Authority Bonds;
(p) "Authority Loan Agreement" means the Loan Agreement dated
as of November 1, 1995 by and between the Authority and the Borrower and any
amendments thereof and supplements thereto relating to the Project to be
financed from proceeds of the Authority Bonds;
(q) "Authority Resolution" means the resolution duly adopted
by the Authority on November 8, 1994, accepting the Application, making certain
findings and determinations and authorizing the issuance and sale of the
Authority Bonds and determining other matters in connection with the Project, as
the same may be amended or supplemented from time to time;
(r) "Authorized Borrower Representative" means any individual
or individuals duly authorized by the Borrower (as evidenced by a written
certificate furnished to the Bank, the Trustee, the Authority and the Council)
to act on its behalf and containing a specimen of such individual's or
individuals' signature(s);
(s) "Authorized Issuer Representative" means any individual or
individuals duly authorized by the applicable Issuer to act on its behalf
pursuant to the applicable Resolution;
(t) "Bank" means First Fidelity Bank, National Association, a
national banking association having its principal office in Philadelphia,
Pennsylvania, in its capacity as the issuer of the Letters of Credit, and its
successors and assigns in such capacity;
(u) "Bank Mortgage" means the Mortgage and Security Agreement
executed by the Borrower and the Council, as Mortgagor, and given to the Bank,
as Mortgagee, substantially in the form of Exhibit B attached hereto, which
constitutes a first mortgage lien on and security interest on the Project
Facilities securing the obligations of the Borrower to the Bank;
(v) "Base Rate" means the rate of interest established by the
Bank from time to time as its reference rate in making loans but which does not
reflect the rate of interest charged to any particular class of borrower. The
Base Rate is not tied to any external or index rate of interest. Any rate of
interest which is determined with reference to the Base Rate shall automatically
and immediately change as of the date of change in the Base Rate without any
notice to the Borrower;
(w) "Bond Counsel" means independent counsel having nationally
recognized standing in matters relating to the tax-exempt nature of interest on
obligations issued by or on behalf of states or political subdivisions thereof;
(x) "Bond Fund" means the Central Castings Corporation Project
Bond Principal and Interest Fund established under Section 8.1 of the applicable
Indenture and consisting of two accounts, the Bond Fund Primary Account and the
Bond Fund Letter of Credit Account;
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(y) "Bond Fund Letter of Credit Account" means the Letter of
Credit Account established under Section 8.1 of the applicable Indenture and
forming part of the Bond Fund;
(z) "Bond Fund Primary Account" means the Primary Account
established under Section 8.1 of the applicable Indenture and forming a part of
the Bond Fund;
(aa) "Bond Proceeds" means the amount, including any accrued
interest, paid to the Issuers by the Placement Agent pursuant to the Placement
Agreement as the purchase price of the Bonds, and the interest income earned
thereon;
(ab) "Bond Purchase Fund" means the Central Castings
Corporation Project Bond Purchase Fund established under Section 8.2 of the
applicable Indenture;
(ac) "Bond Year" means the one-year period commencing November
1 and ending on the following October 31; except that the first Bond Year shall
commence on the Issue Date and end on November 1, 1996;
(ad) "Bondholder" means the Holder of a Bond;
(ae) "Bonds" means collectively, the Authority Bonds and the
Council Bonds and, following an Adjudication of Invalidity, may include
Supplemental Bonds issued by the Council pursuant to and as contemplated by the
Council Indenture, and "Bond" means individually any single Bond, as the context
may require;
(af) "Borrower" means Central Castings Corporation, a
corporation organized and existing under the laws of the State and its
successors and permitted assigns;
(ag) "Borrowing Certificate" means the certificate to be duly
completed, executed and delivered by the chief executive or chief financial
officer of the Borrower, in the form of Exhibit C hereto, as a condition to the
Bank's conversion of reimbursement obligations to an advance of the Term Loan;
(ah) "Business Day" means any day other than (i) a Saturday or
a Sunday, (ii) a day on which banking institutions in New York, New York, in
Philadelphia, Pennsylvania, or in any other city where either the principal
office of the Bank, the Trustee, the Paying Agent, the Remarketing Agent, or the
Tender Agent is located are required or authorized by law (including executive
order) to close or on which the principal office of the Bank, the Trustee, the
Paying Agent, the Remarketing Agent or the Tender Agent is closed for a reason
not related to financial condition, or (iii) a day on which the New York Stock
Exchange is closed;
(ai) "Capitalization" means the amount equal to Net Worth plus
Long-Term Liabilities;
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(aj) "Cash Collateral Account" means that certain deposit
account established and maintained by the Borrower at the Bank as a separate
account from the Debt Service Fund, the proceeds of which shall (i) secure the
Obligations, and (ii) be used in accordance with Section 7.2 hereof;
(ak) "Central Sprink" means Central Sprink Inc., a California
corporation and an affiliate of the Borrower;
(al) "Code" means the Internal Revenue Code of 1986, as
amended and the Treasury Regulations and rules promulgated thereunder;
(am) "Collateral" means (a) all the real property subject to
the lien of the Bank Mortgage; the Machinery and Equipment; and the Personal
Property Collateral and other property subject to the Security Agreement; (b)
all assets of Central Sprink in which the Bank is granted a security interest
pursuant to the Guarantor Security Agreement; (c) the proceeds of the Cash
Collateral Account and the Debt Service Fund; and (d) such other security for
the Obligations as is granted by the Borrower or Guarantors;
(an) "Commitment Letter" means the letter dated June 28, 1995
from the Bank to the Borrower and executed by the Borrower on June 30, 1995
confirming the Bank's commitment to provide the Borrower with an irrevocable
direct pay letter of credit;
(ao) "Consolidated" means the consolidation of the accounts of
the Consolidated Corporations in accordance with GAAP, including principles of
consolidation, applied in a manner consistent with the application of such
principles in the preparation of the audited financial statements mentioned in
Section 6.1 hereof;
(ap) "Consolidated Corporations" means collectively, Central
Sprinkler Corporation and its Consolidated Subsidiaries;
(aq) "Consolidated Funded Indebtedness" means all obligations
of the Consolidated Corporations or any of them for borrowed money including,
without limitation, (i) all obligations, contingent or otherwise, in connection
with all letter of credit facilities, acceptance facilities or other similar
facilities issued for the account of the Consolidated Corporations or any of
them, (ii) all obligations of the Consolidated Corporations evidenced by bonds,
notes, debentures or other similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by the Consolidated Corporations or any of them,
(iv) all capital lease obligations of the Consolidated Corporations or any of
them, (v) all guarantees, endorsements (other than for collection or deposit in
the ordinary course of business), and other contingent obligations of the
Consolidated Corporations, and (vi) all debt referred to in clauses (i) through
(v) above secured by (or for which the holder of such debt has an existing
right, contingent or otherwise, to be secured by) any lien, security interest or
other charge or encumbrance upon or in property (including, without limitation,
accounts or contract rights) owned by such Person; provided, however, that trade
indebtedness, tax and other accruals and deferred compensation occurring in the
ordinary course of business and debt subordinated on terms and conditions
acceptable to the Bank are specifically excluded from this definition;
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(ar) "Conversion Date" means the date on which the interest
payable with respect to the Bonds shall be converted from the Variable Interest
Rate to the Fixed Interest Rate pursuant to the provisions of Section 3.4 of the
applicable Indenture;
(as) "Council" means the Calhoun County Economic Development
Council, an Alabama public corporation, and its successors and assigns;
(at) "Council Bonds" means those certain Calhoun County
Economic Development Council Adjustable Convertible Taxable Industrial Revenue
Bonds (Central Castings Corporation) Series 1995;
(au) "Council Indenture" means that certain Trust Indenture
dated as of November 1, 1995, by and between the Council and the Trustee with
respect to the Council Bonds, as the same may from time to time be amended,
modified or supplemented in accordance with the provisions thereof;
(av) "Council Lease Obligations" means the obligations of
Borrower to the Council under the Council Lease Agreement, in an aggregate
amount not to exceed $3,000,000, being an amount equal to the principal amount
of the Council Bonds;
(aw) "Council Lease Agreement" means the Lease Agreement dated
as of November 1, 1995, by and between the Council and the Borrower and any
amendments thereof and supplements thereto relating to the Project Facilities
leased thereunder;
(ax) "Council Letter of Credit" means the irrevocable direct
pay Letter of Credit issued by the Bank in favor of the Trustee in connection
with the Council Bonds and dated the Issue Date, in the form of Exhibit A-2
attached hereto;
(ay) "Council Resolution" means the resolution duly adopted by
the Council on May 24, 1994, accepting the Application, making certain findings
and determinations and authorizing the issuance and sale of the Council Bonds,
and the subsequent issuance and sale of Supplemental Bonds following an
Adjudication of Invalidity, and determining other matters in connection with the
Project, as the same may be amended or supplemented from time to time;
(az) "Counsel for the Bank" means the law firm of Pepper,
Hamilton & Scheetz, Philadelphia, Pennsylvania;
(ba) "Counsel for the Borrower" means the law firm of Morgan,
Lewis & Bockius, LLP, Philadelphia, Pennsylvania;
(bb) "Counsel for the Issuer" means the law firm of Haskell,
Slaughter, Young & Johnston, P.A., Birmingham, Alabama;
(bc) "Counsel for the Placement Agent" means the law firm of
Pepper, Hamilton & Scheetz, Philadelphia, Pennsylvania;
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(bd) "Counsel for the Trustee" means the law firm of Kelley
Drye & Warren, New York, New York;
(be) "Credit Documents" means any or all of this Reimbursement
Agreement, the Letters of Credit, the Term Loan Note, the Financing Agreements,
the Indentures, the Tender Agent Agreement, the Bank Mortgage, the Security
Agreement, the Guaranties, the Guarantor Security Agreement, the Financing
Statements, any other documents securing the Borrower's obligations under this
Agreement, the Financing Agreements and Indentures, and all documents and
instruments executed in connection therewith and all amendments and
modifications thereto;
(bf) "CS Company" means Central Sprinkler Company, a
Pennsylvania corporation and holder of one hundred percent (100%) of the
authorized, issued and outstanding shares of the Borrower;
(bg) "CS Corporation" means Central Sprinkler Corporation, a
Pennsylvania corporation and the holder of one hundred percent (100%) of the
authorized, issued and outstanding shares of CS Company;
(bh) "Current Assets" means, as to any Person, all of its
assets that, in accordance with GAAP, would be classified as current assets;
(bi) "Current Liabilities" means, as to any Person, all of its
liabilities that, in accordance with GAAP, would be classified as current
liabilities;
(bj) "Debt Service" means the scheduled amount of interest and
amortization of principal payable for any Bond Year with respect to the Bonds as
defined in Section 148(d)(3)(D) of the Code;
(bk) "Debt Service Fund" means the account of the Borrower
maintained at the Bank, to be funded in accordance with Section 2.5 hereof;
(bl) "Default" means any event or circumstance which, with the
passage of time, the giving of notice, or both, would constitute an Event of
Default;
(bm) "Effective Rate Date" means (a) with respect to Bonds at
the end of the Initial Period, November 22, 1995, and (b) with respect to Bonds
after the Initial Period, the date as of which the interest rate determined
shall be effective, which shall be (i) with respect to a Variable Rate Mode,
shall be the Thursday of each week and (ii) with respect to Pledged Bonds that
have been remarketed, which shall be the Special Interest Payment Date (as
defined in the Indentures), and thereafter, the regularly scheduled Effective
Rate Date for the Bonds in the Variable Rate Mode;
(bn) "Eligible Remarketing Proceeds" means the proceeds of the
remarketing of Bonds tendered (or deemed tendered) for purchase pursuant to the
Optional Tender or Mandatory Tender provisions of the applicable Indenture,
other than the proceeds of (i) Obligor Bonds, or (ii) Bonds held by the
Remarketing Agent;
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(bo) "Environmental Laws" means any and all laws, regulations,
and executive orders, federal, state and local, pertaining to pollution or
protection of the environment (including laws, regulations and other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants, or hazardous or toxic materials or wastes into
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, or hazardous or toxic
material or wastes), as the same may be amended or supplemented from time to
time. Any capitalized terms which are defined in any applicable Environmental
Law shall have the meanings ascribed to such terms in said laws; provided,
however, that if any of such laws are amended so as to broaden any term defined
therein, such broader meaning shall apply subsequent to the effective date of
such amendment;
(bp) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor legislation, together
with all rules and regulations promulgated thereunder or pursuant thereto as
from time to time in effect;
(bq) "Event of Default" means any of the events, conditions,
acts or omissions defined as an event of default in Article 8 hereof;
(br) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor legislation, together with the
rules and regulations promulgated thereunder or pursuant thereto as from time to
time in effect;
(bs) "Financing Agreement" means individually, and "Financing
Agreements" means collectively, the Authority Loan Agreement and the Council
Lease Agreement;
(bt) "Financing Statements" means the Uniform Commercial Code
financing statements executed by the Borrower or Central Sprink, as applicable,
as 'Debtor', in favor of the Bank, as 'Secured Party', delivered pursuant to
Sections 5.1(a)(vi) and 5.3(a)(ii) hereof (if applicable);
(bu) "Fixed Interest Rate" means the rate of interest to be
borne by the Bonds after the Conversion Date, as determined in accordance with
Section 3.4 of the applicable Indenture;
(bv) "Fixed Rate Mode" means, with respect to any Bond, the
period following the Conversion Date for such Bond;
(bw) "GAAP" means generally accepted accounting principles in
effect from time to time in the United States, consistently applied;
(bx) "General Certificate of the Authority" means the
certificate of the Authority which is made a part hereof;
(by) "General Certificate of the Council" means the
certificate of the Council which is made a part hereof;
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(bz) "Guarantor" means, individually, and "Guarantors" means,
collectively, jointly and severally, CS Corporation, CS Company and Central
Sprink;
(ca) "Guarantor Security Agreement" means the Security
Agreement dated as of November 1, 1995, executed and delivered by Central Sprink
in favor of the Bank, substantially in the form of Exhibit F hereto;
(cb) "Guaranty" or "Guaranty Agreement" means, individually,
and "Guaranties" or "Guaranty Agreements" means, collectively, the Guaranty and
Suretyship Agreements dated as of November 1, 1995, executed and delivered by
each Guarantor in favor of the Bank, substantially in the form of Exhibit E
hereto;
(cc) "Hazardous Substance(s)" means without limitation any and
all hazardous or toxic substances, materials or waste as defined by or listed
under the Environmental Laws. "Hazardous Substances" also include without
limitation petroleum and petroleum by-products or any fraction thereof,
asbestos, and all other pollutants and contaminants as defined under the
Environmental Laws.
(cd) "Holder", "holder" or "Bondholder" means any Person who
shall be the registered owner of any Bond or Bonds;
(ce) "Indemnified Parties" means the Bank, any Person who
"controls" the Bank, within the meaning of Section 15 of the Securities Act of
1933, as amended, and any member, officer, director, official, employee or
attorney of the Bank.
(cf) "Indenture" means either the Authority Indenture or the
Council Indenture, as applicable, and "Indentures" means collectively, the
Authority Indenture and the Council Indenture;
(cg) "Initial Period" means, with respect to any Bond, the
period commencing with the date such Bond is dated and ending November 22, 1995;
(ch) "Interest Payment Date" means (i) during the period from
the date of the issuance of the Bonds to and including the Conversion Date (if
any), the first Business Day of each calendar month falling within such period
and the Conversion Date (if any) on which such period ends, and (ii) during the
period from, but not including, the Conversion Date (if any) to and including
the date of the final payment of the Bonds, each May 1 and November 1 falling
within such period;
(ci) "Investments" means (i) direct obligations of the United
States or any agency thereof and direct obligations of any state of the United
States or the District of Columbia or any political subdivision, agency or
instrumentality of any such state that, in each case, (a) have a remaining term
(to maturity or to the redemption date established by the issuer of such
obligations pursuant to the terms of such obligations) of three years or less
from the date of acquisition or (b) permit the holder, in its sole discretion,
to tender such obligations to the issuer for purchase within three years from
the date of acquisition and require the issuer to purchase such obligations upon
tender at a purchase price equal to at least 100% of the principal amount
thereof plus accrued interest to the date of purchase; (ii) commercial paper of
a United States domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Services, Inc.; (iii) certificates of
deposit or foreign time deposits with maturities of three years or less from the
date of acquisition issued by any commercial bank having capital and surplus in
excess of One Hundred Million Dollars ($100,000,000); and (iv) money market
preferred stock of a United States domestic issuer rated at least "BBB" by
Standard & Poor's Corporation or "Baa1" by Moody's Investors Services, Inc.
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(cj) "Issue Date" means November 21, 1995, being the date on
which the Bank issues the Letters of Credit;
(ck) "Issuer" means, individually, either the Authority or the
Council, as applicable, and "Issuers" means collectively, the Authority and the
Council;
(cl) "Letter of Credit" means individually, and "Letters of
Credit" means collectively, the Authority Letter of Credit and the Council
Letter of Credit and shall include, if applicable, any Replacement Letter of
Credit issued pursuant to Section 2.1(c) hereof;
(cm) "Letter of Credit Issuer" means the Bank as issuer of the
Letters of Credit and any issuer of an Alternate Letter of Credit;
(cn) "Loan" means individually, and "Loans" means
collectively, the Authority Loan and the Council Loan;
(co) "Long-Term Liabilities" means the liabilities of the
Borrower on a Consolidated basis other than Current Liabilities and deferred
taxes;
(cp) "Machinery and Equipment" means all machinery and
equipment now owned or hereafter acquired with the proceeds of the Bonds, all
books and records and guaranties, warranties and other contractual rights
relating thereto, and all parts, accessories, materials and accessions thereto
and replacements therefor;
(cq) "Mandatory Tender" means a required tender of a Bond for
purchase pursuant to the provisions of Section 3.6 of the applicable Indenture;
(cr) "Material Adverse Effect" means (i) an adverse effect on
the business, properties, assets, results of operations, or condition, financial
or otherwise, of the Consolidated Corporations, taken as a whole, in an amount
equal to or greater than two percent (2%) of the net worth of the Consolidated
Corporations; (ii) the material impairment of the power or authority or ability
of the Borrower or any Guarantor to perform its respective obligations under any
Credit Document to which it is a party; or (iii) the material impairment of the
right of the Bank to enforce any of such obligations;
(cs) "Maximum Stated Amount" means the amount of $8,150,000,
with respect to the Authority Letter of Credit and $3,056,250 with respect to
the Council Letter of Credit, in each case as reduced and reinstated from time
to time in accordance with the provisions hereof and of the respective Letter of
Credit;
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(ct) "Net Proceeds" means the Bond Proceeds less any amounts
placed in a reasonably required reserve or replacement fund within the meaning
of Section 150(a)(3) of the Code;
(cu) "Net Working Capital" means, as to any Person, the amount
by which its Current Assets exceed its Current Liabilities;
(cv) "Net Worth" means, as to any Person, the amount by which
its assets exceed its liabilities, in each case, as the same is determined in
accordance with GAAP;
(cw) "1982 Act" means Act No. 82-222 of the 1982 Regular
Session of the Legislature of Alabama, as amended and supplemented from time to
time;
(cx) "Obligations" means the obligations of the Borrower to
the Bank created pursuant to this Agreement and the other Credit Documents and
secured by the Collateral including, without limitation, (a) the liability of
the Borrower to pay to the Bank the sums due to the Bank pursuant to Article 2
and Article 3 hereof and the Term Loan Note, together with the contingent
liability of the Borrower with respect to reimbursement of draws on the Letters
of Credit, and any and all other advances made pursuant to this Agreement and
all other payment obligations of the Borrower hereunder, (b) all other
liabilities and obligations of the Borrower and the Guarantors to the Bank under
the other Credit Documents, whether primary or secondary, absolute or
contingent, contractual or tortious, arising by operation of law or otherwise,
now or hereafter existing, and (c) any and all reasonable expenses and
out-of-pocket costs incurred by the Bank in connection with the enforcement of
this Agreement or any other Credit Document or the protection of the Bank's
rights hereunder or thereunder;
(cy) "Obligor Bonds" means Bonds registered in the name of (i)
the Authority, (ii) the Council, (iii) the Borrower, (iv) the Bank, (v) any
Guarantor or other obligor with respect to debt service on the Bonds or the
purchase price of Bonds, (vi) any Affiliate of Persons described in clauses (iv)
and (v), or (vii) any nominee or other Person who holds such Bonds for the
benefit of any Person described in clauses (iv), (v) or (vi). The Bank may
assume that no Bondholder is described in clauses (vi) and (vii) of this
definition unless the Bank has actual knowledge to the contrary. Pledged Bonds
shall be considered Obligor Bonds;
(cz) "Optional Tender" means tender of a Bond for purchase at
the option of the Holder thereof pursuant to Section 3.5 of the applicable
Indenture;
(da) "Outstanding" when used with reference to any of the
Bonds, means, at the date as of which the amount of such Bonds outstanding is to
be determined, all such Bonds which have been theretofore authenticated and
delivered by the Trustee under the applicable Indenture, except (i) those of
such Bonds purchased for retirement which have been delivered to and canceled by
the Trustee, (ii) those of such Bonds canceled by the Trustee because of payment
at or after their respective maturities or redemption prior to their respective
maturities, (iii) those of such Bonds for the payment or redemption of which
provision shall have been made with the Trustee as provided in Section 14.1 of
the applicable Indenture, and (iv) those of such bonds in exchange for which, or
in lieu of which, other Bonds have been authenticated and delivered under the
applicable Indenture;
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(db) "Paragraph" means a specified paragraph of a Section,
unless otherwise indicated;
(dc) "Participant Bank" means CoreStates Bank, N.A., a
national banking association;
(dd) "Participation Agreement" means that certain
Participation Agreement dated as of November 1, 1995, by and between the Bank
and the Participant Bank, substantially in the form of Exhibit G hereto;
(de) "Paying Agent" means Chemical Bank, a New York
corporation with its principal office located in the City of New York, in its
capacity as paying agent under the Letters of Credit, and its successors and
assigns in such capacity;
(df) "Permitted Encumbrances" has the meaning set forth in
Section 6.18 hereof;
(dg) "Permitted Investments" means those investments described
in Article VI of the Indenture;
(dh) "Person" or "Persons" means any individual, corporation,
partnership, joint venture, trust, or unincorporated organization, or a
governmental agency or any political subdivision thereof;
(di) "Personal Property Collateral" means all assets of the
Borrower in which the Bank is granted a security interest and all other real and
personal property owned by the Borrower (including without limitation, fixtures,
furniture, equipment, machinery, books and records, and other personal property
financed with the proceeds of the Bonds) and pledged, conveyed or in which the
Bank is otherwise granted a lien and/or security interest in connection with
this Agreement or any other Credit Document;
(dj) "Phase I Audit" means the Phase I Environmental Site
Assessment Report of the Project Site and Project Facilities prepared by Earth
Technology Corporation in June 1994. A true and correct copy of the Phase I
Audit has been delivered to the Bank prior to the date hereof and shall
constitute disclosure in writing to the Bank.
(dk) "Placement Agent" means First Fidelity Securities Group
(a Division of First Fidelity Bank, National Association, a national banking
association), having its principal offices in Philadelphia, Pennsylvania, in its
capacity as agent in connection with the placement of the Council Bonds, and its
successors and assigns in such capacity and, with respect to the Authority
Bonds, First Fidelity Securities Group, and Blount Parrish & Roton, Inc., an
Alabama corporation having its principal offices in Montgomery, Alabama, as
co-agents for Authority Bonds;
(dl) "Pledged Bonds" means Bonds purchased pursuant to the
Optional or Mandatory Tender provisions of the applicable Indenture with money
drawn under the Letter of Credit and held by the Tender Agent for the benefit
of, or registered in the name of, the Bank, as pledgee, pursuant to the
provisions of Section 3.7 of the applicable Indenture;
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(dm) "Pledged Revenues" means all moneys constituting part of
the Trust Estate (as defined in the Indentures) and all moneys derived by the
Issuers from the Project;
(dn) "Principal Payment Date" means, with respect to regularly
scheduled principal payable on the Bonds, the first day of each November during
the term of this Agreement, commencing with November 1, 1996;
(do) "Private Placement Memorandum" means the Private
Placement Memorandum dated as of November 1, 1995 by and among the Placement
Agent, the Bank, the Authority, the Council, and the Borrower;
(dp) "Project" means the Project Site, the Project Building
and the Project Equipment, as they may at any time exist, and all other property
and rights of every kind that are or become subject to the lien of the Bank
Mortgage or the Security Agreement;
(dq) "Project Building" means the foundry building and related
improvements situated on the Project Site, as such building and related
improvements may at any time exist;
(dr) "Project Development Costs" means the following: (i) all
costs and expenses incurred in connection with the planning, development and
design of the Project, including the costs of preliminary investigations,
surveys, estimates and plans and specifications; (ii) all costs and expenses of
acquiring, constructing and installing the various facilities that constitute
the Project, including the cost to the Borrower of supervising construction and
installation, payments to contractors and materialmen and fees for professional
or other specialized services; (iii) the costs of contract bonds and of
insurance of all kinds which may be necessary or desirable in connection with
the Project Development Work and which are not paid by any contractor or
otherwise provided for; (iv) all expenses incurred in connection with the
issuance and sale of the Bonds, including (without limitation) the fees and
expenses of Bond Counsel to each of the Issuers; the acceptance fee of the
Trustee, the fees and expenses of Counsel to the Authority, the fees and
expenses of Counsel to the Trustee, the initial fees (if any) and counsel fees
of the Tender Agent, the Paying Agent and the Remarketing Agent, the fees
payable to the Bank in respect of this Agreement and the Letters of Credit prior
to the date on which the Project Development Work is completed (the "Completion
Date"), the fees and expenses of Counsel to the Bank, the costs of printing the
Bonds, the fees of any Rating Agency rating the Bonds, accounting fees,
financial advisory fees, and other usual and customary expenses; (v) the charges
of the Trustee for the disbursement of moneys from the Construction Fund (as
defined in the Indenture); (vi) all other costs which the Issuers or either of
them shall be required to pay, under the terms of any contract or contracts, in
connection with the Project Development Work; (vii) interest on the Bonds to the
extent that the cumulative amount thereof paid out of the proceeds of the Bonds
does not exceed the total interest that will accrue on the Bonds from their date
until and including the Completion Date; and (viii) the reimbursement to the
Borrower of all amounts paid directly by the Borrower in respect of any of the
aforesaid costs and expenses and of all amounts advanced by the Borrower to the
Issuers or either of them for the payment of such costs and expenses;
(ds) "Project Development Work" means the planning, design,
acquisition, construction, expansion and improvement of the Project Building and
the acquisition of the Project Equipment and the installation thereof as part of
the Project in or around the Project Building;
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(dt) "Project Equipment" means (i) all items (whether or not
fixtures) of furniture, furnishings, fixtures, machinery, equipment or other
personal property the costs of which, in whole or in part, have been or are to
be paid by the Borrower out of the proceeds of the Bonds and (ii) all items
(whether or not fixtures) of furniture, furnishings, fixtures, machinery,
equipment or other personal property that are acquired by the Borrower in
substitution for or replacement of items of machinery, equipment or other
personal property theretofore constituting part of the Project Equipment and
that, under the provisions of the Bank Mortgage or the Security Agreement, are
to constitute part of the Project Equipment;
(du) "Project Facility" or "Project Facilities" means the
land, the improvements and the building situate thereon located on the Project
Site acquired and constructed by the Borrower, including any additions,
substitutions or replacements which have been constructed or acquired thereon
with the proceeds of the Bonds;
(dv) "Project Site" means the (i) the parcel of land located
in Anniston, County of Calhoun, State of Alabama as more specifically described
on Schedule I hereto, and (ii) any other land that, at the time and under the
terms of the Bank Mortgage or the Security Agreement, constitutes a part of the
Project Site;
(dw) "Proper Charge" means (i) issuance costs for the Bonds,
including, without limitation, certain attorneys' fees, printing costs, initial
trustee's fees and similar expenses; or (ii) an expenditure for the Project
incurred for the purposes of redeeming the Bonds which were issued for the
purposes of acquiring and constructing the Project;
(dx) "Purchase Price," with respect to Bonds tendered or
required to be tendered for purchase, shall be determined in accordance with the
applicable provisions of the Indentures;
(dy) "Quick Ratio" means, as of the date of determination, the
ratio of (a) the sum of cash, Investments and accounts receivable to (b) Current
Liabilities;
(dz) "Rate Determination Date" means November 21, 1995 and
thereafter, (i) with respect to the period during which Bonds are in the
Variable Rate Mode, the Wednesday of each week (or if such day is not a Business
Day, the Business Day preceding such Wednesday) on which date the interest rate
shall be set at a weekly rate announced by the Remarketing Agent, and (ii) with
respect to the period during which Bonds are in the Fixed Rate Mode, a date
designated by the Remarketing Agent occurring not earlier than twenty (20)
Business Days before, and not later than the Business Day immediately preceding,
the respective Effective Rate Date;
(ea) "Rating Agency" means Moody's Investor Service, Standard
& Poor's Corporation, or any other nationally recognized rating agency, and
their respective successors;
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(eb) "Redemption" shall have the meaning ascribed to such term
in the applicable Indenture and shall include "Optional Redemptions" and
"Mandatory Redemptions" as defined in such Indentures;
(ec) "Redemption Fund" means the Central Castings Corporation
Project Redemption Fund established under Section 8.3 of the applicable
Indenture;
(ed) "Registrar" means Chemical Bank, in its capacity as
registrar, and its successors in such capacity;
(ee) "Release" means any release, spill, discharge, leak,
disposal or emissions as defined under any Applicable Environmental Law.
(ef) "Remarketing Agent" means First Fidelity Bank, National
Association, a national banking association having its principal offices in
Philadelphia, Pennsylvania in its capacity as agent in connection with the
remarketing of the Bonds, and its successors and assigns in such capacity;
(eg) "Remarketing Agreement" means individually, and
Remarketing Agreements" means collectively, the agreements each dated as of
November 1, 1995 between the Borrower, the Remarketing Agent and the respective
Issuers;
(eh) "Replacement Letter of Credit" means a Letter of Credit
issued by the Bank in connection with the issuance by the Council of the
Supplemental Bonds following the occurrence of an Adjudication of Invalidity,
which Letter of Credit shall be in form and substance satisfactory to the Bank;
(ei) "Section" means a specified section hereof, unless
otherwise indicated;
(ej) "Securities Act" means the Federal Securities Act of
1933, as amended from time to time, together with the rules and regulations
promulgated thereunder or pursuant thereto, as from time to time in effect;
(ek) "Security Agreement" means the General Security Agreement
dated as of November 1, 1995 executed and delivered by the Borrower in favor of
the Bank, substantially in the form of Exhibit D hereto;
(el) "Special Mandatory Tender" means a required tender of the
Authority Bonds upon an Adjudication of Invalidity pursuant to Section 3.6(4) of
the Authority Indenture;
(em) "Spraysafe" means Spraysafe Automatic Systems Limited, a
corporation organized and existing under the laws of the United Kingdom and an
affiliate of the Borrower;
(en) "State" means the State of Alabama;
(eo) "Stated Amount" with respect to each Letter of Credit
means an amount equal to the sum of the principal of the respective series of
Bonds plus forty five (45) days' interest at the maximum interest rate of
fifteen percent (15%) per annum on the Outstanding Bonds of such series, being
on the date hereof, (a) $8,150,000 with respect to the Authority Letter of
Credit, and (b) $3,056,250 with respect to the Council Letter of Credit;
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(ep) "Stated Expiration Date" means the date of expiration of
the Letters of Credit, being November 15, 2000, unless (i) such Letter of Credit
is terminated on an earlier date in accordance with its terms, or (ii) such
expiration date is extended or renewed, as provided in Section 2.2 hereof, in
which case the term "Stated Expiration Date" means such extended date;
(eq) "Subordinated Debt" means any indebtedness now existing
or hereafter arising (a true and correct list of which, as of the date hereof,
is set forth on Schedule II attached hereto) so long as the documents evidencing
such indebtedness provide that (i) the rights of the holders of such
indebtedness are expressly subordinate to the rights of the Bank, (ii) the
holders of such indebtedness will not collect any moneys in excess of the
scheduled amortization payments on such indebtedness without the written consent
of the Bank, including, but not limited to, proceeds from the sale of any of the
Collateral, except as provided herein, (iii) the holders of such indebtedness
shall not challenge, contest or attempt to defeat the priority of the liens
created by the Bank Mortgage, the Security Agreement and other Credit Documents
securing the payment of amounts owing under this Agreement, the Financing
Agreements, the Indentures, and the Bonds, in any dissolution, liquidation,
bankruptcy, insolvency, receivership or other similar proceedings for the
Borrower whether voluntary or involuntary, (iv) the holders of such indebtedness
shall provide notice to the Bank of a payment default thereunder and such
holder's intention to accelerate such indebtedness at least ten (10) days prior
to the date of such acceleration, (v) the holders of such indebtedness shall
provide notice to the Bank of nonpayment defaults and of such holder(s)'
intention to accelerate such indebtedness at the same time such holder gives
notice to the Borrower thereof, and (vi) the Bank shall be deemed a third party
beneficiary of such provisions;
(er) "Subordination Agreement" means the Subordination
Agreement by CS Company and CSC Finance Company in favor of the Bank dated as of
November 1, 1995, substantially in the form of Exhibit I hereto, pursuant to
which CS Company subordinates to its obligations to the Bank under its Guaranty
its obligations to repay a loan to CSC Finance Company, one of its affiliates,
in the principal amount outstanding as of the date hereof of $11,750,000;
(es) "Subsidiary" means, as to any Person, any corporation the
shares of stock of which, having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such other corporation are at the
time owned, or the management of which is otherwise controlled by the Person
directly or indirectly through one or more intermediaries or both;
(et) "Supplemental Bonds" means those Bonds issued for the
account of the Borrower by the Council pursuant to the Council Indenture
following an Adjudication of Invalidity;
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(eu) "Tangible Net Worth" means, as to any Person, as of the
date of determination, (a) the aggregate amount of all assets as may be properly
classified as such, other than (i) all assets which are properly classified as
intangible assets including, without limitation, franchises, licenses, permits,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
experimental or organizational expense and other like intangibles and (ii) the
amount of all loans to shareholders, officers and employees in excess of
$300,000 in the aggregate, less (b) the aggregate amount of all liabilities, all
determined in accordance with GAAP, consistently applied;
(ev) "Tender Agent" means Chemical Bank, a New York banking
corporation with its principal corporate trust office located in the City of New
York, in its capacity as tender agent under the Indentures and the Tender Agent
Agreement, and its successors in such capacity;
(ew) "Tender Agent Agreement" means the Tender Agent Agreement
dated as of November 1, 1995, by and among Chemical Bank, as Trustee under the
Authority Indenture, Chemical Bank, as Tender Agent and the Borrower,
substantially in the form of Exhibit H hereto;
(ex) "Term Loan" means the facility established in Section 3
of this Agreement;
(ey) "Term Loan Note" means the promissory note duly completed
and executed by the Borrower in favor of the Bank in the form attached as
Exhibit J hereto, evidencing Borrower's indebtedness to the Bank under the Term
Loan;
(ez) "Title Insurance Policy" means the title insurance policy
issued pursuant to Commitment No. 28597-S by Lawyers Title Insurance Corporation
on the Project Facilities;
(fa) "Treasury Regulations" means the Income Tax Regulations
promulgated by the Department of Treasury pursuant to Sections 103 and 141-150
of the Code, as the same shall be amended or supplemented from time to time;
(fb) "Trustee" means Chemical Bank, a New York corporation
with its principal corporate trust office located in the City of New York, in
its capacity as Trustee, Paying Agent, Registrar and Tender Agent, and its
successors and assigns in such capacities;
(fc) "UCC" means the Uniform Commercial Code as now or
hereafter in effect under the laws of the State of Alabama or any other
jurisdiction which controls the perfection of a security interest in favor of
the Bank in any of the Collateral;
(fd) "Variable Interest Rate" means the variable rate of
interest borne by the Bonds, as determined from time to time in accordance with
the provisions of Section 3.3 of the applicable Indenture; and
(fe) "Variable Rate Mode" means, with respect to each Bond,
the period between the Initial Period and the Conversion Date.
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Section 1.2. Rules of Construction.
(a) Any capitalized term used herein which is not defined
herein but is defined in one of the Indentures shall herein have the respective
meaning given to it in the applicable Indenture;
(b) Terms used herein which are not otherwise defined herein
(or in the Indentures) but which are defined in or used in Article 9 of the UCC,
shall herein have the respective meanings given to them in such Article 9;
(c) All accounting terms used herein without definition shall
be interpreted in accordance with GAAP, and except as otherwise expressly
provided herein all computations herein required shall be made in accordance
with GAAP, and all principles and practices applied to financial data submitted
pursuant to this Agreement shall be applied in manner consistent with the
application of such principles and practices in the preparation of the audited
financial statements mentioned in Section 6.1 hereof;
(d) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, paragraph, clause and similar references are to this Agreement
unless otherwise specified; the term "heretofore" means before the date of
execution of this Agreement; and the term "hereafter" means after the date of
execution of this Agreement;
(e) Wherever required by the context of this Agreement, the
singular shall include the plural, and vice versa, unless otherwise specified;
and each use of or reference to the masculine, feminine or neuter gender shall
include any or all of such genders, as appropriate; and
(f) All references to Sections and Subsections of certain
agreements and instruments, including without limitation, the Indentures, the
Financing Agreements and the Letters of Credit, shall be deemed to be references
to counterpart provisions in any substitute or replacement document therefor.
ARTICLE 2
THE LETTER OF CREDIT
Section 2.1. Agreement of the Bank to Issue the Letters of Credit.
Subject to the terms and conditions of this Agreement, the Bank agrees to issue
the Letters of Credit as follows:
(a) Original Issuance. On the Issue Date, the Bank shall
issue:
(i) the Authority Letter of Credit in favor of the
Trustee with respect to the Authority Bonds in the Maximum Stated Amount of
Eight Million One Hundred Fifty Thousand Dollars ($8,150,000); and
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(ii) the Council Letter of Credit in favor of the
Trustee with respect to the Council Bonds in the Maximum Stated Amount of Three
Million Fifty-Six Thousand Two Hundred Fifty Dollars ($3,056,250).
(b) Reduction and Reinstatement of Stated Amount. The Stated
Amount under a Letter of Credit will be reduced from time to time to the extent
of any drawing thereunder, subject to reinstatement as hereinafter described.
With respect to an "A Drawing" (as described in Section 2.4(a)(i) hereof), the
amount representing principal and the corresponding amount representing interest
thereon shall be reinstated in an amount equal to any such drawing only to the
extent that the Bank has been reimbursed for the amounts so drawn either from
the proceeds of a remarketing of the Bonds or otherwise, a "B Drawing" (as
described in Section 2.4(a)(ii) hereof), shall permanently reduce the Stated
Amount of the applicable Letter of Credit and the corresponding interest
component. With respect to a "C Drawing" (as described in Section 2.4(a)(iii)
hereof), if within five (5) calendar days from the date of such drawing the Bank
does not send a notice to the Trustee that the Bank has not been reimbursed
therefor, the amount of such drawing representing interest shall be reinstated
on the sixth (6th) calendar day following such drawing.
(c) Replacement Letter of Credit Following Special Mandatory
Tender. Following the occurrence of an Adjudication of Invalidity and the
concomitant Special Mandatory Tender of the Authority Bonds, and subject to the
Borrower's compliance with the terms and conditions of Section 5.2 hereof, the
Bank agrees to issue a replacement Letter of Credit for the account of the
Borrower and in favor of the Council, in the Maximum Stated Amount of the
Purchase Price paid in connection with the Special Mandatory Tender. The Stated
Expiration Date of such replacement Letter of Credit shall be the Stated
Expiration Date of the Authority Letter of Credit in effect immediately prior to
the Adjudication of Invalidity. The significant terms of such Letter of Credit
will be substantially similar to those of the Authority Letter of Credit.
Section 2.2. Term of Letters of Credit. Each Letter of Credit shall,
subject to earlier termination, in accordance with the terms hereof and of such
Letter of Credit, expire on November 15, 2000; provided, that the expiry date of
such Letter of Credit may be extended from time to time at the written request
of the Borrower, in accordance with the procedure set forth below. The Bank
shall provide to the Borrower, not less than 230 days prior to the then
applicable Stated Expiration Date, an application form pursuant to which the
Borrower may request an extension of expiry date. The Borrower shall complete
and deliver such application to the Bank not less than 210 days prior to the
then applicable Stated Expiration Date. The Bank may, at its sole discretion,
and on terms and conditions acceptable to the Bank, extend the expiry date of
such Letter of Credit for one or more terms not to exceed in the aggregate an
additional five (5) years beyond the initial Stated Expiration Date. The Bank
shall give prior written notice to the Borrower, the Trustee and the Rating
Agency of any such extension. If the Bank elects not to extend the expiry date
such Letter of Credit, the Bank shall notify the Borrower, the Trustee and the
Rating Agency, in writing not less than 150 days prior to the then applicable
Stated Expiration Date for such Letter of Credit, that it will not extend the
then applicable Stated Expiration Date of such Letter of Credit.
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Section 2.3. Draws and Other Fees and Expenses Under the Letters of
Credit.
(a) Payments. The Borrower hereby agrees to pay to the Bank:
(i) Drawings. Pursuant to and in accordance with the
requirements set forth in Section 2.5 hereof, an amount necessary to pay on the
date of such drawing the amount(s) to be drawn under the applicable Letter of
Credit for each of the payments described in Section 2.4 hereof;
(ii) Drawing Fee. On each date that any amount is drawn
under a Letter of Credit pursuant to any drawing referred to in clause (i)
above, a drawing fee in the amount of $50 for each drawing payment date;
(iii) Transfer Fee. Upon each transfer of a Letter of
Credit in accordance with its terms, a sum equal to $1,500;
(iv) Customary Charges. Within five (5) Business Days
after demand therefor, made by the Bank and accompanied by a reasonably detailed
statement of such amounts, any and all reasonable charges the Bank may make in
connection with drawings under the Letters of Credit and any and all reasonable
expenses which the Bank incurs relative to the Letters of Credit;
(v) Enforcement Expenses. Within five (5) Business Days
after demand therefor, made by the Bank and accompanied by a reasonably detailed
statement of such amounts, any and all expenses incurred by the Bank in
collecting any Obligations or enforcing any rights under this Agreement and the
other Credit Documents;
(vi) Interest. On demand and, if not demanded prior
thereto, or with respect to obligations relating to Pledged Bonds, as of the
last day of each month, in arrears, interest on any and all amounts drawn on the
Letters of Credit and not reimbursed to the Bank through the amounts deposited
pursuant to clause (i) of this paragraph or otherwise, from the date of drawing
of such amounts under the Letters of Credit until payment in full by or on
behalf of the Borrower at a fluctuating rate of interest per annum equal to two
percent (2.0%) plus the Base Rate. During the Variable Rate Mode, interest shall
be computed on the basis of a 365-day or 366-day year, as the case may be and
the actual number of days elapsed; and during the Fixed Rate Mode, interest
shall be computed based upon a year of 360 days, and the actual number of days
elapsed;
(vii) Facility Fee. On the Issue Date, (and on the
(applicable) issue date of any Replacement Letter of Credit) a one-time Facility
Fee with respect to each Letter of Credit in an amount equal to one-quarter of
one percent (1/4%) of the aggregate Stated Amount of such Letter of Credit as of
such date (reduced, with respect to the Letters of Credit issued on the Issue
Date, in the aggregate by the $12,500 previously paid by the Borrower to the
Bank prior to the date hereof);
(viii) Issuance Fee. An annual non-refundable fee with
respect to each Letter of Credit, computed for the period from and including the
Issue Date to and including the last day a drawing is available under such
Letter of Credit (the "Termination Date") on the basis of a year of 360 days
consisting of twelve (12) thirty (30) day months, at a rate of one percent
(1.0%) per annum on the amount from time to time available to be drawn under
such Letter of Credit, payable quarterly in arrears (except with respect to the
first quarter following the date hereof, which payment shall be made on the
Issue Date), with the next such payment due on May 1, 1996;
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(ix) Payments in Respect of Increased Costs. If any
adoption of or if any change in any law, regulation, policy, or guideline or in
the interpretation or application of any of the foregoing by any court,
administrative or governmental authority charged with the interpretation and/or
administration thereof shall either (i) impose, modify or make applicable any
reserve, special deposit, capital or capital equivalency or ratio, assessment,
insurance premium, or similar requirement in connection with the Letters of
Credit, or documents, advances, or refinancing in connection therewith or (ii)
impose on the Bank (or, if applicable, any of its affiliates or correspondents)
any other condition regarding the Letters of Credit, and the result of any event
referred to in clause (i) or (ii) above shall be to increase the Bank's (or, if
applicable, such affiliate's or correspondent's) costs of issuing, maintaining,
renewing or extending the Letters of Credit then, within five (5) days after
demand therefor, made by the Bank and accompanied by a reasonably detailed
statement of such amounts, the Borrower shall immediately pay to the Bank, from
time to time as the Bank shall specify, additional amounts (calculated on the
basis of such Borrower's pro rata share of the aggregate amount of obligations
to the Bank of the Borrower and all similarly situated customers of the Bank),
which shall be sufficient to compensate the Bank for such increased cost;
provided, however that (x) Borrower shall not be responsible for penalties or
fines payable by Bank for Bank's failure to comply with such laws, rules,
policies or guidelines following the Bank's charge to the Borrower for the same
in accordance with this paragraph, and (y) such increased costs charged to
Borrower shall not exceed the actual increase in costs to, or loss in profit of,
the Bank related to the transactions contemplated by this Agreement. The
obligations of the Borrower set forth in the foregoing sentence shall apply to
and include each such increased cost incurred by the Bank as a result of any
event mentioned in clause (i) or (ii) above for the period through and including
the Termination Date. A certificate setting forth in reasonable detail
(including detailed calculations of) such increased cost incurred by the Bank as
a result of any event mentioned in clause (i) or (ii) above, submitted by the
Bank to the Borrower, shall be conclusive, absent manifest error, as to the
amount thereof; and
(x) Cash Collateral Payments. Upon the occurrence of an
Event of Default, required pursuant to Section 8.2(b) hereof, an amount equal to
the then Maximum Stated Amount of the Letters of Credit, such amount (together
with all interest earned thereon and all investments and proceeds of investments
thereof) to be held by the Bank as cash collateral in the Cash Collateral
Account to secure reimbursement to the Bank of the Obligations hereunder and
under the other Credit Documents.
(b) Applications of Certain Funds. The Borrower hereby
authorizes the Bank to apply (i) (A) the amounts set forth in clause (i) of
paragraph (a) above and (B) the proceeds of the Debt Service Fund from time to
time, to reimburse the Bank for any such drawings honored by the Bank and made
by the Trustee on the Letters of Credit and further acknowledges that the
Borrower is paying such amounts to the Bank for the purpose of reimbursing the
Bank for drawings honored on the Letters of Credit; and (ii) any and all amounts
in the Cash Collateral Account on account of any Obligations of the Borrower or
any Guarantor due and owing to the Bank. In addition, the Borrower hereby
authorizes the Bank to debit any account of the Borrower maintained by the Bank
or its Affiliates or the Participant Bank for any of the Obligations, including
without limitation, attorneys' fees and disbursements, whether or not a Default
or Event of Default has occurred.
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(c) Default Rate. Any amount not paid when due or demanded, as
the case may be under this Section 2.3 shall bear interest from the date such
payment is due or demanded, as applicable at a per annum rate equal to two
percent (2.0%) above the Base Rate.
Section 2.4. Permitted Drawings and Repayments.
(a) Generally. So long as each Letter of Credit is in effect,
the following payments shall be paid from draws by the Trustee on the applicable
Letter of Credit in accordance with the terms of the applicable Indenture:
(i) "A Drawing" - Payment of the Purchase Price of
tendered Bonds upon Optional or Mandatory Tender (other than (A) a Special
Mandatory Tender and (B) Bonds subject to exchange pursuant to the last
paragraph of Section 3.6 of the Council Indenture);
(ii) "B Drawing" - Payment of principal of the Bonds
upon their scheduled stated maturity, Optional or Mandatory Redemption or
Special Mandatory Tender; and
(iii) "C Drawing" - Payment of interest on the Bonds on
or prior to their maturity;
provided, however, that in no event shall payments be made under the Letters of
Credit for drawings with respect to the principal of or interest on Obligor
Bonds.
The outstanding balance of the Loans under the Financing Agreements shall be
reduced by (a) the amount of any such payments made by the Trustee through a
draw on the applicable Letter of Credit and (b) the amount of the Term Loan,
upon the advance of such Term Loan by the Bank, it being understood that the
balance of the Council Loan shall be increased upon the issuance of, and in the
principal amount of, the Supplemental Bonds under the Council Indenture and, if
applicable, the issuance by the Bank of the Replacement Letter of Credit such
Replacement Letter of Credit shall be deemed to have been issued under and
subject to the terms and conditions of this Reimbursement Agreement.
(b) Acceleration of Payment to Redeem Bonds. As permitted by
the Indentures and this Agreement, whenever the Bonds or any of them are subject
to Optional Redemption, the applicable Issuer(s) will, but only upon request of
the Borrower, direct the Trustee in writing to call the same for Redemption as
provided in such Indenture. Whenever the Bonds or any of them are subject to
Mandatory Redemption pursuant to one or both of the Indentures, the Borrower
will cooperate with the applicable Issuer(s) and the Trustee in effecting such
Redemption. In the event of any Mandatory or Optional Redemption of the Bonds or
any of them, the Borrower will pay or cause to be paid into the Debt Service
Fund on or before the date of Redemption an amount equal to the applicable
redemption price (including the redemption premium (if any) and interest accrued
to the date of redemption) as a prepayment of that portion of the Loan
corresponding to the Bonds to be redeemed, or will reimburse the Bank for any
drawings under the respective Letter of Credit for such purposes (exclusive of
the redemption premium) in accordance with this Agreement.
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(c) Special Mandatory Tender Upon Adjudication of Invalidity.
As required by Section 3.6 of the Authority Indenture, the Authority Bonds are
subject to Special Mandatory Tender following receipt by the Trustee of a notice
from the Authority or the Borrower evidencing an Adjudication of Invalidity. In
the event of such Special Mandatory Tender of the Authority Bonds, the Borrower
will pay or cause to be paid into the Debt Service Fund on or before the Special
Mandatory Tender Date, as reimbursement to the Bank for any drawings under the
Authority Letter of Credit to pay the Purchase Price of Authority Bonds subject
to such Special Mandatory Tender, an amount equal to the applicable Purchase
Price provided in such Authority Indenture; provided, however, that upon
Borrower's compliance with the terms and conditions of Sections 3.6 and 5.2
hereof, the Bank shall convert Borrower's reimbursement obligations under such
drawings to a Term Loan pursuant to and in accordance with Article 3 hereof, the
proceeds of which shall be used to reimburse the Bank for such drawings under
the Authority Letter of Credit in lieu of the payment into the Debt Service Fund
described in the first clause of this sentence.
(d) Pledged Bonds. In the event of an Optional or Mandatory
Tender resulting in a drawing on a Letter of Credit, following which any of the
Bonds became Pledged Bonds, interest on such Pledged Bonds shall be payable to
the Bank in accordance with Section 2.3(a)(vi) hereof, and otherwise in
accordance with the applicable Indenture, and the principal amount thereof shall
be payable upon demand by the Bank. Pledged Bonds shall be held by the Tender
Agent as agent for the Bank (and shall be shown as such on the registration
books maintained by the Tender Agent) unless and until the Bank gives the Tender
Agent written confirmation that (i) the applicable Letter of Credit has been
reinstated in full with respect to such drawing and (ii) the Pledged Bonds are
no longer Bank Bonds. Pending such reinstatement of the Letter of Credit and
release of such Pledged Bonds, the Bank shall be entitled to receive all
payments of principal of and interest on such Pledged Bonds and such Bonds shall
not be transferable or deliverable to any party (including the Issuer) except
the Bank. The Remarketing Agent shall continue to use its best efforts to
arrange for the sale of Pledged Bonds, subject to full reinstatement of the
applicable Letter of Credit with respect to the drawings with which such Bonds
were purchased, at a price equal to the principal amount thereof, plus accrued
interest thereon at the rate set forth in Section 2.3(a)(vi) hereof. During such
time as the Bank is the owner of any Pledged Bond, it shall have all of the
rights granted to a Bondholder under the Indentures and Tender Agent Agreement,
and such additional rights as may be available to the Bank hereunder.
Section 2.5. Debt Service Fund. In addition to the payments to be
deposited in the Cash Collateral Account referenced in Section 2.3(a)(x) hereof,
the Borrower shall establish a demand deposit account at the Bank for purposes
of funding the Debt Service Fund. The Borrower shall make the following payments
into the Debt Service Fund: (a) on or before the last Business Day preceding
each Interest Payment Date an amount sufficient to repay to the Bank amounts
scheduled to be drawn on the Letters of Credit for the payment of interest on
such Interest Payment Date; and (b) on or before the last Business Day of each
fiscal quarter of the Borrower, an amount equal to twenty five percent (25%) of
the next annual principal payment scheduled to be drawn on the Letters of Credit
for the payment of principal on the next Principal Payment Date; and (c) on or
before the Special Mandatory Tender Date the Purchase Price of the Authority
Bonds to be tendered. In addition, the Borrower shall deposit or cause to be
deposited into the Debt Service Fund all Eligible Remarketing Proceeds and the
proceeds of the Bond Fund Letter of Credit Account (other than moneys actually
drawn under the Letter of Credit) as and when received by the Trustee or
Remarketing Agent, as applicable, and any and all other payments required
pursuant to Section 2.3(a)(i) and 2.4 hereof except as otherwise permitted
pursuant to Section 2.4(d) (with respect to the Pledged Bonds).
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Section 2.6. Security for Obligations. As security for the payment of
the Obligations, the Borrower (a) will grant to the Bank (i) the Bank Mortgage,
(ii) a security interest in the Machinery and Equipment and other Personal
Property Collateral, pursuant to the Security Agreement, (b) will cause the
Guarantors to (i) provide to the Bank the Guaranty Agreements and (ii) deliver
to the Bank the Guarantor Security Agreement, and (c) hereby grants to the Bank
a security interest in and right of set off with respect to funds held in and
proceeds of the Cash Collateral Account and the Debt Service Fund.
Section 2.7. Place and Method of Payment; Computation of Interest. All
payments by or on behalf of the Borrower to the Bank hereunder shall be made not
later than 2:00 p.m. Philadelphia time on the date such payment becomes due or,
if demand must be made by the Bank in accordance with Section 2.3 hereof, upon
demand (after giving effect to any grace period provided with respect to such
payment, without duplication), in lawful currency of the United States and in
immediately available funds at the Bank's office at 123 South Broad Street,
Philadelphia, Pennsylvania 19109 or at such other place as may be designated by
the Bank by written notice to the Borrower. Any payment due or demanded on a day
which is not a Business Day shall be paid on the next succeeding Business Day
and such extension of time shall in such case be included in the computation of
the payment of interest. The Borrower hereby authorizes the Bank, and the Bank
shall, debit the Debt Service Fund or other Account for the amount of each
payment under this Agreement not later than 2:00 p.m. Philadelphia time on the
date such payment becomes due under this Agreement. The Bank shall send notice
to the Borrower at least two days prior to debiting the Debt Service Fund or
such other Account for any payment due under this Agreement stating the amount
(to the extent that the Bank is then able to calculate such amount) to be
debited. If there are insufficient funds in the Debt Service Fund or other
Account at the time such Debt Service Fund or other Account is debited, and the
debiting creates an overdraft, the Bank may charge the Borrower an
administrative fee established from time to time by the Bank. The foregoing
rights of the Bank to debit the Debt Service Fund or other Account shall be in
addition to, and not in limitation of, any rights of set-off that the Bank may
have under the Credit Documents and any other rights and remedies of the Bank
under the Credit Documents or law and do not in any manner limit the provisions
of Section 8.1 hereof.
Section 2.8. Evidence of Debt. The Bank shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower resulting from each drawing under each Letter of Credit, the
amounts of principal and interest payable and paid from time to time hereunder
or other reimbursable costs and expenses hereunder.
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Section 2.9. Applicable Standards. This Agreement, the Letters of
Credit and all transactions hereunder and thereunder are subject to the Uniform
Customs and Practice for Documentary Credits 1993 revision, ICC Publication No.
500 (the "UCP"); provided, however, if there is a contradiction between the
terms contained herein or in any written document executed by the Borrower in
connection with any Letter of Credit and the UCP, the terms contained herein
and/or in such written document will be controlling.
ARTICLE 3
TERM LOAN
Section 3.1. The Term Loan. Upon the occurrence of an Adjudication of
Invalidity, and subject to the terms and conditions of Section 5.2 hereof and
the other provisions of this Article 3, the Bank will convert to a Term Loan the
reimbursement obligations of the Borrower to the Bank in connection with a draw
on the Authority Letter of Credit to pay the Purchase Price of the Authority
Bonds upon Special Mandatory Tender; provided, however, that the maximum
principal amount of such Term Loan shall not exceed Eight Million One Hundred
Fifty Thousand Dollars ($8,150,000).
Section 3.2. Promissory Note. Borrower's indebtedness to the Bank under
the Term Loan will be evidenced by the Term Loan Note duly completed and
executed by Borrower in favor of and delivered to the Bank in the form of
Exhibit J hereto. The original principal amount of the Term Loan Note shall be
the amount identified as the Purchase Price of the Authority Bonds subject to
the Special Mandatory Tender pursuant to Section 3.6(4) of the Authority
Indenture, provided that notwithstanding the face amount of the Term Loan Note,
Borrower's liability shall be limited at all times to its actual aggregate
outstanding indebtedness thereunder.
Section 3.3. Use of Proceeds. The Term Loan shall constitute a
conversion of the reimbursement obligations of the Borrower to the Bank for
amounts drawn under the Authority Letter of Credit in connection with a Special
Mandatory Tender.
Section 3.4. Principal Repayments. The principal amount of the Term
Loan shall be due and payable sixty (60) days after the date the Term Loan is
advanced to the Borrower (the "Term Loan Date"); provided, however, that
thereafter, the Bank may, in its sole discretion (a) extend the maturity date of
such Loan for such period and under such terms and conditions as it deems
applicable; or (b) convert such Term Loan into a loan payable on demand.
Section 3.5. Interest. The Term Loan shall bear interest on the unpaid
principal balance thereof before, at and after maturity at a rate equal to two
percent (2%) per annum above the Bank's Base Rate, such rate to change when and
as the Base Rate changes. Interest shall be payable monthly commencing on the
first day of the first month following the Term Loan Date and continuing on the
first day of each month thereafter until the Term Loan is paid in full. Interest
shall be calculated on the basis of a three hundred sixty (360) day year and the
actual number of days elapsed.
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Section 3.6. Conversion to Term Loan. Borrower shall give the Bank at
least fourteen (14) days' prior written notice of the requested conversion to
Term Loan, specifying the date, amount and purpose thereof. In addition,
Borrower shall submit to the Bank in writing at least five (5) Business Days'
prior to the date on which the Term Loan is requested to be made, a Borrowing
Certificate certified by the chief executive and chief financial officers of
Borrower which shall contain the following information and representations,
which must be true and correct as of the date of the requested Term Loan, as set
forth below:
(i) the aggregate amount of the requested conversion to
a Term Loan, which shall not exceed the then available Stated Amount of the
Authority Letter of Credit;
(ii) statements that the representations and warranties
set forth in Article 4 hereof are true and correct as of the date thereof and no
Default or Event of Default hereunder has occurred and is then continuing and
that there has been no material adverse change in Borrower's financial condition
or business;
(iii) confirmation of Borrower's satisfaction of each of
the conditions contained in Section 5.3 hereof; and
(iv) confirmation of Borrower's compliance with each of
the covenants contained in Article 7 hereof following such Loan;
Each request for a conversion to a Term Loan pursuant to this
Section 3.6 shall be irrevocable and binding on the Borrower.
Section 3.7. Payments. Each payment under this Agreement and under the
Term Loan Note shall be due not later than 2:00 p.m. Philadelphia time on the
date when due and shall be made in lawful money of the United States in
immediately available funds at the Bank's office at 123 South Broad Street,
Philadelphia, Pennsylvania 19109 or at such other place as may be designated by
the Bank by written notice to the Borrower. The Borrower hereby authorizes the
Bank, and the Bank shall, debit the Debt Service Fund and any other Account for
the amount of each payment under this Agreement and under the Term Loan Note not
later than 2:00 p.m. Philadelphia time on the date such payment becomes due
under this Agreement or the Note. The Bank shall send notice to the Borrower at
least two days prior to debiting the Account for any payment due under this
Agreement or the Term Loan Note stating the amount (to the extent that the Bank
is then able to calculate such amount) to be debited. If there are insufficient
funds in the Debt Service Fund and any other Accounts at the time such Accounts
are debited, and the debiting creates an overdraft, the Bank may charge the
Borrower an administrative fee established from time to time by the Bank. The
foregoing rights of the Bank to debit the Account shall be in addition to, and
not in limitation of, any rights of set-off that the Bank may have under the
Credit Documents and any other rights and remedies of the Bank under the Credit
Documents or law. Whenever any payment to be made under this Agreement or under
the Term Loan Note shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of the
payment of interest.
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Section 3.8. Prepayment. The Borrower shall have the right to prepay
its indebtedness under the Term Loan at any time in whole or in part, without
premium or penalty; provided that any partial prepayments shall be applied first
to accrued interest and then to principal, in the inverse order of the
maturities of the installments thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1. Borrower and Guarantor Representations. Each of the
Borrower and each Guarantor as to itself, as applicable, represents and warrants
to the Bank that:
(a) Organization, Powers, Etc. It (i) is a corporation duly
organized, and in good standing under the laws of the state of its organization
and is qualified to do business in all other jurisdictions in which the conduct
of its activities or the ownership or lease of its properties or assets requires
such qualification, and in which failure to be so qualified is reasonably
likely, either singly or in the aggregate, to have a Material Adverse Effect;
(ii) has the full corporate power and authority to own its properties and assets
and to carry on its business as now being conducted; and (iii) has the power and
authority to perform all the undertakings of this Agreement and the other Credit
Documents, and to execute and deliver this Agreement and the other Credit
Documents.
(b) Execution of Credit Documents. The execution, delivery and
performance by the Borrower and each Guarantor of this Agreement and the other
Credit Documents to which it is a party and other instruments required or
contemplated to be delivered by such entity pursuant to this Agreement:
(i) have been duly authorized by all requisite corporate
action;
(ii) do not and will not conflict with or violate any
provision of law, rule or governmental regulation, any order, decree, writ,
injunction, determination, award or judgment of any court, arbitrator or other
agency of government the sanctions and penalties resulting from which are
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect;
(iii) do not and will not conflict with or violate any
provision of its respective certificate of incorporation and by-laws;
(iv) do not and will not conflict with any of the terms
of, or result in a breach of, or constitute a default under, any indenture,
contract, lease, loan or credit agreement, or other agreement or instrument to
which the Borrower or such Guarantor is a party or by which any of its assets
are bound which conflicts, breaches or defaults are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect; and
(v) do not and will not result in the creation or
imposition of any security interest in or lien or encumbrance upon any of its
assets other than as contemplated by the Credit Documents.
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(c) Title to Collateral. Except as described in Schedule III
hereto, each of the Borrower and Central Sprink has good and marketable title to
the Collateral in which it purports to have an interest, and each of the
Borrower and each Guarantor has good and marketable title to all of its
respective properties and assets, free and clear of any lien or encumbrance
except for the Permitted Encumbrances, if any. Assuming adequate consideration
therefor has been given by the Bank, upon recording in the appropriate office,
the Bank Mortgage will constitute a valid and perfected first mortgage lien on
the Project Facilities and an assignment of the leases thereon and upon
recording in the appropriate offices, the Financing Statements will perfect
valid first priority security interests in the Collateral, other than the
Project Facilities to the extent such security interest may be perfected by the
filing of financing statements.
(d) Litigation. Except as described in Schedule III hereto,
there is no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency or arbitrator now pending or, to
the knowledge of the officers of Borrower or any Guarantor, threatened against
or affecting it or any of its properties or powers in which the relief sought is
in excess of $5,000,000 and which, if adversely determined, would be reasonably
likely, either individually or in the aggregate, to (i) affect the transactions
contemplated hereby, (ii) affect the validity or enforceability of the Credit
Documents, (iii) affect the ability of the Borrower or any Guarantor to perform
its obligations under the Credit Documents, (iv) impair the value of the
Collateral, (v) materially impair the Borrower's or any Guarantor's right to
carry on its business substantially as is now being conducted, (vi) adversely
affect the validity or the enforceability of the Bonds, the Indentures, this
Agreement, the Financing Agreements and the other Credit Documents, or (vii)
have a Material Adverse Effect.
(e) Payment of Taxes. It has filed or has caused to be filed
all federal, state and local tax returns and reports (including, without
limitation, information returns) which are required by applicable law to be
filed, and has paid or caused to be paid all taxes as shown on said returns or
on any assessment made against the Borrower or such Guarantor or against any of
its respective properties or assets and all other taxes, fees or other charges
imposed on it by any governmental authority (other than those presently payable
without penalty or interest and those which, together with the sanctions,
penalties and interest resulting from a failure to timely make such payment,
would not reasonably be likely to have, either individually or in the aggregate,
a Material Adverse Effect); and no tax liens have been filed, and to the
knowledge of the Borrower and the Guarantors, no claims have been asserted
against the Borrower or any Guarantors or any of its respective properties or
assets, with respect to any taxes, fees or charges by any governmental
authority.
(f) No Defaults. Neither the Borrower nor any Guarantor is as
of the date hereof in default or noncompliance in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
material agreement or instrument to which it is a party (including without
limitation, the Credit Documents) or by which it is bound or with respect to any
law, statute, judgment, writ, injunction, decree, rule or regulation of any
court or governmental authority which, either individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect.
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(g) Consents. No consent of any other Person and no consent,
license, approval or authorization of, or registration, filing or declaration
with, any court or governmental authority, other than those previously obtained
by Borrower or such Guarantor, as applicable, is or will be necessary to the
valid execution, delivery or performance by the Borrower or any Guarantor of any
of the Credit Documents to which it is a party. All applicable consents,
licenses, permits and approvals for the acquisition, construction, use and
occupancy of the Project Facilities required to be obtained as of the date
hereof under applicable law have been obtained from all governmental agencies
having jurisdiction with respect thereto including, to the extent applicable,
but not limited to: all environmental approvals (including, without limitation,
written evidence of the State Department of Environmental Protection certifying
as to the proper authorized closure and/or removal of underground storage
tanks); approvals for sewer, water, gas, electric and other utilities; a final
certificate of occupancy; all zoning, site plan and/or subdivision approvals.
Each of the foregoing is in full force and effect, and has not been invalidated,
rescinded, suspended or limited by any governmental agency or court of competent
jurisdiction. All of such approvals and permits shall be legally valid and shall
remain in full force and effect (or shall no longer be required under applicable
law) throughout the term of the Letters of Credit.
(h) Obligations of the Borrower and Guarantor. Each of the
Credit Documents to which the Borrower and any Guarantor are party have been
duly executed and delivered and constitute legal, valid and binding obligations
of the Borrower and any such Guarantor, as applicable, enforceable against it in
accordance with their respective terms.
(i) Indebtedness. None of the Borrower and the Guarantors is
liable to any Person for indebtedness for money borrowed other than as disclosed
in the consolidated balance sheet of the Consolidated Companies as of July 31,
1995, the notes thereto or as otherwise disclosed to the Bank in writing prior
to the date hereof.
(j) No Untrue Statements. No representation contained herein
or in any Credit Document, and no information, certification, instrument,
agreement, exhibit, report furnished by or on behalf of the Borrower or any
Guarantor to the Bank, the Issuers or the Trustee, the Application, or any other
document, certificate or statement furnished to the Bank, the Issuers or the
Trustee, by or on behalf of the Borrower or any Guarantor contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading or
incomplete. The Borrower specifically represents that it is not involved in any
litigation required to be disclosed in the Applications nor to the best of its
knowledge, is it the subject of any investigation or administrative proceeding
except as disclosed in the Applications or on Schedule III hereto.
(k) Financial Statements. The consolidated balance sheets of
the Consolidated Companies as of October 31, 1994, and July 31, 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the fiscal years in the three-year period ended October 31, 1994,
were prepared in accordance with GAAP, consistently applied, and fairly and
accurately present the financial condition of the Consolidated Companies as of
October 31, 1994, and the results of their operations for each of the fiscal
years in the three-year period ended October 31, 1994. Since July 31, 1995,
there has been no material adverse change in the financial condition or
operations of the Consolidated Companies, taken as a whole, except as otherwise
disclosed to the Bank in writing prior to the date hereof.
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(l) No Subsidiaries. Except as set forth on Schedule III
attached hereto, the Borrower (i) has no Subsidiaries and no investment in any
other Person; (ii) has no investment in any partnership, limited partnership or
joint venture; and (iii) is not a member or participant in any partnership,
limited partnership or joint venture.
(m) Compliance with Laws. Each of the Borrower and the
Guarantor, to the best of its knowledge, has complied in all respects with all
laws, regulations, permits, licenses and other requirements of federal, state
and local laws pertaining to the business it conducts, except to the extent that
the failure to so comply would not be reasonably likely to have, either
individually or in the aggregate, a Material Adverse Effect.
(n) Acquisition/Operation of the Project Facility. The
operation of the Project Facility in the manner presently contemplated and as
described in the Applications will not conflict with any current zoning, water,
air pollution or other ordinances, orders, laws or regulations applicable
thereto in any material respect. The Borrower has caused the Project Facility to
be acquired in accordance, in all material respects, with all federal, state and
local laws or ordinances (including rules and regulations) relating to zoning,
building, safety and environmental quality. The Borrower will complete the
Project pursuant to the terms of this Agreement and the Indentures in all
material respects.
(o) Environmental Representations.
(i) Except as disclosed in writing to the Bank prior to
the date hereof, the Borrower has obtained, to the best of its knowledge, all
permits, licenses and other authorizations which are required with respect to
the Project Site, the Project Facilities and activities conducted thereon under
all applicable Environmental Laws. To the best of the Borrower's knowledge, the
Project Facilities and activities conducted thereon are in compliance with all
terms and conditions of the required permits, licenses and authorizations, and
are also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in those laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder except as disclosed in writing to the Bank prior to the date
hereof or except to the extent that the failure to be in compliance, either
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect. To the best of the Borrower's knowledge, there are no
past or present events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with, or prevent, continued
compliance on the part of the Borrower, or which may give rise to any liability
on the part of the Borrower, or otherwise form the basis of any claim, action,
suit, proceeding or investigation against the Borrower, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, of any Hazardous Substance, except as disclosed in writing
to the Bank prior to the date hereof or except to the extent that such liability
or claim, either individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect;
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(ii) There have been no claims, litigation,
administrative proceedings, whether actual or threatened, or judgments or
orders, relating to any Hazardous Substances or other forms of pollution
relating in any way to the Project Site or the Project Facilities except as
disclosed in writing to the Bank prior to the date hereof or except to the
extent that any such claim, litigation or proceeding, either individually or in
the aggregate, would not be reasonably likely to have a Material Adverse Effect;
(iii) To the best of the Borrower's knowledge, neither
the Borrower nor the Project Site, the Project Facilities nor any occupant
thereof, are in violation of or subject to any applicable Environmental Law or
subject to any existing, pending or threatened investigation or inquiry by any
governmental authority pertaining to any applicable Environmental Law, other
than (A) as disclosed in writing to the Bank prior to the date hereof and (B)
such matters which, if determined adversely, would not be reasonably likely,
either individually or in the aggregate, to have a Material Adverse Effect. The
Borrower shall not cause or permit the Project Site or the Project Facilities to
be in violation of, or do anything which would subject the Project Site or the
Project Facilities to any remedial obligations under any applicable
Environmental Law, except to the extent that such violation would not be
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect. The Borrower shall (A) promptly notify the Bank, in writing, of
any existing, pending or threatened investigation or inquiry by any governmental
authority in connection with any applicable Environmental Law and (B) provide
Bank with copies of any and all material written communications with any
governmental authority in connection with any applicable Environmental Law,
promptly upon the Borrower's giving or receiving of same;
(iv) To the best of the Borrower's knowledge, no friable
asbestos, or any asbestos containing substance deemed hazardous by Federal or
State regulations, has been installed in the Project Facilities other than as
disclosed in writing to the Bank prior to the date hereof. The Borrower
covenants that it will not install in the Project Facilities friable asbestos or
any asbestos containing substance deemed hazardous by Federal or State
regulations. In the event any such materials are found to be present at the
Project Facilities in amounts or conditions requiring removal or remediation
pursuant to any applicable Environmental Law, the Borrower agrees to remove or
remediate the same as required by any applicable Environmental Law promptly upon
discovery at its sole cost and expense; and
The Borrower further represents, warrants, covenants and
agrees as follows:
(v) None of the real property owned and/or occupied by
Borrower and located in the State, including without limitation, the Project
Site or the Project Facilities, to the best of the Borrower's knowledge, has
ever been used by previous owners and/or operators (other than as disclosed in
writing to the Bank prior to the date hereof) nor will be used during Borrower's
ownership in the future to refine, produce, store, handle, transfer, process,
generate, manufacture, transport, heat, treat, recycle, or dispose of Hazardous
Substances in violation of any applicable Environmental Law;
(vi) The Borrower has not received any notice of
violation, notice of potential liability for response costs at an offside
location, request for information, summons, citation, directive or other
communication, written or oral, from the Alabama Department of Environmental
Management, the United States Environmental Protection Agency, or any other
governmental entity concerning any intentional or unintentional action or
omission on the Borrower's part resulting in the releasing, spilling, leaking,
pumping, pouring, emitting, emptying or dumping of Hazardous Substances other
than as disclosed in writing to the Bank prior to the date hereof;
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(vii) To the best of the Borrower's knowledge, no lien
has been attached to the Project Site or the Project Facilities, as a result of
any federal, state or local agency, including without limitation, of the United
States Environmental Protection Agency, expending moneys from the Hazardous
Substance Superfund or similar funds for damages and/or response action costs.
In the event that any such lien is or has been filed, and is not validly
disputed by the Borrower, then the Borrower shall, within thirty (30) days from
the date that the Borrower is given such notice of such lien (or within such
shorter period of time in the event that the State or the United States has
commenced steps to have the Project Site or the Project Facilities sold),
either: (A) pay the claim and remove the lien from the Project Site or Project
Facilities; or (B) furnish (1) a bond satisfactory to the Issuers and the Bank
in the amount of the claim out of which the lien arises, (2) a cash deposit in
the amount of the claim out of which the lien arises, or (3) other security
satisfactory to the Issuers and the Bank in an amount sufficient to discharge
the claim out of which the lien arises; and
(viii) In the event that the Borrower shall cause or
permit to exist a Release of Hazardous Substances at the Project Site or the
Project Facilities in violation of any applicable Environmental Law and without
having obtained a permit required by the appropriate governmental authority, the
Borrower shall promptly remove and remediate such Release, when required by and
in accordance with the provisions of any applicable Environmental Law.
(p) Solvency. After giving effect to the transactions
contemplated by this Agreement, (a) the present fair salable value of the assets
of each of the Borrower and each Guarantors is in excess of the amount that will
be required by it to pay its respective probable liability on its existing debts
as such debts become absolute and matured, (b) the property remaining in the
hands of each of the Borrower and each Guarantor is not an unreasonably small
amount of capital, and (c) each of the Borrower and each Guarantor is able to
pay, and does not intend to take or fail to take any action such that it will be
unable to pay, its debts as they mature. The Guarantors and the Borrower have
determined that the Guarantor will derive benefits from the issuance of the
Letters of Credit and the other transactions contemplated hereby and such
benefits are sufficient consideration for the execution and delivery of the
Guaranties by the Guarantors.
Section 4.2. Representations and Warranties as to the Acquisition of
Project Facilities.
(a) Acquisition of Project Facilities. The Borrower agrees
that it will use the proceeds of Bonds to finance the acquisition of and
improvements to the Project Facilities as soon as practicable after the proceeds
of the Bonds become available.
(b) Notices and Permits. The Borrower has given or caused to
be given all notices and has complied or caused compliance with all laws,
ordinances, municipal rules and regulations and requirements of public
authorities applying to or affecting the acquisition and the conduct of the
Project Development Work as to which compliance is required as of the date
hereof, and the Borrower will defend and save the Bank, each Issuer, the
Trustee, and their respective members, officers, directors, agents and employees
harmless from all fines due to failure to comply therewith. The Borrower has
procured or has caused to be procured all permits and licenses necessary for the
Project Development Work as to which compliance is required as of the date
hereof.
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(c) Additions and Changes to Project Facilities. The Borrower
may, at its option and at its own cost and expense, at any time and from time to
time, make such improvements, additions, renovations and changes to the Project
Facilities as it may deem to be desirable for its uses and purposes, provided
that (i) such improvements, additions and changes shall constitute part of the
Project Facilities and be subject to the liens and security interests created by
or in connection with the Credit Documents, and (ii) that the Borrower shall not
permit any alienation, removal, demolition, substitution, improvement,
alteration or deterioration of the Project Facilities or any other act which
might materially impair or reduce the usefulness or value thereof, or the
security provided under or in connection with the Credit Documents, without the
prior written consent of the applicable Issuer(s) and the Bank. The Borrower
shall request in writing that the Bank execute termination statements for any
filings made to perfect the security interests created pursuant to or in
connection with the Credit Documents for any fixture or item of equipment
permanently removed from the Project Facilities by the Borrower, provided that
any item of property so removed by the Borrower shall be replaced by other
property of similar value or function.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.1. Conditions to Issuance of the Letters of Credit. The
obligation of the Bank to issue the Letters of Credit on the Issue Date is
subject to the satisfaction of the following conditions precedent:
(a) Credit Documents. On or before the Issue Date, the Bank
shall have received the following, each in form and substance satisfactory to
the Bank:
(i) this Letter of Credit and Reimbursement Agreement,
duly executed by the Borrower;
(ii) true and correct copies of the Indentures, the Loan
Agreements, the Private Placement Memorandum, the Placement Agreements (as
defined in the Indentures) and the Remarketing Agreements duly executed by each
party thereto;
(iii) the Bank Mortgage duly executed by the Borrower
constituting a valid and perfected first priority lien on the Project Facilities
including, without limitation, all real estate fixtures located and attached to
the Project Site, as security for the Obligations;
(iv) the Security Agreement duly executed by the
Borrower constituting a valid and perfected first priority lien on and security
interest in all Machinery and Equipment and Personal Property Collateral;
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(v) Financing Statements duly executed by the Borrower
and Central Sprink, as "debtors", as may be deemed reasonably necessary by the
Bank or its counsel so as to perfect a valid first priority lien in favor of the
Bank with regard to the Collateral;
(vi) a Guaranty Agreement duly executed by each
Guarantor in favor of the Bank providing for the unconditional irrevocable,
joint and several, guaranty of the obligations of the Borrower under the Credit
Documents;
(vii) a Guarantor Security Agreement duly executed by
Central Sprink in favor of the Bank granting to the Bank a valid and perfect
first priority lien as and security interest in all of the assets of Central
Sprink securing Central Sprink's obligations under its Guaranty;
(viii) the Participation Agreement duly executed by the
Participant Bank providing for the purchase by the Participant Bank of a fifty
percent (50%) risk interest on each Letter of Credit;
(ix) the Subordination Agreement duly executed by CS
Company and CSC Finance Company in favor of the Bank;
(x) secretary's certificates of the Borrower and each
Guarantor, to which are attached certified true copies of (i) the articles of
incorporation of the Borrower and such Guarantor, respectively, and all
amendments thereto, certified by the Secretary of State of the state of such
entity's incorporation, (ii) the By-Laws of the Borrower and each Guarantor and
all amendments thereto, (iii) appropriate resolutions and shareholder consents
of the Borrower and each Guarantor authorizing the transactions contemplated by
this Agreement and the other Credit Documents, and (iv) incumbency certificates
as to officers, and any amendments thereto;
(xi) a good standing certificate issued by the
appropriate official of the state in which each of the Borrower and each
Guarantor is incorporated, which identifies all the dates on which the
Borrower's and such Guarantor's respective articles of incorporation and
amendments thereto were filed; and a good standing certificate issued by the
appropriate official of the states in which the Borrower is qualified as a
foreign corporation, as applicable;
(xii) a certificate in form and substance satisfactory
to the Issuers and the Bank, to the effect that the Project Facilities are not
within a special flood hazard area, as described in the Flood Disaster
Protection Act of 1973 and the National Flood Insurance Act of 1968. Should the
Project Facilities be located in a special flood hazard area as designated by
the Secretary of Housing and Urban Development, the Borrower shall furnish the
Bank with a flood insurance policy in an amount equal to the lesser of (i) the
aggregate Maximum Stated Amount of the Letters of Credit or (ii) the maximum
amount obtainable under the National Flood Insurance Act, naming the Bank as
insureds, together with a receipted bill for the premium. Thereafter, the
Borrower shall furnish the Bank with a renewal flood insurance policy on the
anniversary date of such policy;
(xiii) true and correct copies of certificates, in form
and substance acceptable to the Issuers and the Bank, evidencing the insurances
on the Project Facilities required to be maintained pursuant to this Agreement,
the Indentures, the Financing Agreements, and naming the Bank as lender/loss
payee, mortgagee, and an additional insured;
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(xiv) evidence that the security interest to be granted
to the Bank in the personal property of the Borrower and Central Sprink
constitutes a first-priority lien and security interest, including, without
limitation, any appropriate state and county UCC searches, judgment searches and
tax liens searches against the Borrower and Central Sprink;
(xv) a current boundary and location survey of the
Project Site acceptable to the Bank, its counsel and the title insurer, prepared
by a licensed Alabama surveyor acceptable to the Bank, its counsel and the title
insurer, which survey shall be prepared in accordance with the requirements set
forth by the Bank and shall be certified to the Bank and the title insurer;
(xvi) a completed Phase I Environmental Audit for the
Project Facilities;
(xvii) an MAI as-built appraisal of the Project
Facilities and an appraisal acceptable to the Bank of the Machinery and
Equipment, which appraisals evidence a value of not less than one hundred
percent (100%) of the aggregate principal amount of the Bonds;
(xviii) an ALTA (as hereinafter defined) standard title
policy on the form currently in use in the State at the time of the issuance of
the Letters of Credit in the amount of the Letters of Credit, reinsuring with
direct access agreements and/or co-insured in amounts and with title insurance
companies reasonably acceptable to the Bank, insuring that the Bank Mortgage is
a valid first lien mortgage on the Project Facilities, subject only to those
exceptions, whether of record or otherwise that have been previously approved by
the Bank;
(xix) an environmental indemnity agreement pursuant to
which the Borrower agrees to indemnify the Bank for any and all environmental
liability which the Bank may incur by virtue of its issuing the Letters of
Credit;
(xx) a Continuing Disclosure certification evidencing
the Borrower's and each Guarantor's intent to comply with the provisions of Rule
15c2-12 of the Securities and Exchange Commission as long as this Agreement is
in effect and the Bonds remain Outstanding;
(xxi) certificates of appropriate officers the Borrower
and each Guarantor certifying that (i) all representations and warranties
contained herein and in the other Credit Documents are true and correct as of
the Issue Date; and (ii) as of the Issue Date no Default or Event of Default has
occurred hereunder or under any other Credit Document;
(xxii) any and all other documents reasonably required
by the Bank.
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(b) Payment of Fees. On the Issue Date, the following shall
have been duly paid:
(i) all fees required to be paid to the Bank and the
Placement Agent under any of the Credit Documents including without limitation;
(A) the first quarter issuance fee required
pursuant to Section 2.3(a)(viii) hereof, being $28,015.63;
(B) the balance of the Facility Fee required
pursuant to Section 2.3(a)(vii) hereof, being $12,500.
(ii) the fees and disbursements of Counsel for the Bank
as agreed in Section 6.16 hereof.
(c) Opinions of Counsel.
(i) Opinion of Counsel for Borrower. On the Issue Date,
the Issuer, the Trustee, the Bank and the Placement Agent shall have received
the opinion of Counsel for the Borrower addressed to them and satisfactory in
form and substance to Bond Counsel, Counsel for the Trustee, Counsel for the
Bank and Counsel for the Placement Agent;
(ii) Opinion of Bond Counsel. On the Issue Date, the
Issuers, the Bank, the Placement Agent and the Trustee shall have received the
opinion of Bond Counsel to the effect that, inter alia:
(A) the Bonds have been duly authorized and issued
under the provisions of the Indentures, the Resolutions, the Act and any and all
other applicable laws;
(B) each of the Indentures and the Financing
Agreements have been duly executed and delivered by the applicable Issuer and
each such document and the Bonds constitute the valid and binding obligations of
such Issuer, enforceable in accordance with their respective terms;
(C) the offering of the Bonds is not required to
be registered under the Securities Act of 1933, as amended, or under the rules
and regulations promulgated thereunder;
(iii) Opinion of Counsel for the Trustee. On the Issue
Date, the Issuers, the Bank and the Placement Agent shall have received an
opinion of Counsel for the Trustee, addressed to them and satisfactory in form
and substance to Bond Counsel (and the Borrower shall have received a reliance
letter with respect thereto) stating that the Trustee is lawfully empowered,
authorized and duly qualified to serve as Trustee and to perform the provisions
of and to accept the trusts contemplated by the Indentures, and the Trustee has
duly authorized the acceptance of the trusts contemplated by the Indenture; and
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(iv) Opinion of Counsel for the Bank. On the Issue Date,
the Issuers, the Trustee and the Placement Agent shall have received an opinion
of Counsel for the Bank, addressed to them and satisfactory in form and
substance to Bond Counsel, Counsel for the Trustee and Counsel for the Placement
Agent (and the Borrower shall have received a reliance letter with respect
thereto) stating that the Reimbursement Agreement and Letters of Credit have
been duly authorized and delivered by the Bank and constitute the legal, valid
and binding obligations of the Bank, enforceable against the Bank in accordance
with their terms, except insofar as enforceability may be limited by applicable
insolvency, reorganization, liquidation, readjustment of debt or similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity; and
(v) Opinion of Counsel for the Authority. On the Issue
Date, the Issuers, the Bank and the Placement Agent shall have received an
opinion of Counsel for the for the Authority, addressed to them and satisfactory
in form and substance to Bond Counsel (and the Borrower shall have received a
reliance letter with respect thereto) addressing such matters with respect to
the Authority as are reasonably requested by such Bond Counsel; and
(vi) Opinion of Counsel for the Council. On the Issue
Date, the Issuers, the Trustee and the Placement Agent shall have received an
opinion of Counsel for Council, addressed to them and satisfactory in form and
substance to Bond Counsel, Counsel for the Trustee and Counsel for the Placement
Agent (and the Borrower shall have received a reliance letter with respect
thereto) addressing such matters with respect to the Authority as are reasonably
requested by such Bond Counsel; and
(d) Issuance of Bonds and Related Items. The issuance by the
Authority of Authority Bonds in an aggregate principal amount of $8,000,000, and
the issuance by the Council of Council Bonds in an aggregate principal amount of
$3,000,000.
Section 5.2. Conditions to Term Loan. The obligation of the Bank to
convert the Borrower's reimbursement obligations arising in connection with a
Special Mandatory Tender to the Term Loan is subject to delivery by the Borrower
to the Bank of the following, each in form and substance satisfactory to the
Bank:
(a) the Term Loan Note, duly completed and executed by the
Borrower;
(b) the Borrowing Certificate dated the date of the requested
Term Loan duly completed and containing the information required pursuant to
Section 3.6 hereof;
(c) a copy of written evidence satisfactory to the Bank of the
occurrence of an Adjudication of Invalidity;
(d) an opinion of Bond Counsel satisfactory to the Bank (and
such other parties as is required under the Authority Indenture) to the effect
that such Bond Counsel agrees that the Adjudication of Invalidity is binding on
the Borrower, the Authority or the Authority Bonds;
(e) the original Authority Letter of Credit, for cancellation;
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(f) payment of any and all fees then payable pursuant to the
terms of this Reimbursement Agreement;
(g) such other approvals, opinions or documents as the Bank
may reasonably request, each in form and substance satisfactory to the Bank.
Section 5.3. Conditions to Issuance of Replacement Letter of Credit.
The obligation of the Bank to issue a Replacement Letter of Credit in accordance
with Section 2.1(c) hereof shall be subject to satisfaction of the following
conditions:
(a) Delivery by the Borrower to the Bank of the following,
each in form and substance satisfactory to the Bank:
(i) true and correct copies of the indentures with
respect to the Supplemental Bonds, the loan agreements, the bond purchase
agreement, the bond offering documents, the placement agreements, the
remarketing agreements and any and all other documents, instruments and
agreements required to be executed and delivered in connection with the issuance
or sale of the Supplemental Bonds, duly executed by each party thereto;
(ii) such Financing Statements duly executed by the
Borrower and Central Sprink, as "debtors", as may be deemed reasonably necessary
by the Bank or its counsel so as to perfect a valid first priority lien in favor
of the Bank with regard to the Collateral for the Supplemental Bonds;
(iii) secretary's certificates of the Borrower and each
Guarantor, to which are attached certified true copies of (A) the articles of
incorporation of the Borrower and such Guarantor, respectively, and all
amendments thereto, certified by the Secretary of State of the state of such
entity's incorporation, (B) the By-Laws of the Borrower and each Guarantor and
all amendments thereto, (C) appropriate resolutions and shareholder consents of
the Borrower and each Guarantor authorizing the transactions contemplated by
Replacement Letter of Credit and the other documents executed in connection
therewith, and (D) incumbency certificates as to officers, and any amendments
thereto;
(iv) a good standing certificate issued by the
appropriate official of the state in which each of the Borrower and each
Guarantor is incorporated, which identifies all the dates on which the
Borrower's and such Guarantor's respective articles of incorporation and
amendments thereto were filed; and a good standing certificate issued by the
appropriate official of the states in which the Borrower is qualified as a
foreign corporation, as applicable;
(v) certificates of appropriate officers of the Borrower
and each Guarantor certifying that (i) all representations and warranties
contained herein and in the other Credit Documents are true and correct as of
the date of issuance of the Replacement Letter of Credit; and (ii) as of the
date of issuance of the Replacement Letter of Credit no Default or Event of
Default has occurred hereunder or under any other Credit Document;
(vi) any and all other documents reasonably required by
the Bank.
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(b) Payment in full of any and all amounts outstanding under
the Term Loan, including principal, interest accrued thereon, and fees and costs
incurred in connection therewith;
(c) Payment of a Facility Fee calculated in accordance with
Section 2.3(a)(vii) hereof; and
(d) Payment of the fees and disbursements of the Bank,
including without limitation, legal fees and costs as provided in Section 6.16
hereof.
ARTICLE 6
COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as this
Agreement shall remain in effect, it will, and will cause each Guarantor and
their respective Subsidiaries, as applicable, to:
Section 6.1. Financial Statements.
(a) Annual Reports. As soon as publicly available and in any
event within 120 days after the end of each fiscal year during the term of the
Letters of Credit, will submit to the Bank (i) annual audited consolidated
financial statements for the Consolidated Corporations including therein the
balance sheet of the Consolidated Corporations as of the end of such fiscal year
and the statements of operations of the Consolidated Corporations for such
fiscal year, setting forth in comparative form the corresponding figures for the
preceding fiscal year, prepared in accordance with GAAP, all in reasonable
detail and in each case duly certified on an unqualified basis by independent
certified public accountants of recognized standing acceptable to the Bank, and
by the chief financial or chief accounting officer of CS Corporation; (ii) a
certificate of the chief financial or chief accounting officer of the Borrower
and each Guarantor stating that such officer does not have any knowledge that a
Default or an Event of Default exists, or if such Default or Event of Default
does exist, a statement of the nature thereof and the actions which the Borrower
and each Guarantor propose to take with respect thereto; and (iii) a
management-prepared consolidating worksheet for the Consolidated Corporations.
(b) Quarterly Reports. As soon as publicly available and in
any event within ninety (90) days after the end of each of the first three (3)
quarters of each fiscal year of the Borrowers during the term of the Letters of
Credit, submit to the Bank management-prepared consolidated financial statements
for the Consolidated Corporations, including a balance sheet, income statement
and cash flow statement prepared in accordance with GAAP, in form and substance
satisfactory to the Bank for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, during the term of the
Letters of Credit, together with management-prepared consolidating worksheets
for the Consolidated Corporations.
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(c) Compliance Certificates. At times referred to in
subsections (a) and (b) above, submit to the Bank "no default" certificates
showing the calculations of the financial covenants set forth in Article 6
hereof, and signed by an Authorized Borrower Representative showing that the
Borrower and each Guarantor are in compliance with all covenants and agreements
in this Agreement.
(d) SEC Reports. Concurrently with their sending or filing,
submit to the Bank and the Trustee copies of all proxy statements, financial
statements and other notices and reports when the Borrower or any Guarantor
sends the same to its shareholders as well as copies of all regular, annual,
periodic and special reports and all Registration Statements filed with the
Securities and Exchange Commission or similar government authority or with any
national security exchange succeeding to the functions of the Securities and
Exchange Commission (other than those on Form S-8), including, without
limitation, Forms 10Q and 10K.
Section 6.2. Preservation of Corporate Existence and Qualification.
Except as permitted pursuant to Section 6.12(a) hereof, do all things reasonably
necessary to: (a) preserve and maintain its corporate existence, rights,
franchises and privileges in its jurisdiction of incorporation, (b) qualify and
remain qualified as a foreign corporation in each jurisdiction in which the
failure to be or remain so qualified is reasonably likely to have a Material
Adverse Effect, and (c) comply with all provisions of its Certificate of
Incorporation and By-Laws.
Section 6.3. Records and Books of Account. Keep books and records
reflecting all of its business affairs and transactions in accordance with GAAP
consistently applied and permit the Bank, or its agents, employees or
representatives, on twenty-four (24) hour's prior notice, to inspect its books
and records at any reasonable time during regular business hours; provided that
the Bank shall keep all information obtained from such inspections confidential
and, except as required by law, will not disclose it to any Person unless the
prior written consent of the Borrower or any Guarantor, as applicable, is
obtained or unless such information is otherwise publicly available.
Section 6.4. Maintenance of Properties. Maintain and preserve all of
its properties, necessary or useful in the proper conduct of its activities, in
good working order and condition, ordinary wear and tear excepted and from time
to time will make or will cause to be made, all needed and proper repairs,
renewals, replacements, betterments and improvements thereto.
Section 6.5. Maintenance of Licenses. Maintain and keep in effect and
enforce licensing, patents, trademarks, know-how and similar agreements
necessary in the proper conduct of its activities.
Section 6.6. Further Assurances. Execute, acknowledge and deliver or
cause to be done, executed, acknowledged and delivered all such further
instruments, acts, deeds, and assurances, and reports and other information
concerning the operations and affairs of Borrower, the Guarantors or their
respective Subsidiaries, as may be reasonably requested by the Bank and the
Issuers for the purpose of carrying out the provisions and intent of this
Agreement, the Indentures, the Financing Agreements and any of the Credit
Documents.
Section 6.7. Maintenance of Insurance.
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(a) Insure the Project Facility and Collateral or cause such
to be insured with insurance companies licensed to do business in the State, in
such amounts as indicated herein or in such amounts, manner and against such
loss, damage and liability (including liability to third parties), as is
customary with companies in the same or similar business and located in the same
or similar areas, and to pay the premiums thereon. The form and amount of each
insurance policy issued pursuant to this Section 6.7 shall be satisfactory to
the Bank.
(b) Each insurance policy issued pursuant to this Section 6.7
shall name the Bank as mortgagee, lender/loss payee and additional insured, as
applicable.
(c) Such insurance coverage shall include:
(i) mortgagee title insurance in an amount not less than
$2,000,000 insuring that title to the Project Facilities is marketable and
insurable at regular rates, with no exceptions other than those approved by the
Bank and Counsel for the Bank and that the Bank Mortgage is a valid first
mortgage lien. Such policy shall be issued by a title insurance company
acceptable to the Bank and in a form approved by the American Land Title
Association ("ALTA"), subject to the approval of the Bank and shall include
affirmative coverage against all future liens which might take priority over the
Bank Mortgage; and
(ii) fire, hazard and "All-Risk" insurance, including
extended coverage for flood (subject to a $1,000,000 sublimit) and earthquake
(subject to a $5,000,000 sublimit), together with vandalism, malicious mischief
and Replacement Cost endorsements (non-reporting form), covering the Project
Facilities which shall be in an amount not less than 90% of the agreed upon
fully insurable replacement value of the Project Facilities on a completed value
basis by an insurer satisfactory to the Bank, so written and endorsed as to make
losses, if any, payable to the Bank, as mortgagee and/or lender/loss payee, as
its interests may appear; and
(iii) flood insurance, as described in Section 5.1(m),
if the Project Facility is located in an area designated by the United States
Department of Housing and Urban Development as being subject to a special flood
hazard in the maximum amount of flood insurance available through the Federal
Flood Insurance Program for the improvements located on the Project Site, naming
the Bank, as the mortgagee and/or lender/loss payee, as its interests may
appear; and
(iv) comprehensive general public liability insurance,
including Broad Form Endorsement, protective liability coverage on operations of
independent contractors engaged in construction, blanket contractual liability
insurance, completed operations and products liability coverage against any and
all liability of the Borrower or claims of liability of the Borrower arising out
of, occasioned by or resulting from any bodily injury, death, personal injury
and property damage liability with limits of liability in minimum amounts of
$1,000,000 per person per occurrence and $2,000,000 aggregate per occurrence;
and
(v) Excess/Umbrella Liability Insurance on a "follow
form" basis with a minimum limit of liability of $10,000,000 for the Project
Facilities.
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(d) The insurance policies or endorsements shall cover the
entire Project Facilities and shall provide that the coverage will not be
reduced, canceled or not renewed without thirty (30) days prior written notice
to the Bank. The Borrower shall provide the Bank with certificates from the
insurers at closing, and evidence of renewal or replacement of policies required
to be maintained by this Section shall be provided to the Bank at least ten (10)
days prior to the expiration of any such policy. The Borrower may furnish,
instead of original or duplicate policies, certificates of blanket coverage
provided the Project Facilities are identified and specifically allocated
amounts are shown.
Section 6.8. Payment of Taxes and Other Indebtedness.
(a) Promptly pay and discharge or cause to be promptly paid
and discharged all taxes, assessments and governmental charges or levies imposed
upon it or in respect of any of its property and assets as and when due, but in
no event after interest or penalties commence to accrue thereon, as well as all
lawful claims (including without limitation, claims for material, supplies and
labor furnished in connection with the Project); in each case which, if unpaid,
might become a lien or charge upon such property and assets or any part thereof;
provided, however, that it need not pay or discharge such amounts that are then
being contested in good faith by such entity by appropriate proceedings promptly
initiated and diligently prosecuted, for which such entity has maintained
adequate reserves in accordance with GAAP.
(b) Pay all of its indebtedness and obligations promptly and
in accordance with the terms thereof, except where the failure to pay any
indebtedness or obligation (other than to the Bank) would not reasonably be
likely to have, individually or in the aggregate, a Material Adverse Effect.
Section 6.9. Payment of Indebtedness. The Borrower shall maintain a
deposit account (the "Account") at the Bank continuously until all Obligations
under this Agreement, the Letters of Credit, the Term Loan Note and the other
Credit Documents have been satisfied in full.
Section 6.10. Compliance with Applicable Laws. Operate and maintain the
Project Facilities in accordance with, and shall otherwise comply with, and will
cause the Guarantors and their Subsidiaries to comply with, all applicable
federal, state, county and municipal laws, ordinances, rules and regulations now
in force or that may be enacted hereafter including, but not limited to ERISA,
the Americans with Disabilities Act and applicable Environmental Laws, workers'
compensation, sanitary, safety, non-discrimination and zoning laws, ordinances,
rules and regulations as shall be binding upon the Borrower and which might have
a Material Adverse Effect.
Section 6.11. Environmental Covenant. Not permit any action to occur
which would be in direct violation of any and all applicable federal, state,
county and municipal laws, ordinances, rules and regulations now in force or
hereinafter enacted, including applicable Environmental Laws, the regulations of
the Issuers and the regulations of the Alabama Department of Environmental
Management, except to the extent that the violation or noncompliance would not
be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect.
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The Borrower shall give prompt written notice, in the manner
provided in Section 9.14 hereof, to the Bank, of any inquiry, notices of
investigation or any similar communication from the Alabama Department of
Environmental Management and the United States Environmental Protection Agency
regarding violation of any applicable Environmental Laws.
Section 6.12. Mergers, Etc.
(a) Not sell, assign, lease, transfer or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its assets or properties (whether now owned or hereafter acquired) to any
Person without the prior express written consent of the Bank, or consolidate
with or merge into any other entity or permit any entity to merge into it
(except intercompany mergers between existing subsidiaries or between the parent
and existing subsidiaries, provided that the Borrower or a Guarantor is the
surviving entity with respect to any merger involving such entity and provided
further that, so long as no Default or Event of Default has occurred and is
continuing Central Sprink may merge or consolidate with (i) the Borrower (in
which case the Guarantor's Obligations under the Guarantor Security Agreement
shall be deemed to be Obligations of the Borrower) or (ii) CS Company or CS
Corporation (in which event the surviving entity shall expressly assume the
Obligations of Central Sprink under the Guarantor Security Agreement); and
(b) During the period commencing on the Issue Date of the
Bonds and continuing so long as any Letters of Credit or any Obligation under
any Credit Document remains outstanding, maintain or cause to be maintained
separate books and records with respect to the Project Facilities and any and
all other facilities located wholly or partly within the Project Site, which
books and records shall be sufficient to indicate the nature of any and all
capital expenditures with respect to the Project Facilities and such other
facilities.
Section 6.13. Lease or Transfer of Project Facilities. Except as set
forth in the Applications, not lease, sublease, sell or otherwise dispose of any
possessory interest in whole or part of the Project Facilities, other than such
dispositions the ordinary course of business for value received, without the
express prior written consent of the Bank. In the event that the Borrower leases
or subleases the Project Facilities or any portion thereof, the Borrower and the
proposed lessee shall submit to the Bank an application for project occupants
and a copy of the lease. The Borrower shall promptly send a copy of each
executed lease to the Issuers and the Bank.
Section 6.14. Inspection of the Project Facility. Permit the Bank, and
its duly authorized agents or representatives at all reasonable times and upon
prior reasonable notice, to enter upon and to examine and inspect the Project
Facility. The Bank and its officers and agents shall also be permitted, at all
reasonable times and upon prior notice, to examine the books and records of the
Borrower with respect to the Project Facility, to discuss its affairs, finances
and accounts with any of its officers or directors or accountants and to make
copies or abstracts thereof.
Section 6.15. Relocation of the Project Facilities. Not relocate,
during the term of this Agreement, the Project Facility or a substantial number
of its employees to another location either within or without the State without
first obtaining the prior express written consent of the Issuers and the Bank.
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Section 6.16. Costs and Expenses; Indemnity.
(a) Pay on demand all reasonable costs and expenses of the
Bank in connection with the preparation, execution, delivery, administration,
modification and enforcement of the Commitment Letter and any and all of the
other Credit Documents (including, without limitation, the fees and
disbursements of Counsel for the Bank); and
(b) Indemnify, save, and hold harmless the Bank and its
directors, officers, agents and employees (collectively the "indemnitees") from
and against:
(i) any and all claims, demands, actions, or causes of
action that are asserted against any indemnitee by any Person arising, directly
or indirectly, from or as a result of any of the transactions contemplated by
the Credit Documents including, without limitation, the collection and
enforcement of the Obligations; and
(ii) any and all liabilities, losses, costs or expenses
(including reasonable attorneys' fees and disbursements) that any indemnitee
suffers or incurs as a result of the assertion of, or the prosecution of or
defense against, any claim, demand, action, or cause of action specified in the
immediately preceding subparagraph (i).
The covenants and agreements of this Section 6.16 shall be unconditional,
whether or not the Letters of Credit are issued or the transactions contemplated
hereby are consummated and shall survive the repayment of the Obligations, the
termination of this Agreement and other Credit Documents and the cancellation of
the Letters of Credit.
Section 6.17. Damage to or Condemnation of Project Facilities. In the
event of damage, destruction or condemnation of part or all of the Project
Facilities, the Borrower shall notify the Trustee and the Bank not later than
five (5) days after the occurrence of such event (the "Initial Notice").
(a) In the event of any partial damage, destruction or
condemnation of the Project Facilities in an amount aggregating less than
$1,000,000 the Borrower shall have the option to (i) use the proceeds of its
insurance funds for restoration, repair or replacement of the Project Facility,
or (ii) provided that the failure to restore, repair or replace is not
reasonably likely to have a Material Adverse Effect, redeem Bonds in a principal
amount equal to the proceeds of such insurance. In the event Borrower elects the
option set forth in clause (i) above, such funds representing insurance proceeds
shall be paid in accordance with the with Section 5.1 or 5.2, as the case may
be, of the applicable Financing Agreement.
(b) In the event (i) the Borrower fails to exercise one of the
options set forth in Section 6.17(a) above with respect to any such partial
damage, destruction or condemnation of the Project Facilities , within sixty
(60) days after the Initial Notice when such proceeds aggregate less than
$1,000,000, or (ii) such proceeds exceed $1,000,000, the Bank shall have the
option to (A) apply such funds to the costs of repair, reconstruction and
restoration of the Project Facilities to a substantially equivalent condition or
value existing immediately prior to such event or to a condition of at least an
equivalent value, in which case such funds shall be deposited with the Trustee
in a separate trust account in accordance with Section 5.1(a) of the applicable
Financing Agreement; or (B) use such proceeds to reduce any outstanding
principal balance of unreimbursed draws under the Letters of Credit or other
outstanding Obligations and remit the balance to the Borrower; or (C) retain
such proceeds (up to the amount of the Obligations) as cash collateral for such
Obligations; or (D) redeem Bonds from moneys from the Letters of Credit pursuant
to Section 5.1(b) of the applicable Financing Agreement and apply the amount of
such net proceeds of any insurance, casualty or condemnation award to reimburse
the Bank for any draw on the Letters of Credit, but only to the extent of any
such proceeds. The Bank shall notify the Trustee and the Borrower in writing of
its election within seventy (70) days after the Initial Notice.
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(c) The Borrower shall cooperate and consult with the Bank in
all matters pertaining to the settlement or adjudication of any insurance claims
and all claims and demands for damages on account of any taking or condemnation
of the Project Facility or pertaining to the settlement, compromising or
arbitration of any claim on account of any damage or destruction of the Project
Facility. In no event shall the Borrower voluntarily settle, or consent to the
settlement of, any insurance claim equal to or greater than $1,000,000 with
relation to the Project Facility or any proceedings arising out of any
condemnation of the Project Facility without the prior written consent of the
Bank, which consent will not be unreasonably withheld.
(d) Damage to, destruction of or condemnation of all or a
portion of the Project Facilities shall not terminate this Agreement, or cause
any abatement of or reduction in the payments to be made by the Borrower or
otherwise affect the respective obligations of the Issuers or the Borrower,
except as set forth in this Agreement.
Section 6.18. Prohibition of Liens. Without the prior written consent
of the Bank, not create, or suffer to be created by any Person any lien or
charge upon its respective property or the Bond Fund or the Project Facilities
or any part thereof or upon the rents, contributions, charges, receipts or
revenues therefrom other than (collectively, the "Permitted Encumbrances"):
(i) with respect to the Borrower and each Guarantor and
Spraysafe:
(A) liens for taxes and assessments or other
governmental charges or levies not then delinquent or, provided there is no risk
of forfeiture or sale of any of the Collateral, which are being contested in
good faith by appropriate proceedings and for which reserves have been
established by the Borrower or the affected Guarantor or Spraysafe, as
applicable, in accordance with GAAP and the provisions of Section 6.8 hereof;
(B) liens granted pursuant to the Credit
Documents, including pursuant to the Council Lease Agreement;
(C) utility access and other easements and rights
of way, restrictions and exceptions that the Title Insurance Policy insures will
not interfere with or impair the Project Facility and previously approved by and
acceptable to the Bank;
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(D) liens securing claims of mechanics and
materialman or other like liens incurred in the ordinary course of business and
(1) are not more than thirty (30) days past due, or (2) are being contested in
good faith by appropriate proceedings and for which appropriate reserves have
been established by the Borrower or the affected Guarantor or Spraysafe, as
applicable;
(E) purchase money security interests encumbering
(1) property other than the Collateral or (2) property acquired after the date
hereof and otherwise comprising Collateral; provided, however, that the Bank's
lien shall remain in effect with respect to such Collateral subject only to such
purchase money security interest(s);
(F) those exceptions shown on Schedule B of the
Title Insurance Policy and other liens in existence on the date hereof as have
previously been disclosed to the Bank in writing and have been approved by the
Bank (a true and complete listing of which, as of the date hereof, appears in
Schedule III hereto), including those liens that may be renewed or maintained in
effect to secure indebtedness that is renewed, extended or refinanced in
accordance with Section 6.19(a)(i) hereof;
(G) liens under worker's compensation,
unemployment insurance, social security or similar legislation;
(H) liens, deposits or pledges to secure the
performance of bids, tenders, contracts, leases (permitted under the terms of
this Agreement) public or statutory obligations, surety, indemnity, performance
or other similar bonds, or other similar obligations arising in the ordinary
course of business;
(I) liens of or resulting from any litigation or
legal proceeding which are being contested in good faith by appropriate
proceedings promptly initiated and diligently prosecuted and for which adequate
reserves have been established, or any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in respect
of which the Borrower shall at any time in good faith be prosecuting an appeal
or proceeding for a review and in respect of which a stay of execution pending
such appeal or proceeding for review shall have been secured or for which a
supersedeas bond has been timely posted; and
(J) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Borrower, such Guarantor or Spraysafe, as applicable, or which customarily exist
on properties of corporations engaged in similar activities and similarly
situated and which do not in the aggregate materially impair the operation of
the business of the Borrower, such Guarantor or Spraysafe, as applicable; and
(ii) with respect to the Guarantors and Spraysafe, but
not the Borrower, liens created to secure additional indebtedness of such
entity, provided that the GAAP book value of the properties subject to such
liens shall not exceed $3,000,000 in the aggregate at any time.
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The Borrower further agrees to pay or cause to be discharged
or make adequate provision to satisfy and discharge, within thirty (30) days
after the same shall become due, any such lien or charge (other than a Permitted
Encumbrance) and also all lawful claims or demands for labor, materials,
supplies or other charges which, if unpaid, might be or become a lien upon the
Bond Fund, the Project Facilities or any part thereof or the revenues or income
therefrom; provided, however that nothing in this Section 6.18 shall require the
Borrower to pay or cause to be discharged or make provision for any such lien or
charge so long as the validity thereof shall be diligently contested in good
faith and by appropriate proceedings so long as the Collateral, the Bond Fund,
the Project Facilities or any part thereof are not subject to loss or
forfeiture.
Section 6.19. Additional Indebtedness.
(a) Not incur, create, assume or permit to exist any
indebtedness for borrowed money, or on account of deposits (other than in the
ordinary course of business), or evidenced by notes, bonds, debentures or
similar obligations except, with respect to the Borrower, Guarantors and
Spraysafe, indebtedness described in items (i) through (v) below and, with
respect to the Guarantors and Spraysafe, but not the Borrower, indebtedness
described below in items (vi) through (viii):
(i) existing indebtedness previously disclosed to and
approved by the Bank, as listed on Schedule III attached hereto, such
indebtedness not to be renewed, extended or refinanced unless, in doing so, the
effective rate of amortization thereof is not increased, and in any case, not to
be on terms less favorable to the Borrower and the Guarantors than those
provided in the agreements evidencing such indebtedness as in effect on the date
hereof;
(ii) indebtedness to the Bank;
(iii) indebtedness subordinated to the Obligations on
terms and conditions satisfactory to the Bank;
(iv) indebtedness arising from purchase money mortgages
or capital leases for equipment financing;
(v) indebtedness to the Participant arising in
connection with the Credit Documents;
(vi) seller financing, provided that the indebtedness
pursuant to such financing is unsecured, contains no covenants (other than the
obligation to repay such indebtedness) and is treated as current debt for
purposes of compliance with the covenants contained in Article 6 hereof;
(vii) additional secured indebtedness, provided that
such secured indebtedness shall not exceed $3,000,000 in the aggregate at any
time; and
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(viii) cash borrowings under existing unsecured lines of
credit, as extended, provided that such cash borrowings shall not exceed
$40,000,000 in the aggregate outstanding at any time;
(b) not guaranty or otherwise in any way become or be
responsible for indebtedness or obligations of any other Person, contingent or
otherwise, except with respect to the Borrower, Guarantors and Spraysafe,
guarantees described in items (i) through (iii) below and, with respect to the
Guarantors and Spraysafe, but not the Borrower, guarantees described in below in
items (iv):
(i) existing guarantees, as listed on Schedule III
attached hereto, such guaranties not to be extended or renewed, except in
connection with the renewal, extension or refinancing of indebtedness in
accordance with Section 6.19(a)(i) above;
(ii) the endorsement of negotiable instruments for
deposit in the normal course of business;
(iii) guarantees issued in favor of the Bank and, with
regard to the transactions contemplated by this Agreement, in favor of the
Participant; and
(iv) additional guarantees not to exceed $3,500,000 in
the aggregate at any time;
(c) not make loans, advances, or investments except such as
are customary and in the ordinary course of business;
(d) not sell, discount or otherwise dispose of notes or
accounts receivable except for the purpose of collection in the ordinary course
of business; or
(e) not enter into any agreement restricting or prohibiting
its right to grant liens to other Persons (other than as previously granted to
the Participant).
Section 6.20. Financing Statements. At the Borrower's own expense,
cause financing statements under the UCC to be filed in the places required by
law in order to perfect the security interests created or contemplated by
Section 2.6 hereof naming each of the Borrower and Central Sprink, respectively,
as debtor and the Bank as secured party. The Borrower shall execute and file or
cause to be executed and filed all further instruments as shall be required by
law to preserve such security interest, and shall furnish satisfactory evidence
to the Bank and the Issuers of the filing and refiling of such instruments.
Section 6.21. Change in Nature of Corporate Activities. Not make any
material change in the nature of its corporate activities; provided that the
foregoing shall not prohibit the Borrower from engaging in additional activities
related to its present corporate activities and not otherwise prohibited under
the Code or the Act.
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Section 6.22. Notice and Certification With Respect to Bankruptcy
Proceedings. Notify the Bank in writing of the occurrence of any of the
following events and shall keep the Bank informed of the status of any petition
in bankruptcy filed (or bankruptcy or similar proceeding otherwise commenced)
against the Borrower or any Guarantor: (i) application by the Borrower or any
Guarantor for or consent by the Borrower or any Guarantor to the appointment of
a receiver, trustee, liquidator or custodian or the like of itself or of its
property, or (ii) is not generally paying its debts as they become due, or (iii)
general assignment by the Borrower or any Guarantor for the benefit of
creditors, or (iv) adjudication of the Borrower or any Guarantor as a bankrupt
or insolvent, or (v) commencement by the Borrower or any Guarantor of a
voluntary case under the United States Bankruptcy Code or filing by the Borrower
or any Guarantor of a voluntary petition or answer seeking reorganization of the
Borrower or any Guarantor, an arrangement with creditors of the Borrower or any
Guarantor or an order for relief or seeking to take advantage of any insolvency
law or filing by the Borrower or any Guarantor of an answer admitting the
material allegations of an insolvency proceeding, or action by the Borrower or
any Guarantor for the purpose of effecting any of the foregoing, (vi) if without
the application, approval or consent of the Borrower or any Guarantor, a
proceeding shall be instituted in any court of competent jurisdiction, under any
law relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking in respect of the Borrower or any Guarantor an order for relief or an
adjudication in bankruptcy, reorganization, dissolution, winding up,
liquidation, a composition or arrangement with creditors, a readjustment of
debts, the appointment of a trustee, receiver, liquidator or custodian or the
like of the Borrower or any Guarantor or of all or any substantial part of its
respective assets, or other relief in respect thereof under any bankruptcy or
insolvency law.
Except where expressly provided to the contrary, all covenants
in this Article shall be given independent effect so that if a particular action
or condition is not permitted by any of such covenants, the fact that it would
be permitted by an exception to, or be otherwise within the limitations of,
another covenant shall not avoid the occurrence of an Event of Default or
Default if such action is taken or condition exists.
Section 6.23. Other Notices; Litigation; Event of Default. Notify Banks
in writing immediately of the institution of any litigation, the commencement of
any administrative proceedings, the happening of any event or the assertion or
threat of any claim which could have a Material Adverse Effect or the occurrence
of any Event of Default or Default hereunder.
Section 6.24. Continuing Disclosure. Provide or cause to be provided by
each Guarantor (a) on a timely basis, all of the information required to be
provided pursuant to and in accordance with Rule 15c2-12 of the Exchange Act,
and (b) on or prior to the effective date of any such transaction, notification
of the purchase or sale, by or for the account of the Borrower, of any of the
Bonds, together with a detailed description of such transaction.
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ARTICLE 7
FINANCIAL COVENANTS
Section 7.1. Consolidated Tangible Net Worth. The Consolidated
Corporations' Consolidated Tangible Net Worth as at the end of any fiscal
quarter (tested in connection with the delivery of financial statements pursuant
to Sections 6.1 and 6.2 hereof), during the term f this Agreement shall not be
less than the amounts set forth in the right column for the test dates within
the periods set forth in the left column:
Period Amounts
------ -------
March 31, 1995 through December 30, 1995 $37,000,000
December 31, 1995 and thereafter $41,000,000
Section 7.2. Consolidated Current Ratio. The Consolidated Corporations
shall maintain at all times (to be measured as of the last day each fiscal
quarter and tested in connection with the delivery of financial statements
pursuant to Sections 6.1 and 6.2 hereof) a ratio of Consolidated Current Assets
to Consolidated Current Liabilities of not less than the amounts set forth in
the right column for the test dates within the periods set forth in the left
column:
Period Ratio
------ -------
March 31, 1995 through December 30, 1995 1.30:1.00
December 31, 1995 through December 30, 1996 1.50:1.00
December 31, 1996 and thereafter 1.75:1.00
provided, however, that for purposes of computing this
covenant, amounts outstanding under the Term Loan shall be excluded from the
calculation of current liabilities.
Section 7.3. Consolidated Quick Ratio. The Consolidated Corporations
shall maintain at all times (to be measured as of the last day of each fiscal
quarter and tested in connection with the delivery of financial statements
pursuant to Sections 6.1 and 6.2 hereof) a Consolidated Quick Ratio of not more
than the amount set forth in the right column for the test dates within the
periods set forth in the left column:
Period Ratio
------ -------
March 31, 1995 through December 30, 1995 0.7:1.0
December 31, 1995 and thereafter 0.87:1.0
provided, however, that for purposes of this computing
covenant, amounts outstanding under the Term Loan shall be excluded from the
calculation of current liabilities.
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Section 7.4. Ratio of Consolidated Funded Indebtedness to Consolidated
Tangible Net Worth. The Consolidated Corporations shall maintain a ratio of
Consolidated Funded Indebtedness to Consolidated Tangible Net Worth (to be
measured as of the last day of each fiscal quarter and tested in connection with
the delivery of financial statements pursuant to Sections 6.1 and 6.2 hereof) of
not greater than the amounts set forth in the right column for the test dates
within the periods set forth in the left column:
Period Ratio
------ -------
March 31, 1995 through December 30, 1995 1.5:1.0
December 31, 1995 through December 30, 1996 1.37:1.0
December 31, 1996 and thereafter 1.2:1.0
Section 7.5. Cash Equivalents. The cash, cash equivalents and
investments of the Consolidated Companies having maturities of up to three years
shall not at any time be less than $5,000,000.
ARTICLE 8
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default: Acceleration. Each of the following
events is hereby defined as, and is declared to be and to constitute, an "Event
of Default" hereunder:
(a) Failure by the Borrower to make or cause to be made (i)
any reimbursement of a draw under the Letters of Credit, or any principal
payment under the Term Loan, within one (1) Business Day after the date the same
is due, or (ii) any other payment required to be made hereunder or under the
Letters of Credit or Term Loan Note within five (5) Business Days after the date
the same is due; or
(b) Any material representation or warranty by or on behalf of
the Borrower or any Guarantor contained in this Agreement or in any report,
certificate, financial instrument or other instrument furnished in connection
with this Agreement or any other Credit Document shall prove to be false or
misleading;
(c) Failure of the Borrower or any Consolidated Corporation to
observe, perform or comply with any of the covenants or conditions contained in
Article 6 hereof;
(d) Failure or refusal by the Borrower or any Guarantor to
observe, perform or comply with any of its other covenants hereunder or under
any of the other Credit Documents and such failure or refusal shall continue for
a period of thirty (30) days after the earlier of (i) the date on which the
Borrower first becomes aware of such failure or (ii) the date on which the Bank
has provided written notice thereof to the Borrower; provided that if such
failure is of such nature that it can be corrected but not within thirty (30)
days, it will not be an Event of Default so long as prompt corrective action is
instituted and is diligently pursued by the Borrower, to the reasonable
satisfaction of Bank; or
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(e) The Borrower or any Guarantor shall fail to pay in full
when due (after giving effect to any grace period applicable thereto, without
duplication) (i) any amount owing by the Borrower or such Guarantor with respect
to the Bonds (including payments due under any Indenture, Financing Agreement,
lease agreement or similar agreement), or (ii) the principal of, premium (if
any) on or interest on any other indebtedness of the Borrower or any Guarantor
in a principal amount exceeding $750,000 (unless such amount owing is being
contested in good faith by the Borrower or any Guarantor with diligence and
continuity and by appropriate proceedings for which the Borrower or respective
Guarantor has maintained adequate reserves in accordance with GAAP), or the
occurrence of any default under any mortgage, agreement or other instrument
under or pursuant to which the Bonds or such indebtedness is incurred, secured,
or issued, and continuance of which default beyond the period of grace, if any,
allowed with respect thereto; or
(f) The entry or filing of any judgment, writ or warrant of
attachment or of any similar process in an amount in excess of $750,000 against
the Borrower or any Guarantor or against its respective property and failure of
the Borrower or such Guarantor to vacate, pay, bond, stay or contest in good
faith such judgment, writ, warrant of attachment or other process for a period
of thirty (30) days, unless the Borrower or such Guarantor delivers the Bank
evidence, satisfactory to the Bank, that such amount is fully covered by
third-party insurance; or
(g) The Borrower or any Guarantor shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian or
the like of itself or of its property, or (ii) admit in writing its inability to
pay its debts generally as they become due, or (iii) make a general assignment
for the benefit of creditors, or (iv) be adjudicated a bankrupt or insolvent, or
(v) commence a voluntary case under the United States Bankruptcy Code, or file a
voluntary petition or answer seeking reorganization, an arrangement with
creditors or an order for relief, or seeking to take advantage of any insolvency
law or file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization, or insolvency proceeding, or
action shall be taken by it for the purpose of effecting any of the foregoing,
or (vi) if without the application, approval or consent of the Borrower or any
Guarantor, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking in respect of the Borrower or such Guarantor an
order for relief or an adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver, liquidator or
custodian or the like of the Borrower or such Guarantor or of all or any
substantial part of its assets, or other like relief in respect thereof under
any bankruptcy or insolvency law, and, if such proceeding is being contested by
the Borrower or such Guarantor in good faith, the same shall (A) result in the
entry of an order for relief or any such adjudication or appointment or (B)
remain unvacated, undismissed, undischarged, unstayed or unbonded for a period
of sixty (60) days; or
(h) For any reason any of the Bonds are declared due and
payable by acceleration in accordance with Section 10.2 of the applicable
Indenture; or
(i) This Agreement, or any of the other Credit Documents
(other than the Authority Loan Agreement or Authority Indenture, as a result of
an Adjudication of Invalidity) ceases to be valid and binding on the Borrower or
is deemed null and void or the validity or enforceability thereof is contested
by the Borrower or any Guarantor or the Borrower denies that it has further
liability under this Agreement or any of the other Credit Documents, or any
Guarantor denies that it has further liability under its Guaranty; or
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(j) The transfer of title to or possession of the Project
Facilities, the Collateral or any part thereof (in one or more transactions) for
any reason not expressly permitted herein pursuant to Sections 6.12 and 6.13
hereof without the prior written consent of the Bank; or
(k) The Borrower shall at any time cease to be a wholly-owned
subsidiary of CS Company, or CS Company shall at any time cease to be a
wholly-owned subsidiary of CS Corporation.
Section 8.2. Remedies.
(a) Upon the occurrence of any Event of Default (other than
one referred to in clause (f) or (g) of Section 8.1, with respect to which the
remedies provided in clause (i) of this Section 8.2(a) shall automatically and
immediately be applicable, without notice or demand of any kind), the Bank may
(i) by mailing of notice to the Borrower declare an amount equal to the
applicable Stated Amount which may at any time be drawn under the Letters of
Credit whether or not the Trustee shall have presented, or shall be entitled at
such time to present, the drafts, certificates or other documents required to
draw on the Letters of Credit) together with the other obligations of the
Borrower hereunder (including, without limitation, under the Term Loan) or under
the other Credit Documents to be forthwith due and payable, and the same shall
thereupon become due and payable without demand, presentment, protest or further
notice of any kind, all of which are hereby expressly waived, (ii) subject to
the terms of the Letters of Credit, refuse to reinstate (A) the applicable
Stated Amount and any interest portion of the Letters of Credit with respect to
any draft representing interest following the payment by the Bank of the amount
set forth in such draft, and/or (B) the applicable Stated Amount, the interest
portion and the principal portion of the Letters of Credit with respect to any
draft representing payment of principal following the payment by the Bank of an
amount set forth in such draft, and (iii) pursue any other rights or remedies it
may have at law or in equity or pursuant hereto or to any of the other Credit
Documents.
(b) In addition to the remedies provided in Section 8.2(a)
hereof, upon the occurrence of any Event of Default under Section 8.1(a) or (g)
hereof, or upon the Bank's declaring the obligations of the Borrower hereunder
to be due and payable, the Bank shall have the right to foreclose on the Bank
Mortgage, and collect and sell or otherwise liquidate any Collateral and (A)
apply the proceeds thereof to payment of the Obligations outstanding or (B)
deposit such proceeds in the Cash Collateral Account, to be applied in
accordance with Section 8.2(c) hereof.
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(c) So long as the Letters of Credit or either of them shall
remain outstanding, any amounts due and payable as described in the previous
subparagraphs (a) and (b), when received by the Bank, shall (in such manner and
order as the Bank shall determine in its sole discretion): (i) to the extent of
the Maximum Stated Amount (and any reinstatements thereof which the Bank is
obligated to make, if any), be deposited in the Cash Collateral Account and held
by the Bank as cash collateral for the Obligations; and/or (ii) be applied to
payment of any or all of the Obligations. Upon any draw under the Letters of
Credit, the Bank shall have the unconditional right to debit any and all
accounts of the Borrower at the Bank, including the Cash Collateral Account to
reimburse the Bank for the amount of such draw. The Borrower shall have the
right to direct the investment in Permitted Investments of any funds in such
accounts, and the Bank shall not have any duty or liability with respect to such
investments (including, without limitation, any liability for any loss due to
change in value or for any penalty, charge or loss upon liquidation thereof
prior to maturity in accordance with the immediately succeeding sentence) except
to make the investments directed by the Borrower, and to hold, receive the
proceeds of, liquidate as necessary, and apply such investments and the proceeds
thereof in accordance with this Section 8.2(c). In the event that any of the
funds held in the Cash Collateral Account are invested in an investment that
requires payment or deduction of a prepayment, breakage or similar penalty or
charge upon liquidation prior to maturity (including without limitation a
certificate of deposit), the Borrower shall have a further obligation under this
Agreement to reimburse or pay to the Bank, upon demand, the full amount of each
such penalty, charge, loss of investment earnings, or loss of funds attributable
to any action by the Bank in so liquidating any such investment in order to
apply the proceeds of the Cash Collateral Account in accordance with this
paragraph, and such obligation until paid in full shall be added to and become a
part of the Obligations, shall bear interest as provided in Section 2.3(c)
hereof, and shall be secured by the Collateral. In the event that either Letter
of Credit is canceled or expires or in the event at any time of any permanent
reduction of the Maximum Stated Amount (i.e., a reduction not subject to any
possible subsequent reinstatement pursuant to the terms of the applicable Letter
of Credit, except voluntarily by the Bank at its sole option) at any time, the
Bank shall apply the amounts then in the Cash Collateral Account (to the extent
that funds are available therein, including, as and to the extent necessary, the
liquidation of any investments held in the Cash Collateral Account subject to
the provisions of this paragraph), by, first, setting aside in the Cash
Collateral Account (to the extent so available) an amount of funds and
investments (excluding any accrued or expected interest or earnings thereon to
the extent not actually received by the Bank) equal to the Maximum Stated Amount
immediately after such cancellation, expiration or permanent reduction, second,
applying any remaining amounts (if any) to the payment of the outstanding
Obligations, and third, after payment in full of all such Obligations to the
Bank, paying any remaining amounts (if any) to the Borrower.
(d) Except with respect to the Bank's ability to charge
against the Debt Service Fund payments due hereunder, as provided in Sections 2
and 3 hereof (which may be exercised at any time, including without limitation,
prior to the occurrence of a Default or an Event of Default) the Bank shall have
the right, following the occurrence and during the continuance of an Event of
Default, and without notice or demand, and it is specifically authorized hereby,
to set-off, charge and/or debit and apply to any amounts payable under this
Agreement or any other Credit Document, or any other Obligation: (i) any funds
belonging to the Borrower and held by the Bank or any of its Affiliates or the
Participant, (ii) any and all deposits and accounts and/or other property
(including, without limitation, securities) owned by the Borrower or in which it
has an interest (whether general or special, time or demand, matured or
unmatured) which is or at any time may be delivered to, held by, or otherwise be
in the possession of the Bank, or any of its Affiliates, or the Participant, in
any capacity whatsoever, and (iii) any other indebtedness at any time held or
owing by the Bank or any of its Affiliates or the Participant to or for the
credit or account of the Borrower, even if effecting such set-off, charge and/or
debit results in a loss or reduction of interest or the imposition of a penalty
applicable to the early withdrawal of time deposits or otherwise. For such
purpose, each of the Bank and its Affiliates and the Participant shall have, and
the Borrower hereby grants to the Bank and its Affiliates and the Participant, a
first lien on and security interest in such funds, deposits, accounts, property
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and the proceeds thereof. Such right of set-off, charge and/or debit shall exist
whether or not: (i) a draft has been presented or paid under the applicable
Letter of Credit, (ii) the Bank shall have made any demand under this Agreement
or any other Credit Document, (iii) any amounts payable or other obligations
under this Agreement or any other Credit Document are matured or unmatured,
fixed or contingent, liquidated or unliquidated, (iv) the Borrower shall have
furnished sufficient collateral to the Bank, and/or (v) otherwise. In
furtherance of the purposes of this subsection, the Borrower authorizes each of
the Affiliates of the Bank and the Participant, at the request of the Bank and
without notice to the Borrower or any Guarantor, to turn over to the Bank any
property belonging to the Borrower or in which the Borrower has an interest,
including, without limitation, funds and securities, held by such Affiliate or
the Participant for the account of the Borrower and to debit any deposit account
maintained by the Borrower with such Affiliate or the Participant (even if such
deposit account is not then due or there results a loss or reduction of interest
or the imposition of a penalty in accordance with law applicable to the early
withdrawal of time deposits or otherwise), in the amount requested by the Bank
up to any amounts payable under this Agreement and/or any other Obligations to
the Bank, and to pay or transfer such amounts or property to the Bank. The
rights of the Bank under this Subsection are in addition to all other rights and
remedies available to the Bank, including other rights of set-off that the Bank
may have.
(e) Upon the occurrence and during the continuance of any
Event of Default, the Bank shall be entitled to notify the Trustee thereof and,
whether or not it has accelerated any other Obligations hereunder, demand the
acceleration of the maturity of the Bonds pursuant to Sections 10.1(f) and 10.2
of the applicable Indenture and request the Trustee to draw under the Letters of
Credit.
Section 8.3. No Remedy Exclusive. No remedy herein conferred or
reserved to the Bank is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement and the other Credit
Documents or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power occurring upon any default
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Bank to exercise any
remedy reserved to it in this Article, it shall not be necessary to give notice
to any party, other than such notice as may be required in this Article 8. The
rights and remedies of the Bank specified herein are for the sole and exclusive
benefit, use and protection of the Bank and the Bank is entitled, but shall have
no duty or obligation to the Borrower, any Guarantor, the Issuers, the Trustee,
the Bondholders, or any other Person, (a) to exercise or refrain from exercising
any right or remedy reserved to the Bank hereunder or under any other Credit
Document, or (b) to cause the Trustee, the Issuers or any other Person to
exercise or refrain from exercising any right or remedy available to it under
any of the Credit Documents to which it is a party.
Section 8.4. Agreement to Pay Attorneys Fees and Expenses. In the event
the Borrower or any Guarantor shall default under any of the provisions of this
Agreement or any other Credit Document and the Bank shall require and employ
attorneys or incur other expenses for the collection of payments due or to
become due or for the enforcement or performance or observance of any obligation
or agreement on the part of the Borrower herein contained, the Borrower agrees
that it will on demand therefor pay to the Bank the reasonable fees of such
attorneys and such other expenses so incurred by the Bank whether or not suit be
brought.
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Section 8.5. No Additional Waiver Implied by One Waiver. In the event
any agreement contained in this Agreement should be breached by any party and
thereafter waived by any other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
Section 8.6. Additional Rights of the Bank. So long as the Letters of
Credit are in full force and effect, the Bank shall have the sole right and
power to take, make, give or withhold any consent to any amendment, substitution
or release of any of the Bank Mortgage, the Security Agreement, the Guarantor
Security Agreement or the property subject to the lien or interests created
therein and (except for the right of the Issuers or either of them to declare an
event of default and to exercise their other remedies thereunder) to exercise
all rights and remedies provided for herein, in the Indenture, or in the other
Credit Documents with respect to the Collateral.
ARTICLE 9
MISCELLANEOUS
Section 9.1. Indemnity Against Claims. In the exercise of the powers of
the Bank, hereunder, including without limitation the application of moneys, the
investment of funds and disposition of the Project Facilities upon the
occurrence of an Event of Default, neither the Bank nor its directors, officers,
shareholders, employees or agents shall be accountable to the Borrower for any
action taken or omitted by any of them in good faith and with the belief that it
is authorized or within the discretion or rights or powers conferred hereunder
or under the Indentures. The Bank and its directors, officers, shareholders,
employees and agents shall be protected in acting upon any paper or document
believed to be genuine, and any of them may conclusively rely upon the advice of
counsel and may (but need not) require further evidence of any fact or matter
before taking any action. No recourse shall be had by the Borrower for any
claims based hereon or on the Indentures against any member, director, officer,
employee or agent of the Bank alleging personal liability on the part of such
Person unless such claims are based upon the gross negligence or willful
misconduct of such Person. As such, the Borrower shall indemnify and hold
harmless each Indemnified Party against any and all claims, losses, damages or
liabilities, joint and several, to which the Indemnified Parties become subject,
insofar as such losses, claims, damages or liabilities (including all costs,
expenses and reasonable counsel fees incurred in investigating or defending such
claim) (or actions in respect thereof) suffered by any of the Indemnified
Parties caused by, relating to, arising directly or indirectly out of, resulting
from or in any way connected to the Project Facility or the Project or are based
upon any other act or omission in connection with (a) the condition, use,
possession, conduct, management, planning, design, acquisition, construction,
installation, financing or sale of the Project Facility or any part thereof; or
(b) any untrue statement of a material fact contained in information submitted
or to be submitted to the Indemnified Parties by the Borrower with respect to
the transactions contemplated hereby; or (c) any omission of any fact necessary
to be stated therein in order to make such statement to the Indemnified Parties
not misleading or incomplete in any material respect unless the losses, damages
-58-
<PAGE>
or liabilities arise from the gross negligence or willful misconduct of the
Person to be indemnified. In the event any claim is made or action brought
against an Indemnified Party, except for claims or actions brought which arise
from the gross negligence or willful misconduct of any such Person, the
Indemnified Party may direct the Borrower to assume the defense of the claim and
any action brought thereon and pay all reasonable expenses (including attorneys'
fees) incurred therein; or such Indemnified Party may assume the defense of any
such claim or action, the reasonable cost (including attorneys' fees) of which
shall be paid by the Borrower upon written request of the Indemnified Party to
the Borrower, provided, that if the Bank assumes such defense, no settlement of
any such claim or action shall be made without the consent of the Borrower,
which consent shall not be unreasonably withheld. The Borrower may engage its
own counsel at its own cost to participate in the defense of any such action.
The defense of any such claim shall include the taking of all actions necessary
or appropriate thereto. The Borrower shall not be liable for any settlement of
any such action effected without Borrower's consent, but if settled with the
consent of the Borrower, or if there is a final non-appealable judgment for the
claimant on any such action, the Borrower agrees to indemnify and hold harmless
the Indemnified Parties from and against any loss or liability by reason of such
settlement or judgment.
The indemnification provisions of this Section 9.1 shall
survive the termination of this Agreement and the other Credit Documents.
Section 9.2. Severability. If any provision hereof is found by a court
of competent jurisdiction to be prohibited or unenforceable, it shall be
ineffective only to the extent of such prohibition or unenforceability, and such
prohibition or unenforceability shall not invalidate the balance of such
provision to the extent it is not prohibited or unenforceable, nor invalidate
the other provisions hereof, all of which shall be liberally construed in order
to effect the provisions of this Agreement.
Section 9.3. Successors and Assigns.
(a) The provisions of the Credit Documents shall be binding
upon and inure to the benefit of the parties thereto and their respective
successors and permitted assigns, except that the Borrower may not assign any
Letter of Credit, or its rights and obligations under this Agreement and the
other Credit Documents or any of its obligations, liabilities, rights or
benefits hereunder or thereunder without the prior written consent of the Bank,
which the Bank may withhold in its absolute discretion.
(b) Without limiting any other rights of the Bank under
applicable law, the Bank may at any time grant to one or more banks or other
institutions or entities, including but not limited to the Participant Bank,
participating interests in the Letters of Credit issued for the account of the
Borrower under this Agreement.
Subject to the foregoing, this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns, and the terms "Authority," "Council," "Borrower" and
"Trustee" shall, where the context requires, include the respective successors
and assigns of such Persons. No assignment pursuant to this Section shall
release the Borrower from its obligations under this Agreement.
-59-
<PAGE>
Section 9.4. Amendments, Etc. No amendment, modification, termination
or waiver of any provision of this Agreement or the other Credit Documents to
which the Bank is a party or beneficiary, and no consent to any departure there
from by the Borrower or any Guarantor or any other party thereto, shall in any
event be effective unless the same shall be in writing and signed by the Bank
(and such other parties as each such document shall specify) and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower or such
Guarantor in any case shall entitle the Borrower or any Guarantor to any other
or further notice or demand in similar or other circumstances.
Section 9.5. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which shall be deemed to be an original and all of which
(taken together) shall constitute one and the same agreement.
Section 9.6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the Commonwealth of
Pennsylvania (without giving effect to principles of conflicts of law), except
to the extent that the perfection and enforcement of any lien are required to be
governed by the law of the state in which the property subject to such lien is
located.
Section 9.7. Consent to Jurisdiction. Borrower irrevocably appoints
each and every owner and/or officer of Borrower as its attorneys upon whom may
be served, by regular or certified mail at the address set forth in this
Agreement, any notice, process or pleading in any action or proceeding against
it arising out of or in connection with this Agreement or any of the other
Credit Documents; and Borrower hereby consents that any action or proceeding
against it be commenced and maintained in any court within the Commonwealth of
Pennsylvania or in the United States District Court for the Eastern District of
Pennsylvania by service of process on any such owner, partner and/or officer;
and Borrower agrees that the courts of the Commonwealth of Pennsylvania and the
United States District Court for the Eastern District of Pennsylvania shall have
non-exclusive jurisdiction with respect to the subject matter hereof and the
person of Borrower and all collateral securing the obligations of Borrower.
Borrower agrees not to assert any defense to any action or proceeding initiated
by the Bank based upon improper venue or inconvenient forum. Borrower agrees
that any action brought by Borrower shall be commenced and maintained only in a
court in the federal judicial district or county in which the Bank has a place
of business in Pennsylvania.
Section 9.8. Reasonable Consent. Any and all consents required to be
given, pursuant to this Agreement or any of the Credit Documents, by the
Authority, the Bank, or the Trustee shall be based on a reasonable standard
other than when the Trustee is acting upon the direction of any of the parties
pursuant to any of the Credit Documents, except that any consent to any sale,
transfer, other lien or encumbrance on the Collateral shall be in the sole
discretion of the Bank.
-60-
<PAGE>
Section 9.9. Amounts Remaining in Bond Fund. It is agreed by the
parties hereto that any amounts remaining in the Bond Fund, after payment in
full of the Bonds (or provision for payment thereof having been made in
accordance with the provisions of the Indenture) and of the fees, charges and
expenses of the Trustee and the Issuers in accordance with the applicable
Indenture, shall upon release of the Indentures pursuant to Section 14.3
thereof, be paid first by the Trustee to the Bank to the extent of any
unreimbursed drawing under the Letters of Credit, or any other obligations owing
by the Borrower to the Bank under this Agreement and any remaining moneys shall
belong to and be paid to the Borrower by the Trustee as overpayment of the
Loans.
Section 9.10. Receipt of Indenture. The Borrower hereby acknowledges
that it has received an executed copy of the Indentures and is familiar with
their provisions, and agrees that it will take all such actions as are required
or contemplated of it under the Indentures to preserve and protect the rights of
the Trustee and of its Agents and of the Bondholders thereunder and that it will
not take any action which would cause a default thereunder. Any redemption of
Bonds prior to maturity shall be effected as provided in the Indentures. The
Borrower agrees to comply with the terms and conditions of the Indentures.
Section 9.11. Headings. The captions or headings in this Agreement are
for convenience of reference only and shall not control or affect the meaning or
construction of any provision hereof.
Section 9.12. Integration: Entire Agreement. This Agreement and the
other Credit Documents and other instruments and documents to be delivered
hereunder and thereunder, are intended by the parties hereto and thereto to be,
an integrated contract, which together contain the entire understandings of the
parties with respect to the subject matter contained herein. This Agreement and
the other Credit Documents supersede all prior agreements and understandings
between the parties with respect to such subject matter, whether written or
oral.
Section 9.13. Survival of Agreements. All agreements, covenants,
representations and warranties made herein shall survive the delivery of the
Letters of Credit and this Agreement and the respective obligations of the
parties hereto shall remain in full force and effect from the date of execution
and delivery of this Agreement until (i) the date on which the principal or
redemption price of and all interest on the Bonds and any other expenses of the
Issuers with respect to the Bonds shall have been fully paid or provision for
the payment thereof shall have been made pursuant to the Indentures, (ii) the
Borrower shall have fully performed and satisfied all other covenants,
agreements and obligations under this Agreement and the other Credit Documents,
and (iii) the Indentures shall have been released and discharged pursuant to the
terms of such Indentures.
Section 9.14. Addresses for Notices, Etc. All notices requests,
demands, directions and other communications provided for hereunder or under any
other Credit Document shall be sufficient if made in writing and delivered
personally (including by Federal Express or other recognized courier), if mailed
by certified mail, return receipt requested, or if telecopied, to the applicable
party at the addresses indicated below:
-61-
<PAGE>
If to the Authority:
- --------------------
State Industrial Development Authority
401 Adams Avenue
Montgomery, Alabama 36130
Attention: President
Telecopier Number: ________________
If to the Council:
- ------------------
Calhoun County Economic Development Council
Post Office Box 944
[-----------------]
Anniston, Alabama 56202
Attention: Chairman of the Board of Directors
Telecopier Number: ________________
If to the Borrower:
- -------------------
Central Castings Corporation
2660 Old Gadsden Highway
Anniston, Alabama 36206
Attention: Vice President-Finance
Telecopier Number: (205) 238-0387
- - with a duplicate copy to -
Central Sprinkler Corporation
Central Sprinkler Company
Central Sprink, Inc.
451 North Cannon Avenue
Lansdale, Pennsylvania 19446
Attention: Albert T. Sabol, Vice President
Telecopier Number: (215) 362-5385
If to the Bank:
- ---------------
First Fidelity Bank, National Association
123 South Broad Street - PMB 010
Philadelphia, Pennsylvania 19109-1199
Attention: Thomas J. Saunders, Vice President
Telecopier: (215) 985-3719
-62-
<PAGE>
If to the Trustee:
- ------------------
Chemical Bank
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
Attention: Josiana DeSousa
Corporate Trust Administration
Telecopier: (212) 946-6782 or (212) 946-7800
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of the Credit Documents. All notices, requests, demands, directions and other
communications shall (if delivered personally) be effective when delivered, (if
mailed) three (3) Business Days after having been deposited in the mail,
addressed as aforesaid, or (if sent by telecopier) upon receipt of confirmation
of transmission by the sender.
Section 9.15. JUDICIAL PROCEEDINGS; WAIVERS.
(a) EACH PARTY TO THIS REIMBURSEMENT AGREEMENT AGREES THAT ANY
SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED
BY ANY PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY PARTY, ON OR WITH RESPECT
TO THIS REIMBURSEMENT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS, THE
COLLATERAL OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO SHALL
BE TRIED ONLY BY A COURT AND NOT BY A JURY.
(b) THE BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. FURTHER, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES.
(c) THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS
A SPECIFIC AND MATERIAL ASPECT OF THIS REIMBURSEMENT AGREEMENT AND THAT THE BANK
WOULD NOT EXTEND CREDIT IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A
PART OF THIS REIMBURSEMENT AGREEMENT.
-63-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have caused this Agreement to be executed and delivered as of the
date first written above.
ATTEST: CENTRAL CASTINGS CORPORATION
/s/ George D. Pelose By: /s/ Albert T. Sabol
- ----------------------------------- ---------------------------------
George D. Pelose, Asst. Secretary Name: Albert T. Sabol
Title: Vice President
[SEAL]
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION
By: /s/ Thomas J. Saunders
---------------------------------
Name: Thomas J. Saunders
Title: Vice President
ACKNOWLEDGED AND AGREED
this __ day of November, 1995
ATTEST: CENTRAL SPRINKLER CORPORATION
/s/ Thomas J. Saunders By: /s/ Albert T. Sabol
- ------------------------------------- ---------------------------------
Thomas J. Saunders, Asst. Secretary Name: Albert T. Sabol
Title: Vice President
ATTEST: CENTRAL SPRINKLER COMPANY
/s/ Thomas J. Saunders By: /s/ Albert T. Sabol
- ------------------------------------- ---------------------------------
Thomas J. Saunders, Asst. Secretary Name: Albert T. Sabol
Title: Vice President
ATTEST: CENTRAL SPRINK INC.
/s/ Thomas J. Saunders By: /s/ Albert T. Sabol
- ------------------------------------- ---------------------------------
Thomas J. Saunders, Asst. Secretary Name: Albert T. Sabol
Title: Vice President
-64-
<PAGE>
<PAGE>
Exhibit 11
CENTRAL SPRINKLER CORPORATION
EARNINGS PER COMMON SHARE
(Amounts in thousands, except per share amounts)
Year Ended Year Ended Year Ended
October 31, October 31, October 31,
1995 1994 1993
---------- ---------- -----------
Income before cumulative effect
of accounting change $8,458 $3,780 $2,376
Cumulative effect of accounting
change to SFAS No. 109-
Income Taxes - 238 -
------ ------ ------
Net income $8,458 $4,018 $2,376
====== ====== ======
Average number of common shares
outstanding 3,902 4,953 4,677
Adjustment to exclude average
unallocated common shares in ESOP (672) - -
Adjustment for assumed conversion
of stock options 152 51 33
------ ------ ------
Average number of common shares 3,382 5,004 4,710
====== ====== ======
Earnings per common share:
Before cumulative effect of
accounting change $2.50 $.75 $.50
Cumulative effect of accounting
change for income taxes - .05 -
------ ------ ------
After cumulative effect of
accounting change $2.50 $.80 $.50
====== ====== ======
<PAGE>
Exhibit 21
CENTRAL SPRINKLER CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Names
Jurisdiction of Under Which
Name Organization Doing Business
- ------------------------ --------------- --------------
CSC Finance Company Delaware Corporate Name
CSC Investment Company Delaware Corporate Name
Central Sprinkler Company Pennsylvania Corporate Name
Spraysafe Automatic
Sprinklers Limited United Kingdom Corporate Name
Central Sprink Inc. California Corporate Name
Central Castings Corporation Alabama Corporate Name
Central CPVC Corporation Alabama Corporate Name
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed Form S-8
Registration Statement File No. 33-30092.
Arthur Andersen LLP
Philadelphia, Pa.
January 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000766041
<NAME> CENTRAL SPRINKLER CORPORATION
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<CASH> 2,205
<SECURITIES> 10,079
<RECEIVABLES> 35,499
<ALLOWANCES> 3,813
<INVENTORY> 35,955
<CURRENT-ASSETS> 85,433
<PP&E> 43,593
<DEPRECIATION> 15,567
<TOTAL-ASSETS> 117,360
<CURRENT-LIABILITIES> 38,141
<BONDS> 27,516
0
0
<COMMON> 55
<OTHER-SE> 49,495
<TOTAL-LIABILITY-AND-EQUITY> 117,360
<SALES> 158,849
<TOTAL-REVENUES> 158,849
<CGS> 107,165
<TOTAL-COSTS> 107,165
<OTHER-EXPENSES> 36,379
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,902
<INCOME-PRETAX> 13,403
<INCOME-TAX> 4,945
<INCOME-CONTINUING> 8,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,458
<EPS-PRIMARY> 2.50
<EPS-DILUTED> 2.50
</TABLE>
