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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13940
CENTRAL SPRINKLER CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2328106
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
451 North Cannon Avenue, Lansdale, PA 19446
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(Address of principal executive offices)
(Zip Code)
(215) 362-0700
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 11, 1997
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Common Stock, $.01 Par Value 3,845,637
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTRAL SPRINKLER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
January 31, October 31,
1997 1996
--------- -----------
(Amounts in thousands
except per share)
ASSETS
Current Assets:
Cash and cash equivalents $ 922 $ 2,884
Short-term investments 13,367 12,466
Accounts receivable, less allowance
for doubtful receivables of $4,996
in 1997 and $4,622 in 1996 37,743 38,518
Inventories 47,585 43,414
Deferred income taxes 7,548 7,245
Prepaid expenses and other assets 586 610
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Total current assets 107,751 105,137
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Property, Plant and Equipment 63,545 60,166
Less - Accumulated depreciation (20,252) (18,807)
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43,293 41,359
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Goodwill, less accumulated amortization of
$3,326 in 1997 and $3,263 in 1996 2,696 2,759
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Other Assets 1,679 1,663
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$ 155,419 $ 150,918
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 39,549 $ 34,390
Current portion of long-term debt 3,847 3,850
Accounts payable 19,697 19,993
Accrued expenses 8,844 10,388
Accrued income taxes 1,665 994
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Total current liabilities 73,602 69,615
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Long-Term Debt 23,582 24,674
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Other Noncurrent Liabilities 419 448
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Deferred Income Taxes 1,910 1,789
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Shareholders' Equity:
Common stock, $.01 par value; shares
authorized - 15,000; issued -
5,568 in 1997 and 5,474 in 1996 56 55
Additional paid-in capital 30,686 29,763
Retained earnings 48,001 46,702
Cumulative translation adjustments 1 (7)
Deferred cost - Employee Stock Ownership
Plan ("ESOP") (5,929) (6,018)
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72,815 70,495
Less - Common stock in treasury, at
cost - 1,722 shares in 1997 and
1,680 shares in 1996 (16,909) (16,103)
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55,906 54,392
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$ 155,419 $ 150,918
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See accompanying notes to financial statements
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CENTRAL SPRINKLER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
January 31,
1997 1996
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(Amounts in thousands,
except per share)
Net Sales $ 48,180 $ 40,750
Cost of Sales 33,095 28,469
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Gross profit 15,085 12,281
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Operating Expenses:
Selling, general
and administrative 10,519 8,843
Research and development 1,510 1,210
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12,029 10,053
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Operating income 3,056 2,228
Interest Expense (Income):
Interest expense 1,111 672
Interest income (124) (127)
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987 545
-------- --------
Income before income taxes 2,069 1,683
Income Taxes 770 642
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Net Income $ 1,299 $ 1,041
======== ========
Net Income Per Common Share $ .39 $ .31
======== ========
See accompanying notes to financial statements
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CENTRAL SPRINKLER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
January 31,
1997 1996
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(Amounts in thousands)
Operating activities:
Net income $ 1,299 $ 1,041
Noncash items included in income:
Depreciation and amortization 1,508 1,001
Deferred income taxes (182) (161)
Deferred costs 172 259
Decrease (increase) in -
Accounts receivable, net 775 1,155
Inventories (4,171) (2,894)
Prepaid expenses and other assets 24 136
Increase (decrease) in -
Accounts payable (296) (1,493)
Accrued expenses (1,544) (548)
Accrued income taxes 671 292
-------- --------
Cash used for operating activities (1,744) (1,212)
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Investing activities:
Acquisition of property, plant and equipment (3,379) (4,701)
Sales of short-term investments 1,800 3,316
Purchases of short-term investments (2,701) (3,844)
Other long-term assets (16) (373)
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Cash used for investing activities (4,296) (5,602)
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Financing activities:
Short-term borrowings, net 5,159 (1,533)
Proceeds from long-term debt -- 11,000
Proceeds from exercised stock options 6 34
Tax benefits from exercised stock options -- 12
Repayments of long-term debt (1,095) (1,105)
Other - net 8 (14)
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Cash provided by financing activities 4,078 8,394
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(Decrease) increase in cash and cash equivalents (1,962) 1,580
Cash and cash equivalents at beginning of period 2,884 2,025
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Cash and cash equivalents at end of period $ 922 $ 3,605
======== ========
See accompanying notes to financial statements.
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CENTRAL SPRINKLER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
Three Months Ended
January 31,
1997 1996
---- ----
(Amounts in thousands)
Supplemental disclosures of cash flow
information:-
Cash paid (received) during the period for:
Interest expense $ 864 $ 839
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Income taxes $ 281 $ 511
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Interest income $(125) $ (165)
===== ======
See accompanying notes to financial statements.
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CENTRAL SPRINKLER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share)
(1) Basis of Presentation:
The condensed financial statements included herein have been prepared
by the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These statements include all adjustments that, in the
opinion of management, are necessary to provide a fair statement of the results
for the periods covered. These financial statements should be read in
conjunction with the audited financial statements and the notes thereto included
in the Company's Form 10-K for the year ended October 31, 1996. The results of
operations for the interim periods presented are not necessarily indicative of
the results for the full year.
(2) Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist of the following:
January 31, October 31,
1997 1996
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Raw Materials and Work in Process $14,506 $12,957
Finished Goods 33,079 30,457
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$47,585 $43,414
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(3) Earnings Per Common Share:
Earnings per common share are computed using the weighted average
number of shares of common stock and commmon stock equivalents outstanding
(dilutive stock options) during the period (3,344 and 3,352 for the three month
periods ended January 31, 1997 and 1996, respectively). Unreleased shares of the
Company's stock in the ESOP are excluded from the average number of common
shares outstanding when computing earnings per share. In the first quarter of
fiscal 1997 and fiscal 1996, 618 and 654 unreleased ESOP shares were excluded
from the average number of common shares outstanding.
(4) Unusual Non-Recurring Omega TM charge
In the fourth quarter of 1996, the Company recorded an unusual
non-recurring charge in cost of sales of $3,750 ($2,362 net of
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tax or $.72 per share) for the estimated costs to be incurred by the Company in
connection with the Omega TM installation problems. In fiscal 1996, the Company
became aware of installation problems in certain steel pipe systems utilizing
Omega TM sprinklers. The addition of stop-leak products or the presence of
excessive hydrocarbons has been found in certain circumstances to impair the
operation of such sprinklers. In order to assess the extent of the problems, the
Company has strongly recommended that a sampling of Omega TM sprinklers from
each such installed system be returned to the Company for testing. Based on the
results of the tests, the Company will review each situation with the building
owner and develop an appropriate action plan, as needed. The Company did not
install such sprinklers and installation of the sprinklers is the responsibility
of the building owner. However, the Company's primary concern is to offer the
finest possible fire protection to building owners while working within its
sales and warranty policy to maintain customer goodwill. The Company continues
to monitor the results of the tests and costs incurred.
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CENTRAL SPRINKLER CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
(Amounts in thousands, except per share)
RESULTS OF OPERATIONS
Net Sales. Net sales for the first quarter of fiscal 1997 increased 18.2% to
$48,180. Such sales were $7,430 greater than the $40,750 recorded in the first
quarter of fiscal 1996. The new construction market and the retrofit of existing
buildings drive the worldwide demand for the Company's fire sprinklers and
related products. The growth in sales in the first fiscal quarter of 1997 from
the comparable period in 1996 is due to a continuing strong market demand for
fire sprinkler products, the strong market share held by the Company and unit
sales increases in several fire sprinkler system products. The Company's
continuing programs to develop and expand production and marketing of products
have continued to increase sales. The glass bulb fire sprinkler models continue
to lead the Company's sprinkler sales gains. The Company also experienced strong
sales gains in valves, CPVC pipe and fittings and grooved fittings. Sales
increases were realized throughout the U.S. and in international markets. The
Company continues to experience more competitive conditions in the sprinkler
market through increased price competition which has depressed sales prices. The
Company's sales level in the first quarter of fiscal 1996 was unfavorably
impacted by harsher weather conditions in many parts of the
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United States which slowed construction activity and demand for Company
products. Sales were also unfavorably impacted in the first quarter of 1996 by
construction and expansion delays limiting production at the Company's grooved
fittings facility.
Cost of Sales and Gross Profit. Cost of sales, in terms of dollars of expense,
for the first quarter of fiscal 1997 increased 16.2% to $33,095. Cost of sales
were $4,626 greater than the $28,469 in the same fiscal 1996 quarter. The
increase in cost of sales is due to increased costs of manufacturing related to
the higher sales volume. The Company's cost of sales for the first quarter of
fiscal 1997 was 68.7% of net sales compared to 69.9% of net sales for the first
quarter of fiscal 1996. This resulted in a gross margin percentage of 31.3% in
the first quarter of fiscal 1997 compared to 30.1% in the first fiscal quarter
of 1996. The primary reason for the increase in the gross profit margin
percentage was the increased levels of production at the grooved fittings
facility in Alabama as compared to a virtual shut-down of the manufacturing
facility in the first fiscal quarter of 1996 due to its reconstruction and
expansion. The increased production levels reduced the unabsorbed fixed overhead
costs in the first quarter of fiscal 1997 as compared to the same period of the
prior year. The fiscal 1997 first quarter gross margin percentage was negatively
impacted by lower sales prices due to increased price competition. Also
impacting the gross margin percentage were increased costs of manufacturing,
primarily raw materials and labor.
Operating Expenses. Operating expenses for the first quarter of fiscal 1997
increased 19.7% from the first quarter of fiscal 1996. Total operating expenses
increased $1,976 to $12,029 for the first quarter of fiscal 1997 compared to
$10,053 for the same period for fiscal 1996. Operating expenses were 25.0% of
net sales in the first fiscal quarter of 1997 as compared to 24.7% in the same
period in fiscal 1996. Selling, general and administrative expenses increased
19.0%, or $1,676, from the first fiscal quarter of 1996. The primary increase in
selling, general and administrative expenses were selling and distribution
expenses which increased 27.2%, or $1,742, from the first quarter of fiscal
1996. The higher expenses are due to the increase in sales volume and the
expansion of distribution operations to better serve existing and new customers
in the U.S. and internationally with expanded product lines. The Company also
opened new sales locations in Hong Kong and China late in fiscal 1996. General
and administrative expenses in the first fiscal period of 1997 decreased 2.7%,
or $66, from the comparable period in fiscal 1996. Legal costs were $263 lower
in the first fiscal quarter of 1997 from the comparable period in 1996 primarily
due to significant costs incurred to protect patents on several products in
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the prior year period. Research and development expenses increased 24.8%, or
$300, to $1,510 in the first fiscal quarter of 1997 as compared to the same
period in fiscal 1996. The Company continues its high degree of emphasis on
research and development in the development of innovative new products and to
improve and expand product lines. The increase is due to higher personnel and
outside expenses for development and testing.
Interest Expense (Income). Interest expense of $1,111 was incurred in the first
fiscal quarter of 1997 compared to interest expense of $672 in the comparable
quarter of fiscal 1996. The higher interest expense was due to the overall
increase in debt. Short and long-term debt totalled $66,978 at January 31, 1997
as compared to $53,753 at January 31, 1996. The additional debt was required to
finance the increased growth in the Company's business, principally in
manufacturing capital expenditures and increased accounts receivable and
inventories. The Company capitalized $180 of interest cost in the first quarter
of fiscal 1996. No interest was capitalized in the first fiscal quarter of 1997.
Interest income for the three months ended January 31, 1997 and 1996 was $124
and $127, respectively. A higher average investment balance in fiscal 1997 was
offset by lower interest income rates.
Income Taxes. The Company's effective tax rate for the first quarter of fiscal
1997 was 37.2% compared to 38.1% in the comparable period of 1996. The decrease
in the overall effective income tax rate includes an increase in anticipated
federal income tax credits.
Seasonal Aspects of Business. The Company's sales are affected by seasonal
factors and the weather as well as the level of new construction activity,
remodeling and retrofitting of older properties in the industrial, commercial,
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 the warmer spring and summer months, the demand for
sprinkler system components tends to be greater during the summer and fall than
during other seasons.
FINANCIAL CONDITION
January 31, 1997 Compared to October 31, 1996
Cash, Cash Equivalents and Short-Term Investments. Cash, cash equivalents and
short-term investments were $14,289 as of January 31, 1997 as compared to
$15,350 at October 31, 1996. This decrease was a result of normal fluctuation in
operations.
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Inventories. Inventories were $47,585 at January 31, 1997 as compared to $43,414
at October 31, 1996. The $4,171 increase in inventories was comprised of $1,549
in raw materials and work in process and an increase of $2,622 in finished
goods. The increase in raw materials and work in process was primarily due to
increased material requirements to meet the product demand. The increase in
finished goods was also due to an anticipation of a continued strong demand for
fire sprinkler system products. In particular, the Company is producing and
stocking new lines of grooved fittings products.
Property, Plant and Equipment. The Company's property, plant and equipment rose
by $3,379 to $63,545 at January 31, 1997. The increase is due to expanding
manufacturing capabilities for fire sprinklers and associated components,
grooved fittings product lines and the ongoing construction of a Company owned
manufacturing facility for CPVC plastic pipe and fittings in Huntsville,
Alabama.
Total Debt. The Company's total debt increased to $66,978 at January 31, 1997
compared to $62,914 at October 31, 1996. The additional borrowings of $4,064
were used primarily to fund capital expenditures and finance increased working
capital needs as a result of the Company's growth. The funds were borrowed under
the Company's lines of credit from banks and under a new construction loan
obtained in December 1996. The ongoing construction of the Company owned
manufacturing facility for the production of CPVC plastic pipe and fittings has
been financed through the new short-term construction loan. The Company's intent
is to re-finance this short-term loan with long-term debt upon completion of the
facility.
Liquidity and Capital Resources. The Company's primary sources of long-term and
short-term liquidity are its current financial resources, projected cash flow
from operations and its borrowing capacity. The Company believes that these
sources are sufficient to fund the programs necessary for future growth and
expansion. In the first fiscal quarter of 1997, the available borrowings under
the Company's lines of credit was increased by $5,000. At January 31, 1997, the
Company has approximately $5,200 of available borrowing capacity under its lines
of credit.
Cash used for operating activities in the first quarter of fiscal 1997 was
$1,744 as compared to $1,212 in the same period of 1996. Net income plus
non-cash items generated $2,797 of cash in the first fiscal quarter of 1997 as
compared to $2,140 in the first fiscal quarter of 1996. The increase was due to
higher net income and increased depreciation expense. Cash used for working
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capital purposes increased to $4,541 in the first fiscal quarter of 1997 from
$3,352 in the same period of 1996 primarily due to increased levels of
inventories. Increases in sales volume will continue to require the use of
operating cash flow to support increased levels of working capital.
Cash used in investing activities was $4,296 in the first fiscal quarter of 1997
as compared to $5,602 in the comparable 1996 period. The primary use of cash was
for the acquisition of property, plant and equipment during these periods. These
capital expenditures were primarily for buildings, building improvements and
machinery and equipment to expand the manufacturing capacity and improve the
operations for the Company's various product lines. The capital expenditures in
the first fiscal quarter of 1997 included the ongoing construction of the
Company's CPVC plastic pipe and fittings facility. The capital expenditures in
the first fiscal quarter of 1996 included the reconstruction and expansion of
the grooved fittings facility in Alabama. In the first fiscal quarter of 1997, a
net amount of $901 was used to purchase additional short-term investments.
Cash provided by financing activities in the first fiscal quarter of 1997 was
$4,078 as compared to $8,394 in the comparable prior year period. The primary
source of cash in the first fiscal quarter of 1997 was additional borrowings of
$5,159 under the Company's lines of credit and the new construction loan. In the
first fiscal quarter of 1996, short-term borrowings decreased by $1,533 as a
result of the Company's issuance of long-term debt. In November 1995, the
Company received proceeds of $11,000 from the issuance of Industrial Revenue
Bonds ("IRB's"). At October 31, 1995, $11,000 of short-term borrowings had been
classified as long-term debt based upon the issuance of these IRB's. The
borrowings in the current and prior fiscal quarters were needed to finance the
increased growth in the Company's business, including capital expenditures and
working capital.
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 has made certain commitments to build
a Company owned manufacturing facility for CPVC pipe and fittings components in
Huntsville, Alabama. It is expected that the capital expenditures for this
facility and equipment will aggregate $7,500 of which $2,200 was incurred as of
January 31, 1997. It is expected that $1,300 will be incurred in the remainder
of fiscal 1997 and $4,000 is expected to be incurred in fiscal 1998. It is
anticipated that the first phase
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of the facility will be completed and in operation in the second fiscal quarter
of 1997.
The Company's cash, cash equivalents and short-term investments, along with the
Company's borrowing capacity, provide adequate liquidity to meet the Company's
obligations and to fund programs necessary for future growth and expansion.
In the fourth quarter of fiscal 1996, the Company recorded an unusual
non-recurring charge of $3,750 resulting from the program announced by the
Company to encourage customers to test and possibly replace some Omega TM
sprinklers that have been exposed to harmful substances in certain installations
(See Footnote #4 of the Notes to Consoliated Financial Statements).
This document contains certain forward-looking statements that are subject to
risks and uncertainties. Forward-looking statements include certain information
relating to general business strategy, the potential market and uses for the
Company's sprinklers and other products, expansion plans, the effects of
competition on the structure of the markets in which the Company competes,
operating performance and liquidity, as well as information contained elsewhere
in this document where statements are preceded by, followed by or include the
words "believes," "expects," "estimates," "anticipates" or similar expressions.
For such statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Actual events or results may differ materially from those discussed
in forward-looking statments as a result of various factors, including without
limitation, those discussed elsewhere in this document.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following data summarizes the Annual Meeting highlights:
(a) The Annual Meeting of Shareholders of the Company was held at the
Company's offices in Lansdale, Pennsylvania on March 7, 1997.
Proxies for the Annual Meeting were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended.
(b) At the Annual Meeting, shareholders re-elected the board of
directors to one-year terms and until their successors are elected
and qualified.
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(c) The shareholders approved the Central Sprinkler Corporation 1996
Equity Compensation Plan.
Number of Votes
For Against Abstain
--------- ------- -------
2,032,199 885,972 4,012
(d) The shareholders ratified the appointment of Arthur Andersen LLP as
indeptndent auditors for the Company for fiscal year ending October 31,
1997.
Number of Votes
For Against Abstain
--------- ------- -------
3,338,838 5,212 11,774
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are filed as an Exhibit and attached as follows:
10 (a) Amendments to Term Loan Agreement between Central Sprinkler
Company and First Union National Bank, including exhibits and
amendments thereto (pages 16-23 in the sequential numbering system)
10 (b) Amendments to Term Loan Agreement between Central Sprinkler
Company and CoreStates Bank, N.A., including exhibits and
amendments thereto (pages 24-32 in the sequential numbering system)
10 (c) Amendments to Letter of Credit and Reimbursement Agreement
between Central Sprinkler Company and First Union National Bank,
including exhibits and amendments thereto (pages 33-40 in the
sequential numbering system)
11 -- Computation of Earnings Per Common Share (page 41 in the
sequential numbering system)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended January
31, 1997.
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SIGNATURES
Pursuant to the requirements 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
-----------------------------------
(Registrant)
/s/ George G. Meyer
-----------------------------------
George G. Meyer
Chief Executive Officer
DATE: March 14, 1997
/s/ Albert T. Sabol
-----------------------------------
Albert T. Sabol
Vice President-Finance
(Principal Financial and
Accounting Officer)
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Exhibit 10(a)
FOURTH AMENDMENT TO LOAN AGREEMENT
This FOURTH AMENDMENT TO LOAN AGREEMENT (the "Fourth
Amendment"), dated as of January 27, 1997, and effective as of October 31, 1996,
is by and among FIRST UNION NATIONAL Bank, successor to FIRST FIDELITY BANK,
N.A., a national banking association with offices located at 123 South Broad
Street, Philadelphia, PA 19109 (the "Bank"), CENTRAL SPRINKLER COMPANY, a
Pennsylvania corporation with offices located at 451 North Cannon Avenue,
Lansdale, PA 19446 (the "Borrower"), CENTRAL SPRINKLER CORPORATION, a
Pennsylvania corporation with offices located at 451 North Cannon Avenue,
Lansdale, PA 19446 ("Corporation") and CENTRAL CPVC CORPORATION, an Alabama
corporation with offices located at 3415 Stanwood Boulevard, Huntsville, AL
35811 ("CPVC", and together with the Corporation, the "Guarantors", and together
with the Borrower, the "Obligors").
Background
A. The Bank, Central Sprink, Inc. (formerly, a California corporation
which has been merged into Central Castings Corporation, an Alabama corporation
and a subsidiary of Borrower ("Castings")), the Corporation and the Borrower
entered into that certain loan agreement, dated as of April 15, 1994 (as amended
from time to time, including without limitation, by this Fourth Amendment, 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 (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 (as amended, extended, substituted or replaced
from time to time, the "Note"), in favor of the Bank in the original principal
amount of $10,000,000.
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".
F. Since the date of the last amendment to the Agreement, Sprink has
merged into Castings and CPVC and Central Sprinkler Export Corporation were
formed as subsidiaries of Borrower.
G. The Bank, the Borrower, and the Guarantors, pursuant to the terms
hereof, wish to amend certain of the terms of the Loan Documents.
<PAGE>
NOW, THEREFORE, incorporating the foregoing Background herein by
reference and for other good and valuable consideration, the receipt and legal
sufficiency of which are 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 respective meanings ascribed to such terms in
the Loan Agreement.
2. Amendments.
a. Each of the following defined terms
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, tax deferrals 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 secured such bonds, shall be used for purposes of
calculating Consolidated Funded Indebtedness.
"Guarantor" means, individually, and "Guarantors"
means, collectively, jointly and severally, Central Sprinkler
Corporation and CPVC;
"Guaranty" means, individually, and "Guaranties"
means, collectively (i) the Guaranty and Suretyship Agreements
dated as of April 15, 1994, executed and delivered by each
Original Guarantor in favor of the Bank, substantially in the
form of Exhibit B hereto, and (ii) the Guaranty and Suretyship
Agreement, in form and substance satisfactory to the Bank,
dated as of January 27, 1997, executed and delivered by CPVC
in favor of the Bank;
b. Each of the following additional definitions is
hereby added to Section 1.01 of the Loan Agreement to read in its entirety as
follows:
"CPVC" means Central CPVC Corporation, an Alabama
corporation.
"Export" means Central Sprinkler Export Corporation,
a Barbados corporation.
<PAGE>
"Fourth Amendment" means the Fourth Amendment to Loan
Agreement dated as of January 27, 1997, by and between the
Bank, Borrower, and Guarantors.
"Fourth Amendment Documents" means collectively, the
Fourth Amendment, the Guaranties executed and delivered
pursuant to Paragraph 6(a) of the Fourth Amendment, and all
other agreements, documents, instruments and writings required
pursuant to or delivered in connection with the Fourth
Amendment.
"Original Guarantor" means, individually, and
"Original Guarantors" means collectively, jointly, and
severally, Central Sprinkler Corporation and Central Sprink,
Inc.
c. Section 5.11 of the Loan Agreement is
hereby amended by substituting the following for clause (b) thereof:
(b) Liens (i) in existence on the date of, and disclosed in
the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1993, or otherwise disclosed to the Bank in
writing on or prior to April 15, 1994, all as listed and
described on Schedule 5.11 attached hereto and (ii) in
existence on the date of the Fourth Amendment or contemplated
in connection with the financing of CPVC's new plant and
machinery, as listed and described on Schedule A to the Fourth
Amendment, relating to the following: (A) Central Sprinkler
Company indebtedness to CoreStates Bank, N.A., in the original
principal amount of $688,000, (B) CPVC indebtedness to
CoreStates Bank, N.A., in a principal amount of up to
$7,500,000, or any refinancing thereof, whether such
refinancing is with CoreStates Bank, N.A., or with another
lender, in any form whatsoever, including without limitation,
a bond issue, and (C) Spraysafe's indebtedness to Royal Bank
of Scotland in the original principal amount of $1,110,000;
provided however, that such Liens permitted hereunder shall
not include the extension thereof to other property, but shall
include those of such Liens that may be renewed or maintained
in effect to secure indebtedness that is renewed, extended or
refinanced in accordance with Section 5.12(a).
d. Section 5.12 of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:
Section 5.12. Neither the Company nor any Guarantor will, or
will permit any Subsidiary 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:
(a) existing indebtedness listed and described on
Schedule 5.12 attached hereto and the indebtedness listed on
Schedule A attached to the Fourth Amendment and renewals,
extensions and refinancings thereof, provided that the
effective rate of amortization thereof is not increased by any
such renewal, extension or refinancing and any such renewal,
extension or refinancing shall not be on terms less favorable
to the Company and the Guarantors than those provided in the
existing agreements for such indebtedness;
(b) indebtedness to the Bank;
<PAGE>
(c) indebtedness subordinated to the indebtedness
evidenced by the Loan Documents on terms and conditions
satisfactory to the Bank;
(d) indebtedness arising from purchase money
mortgages or capital leases for equipment financing;
(e) acquisition indebtedness provided by the seller
in any transaction, provided that such indebtedness is
unsecured and is treated as current debt for purposes of
compliance with the covenants contained in this Agreement and
none of the Company and the Guarantors makes any covenant
(other than to repay such indebtedness) in incurring such
indebtedness;
(f) additional secured indebtedness, provided that
such indebtedness shall not exceed $3,000,000 in the aggregate
at any time ("Additional Secured Indebtedness");
(g) indebtedness incurred as a result of a Second
CoreStates Loan; and
(h) indebtedness under existing unsecured lines of
credit, provided that such indebtedness shall not exceed
$45,000,000 in the aggregate at any time, and
(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 and restated in its entirety to read as follows:
Section 5.13. 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 prior written consent of the Bank, except that the
Company and the Guarantors may incur, create or permit to
exist the following:
(a) the existing guarantees listed and
described on Schedule 5.13 attached hereto and the
additional guarantees listed and described on
Schedule A attached to the Fourth Amendment, as such
guarantees may be extended or renewed in connection
with the renewal, extension or refinancing of
indebtedness in accordance with Section 5.12(a);
(b) by endorsement of negotiable instruments
for deposit in the normal course of business;
(c) guarantees issued in favor of the Bank;
<PAGE>
(d) guarantees issued by either or both of
the Guarantors in favor of CoreStates Bank, N.A. in
connection with a Second CoreStates Loan; and
(e) additional unsecured guarantees for
indebtedness, provided that the amount of
indebtedness guaranteed shall not exceed $3,500,000
in the aggregate at any time; and
(f) guarantees of the indebtedness permitted
pursuant to Section 5.12(i) hereof.
f. Sections 5.15 through 5.18 of the Loan Agreement
are hereby amended and restated in their entirety to read as follows:
Section 5.15. The Parent and its consolidated Subsidiaries
will maintain at all times, from and after October 31, 1996, a
consolidated Tangible Net Worth of at least $41,000,000, to be
tested on a quarterly basis in connection with the delivery of
financial statements pursuant to Section 5.01.
Section 5.16. The Parent and its consolidated Subsidiaries
will maintain at all times, a ratio of consolidated current
assets to consolidated current liabilities (a) not less than
1.40 to 1.0, from October 31, 1996 through October 30, 1997,
and (b) not less than 1.75 to 1.0, from and after October 31,
1997, to be tested on a quarterly basis in connection with the
delivery of financial statements pursuant to Section 5.01.
Section 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 (x) not less than 0.69 to 1.0, from October 31,
1996 through October 30, 1997, and (y) not less than 0.87 to
1.0, from and after October 31, 1997, 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.
Section 5.18. The Parent and its consolidated Subsidiaries
will maintain at all times, a ratio of (a) Consolidated Funded
Indebtedness, to (b) consolidated Tangible Net Worth (i) not
greater than 1.37 to 1.0, from October 31, 1996 through
October 30, 1997, and (ii) not greater than 1.2 to 1.0, from
and after October 31, 1997, to be tested on a quarterly basis
in connection with the delivery of financial statements
pursuant to Section 5.0l."
3. Conditions Precedent. The effectiveness of this
Fourth Amendment and the Bank's obligations hereunder are conditioned upon the
satisfaction of the following conditions precedent:
a. The Obligors shall have delivered to the Bank this
Fourth Amendment, 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 Fourth Amendment 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.
c. The Obligors shall have executed and delivered to
the Bank such other documents, instruments and agreements as the Bank may
reasonably request.
<PAGE>
4. Representations and Warranties. In order to induce the Bank
to enter into this Fourth Amendment, 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 Fourth
Amendment and after giving effect hereto, no Event of Default, or event which,
with the passage of time, the giving of notice, or both, would be or become an
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
Fourth Amendment 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 Fourth Amendment 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 Fourth Amendment 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
Fourth Amendment 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 Fourth Amendment 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.
5. Consents. Subject to, and conditioned upon the Obligors'
compliance with the provisions of Paragraph 7 hereof, the Bank hereby
consents to the following:
a. the merger of Sprink into Castings, which consent
is granted pursuant to Sections 5.03 and 5.14(d) of the Loan Agreement;
b. the creation of CPVC and Export as wholly-owned
subsidiaries of the Borrower, which consent is granted pursuant to Section 5.14
of the Loan Agreement;
c. the creation of additional liens disclosed on
Schedule A hereto, which consent is granted pursuant to Section 5.11 of the Loan
Agreement; and
d. the incurrence of the additional indebtedness
identified on Schedule A hereto, which consent is granted pursuant to Section
5.12 of the Loan Agreement; and
e. the guaranty by Borrower or Guarantors of the
additional indebtedness identified on Schedule A hereto, which consent is
granted pursuant to Section 5.13 of the Loan Agreement.
<PAGE>
6. Waivers. Subject to, and conditioned upon the Obligors'
compliance with the provisions of Paragraph 7 hereof, the Bank hereby waives the
Event of Default under Section 6.01(g) of the Loan Agreement resulting from the
merger of Sprink into Castings.
7. Delivery of Additional Agreements and Instruments. Obligors
covenant and agree that, within ten (10) days after the date hereof, they will
deliver or will cause to be delivered to the Bank the Guaranty Agreement by CPVC
in favor of the Bank, each in form and substance satisfactory to the Bank.
8. 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.
9. Confirmation of Guaranties. Each of the Original Guarantors
(other than Sprink) 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.
10. Binding Effect. This Fourth Amendment 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 Fourth
Amendment 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.
11. Counterparts: Effectiveness. This Fourth Amendment 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
Fourth Amendment 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.
12. Amendment and Waiver. No amendment or modification of this
Fourth Amendment, 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.
13. Governing Law. This Fourth Amendment shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Pennsylvania without reference to conflict of laws principles.
14. Severability. Any provision of this Fourth Amendment 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 Fourth Amendment are
declared to be severable.
15. Judicial Proceedings. Each party to this Fourth Amendment
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 Fourth Amendment, the documents, instruments
<PAGE>
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 Fourth AMENDMENT AND THAT THE BANK WOULD
NOT ENTER INTO THIS Fourth AMENDMENT IF THE WAIVERS SET FORTH IN THIS SECTION
WERE NOT A PART OF THIS Fourth AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed and delivered as of the day and year first above
written.
ATTEST: CENTRAL SPRINKLER COMPANY
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- ---------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL SPRINKLER CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
------------------- --------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL CPVC CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- --------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
FIRST UNION NATIONAL BANK
By: /s/ Suzanne S. Storm
---------------------
Name: Suzanne S. Storm
Title: Senior Vice President
<PAGE>
Exhibit 10(b)
FIFTH AMENDMENT TO 1994 TERM LOAN AGREEMENT
This FIFTH AMENDMENT to 1994 TERM LOAN AGREEMENT ("Amendment"), dated
as of October 31, 1996, is by and among CENTRAL SPRINKLER COMPANY, a
Pennsylvania corporation, as the Company (the "Company"), CENTRAL SPRINKLER
CORPORATION, a Pennsylvania corporation, and CENTRAL CASTINGS CORPORATION, an
Alabama corporation, successor by merger with CENTRAL SPRINK, INC. and CENTRAL
CPVC CORPORATION, an Alabama corporation ("CPVC") as the guarantors
(collectively the "Guarantors") (hereinafter, Company and Guarantors will be
collectively referred to as the "Consolidated Corporations"), 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, a Second Amendment to and Consent
Under 1994 Term Loan Agreement dated as of October 25, 1994 and a Third
Amendment to 1994 Term Loan Agreement dated as of March 31, 1995 and a Fourth
Amendment to 1994 Term Loan Agreement dated as of October 31, 1995 (said Letter
Agreement, as so amended, the "Agreement") pursuant to which the Bank has made a
$10,000,000 term loan to the Company guaranteed by each Guarantor.
B. Since the date of the Fourth Amendment to 1994 Term Loan Agreement,
CPVC and Central Sprinkler Export Company, a Barbados Corporation ("Export")
were formed as subsidiaries of Borrower and CPVC is an additional guarantor of
the Agreement. In addition, Central Sprink, Inc., a California corporation, has
merged with Central Castings Corporation.
<PAGE>
C. The Company, the Guarantors and the Bank desire to amend the
Agreement all as more particularly hereinafter set forth.
D. All capitalized terms used herein and not otherwise defined herein
shall have the meaning assigned to them in the Agreement.
THEREFORE, in consideration of the premises contained herein and
intending to be legally bound, the Company, the Guarantors, and the Bank agree
as follows:
I . Amendments
--- ----------
(a) The defined term "Funded Indebtedness" contained in
Section 1.01 of the Agreement is hereby amended and restated in its entirety
as follows:
The "Funded Indebtedness" means all consolidated obligations
of Central Sprinkler Corporation and its wholly-owned
subsidiaries for borrowed money, including, without limitation
(and without duplication); (i) all obligations, contingent or
otherwise, in connection with all letter of credit facilities
(whether or not drawn), 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, 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, (iv) all capital lease obligations
of the Consolidated Corporations, (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 clause (i) through (v) 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: (A) trade indebtedness,
tax and other accruals, tax deferrals and deferred
compensation occurring in the ordinary course of the Company's
business shall be specifically excluded from the foregoing
definition, and (B) the greater of (x) the aggregate
outstanding amount of indebtedness under the Bonds, and (y)
the maximum aggregate amount of indebtedness for which the
Borrower or any Guarantor
2
<PAGE>
is obligated under the Letters of Credit, shall be used for
purposes of calculating Consolidated Funded Indebtedness.
(b) Section 4.16 of the Loan Agreement is hereby amended by:
(i) adding in the 3rd line, after the words "in Section 4.10" the words "and in
this Section", (ii) adding to the end of the paragraph, "Company was notified by
the Environmental Protection Agency ("EPA") in August, 1991, that it 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 EPA. Pursuant to the AOC, in 1996 the Company performed certain tests
on the Company's property to determine whether any land owned by the Company
could be a source of any of the contamination at the site. Based upon such
tests, management believes that the Company's operations did not contribute to
this contamination problem and the Company has no liability to clean-up this
site. Should the EPA mandate the Company's participation in clean-up efforts, it
is estimated that such costs could range from a minimal amount to $2,700,000.00.
The Company has not accrued for such clean-up costs.
(c) Section 5.06 of the Agreement is hereby amended by
substituting the following for clause (b) thereof:
"Liens (I) in existence on the date of, and disclosed in the
Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1993, or otherwise disclosed to the Bank in
writing on or prior to April 29, 1993, and (ii) in existence
on the date of this Fifth Amendment or contemplated in
connection with the funding of CPVC's new plant and machinery,
as listed and described on Schedule A of this Fifth Amendment,
relating to the following: (A) Central Sprinkler Company
indebtedness to Bank in the original principal amount of
$688,000, (B) CPVC indebtedness to Bank in the principal
amount of up to $7,500,000 or any refinancing thereof, whether
such refinancing is with the Bank or any other lender in any
form whatsoever, including without limitation, a bond issue,
and (C) Spraysafe Automatic Sprinklers Ltd.'s indebtedness to
Royal Bank of Scotland in the original principal amount of
$1,110,000 and $5,100,000 Line of Credit from National
Westminster Bank; provided however, that such Liens
3
<PAGE>
permitted hereunder shall not include the extension thereof to
other property, but shall include those of such Liens that may
be renewed or maintained in effect to secure indebtedness that
is renewed, extended or refinanced in accordance with Section
5.07(2)."
(d) Section 5.07 (2) of the Agreement is hereby amended and
restated in it's entirety to read as follows:
"Debt existing on the date hereof (including the full
amount of Debt under existing unsecured lines of credit, provided that such Debt
under lines of credit shall not exceed $45,000,000 in the aggregate at any time)
and disclosed in the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1993, or otherwise disclosed to the Bank in writing on or
prior to April 29, 1993, and (ii) in existence on the date of this Fifth
Amendment, as listed and described on Schedule A of this Fifth Amendment, and
renewals, extensions or refinancings thereof, provided that the effective rate
of amortization thereof is not increased in connection with any such renewal,
extension or refinancing shall not be on terms less favorable to the Company,
CSC or such consolidated Subsidiaries than those provided in the existing
agreements for such Debt."
(e) Section 5.11(3) of the Agreement is hereby amended and
restated in it's entirty to read as follows:
"Guaranties existing on the date hereof and disclosed
in the Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1993, or otherwise disclosed to the Bank in writing on or prior to April 29,
1993, and (ii) in existence on the date of this Fifth Amendment, as listed and
described on Schedule A of this Fifth Amendment, as such guaranties may be
renewed and extended in connection with the renewal, extension or refinancing of
Debt in accordance with Section 5.07(2)."
(f) 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 $48,000,000 from and
after October 31, 1996, 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 1.40 to 1.0 from October 31, 1996 through October 30,
1997 and not less than 1.75 to 1.0 at October 31, 1997 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."
4
<PAGE>
"5.14, CSC and its consolidated Subsidiaries will
maintain a ratio of consolidated Funded Indebtedness, to consolidated Tangible
Net Worth not greater than 1.37 to 1.0 from October 31, 1996 through October
30, 1997 and not greater than 1.2 to 1.0 at October 31, 1997 and at the end
of each fiscal quarter thereafter, to be tested in connection with the delivery
of quarterly financial statements pursuant to Section 5.0l."
"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 0.69 to 1.0
from October 31, 1996 until October 30, 1997 and not less than 0.87 to 1.0 at
October 31, 1997 and 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 5.0l."
(f) Bank acknowledges that Borrower's fiscal year end is
October 31, for purposes of financial reporting, compliance and calculations of
the financial ratios. The fiscal quarters end on January 31, April 30 and July
31.
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. 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.
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. such other documents, instruments and agreements as the
Bank may reasonably request.
3. Representations and Warrants: 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
5
<PAGE>
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 of the Company and the Guarantors set
forth in Article 4 of the Agreement, as amended hereby, 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. Confirmation of Guarantors Each of the original Guarantors hereby
reaffirm and ratifies all of their terms, covenants and conditions contained in
each of their respective Guarantees and confirms that such Guarantees are
binding and enforceable against Guarantors as if the Guaranties had been
executed as of the date hereof.
5. Consents The Bank hereby consents to the following:
a. The merger of Central Sprink, Inc. into Central Castings
Corporation, which consent is granted pursuant to Section 5.08 of the Agreement;
b. The creation and incorporation of CPVC and Export as
wholly-owned subsidiaries of the Borrower, which consent is granted pursuant to
Section 5.08 of the Agreement,
c. The creation of additional liens disclosed on Schedule A
hereto, which consent is granted pursuant to Section 5.06 of the Agreement,
d. the incurring of additional indebtedness identified on
Schedule A hereto, consent is granted pursuant to Section 5.07 of the Agreement,
as well as domestic indebtedness incurred or to be incurred under unsecured
lines of credit provided that such indebtedness shall not exceed $45,000,000 in
the aggregate at any time, and
e. the guaranty by Borrower or Guarantors of the additional
indebtedness identified on Schedule A hereto, which consent is granted pursuant
to Section 5.11 of the Agreement.
6. Ratification. Except as amended by this Amendment, all of the terms
and
6
<PAGE>
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.
7. Miscellaneous.
(a) Expenses. The Company agrees to pay all out-of-pocket
costs and expenses of the Bank, including, without limitation, all reasonable
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.
(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.
7
<PAGE>
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/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- ---------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL SPRINKLER CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
------------------- --------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL CPVC CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- --------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL CASTINGS CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- --------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
CORESTATES BANK, N.A.
By: /s/ William Johnston
---------------------
Name: William Johnston
Title: Vice President
8
<PAGE>
SCHEDULE A
----------
Indebtedness
------------
All items disclosed in the October 31, 1996 financial statements included with
Form 10-K and the notes thereto, as well as the following (certain of which may
be included in such financial statements and notes.)
<TABLE>
<CAPTION>
Company 12/17/96 Maturity
Limit Description Lender Balance Date
----- ----------- ------ ------- ----
<S> <C> <C>
1. $20,000,000 Line of Credit CoreStates $18,116,000 on going
2. 10,000,000 Line of Credit First Union 10,000,000 on going
3. 5,000,000 Line of Credit Brown Brothers 5,000,000 on going
4. 5,000,000 Term Note CoreStates 1,000,000 07-01-97
5. 7,275,000 Term Note Central ESOP 6,913,000 10-31-07
6. 1,100,000 Mortgage Loan CoreStates 384,896 02-01-02
7. 10,000,000 Term Loan First Union 7,333,334 04-01-04
8. 10,000,000 Term Loan CoreStates 7,500,000 03-01-04
9. 688,000 Mortgage Loan CoreStates 1,670,800 06-01-06
10. 11,750,000 L/C - IRB F.Union/CoreStates 10,450,000 11-01-15
Central CPVC Corp.
- ------------------
1. $ 2,000,000 Demand CoreStates $1,182,530 Demand
Spraysale Ltd.
-------------
1. $ 5,100,000 Line of Credit Nat'l Westminster $ 2,624,500 on going
2. 1,110,000 Term Note Royal Bank of 1,110,000 7 years
Scotland
</TABLE>
Guarantees
----------
All items disclosed in the October 31, 1996 financial statements included with
Form 10-K and the notes thereto, as well as the following (certain of which may
be included in such financial statements and notes).
<TABLE>
<CAPTION>
Company Obligation Maturity
Limit Beneficiary Balance Guaranteed Date
----- ----------- ------- ---------- ----
<S> <C> <C> <C> <C>
1. $13,339 FuSan Mach.Co. $13,339 Letter of Credit 1-31-97
2. 35,924 Yong An Valve 35,924 Letter of Credit 1-31-97
</TABLE>
Corp.
- -----
1. All debt of Spraysafe, Company, Central Castings, Central CPVC as well as
Warehouse Leases, Auto Leases of subsidiaries.
9
<PAGE>
Exhibit 10(c)
AMENDMENT TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
This AMENDMENT TO LETTER OF CREDIT AND REIMBURSEMENT
AGREEMENT (the "Amendment"), dated as of January 27, 1997, and effective as of
October 31, 1996, is by and among FIRST UNION NATIONAL BANK, successor to FIRST
FIDELITY BANK, N.A., a national banking association with offices located at 123
South Broad Street, Philadelphia, PA 19109 (the "Bank"), CENTRAL CASTINGS
CORPORATION, an Alabama corporation with offices located at 2660 Old Gadsden
Highway, Anniston, Alabama 36206 (the "Borrower"), CENTRAL SPRINKLER COMPANY, a
Pennsylvania corporation with offices located at 451 North Cannon Avenue,
Lansdale, PA 19446 ("CSC"), CENTRAL SPRINKLER CORPORATION, a Pennsylvania
corporation with offices located at 451 North Cannon Avenue, Lansdale, PA 19446
("Corporation"), and CENTRAL CPVC CORPORATION, an Alabama corporation with
offices located at 3415 Stanwood Boulevard, Huntsville, AL 35811 ("CPVC" and,
together with CSC and the Corporation, the "Guarantors", and together with the
Borrower, the "Obligors").
Background
A. The Bank and the Borrower entered into that certain Letter of Credit
and Reimbursement Agreement, dated as of November 1, 1995 (as amended from time
to time, including without limitation, by this Amendment, the "Credit
Agreement"), pursuant to which the Bank agreed to issue for the account of
Borrower letters of credit in the aggregate face amount of $11,206,250 (the
"Letters of Credit").
B. In order to secure Borrower's obligations under the Agreement,
Borrower executed and delivered to the Bank (i) a Mortgage and Security
Agreement by Borrower and the Calhoun County Economic Development Council (the
"Council") covering the Project Facilities, and (ii) a General Security
Agreement dated as of November 1, 1995 (the "Security Agreement").
C. In connection with the execution and delivery of the Agreement and
the Note and in order to secure the prompt payment and performance of the
Borrower's obligations thereunder, CSC executed and delivered to the Bank that
certain Guaranty, dated as of November 1, 1995 (together with all amendments and
modifications thereto, "CSC Guaranty").
D. In connection with the execution and delivery of the 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 November 1, 1995 (together with all
amendments and modifications thereto, "Corporation Guaranty").
E. in connection with the execution and delivery of the Agreement and in
order to secure the prompt payment and performance of the Borrower's obligations
thereunder, Central Sprink, Inc. (formerly, a California corporation and
subsequently merged into the Borrower) executed and delivered to the Bank that
certain Guaranty, dated as of November 1, 1995 (together with all amendments and
modifications thereto, "Sprink Guaranty", and together with Corporation
Guaranty, the "Guarantees").
F. The Agreement, the Collateral Security Documents, 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 "Credit Documents".
<PAGE>
G. Since the date of the Agreement, Sprink has merged into Borrower and
CPVC and Central Sprinkler Export Corporation, a Barbados corporation ("Export")
have been incorporated as subsidiaries of CSC.
H. The Bank, the Borrower, and the Guarantors, pursuant to the terms
hereof, wish to amend certain of the terms of the Credit Documents.
NOW, THEREFORE, incorporating the foregoing Background herein
by reference and for other good and valuable consideration, the receipt and
legal sufficiency of which are 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 respective meanings ascribed to such terms in
the Credit Agreement.
2. Amendments.
a. Each of the following defined terms contained in
Section 1.1 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
(aq) "Consolidated Funded Indebtedness" means all obligations
of the Consolidated Corporations for borrowed money,
including, without limitation (and without duplication): (i)
all obligations, contingent or otherwise, in connection with
all letter of credit facilities (whether or not drawn),
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, 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,
(iv) all capital lease obligations of the Consolidated
Corporations, (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 clause (i) through (v) 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: (A)
trade indebtedness, tax and other accruals, tax deferrals and
deferred compensation occurring in the ordinary course of the
Company's business shall be specifically excluded from the
foregoing definition; and (B) the greater of: (x) the
aggregate outstanding amount of indebtedness under the Bonds,
and (y) the maximum aggregate amount of indebtedness for which
the Borrower or any Guarantor is obligated under the Letters
of Credit, shall be used for purposes of calculating
Consolidated Funded Indebtedness.
(bz) "Guarantor" means, individually, and "Guarantors" means,
collectively, jointly and severally, CS Corporation, CS
Company and CPVC;
(ca) "Guarantor Security Agreement" means individually and
collectively, 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 and
assumed by Borrower in accordance with the terms of the
Amendment;
(cb) "Guaranty" or "Guaranty Agreement" means, individually,
and "Guaranties" or "Guaranty Agreements" means, collectively
(i) the Guaranty and Suretyship Agreements
-2-
<PAGE>
dated as of November 1, 1995, executed and delivered by each
Original Guarantor in favor of the Bank, substantially in the
form of Exhibit E hereto, and (ii) the Guaranty and Suretyship
Agreement in form and substance satisfactory to the Bank,
dated as of January 27, 1997, executed and delivered by CPVC
in favor of the Bank;
b. Each of the following additional definitions is
hereby added to Section 1.1 of the Credit Agreement to read in its entirety as
follows:
"Amendment" means the Amendment to Letter of Credit
and Reimbursement Agreement dated as of January 27, 1997, by
and between the Bank, Borrower, and Guarantors.
"Amendment Documents" means collectively, the
Amendment, the Guaranties executed and delivered pursuant to
Paragraph 6(a) of the Amendment and all other agreements,
documents, instruments and writings required pursuant to or
delivered in connection with the Amendment.
"CPVC" means Central CPVC Corporation, an Alabama
corporation.
"Export" means Central Sprinkler Export Corporation,
a Barbados corporation.
"Original Guarantor" means, individually, and
"Original Guarantors" means collectively, jointly, and
severally, CS Corporation, CS Company and Central Sprink.
C. Section 6.18(i) of the Credit Agreement is hereby
amended by adding a new subsection (K) thereto which states as follows:
(K) such additional liens as are described
on Schedule A attached to the Amendment relating to
the following: (a) CS Company indebtedness to
CoreStates Bank, N.A. in the original principal
amount of $688,000, (b) CPVC indebtedness now
existing or hereafter incurred to CoreStates Bank,
N.A. in the principal amount of up to $7,500,000 for
the purpose of financing CPVC's new plant and
machinery and the refinancing thereof, whether such
refinancing is with CoreStates Bank, N.A., or with
any other entity, and in any other form, including
without limitation a bond issue; and (c) Spraysafe's
indebtedness to Royal Bank of Scotland in the
original principal amount of $1,110,000;
d. Section 6.19(a) of the Credit Agreement is hereby
amended as follows
(A) the initial clause of Section 6.19(a) is hereby replaced with the
following:
(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 the items
identified on Schedule A attached to the Amendment
and, 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):
(B) clause (viii) of Section 6.19(a) is hereby replaced with the
following:
-3-
<PAGE>
(viii) cash borrowings under existing
unsecured lines of credit, as extended, provided that
such cash borrowings shall not exceed $45,000,000 in
the aggregate outstanding at any time;
e. Section 6.19(b) of the Credit Agreement is hereby
amended by substitution for the initial clause the following:
(b) not guaranty or otherwise in any way become or be
responsible for indebtedness or obligations of any
other Person, contingent or otherwise, except the
guarantees described in Schedule A attached to the
Amendment and, 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):
f. Sections 7.1 through 7.4 of the Credit Agreement are
hereby amended and restated in their entirety to read as follows:
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 Section 6.1 and 6.2 hereof), during the
term hereof, and from and after October 31, 1996, shall
be not less than $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 of 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 (a) not less than
1.40:1.00 from October 3 1, 1996 through October 30,
1997 and (b) not less than 1.75 to 1.0 from and after
October 31, 1997; 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 (a) not less than 0.69:1.00
from October 31, 1996 through October 30, 1997, and (b)
not less than 0.87:1.00 from and after October 31,
1997; 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 7.4 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:
-4-
<PAGE>
Period Ratio
------ -----
October 31, 1996 through October 30, 1997 1.37:1.0
October 31, 1997 and thereafter 1.2:1.0
3. Conditions Precedent. The effectiveness of this Amendment
and the Bank's obligations hereunder are conditioned upon the satisfaction of
the following conditions precedent:
a. The Obligors shall have delivered to the Bank this
Amendment, 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 Amendment 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.
c. 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 Amendment, the Obligors hereby represent and warrant to the
Bank as follows:
a. The representations and warranties contained in the
Credit Documents are true and correct on and as of the date of this Amendment
and after giving effect hereto, no Default or 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
Amendment 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 Amendment 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 Amendment and each of the documents, instruments and agreements executed
and/or delivered in connection herewith and the performance of the Credit
Agreement as amended hereby.
d. The execution, delivery and performance of this
Amendment 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 Credit Documents, this Amendment 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.
5. Consents. Subject to, and conditioned upon the Obligors'
compliance with the provisions of Paragraph 6 hereof, the Bank hereby consents
to the following:
-5-
<PAGE>
a. the merger of Sprink into the Borrower, which
consent is granted pursuant to Section 6.12(a) of the Credit Agreement;
b. the creation of CPVC and Export as wholly-owned
subsidiaries of CS Company, which consent is granted pursuant to Section 6.12(a)
of the Credit Agreement;
c. the intercompany transfers between the Borrower
and Export, to the extent such transfers relate to receivables arising in
connection with export sales;
d. the creation of additional liens disclosed on
Schedule A hereto, otherwise prohibited pursuant to Section 6.18 of the Credit
Agreement; and
e. the incurrence of the additional indebtedness and
guarantees thereof identified on Schedule A hereto, otherwise prohibited
pursuant to Section 6.19 of the Credit Agreement;
6. Delivery of Additional Agreements and Instruments. Obligors
covenant and agree that, within ten (10) days after the date hereof, they will
deliver or will cause to be delivered to the Bank a Guaranty Agreement by CPVC
in favor of the Bank, in form and substance satisfactory to the Bank:
7. Reaffirmation. Except as amended hereby, all of the terms,
covenants and conditions of the Credit Agreement and each of the other Credit
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.
8. Confirmation of Guaranties. Each of the Original
Guarantors (other than Sprink) 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.
9. Continuation of Mortgages and Security Interests.
a. Borrower hereby reaffirms and ratifies all of the
terms, covenants and conditions contained in the Mortgage and confirms that such
Mortgage is binding, enforceable against Borrower and in full force and effect,
and continues to secure all of Borrowers' obligations under the Credit
Documents, as such obligations have been modified hereby;
b. The Borrower, as successor to Sprink in accordance
with the requirements of Section 6.12(a) of the Credit Agreement, hereby
assumes, reaffirms and ratifies all of the terms, covenants, and conditions
contained in the Guarantor Security Agreement and confirms that such Guarantor
Security Agreement is binding and enforceable against the Borrower and in full
force and effect and continues to secure all of such Guarantors' obligations
under the Credit Documents as such obligations have been modified hereto.
10. Binding Effect. This Amendment 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 Amendment
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.
-6-
<PAGE>
11. Counterparts; Effectiveness. This Amendment 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
Amendment 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.
12. Amendment and Waiver. No amendment or modification of this
Amendment, 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.
13. Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania without reference to conflict of laws principles.
14. Severability. Any provision of this Amendment 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 Amendment are declared to be severable.
15. Judicial Proceedings. Each party to this Amendment 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 Amendment, the documents, instruments and agreements
executed in connection herewith, the Credit 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 AMENDMENT
AND THAT THE BANK WOULD NOT ENTER INTO THIS AMENDMENT IF THE WAIVERS SET FORTH
IN THIS SECTION WERE NOT A PART OF THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
ATTEST: CENTRAL CASTINGS CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- ---------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
(EXECUTIONS CONTINUED)
-7-
<PAGE>
ATTEST: CENTRAL SPRINKLER COMPANY
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- ---------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL SPRINKLER CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
------------------- --------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL CPVC CORPORATION
By:/s/ George G. Meyer By: /s/ Albert T. Sabol
--------------------- --------------------
Name: George G. Meyer Name: Albert T. Sabol
Title: CEO Title: E.V.P. - Finance
FIRST UNION NATIONAL BANK
By: /s/ Suzanne S. Storm
--------------------
Name: Suzanne S. Storm
Title: Senior Vice President
-8-
<PAGE>
Exhibit 11
CENTRAL SPRINKLER CORPORATION
EARNINGS PER COMMON SHARE
Three Months Ended
January 31,
1997 1996
------ ------
(Amounts in thousands,
except per share)
Net income $1,299 $1,041
====== ======
Average number of common shares
outstanding 3,834 3,791
Adjustment to exclude average
unreleased common shares in ESOP (618) (654)
Adjustment for assumed conversion
of stock options 128 215
------ ------
Average number of common shares 3,344 3,352
====== ======
Net Income per common share $.39 $.31
====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000766041
<NAME> CENTRAL SPRINKLER CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 922
<SECURITIES> 13,367
<RECEIVABLES> 42,739
<ALLOWANCES> 4996
<INVENTORY> 47,585
<CURRENT-ASSETS> 107,751
<PP&E> 63,545
<DEPRECIATION> 20,252
<TOTAL-ASSETS> 155,419
<CURRENT-LIABILITIES> 73,602
<BONDS> 23,582
0
0
<COMMON> 56
<OTHER-SE> 55,850
<TOTAL-LIABILITY-AND-EQUITY> 155,419
<SALES> 48,180
<TOTAL-REVENUES> 48,180
<CGS> 33,095
<TOTAL-COSTS> 33,095
<OTHER-EXPENSES> 12,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 987
<INCOME-PRETAX> 2,069
<INCOME-TAX> 770
<INCOME-CONTINUING> 1,299
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,299
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
