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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1996
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OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________ to ___________________
Commission file number 0-13940
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CENTRAL SPRINKLER CORPORATION
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2328106
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
451 North Cannon Avenue, Lansdale, Pennsylvania 19446
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: 215-362-0700
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. _X_
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (computed by reference to the closing price of such stock in
the NASDAQ National Market System on December 31, 1996 -- $26.25) was
approximately $90.4 million.
The number of shares of the Registrant's common stock outstanding as of
December 31, 1996 was 3,845,637 shares.
DOCUMENTS INCORPORATED BY REFERENCE
(Specific pages incorporated are indicated
under applicable Item herein):
Registrant's definitive Proxy Statement for its 1997 Annual Meeting of
Shareholders is incorporated by reference into Part III hereof.
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PART I
Item 1. Business.
(a) General Development of Business
Central Sprinkler Corporation (the "Company"), through its wholly-owned
subsidiaries, Central Sprinkler Company ("Central Sprinkler"), Spraysafe
Automatic Sprinklers Limited ("Spraysafe"), Central Sprink Inc. ("Sprink"),
Central Castings Corporation ("Castings") and Central CPVC Corporation ("CPVC"),
is a leading manufacturer of automatic fire sprinkler heads, valves and other
sprinkler system components as well as a distributor of component parts of
complete automatic fire sprinkler systems that are either manufactured by the
Company or purchased by the Company for resale to its customers.
The Company acquired Central Sprinkler in May 1984. Key executives of
Central Sprinkler remained with the business and purchased a portion of the
Company's common stock with the remainder purchased by an outside investor
group. Prior to the acquisition, the Company did not have any significant assets
or liabilities or engage in any activities other than those related to the
acquisition. In May 1985, the Company went public by its sale of shares of
common stock of the Company in an underwritten public offering.
In September 1985, the Company conducted an underwritten public
offering of 8% Convertible Subordinated Debentures due 2010 (the "Debentures")
in an aggregate principal amount of $17.3 million. During 1988, the Company
called for early redemption all of its outstanding Debentures. Holders of $16.8
million face value of such Debentures elected to convert them into 1.6 million
shares of newly issued common stock while $135 thousand face value of such
Debentures were redeemed for cash.
On November 1, 1985, the Company acquired 80% of the outstanding common
stock and 100% of the outstanding preferred stock of Spraysafe, a sprinkler head
manufacturer and distributor in the United Kingdom. During 1989, the Company
increased its ownership in Spraysafe from 80% to 100% by purchasing all of the
remaining common stock from the minority shareholder. The acquisition resulted
in an expansion of the Company's product lines to include Spraysafe's glass bulb
sprinkler heads and provide a further means of distributing the Company's
products in foreign markets.
On November 1, 1992, Central Sprinkler acquired certain business assets
of a midwestern company engaged in the distribution of fire sprinkler equipment
at a cost of approximately $1.2 million. The acquired assets consisted primarily
of inventory. Central Sprinkler merged the acquired assets into its distribution
network and strengthened its overall distribution network. On August 17, 1993,
Central Sprinkler acquired certain business assets and assumed certain
liabilities of Sprink, Inc., a company engaged in the business of
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manufacturing and distributing pipe couplings, fittings and other products that
are used in fire sprinkler systems. The assets acquired included, among other
things, inventories (excluding selected items), property and equipment, customer
records, patents, warehouse and office supplies, computer software and the
capital stock of Sprink International, S.A. de C.V. for a purchase price of
approximately $4.1 million. The liabilities assumed were principally warranty
obligations and obligations under operating leases. The acquisition was made
through a newly organized company, Central Sprink Inc. ("Sprink").
In July 1994, Central Sprinkler formed a new company, Central Castings
Corporation ("Castings"). Castings acquired substantially all of the business
assets of a foundry in the Southeastern United States engaged in manufacturing
piping system components. The purchase price was approximately $1.8 million for
assets consisting primarily of property, plant and equipment. The Company has
incurred approximately $20.8 million in capital expenditures for the expansion
of this facility to accommodate production of several additional product lines.
In May 1995, Central Sprinkler formed a new company, Central CPVC
Corporation ("CPVC"). Central Sprinkler Company contributed business assets to
CPVC. CPVC is engaged in manufacturing CPVC plastic pipe and fittings.
On October 31, 1996, Central Sprink Inc. was merged into Central
Castings Corporation in a tax-free merger. Central Castings Corporation assumed
all assets and liabilities of Central Sprink Inc.
(b) Financial Information About Industry Segments.
The Company operates in one industry; the manufacture and sale or
purchase and sale of component parts of complete automatic fire sprinkler
systems.
(c) Narrative Description of Business.
General
The Company is a leading manufacturer of automatic fire sprinkler heads
and valves and other components as well as a distributor of component parts of
complete automatic fire sprinkler systems. Approximately 56% of the Company's
fiscal 1996 annual net sales are derived from the manufacture and sale of the
Company's primary product lines which are fire sprinkler heads, valves and other
component parts. The balance is derived principally from the sale of
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other component parts, several of which are also manufactured by the Company's
subsidiaries. The Company designs, manufactures and markets a wide variety of
sprinkler heads, valves and other component parts for commercial, industrial,
residential and institutional uses throughout the world. The Company sells its
products to more than 3 thousand customers, most of which are sprinkler
installation contractors.
Products
The principal components of a sprinkler system are the sprinkler heads
and the valves, both of which are manufactured and marketed by the Company and
represented approximately 47% and 9%, respectively, of the Company's sales in
fiscal 1996 and fiscal 1995 and 49% and 10%, respectively, in fiscal 1994. The
Company also manufactures and distributes several other components and
distributes other sprinkler system component parts. Other product lines
manufactured and sold under the Company's various trade names are steel pipe,
CPVC plastic pipe and fittings and ductile iron grooved fittings and couplings
as well as other piping system components.
The sprinkler head is the mechanism that is activated by heat and
discharges a water spray. The sprinkler head is composed principally of copper,
brass and other non-corrosive materials. The Company presently produces and
markets six basic types of sprinkler heads: the standard commercial sprinkler,
the residential/life-safety sprinkler, the Flow Control (TM) sprinkler, the
extended coverage commercial sprinkler, the early suppression fast response
sprinkler and specific application series sprinklers.
The standard commercial sprinkler head is installed near the ceiling of
a structure and consists of a fusable alloy pellet which is sealed into a bronze
center strut by a stainless steel ball. When the alloy melts at its rated
temperature, the ball is forced upward into the center strut, releasing two
ejector springs and activating the sprinkler, which discharges water in a
prescribed flow path. The Company also has standard commercial sprinklers with
glass bulb activating mechanisms. Generally, standard commercial sprinklers are
designed to activate at specified temperatures between 135 and 286 degrees.
Standard commercial sprinkler heads are manufactured in a wide variety of
models, sizes, and finishes. The Company also has several adjustable concealed
standard commercial sprinklers. These models have several advantages over
previous models produced by both the Company and its competitors.
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The second type of sprinkler head produced and marketed by the Company
are residential/life-safety sprinklers. These sprinklers have quick response
features and are designed to react to a fire before it has a chance to spread,
which effectively minimizes the smoke, fumes and toxic by-products of the fire.
These residential/life-safety sprinklers are recognized today as the best means
to protect a life in the event of a fire. In fiscal 1983, the Company introduced
its first life-safety sprinkler in the form of the Omega (TM) sprinkler. This
patented Omega (TM) sprinkler is equipped with unique design features which
provide two principal advantages over the standard commercial sprinkler. The
Omega (TM) sprinkler operates five to six times faster than a standard
commercial sprinkler and features a spray pattern that has been shown to be more
effective in the control or extinguishment of fire. In late 1989, the Company
introduced new residential/life-safety sprinklers with glass bulb activating
mechanisms. These models featured more traditional sprinkler designs along with
the quick response features previously only available in the Omega (TM) model.
These sprinklers are more moderately priced than the Omega (TM) model. The
Company introduced several new models of its Glass Bulb residential sprinklers
in fiscal 1995 and fiscal 1994. Additionally, the Company introduced a new
residential series of concealed sprinklers called ROC (Residential Optima
Concealed). These sprinklers offer the best flows at the greatest area of
coverage on the market.
The third type of sprinkler head produced by the Company is the Flow
Control (TM) sprinkler, which the Company has marketed since 1984. Unlike the
standard commercial sprinkler head and the residential/life-safety sprinkler
head, which continue to spray water until manually turned off, the Flow Control
(TM) sprinkler head has a distinct operating feature which allows it to open and
close automatically as heat conditions dictate. It is, therefore, particularly
well suited for areas sensitive to water damage, such as libraries, museums or
computer rooms. The Flow Control (TM) sprinkler operates faster than a standard
commercial sprinkler and is able to react to a fire before it has a chance to
spread, thereby limiting damage to the affected area.
The fourth type of sprinkler head produced by the Company is the
extended coverage commercial sprinkler. This sprinkler line brings about a
dramatic turning point in sprinkler technology by extending ordinary spacing
from 130 sq. ft. to 400 sq. ft. These sprinklers are being marketed under the
trade name of Optima (TM) sprinklers. The Company introduced the Optima (TM)
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sprinkler in 1993 and developed new models in both fiscal 1995 and 1994. A
patent has been issued on these sprinklers that provide uniform distribution of
minimum densities at very low start pressures, while achieving superior fire
control when compared to the standard commercial sprinkler line.
The fifth type of sprinkler head produced by the Company starting in
fiscal 1993 is the early suppression fast response ("ESFR") sprinkler. This
sprinkler is designed for use in special hazards situations. It is used
primarily to protect storage areas where there is a need for a high density of
water with a quick responding sprinkler head.
The sixth type of sprinkler produced and marketed by the Company is the
specific application series. These sprinklers, such as the Window Sprinklers
introduced in fiscal 1995 and the Attic (TM) and the ELO-231 specific
application sprinklers, are designed to provide better fire protection for
specific occupancies while providing overall economic savings to our
installation contractor customers.
The Company markets a wide variety of sprinkler system valves which are
used specifically in fire sprinkler installations. Several of these valves are
manufactured by the Company (alarm valve, butterfly valve, check valve, deluge
valve and dry pipe valve), while certain other valves are manufactured by others
and marketed by the Company. In fiscal 1995 and 1994, the Company introduced
several new manufactured valve models including butterfly valves and a new
deluge valve. A sprinkler system valve is the mechanical device by which the
water supply is controlled. When the sprinkler head is activated, the valve
allows water to flow into and through the system.
The average cost of sprinkler heads and valves used in a complete fire
sprinkler system is generally less than 5% of the total cost of a complete
system.
In addition to its primary product lines of manufactured sprinkler
heads and valve products, the Company also manufactures its own line of CPVC
plastic pipe and CPVC plastic pipe fittings. The Company expanded such CPVC
product lines and manufacturing capacity in fiscal years 1996, 1995 and 1994.
The CPVC plastic pipe and fittings are manufactured using principally Company
owned machinery and equipment under a production supply contract whereby the
Company is using facilities and certain personnel of an unaffiliated plastic
manufacturer. In fiscal 1996, the Company began construction of a Company owned
manufacturing facility in
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Huntsville, Alabama. Upon completion of the Company owned facility, the
production supply contract will end. The Company also manufactures its own line
of steel sprinkler pipe through a production supply contract with a steel pipe
manufacturer. The steel pipe production supply contract encompasses the
manufacture of such pipe for the Company using Company owned machinery and
equipment and using certain facilities, personnel and machinery and equipment
that are owned by an unaffiliated manufacturer. In fiscal 1993, the Company
started to manufacture its own line of glass bulb ampules for use as activating
mechanisms in sprinkler heads. In addition, the 1993 acquisition of Sprink
brought the Company into the manufacture of pipe couplings and fittings and a
1994 acquisition of a ductile iron foundry and subsequent expansion of the
foundry resulted in the Company's ability to manufacture grooved fittings and
couplings and other piping system components. The Company also distributes a
wide variety of other parts used in sprinkler system installations. The majority
of the other components include fittings, control valves, electric switches,
hangers and a variety of other items. The Company developed and markets computer
aided design ("CAD") systems to architects, designers, and contractors for use
in the design and installation of sprinkler systems. The Company also provides
other CAD related services through its SprinkCAD division.
Marketing and Customers
The Company's products are marketed by its own sales and marketing
staff. The sales, marketing and distribution staff consists of approximately 200
people and operates from eighteen regional sales office/distribution centers
located near Boston, Atlanta, Miami, Dallas, Chicago, Los Angeles, San
Francisco, Seattle, Philadelphia, Baltimore, Salt Lake City, Greensboro,
Portland, Cleveland and from one distribution center in the United Kingdom and
one in Singapore. New sales offices were opened in the latter part of fiscal
1996 in China and Hong Kong. Unlike the majority of the industry which markets
its products primarily through wholesale distributors, the Company sells most of
its products directly to sprinkler installation contractors. This places the
Company in direct contact with its customers and allows it to respond
effectively to customer demands and suggestions.
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The Company's sales and marketing efforts are directed primarily to
these sprinkler installation contractors. Additional sales and marketing efforts
are directed to the introduction and promotion of the Company's products to
architects, engineers, builders, end-users, local fire authorities and insurance
underwriters, for purposes of encouraging them to recommend or specify the
Company's sprinklers for use in new construction and retrofit installations.
The Company markets its products to more than 3 thousand customers, the
majority of whom are sprinkler industry contractors, for commercial, industrial,
residential and institutional use throughout the world.
In fiscal 1996, no single customer accounted for more than 3% of the
Company's net sales.
The Company typically manufactures about 90% of its products for
estimated shipping demands and 10% pursuant to specific customer orders. The
Company does not have any significant order backlog.
The Company advertises its products through various media including
insurance publications and trade journals. The Company also participates in
trade shows and trade organizations. Approximately $555 thousand was spent on
advertising the Company's products in 1996.
The Company's products are not marketed pursuant to long-term purchase
agreements, but are sold pursuant to individual purchase orders. Often the
Company's published sales terms sheet is the controlling purchase document.
The Company is affected by seasonal factors and the weather as well as
the level of new construction activity, remodeling and retrofitting of older
properties in the commercial, industrial, residential and institutional real
estate markets. The Company's sales tend to increase the most when there is a
high level of new construction activity in all such real estate markets and
decline when there is a slowdown in new construction activity. In addition, as a
result of relatively higher levels of new construction during warmer spring and
summer months, the demand for sprinkler system components tends to be greater
during the summer and fall than during other seasons.
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Competition
The Company competes on the basis of price, service, product quality,
design and performance characteristics. The Company encounters competition
worldwide primarily from approximately seven domestic manufacturers of sprinkler
heads and valves and a large number of manufacturers and/or distributors of
other sprinkler system component parts.
The Company is the world's leading manufacturer of fire sprinklers. The
Company also believes its position is due in large part to its relationships
with customers and the innovative technological features of its products.
Research and Development
Research and development has contributed significantly to the Company's
success over the years and will be a major factor in the Company's ability to
continue its future growth.
The Company maintains a staff of fifteen engineers and thirty-five
support technicians who devote their time to research and development
activities. During the 1996 fiscal year, the Company spent $5.5 million on
research and development compared to $5.1 million in fiscal 1995 and $4.1
million in fiscal 1994. The Company's efforts in this area are primarily focused
on sprinkler head and valve design and development, and are directed toward both
new product development and further refinement of the quick response technology
designed for residential/life-safety purposes, extended coverage sprinklers,
enhancements to dry pendant and Optima(TM) sprinklers, and the specific
application sprinkler series. In fiscal 1996, the Company expanded the research
and development facilities in Lansdale, Pennsylvania. The Company's heavy
emphasis on the development of new products continued throughout the year and
led to new products in fiscal years 1996, 1995 and 1994.
Patents
The Company holds a number of patents. The Omega (TM) sprinkler head
patent, which expires January 1, 2002, protects a unique operating feature
(relating to increased activating speed and extended water coverage of the spray
pattern) and sets the Omega (TM) head apart from standard commercial sprinklers.
In December 1996, the Company was issued a patent on the extended coverage
ceiling sprinklers. The Company was issued a patent in fiscal 1995 on the new
extended coverage
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commercial sprinkler and additional related patent applications are pending.
These are very important to the Company based upon the
Company's substantial investment in the product line and the dramatic turning
point they provide in fire sprinkler protection and technology. The Company has
also filed for patent protection on a number of other products.
Trademarks
The Company has a number of trademarks on various product names and
selected product components. An important trademark is on the appearance of
installed Omega (TM) products and the Company hopes it will ultimately prevent
others from copying this product.
Sources of Supply
The Company uses a number of component parts in its manufacture of
sprinkler heads and valves. The principal components of the sprinkler head
include the frame, the deflector and the activating mechanism. The major
component of the valve is the metal casting.
Materials, parts and components purchased by the Company for the
production of its sprinkler heads and valves are generally available from a
large number of suppliers. The vast majority of items are manufactured
specifically for the Company's needs from molds, dies and patterns owned by the
Company. The Company has not experienced any shortages or significant delays in
delivery of these materials in the recent past, and management believes that
adequate supplies will continue to be available.
The Company also has a non-exclusive supply contract with the B.F.
Goodrich Company to supply the resin that the Company uses to produce CPVC
plastic pipe and fittings. This supply contract, which expires in December 2000,
provides the Company with a source of resin that is not generally available.
Other products manufactured by the Company such as steel pipe, fittings and
couplings and other piping system components use raw materials that are
available from a wide variety of suppliers.
Other component parts purchased by the Company for distribution
purposes are generally available from a number of manufacturers.
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Effect of Environmental Protection Regulations
The Company is subject to compliance with various federal, state and
local regulations relating to protection of the environment. The Company has not
made nor does it currently expect to make any material capital expenditures for
environmental protection and control equipment for its current operations. As
more fully discussed in Item 7, "Environmental Matters", the Company has been
advised by the Environmental Protection Agency of a potential contamination
problem in the vicinity of the Company's primary plant.
Employees
The Company employs approximately 1300 people, of whom approximately
950 are production or shipping employees, with the remainder serving in
executive, administrative or sales capacities. The Company's sprinkler and valve
production and shipping employees are covered by a collective bargaining
agreement with the International Association of Machinists & Aerospace Workers
that expries in October 1997. In late December 1996, the agreement was extended
to October 2000. All of the covered employees are located at the Company's
primary manufacturing plant in Lansdale, Pennsylvania.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales.
The Company operates in one business segment and engages in business
activity outside the United States. During fiscal 1996, 1995 and 1994, the
combined export and foreign sales represented approximately 12.5%, 10.1% and
11.3%, respectively, of the Company's net sales. Included in foreign sales are
the sales of the Company's United Kingdom subsidiary (Spraysafe). Spraysafe
primarily manufactures sprinkler heads and distributes them and other products
in Europe and other foreign countries. Significant financial information about
Spraysafe's operations consists of the following in thousands of dollars:
Year Ended October 31,
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1996 1995 1994
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Sales $16,807 $11,210 $8,800
Operating Income 1,390 1,202 702
Net Income 789 699 440
Total Assets 10,803 7,903 5,065
Total Liabilities 6,799 4,862 2,710
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Item 2. Properties.
The Company's primary manufacturing plant and executive offices are
located in Lansdale, Pennsylvania. The Lansdale facility is owned by the
Company. It is comprised of several buildings which contain approximately 166
thousand square feet of floor space on a parcel of about 7 acres. This facility
is pledged as security for a mortgage loan. In fiscal 1996, the Company
purchased a building and land for additional offices in Lansdale, Pennsylvania
which contains approximately 14 thousand square feet. The SprinkCAD division is
in a separate leased facility in Lansdale, Pennsylvania of approximately 3
thousand square feet. The lease expires upon thirty days notice given by the
Company. The Company also owns a separate fire sprinkler component manufacturing
facility of approximately 10 thousand square feet in Pennsylvania and a piping
systems components manufacturing facility and foundry of approximately 155
thousand square feet on a 67 acre parcel in Alabama purchased in fiscal 1994.
The Company's fourteen domestic sales office/distribution centers are
located in major cities across the United States listed in Item 1(c), Marketing
and Customers, hereof and range in size from 11 thousand to 66 thousand square
feet per building. These facilities are leased by the Company pursuant to leases
which terminate from 1996 through 2002. The Company has options to extend
certain of its leases for additional periods on similar terms.
The Company's United Kingdom subsidiary owns a manufacturing plant in
the United Kingdom which contains approximately 16 thousand square feet of floor
space on a parcel of about 1 acre. This facility is also pledged as security for
a loan. The United Kingdom subsidiary also leases a distribution center of
approximately 5 thousand square feet in the United Kingdom under a lease that
expires in 2000, leases a distribution center of approximately 3 thousand square
feet in Singapore under a lease that expires in 1997, leases 1 thousand square
feet of office space in Hong Kong and leases 1 thousand square feet in Beijing,
China.
The Company's manufacturing and assembly facilities operate on a
two-shift per day basis. All of the manufacturing equipment used in the
production process is owned by the Company.
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At October 31, 1996, the Company's owned and leased facilities are generally
adequate and suitable for the Company's needs and are virtually fully utilized
for their intended use. In the normal course of business, the Company
continually evaluates its properties for their adequacy and suitability. As
discussed in Item 1 (c) and Footnote #15 of the Notes to Consoliated Financial
Statements, the Company is building a Company owned manufacturing facility for
CPVC pipe and fittings components in Huntsville, Alabama. This new facility will
manufacture the Company's CPVC plastic pipe and fittings with expanded
production capacity.
Item 3. Legal Proceedings.
The Company is engaged in discussions with the Environmental Protection
Agency concerning a claim which may develop in connection with the Company's
primary manufacturing plant in Lansdale, Pennsylvania. This potential claim is
more fully discussed in Item 7, "Environmental Matters". While there are various
other claims pending and threatened against the Company pursuant to the ordinary
conduct of business, the Company does not expect these claims nor legal
proceedings in total to have any material adverse effect on the consolidated
financial position, results of operation or liquidity of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders of the Company,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1996.
Item 4(a). Executive Officers of the Registrant.
The names and ages of the Registrant's executive officers and key
employees, their positions with the Company and with Central Sprinkler, its
primary operating subsidiary, and their principal occupations during the past
five years are as follows:
Position(s) with the Company, and
where indicated, with Central
Name Age Sprinkler
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Winston J. Churchill 56 Chairman of the Board and Director
William J. Meyer 76 President and Director, and
Chairman of the Board and Treasurer
of Central Sprinkler
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George G. Meyer 47 Chief Executive Officer, Secretary,
Treasurer and Director, and
President and Chief Executive
Officer of Central Sprinkler
James R. Buchanan 47 Executive Vice President, Sales of
Central Sprinkler
Stephen J. Meyer 45 Director, and Executive Vice
President of Central Sprinkler
William J. Pardue 46 Executive Vice President of Central
Sprinkler
Albert T. Sabol 44 Executive Vice President, Finance
and Administration of the Company
and Central Sprinkler
James E. Golinveaux 33 Senior Vice President, Engineering
of Central Sprinkler
Anthony A. DeGregorio 37 Vice President, SprinkCAD of
Central Sprinkler
Michael J. Graham 46 Vice President, International
Operations of Central Sprinkler
Richard C. Hobbs 37 Vice President, Materials and
Quality Assurance of Central
Sprinkler
George S. Polan 46 Vice President, Research and
Development of Central Sprinkler
Douglas F. Rice 34 Vice President, Marketing and
Technical Services of Central
Sprinkler
Carmine L. Schiavone 30 Vice President, Piping Products of
Central Sprinkler
Leonard E. Schiavone 30 Vice President, Piping Products of
Central Sprinkler
Albert H. Schoenberger, Jr. 69 Vice President, Manufacturing of
Central Sprinkler
Marilyn M. Thomas 37 Vice President, Distribution
Operations of Central Sprinkler
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WINSTON J. CHURCHILL - Mr. Churchill has been Chairman of the Board and
a director of the Company and a director of Central Sprinkler since 1984. Mr.
Churchill has been President of Churchill Investment Partners, Inc., a private
investment firm, since 1989. He was a partner of Bradford Associates, a private
investment firm, from 1984 to 1989. Mr. Churchill is also a director of IBAH,
Inc., Geotek Communications, Inc. and Tescorp, Inc.
WILLIAM J. MEYER - Mr. Meyer has been President and a director of the
Company and Chairman of the Board of Central Sprinkler since 1984. He has also
served Central Sprinkler as a director and Treasurer since 1975 and as President
from 1975 to 1984.
GEORGE G. MEYER - Mr. Meyer has been Chief Executive Officer since 1987
and Secretary and Treasurer of the Company since 1985, and a director of the
Company and President and a director of Central Sprinkler since 1984. He was
Executive Vice President of the Company from 1985 to 1987.
JAMES R. BUCHANAN - Mr. Buchanan has been Executive Vice President,
Sales of Central Sprinkler since 1996. He was Vice President, Sales of Central
Sprinkler since 1984.
STEPHEN J. MEYER - Mr. Meyer has been a director of the Company and
Executive Vice President of Central Sprinkler since 1986. He has been a director
of Central Sprinkler since 1983.
WILLIAM J. PARDUE - Mr. Pardue has been Executive Vice President of
Central Sprinkler since 1980.
ALBERT T. SABOL - Mr. Sabol has been Executive Vice President, Finance
and Administration and Chief Financial Officer of the Company and Central
Sprinkler since 1996. He was Vice President, Finance and Chief Financial Officer
of the Company and Central Sprinkler since 1986.
JAMES E. GOLINVEAUX - Mr. Golinveaux has been Senior Vice President,
Engineering of Central Sprinkler since 1996. He was Vice President, Technical
Service and Engineering of Central Sprinkler since 1993 and Vice President,
Technical Service of Central Sprinkler since 1992. He was Director of Technical
Service from 1991 to 1992. From 1986 to 1991 he was the Design Manager for a
large fire protection installation contractor.
ANTHONY A. DEGREGORIO - Mr. DeGregorio has been Vice President,
SprinkCAD of Central Sprinkler since 1993 and was manager of SprinkCAD sales and
service from 1990 to 1993. From 1986 to 1990 he was General Manager of a
computer aided design services company.
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MICHAEL J. GRAHAM - Mr. Graham has been Vice President, International
Operations of Central Sprinkler since 1995 and Managing Director of Spraysafe
Automatic Sprinkler Limited (U.K.) since 1990.
RICHARD C. HOBBS - Mr. Hobbs has been Vice President, Materials and
Quality Assurance of Central Sprinkler since 1996 and was Director of Purchasing
from 1995 to 1996. From 1990 to 1995 he was Engineering Manager.
GEORGE S. POLAN - Mr. Polan has been Vice President, Research and
Development of Central Sprinkler since 1990. He was Vice President, Engineering
of Central Sprinkler from 1986 to 1989.
DOUGLAS F. RICE - Mr. Rice has been Vice President, Marketing and
Technical Services of Central Sprinkler since 1996 and was Director of Marketing
from 1995 to 1996 and Director of Technical Services from 1993 to 1995. He was
Manager of Technical Services from 1992 to 1993. From 1990 to 1993 he was a
consultant in the fire sprinkler industry.
CARMINE L. SCHIAVONE - Mr. Schiavone has been Vice President of Piping
Products of Central Sprinkler since 1996 and was Director of Piping Products
from 1995 to 1996 and Manager of Piping Products from 1993 to 1995. He was
Manager of Customer Service from 1989 to 1993.
LEONARD E. SCHIAVONE - Mr. Schiavone has been Vice President of Piping
Products of Central Sprinkler since 1996 and was Director of Piping Products
from 1995 to 1996. He was Marketing Manager from 1989 to 1995.
ALBERT H. SCHOENBERGER, JR. - Mr. Schoenberger has been Vice President,
Manufacturing of Central Sprinkler since 1977.
MARILYN M. THOMAS - Ms. Thomas has been Vice President, Distribution
Operations of Central Sprinkler since 1995 and was Director of Warehouse
Operations from 1984 to 1994.
George G., Stephen J. Meyer, and Marilyn M. Thomas are brothers and
sister and are sons and daughter of William J. Meyer. William J. Pardue is
William J. Meyer's son-in-law.
-16-
<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters.
The Company's Common Stock is traded on the NASDAQ National Market,
NASDAQ symbol - CNSP. The following table sets forth, for the fiscal years
indicated, the range of high and low price quotations.
Fiscal 1996:
- ------------
High Low
------- -------
First Quarter............... $38 3/4 $28 3/4
Second Quarter.............. 39 1/4 27 1/4
Third Quarter............... 28 3/4 20
Fourth Quarter.............. 22 1/2 16
Fiscal 1995:
- ------------
First Quarter............... $12 $ 8 5/8
Second Quarter.............. 21 10 3/4
Third Quarter............... 29 1/2 18 1/2
Fourth Quarter.............. 37 1/4 26 1/2
As of December 31, 1996, there were approximately 1 thousand holders of
record of Common Stock of the Company. The closing price of such stock on the
NASDAQ National Market on December 31, 1996 was $26.25.
The Company has not paid dividends on Common Stock since its inception
in 1984. The Company intends to continue its policy of retaining earnings to
finance future growth.
Item 6. Selected Financial Data.
The following summary sets forth selected financial data with respect
to the Company for the last five fiscal years. The selected financial data has
been derived from the consolidated financial statements of the Company.
This data should be read in conjunction with other financial
information of the Company, including the consolidated financial statements of
the Company and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.
-17-
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share)
The following fiscal year information should be read in conjunction with the
accompanying consolidated financial statements appearing elsewhere in this
report.
<TABLE>
<CAPTION>
Interest
(1) Expense
Net Gross Operating (Income), Net Earnings
CONSOLIDATED OPERATIONS Sales Profit Income Net Income Per Share
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Year Ended October 31, 1996 $187,220 $52,225(2) $ 8,999(2) $2,939 $3,763(2) $1.13(2)
Year Ended October 31, 1995 158,849 51,684 15,305 1,902 8,458 2.50
Year Ended October 31, 1994 116,249 35,237 6,428 678 4,018(3) .80(3)
Year Ended October 31, 1993 82,481 23,396 2,881 (295) 2,376 .50
Year Ended October 31, 1992 60,471 17,139 196 (509) 582 .13
Long-
CONSOLIDATED FINANCIAL Working Current Total Term Total Shareholders'
POSITION Capital Ratio Assets Debt Debt Equity
_______________________________________________________________________________________
As of October 31, 1996 $35,522 1.5:1 $150,918 $24,674 $62,914 $54,392
As of October 31, 1995 47,292 2.2:1 117,360 27,516 45,391 49,550
As of October 31, 1994 53,168 3.0:1 99,061 19,391 30,955 51,101
As of October 31, 1993 38,078 2.4:1 80,303 3,544 19,001 46,563
As of October 31, 1992 34,675 5.6:1 55,415 623 1,131 44,633
_______________________________________________________________________________________
</TABLE>
SELECTED FINANCIAL DATA FOOTNOTES
(1) Operating income represents income before income taxes and interest
expense (income), net.
(2) After unusual non-recurring fourth quarter charge of $3,750 ($2,362 net
of tax or $.72 per share).
(3) After favorable cumulative effect of $238 ($.05 per share) due to
accounting change for income taxes.
-18-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
The following table shows, for the years indicated, the percentage
relationships to net sales of the items included in the Consolidated Statements
of Income and the percentage changes in the dollar amounts of such items from
year-to-year.
Percentage of Net Sales
------------------------------ Percentage Increase
Year Ended October 31, (Decrease)
------------------------------ ----------------------
Year 1996 Year 1995
1996 1995 1994 Over 1995 Over 1994
----- ----- ----- --------- ---------
Net sales............ 100.0% 100.0% 100.0% 17.9% 36.6%
Cost of sales........ 72.1 67.5 69.7 26.0 32.3
----- ----- -----
Gross profit......... 27.9 32.5 30.3 1.0 46.7
----- ----- -----
Selling, general and
administrative..... 20.5 20.0 21.4 20.8 27.5
Research and
development........ 2.9 3.2 3.5 6.3 25.5
Other income, net.... (.3) (.3) (.1) 13.7 154.2
----- ----- -----
23.1 22.9 24.8 18.8 26.3
----- ----- -----
Operating income..... 4.8 9.6 5.5 (41.2) 138.1
----- ----- -----
Interest expense..... 1.8 1.5 1.1 43.5 81.4
Interest income ..... (.2) (.3) (.5) ( 2.2) (26.2)
----- ----- -----
1.6 1.2 .6 54.5 180.5
----- ----- -----
Income before
income taxes....... 3.2 8.4 4.9 (54.8) 133.1
Income taxes......... 1.2 3.1 1.7 (53.5) 151.0
----- ----- -----
Income before
cumulative effect
of accounting
change............. 2.0 5.3 3.2 (55.5) 123.8
Cumulative effect of
accounting change
for income taxes... - - .3 N/M N/M
----- ----- -----
Net income........... 2.0 5.3 3.5 (55.5) 110.5
===== ===== =====
N/M indicates not meaningful.
-19-
<PAGE>
Fiscal 1996 set a new net sales record. Fiscal 1996 net sales increased
$28.4 million or 17.9% to $187.2 million from fiscal 1995 net sales of $158.8
million. The sales increase reflects a continuing strong market demand for fire
sprinkler products, the continued strong market share held by the Company as
well as strong sales for several of the Company's fire sprinkler models. New
construction and the retrofit of existing buildings drive the worldwide market
demand for the Company's fire sprinklers and related products. The Company's
programs to develop and expand production and marketing of products have
continued to increase sales. The Company experienced unit sales gains in sales
of virtually all major product groups. The glass bulb fire sprinkler models
continue to lead the Company's sprinkler sales gains. Strong market demand
helped the Company achieve increased unit sales in other products that are sold
for use in complete automatic fire sprinkler systems. The Company also
experienced particularly strong unit sales of its valves and CPVC plastic pipe
and fittings products. Sales also benefited from several new or expanded
distribution centers and sales offices in the U.S. and abroad as well as the
expansion of the Company's pipe and fittings product lines.
In fiscal 1996, domestic sales increased 14.7% and sales outside the
U.S. increased 45.8% from fiscal 1995. The Company has experienced very
competitive conditions in the sprinkler market causing increased price
competition resulting in depressed sales prices. Sales were also unfavorably
impacted early in the fiscal year due to severe weather conditions in many parts
of the U.S. which slowed construction activity and demand as well as
construction and expansion delays limiting production at the Company's grooved
fittings facility in Alabama. The significant increase outside the U.S. is the
result of increased marketing efforts worldwide, increased production capacity
in the U.S. and at Spraysafe and new sales offices in Hong Kong and China. In
July 1996, the Company announced sales list price increases of 8% on most of its
sprinkler and valve products in an effort to improve the Company's gross profit.
Fiscal 1995 net sales were $158.8 million, an increase of $42.6 million
or 36.6% from the net sales recorded in fiscal 1994. The significant increase in
sales was led by the strong demand for fire sprinklers and related products.
Growth in the new construction market and higher levels of product usage in the
retrofit market have driven the strong market demand for the Company's range of
products. The Company's innovation and expansion of its lines of fire sprinkler
and related products also improved sales from the prior year. The Company
experienced sales gains in virtually all major product groups. The Company's
major product line of fire sprinklers experienced strong sales gains
particularly for its Optima (TM) and Glass Bulb models. Significant sales gains
were experienced in other product lines including plastic, steel pipe and pipe
fittings. Sales improvements were realized in all regions throughout the United
States. Foreign and export sales increased 22.6% in fiscal 1995 from fiscal
1994. Late in fiscal 1995, Spraysafe opened a distribution center in Singapore.
Sales prices continued to be very competitive in fiscal 1995. Overall, sales
prices were slightly higher in fiscal 1995 when compared to fiscal
- 20 -
<PAGE>
1994. The Company increased its list prices on most manufactured products by 7%
in July 1995. This price increase contributed to the overall sales and gross
margin increase for the year.
Cost of sales for fiscal 1996, in terms of dollars of expense,
increased 26.0% or $27.8 million from fiscal 1995. The increase in cost of sales
is due to higher sales volume, increased costs of manufacturing and an unusual
non-recurring charge in the fourth quarter of fiscal 1996. The Company's cost of
sales increased to 72.1% of net sales from 67.5% of net sales in fiscal 1995.
This resulted in a gross margin percentage of 27.9% in fiscal 1996 compared to
32.5% in fiscal 1995. The decrease in gross margin percentage was due to several
items. In the fourth quarter of fiscal 1996, the Company recorded an unusual
non-recurring charge of $3.75 million 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 #15 of the Notes to Consolidated Financial
Statements). Excluding the unusual non-recurring charge, cost of sales as a
percent of net sales would have been 70.1% in fiscal 1996 and the gross margin
percentage would have been 29.9% in fiscal 1996. Another factor reducing the
gross margin percentage in fiscal 1996 from fiscal 1995 were increased costs of
manufacturing sprinklers, valves and associated products. In response to
increased sales volumes, the Company significantly increased production levels
which resulted in some manufacturing inefficiencies. These inefficiencies along
with higher raw material costs and the delay in the startup of the grooved
fittings facility all contributed to the reduction in gross margin in fiscal
1996.
Late in fiscal 1996 the Company experienced improvement in sprinkler
and valve manufacturing efficiencies as compared to earlier in the fiscal year.
The expansion of the grooved fittings facility which depressed earnings in the
earlier quarters of fiscal 1996 improved in virtually all areas in the fourth
quarter including improved production levels and lower costs per unit.
Cost of sales for fiscal 1995 increased $26.2 million, or 32.3%, to
$107.2 million from fiscal 1994. The increase is primarily due to the
significantly higher sales volume. The Company's cost of sales decreased to
67.5% of net sales from 69.7% of net sales in fiscal 1994. This resulted in a
gross margin percentage of 32.5% in fiscal 1995 compared to 30.3% in fiscal
1994. This increase in gross profit margin percentage was due primarily to a
stronger sales mix of higher margin product lines. Other factors include
additional sales from new products, certain price increases that were put into
effect in fiscal 1995 and lower costs of certain products. The increase in
production of manufactured fire sprinkler products to meet market demand has
increased utilization of the Company's production capacity. This has resulted in
a lower unit product cost for certain products. The gross profit margin
percentage for fiscal 1995 was somewhat
- 21 -
<PAGE>
lower than expected due to the costs related to the continuing expansion of the
foundry and manufacturing facility for grooved piping products acquired in late
fiscal 1994. The gross profit margin was also negatively impacted by price
increases to the Company from suppliers of certain materials in fiscal 1995.
Selling, general and administrative expenses increased $6.6 million or
20.8% to $38.4 million in fiscal 1996 from $31.8 million in fiscal 1995. Such
expenses were 20.5% of net sales in fiscal 1996 as compared to 20.0% of net
sales in fiscal 1995. The principal increases in selling, general and
administrative expenses are due to the increase in sales volume and the
expansion of its distribution operations to better serve existing and new
customers. The Company expanded five existing distribution centers to better
serve those markets with more space, personnel and expanded product lines and
opened a new distribution center in Cleveland, Ohio in November 1995. Spraysafe
opened a sales location in Singapore in July 1995 and opened sales locations in
Hong Kong and China late in fiscal 1996. The principal components of the dollar
increase included salaries and fringes of $2.3 million, freight of $1.1 million,
building and vehicle expenses of $832 thousand and travel of $657 thousand.
Selling, general and administrative expenses were 20.0% of net sales in
fiscal 1995 compared to 21.4% of net sales in fiscal 1994. The reduced
percentage of such expenses to net sales is due to sales increasing at a faster
rate than the selling, general and administrative rate of increase. The total
dollar amount of selling, general and administrative expenses increased by 27.5%
or $6.9 million from fiscal 1994. The majority of the increase in expenses is
due directly to the increased sales volume. The expense increases included a
higher amount of personnel, fringe benefits, freight, travel and certain
marketing costs. Distribution costs also increased due to the opening of three
new distribution centers in late 1994 and relocations to larger facilities. In
July 1995, Spraysafe opened a new distribution center in Singapore. The Company
also started a project to increase efficiency of its distribution centers and to
increase service to its customers. Fringe benefit costs increased due to higher
costs of the Employee Stock Ownership Plan ("ESOP") resulting from the
significant increase in the Company's stock price as compared to fiscal 1994.
Legal fees incurred in fiscal 1995 increased significantly over fiscal 1994 to
protect our patents on innovative products.
Research and development expenses for fiscal 1996 were $5.5 million
which was a 6.3% increase of $322 thousand from fiscal 1995. Research and
development expenses were 2.9% of net sales in fiscal 1996 as compared to 3.2%
in fiscal 1995. The research and development expense increase was due to an
increase in the number of personnel for the development and testing of new and
improved products. The decrease in research and development as a percent of
sales was attributable to the significant increase in sales in 1996. The Company
has continued its emphasis on research and development to improve existing
product lines and to provide innovative new products. Research and development
programs are a very important part of the long term growth plan of the Company.
New products have helped the Company maintain its leadership position in the
fire sprinkler industry.
- 22 -
<PAGE>
Research and development expenses for fiscal 1995 reached $5.1 million
which was an increase of $1 million or 25.5% over fiscal 1994. Research and
development expenses were 3.2% of net sales in fiscal 1995 as compared to 3.5%
in fiscal 1994. Such expenses increased at a high rate but somewhat lower than
the growth rate in sales. The higher expenses in fiscal 1995 were related to
increased product development and testing, along with increases in the use of
outside services and in the number of personnel. The Company continued to incur
incremental research and development costs associated with the development and
expansion of the piping products line.
Net interest expense of $2.9 million was 1.6% of net sales in fiscal
1996 as compared to $1.9 million, or 1.2% of net sales in fiscal 1995. Interest
expense was $3.4 million, after capitalizing $290 thousand of interest incurred,
in fiscal 1996 as compared to $2.4 million, after capitalizing $333 thousand in
fiscal 1995. Interest expense increased due to higher levels of debt required to
finance the increased growth in the Company's business, principally in
manufacturing capital expenditures and increased accounts receivable and
inventories. At October 31, 1996, total debt was $62.9 million as compared to
$45.4 million at October 31, 1995. Interest income was $451 thousand in fiscal
1996 as compared to $461 thousand in fiscal 1995. A higher average investment
balance in fiscal 1996 was offset by slightly lower interest income rates.
Net interest expense for fiscal 1995 of $1.9 million was 1.2% of net
sales as compared to $678 thousand, or .6%, in fiscal 1994. Interest expense was
$2.4 million, after capitalizing $333 thousand of interest incurred, as compared
to $1.3 million in fiscal 1994. The increase in interest expense was primarily
due to increased levels of debt. At October 31, 1995, total debt was $45.4
million as compared to $31 million at the end of fiscal 1994. The additional
debt was required to repurchase treasury stock, to fund the Company's capital
expenditures in primarily manufacturing and distribution expansions and to
provide for increased accounts receivable and inventories. Interest income
decreased to $461 thousand in fiscal 1995 from $625 thousand in fiscal 1994. The
Company had lower interest income due primarily to a decline in the investment
balance due to the repurchase of 1.2 million shares of the Company's common
stock for the treasury in December 1994.
The Company's effective income tax rate for fiscal 1996 was 37.9% as
compared to 36.9% in fiscal 1995. The increase in the overall effective income
tax rate is the result of the unfavorable impact of non-deductible expenses on
the lower level of income in 1996 offset by a reduction in the effective state
income tax rate and higher tax-exempt investment income as a percentage of
pre-tax income as compared to fiscal 1995. The overall effective federal income
tax rate includes the unfavorable effect of the market value adjustment of ESOP
shares.
The effective income tax rate for fiscal 1995 was 36.9% as compared to
34.3% in fiscal 1994. The increase in the effective income tax rate includes a
higher effective state income tax rate due to several factors that also
increased the effective U.S. Federal income tax rate. One factor is a
substantial reduction in the nontaxable investment income in fiscal 1995 as
compared to fiscal 1994 resulting from a lower balance in
- 23 -
<PAGE>
investments. The Company also had a higher level of pretax income. Income before
income taxes increased by $7.7 million, or 133.1%, to $13.4 million. The higher
level of pretax income combined with lower amounts of nontaxable income and tax
credits proportionately reduces the favorable effect on the effective tax rate
in fiscal 1995.
The 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 commercial, industrial, residential and institutional
real estate markets. The Company's sales tend to increase the most when there is
a high level of new construction activity in all such real estate markets. In
addition, as a result of relatively higher levels of new construction during
warmer spring and summer months, the demand for sprinkler system components
tends to be greater during the summer and fall than during other seasons.
Liquidity and Capital Resources
The Company's primary sources of long-term and short-term liquidity are
its current financial resources, projected cash from operations and borrowing
capacity. The Company believes that these sources are sufficient to fund the
programs necessary for future growth and expansion. The Company's combined cash,
cash equivalents and short-term investments were $15.4 million at October 31,
1996 as compared to $12.1 million at October 31, 1995. The increase was a result
of normal fluctuations in operations. As of October 31, 1996, the Company has
approximately $3.2 million of available borrowing capacity under its current
lines of credit. The Company is currently in the process of negotiating with its
primary lenders to increase the available borrowings under these lines of
credit. In addition, the Company is currently in the process of obtaining
long-term financing for the construction of a company owned manufacturing
facility for CPVC pipe and fittings.
Cash provided by operating activities in fiscal 1996 was $4.2 million
as compared to $3.9 million in fiscal 1995. Net income plus non-cash items
generated $7.4 million of cash in 1996 as compared to $12.4 million in 1995. The
reduction in 1996 was the result of lower income in 1996. Net cash used for
working capital purposes decreased from $8.5 million in 1995 to $3.3 million in
1996 primarily as a result of increases in accounts payable and accrued
expenses. Increases in sales volume will continue to utilize operating cash flow
to support increased levels of inventories and accounts receivable.
Cash used in investing activities was $21.0 million in fiscal 1996 as
compared to $7.8 million in fiscal 1995. 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
- 24 -
<PAGE>
capacity and improve the operations for the Company's various product lines.
During fiscal 1996 and 1995, $8.6 million and $12.2 million, respectively, were
used for the expansion at the Company's grooved fittings facility in Alabama.
During fiscal 1995, net proceeds of $8.3 million were generated from the sale of
short-term investments which were utilized primarily for the repurchase of
treasury stock.
Cash provided by financing activities in fiscal 1996 was $17.7 million
as compared to $3.8 million in fiscal 1995. The primary source of cash was from
additional borrowings under the Company's lines of credit which increased $9.3
million in fiscal 1996 as compared to an increase of $16.0 million in fiscal
1995. In addition, in November 1995 the Company received proceeds of $11.0
million from the issuance of Industrial Revenue Bonds ("IRB's"). At October 31,
1995, $11.0 million of short-term borrowings had been classified as long-term
debt based upon the issuance of these IRB's. The increase in short-term
borrowings in fiscal 1996 and 1995 and the proceeds from the IRB's were needed
to finance the increased growth in the Company's business, including working
capital needs and capital expenditures. In fiscal 1995, the Company utilized
$11.8 million for the repurchase of 1.2 million shares of its common stock which
are being held in the treasury for possible future issuance.
In July 1994, the Company purchased substantially all of the business
assets of a foundry in the southeastern United States engaged in manufacturing
grooved components for piping systems for $1.6 million and a $200 thousand note
payable. The assets acquired were principally property, plant and equipment. The
Company substantially expanded this facility's production capacity to
accommodate several additional product lines. In addition to the cash required
for the purchase, substantial amounts of working capital and additional
property, plant and equipment were used in the business after the purchase.
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 $7.5 million of which $1.3 million was incurred in
fiscal 1996 and $2.2 million and $4.0 million are expected to be incurred in
fiscal 1997 and 1998, respectively. It is expected that the first phase of the
facility will be completed and in operation in fiscal 1997.
The Company believes that its current cash and investments along with
its future earnings and borrowing capacity will be sufficient to meet the
Company's working capital requirements and anticipated capital expenditures for
fiscal 1997.
- 25 -
<PAGE>
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company is required to adopt this
standard for the year ending October 31, 1997. The Company has elected to adopt
the pro-forma disclosure requirement of this pronouncement. The Financial
Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and undiscounted cash flows
estimated to be generated by those assets are less than the assets carrying
amount. SFAS No. 121 also addresses the accounting for long-lived assets where
disposal is expected. The Company will adopt SFAS No. 121 in the first quarter
of fiscal year 1997 and does not expect the adoption to have a material impact
on the Company's financial position or results of operations.
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 statements as a result of various factors, including without
limitation, those discussed elsewhere in this document.
The Company and approximately thirty other local businesses were
notified by the Environmental Protection Agency ("EPA") in August 1991 that they
may be a potentially responsible party with respect to a groundwater
contamination problem in the vicinity of the Company's primary manufacturing
plant in Lansdale, Pennsylvania. The Company has entered into an Administrative
Order of Consent for Remedial Investigation/Feasibility Study ("AOC") effective
May 19, 1995 with the EPA. Pursuant to the AOC, 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 cleanup
efforts, it is estimated that such costs could range from a minimal amount to
$2.7 million. The Company has not accrued for such cleanup costs.
The Company, in the normal course of business, is party to various
claims and lawsuits with regard to its products and other matters. Management
believes that the ultimate resolution of these matters as well as the other
matters discussed herein will not have a material impact on the Company's
financial position, results of operations or liquidity.
- 26 -
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Company for the years ended October 31,
1996, 1995, and 1994, together with the report thereon of Arthur Andersen LLP
dated December 11, 1996, are set forth on pages F-1 through F-15 hereof. The
supplementary financial data for the Company is set forth on page F-16 hereof.
The remainder of the financial information required by this report is
set forth on page S-1 which follow the financial statements and supplementary
financial data set forth on pages F-1 through F-16 hereof. Such information is
listed in Item 14(a)(2) hereof.
Item 9. Disagreements on Accounting and Financial Disclosure.
There have been no disagreements on any matter of accounting principles
or practices or financial statement disclosure between the Company and its
independent public accountants within the past two fiscal years.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information called for by this Item regarding the executive
officers of the Registrant is incorporated herein by reference to the material
under the caption "Executive Officers of the Registrant" in Part I - Item 4(a)
hereof.
The remainder of the information called for by this Item is
incorporated herein by reference to Registrant's definitive Proxy Statement for
its 1997 Annual Meeting of Shareholders which Registrant intends to file with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K.
Item 11. Executive Compensation.
The information called for by this Item is incorporated herein by
reference to Registrant's definitive Proxy Statement for its 1997 Annual Meeting
of Shareholders which Registrant intends to file with the Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information called for by this Item is incorporated
- 27 -
<PAGE>
herein by reference to Registrant's definitive Proxy Statement for its 1997
Annual Meeting of Shareholders which Registrant intends to file with the
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K.
Item 13. Certain Relationships and Related Transactions.
The information called for by this Item is incorporated herein by
reference to Registrant's definitive Proxy Statement for its 1997 Annual Meeting
of Shareholders which Registrant intends to file with the Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K.
- 28 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) The following documents are filed as a part of this report:
(1) The financial statements and supplemental financial data required
by Item 8 of this report are filed below:
FINANCIAL STATEMENTS:
Page(s)
--------
Report of Independent Public Accountants.............................. F-1
Consolidated Balance Sheets as of October 31, 1996 and
1995................................................................ F-2-3
Consolidated Statements of Income for the years ended
October 31, 1996, 1995 and 1994..................................... F-4
Consolidated Statements of Cash Flows for the years
ended October 31, 1996, 1995 and 1994............................... F-5-6
Consolidated Statements of Shareholders' Equity for the
years ended October 31, 1996, 1995 and 1994......................... F-7
Notes to Consolidated Financial Statements............................ F-8-15
Supplementary Financial Data (unaudited):
Page
------
Quarterly Financial Data.............................................. F-16
(2) The financial statement schedules required by Item 8 of this report
are listed below:
Page
------
Schedule II - Valuation and Qualifying Accounts....................... S-1
Other Schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in the
financial statements or notes thereto.
- 29 -
<PAGE>
(3) Index of Exhibits
The following is a list of the Exhibits filed as a part of this report:
Footnote to Exhibits:-
* Indicates this is a management contract which is a compensatory plan
or arrangement which is required to be filed as an exhibit to this
form pursuant to Item 14(c) of this report.
The following Exhibit has previously been filed with the Registrant's
Annual Report on Form 10-K for the year ended October 31, 1990 as Exhibit 3(a)
and is incorporated herein by reference thereto:
3(a) Restated Articles of Incorporation of the Registrant
The following Exhibit has been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1987 as Exhibit 3(b)
and is incorporated herein by reference thereto:
3(b) Restated By-Laws of the Registrant
The following Exhibits 10(a) through 10(b) have been previously filed
with Registrant's Form S-1 Registration Statement No. 2-96850 dated April 3,
1985, to Amendment No. 1 thereto dated May 8, 1985 or to Amendment No. 2 thereto
dated May 17, 1985 as the Exhibit numbers indicated and are incorporated herein
by reference thereto:
10(a) Deferred Compensation Plan (formerly 10(f))*
10(b) Multiemployer Union-Sponsored Pension Plan (formerly 10(i))
The following Exhibit has been previously filed with Registrant's
Amendment No. 1 to S-1 Registration Statement No. 33- 4828 dated April 24, 1986
as the Exhibit number indicated and is incorporated herein by reference thereto:
10(c) Employment Agreement between Central Sprinkler and Albert H.
Schoenberger, Jr. (formerly 10(t))*
The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1986 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:
- 30 -
<PAGE>
10(d) Form of Indemnification Agreement among Central Sprinkler
Corporation, Central Sprinkler Company, CSC Finance Company
and their Executive Officers and Directors dated September 15,
1986 (formerly 10(t))*
10(e) 1986 Incentive Stock Option Plan, as amended to date (formerly
10(v))*
The following Exhibit has been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1988 as the Exhibit
number indicated and is incorporated herein by reference thereto:
10(f) Incentive Compensation Plan, as amended to date (formerly
10(k))*
The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1990 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:
10(g) Employment Agreement with William J. Meyer dated March 19,
1990 (formerly 10(n))*
10(h) Employment Agreement with George G. Meyer dated March 19, 1990
(formerly 10(o))*
10(i) Employment Agreement with Stephen J. Meyer dated March 19,
1990 (formerly 10(p))*
The following Exhibit has been previously filed with Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended April 30, 1992 as
the Exhibit 19 and is incorporated herein by reference thereto:
10(j) 1988 Non-Qualified Stock Option Plan, as amended*
The following Exhibits have been previously filed with Registrant's
Annual Report or Form 10-K for the year ended October 31, 1992 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:
10(k) Form of Employment Agreement, Schedule of Compensation and
Amendment thereto dated September 22, 1992 for certain
officers (formerly 10(m))*
10(l) Employment Agreement with George S. Polan dated October 1,
1992 (formerly 10(n))*
- 31 -
<PAGE>
10(m) Central Sprinkler Company Term Loan Agreement dated November
20, 1992 (formerly 10(n))
The following Exhibit has been previously filed with Registrant's Form
8-K dated August 17, 1993 as the Exhibit number indicated and is incorporated
herein by reference thereto:
10(n) Agreement to Purchase Assets dated August 12, 1993 among
Sprink Inc., James Hardie Irrigation, Inc., J.H. Industries
(U.S.A.) Inc., Central Sprink Inc., Central Sprinkler Company
and Central Sprinkler Corporation (formerly Exhibit 2.1 and
10(o))
The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1993 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:
10(o) Consulting Agreement between the Company and Churchill
Investment Partners, Inc. dated June 21, 1993 (formerly 10(p))
10(p) Consulting Agreement between the Company and Bradford
Ventures Ltd. dated June 21, 1993 (formerly 10(r))
10(q) 1993 Non-Employee Director Stock Option Plan (formerly (10(s))
The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1994 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:
10(r) Central Sprinkler 401(k) Profit Sharing Plan and Trust, as
amended to date (formerly 10(s))
10(s) Term Loan Agreement between Central Sprinkler Company and
First Fidelity Bank, including exhibits and amendments thereto
(formerly 10(t))
10(t) Term Loan Agreement between Central Sprinkler Company and
CoreStates Bank, N.A., including exhibits and amendments
thereto (formerly 10(u))
- 32 -
<PAGE>
The following Exhibits have been previously filed with Registrant's
Annual Report on Form 10-K for the year ended October 31, 1995 as the Exhibit
numbers indicated and are incorporated herein by reference thereto:
10(u) Amendment of Employment Agreement with William J. Meyer dated
January 5, 1996 (formerly 10(v))*
10(v) Amendment of Employment Agreement with George G. Meyer dated
January 5, 1996 (formerly (10(w))*
10(w) Amendment of Employment Agreement with Stephen J. Meyer dated
January 5, 1996 (formerly 10(x))*
10(x) Employment Agreement with James E. Golinveaux dated November
30, 1995 (formerly 10(y))*
10(y) Amendments to Term Loan Agreement between Central Sprinkler
Company and First Fidelity Bank (formerly 10(z))
10(z) Amendments to Term Loan Agreement between Central Sprinkler
Company and CoreStates Bank, N.A. (formerly 10(aa))
10(aa) Loan Agreement between Alabama State Industrial Development
Authority and Central Castings Corporation dated as of
November 1, 1995 (formerly 10(ab))
10(ab) Lease Agreement between Calhoun County Economic Development
Council and Central Castings Corporation dated as of November
1, 1995 (formerly 10(ac))
10(ac) Letter of Credit and Reimbursement Agreement by and between
First Fidelity Bank, National Association and Central Castings
Corporation dated as of November 1, 1995 (formerly 10(ad))
The following Exhibits are filed herewith:
10(ad) Central Sprinkler Corporation Employee Stock Ownership Plan,
as amended to date. (pages 58-114 in the sequential numbering
system)
10(ae) Central Sprinkler Corporation 1996 Equity Compensation Plan
(pages 115-124 in the sequential numbering system)*
- 33 -
<PAGE>
10(af) Interest Rate and Currency Exchange Agreement between Central
Castings Corporation and CoreStates Bank, N.A.(pages 125-150
in the sequential numbering system)
10(ag) Construction Loan Agreement between Central CPVC Corporation
and CoreStates Bank, N.A. including exhibits and amendments
thereto. (pages 151-232 in the sequential numbering system)
11 Statement of Computation of Earnings per Common Share (page
233 in the sequential numbering system)
21 Subsidiaries of Registrant (page 234 in the sequential
numbering system)
23 Consent of Independent Public Accountants (page 235 in the
sequential numbering system)
(b) No reports on Form 8-K were filed during the quarter ended October 31, 1996.
- 34 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CENTRAL SPRINKLER CORPORATION
By: /s/William J. Meyer
_________________________
William J. Meyer
President
Date: January 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and as of the date indicated.
Signature Title Date
_______________________ _______________________ _______________________
/s/Winston J. Churchill Chairman of the January 24, 1997
- ----------------------- Board and Director
Winston J. Churchill
/s/William J. Meyer President and January 24, 1997
- ----------------------- Director
William J. Meyer
/s/George G. Meyer Chief Executive January 24, 1997
- ----------------------- Officer, Treasurer
George G. Meyer Secretary and
Director
/s/Albert T. Sabol Executive Vice- January 24, 1997
- ----------------------- President Finance
Albert T. Sabol (Principal Financial
and Accounting Ofricer)
/s/Stephen J. Meyer Director January 24, 1997
- -----------------------
Stephen J. Meyer
/s/Joseph L. Jackson Director January 24, 1997
- -----------------------
Joseph L. Jackson
- 35 -
<PAGE>
Signature Title Date
_______________________ _______________________ _______________________
/s/Barbara M. Henagan Director January 24, 1997
- -----------------------
Barbara M. Henagan
/s/Richard P. O'Leary Director January 24, 1997
- -----------------------
Richard P. O'Leary
/s/Thomas J. Sharbaugh Director January 24, 1997
- -----------------------
Thomas J. Sharbaugh
/s/Timothy J. Wagg Director January 24, 1997
- -----------------------
Timothy J. Wagg
- 36 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Central Sprinkler Corporation:
We have audited the accompanying consolidated balance sheets of Central
Sprinkler Corporation (a Pennsylvania corporation) and subsidiaries as of
October 31, 1996 and 1995, and the related consolidated statements of income,
cash flows and shareholders' equity for the years ended October 31, 1996, 1995,
and 1994. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Central Sprinkler Corporation
and subsidiaries as of October 31, 1996 and 1995, and the results of their
operations and their cash flows for the years ended October 31, 1996, 1995, and
1994, in conformity with generally accepted accounting principles.
As explained in Note 2 to the consolidated financial statements, effective
November 1, 1994, the Company adopted the provisions of Statement of Position
No. 93-6 "Employers' Accounting for Employee Stock Ownership Plans". In
addition, as explained in Note 1 to the consolidated financial statements,
effective November 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes".
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Philadelphia, Pa.,
December 11, 1996
F-1
<PAGE>
Central Sprinkler Corporation and Subsidiaries
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
October 31,
------------------------
ASSETS 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,884 $ 2,025
Short-term investments 12,466 10,079
Accounts receivable, less allowance for doubtful
receivables of $4,622 in 1996 and $3,813 in 1995,
respectively 38,518 31,686
Inventories 43,414 35,955
Deferred income taxes 7,245 5,038
Prepaid expenses and other assets 610 650
---------- ----------
Total current assets 105,137 85,433
---------- ----------
Property, Plant and Equipment:
Land 810 337
Buildings and improvements 10,246 6,306
Machinery and equipment 47,122 35,529
Furniture and fixtures 1,988 1,421
---------- ----------
60,166 43,593
Less -- Accumulated depreciation (18,807) (15,567)
---------- ----------
41,359 28,026
---------- ----------
Goodwill, less accumulated amortization of $3,263 in 1996 and
$3,012 in 1995, respectively 2,759 3,010
---------- ----------
Other Assets 1,663 891
---------- ----------
$150,918 $117,360
========== ==========
</TABLE>
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
October 31,
------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Short-term borrowings $ 34,390 $ 14,062
Current portion of long-term debt 3,850 3,813
Accounts payable 19,993 12,724
Accrued expenses 10,388 6,896
Accrued income taxes 994 646
---------- ----------
Total current liabilities 69,615 38,141
---------- ----------
Long-Term Debt 24,674 27,516
---------- ----------
Other Noncurrent Liabilities 448 577
---------- ----------
Deferred Income Taxes 1,789 1,576
---------- ----------
Commitments and Contingent Liabilities (Note 15)
Shareholders' Equity:
Common stock, $.01 par value; shares authorized --
15,000; issued -- 5,474 in 1996 and 5,472 in 1995,
respectively 55 55
Additional paid-in capital 29,763 29,118
Retained earnings 46,702 42,939
Cumulative translation adjustments (7) (109)
Deferred cost-Employee Stock Ownership Plan (ESOP) (6,018) (6,360)
Unrealized investment holding gains, net -- 10
---------- ----------
70,495 65,653
Less -- Common stock in treasury, at cost -- 1,680
shares in 1996 and 1995 (16,103) (16,103)
---------- ----------
Total shareholders' equity 54,392 49,550
---------- ----------
$150,918 $117,360
========== ==========
</TABLE>
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $187,220 $158,849 $116,249
Cost of Sales 134,995 107,165 81,012
---------- ---------- ----------
Gross profit 52,225 51,684 35,237
---------- ---------- ----------
Operating Expenses:
Selling, general and administrative 38,395 31,795 24,934
Research and development 5,455 5,133 4,091
Other income, net (624) (549) (216)
---------- ---------- ----------
43,226 36,379 28,809
---------- ---------- ----------
Operating income 8,999 15,305 6,428
---------- ---------- ----------
Interest Expense (Income):
Interest expense 3,390 2,363 1,303
Interest income (451) (461) (625)
---------- ---------- ----------
2,939 1,902 678
---------- ---------- ----------
Income before income taxes 6,060 13,403 5,750
Income Taxes 2,297 4,945 1,970
---------- ---------- ----------
Income Before Cumulative Effect of
Accounting Change 3,763 8,458 3,780
Cumulative Effect of Accounting Change
for Income Taxes -- -- 238
---------- ---------- ----------
Net Income $ 3,763 $ 8,458 $ 4,018
========== ========== ==========
Net Income per Common Share:
Before Cumulative Effect of Accounting
Change $ 1.13 $ 2.50 $ .75
Cumulative Effect of Accounting Change
for Income Taxes -- -- .05
---------- ---------- ----------
Net Income per Common Share $ 1.13 $ 2.50 $ .80
========== ========== ==========
</TABLE>
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net Income $ 3,763 $ 8,458 $ 4,018
Noncash items included in income:
Depreciation and amortization 4,731 3,520 3,083
Cumulative effect of accounting change -- -- (238)
Deferred income taxes (1,878) (144) (1,708)
Deferred costs 818 529 183
Decrease (increase) in --
Accounts receivable, net (6,832) (6,779) (4,587)
Inventories (7,459) (7,302) (4,978)
Prepaid expenses and other assets 40 252 (233)
Increase (decrease) in --
Accounts payable 7,269 4,993 (386)
Accrued expenses 3,492 1,595 1,381
Accrued income taxes 232 (1,260) 1,690
---------- ---------- ---------
Cash provided by (used for) operating
activities 4,176 3,862 (1,775)
---------- ---------- ---------
Investing activities:
Acquisition of property, plant and
equipment (17,813) (16,047) (6,285)
Acquisition of business -- -- (1,571)
Sales of short-term investments 5,716 22,069 7,283
Purchases of short-term investments (8,103) (13,814) (8,318)
Other long-term assets (772) (9) 22
---------- ---------- ---------
Cash used for investing activities (20,972) (7,801) (8,869)
---------- ---------- ---------
Financing activities:
Short-term borrowings, net 9,328 16,576 13,908
Purchase of treasury stock -- (11,750) --
Proceeds from long-term debt 12,018 948 20
Repayments of long-term debt (3,823) (3,088) (2,174)
Proceeds from exercised stock options 31 745 17
Tax benefits from exercised stock options 9 368 3
Other -- net 92 (23) 158
---------- ---------- ---------
Cash provided by financing activities 17,655 3,776 11,932
---------- ---------- ---------
Increase (decrease) in cash and cash
equivalents 859 (163) 1,288
Cash and cash equivalents at beginning of year 2,025 2,188 900
---------- ---------- ---------
Cash and cash equivalents at end of year $ 2,884 $ 2,025 $ 2,188
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest expense $ 3,466 $ 2,638 $ 1,239
========= ========= =========
Income taxes $ 3,943 $ 6,061 $ 2,016
========= ========= =========
Interest income $ (485) $ (854) $ (928)
========= ========= =========
Supplemental schedule of non-cash investing and
financing activities:
Refinancing of short-term borrowings with
long-term debt $ -- $11,000 $20,000
========= ========= =========
Acquisition:
Fair value of assets acquired $ -- $ -- $ 1,771
Note payable issued -- -- (200)
--------- --------- ---------
Cash paid for net assets acquired $ -- $ -- $ 1,571
========= ========= =========
</TABLE>
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Cumulative Deferred Investment Treasury
---------------------- Paid-in Retained Translation Cost- Holding Stock,
Shares Amount Capital Earnings Adjustments ESOP Gains, Net Common
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October
31, 1993 5,396 $54 $27,654 $30,463 $(279) $(6,976) $ -- $ (4,353)
Exercise of
stock
options 2 -- 20 -- -- -- -- --
Annual ESOP
costs -- -- -- -- -- 297 -- --
Translation
adjustments -- -- -- -- 203 -- -- --
Net income -- -- -- 4,018 -- -- -- --
---------- ---------- -------------- ------------ --------------- ------------ -------------- -------------
Balance, October
31, 1994 5,398 54 27,674 34,481 (76) (6,679) -- (4,353)
Purchase of
1,237 shares
of common
stock for
treasury -- -- -- -- -- -- -- (11,750)
Unrealized
investment
holding
gains, net -- -- -- -- -- -- 10 --
Exercise of
stock
options 74 1 1,112 -- -- -- -- --
Annual ESOP
costs -- -- 332 -- -- 319 -- --
Translation
adjustments -- -- -- -- (33) -- -- --
Net income -- -- -- 8,458 -- -- -- --
---------- ---------- -------------- ------------ --------------- ------------ -------------- -------------
Balance, October
31, 1995 5,472 55 29,118 42,939 (109) (6,360) 10 (16,103)
Unrealized
investment
holding
losses, net -- -- -- -- -- -- (10) --
Exercise of
stock
options 2 -- 40 -- -- -- -- --
Annual ESOP
costs -- -- 605 -- -- 342 -- --
Translation
adjustments -- -- -- -- 102 -- -- --
Net income -- -- -- 3,763 -- -- -- --
---------- ---------- -------------- ------------ --------------- ------------ -------------- -------------
Balance, October
31, 1996 5,474 $55 $29,763 $46,702 $ (7) $(6,018) $ -- $(16,103)
========== ========== ============== ============ =============== ============ ============== =============
</TABLE>
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
Central Sprinkler Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company -- The Company's operations are conducted in one business
segment as a manufacturer and distributor of components used in automatic
fire sprinkler systems. These fire sprinkler system components are used in
commercial, industrial, residential and institutional properties and are sold
to over 3 thousand customers, most of which are sprinkler installation
contractors.
Principles of Consolidation -- The consolidated financial statements
include the accounts of Central Sprinkler Corporation and its subsidiaries
(the "Company"). All significant intercompany transactions and accounts have
been eliminated.
Cash Equivalents -- The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents for the purpose of determining cash flows.
Short-Term Investments -- The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115-Accounting for Certain Investments in
Debt and Equity Securities prospectively effective November 1, 1994. The
short-term investments have been categorized as available for sale and as a
result are stated at fair value. Unrealized holding gains and losses are
included as a separate component of shareholders' equity until realized. All
of the Company's investment holdings have been classified in the consolidated
balance sheet as current assets.
Inventories -- Inventories are stated at the lower of cost (first-in,
first-out) or market.
Property, Plant and Equipment -- Property, plant and equipment are stated
at cost. Depreciation and amortization are being recorded on a straight-line
basis over the estimated lives of the assets which range from 3 to 20 years.
Goodwill -- Goodwill represents the excess of the purchase cost of net
assets acquired over their fair market value and is amortized primarily on a
straight-line basis over 25 years. The Company considers goodwill to be fully
realizable through future operations.
Fair Value of Financial Instruments -- The Company's financial instruments
consist primarily of cash and cash equivalents, short-term investments,
accounts receivable, accounts payable, accrued expenses and debt instruments.
The book values of cash and cash equivalents, short-term investments,
accounts receivable, accounts payable and accrued expenses are considered to
be representative of their respective fair values. Based on the terms of the
Company's debt instruments that are outstanding as of October 31, 1996, the
carrying values are considered to approximate their respective fair values.
See Note 7 for the terms and carrying values of the Company's various debt
instruments.
Foreign Currency Translation -- Assets and liabilities of a foreign
subsidiary are translated into U.S. dollars at the rate of exchange
prevailing at the end of the year. Income statement accounts are translated
at the average exchange rate prevailing during the year. Translation
adjustments resulting from this process are recorded directly in
shareholders' equity.
Research and Development Costs -- Costs of research, new product
development and product redesign are expensed as incurred.
Income Taxes -- Effective November 1, 1993, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 109-Accounting for Income
Taxes. The cumulative effect of this accounting change resulted in the
recognition of a one-time gain of $238 or $.05 per common share in fiscal
1994. SFAS No. 109 requires that deferred tax liabilities and assets be
recognized for the tax effects of difference between the financial reporting
and tax bases of assets and liabilities.
F-8
<PAGE>
Net Income Per Common Share -- Net income per common share is computed
using the weighted average number of shares of common stock and common stock
equivalents outstanding (dilutive stock options).
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the fiscal year. Actual amounts could differ from those estimates.
New Accounting Pronouncements -- The Financial Accounting Standards Board
has issued SFAS No. 123, "Accounting for Stock-Based Compensation." The
Company is required to adopt this standard for the year ending October 31,
1997. The Company has elected to adopt the pro-forma disclosure requirement
of this pronouncement. The Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and undiscounted cash flows estimated to be generated
by those assets are less than the assets carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets where disposal is expected.
The Company will adopt SFAS No. 121 in the first quarter of fiscal year 1997
and does not expect the adoption to have a material impact on the Company's
financial position or results of operations.
Reclassifications -- Certain reclassifications of previously reported
balances have been made to conform with the current year classification of
such balances.
2. NET INCOME PER COMMON SHARE:
The weighted average common shares outstanding were 3,330, 3,382, and
5,004 for the years ended October 31, 1996, 1995 and 1994, respectively.
Effective November 1, 1994, the Company adopted Statement of Position No.
93-6, "Employers' Accounting for Employee Stock Ownership Plans" ("SOP"). The
SOP requires that unreleased shares of the Company's stock in the ESOP are
excluded from the average number of common shares outstanding when computing
net income per common share. In accordance with this SOP, 640 and 672
unreleased ESOP shares were excluded from the average number of common shares
outstanding in fiscal year 1996 and 1995, respectively. In accordance with
the provisions of the SOP, fiscal year 1994 information has not been
restated.
3. FOREIGN OPERATIONS:
The Company owns Spraysafe Automatic Sprinklers Limited ("Spraysafe"), a
Company in the United Kingdom. Spraysafe manufactures sprinkler heads and
distributes these and other products in Europe and other foreign countries.
Significant financial information about Spraysafe's operations consist of
the following--
Year Ended October 31,
1996 1995 1994
- ------------------------------------------------------------------------------
Sales $16,807 $11,210 $8,800
Operating income 1,390 1,202 702
Net income 789 699 440
Total assets 10,803 7,903 5,065
Total liabilities 6,799 4,862 2,710
- ------------------------------------------------------------------------------
Foreign and export net sales for the Company are comprised of the
following --
Year Ended October 31
----------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
Pacific and
Far East $10,127 $ 6,679 $ 5,775
Europe 7,038 4,901 3,747
Canada 4,847 3,987 3,358
Other 1,379 478 203
---------- --------- ---------
$23,391 $16,045 $13,083
========== ========= =========
- -----------------------------------------------------------------------------
F-9
<PAGE>
4. SHORT-TERM INVESTMENTS:
The following is a summary of the estimated fair value of available for
sale securities by balance sheet classification --
October 31,
------------------------------------
1996 1995
- -----------------------------------------------------------------------------
Cash Equivalents:
U.S. Money Market
Funds $ 872 $ 517
========= ========
Short-Term Investments:
Tax-Exempt
Securities $12,466 $10,079
========= ========
- -----------------------------------------------------------------------------
Gross unrealized holding gains and losses for the years ended October 31,
1996 and 1995 were not material. The net unrealized holding gains for the
years ended October 31, 1996 and 1995 have been recorded as a separate
component of shareholders' equity. The gross proceeds from sales and
maturities of investments were $5,716 and $22,069 for the years ended October
31, 1996 and 1995, respectively. Gross realized gains and losses for the
years ended October 31, 1996 and 1995 were not material. For the purpose of
determining gross realized gains and losses, the cost of securities sold is
based upon specific identification.
Short-term investments are generally comprised of variable rate securities
that provide for optional or early redemption within twelve months and the
contractual maturities are generally greater than twelve months.
5. INVENTORIES:
Inventories consist of the following --
October 31,
---------------------------------------
1996 1995
- ------------------------------------------------------------------------------
Raw materials and
work in process $12,957 $11,237
Finished goods 30,457 24,718
--------- ---------
$43,414 $35,955
========= =========
- -----------------------------------------------------------------------------
6. SHAREHOLDERS' EQUITY:
Redeemable Preferred Stock -- The Company has authorized 2,000 shares of
Redeemable Preferred Stock, $.01 par value. At October 31, 1996, 1995 and
1994, there were no shares issued and outstanding.
<PAGE>
Treasury Stock -- The Company repurchased 1,237 shares of its common stock
on December 21, 1994 at a cost of $11,750. There were no repurchases in
fiscal 1996 or 1994. All shares are being held in the treasury for possible
future issuance.
Stock Options -- The Company has stock option plans ("Option Plans") which
cover a maximum of 936 shares of common stock which may be granted. The
Option Plans provide for the granting of 163 incentive stock options under a
plan adopted in 1986 and 713 nonqualified or incentive stock options under a
plan adopted in 1988 and amended in fiscal 1991. Under a plan adopted in
1993, the Company can issue up to 60 nonqualified options under a
non-employee director stock option plan. Options have been granted to
officers, other key employees and non-employee directors at exercise prices
not less than 100% of the fair market value of the Company's common stock on
the date of the grant. The options become exercisable after the date of the
grant and expire ten years from the date of grant.
The following table presents data related to the Option Plans --
-----------------------------------------------------------------------------
In- Non-
centive qualified
Stock Stock Option
Options Options Price
--------- ----------- --------------
October 31, 1993 126 393 $8.60-$13.80
Granted - 12 13.00
Exercised (2) - 8.60
--------- -----------
October 31, 1994 124 405 8.60- 13.80
Granted - 12 15.60
Exercised (29) (44) 8.60- 13.80
--------- -----------
October 31, 1995 95 373 8.60- 15.60
Granted 100 12 29.95
Exercised - (2) 13.00
--------- -----------
October 31, 1996 195 383 $8.60-$29.95
========= ===========
- ------------------------------------------------------------------------------
At October 31, 1996, 503 of the outstanding options were exercisable and
237 nonqualified or incentive stock options were available for
F-10
<PAGE>
grant under the 1988 plan and 24 nonqualified stock options were available
for grant under the 1993 plan.
7. DEBT:
The Company's long-term debt consists of the following --
October 31,
------------------------------------
1996 1995
- -----------------------------------------------------------------------------
Industrial Revenue Bonds $10,450 $ --
Term Loan 7,417 8,417
Term Loan 7,500 8,500
Term Note 1,000 2,000
Mortgage Loans 1,067 464
Foreign Term Loan 1,090 948
Short-term borrowings
refinanced subsequent
to year end -- 11,000
--------- ---------
28,524 31,329
Less-Current portion (3,850) (3,813)
--------- ---------
$24,674 $27,516
========= =========
- ------------------------------------------------------------------------------
The Company's Industrial Revenue bonds consist of principal amount of
$8,000 State of Alabama Industrial Development Authority Adjustable
Convertible Taxable Industrial Revenue Bonds and principal amount of $3,000
Calhoun County (Alabama) Economic Development Council Adjustable Convertible
Taxable Industrial Revenue Bonds ("IRB's") which were issued in November
1995. The IRB's have a 20 year term and are payable in annual installments of
$550 and bear interest at a variable rate which was 5.55% at October 31,
1996. The IRB's are collateralized by a letter of credit and are subject to
early redemption under certain circumstances. In January 1996, the Company
entered into an interest rate swap agreement which fixes the interest rate on
the IRB's in order to reduce the impact of changes in interest rates. The
interest rate is fixed at 6.13% for the remainder of the 20 year term.
Interest expense is recorded monthly at the fixed rate plus related fees. The
difference between the variable rate paid to IRB bondholders and the fixed
rate costs are settled monthly between the Company and a bank which is party
to the swap agreement. As of October 31, 1996, the swap agreement has a
notional principal balance of $10,450 and the swap agreement matures at the
time the related IRB's mature. The swap agreement is with a large national
bank and the Company does not anticipate nonperformance by the counterparty.
In January 1996, the Company converted the two term loans, the term note
and the mortgage loan secured by the Company's primary manufacturing facility
from a variable interest rate option to a fixed interest rate option under
the terms of the respective loan agreements.
The Company obtained two $10,000 ten-year term loans from banks in fiscal
1994. These term loans are unsecured and the proceeds of such loans were used
to refinance borrowings under unsecured lines of credit from such banks. The
loan proceeds were used primarily for working capital purposes and the
acquisition and expansion of facilities to accommodate the growth in the
Company's business. One term loan is payable through 2004 in monthly
principal installments of $84 and bears interest at a fixed rate which was
6.67% at October 31, 1996. The other term loan is payable through 2004 in
quarterly principal installments of $250 and bears interest at a fixed rate
which was 6.48% at October 31, 1996.
The Company's term note is unsecured and payable through 1997 in
semi-annual payments of $500. Interest on this note is fixed and was 5.98% at
October 31, 1996.
For both the term loans and the term note, the Company must maintain
certain tangible net worth, certain financial ratios and other requirements
under the provisions of these loan agreements. As of October 31, 1996, the
Company is in compliance with these loan agreements, as amended.
The Company's mortgage loans consists of two mortgages. One mortgage is
secured by the Company's primary manufacturing facility and is payable
through 2002 in monthly installments of $6 and bears interest at a fixed rate
which was 6.20% at October 31, 1996. The second mortgage note was obtained in
August 1996 for land and buildings for expanded offices and is payable
through 2006 in monthly installments of $6 and bears interest at a variable
rate which was 8% at October 31, 1996.
F-11
<PAGE>
In fiscal 1996, Spraysafe refinanced a five-year unsecured term loan
obtained in 1995 with a seven-year term loan in the amount of $1,065. This
loan is secured by machinery and equipment and is payable through 2003 in
monthly installments of $10 and bears interest at a variable rate which was
7.13% at October 31, 1996. The loan proceeds were used primarily for
machinery and equipment and the expansion of Spraysafe's manufacturing
facility.
The Company's short-term borrowings are demand loans under lines of
credit. At October 31, 1995, $11,000 of short-term borrowings were classified
as long-term debt based on the Company's issuance of the IRB's on November
21, 1995. The Company has domestic demand loans outstanding at October 31,
1996 of $31,770 which bear interest at variable interest rates. The weighted
average interest rate on these loans was 5.90% and 6.46% at October 31, 1996
and 1995, respectively. Spraysafe has short-term borrowings in the form of a
demand loan which is payable in British pounds in the amount of $2,620 at
October 31, 1996. This loan bears interest at a variable interest rate which
was 7.13% and 7.98% at October 31, 1996 and 1995, respectively. Approximately
$3,230 of the Company's lines of credit were unused and available for use at
October 31, 1996.
Annual principal payments required under long-term debt obligations are as
follows --
-----------------------------------------------------------------------------
Fiscal Year
-------------
1997 $ 3,850
1998 2,828
1999 2,836
2000 2,847
2001 2,859
Thereafter 13,304
---------
$28,524
=========
- -----------------------------------------------------------------------------
8. CAPITALIZED INTEREST:
The interest cost incurred by the Company for fiscal year 1996 and 1995
amounted to $3,680 and $2,696, respectively. The Company capitalized $290 and
$333 of interest cost in fiscal years 1996 and 1995, respectively, in
connection with the expansion of the grooved fittings manufacturing facility. No
interest was capitalized in fiscal 1994.
9. INCOME TAXES:
The following table summarizes the source of income before income taxes
and information concerning the provision for income taxes --
Year Ended October 31,
---------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
Income before income taxes--
Domestic $ 4,876 $12,284 $ 5,102
Foreign 1,184 1,119 648
--------- --------- ---------
Total $ 6,060 $13,403 $ 5,750
========= ========= =========
Provision for income taxes:
Current--
U.S. Federal $ 3,040 $ 3,674 $ 2,774
State 740 1,067 696
Foreign 395 348 208
--------- --------- ---------
Total 4,175 5,089 3,678
--------- --------- ---------
Deferred--
U.S. Federal (1,386) 54 (1,328)
State (492) (270) (380)
Foreign - 72 -
--------- --------- ---------
Total (1,878) (144) (l,708)
--------- --------- ---------
Total tax
provision $ 2,297 $ 4,945 $ 1,970
========= ========= =========
- -----------------------------------------------------------------------------
Income tax expense differs from the amount currently payable because
certain revenues and expenses are reported in the income statement in periods
which differ from those in which they are subject to taxation. The principal
differences in timing between the income statement and taxable income involve
certain accrued expenses and reserves not currently deductible for tax
purposes, tax regulations which limit deductions for bad debt expense, the
uniform cost capitalization rules and different methods used in computing tax
and book depreciation. Such differences are recorded as deferred income taxes
in the accompanying balance sheets under the liability method.
The components of the deferred income tax assets and liabilities, measured
under SFAS No. 109 at the beginning and end of the fiscal year, are listed
below. There is no valuation reserve for deferred tax assets.
F-12
<PAGE>
10/31/96 11/1/95
- ------------------------------------------------------------------------------
Deferred Tax Assets--
Accounts receivable $ 2,129 $ 1,813
Inventories 2,672 1,702
Pensions 179 230
Patents 613 466
ESOP 362 282
Other non-deductible
liabilities 2,024 813
---------- ---------
Deferred tax assets 7,979 5,306
---------- ---------
Deferred Tax Liabilities--
Depreciation (1,762) (1,105)
Other (761) (739)
---------- ---------
Deferred tax
liabilities (2,523) (1,844)
---------- ---------
Net Deferred Tax Asset $ 5,456 $ 3,462
========== =========
- -----------------------------------------------------------------------------
The effective tax rate is reconciled to the statutory U.S. Federal Income
tax rate as follows--
Year Ended October 31,
---------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
U.S. Federal
statutory rate 34.0% 34.0% 34.0%
Amortization of
goodwill 1.3 .6 1.4
State income
taxes, net of
U.S. federal
benefit 3.3 3.9 2.3
Income tax credits
utilized (1.3) (1.6) (1.9)
Tax-exempt interest (2.3) (1.0) (3.5)
Market value
adjustment of
ESOP shares 3.1 .8 -
Other (.2) .2 2.0
------- ------- -------
37.9% 36.9% 34.3%
======= ======= =======
- -----------------------------------------------------------------------------
10. RELATED-PARTY TRANSACTIONS:
The Company has financial consulting agreements with companies affiliated
with certain of its directors/shareholders. These agreements provide for
aggregate annual fees of $200 per year plus out-of-pocket expenses. These
agreements extend through October 1997 and automatically renew for an additional
year unless notice of cancellation is given.
The Company leases an aircraft from a business in which a director and
executive officer of the Company is the sole proprietor. For the years ended
October 31, 1996, 1995, and 1994, the Company recorded lease expense of $395,
$322, and $270, respectively.
The Company expensed $346, $594, and $97 in the years ended October 31,
1996, 1995, and 1994, respectively, for legal fees to a firm having a member
who is also a director of the Company.
<PAGE>
11. LEASES:
The Company has operating leases for its warehousing facilities and
certain transportation and office equipment. The total rental expense for the
years ended October 31, 1996, 1995 and 1994 was $1,325, $1,118, and $975,
respectively. The future minimum rental payments required under operating
leases that have initial or remaining lease terms in excess of one year as of
October 31, 1996 are as follows--
- -----------------------------------------------------------------------------
Fiscal Year
-------------
1997 $1,451
1998 1,192
1999 933
2000 605
2001 416
Thereafter 144
- -----------------------------------------------------------------------------
12. INCENTIVE COMPENSATION PLANS:
The Company has an Incentive Compensation Plan which provides awards to
officers and other employees of the Company. Amounts credited to the
incentive compensation fund are 8% of monthly operating income, as defined in
the Plan, if monthly operating income meets specified levels. Another plan
provides three executive officers with a bonus paid on annual net income in
excess of the 1985 base income level at a combined rate of 2 1/2 % of the
increase. The total amounts charged to expense for all such plans were
$1,013, $1,553 and $590 for the years ended October 31, 1996, 1995 and 1994,
respectively. Awards from the Incentive Compensation Plan are made to
officers and other employees based on both specified percentage participation
in the Plan as well as special awards determined at the discretion of the
Company's Chairman.
F-13
<PAGE>
13. EMPLOYEE BENEFIT PLANS:
Certain of the Company's manufacturing employees are covered by a
union-sponsored, collectively bargained, Multiemployer Pension Plan. The
Company contributed and charged to expense $277, $248 and $210 for the years
ended October 31, 1996, 1995 and 1994, respectively. These contributions are
determined in accordance with the provisions of negotiated labor contracts
and generally are based on the number of hours worked. At October 31, 1996,
the Company had no liability for unfunded vested benefits of this plan.
The Company sponsors a 401(K) Profit Sharing Plan which covers certain
employees not covered by collective bargaining agreements and maintains
Deferred Compensation Plans which provide retirement benefits for certain
officers. The expense under these plans was $222, $189 and $175 for the years
ended October 31, 1996, 1995 and 1994, respectively.
The Company has an ESOP which covers certain employees not covered by
collective bargaining agreements. At October 31, 1996, the ESOP holds 778
shares of the Company's common stock. On April 28, 1993, the ESOP purchased
750 shares of the Company's common stock in a leveraged transaction at a
market value of $9.70 per share for a total cost of $7,275. The total cost of
the plan for this transaction is being amortized over 15 years. The
unamortized cost is reported as Deferred Cost-ESOP in the equity section of
the accompanying balance sheets. The ESOP issued a note payable to the
Company which will be repaid over 15 years with interest at a variable rate.
This note will be repaid from cash contributed to the plan by the Company.
The stock will be committed to be released to the eligible employees over 15
years based upon the annual principal and interest payments made by the ESOP
on the note payable to the Company. As described in Note 2, the Company
adopted SOP 93-6 effective November 1, 1994. Compensation expense is recorded
for shares committed to be released to employees based on the fair market
value of those shares in the period in which they are committed to be
released. The difference between cost and fair market value of committed to
be released common shares, which was $605 in 1996 and $332 in 1995, is
recorded in additional paid-in capital. The ESOP shares are summarized as
follows -
October 31,
---------------------------------------
1996 1995
- -----------------------------------------------------------------------------
Committed to be
released shares 157 123
Unreleased shares 621 657
--------- --------
Total ESOP shares 778 780
========= ========
Fair value of
unreleased
shares $11,023 $21,681
========= ========
- -----------------------------------------------------------------------------
The ESOP expense for the years ended October 31, 1996, 1995 and 1994 was
$947, $651 and $297, respectively.
14. ACQUISITION:
The Company purchased substantially all of the business assets of a foundry
in the Southeastern United States engaged in manufacturing components for piping
systems for a purchase price of $1,771 effective July 15, 1994. The assets
consist primarily of property, plant and equipment and were acquired for cash
and a $200 note payable that reduced the cash payment of the purchase price.
15. COMMITMENTS AND CONTINGENT LIABILITIES:
Unusual Non-Recurring Omega Charge
The Company has become aware of installation problems in certain steel pipe
systems utilizing Omega(TR) 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(TR) 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.
F-14
<PAGE>
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. 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 tax or $.72 per share) for the estimated costs to be incurred by the
Company for this program. The Company will continue to monitor the results of
the tests and costs incurred.
Agreements and 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 and is intended to be financed by a long-term
obligation. Capital expenditures incurred in fiscal 1996 amounted to $1,300
and are expected to be $2,200 in fiscal 1997 and $4,000 in fiscal 1998. These
commitments are for buildings and various machinery and equipment. As of
October 31, 1996, the open commitments relating to this facility were
approximately $6.2 million for fiscal 1997 and 1998. It is expected that the
first phase of the facility will be completed and in operation in fiscal
1997. A second phase will include additional building and machinery and
equipment to expand further the Company's productive capacity.
The Company is a party to patent licensing agreements to manufacture and sell
certain types of sprinkler devices. Under the terms of the agreements, the
Company is required to pay a royalty on net commissioned sales (as defined in
the agreements) of the licensed product during the terms of the patents. The
expense under these agreements was $323, $417 and $389 for the years ended
October 31, 1996, 1995 and 1994, respectively.
The Company has employment contracts with certain officers under which their
employment could not be terminated without five years
prior notice. The Company also has various purchase commitments for
materials, supplies, machinery and equipment incident to the ordinary conduct
of business. Such commitments are not at prices in excess of current market.
Environmental Matters
The Company and approximately thirty other local businesses were notified by
the Environmental Protection Agency ("EPA") in August 1991 that they may be a
potentially responsible party with respect to a groundwater contamination
problem in the vicinity of the Company's primary manufacturing plant in
Lansdale, Pennsylvania. The Company has entered into an Administrative Order
of Consent for Remedial Investigation/Feasibility Study ("AOC") effective May
19, 1995 with the EPA. Pursuant to the AOC, 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
cleanup efforts it is estimated that such costs could range from a minimal
amount to $2,700. The Company has not accrued for such cleanup costs.
Summary
The Company, in the normal course of business, is party to various claims and
lawsuits with regard to its products and other matters. Management believes
that the ultimate resolution of these matters as well as the other matters
discussed herein will not have a material impact on the Company's financial
position or results of operations.
F-15
<PAGE>
SUPPLEMENTARY FINANCIAL DATA
Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
(Amounts in thousands, except per share)
----------------------------------------------
First Second Third Fourth
----------------------------------------------
<S> <C> <C> <C> <C>
1996
Net sales $40,750 $44,801 $49,491 $52,178
Gross profit 12,281 13,281 14,251 12,412*
Net income 1,041 1,265 1,304 153*
Net income per share .31 .38 .39 .05*
1995
Net sales $33,714 $37,990 $42,758 $44,387
Gross profit 10,612 12,258 14,006 14,808
Net income 1,448 1,923 2,389 2,698
Net income per share .39 .60 .73 .82
1994
Net sales $24,463 $25,766 $30,831 $35,189
Gross profit 7,438 8,339 9,049 10,411
Income before cumulative effect of
accounting change 424 769 1,188 1,399
Net income 662 769 1,188 1,399
Net income per share before cumulative
effect of accounting change .08 .15 .24 .28
Net income per share .13 .15 .24 .28
</TABLE>
*After unusual non-recurring fourth quarter charge of $3,750 ($2,362 net of
tax or $.72 per share).
Note: The total of the individual quarterly net income per common share may
not equal the net income per common share for the year due to changes in the
number of shares outstanding during the year.
F-16
<PAGE>
SCHEDULE II
CENTRAL SPRINKLER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
RESERVE FOR DOUBTFUL RECEIVABLES
(Amounts in thousands)
Balance Charges Balance
Beginning to End of
Year Ended of Period Expense Recoveries Writeoffs Period
---------- --------- ------- ---------- --------- ------
October 31, 1996 $3,813 $1,330 $90 $611 $4,622
====== ====== === ==== ======
October 31, 1995 $3,737 $ 975 $64 $963 $3,813
====== ====== === ==== ======
October 31, 1994 $2,691 $1,467 $89 $510 $3,737
====== ====== === ==== ======
S-1
<PAGE>
CENTRAL SPRINKLER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
As Amended and Restated
Effective November 1, 1991
<PAGE>
TABLE OF CONTENTS
Article Subject Matter Page
- ------- -------------- ----
I Statement of Purpose 1
II Definitions 3
III Participation Eligibility 14
IV Participant Contributions 15
V Employer Contributions 16
VI Allocation of Employer Contributions 19
VII Vesting 24
VIII Distributions 26
IX The Fund 33
X Investment By the Trustee 34
XI Amendment and Termination 41
XII Plan Administrator 43
XIII Claims Procedure 47
XIV Top-Heavy Provisions 49
XV Miscellaneous 52
-i-
<PAGE>
ARTICLE I
STATEMENT OF PURPOSE
1.
1 General Purpose. Central Sprinkler Corporation, a Pennsylvania corporation
(the "Employer"), has established the Central Sprinkler Corporation Employee
Stock Ownership Plan (the "Plan") to enable each eligible person employed by the
Employer to benefit, in accordance with the terms of the Plan, from an
accumulation of stock of the Employer and to provide for employee participation
in the ownership of the Employer. It is anticipated that the Employer will
contribute Company Stock (as defined in the Plan) to the Plan on a periodic
basis. It is also anticipated that the Trustee of the Plan may arrange from time
to time for loans meeting the requirements of "exempt loans" under ERISA and the
Code, that the proceeds of these loans will be used as soon as practicable to
purchase Company Stock, that such Company Stock will be held in a suspense
account pending payments on such loans, that Employer contributions (and, in
certain instances, dividends on Company Stock) will be used to pay principal and
interest on such loans, that at the end of each Plan Year, Company Stock will be
released from the suspense account to reflect the payments on such loans and
will be allocated to the accounts of Participants, and that Participants will
enjoy all the rights of an owner with respect to the Company Stock allocated to
their accounts but subject to the Plan's vesting rules, all as more specifically
described in this Plan.
1.2 Qualification Under the Internal Revenue Code. It is
intended that the Plan be a qualified plan within the meaning of Section 401(a)
of the Code and that the funding vehicle(s) associated with the Plan be exempt
from federal income taxation pursuant to the provisions of Section 501(a) of the
Code. Subject to the provisions of Article V of the Plan (identifying certain
circumstances authorized by statute or regulation the occurrence of which may
result in refunds to the Employer of amounts contributed under the Plan), the
assets of the Plan shall be applied exclusively for the purposes of providing
benefits to Participants and Beneficiaries under the Plan and for defraying
expenses incurred in the administration of the Plan and its corresponding
funding vehicle(s).
In order to ensure that the Plan and the accompanying Fund, as
defined below, have been in compliance with the Tax Reform Act of 1986 and have
been qualified under sections 401(a) and 501(a) of the Code since the Company
adopted the Plan, the Plan is now amended to incorporate all the changes
required to be made by applicable legislation, rules and regulations subsequent
to the Tax Reform Act of 1986 and to be retroactively effective as of November
1, 1991, including the applicable requirements of the Unemployment Compensation
Amendments of 1992, the Omnibus Budget Reconciliation Act of 1993, and final
regulations issued by the Internal Revenue Service under section 401(a)(4) of
the Code.
-1-
<PAGE>
1.3 Plan Documents. The Plan shall consist of this instrument
together with its corresponding Trust Agreement, all amendments to either of the
foregoing, and all documents specifically incorporated in either of the
foregoing by reference. Descriptive materials published in connection with the
Plan, such as plan descriptions, summaries of plan provisions, and notices
relating to modification of the Plan, do not constitute part of the Plan and
shall not give rise to rights or benefits not provided under the Plan.
-2-
<PAGE>
ARTICLE II
DEFINITIONS
2.1 "Account" shall mean the entire interest of a Participant in the Plan.
Unless otherwise specified, the value of a Participant's Account and the
quantity of Company Stock allocable to a Participant's Account shall be
determined as of the Valuation Date of the Plan coincident with or next
following the occurrence of the event to which reference is made. While a
Participant will have only one Account, a Participant's Account may consist of
several "Subaccounts" in order to differentiate, as needed, among the categories
of investments allocated to his Account or for such other purposes as the Plan
Administrator may consider advisable.
2.2 "Acquisition Loan" shall mean a loan which is used to
purchase Financed Shares and which satisfies the requirements of Treas. Reg.
ss.54.4975-7(b) and Section 2550.408(b)-3 of the Department of Labor
Regulations, or any future law or regulation that modifies either or both of
these two regulations and affects the exemption for such loans.
2.3 "Affiliated Company" shall mean (a) such parent or
subsidiaries of the Company (or companies under common control with the Company)
which are included in a controlled group of corporations with the Company, as
determined under Section 414(b) of the Code, and (b) any member of an affiliated
service group, as determined under Section 414(m) of the Code, of which the
Company is a member, and (c) such trades or businesses under common control with
the Company, as determined under Section 414(c) of the Code, and (d) any entity
required to be aggregated with the Company pursuant to Section 414(o) of the
Code and regulations thereunder. An entity shall be considered an Affiliated
Company only with respect to such period as the relationship described in the
preceding sentence exists. Solely for purposes of applying sections 414(b) and
(c) of the Code to the limitations on Annual Additions of Section 6.6, the
phrase "more than 50 percent" shall be substituted for the phrase "at least 80
percent" whenever the latter phrase appears in Section 1563(a)(1) of the Code,
which is then incorporated by reference in sections 414(b) and (c) of the Code.
2.4 "Anniversary Date" shall mean the last day of each Plan
Year.
2.5 "Annual Addition" shall mean, as to any Participant for
any Limitation Year, the sum of the following amounts allocated a Participant's
accounts under the Plan and any other qualified defined contribution plan
maintained by the Employer or an Affiliated Company:
(a) Employer contributions;
-3-
<PAGE>
(b) Participant contributions (including mandatory or
voluntary employee contributions made under a qualified defined benefit plan
maintained by the Employer or an Affiliated Company, but excluding any rollover
contributions);
(c) forfeitures; and
(d) amounts described in Code section 415(l)(1) (relating to
contributions allocated to individual medical accounts which are part of a
pension or annuity plan ) and Code section 419A(d)(2) (relating to contributions
allocated to post-retirement medical benefit accounts for Key Employees.
2.6 "Beneficiary" shall mean the person or entity designated
or otherwise determined to be such in accordance with Section 8.4.
2.7 "Benefit Commencement Date" shall mean the date on which
there is distributed to the Participant (or to the Beneficiary of a deceased
Participant) the entire amount standing to his credit under the Plan, or, if
distribution is to be made as an annuity or otherwise in more than one payment,
the date on which the first such benefit payment is made to the Participant or
to the Beneficiary of a deceased Participant.
2.8 "Board of Directors" shall mean the Board of Directors of
the Company.
2.9 "Break in Service" shall mean failure by a Participant or
Employee to complete more than five hundred (500) Hours of Service during the
applicable twelve- consecutive month period. [However, no Break in Service shall
be deemed to have occurred until there occurs a termination of the
employer-employee relationship between the Employer and the Employee or
Participant involved. An Employee shall be deemed to incur a one-year Break in
Service on the last day of the first such twelve-month period. A Break in
Service shall not be deemed to have occurred during any period of Excused
Absence if the Employee returns to the service of the Employer within the time
permitted pursuant to the provisions of the Plan setting forth circumstances of
Excused Absence. Service with an Affiliated Company shall be considered service
with the Employer for the purposes of this Section 2.10. Solely for the purposes
of determining whether or not a Break in Service has occurred, there shall be
credited to each Employee absent from service on a "parenthood leave" the lesser
of (i) the number of Hours of Service that would normally have been credited to
the Participant but for such absence if determinable, and if not determinable,
then the number of Hours of Service determined by multiplying the number of days
of such absence by eight (8), or (ii) five hundred one (501) Hours of Service,
with all of the Hours of Service so credited being deemed to have been credited
to the computation period in which such absence begins if necessary to avoid a
Break in Service in such computation period or, if not necessary to avoid such a
Break in Service, then to the computation period next following the computation
period in which such absence began. The term "parenthood leave" shall mean any
absence from work for reasons of (i) pregnancy of the Employee, (ii) the birth
of a child of the Employee or the
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placement of a child with the Employee for the purposes of adoption, or (iii)
the care of a child for a period beginning immediately following such birth or
placement. Nothing in this Section shall be construed as establishing, expanding
or amending any maternity or paternity leave policy of the Employer.
2.10 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.11 "Committee" shall mean the persons appointed by the Board
of Directors to supervise the administration of the Plan, as hereinafter
provided.
2.12 "Common Stock" shall mean shares of the common stock of
the Company, which constitute qualifying employer securities as that term is
defined in section 4975(e)(8) of the Code.
2.13 "Common Stock Fund" shall mean the Investment Medium
dedicated to the acquisition and holding of Common Stock.
2.14 "Company" shall mean Central Sprinkler Corporation, a
Pennsylvania corporation, or its successors.
2.15 "Company Stock" shall mean the Common Stock and Preferred
Stock issued by the Company.
2.16 "Compensation" shall mean, except as otherwise provided
in the Plan, wages within the meaning of section 3401(a) of the Code for the
purposes of income tax withholding at the source but determined without regard
to any rules that limit the remuneration included in wages based on the nature
or location of the employment or the services performed (such as the exception
for agricultural labor in section 3401(a)(2) of the Code. Compensation shall
include only that Compensation which is actually paid to a Participant during
the determination period. Except as provided elsewhere in the Plan, the
determination period shall be the Plan Year. However, for the Plan Year in which
an Employee begins participation in the Plan and the Plan Year in which an
Employee ends participation in the Plan, the determination period is the portion
of the Plan Year during which the Employee is a Participant in the Plan.
Compensation shall include any amount which is contributed by the Employer
pursuant to a salary reduction agreement and which is not includible in the
gross income of the Employee under section 125, 402(e)(3), 402(h), or 403(b) of
the Code; Compensation deferred under an eligible deferred compensation plan
within the meaning of section 457(d) of the Code; and employee contributions
described in section 414(h)(2) of the Code that are picked up by the employing
unit and, thus, are treated as employer contributions.
Notwithstanding the foregoing, the amount of a Participant's
Compensation taken into account under the Plan for any Plan Year shall not
exceed $200,000 ($150,000, effective November 1, 1994), or such other amount as
may be applicable under section
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401(a)(17) of the Code. In determining Compensation for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except that
in applying such rules, the term "family" shall include only the spouse of the
Participant and any lineal descendants who have not attained age 19 before the
close of the Plan Year. If, as a result of the application of the rules of
Section 414(q)(6) of the Code, the limitation is exceeded, then the limitation
shall be prorated among the affected family members in proportion to each such
member's Compensation as determined under this Section prior to application of
this limitation.
2.17 "Disability" shall mean a Participant's incapacity to
engage in any substantial gainful activity because of a medically determinable
physical or mental impairment which can be expected to result in death, or to be
of long, continued and indefinite duration. Such determination of Disability
shall be made by the Plan Administrator with the advice of competent medical
authority. All Participants in similar circumstances will be treated similarly.
Disability resulting from the following causes shall not constitute 'Disability'
under the Plan: (a) service in the Armed Forces or Merchant Marine of the United
States or any other country; (b) warfare; (c) willful participation in any
criminal act; (d) intentionally self-inflicted or self-incurred injury; or (e)
use of drugs or narcotics contrary to law.]
2.18 "Disability Retirement Date" shall mean the first day of
the month following the month in which (a) the Plan Administrator has determined
that a Participant has suffered a Disability, and (b) the Participant ceases to
be employed by the Company and all Affiliated Companies on account of such
Disability.
2.19 "Earliest Retirement Age" shall mean for purposes of
Section 2.42 the earlier of (a) the date on which the Participant is entitled to
a distribution under the Plan or (b) the later of (i) the date the Participant
attains age 50, or (ii) the earliest date on which, under the Plan, the
Participant could elect to receive benefits if the Participant incurred a
Termination Date.
2.20 "Effective Date" shall mean November 1, 1991.
2.21 "Eligible Employee" shall mean each person in the employ
of an Employer, other than (a) any person whose terms and conditions of
employment are determined through collective bargaining, unless the collective
bargaining agreement provides for the eligibility of such person to participate
in this Plan, (b) any person who, as to the United States, is a non-resident
alien with no U.S. source income from the Employer, and (c) any person who is an
Employee solely by reason of being a leased employee within the meaning of
section 414(n) or 414(o) of the Code.
2.22 "Employee" shall mean a person who is employed by an
Employer or an Affiliated Company. A person who is not otherwise employed by an
Employer or Affiliated Company shall be deemed to be employed by any such
company if he is a
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leased employee with respect to whose services such Employer or Affiliated
Company is the recipient, within the meaning of section 414(n) or 414(o) of the
Code, but to whom Code section 414(n)(5) does not apply.
2.23 "Employer" shall mean the Company or any Affiliated
Company which has duly adopted the Plan with the consent of the Board of
Directors. An Affiliated Company shall be considered an Employer only with
respect to such period as the Affiliated Company participates in the Plan for
the benefit of its Employees.
2.24 "Employment Commencement Date" shall mean the first date
on which an individual performs an Hour of Service as described in Section 2.30.
2.25 "Excused Absence" means any of the following:
(a) Absence on leave granted by the Employer for any cause
for the period stated in such leave or, if no period is stated, then for six (6)
months and any extensions that the Employer may grant in writing. For the
purposes of this provision, the Employer will give similar treatment to all
Employees in similar circumstances.
(b) Absence in any circumstance so long as the Employee
continues to receive his regular compensation from the Employer.
(c) Absence in the armed forces of the United States or
government service in time of war or national emergency.
(d) Absence by reason of illness or disability until such
time as the employment relationship between Employer and Employee is severed.
An "Excused Absence" shall cease to be an "Excused Absence" and shall be deemed
a period of severance commencing as of the Employee's Severance from Service
Date if the Employee fails to return to the service of the Employer (A) within
five (5) days of the expiration of any leave of absence referred to in
Subsection (a) of this Section; (B) at such time as the payment of regular
compensation' referred to in Subsection (b) of this Section is discontinued; (C)
within six (6) months after his discharge or release from active duty, or, if
the Employee does not return to the service of the Employer within the said six
(6) month period by reason of a disability incurred while in the armed forces,
if he returns to service with the Employer upon the termination of such
disability as evidenced by release from confinement in a military or veterans
health care facility; or (D) upon recovery from illness or disability. The
Employer shall be the sole judge of whether or not recovery from illness or
disability has occurred for this purpose.
2.26 "Financed Shares" shall mean the shares of Company Stock
acquired by the Trustee with the proceeds of an Acquisition Loan.
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2.27 "415 Compensation" shall mean a Participant's
remuneration including wages, salaries, fees for professional services and other
amounts received for personal services actually rendered in the course of
employment with an Employer maintaining the Plan or an Affiliated Company
including overtime, bonuses, premium time, etc., but excluding the following:
(a) contributions to a deferred compensation plan which,
without regard to Section 415 of the Code, are not includable in the
Participant's gross income for the taxable year in which contributed;
(b) contributions made on behalf of a Participant to a
simplified employee pension plan described in section 408(k) of the Code;
(c) distributions from a deferred compensation plan (except
from an unfunded nonqualified plan when includable in gross income);
(d) amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property) held by a Participant
either becomes freely transferable or is no longer subject to a substantial risk
of forfeiture;
(e) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; or
(f) other amounts which receive special tax benefits, such as
premiums for group term life insurance (to the extent excludable from gross
income) or Employer contributions towards the purchase of an annuity contract
described in Section 403(b) of the Code.
For purposes of the definition of "Key Employee" and the
definition of "Highly Compensated Employee," "415 Compensation" shall include
elective contributions that are excluded from gross income under sections 125,
402(e)(3), 402(h) or 403(b) of the Code.
2.28 "Fund" shall mean the separate fund established for this
Plan, administered under the Trust Agreement, out of which benefits payable
under this Plan shall be paid.
2.29 "Highly Compensated Employee" shall mean:
(a) each Employee who, with respect to the Employer or an
Affiliated Company, performed services (an "Active Employee") during the Plan
Year for which a determination is being made (the "Determination Year") and who
during such Determination Year, or the preceding Determination Year:
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(i) was at any time a 5% owner, as defined in section
416(i) of the Code;
(ii) received 415 Compensation in excess of $75,000
(adjusted to reflect any cost of living increases provided in
accordance with Section 415(d) of the Code);
(iii) received 415 Compensation in excess of $50,000
(adjusted to reflect any cost-of-living increases provided in
accordance with Section 415(d) of the Code) and was in the top paid
group of Active Employees (based on 415 Compensation received)
(excluding, solely for purposes of determining the number of Employees
and persons in the top-paid group, Employees described in section
414(q)(8) of the Code) during such year; or
(iv) was an officer (as defined in Section 416(i) of the
Code and the regulations issued thereunder) and received 415
Compensation greater than fifty percent (50%) of the amount in effect
under Section 415(b)(1)(A) of the Code for the calendar year in which a
determination is made.
Notwithstanding the foregoing, with respect to the
Determination year of reference, an Employee not described in paragraphs (ii),
(iii) or (iv) above for the preceding year (without regard to this paragraph)
shall not be treated as described in paragraphs (ii), (iii) or (iv) unless the
Employee is one of the top 100 Active Employees (based on 415 Compensation
received) during such Determination Year.
(b) For purposes of the definition of Highly Compensated
Employee, the following definitions and rules shall apply: (i) the top-paid
group consists of the top 20% of Employees ranked on the basis of 415
Compensation received during the year; (ii) the number of officers is limited to
50 (or, if lesser, the greater of 3 employees or 10% of employees) excluding
those employees who may be excluded in determining the top-paid group; and (iii)
when no officer has compensation in excess of 50% of the Code ss.415(b)(1)(A)
limit, the highest paid officer is treated as highly compensated.
(c) a Highly Compensated Employee who is either 5% owner or
one of the ten most highly compensated employee is subject to the family
aggregation rules of Code ss.414(q)(6). "Family member" for this purpose shall
mean the spouse and the lineal ascendants and descendants (and spouses of such
ascendants and descendants) of any employee or former employee.
2.30 "Hour of Service" shall be defined in a manner consistent
with regulations published by the Secretary of Labor at Title 29, Code of
Federal Regulations, Section 2530.200b-2, and shall mean (a) each hour for which
an Employee is paid or entitled to payment for the performance of duties for the
Employer or an Affiliated Company during the applicable computation period, (b)
each hour for which an Employee
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is paid or entitled to payment by the Employer or an Affiliated Company on
account of a period of time during which no duties are performed (irrespective
of whether or not the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury or military
duty, or leave of absence, and (c) each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the Employer or an
Affiliated Company. Hours of Service shall be credited to the computation period
in which earned, regardless of when determined or awarded. Notwithstanding the
foregoing, except as provided in the following sentence, (i) not more than five
hundred one (501) Hours of Service shall be credited to an Employee on account
of any single continuous period during which the Employee performs no duties for
the Employer or an Affiliated Company; (ii) no credit shall be granted for any
period with respect to which an Employee receives payment or is entitled to
payment under a plan maintained solely for the purpose of complying with
applicable workmen's compensation or disability insurance laws; and (iii) no
credit shall be granted for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee. Each week of
absence for military service in the armed forces of the United States from which
service the Employee returns to the Employer or an Affiliated Company within the
period during which he has legally protected reemployment rights shall count as
a number of Hours of Service equal to the number of Hours of Service that would
have been credited to the Employee with respect to the employee's customary week
of employment during the month immediately preceding the date on which absence
for military service commenced. Service rendered at overtime or other premium
rates shall be credited at the rate of one (1) Hour of Service for each hour for
which pay is earned, regardless of the rate of compensation in effect with
respect to such hour. No Hours of Service shall be credited twice.
If an Employee's payroll records are normally kept on other
than an hourly basis, Hours of Service shall be credited on the basis of the
manner in which the Employee's payroll records are maintained, utilizing such of
the following equivalencies as may be appropriate:
Basis Upon Which the Credit Granted if Employee
Employee's Payroll Earns One (1) or More
Records are Maintained Hours of Service During Period
---------------------- ------------------------------
Shift Actual hours for full shift
Day 10 Hours of Service
Week 45 Hours of Service
Semi-monthly Payroll Period 95 Hours of Service
Months of employment 190 Hours of Service
2.31 "Investment Media" shall mean those modes of investment
in which a Participant's Account balance is invested.
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2.32 "Late Retirement Date" The term Late Retirement Date
means the first day of the month coincident with or next following the date a
Participant is separated from service with the Employer after his Normal
Retirement Age, for any reason other than death.
2.33 "Non-Highly Compensated Employee" shall mean an Employee
who is not a Highly Compensated Employee.
2.34 "Normal Retirement Age" shall mean age 65.
2.35 "Normal Retirement Date" shall mean the first day of the
month coincident with or next following the date on which a Participant attains
his Normal Retirement Age.
2.36 "Participant" shall mean any Eligible Employee who
participates in this Plan in accordance with its provisions.
2.37 "Plan" shall mean the Central Sprinkler Corporation
Employee Stock Ownership Plan, as set forth herein and as hereafter amended from
time to time. The Plan is intended to be a stock bonus plan and an "employee
stock ownership plan" within the meaning of Section 4975(e)(7) of the Code and
is designed to invest primarily in qualifying employer securities within the
meaning of section 4975(e)(8) of the Code.
2.38 "Plan Administrator" shall mean the person or persons
designated by the Board of Directors in accordance with Section 12.1 hereof and
any successor(s) thereto to administer the Plan.
2.39 "Plan Year" shall mean the twelve-month period commencing
on November 1 and ending the following October 31.
2.40 "Preferred Stock" shall mean the shares of convertible
preferred stock issued by the Company in conjunction with the operation of this
Plan and which are "qualifying employer securities" within the meaning of Code
Section 4975(e)(8).
2.41 "Preferred Stock Fund" shall mean the Investment Medium
dedicated to the acquisition and holding of Preferred Stock.
2.42 "Qualified Domestic Relations Order" or "QDRO" shall mean
a "qualified domestic relations order" within the meaning of section
206(d)(3)(B) of ERISA and section 414(p) of the Code
2.43 "Required Distribution Date" shall mean the April 1 of
the calendar year following the later of (a) the calendar year in which the
Participant attains age 70 1/2; or (b) in the case of a Participant who attained
age 70 1/2 before January 1, 1988, and who
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is not a Five-Percent Owner at any time during the five-year period ending in
the year in which the Participant attains age 70 1/2, the calendar year in which
the Participant retires.
2.44 "Severance from Service Date" shall mean the earliest of:
(a) the date on which the individual retires, quits, is
discharged from employment or dies; or
(b) the first anniversary of the first date of a period in
which the individual remains absent from service (with or without pay) from the
Employer and all Affiliated Companies for any reason other than retirement,
quit, discharge from employment or death, such as vacation, holiday, sickness,
disability, leave of absence or layoff; or
(c) the date on which the individual retires, quits, is
discharged from employment or dies while on a period of absence described in
Subsection (b).
2.45 "Spouse" shall mean the spouse or surviving spouse of the
Participant, as the context requires; provided, that a former spouse shall be
treated as the spouse or surviving spouse to the extent provided under a QDRO.
2.46 "Suspense Account" shall mean the account created by the
Trustee to hold Company Stock acquired with the proceeds of an Acquisition Loan.
2.47 "Termination Date" shall mean the earlier of the dates on
which an Employee dies or his employment terminates for any reason.
2.48 "Trust Agreement" shall mean the trust agreement entered
into by the Employer and the Trustee, which trust agreement forms a part of, and
implements the provisions of this Plan.
2.49 "Trustee" shall mean, initially, William J. Pardue,
George G. Meyer, Albert T. Sabol and such other individual or individuals as
subsequently designated by the Board of Directors to replace them.
2.50 "Valuation Date" shall mean the last day of the Plan Year
and such other date on which a valuation of the Fund is made.
2.51 "Year of Service" shall mean a 12 consecutive month
period during which an Employee has completed at least 1,000 Hours of Service.
(a) Eligibility Computation Period. For purposes of
determining Years of Service and Breaks in Service for eligibility, the 12
consecutive month period shall begin
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with the Employee's Employment Commencement Date and, where additional periods
are necessary, succeeding anniversaries of his Employment Commencement Date.
(b) Vesting Computation Period. In computing Years of Service
and Breaks in Service for vesting, the 12 consecutive month period shall be the
Plan Year. However, active participation as of the last day of the Plan Year is
not required in order for a Participant to be credited with a Year of Service
for vesting purposes. If any Plan Year is less than 12 consecutive months, the
number of Hours of Service required to accrue a Year of Service (or to incur a
1-Year Break in Service), in such short Plan Year, shall bear the same ratio to
1,000 (or in the case of a Break in Service, 500) as the number of days in the
short Plan Year bears to 365. In addition, service performed by an Employee
prior to the Effective Date shall be disregarded.
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ARTICLE III
PARTICIPATION ELIGIBILITY
3.1 Minimum Age and Service Requirement. Every Eligible
Employee who has completed one Year of Service and who has attained age 21 shall
become a Participant as of November 1 or May 1 coincident with or immediately
following the date such requirements are satisfied.
3.2 Procedure for and Effect of Admission. Each Eligible
Employee who becomes eligible for admission to participation in the Plan shall
complete such forms and provide such data as are reasonably required by the Plan
Administrator as a precondition of admission to the Plan. By becoming a
Participant, each Eligible Employee shall for all purposes be deemed
conclusively to have assented to the terms and provisions of the Plan, the
corresponding Trust Agreement and to all amendments to such instruments.
3.3 Changes in Status. A Participant who ceases to be
employed as an Eligible Employee shall no longer be eligible to participate in
the Plan as an active Participant until he again becomes an Eligible Employee at
which time he will again become an active Participant. In the event that a
person who has been in the employ of the Employer in a category of employment
not eligible for participation in the Plan (or who has been employed by an
Affiliated Company) becomes an Eligible Employee by reason of a change in status
(without experiencing a Break in Service) to a category of employment eligible
for participation, he shall become an active Participant as of the later of the
date of such change to Eligible Employee status or the date specified in
Section 3.1.
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ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.1 No Participant Contributions. No contributions shall be
required of, nor shall any contributions be accepted from, any Participant.
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ARTICLE V
EMPLOYER CONTRIBUTIONS
5.1 Contributions to Pay Principal and Interest on
Acquisition Loans. For each Plan Year during which an Acquisition Loan is
outstanding, the Employer shall make contributions under the Plan with respect
to such Plan Year as follows:
(a) Contributions to Pay Principal. On or before the date on
which any principal payment is due under the terms of any Acquisition Loan then
outstanding (to the extent that such payment due exceeds the income generated by
the Company Stock held in the suspense account with respect to the loan on which
principal payments are being made), the Employer shall make such contributions
as shall be necessary so that the Trustee can timely make the principal payments
on that Acquisition Loan, provided that such contribution is currently
deductible with respect to the Plan Year within which or for which made, unless
the Employer determines, in its absolute discretion, to make such contribution
whether or not it is currently deductible.
(b) Contributions to Pay Interest. For each Plan Year during
which a payment of interest is due under the terms of any Acquisition Loan then
outstanding, the Employer may make such contribution, if any, to the Fund as the
Board of Directors, in its absolute discretion, determines in order to enable
the Trustee to make any such interest payments (to the extent that such interest
payments exceed the income generated by the Company Stock held in the Suspense
Account with respect to the Loan on which interest payments are being made).
Contributions which the Employer determines to make pursuant to this Subsection,
shall be paid to the Trustee on or before the due date for the interest payment
with respect to which the contribution is being made.
5.2 Additional Employer Contributions. In addition to the
contributions which it makes pursuant to Section 5.1, the Employer may make such
contributions to the Fund in respect of the fiscal year of the Employer during
which this Plan is first adopted and in respect of each fiscal year thereafter
during which the Plan is in effect, in such amounts as the Board of Directors,
in its absolute discretion, shall timely determine, provided that any such
additional contribution may not be made if it would exceed the amount which is
deductible by the Employer for that fiscal year after giving effect to the
contributions it has made for that fiscal year pursuant to Section 5.1. In
allocating any such additional contribution among the Accounts of Participants
eligible to share in such allocation, the contribution shall be allocated
separately from the contribution made pursuant to Section 5.1, shall be
allocated to a separate Subaccount of the Accounts of such Participants, and
shall otherwise be allocated as provided in Section 6.1. Additional Employer
contributions may be made in cash, in Company Stock, or in any combination of
cash and/or Company Stock. This Section shall not be construed as requiring the
Employer to make contributions in any specific fiscal year; provided, however,
that notwithstanding
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any other provision of the Plan to the contrary, the Employer shall make such
contributions as may be required to meet the minimum accrual requirements under
the Code relating to Top-Heavy Plans for any period during which the Plan is
Top-Heavy, to the extent such minimum accrual requirements are not satisfied by
the allocation of the Employer's contributions, if any, made pursuant to Section
5.1.
5.3 Reinstatement of Certain Forfeitures. In addition to the
contributions pursuant to Section 5.1 and 5.2, the Employer shall pay to the
Plan such sums, if any, as may be required to reinstate previously forfeited
amounts to the Accounts of Participants as provided for in Section 6.2.
5.4 Timing of Contributions. Except as otherwise provided in
Section 5.1, the Employer shall pay its contribution made with respect to any
Plan Year to the Trustee on or before the date established for the filing of the
Employer's federal income tax return (including any extensions of that date) for
the fiscal year of the Employer ending with or within the Plan Year with respect
to which such contribution is made.
5.5 Contingent Nature of Contributions. Each contribution
made by Employer pursuant to the provisions of Sections 5.1 and 5.2 hereof is
hereby made expressly contingent on the deductibility thereof for federal income
tax purposes for the year with respect to which such contribution is made,
except as otherwise specifically provided in such Sections.
5.6 Exclusive Benefit; Refund of Contributions. All
contributions made by the Employer are made for the exclusive benefit of the
Participants and their Beneficiaries, and such contributions shall not be used
for nor diverted to purposes other than for the exclusive benefit of the
Participants, their Beneficiaries and, where applicable, their respective
Alternate Payees (including the costs of maintaining and administering the Plan
and Fund). Notwithstanding the foregoing, to the extent that such refunds do
not, in themselves, deprive the Plan of its qualified status, refunds of
contributions shall be made to the Employer under the following circumstances
and subject to the following limitations:
(a) Initial Non-Qualification. If the Plan as amended fails
initially to satisfy the qualification requirements of section 401(a) of the
Code, and if the Company declines to amend the Plan to satisfy such
qualification requirements, contributions made prior to the determination that
the Plan has initially failed to qualify shall be returned to the Company.
(b) Disallowance of Deduction. To the extent that a federal
income tax deduction is disallowed for any contribution made by Employer, other
than a contribution which, pursuant to Sections 5.1 and 5.2, the Employer has
committed itself to make notwithstanding failure of deductibility, the Trustee
shall refund to the Employer the amount so disallowed within one (1) year of the
date of such disallowance.
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(c) Mistake of Fact. In the case of a contribution which is
made in whole or in part by reason of a mistake of fact, so much of the Employer
contribution as is attributable to the mistake of fact shall be returnable to
the Employer upon demand, upon presentation of evidence of the mistake of fact
to the Trustee and of calculations as to the impact of such mistake. Demand and
repayment must be effectuated within one (1) year after the payment of the
contribution to which the mistake applies.
In the event that any refund is paid to the Employer
hereunder, such refund shall be made without regard to net investment gains
attributable to the contribution, but shall be reduced to reflect net investment
losses attributable thereto. Such refund shall be deducted from among the
Accounts of the Participants only to the extent that the amounts to be refunded
were credited to such Accounts.
Notwithstanding any other provision of this Section, no refund
shall be made to the Employer which is specifically chargeable to the Account(s)
of any Participant(s) in excess of one hundred percent (100%) of the amount in
such Account(s) nor shall a refund be made by the Trustee of any funds,
otherwise subject to refund hereunder, which have been distributed to
Participants, Beneficiaries and Alternate Payees. In the case that such
distributions become refundable, Employer shall have a claim directly against
the distributees to the extent of the refund to which it is entitled.
All refunds pursuant to this Section shall be limited in
amount, circumstance and timing to the provisions of Section 403(c) of ERISA,
and no such refund shall be made if, solely on account of such refund, the Plan
would cease to be a qualified plan pursuant to Section 401(a) of the Code.
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ARTICLE VI
ALLOCATION OF EMPLOYER CONTRIBUTIONS
6.1 Allocation of Employer Contributions. As of each
Anniversary Date, the Employer's contribution made pursuant to Sections 5.1 and
5.2 for the Plan Year as well as (A) Company Stock purchased and paid for by the
Fund with cash dividends on Company Stock pledged as collateral for an
Acquisition Loan and (B) Financed Shares released from encumbrance under Section
10.5 shall be allocated among the Accounts of the Participants entitled to share
therein (as determined pursuant to Subsection (c) hereof) as follows:
(a) Initial Allocation. Subject to the limitation of
Subsection (b) below, the amount to be allocated to the Account of each
Participant shall be determined by multiplying the total of the Employer's
contribution for that Plan Year by a fraction, the numerator of which is the
Participant's Compensation for such Plan Year and the denominator of which is
the aggregate Compensation for the Plan Year of all Participants.
(b) Restricted Group Limitation. The limitation of this
Subsection shall be applicable to the allocation of the Employer's contribution
made pursuant to Section 5.1 and Section 5.2 for any Plan Year in which the
aggregate of the Compensation for that Plan Year of all Participants who are
members of the "Restricted Group" (as defined in this Subsection) for that Plan
Year is more than one third (1/3) of the aggregate Compensation for the Plan
Year of all Participants for the Plan Year. If this Subsection is applicable to
a Plan Year, (1) the Compensation for such period of all Participants who are
members of the Restricted Group for such period shall be reduced, pro rata
according to such Compensation, so that the aggregate Compensation of such
Restricted Group members shall not be more than one-third (1/3) of the aggregate
Compensation of all Participants for such period, and (2) such "reduced"
Compensation shall be used for purposes of both the numerator and denominator in
the fractions used pursuant to subsection (a) in allocating the Employer's
contribution for such period to the Accounts of Participants eligible to share
therein. Following the redetermination of the allocation of Employer
Contributions pursuant to this Subsection for a Plan Year, the Plan
Administrator shall make such adjustments in the redetermined allocations, pro
rata according to Compensation (reduced for a Restricted Group member as
provided in this Subsection), so that no more than one-third (1/3) of the
Employer's contribution for such period has been allocated to the Accounts of
Participants who are members of the Restricted Group for that period. A
Participant shall be a member of the Restricted Group for a Plan Year if he is
considered a "Highly Compensated Employee" (taking into account the family
aggregation rules under Code section 414(q)(6)) for that Plan Year.
(c) Entitlement to Share in Allocation. A Participant shall
be a Participant for purposes of this Section and shall be entitled to share in
the allocation of the Employer
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contribution for a particular Plan Year pursuant to this Section only if he
either (i) completed 1,000 Hours of Service during the Plan Year or (ii)
retired, experienced a Disability or died during the Plan Year.
(d) Effect of Status Change. Any Participant who remained in
the employ of the Employer through the end of the Plan Year, but who changed
from an eligible to an ineligible classification (or vice-versa) during the Plan
Year shall be eligible to share in the allocation of the Employer's contribution
pursuant to this Section only with respect to his Compensation paid for Hours of
Service completed in an eligible status during such Plan Year.
6.2 Allocation of Forfeitures. The Account of a Participant
who terminates employment with the Company or an Affiliated Company shall be
closed, and the forfeitable amount held therein shall be forfeited on the
earlier of: (i) the date on which he receives a distribution of his entire
vested interest in his Account, which is less than one hundred percent (100%);
or (2) the date on which he incurs five consecutive one-year Breaks in Service.
Forfeitures which become available for allocation during a Plan Year, shall be
allocated among the Accounts of Participants entitled to share in the allocation
of the Employer's contribution, if any, for that Plan Year pursuant to Section
6.1. The allocation shall be made as provided in Subsection 6.1(a) without
regard to the limitation of Subsection 6.1(b); provided that, if there is more
than one entity constituting the Employer, forfeitures arising from the Accounts
of Participants employed by any such entity shall be reallocated, to the extent
traceable and practicable, among the Accounts of other Participants employed by
that entity. Any forfeiture attributable to a Participant's one-year Break in
Service occurring in the Plan Year just ending shall be credited and allocated
to the Accounts of Participants who have completed a Year of Service. Except as
provided below, if a former Participant returns to employment with the Employer
or any Affiliated Company after the occurrence of a one-year Break in Service
and prior to the occurrence of five consecutive one-year Breaks in Service and
repays the amount of his prior distribution as provided in Section 7.4 hereof,
forfeitures, if any, will first be used to restore the non-vested Account of
such Participant equal to the value of the non-vested Account at the time the
Participant terminated service with the Employer. In the event that the
available forfeitures are not sufficient to restore the non-vested Account, the
Employer will make an additional contribution sufficient to make the non-vested
Account whole. If any Participant forfeits a portion of his Account under the
Plan, but not all of such Account, Company Stock shall be deemed forfeited only
after all other assets held in such Participant's Account have been forfeited.
If Company Stock allocated to the Account of such Participant consist of more
than one class of such stock, and if any portion of such Company Stock is
forfeited, the Participant shall be treated as forfeiting the same proportion of
each such class.
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6.3 Separate Accounts. The Committee shall establish and
maintain separate individual Accounts for each Participant who has an interest
in the Plan. Such separate Accounts shall not require a segregation of the Fund
assets and no Participant shall acquire any right to or interest in any specific
asset of the Fund as a result of the allocations provided for in the Plan.
6.4 Valuations. All valuations of the Fund shall be performed
on the basis of the fair market value of the assets therein and the value of
Company Stock which is not readily tradeable on an established securities market
shall be determined in accordance with a valuation by an independent appraiser
selected by the Committee.
6.5 Company Stock From Certain Transactions. Notwithstanding
anything in the Plan to the contrary, no portion of the assets of the Plan
attributable to (or allocable in lieu of) Company Stock acquired by the Plan in
a sale to which Section 1042 of the Code applies may be allocated directly or
indirectly under the Plan or any other qualified plan of the Company and all
Affiliated Companies:
(a) during the period beginning on the date of the sale of
such Company Stock and ending on the later of (1) the tenth anniversary of the
date of the sale, or (2) the date of the allocation under Section 6.1
attributable to the final payment of any loan under Section 10.1 incurred in
connection with the sale, for the benefit of any taxpayer (or any relative of a
taxpayer within the meaning of Section 267(b) of the Code) who makes an election
under Section 1042(a) of the Code with respect to Common Stock, or
(b) for the benefit of any other person who owns (after
application of Section 318(a) of the Code without regard to the employee trust
exception in Section 318(a)(2)(B)(i)) more than 25% of any class (or the total
value of any class) of outstanding stock of the Company or any Affiliated
Company which is a member of the same controlled group as the Company within the
meaning of Code Section 409(l)(4).
For purposes of Section 6.5(a), an individual shall not be a relative of a
taxpayer if (i) such individual is the taxpayer's lineal descendant and (ii) the
aggregate amount allocated to all such lineal descendants during the applicable
period does not exceed more than 5% of the Company Stock attributable to a sale
to the Plan by any person related to such descendants (within the meaning of
Code Section 267(c)(4)) in a transaction to which Section 1042 of the Code
applied. For purposes of Section 6.5(b), a person shall fail to meet the 25%
stock ownership limitation if such person fails to meet such limitation (i) at
any time during the one-year period ending on the date of the sale of the
Company Stock to the Plan or (ii) on the date as of which such Company Stock is
allocated to Participants under Section 6.1.
6.6 Annual Additions Limitations.
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(a) Primary Limitation. In no event shall the Annual Addition
to a Participant's accounts under all defined contribution plans maintained by
the Company or an Affiliated Company for any Limitation Year exceed the lesser
of:
(i) $30,000 or, if greater, one-fourth of the defined
benefit dollar limit set forth in section 415(b)(1)(A) of the Code as
in effect for the Limitation Year,or
(ii) twenty-five percent (25%) of such Participant's 415
Compensation for the Limitation Year. The limitation in Subparagraph
(a)(ii) shall not apply to any contribution for medical benefits within
the meaning of section 401(h) or section 419A(f)(2) of the Code which
is otherwise treated as an Annual Addition under section 415(l)(1) or
419A(d)(2) of the Code.
(b) Secondary Limitation. In no event shall the amount
allocated to the accounts of any Participant under all defined contribution
plans maintained by the Company or an Affiliated Company for any Limitation Year
cause the sum of the defined contribution fraction and the defined benefit
fraction (as such terms are defined in Section 415(e) of the Code) to exceed
1.0, or such other limitation as may be applicable under Section 415 of the Code
with respect to any combination qualified plans without disquali fication of any
such plan.
In the event that the amount tentatively available for allocation to the
accounts of any Participant under all defined contribution plans maintained by
the Company or an Affiliated Company in any Limitation Year exceeds the maximum
permissible hereunder, the Participant's share of Employer contributions and
reallocable forfeitures shall be re duced to the extent necessary to result in
conformity to the limitations expressed herein, provided that for any Limitation
Year in which the Plan meets the requirements of Section 415(c)(6) of the Code,
the limitations described in this Section shall not apply to any portion of a
Participant's Annual Additions representing either forfeitures of any Company
Stock which were acquired with the proceeds of an Acquisition Loan or Employer
contributions to the Plan which are deductible under section 404(a)(9)(B) of the
Code and charged against the Participant's Account. Amounts released pursuant to
the preceding sentence shall then be reallocated among the Accounts of the
remaining Participants as though an additional Employer contribution for
allocation for the Plan Year ending with or within said Limitation Year,
provided, however, that such amounts shall be credited to the Accounts of
Participants only to the extent that is permissible without causing any such
Accounts to experience Annual Additions in excess of the maximum allowable
hereunder. If, after all such reallocations have been completed, there remains a
reallocable amount which cannot be reallocated to the Accounts of any of the
Participants, such remaining reallocable amount shall be placed in a suspense
account, to be held and applied as an additional Employer contribution in the
next succeeding Limitation Year(s) until exhausted.
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ARTICLE VII
VESTING
7.1 Vesting of Employer Contributions. A Participant's
interest in his Account shall vest based on his completed Years of Service in
accordance with the following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than 3 0%
3 but less than 4 25%
4 but less than 5 50%
5 but less than 6 75%
6 or more 100%
Notwithstanding the foregoing, a Participant will become fully
(100%) vested upon (i) his attainment of his Normal Retirement Age while in the
employ of an Employer or an Affiliated Company, (ii) his death while in the
employ of an Employer or an Affiliated Company or (iii) his termination of
employment with an Employer or an Affiliated Company on account of his
Disability.
7.2 Plan Amendments. No Plan amendment shall change any
vesting schedule under the Plan unless each Participant having at least three
Years of Service at the end of the period described in this sentence is
permitted to elect, within a period beginning on the date such amendment is
adopted and ending 60 days after the latest of: (i) the day the amendment is
adopted, (ii) the day the amendment becomes effective, or (iii) the day the
Participant is issued written notice of the amendment, to have his vested
percentage computed under the Plan without regard to such amendment.
7.3 Nonvested Accounts. If a Participant terminates
employment before he has a vested interest in his Account pursuant to
Section 7.1, he shall be deemed to receive a distribution of his entire vested
benefit of zero dollars as of his termination of employment. Nonvested amounts
in a Participant's Accounts at his termination of employment, to the extent they
constitute Forfeitures, shall be reallocated in accordance with Article VI.
7.4. Effect of Reemployment.
(a) If a Participant who terminated employment returns to the
employment of the Company or an Affiliated Company in an eligible classification
after the occurrence of a one-year Break in Service and prior to the occurrence
of five consecutive one-year Breaks in Service, after forfeiting all or a
portion of his Accounts and, within five
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(5) years of the Participant's resumption of employment, repays the amount of
the distribution, if any, he received from his Account upon his prior
termination of employment, then any such repaid amount plus the amount of his
previously forfeited non-vested amounts (unadjusted by any gains or losses)
shall be credited to the Participant's new Account in accordance with Section
6.2. Such reemployed former Participant shall have the rights and benefits
provided by this Plan. A Participant who is deemed to have received a
distribution of his entire vested interest pursuant to Section 7.3 shall be
deemed to repay such distribution as of the date he resumes employment as an
Employee. If a Participant does not again become an Eligible Employee before he
has had five consecutive one-year Breaks in Service, the forfeited amount shall
not be restored to his Account under any circumstances.
(b) If a Participant described in Paragraph (a) fails to
repay any amount distributed to him upon his prior termination of employment,
there shall be paid to his new Account the amount of his previously forfeited
nonvested amounts (unadjusted by any gains or losses). Such reemployed former
Participant shall have the rights and benefits provided by this Plan except that
upon his subsequent termination of employment for any reason, he shall receive
an amount computed according to the following formula:
[(A + B) x C] - B, where
A = the total amount in his Account
B = the amount of his previous distribution
C = his vested percentage, counting all Years of Service
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ARTICLE VIII
DISTRIBUTIONS
8.1 Retirement and Disability Benefits. The benefit of a
Participant who terminates employment with the Employer on account of his
retirement on his Normal Retirement Date or Late Retirement Date or on account
of his Disability shall be equal to one hundred percent (100%) of the balance of
his Account, determined as of the Valuation Date coincident with or next
following such retirement or termination of employment, or, if later, the
Valuation Date immediately preceding his Benefit Commencement Date. The benefit
shall be payable to the Participant as soon as practicable after the Valuation
Date first above mentioned; provided, however, that in the case of a Participant
whose vested Account balance exceeds $3,500 (or, in the case of a Participant
who has not reached age 65, whose vested balance in his Account ever exceeded
$3,500 at the time of a prior distribution), no distribution shall be made
without the consent of the Participant.
8.2 Withdrawals by Qualified Participants. A Qualified
Participant may elect within 90 days after each annual Valuation Date in the
"Qualified Election Period" to receive a distribution of up to the number of
shares of Company Stock which may be distributed to him as of that annual
Valuation Date as determined in accordance with this Section. Upon receipt of
such an election by a Qualified Participant, the Plan Administrator shall direct
the Trustee to distribute to the Qualified Participant, within 90 days after the
end of the Participant's election period, the number of shares of Company Stock
elected by the Participant in accordance with this Section. The maximum number
of shares of Company Stock which a Qualified Participant may elect to receive as
of any annual Valuation Date during his Qualified Election Period shall be that
number of such shares (rounded to the nearest whole number) which is equal to
the result determined by the formula (25% x (A+B)) - B, where A is the shares of
Company Stock which are allocated to his Account as of that annual Valuation
Date and B is the shares of Company Stock, if any, previously distributed to him
pursuant to this Section provided that for purposes of determining such maximum
number of shares for the last annual Valuation Date in a Qualified Election
Period, fifty percent (50%) shall be substituted for twenty-five percent (25%).
For purposes of this Section, the following terms shall have the following
meanings:
(a) "Qualified Election Period" shall mean the 6 Plan Year
period beginning with the Plan Year in which the Participant first becomes a
Qualified Participant.
(b) "Qualified Participant" shall mean any Participant who
completed ten (10) Years of participation in the Plan and has attained age 55.
8.3 Benefits Upon Termination of Employment. The benefit
payable to a Participant upon such Participant's termination from employment
with the Employer (and
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all Affiliated Companies) for reasons other than those specified in Sections 8.1
and 8.4, shall be equal to the vested portion of the balance of his Account,
determined as of the Valuation Date coincident with or next following such
termination of employment, or, if later, the Valuation Date immediately
preceding his Benefit Commencement Date. The benefit shall be payable to the
Participant as soon as practicable after the Valuation Date first above
mentioned; provided, however, that in the case of a Participant whose vested
Account balance exceeds $3,500 (or, in the case of a Participant who has not
attained age 65, whose vested balance in his Account ever exceeded $3,500 at the
time of a prior distribution), no distribution shall be made prior to his Normal
Retirement Date without the consent of such Participant.
8.4 Death Benefits.
(a) In the event of a Participant's death prior to his
Benefit Commencement Date, his Beneficiary shall be entitled to receive a death
benefit equal to one hundred percent (100%) of the balance of his Account,
determined as of the Valuation Date coincident with or next following his date
of death, or, if later, the Valuation Date immediately preceding the Benefit
Commencement Date with respect to such benefit. Such death benefit shall be
payable to the Participant's Beneficiary as soon as practicable after the
Valuation Date first mentioned above. provided, however, that no death benefit
shall be paid to the Beneficiary of a Participant who terminated employment with
the Company and all Affiliated Companies prior to his death at a time when he
had no vested interest in his Accounts pursuant to Section 7.1.
(b) The Beneficiary of the death benefit shall be the
Participant's Spouse; provided, however, that the Participant may designate a
Beneficiary other than his Spouse if:
(i) the Spouse has waived her right to be the
Participant's Beneficiary in accordance with Section 8.4(d), or
(ii) the Participant has no Spouse, or
(iii) the Spouse cannot be located.
In such event, the designation of a Beneficiary shall be made
on a form satisfactory to the Plan Administrator. A Participant may at any time
revoke his designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Plan Administrator.
However, the Participant's Spouse must again consent in writing to any such
change or revocation, unless the consent of the Spouse expressly permits
designations by the Participant without any requirement of further consent by
the Spouse.
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(c) Beneficiary Designation Right. Each unmarried Participant
and each married Participant whose Spouse has consented to designation of
persons or entities other than such Spouse as Beneficiaries in accordance with
the provisions of Subsection (b) hereof, shall have the right to designate one
or more primary and one or more contingent Beneficiaries to receive any benefit
becoming payable upon the Participant's death. All Beneficiary designations
shall be in writing in form satisfactory to the Plan Administrator. Each
Participant shall be entitled to change his Beneficiaries at any time and from
time to time. In the event that the Participant fails to designate a Beneficiary
to receive a benefit that becomes payable pursuant to the provisions of this
Article, or in the event that the Participant is predeceased by all designated
primary and secondary Beneficiaries, the death benefit shall be payable to the
following classes of takers, each class to take to the exclusion of all
subsequent classes, with all members of each class sharing equally:
(i) Spouse;
(ii) lineal descendants (including adopted and
step-children), per stirpes;
(iii) surviving parents (equally); and
(iv) the Participant's estate.
(d) Form and Content of Spouse's Consent. A Spouse may
consent to the designation of one or more Beneficiaries other than such Spouse
provided that such consent shall be in writing, shall acknowledge the effect of
such consent and the specific alternate Beneficiary designated by the
Participant (or permits Beneficiary designations by the Participant without the
Spouse's further consent), and shall be witnessed by a Plan representative or a
notary public. Such Spouse's consent shall be irrevocable, unless expressly made
revocable.
8.5 Disability. In the event that a Participant suffers a
Disability before retirement, the value of his Accounts, computed in accordance
with Section 8.6, shall be paid to him or applied for his benefit in a single
payment as soon as practicable after the last day of the Valuation Date
coincident with or next following the date on which the Plan Administrator
determines that he has a Disability.
8.6 Valuation for Distribution. For the purposes of paying
the amounts to be distributed to a Participant or his Beneficiaries under the
provisions of this Article, the value of the Fund and the amount of the
Participant's Account shall be determined in accordance with the provisions of
this Section as of the Valuation Date coincident or next following the date on
which occurs the event which gives rise to payment under this Article. The
Trustee may establish accounting procedures for the purpose of making the
allocations, valuations, and adjustments necessary to maintain the Participant's
Account in the Fund. From time to time, the Trustee may modify its accounting
procedures for the purpose of achieving equitable and nondiscriminatory
allocation among the Accounts of
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Participants in accordance with the general concepts of the Plan and the
provisions of this Article. All valuations of the Fund shall be performed in
accordance with Section 6.4 hereof.
8.7 Timing of Distribution.
(a) Unless the Participant elects otherwise, a Participant
entitled under this Article to receive benefits shall commence to receive
benefits in accordance with subsection (b), but in no event later than the
earlier of the dates determined under (1) and (2) below:
(i) the later of (A) the 60th day after the close of
the Plan Year in which the Participant attains age 65 or (B) the 60th
day after the close of the Plan Year in which the Participant's
employment with the Employer and all Affiliated Companies terminates;
or
(ii) the Participant's Required Distribution Date.
(b) Except as otherwise provided in subsection (a), the
distribution of the balance credited to a Participant's Account will commence
not later than one year after the close of the Plan Year:
(i) in which the Participant separates from service by
reason of the attainment of his Normal Retirement Age, Disability, or
death; or
(ii) which is the fifth Plan Year following the Plan
Year in which the Participant otherwise separates from service;
provided, however, that this clause (ii) shall not apply if the
Participant is reemployed by the Employer before the distribution is
required to begin under this clause (ii).
(c) Notwithstanding the foregoing, with respect to all
Company Stock allocated to Accounts pursuant to any repayments of any
Acquisition Loan, the Benefit Commencement Date for the portion of the benefit
payable to a Participant attributable to Company Stock purchased with the
proceeds of an Acquisition Loan shall not be earlier than the earliest of
(1) the last day of the Plan Year in which such Acquisition Loan is fully repaid
pursuant to Section 409(o)(1)(B) of the Code, (2) the Participant's Required
Distribution Date, or (3) the sixty (60)-day period commencing after the latest
of the close of the Plan Year in which (A) occurs the date on which the
Participant attains the Normal Retirement Age specified hereunder (B) occurs the
tenth anniversary of the year in which the Participant commenced participation
in the Plan, or (C) the Participant terminates service with the Employer,
provided that the Participant may, without Spousal consent, elect to defer
further the commencement of such portion of his or her benefits until any
subsequent date elected by the Participant in writing pursuant to such
procedures as the Committee may impose, but not beyond his Required Distribution
Date. A Participant's
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election to commence payment prior to his Normal Retirement Date must be made
within the 90-day period ending on the benefit commencement date elected by the
Participant and in no event earlier than the date the Committee provides the
Participant with written information relating to his right to defer payment
until his Required Distribution Date, the modes of payment available to him and
the relative values of each, and his right to make a direct rollover as
described in Section 8.13. Such information must be provided not less than 30
days and not more than 90 days prior to the benefit commencement date.
Notwithstanding the preceding sentence, a Participant's benefit commencement
date may occur less than 30 days after such information has been provided to the
Participant provided that, after the Participant has received such information
and has been advised of his right to a 30-day period to make a decision
regarding the distribution, the Participant affirmatively elects a distribution.
8.8 Mode of Distribution. Distributions under this Article
shall be made as follows:
(a) the portion of a Participant's Account that is not
invested in the Common Stock Fund or the Preferred Stock Fund shall be paid in
cash; and
(b) the portion of a Participant's Account that is invested
in the Common Stock Fund or the Preferred Stock Fund shall be paid in whole
shares of Common Stock except that the value of any fractional share shall be
distributed in cash. With respect to the distribution of the portion of a
Participant's Account that is invested in the Preferred Stock Fund, the Trustee
shall exercise its rights pursuant to Section 10.4 in order to obtain the Common
Stock to be distributed hereunder.
(c) The Company shall issue a "put option" to any Participant
(or Beneficiary) who receives a distribution of Company Stock. The put option
shall permit the Participant to sell the Company Stock to the Company at any
time during the two option periods, at a price equal to the fair market value of
the Company Stock. The first option period shall be for at least 60 days
beginning on the date of distribution. If the put option is not exercised within
such 60-day period, an additional 60-day option period shall be provided
beginning on the first day of the Plan Year following the Plan Year in which the
Company Stock was distributed. The payment for any Company Stock sold under a
put option may, at the option of the Company, be made in lump sum or in
substantially equal installments (not less frequently than annually) over a
period not exceeding 5 years, if adequate security is given and a reasonable
interest rate is paid on any unpaid installment balance (as determined by the
Company). The Plan Administrator shall give written notice of the terms and
conditions of the put option to the Participant at the time of distribution and
at the beginning of the second option period. The put option described in this
Section shall be ineffective if the Company Stock distributed to the Participant
is readily tradeable on an established securities market.
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(d) The "put option" provided for by Section 8.8(c) above
shall continue to apply to any distribution made in Company Stock at a time
described in the Section 8.7, notwithstanding any amendment to or termination of
the Plan that causes the Plan to cease to be an employee stock ownership plan
within the meaning of Section 4975(e)(7) of the Code and notwithstanding the
absence of any outstanding balance on an Acquisition Loan at the time of such
distribution.
8.9 Certain Securities Law Restrictions. Any distribution of
Company Stock pursuant to this Article shall be subject to all applicable laws,
rules and regulations and to such approvals by stock exchanges or governmental
agencies as may be deemed necessary or appropriate by the Board of Directors.
Each distributee may be required to give the Employer a written representation
that he or she will not involve a violation of state or federal securities laws,
including the Securities Act of 1933, as amended; the form of such written
representation will be prescribed by the Board of Directors.
8.10 Certificates. Share certificates representing Company
Stock distributed pursuant to this Article shall be embossed or inscribed with
such legends as the Board of Directors deems necessary or appropriate in respect
of the matters referred to in Section 8.9 above, and stop transfer instructions
may be issued in connection therewith.
8.11 Sole Source of Benefits. The Fund shall be the sole
source for the provision of benefits under the Plan. Neither the Employer nor
any other person shall be liable therefor.
8.12 Minimum Distribution Requirements. Distributions under
the Plan shall comply with the requirements of Section 401(a)(9) of the Code and
Treasury regulations thereunder, including the incidental death benefit
requirements of proposed Treas. Reg. ss.1.401(a)(9)-2.
8.13 Direct Rollovers. Effective January 1, 1993, in the event
any payment or payments to be made to a person pursuant to this Plan would
constitute an "eligible rollover distribution" within the meaning of Section
401(a)(31)(C) of the Code and regulations thereunder, such person may request
that, in lieu of payment to the person, all or part of such eligible rollover
distribution be rolled over directly to the trustee or custodian of an "eligible
retirement plan" within the meaning of Section 401(a)(31)(D) of the Code and
regulations thereunder. Any such request shall be made in writing, on the form
and subject to such requirements and restrictions as may be prescribed by the
Committee for such purpose pursuant to Treasury regulations, at such time in
advance of the date payment would otherwise be made as may be required by the
Committee. For purposes of this Section, a "person" shall include an Employee or
former Employee or his surviving spouse or his spouse or former spouse who is an
alternate payee under a qualified domestic relations order within the meaning of
Section 414(p) of the Code.
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ARTICLE IX
THE FUND
9.1 Designation of Trustee. The Company, by appropriate
resolution of its Board of Directors, shall name and designate a Trustee and
enter into a Trust Agreement with such Trustee. The Company shall have the
power, by appropriate resolution of its Board of Directors, to amend the Trust
Agreement, remove the Trustee, and designate a successor Trustee, all as
provided in the Trust Agreement. All of the assets of the Plan shall be held in
trust by the Trustee for use in accordance with this Plan in providing for the
benefits hereunder.
9.2 Exclusive Benefit. No part of the corpus or income of the
Fund shall be used for or diverted to purposes other than for the exclusive
benefit of Participants and their beneficiaries, except as expressly provided in
this Plan and in the Trust Agreement.
9.3 No Interest in Fund. No person shall have any interest
in, or right to, any part of the assets or income of the Fund, except to the
extent expressly provided in this Plan and in the Trust Agreement.
9.4 Trustee. The Trustee shall be a fiduciary with respect to
management and control of Plan assets and shall have exclusive and sole
responsibility for the custody and investment thereof in accordance with the
terms of this Plan and the Trust Agreement.
9.5 Expenses. Unless otherwise paid by the Company, the
expenses of establishing and administering the Plan and Fund, including any Fund
asset charges and reimbursement for the reasonable expenses incurred by the
Trustee and the Plan Administrator, shall be paid from the Fund.
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ARTICLE X
INVESTMENT BY THE TRUSTEE
10.1 Acquisition Loans. The Company may direct the Trustee to
incur an Acquisition Loan from time to time, the proceeds of which may be used
to (i) acquire Financed Shares, (ii) repay such loan, or (iii) repay a prior
Acquisition Loan. An installment obligation incurred in connection with the
purchase of Preferred Stock shall be treated as an Acquisition Loan, provided
the obligation satisfies the following provisions. An Acquisition Loan shall
comply with the following provisions:
(a) The loan must be for a specific term, bear a reasonable
rate of interest within the meaning of Treas. Reg. ss.54.4975-7(b)(7), and shall
not be payable on demand except in the event of default;
(b) Any collateral pledged to the lender by the Fund shall be
held in a suspense account and shall consist only of the Financed Shares
acquired with the borrowed funds (and any stock dividends received for such
Financed Shares before its release from encumbrance), or acquired with the
proceeds of a prior Acquisition Loan which is being refinanced (although, in
addition to such collateral, the Company may guarantee repayment of the loan)
and such assets shall constitute assets of the Fund for all other purposes;
(c) No lender shall have recourse against the Plan, and no
person entitled to payment under the Acquisition Loan shall have any right to
the Fund assets other than collateral given for the loan, contributions (other
than contributions of Company Stock) that are made under the Plan to meet its
obligations under the loan, and earnings attributable to such collateral and the
investment of such contributions;
(d) Any pledge of Financed Shares must provide for the
release of the Financed Shares so pledged as payments on the Acquisition Loan
are made by the Trustee and as the Financed Shares are to be allocated to
Participants' Accounts as provided in Section 10.5. If the lender is a "party
in interest" (as defined in Section 3(14) of ERISA), the Acquisition Loan must
provide for a transfer of Fund assets on default only upon and to the extent of
the failure of the Trustee to meet the payment schedule of the Acquisition Loan;
(e) The borrowing shall be primarily for the benefit of the
Participants and their Beneficiaries within the meaning of Treas. Reg.
Section 54/4975-7(b)(3); and
(f) Except as otherwise required by applicable law, no
Financed Shares shall be subject to a put, call or other option, or buy-sell or
similar arrangement while held by the Fund and when distributed from the Fund,
whether or not the Plan is then an ESOP as defined in Section 54.4975-7(b)(1)(i)
of the Treasury Regulations. In the
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event an Acquisition Loan is repaid, or the Plan ceases to be an ESOP as defined
in Section 54.4975-7(b)(1)(i) of the Treasury Regulations, the protections and
rights described herein relating to Financed Shares shall continue to be
applicable in accordance with the applicable provisions herein.
10.2 Acquisition Loan Payments. Payments of principal and/or
interest on any Acquisition Loan shall be made by the Trustee (as directed by
the Plan Administrator) only from Employer contributions paid in cash to enable
the Trustee to repay such Acquisition Loan, from earnings attributable to such
Employer contributions and from any cash dividends received by the Trustee on
Company Stock (whether or not allocated), but only to the extent that Company
Stock with a fair market value of not less than the amount of the dividends
allocated to the Participant for the Plan Year is allocated to the Account of
each Participant in accordance with Section 10.5(d)(i) hereof. The payments made
with respect to an Acquisition Loan for a Plan Year must not exceed the sum of
such amounts for that Plan Year (or prior to the year), less the amount of such
payments in prior Plan Years. If the Company is the lender with respect to an
Acquisition Loan, Employer contributions may be paid in the form of forgiveness
of indebtedness under the Acquisition Loan. If the Company is not the lender
with respect to an Acquisition Loan, the Company may elect to make payments on
the Acquisition Loan directly to the lender and to treat such payments as
Employer contributions.
10.3 Sales of Company Stock. Subject to the approval of the
Board of Directors, the Plan Administrator may direct the Trustee to sell shares
of Company Stock to any person (including the Company) provided that any such
sale must be made for adequate consideration and, with respect to sales to the
Company, no commission may be charged with respect thereto. In the event that
the Trustee is unable to make payments of principal and/or interest on an
Acquisition Loan when due (i.e. a default), the Plan Administrator (with the
approval of the Board of Directors) may direct the Trustee to sell any Financed
Shares that have not yet been allocated to Participants' Accounts or to obtain
an Acquisition Loan in an amount sufficient to make such payments.
10.4 Conversion/Put Right. Except as is otherwise provided in
Section 10.9, with respect to shares of Preferred Stock held in the Fund, the
Trustee shall have the exclusive right to (i) exercise any conversion rights
which would require that the Company convert the shares of Preferred Stock into
a number of shares of Common Stock in accordance with the terms of any
conversion feature appurtenant to the Preferred Stock and (ii) "put" the
Preferred Stock to the Company in exchange for cash and/or Common Stock, the
amount of which must be determined in accordance with the valuation conducted by
the independent appraiser pursuant to Section 6.4. In all events, the conversion
must be at a price that is reasonable as of the date of acquisition of the
Preferred Stock by the Plan. In the event that the Trustee is unable to make
payments of principal and/or interest on an Acquisition Loan when due, after
taking into account any Employer contributions, (i.e., in the event of a
default), the Trustee may, and at the request of the Company shall, "put" any
shares of Preferred Stock that have not yet been allocated
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to Participants' Accounts to the Company in accordance with the terms of the
Preferred Stock or obtain an Acquisition Loan in an amount sufficient to make
such payments.
10.5 Financed Shares. Any Financed Shares acquired by the Fund
shall initially be credited to a "Loan Suspense Account" and will be allocated
to the Accounts of the Participants only as payments on the Acquisition Loan are
made by the Trustee. The number of Financed Shares to be released from the Loan
Suspense Account for allocation to those accounts for each Plan Year shall be
determined by the Plan Administrator as follows:
(a) General Rule - The number of Financed Shares held in the
Loan Suspense Account immediately before the release for the current Plan Year
shall be multiplied by a fraction, the numerator of which shall be the amount of
principal and/or interest paid on the Acquisition Loan for that Plan Year and
the denominator of which shall be the sum of the numerator plus the total
payments of principal and interest on that Acquisition Loan projected to be paid
for all future Plan Years. For this purpose, the interest to be paid in future
years is to be computed by using the interest rate in effect as of the current
allocation date.
(b) Special Rule - The Plan Administrator may elect (as to
each Acquisition Loan), or the provisions of the Acquisition Loan may provide,
for the release of Financed Shares from the Loan Suspense Account based solely
on the ratio that the payments of principal for each Plan Year bear to the total
principal amount of the Acquisition Loan. This method may be used only to the
extent that: (i) the Acquisition Loan provides for annual payments of principal
and interest at a cumulative rate that is not less rapid at any time than level
annual payments of such amounts for ten years, (ii) interest included in any
payment on the Acquisition Loan is disregarded only to the extent that it would
be determined to be interest under standard loan amortization tables and (iii)
the entire duration of the Acquisition Loan repayment period does not exceed ten
years, even in the event of a renewal, extension or refinancing of the
Acquisition Loan.
(c) Conditions Applicable to Both the General Rule and the
Special Rule - In determining the number of shares to be released for any Plan
Year under either the General Rule or the Special Rule:
(1) The number of future years under the Loan must be
definitely ascertainable and must be determined without taking into account any
possible extensions or renewal periods;
(2) If the Loan provides for a variable interest rate,
the interest to be paid for all future Plan Years must be computed by using the
interest rate applicable as of the end of the Plan Year for which the
determination is being made; and
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(3) If the Company Stock allocated to the Suspense
Account includes more than one class of shares, the number of shares of each
class to be withdrawn for a Plan Year from the Suspense Account must be
determined by applying the applicable fraction provided for above to each such
class.
(d) Allocations - For each Plan Year in which Fund assets are
applied to make payments on an Acquisition Loan, the Financed Shares released
from the Loan Suspense Account in accordance with the provisions of this Section
10.5 shall be allocated among the Accounts of the Participants as follows:
(i) To the extent that dividends received on shares
of Company Stock that are allocated to the Participants' Accounts are
utilized by the Trustee to make payments on an Acquisition Loan, an
allocation of Financed Shares released from the Loan Suspense Account
shall be made to each Participant's Accounts such that the value of the
Financed Shares so allocated equals the value of the dividends from (or
which would have otherwise been credited to) the Participant's Accounts
that were utilized to make payments on the Acquisition Loan (such value
to be determined on the basis of the fair market value of the Financed
Shares determined as of the date that the payments on the Acquisition
Loan are made by the Trustee); and
(ii) To the extent that Employer contributions are
utilized by the Trustee to make payments on an Acquisition Loan, an
allocation of Financed Shares released from the Loan Suspense Account
shall be made to each Participant's Accounts such that the value of the
Financed Shares so allocated equals the value of the Employer
contributions from the Participant's Accounts that were utilized to
make payments on the Acquisition Loan (such value to be determined on
the basis of the purchase price of the Financed Shares on the date of
their allocation to the Loan Suspense Account; provided that the actual
value of the Financed Shares is equal to or greater than the value of
such shares on the date of their allocation to the Loan Suspense
Account).
(iii) To the extent that the number of Financed Shares
released from the Loan Suspense Account exceeds the number that may be
currently allocated to the Participants' Accounts, the excess
Financed Shares released from the Loan Suspense Account shall be held
in an Allocation Suspense Account until such time as they may be
allocated to the Participants' Accounts either for the previous Plan
Year or the current Plan Year in accordance with subparagraphs (i) and
(ii) above, but in no event shall the allocations occur later than as
of the end of the Plan Year in which the Financed Shares were released
from the Loan Suspense Account.
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10.6 Dividends on Company Stock. Any cash dividends received
on shares of Company Stock acquired with the proceeds of an Acquisition Loan and
both held in suspense account and allocated to the Accounts of the Participants
may be applied first to repay the principal and the interest, at the Committee's
discretion, of the Acquisition Loan, provided, if any cash dividends on shares
of such Company Stock allocated to the Participants' Accounts are used to the
principal and/or interest of the Acquisition Loan at the Committee's discretion,
Company Stock with a fair market value not less than the amount of the dividends
so sued must be allocated to the Participants' Accounts to which such cash
dividends would have been allocated. Any cash dividends received on shares of
Company Stock may also be paid to the Participants in the manner set forth
below.
In the case of any cash dividends on Company Stock that are
allocated to the Accounts of the Participants with respect to vested shares,
they may be paid currently as cash (or within ninety days after the end of the
Plan Year in which the dividends are paid to the Trust), provided such dividends
are paid to Participants within two years of the date of such Participant's
Accounts as the Committee may determine. Any dividends paid with respect to
unallocated shares shall be paid out to Participants in proportion to the
allocated vested shares in their respective Accounts. The Committee shall also
have the discretion to extend such treatment to cash dividends paid with respect
to shares of Company Stock that are allocated to the Accounts Participants, but
not vested, provided that the Plan is primarily invested in Company Stock, and
that the Company shall be allowed deduction with respect to any dividends paid.
10.7 Voting Company Stock. The Trustee shall deliver, or cause
to be delivered, to each Participant all notices, prospectuses, financial
statements, proxies and proxy soliciting material relating to the Company Stock
allocated to the Participant's Accounts. Each Participant, or Beneficiary of
such Participant in the event the Participant dies prior to the complete
distribution of such Company Stock, shall have the right to direct the Trustee
as to the exercise of voting rights with respect to such Company Stock including
fractional shares; provided, however, that the Plan Administrator may, to the
extent possible, direct the Trustee to vote the combined fractional shares so as
to reflect the aggregate direction of all Participants giving direction with
respect to fractional shares. Shares of Company Stock that have not been
allocated to Participants' Accounts and shares of Company Stock that have been
allocated to Participants' Accounts but which have not been voted by the
Participants shall be voted in accordance with the voting instructions received
by the Trustee with respect to the shares of Company Stock that had been
allocated to Participant Accounts. Specifically, the Trustee shall determine how
the plurality of the allocated shares have been directed to vote and shall vote
all of the unallocated shares and unvoted allocated shares of Company Stock in
accordance with the directions received with respect to the plurality of the
allocated shares. The voting of Company Stock by the Trustee shall be
accomplished solely pursuant to this Section 10.7 and shall not constitute a
fiduciary duty of the Trustee. Voting instructions received from Participants
and Beneficiaries shall be held in confidence by the Trustee or its delegate for
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this purpose and shall not be divulged to the Company or any officer or employee
of the Company or to any other person.
10.8 Tender Offer Response. In the event of a tender offer for
any Company Stock held in the Plan, the Trustee shall as promptly as practicable
request of each Participant (or Beneficiary in the case of a deceased
Participant) instructions as to the tender offer response desired by that
Participant in connection with the shares of Company Stock held by the Trustee
for the Account of such Participant and the Trustee shall be bound by the
instructions received. In addition, with respect to the shares of Preferred
Stock held by the Trustee for the Account of a Participant, the Participant
shall have the right to require the Trustee to exercise any conversion rights
which would require that the Company convert the shares of Preferred Stock into
a number of shares of Common Stock in accordance with the terms of any
conversion feature appurtenant to the Preferred Stock; provided, however that
the Trustee shall abide by the Participant's conversion instructions only if
those instructions also direct the Trustee to tender the shares of Common Stock
received as a result of the Trustee's exercise of the conversion privilege. The
Trustee shall not tender shares held for the Account of any Participant who
fails to give instructions. As to the shares of Company Stock held in the Loan
Suspense Account and the Allocation Suspense Account, the Trustee shall be bound
to tender such Common Stock (or to convert Preferred Stock into Common Stock and
tender such Common Stock) in response to a tender offer if the plurality of the
Participants delivering timely instruction to the Trustee with respect to the
Company Stock allocated to their respective Accounts have instructed the Trustee
to tender the Company Stock allocated to their respective Accounts, and the
Trustee shall be bound to refrain from tendering such Company Stock in response
to a tender offer if the plurality in number of the Participants delivering
timely instruction to the Trustee with respect to the Company Stock allocated to
their respective Accounts have instructed the Trustee to refrain from tendering
the Company Stock. If the plurality of Participants first directs tender by the
Trustee of the Company Stock held for their respective Accounts, and then a
sufficient number of such Participants withdraw such tender instruction so that
a plurality of Participants then have effectively instructed the Trustee to
refrain from making any such tender, the Trustee shall immediately withdraw any
affirmative response to such tender offer previously made with respect to the
Company Stock held in the Loan Suspense Account and the Allocation Suspense
Account. The tendering of Company Stock by the Trustee shall be accomplished
solely pursuant to this Section 10.8 and shall not constitute a fiduciary duty
of the Trustee. Tender instructions received from Participants and Beneficiaries
shall be held in confidence by the Trustee or its delegate for this purpose and
shall not be divulged to the Company or any officer or employee of the Company
or to any other person.
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ARTICLE XI
AMENDMENT AND TERMINATION
11.1 Amendment. The provisions of the Plan may be amended at
any time and from time to time, by the Board of Directors; provided, however,
that:
(a) No amendment shall increase the duties or liabilities of
the Plan Administrator or of the Trustee without the consent of that party;
(b) No amendment shall deprive any Participant or Beneficiary
of any of the benefits to which he is entitled under the Plan with respect to
contributions previously made, nor shall any amendment decrease the balance in
any Participant's Account; and
(c) No amendment shall provide for the use of funds or assets
held to provide benefits under the Plan other than for the benefit of
Participants and their Beneficiaries, to meet the administrative expenses of the
Plan, or to provide that funds may revert to the Employer; and
(d) except as required by law or as otherwise indicated in an
amendment, no amendment shall affect or alter the rights, obligations or
benefits of any person who ceased to be a Participant prior to the amendment
effective date.
11.2 Plan Termination.
(a) Right Reserved. It is the Employer's intention to
continue the Plan indefinitely in operation. However, each entity constituting
the Employer reserves the right to terminate its participation in this Plan by
action of its board of directors or other governing body. Furthermore, the
Company reserves the right to terminate the Plan in whole or in part at any
time. Whole or partial termination of the Plan shall result in full and
immediate vesting in each affected Participant whose Severance from Service Date
has not occurred of the entire amount standing to his credit in his Accounts,
and there shall not thereafter be any forfeitures with respect to any affected
Participant for any reason. Plan termination shall be effective as of the date
specified by resolution of the Board of Directors, subject, however, to the
provisions of Section 11.4 hereof.
(b) Effect on Retired Persons, Etc. Termination of the Plan
shall have no effect upon payment of benefits to former Participants, their
Beneficiaries and their estates, where benefit payments commenced prior to Plan
termination.
(c) Effect on Remaining Participants. The Employer shall
instruct the Trustee either (1) to continue to manage and administer the assets
of the Fund for the benefit of the Participants and their Beneficiaries pursuant
to the terms and provisions of
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the Trust Agreement, or (2) to pay over to each Participant (and former
Participant) the value of his interest, and to thereupon dissolve the Fund.
11.3 Complete Discontinuance of Employer Contributions. While
it is the Employer's intention to make substantial and recurrent contributions
to the Fund pursuant to the provisions of the Plan, the right is, nevertheless,
reserved to at any time completely discontinue Employer contributions. Such
complete discontinuance shall be established by resolution of the Board of
Directors and shall have the effect of a termination of the Plan, as set forth
in Section 11.2, except that the Trustee shall not have the authority to
dissolve the Fund except upon adoption of a further resolution by the Board of
Directors to the effect that the Plan is terminated and upon receipt from the
Employer of instructions to dissolve the Fund pursuant to Subsection 11.2(c).
11.4 Suspension of Employer Contributions. The Employer shall
have the right at any time, and from time to time, to suspend Employer
contributions to the Fund pursuant to the Plan. Such suspension shall have no
effect on the operation of the Plan except as set forth below:
(a) If the Board of Directors determines by resolution that
such suspension shall be permanent, a permanent discontinuance of contributions
will be deemed to have occurred as of the date of such resolution or such
earlier date as is therein specified.
(b) If such suspension becomes a plan termination, a complete
discontinuance of contributions will be imputed. In such case, the permanent
discontinuance, with resultant full vesting for all affected Participants, shall
be deemed to have occurred on the earlier of:
(i) the date specified by resolution of the Board of
Directors or established as a matter of equity by the Plan
Administrator, or
(ii) the last day of the first Plan Year which meets
both of the following criteria: (A) no Employer contributions were made
for that or for any subsequent Plan Year, and (B) there existed for
such Plan Year net income out of which Employer contributions could
have been made, and the existence of such net income was known to the
Board of Directors in time to make deductible contributions for such
Plan Year.
11.5 Mergers and Consolidations of Plans. In the event of any
merger or consolidation with, or transfer of assets or liabilities to, any other
plan, each Participant shall have a benefit in the surviving or transferee plan
(determined as if such plan were then terminated immediately after such merger,
consolidation or transfer) that is equal to or greater than the benefit he would
have been entitled to receive immediately before such merger, consolidation or
transfer in the plan in which he was then a Participant (had such
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plan been terminated at that time). For the purposes hereof, former Participants
and Beneficiaries shall be considered Participants.
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ARTICLE XII
PLAN ADMINISTRATOR
12.1 Appointment and Tenure. The Plan Administrator shall
consist of those persons or entities appointed by the Board of Directors who
shall serve at the pleasure of the Board of Directors. If no person has been
appointed to the Board of Directors, the Employer shall be deemed to be the Plan
Administrator.
12.2 Delegation. The Plan Administrator may, by written
majority decision, delegate to each or any one of its number authority to sign
any documents or to perform ministerial acts on its behalf.
12.3 Authority and Responsibility of the Plan Administrator.
The Plan Administrator shall have the following duties and responsibilities:
(a) to maintain and preserve records relating to Plan
Participants, former Participants, and their Beneficiaries;
(b) to prepare and furnish to Participants all information
and notices required under Federal law or the provisions of this Plan;
(c) to prepare and furnish to the Trustee sufficient employee
data and the amount of contributions received from all sources so that the
Trustee may maintain separate Accounts for Participants and make required
payments of benefits;
(d) to prepare and file or publish with the Secretary of
Labor, the Secretary of the Treasury, their delegates and all other appropriate
government officials all reports and other information required under law to be
so filed or published;
(e) to provide directions to the Trustee with respect to
methods of benefit payment, valuations at dates other than annual Valuation
Dates and on all other matters where called for in the Plan or requested by the
Trustee;
(f) to construe the provisions of the Plan, to correct
defects therein and to supply omissions thereto;
(g) to engage assistants and professional advisers;
(h) to arrange for bonding, if required by law;
(i) to provide procedures for determination of claims for
benefits;
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(j) to determine whether any domestic relations order
constitutes a QDRO and to take such action as the Plan Administrator deems
appropriate in light of such domestic relations order; and
(k) to retain records on elections and waivers by
Participants, their Spouses and their Beneficiaries, all as further set forth
herein.
12.4 Reporting and Disclosure. The Plan Administrator shall
keep all individual and group records relating to Plan Participants, and
Beneficiaries, and all other records necessary for the proper operation of the
Plan. Such records shall be made available to the Employer and to each
Participant and Beneficiary for examination during business hours except that a
Participant or Beneficiary shall examine only such records as pertain
exclusively to the examining Participant or Beneficiary and those records and
documents relating to all Participants generally. The Plan Administrator shall
prepare and shall file as required by law or regulation all reports, forms,
documents and other items required by ERISA, the Code and every other relevant
statute, each as amended, and all regulations thereunder. This provision shall
not be construed as imposing upon the Plan Administrator the responsibility or
authority for the preparation, preservation, publication or filing of any
document required to be prepared, preserved or filed by the Trustee or by any
other named fiduciary to whom such responsibilities are delegated by law or by
this Plan.
12.5 Construction of the Plan. The Plan Administrator shall
take such steps as are considered necessary and appropriate to remedy any
inequity that results from incorrect information received or communicated in
good faith or as the consequence of an administrative error. The Plan
Administrator shall have the full discretionary authority to make factual
determinations, to interpret the Plan, to make benefit eligibility
determinations, and to determine all questions arising in the administration,
interpretation and application of the Plan. All such corrections,
reconciliations, interpretations and completions of Plan provisions shall be
final, binding and conclusive on the parties, including the Employer, the
Employees, their families, dependents, Beneficiaries and any Alternate Payees.
12.6 Engagement of Assistants and Advisers. The Plan
Administrator shall have the right to hire such professional assistants and
consultants as it, in its sole discretion, deems necessary or advisable,
including, but not limited to:
(a) investment managers and/or advisers;
(b) accountants;
(c) actuaries;
(d) attorneys;
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(e) consultants;
(f) clerical and office personnel;
(g) medical practitioners.
The expenses incurred by the Plan Administrator in connection with the operation
of the Plan, including, but not limited to, the expenses incurred by reason of
the engagement of professional assistants and consultants, shall be expenses of
the Plan and shall be payable from the Fund at the direction of the Plan
Administrator. The Employer shall have the option, but not the obligation, to
pay any such expenses, in whole or in part, and by so doing, to relieve the Fund
from the obligation of bearing such expenses. Payment of any such expenses by
the Employer on any occasion shall not bind the Employer to thereafter pay any
similar expenses.
12.7 Bonding. The Plan Administrator shall arrange for such
bonding as is required by law, but no bonding in excess of the amount required
by law shall be considered required by the Plan.
12.8 Compensation of the Plan Administrator. The Plan
Administrator shall serve without compensation for its services as such, but all
expenses of the Plan Administrator shall be paid or reimbursed by the Employer,
and if not so paid or reimbursed, shall be proper charges to the Fund and shall
be paid therefrom.
12.9 Indemnification of the Plan Administrator and the
Committee Members. The Plan Administrator and each member of the Committee shall
be indemnified by the Employer against costs, expenses and liabilities (other
than amounts paid in settlement to which the Employer does not consent)
reasonably incurred by them in connection with any action to which they may be a
party by reason of their service as the Plan Administrator or a member of the
Committee except in relation to matters as to which they shall be adjudged in
such action to be personally guilty of negligence or willful misconduct in the
performance of their duties. The foregoing right to indemnification shall be in
addition to such other rights as the Plan Administrator and each member of the
Committee may enjoy as a matter of law or by reason of insurance coverage of any
kind, but shall not extend to costs, expenses and/or liabilities otherwise
covered by insurance or that would be so covered by any insurance then in force
if such insurance contained a waiver of subrogation.
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ARTICLE XIII
CLAIMS PROCEDURE
13.1 Application for Benefits. Each Participant and/or
Beneficiary believing himself eligible for benefits under the Plan shall apply
for such benefits by completing and filing with the Plan Administrator an
application for benefits on a form supplied by the Plan Administrator. Before
the date on which benefit payments commence, each such application must be
supported by such information and data as the Plan Administrator deems relevant
and appropriate. Evidence of age, marital status (and, in the appropriate
instances, health, death or disability), and location of residence shall be
required of all applicants for benefits.
13.2 Appeals of Denied Claims for Benefits. In the event that
any claim for benefits is denied in whole or in part, the Participant or
Beneficiary whose claim has been so denied shall be notified of such denial in
writing by the Plan Administrator. The notice advising of the denial shall
specify the reason or reasons for denial, make specific reference to pertinent
Plan provisions, describe any additional material or information necessary for
the claimant to perfect the claim (explaining why such material or information
is needed), and shall advise the Participant or Beneficiary, as the case may be,
of the procedure for the appeal of such denial. All appeals shall be made by the
following procedure:
(a) The Participant or Beneficiary whose claim has been
denied shall file with the Plan Administrator a notice of desire to appeal the
denial. Such notice shall be filed within sixty (60) days of notification by the
Plan Administrator of claim denial, shall be made in writing, and shall set
forth all of the facts upon which the appeal is based, together with all issues,
comments, and the theories supporting the appeal. Any facts or theories not
raised in the review process will be deemed waived. Appeals not timely filed
shall be barred.
(b) The Plan Administrator shall, within thirty (30) days of
receipt of the Participant's or Beneficiary's notice of appeal, establish a
hearing date on which the Participant or Beneficiary may make an oral
presentation to the named appeals fiduciary in support of his appeal. The
Participant or Beneficiary shall be given not less than ten (10) days' notice of
the date set for the hearing.
(c) The named appeals fiduciary shall consider the merits of
the claimant's written and oral presentations, the merits of any facts or
evidence in support of the denial of benefits, and such other facts and
circumstances as the named appeals fiduciary shall deem relevant. If the
claimant elects not to make an oral presentation, such election shall not be
deemed adverse to his interest, and the named appeals fiduciary shall
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proceed as set forth below as though an oral presentation of the contents of the
claimant's written presentation had been made.
(d) The named appeals fiduciary shall render a determination
upon the appealed claim which determination shall be accompanied by a written
statement as to the reasons therefor. The determination so rendered shall be
binding upon all parties.
13.3 Appointment of the Named Appeals Fiduciary. The named
appeals fiduciary shall be the person or persons named as such by the Board of
Directors, or, if no such person or persons be named, then the person or persons
named by the Plan Administrator as the named appeals fiduciary. Named appeals
fiduciaries may at any time be removed by the Board of Directors, and any named
appeals fiduciary named by the Plan Administrator may be removed by the Plan
Administrator. All such removals may be with or without cause and shall be
effective on the date stated in the notice of removal. The named appeals
fiduciary shall be a "Named Fiduciary" within the meaning of ERISA, and, unless
appointed to other fiduciary responsibilities, shall have no authority,
responsibility, or liability with respect to any matter other than the proper
discharge of the functions of the named appeals fiduciary as set forth herein.
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ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 Definitions. Whenever used in this Article with respect
to this Plan, the following capitalized terms shall have the following meanings:
(a) "Determination Date" shall mean for any Plan Year:
(1) with respect to this Plan, the October 31 next
preceding such Plan Year; or
(2) with respect to any other plan in a Permissive
Aggregation Group or Required Aggregation Group, the last day of the plan year
of such plan that ends in the calendar year in which falls the Determination
Date with respect to this Plan for such Plan Year.
(b) "Key Employee" shall mean, for any Plan Year, an
individual who is a key employee for such Plan Year within the meaning of
Section 416(i) of the Code.
(c) "Non-Key Employee" shall mean any employee or former
employee of the Company or an Affiliated Company in any Plan Year, but who is
not a Key Employee as to that Plan Year.
(d) "Permissive Aggregation Group" shall mean the group of
affiliated retirement plans maintained by the Company or any Affiliated Company,
which group consists of the Required Aggregation Group and any other such plan
or plans which, considered together with the Required Aggregation Group, meet
the requirements of Section 401(a)(4) and 410 of the Code.
(e) "Required Aggregation Group" shall mean the group of
qualified retirement plans maintained by the Company or any Affiliated Company,
which group consists of each plan in which a Key Employee is a Participant in
the Plan Year containing the Determination Date or any of the four preceding
Plan Years, including any frozen or terminated plan that was maintained within
the five-year period ending on the Determination Date, and each other plan that
enables any such plan to meet the requirements of Section 401(a)(4) or 410 of
the Code, but only if such group includes this Plan. Otherwise, the Required
Aggregation Group consists of this Plan only.
(f) "Top-Heavy Plan Year" shall mean a Plan Year in which the
Plan is top-heavy. The Plan is top-heavy for a given Plan Year if for that Plan
Year (i) the Required Aggregation Group is top-heavy, and (ii) the Required
Aggregation Group is not part of a Permissive Aggregation Group that is not
top-heavy. The Required Aggregation
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Group or a Permissive Aggregation Group (the "Group") is top-heavy for a given
Plan Year if the ratio (determined as provided in Section 416(g) of the Code) of
the aggregate accounts (or, the present value of cumulative accrued benefits, in
the case of a defined benefit plan included in such Group) of participants who
are key employees to the like amount determined for all participants in all
plans included in such Group exceeds 60%. The present value of cumulative
accrued benefits under any defined benefit plan shall be determined under the
method used for accrual purposes for all plans maintained by the Company and all
Affiliated Companies if a single method is used by all such plans, or otherwise,
the slowest accrual method permitted under Section 411(b)(1)(C) of the Code.
14.2 Operating Rules. Anything in the Plan to the contrary
notwithstanding, the following rules shall apply in a Top-Heavy Plan Year:
(a) For any Top-Heavy Plan Year, the contribution on behalf
of each Employee who is a Non-Key Employee and who remained in the employ of the
Company or an Affiliated Company through the end of such Plan Year, taking into
account contributions allocated to such Employee under any defined contribution
plan included in the Required Aggregation Group or any Permissive Aggregation
Group, shall be at least equal to the required minimum percentage described in
Subparagraph (1) below. For purposes of this Paragraph:
(1) the required minimum percentage shall be 3% of such
Non-Key Employee's 415 Compensation for such Plan Year provided that, if the
Plan does not enable a defined benefit plan in the Required Aggregation Group to
meet the requirements of Section 401(a)(4) or 410 of the Code, the required
minimum percentage shall be the lesser of 3% or the percentage of the 415
Compensation, to a maximum of $200,000 ($150,000, effective November 1, 1994) of
415 Compensation (or such other amount as may be permitted under Section
401(a)(17) of the Code for the Plan Year), allocated to the Key Employee for
whom such percentage is the highest for such Plan Year.
If any person who is an Employee in the Plan is a participant under any
qualified defined benefit pension plan sponsored by the Company or an Affiliated
Company, "4%" shall be substituted for "3%" in Subparagraph (1) above. The
provisions of this Paragraph (a) shall not apply to any Non-Key Employee for a
Plan Year, if with respect to that Plan Year, the Non-Key Employee was an active
participant in a qualified defined benefit plan(s) included in the Required or
Permissive Aggregation Group under which the Non-Key Employee's accrued benefit
is not less than the minimum accrued pension benefit that would be required
under Section 416(c)(1) of the Code.
(b) If the Plan Year would be a Top-Heavy Plan Year
substituting "90%" for "60%" in Section 14.1(f) above, "1.0" shall be
substituted for "1.25" in Section 4.7(b)(3) and Section 4.7(b)(5)(B)(i); and
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(c) Each Participant's Account shall become vested in
accordance with the following schedule:
Completed Years of Service Vested Percentage
-------------------------- -----------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(d) If the Plan ceases to be a Top-Heavy Plan, the vesting
rule set forth in Section 7.1 shall again apply to all Years of Service,
provided that:
(1) each Participant described above shall maintain the
same vested interest in his Account determined under the schedule above as of
the date on which the Plan ceases to be a Top-Heavy Plan until the Participant's
vested percentage under the schedule in Section 7.1 exceeds the percentage
maintained under the schedule above; and
(2) any such Participant with at least three (3) Years of
Service at the time the Plan ceases to be a Top-Heavy Plan shall continue to
have his vested percentage computed under the Plan in accordance with the
vesting schedule set forth above.
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ARTICLE XV
MISCELLANEOUS
15.1 Nonalienation of Benefits. None of the payments, benefits
or rights of any Participant, Beneficiary or Alternate Payee shall be subject
to any claim of any creditor, and in particular, to the fullest extent permitted
by law, all such payments, benefits and rights shall be free from attachment,
garnishment, trustee's process, or any other legal or equitable process
available to any creditor of such Participant, Beneficiary or Alternate Payee.
No Participant, Beneficiary or Alternate Payee shall have the right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or payments
which he may expect to receive, contingently or otherwise, under the Plan,
except the right reserved to Participants, and in certain circumstances to their
surviving Spouse, to designate a Beneficiary or Beneficiaries as hereinabove
provided. Compliance with the provisions and conditions of any QDRO shall not be
considered a violation of this provision.
15.2 Action of Employer. Any action permitted or required to
be taken by the Employer hereunder may be taken by the President or any Vice
President (and if required, attested to by any officer), except that amendment
or termination of the Plan, the permanent or complete discontinuance of
contributions by the Employer, the determination of Employer contributions for
any Accrual Computation Period and the removal or appointment of the Plan
Administrator or the Trustee shall be by resolution of the Board of Directors or
any committee thereof, or by any person or persons authorized to take such
action (or whose action so taken is ratified) by resolution of the Board or such
committee. Notwithstanding the foregoing, any amendment necessary to initially
qualify the Plan under section 401(a) of the Code, or to maintain such
qualification, may be made without the further approval of the Board of
Directors if signed by the officers or other persons authorized pursuant to this
Section.
Each entity constituting the Employer hereby delegates to the
Board of Directors (and to the officers and other persons authorized to act on
behalf of the Employer pursuant to this Section) the full authority to act in
its stead and on its behalf on all matters with respect to the Plan and the
Trust Agreement.
15.3 No Contract of Employment. Neither the establishment of
the Plan, nor any modification thereof, nor the creation of any fund, trust or
account, nor the payment of any benefits shall be construed as giving any
Participant or Employee, or any person whomsoever, the right to be retained in
the service of the Employer, and all Participants and other Employees shall
remain subject to discharge to the same extent as if the Plan had never been
adopted.
15.4 Severability of Provisions. If any provision of the Plan
shall be held invalid or unenforceable, such in validity or unenforceability
shall not affect any other provision
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hereof, and the Plan shall be construed and enforced as if such provision had
not been included.
15.5 Heirs, Assigns and Personal Representatives. This Plan
shall be binding upon the heirs, executors, administrators, successors and
assigns of the parties, including each Participant and Beneficiary, present and
future and all persons for whose benefit there exists any QDRO with respect to
any Participant (except that no successor to the Employer shall be considered a
Plan sponsor unless that successor adopts the Plan).
15.6 Headings and Captions. The headings and captions herein
are provided for reference and convenience only, shall not be considered part of
the Plan, and shall not be employed in the construction of the Plan.
15.7 Gender and Number. Except where otherwise clearly
indicated by context, the masculine and the neuter shall include the feminine
and the neuter, the singular shall include the plural, and vice-versa.
15.8 Controlling Law. The Plan shall be construed and
enforced according to the laws of the Commonwealth of Pennsylvania to the extent
not preempted by Federal law, which shall otherwise control.
15.9 Funding Policy. The Plan is designed to invest
primarily in Company Stock so as to give Participants an ownership interest in
the Employer.
15.10 Title to Assets. No Participant, Beneficiary or
Alternate Payee shall have any right to, or interest in, any assets of the Fund
upon termination of his employment or otherwise, except as provided from time to
time under the Plan, and then only to the extent of the benefits payable under
the Plan to such Participant, Beneficiary or Alternate Payee out of the assets
of the Fund. All payments of benefits as provided for in the Plan shall be made
from the assets of the Fund, and neither the Employer nor any other person shall
be liable therefor in any manner.
15.11 Payments to Minors, Etc. Any benefit payable to or for
the benefit of a minor, an incompetent person or other person incapable of
receipting therefor shall be deemed paid when paid to such person's guardian or
to the party providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge the Trustee, the Plan
Administrator, the Employer and all other parties with respect thereto.
15.12 Reliance on Data and Consents. The Employer, the
Trustee, the Plan Administrator, all fiduciaries with respect to the Plan, and
all other persons or entities associated with the operation of the Plan, the
management of its assets, and the provision of benefits thereunder, may
reasonably rely on the truth, accuracy and completeness of any representations
or data provided by any Participant, any Beneficiary, any spouse of a
Participant or any Alternate Payee, including, without limitation,
representations or data as to
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age, health, marital status and any inability to locate a spouse. All such
representations made and data submitted are binding on any party seeking to
claim a benefit through a Participant, Beneficiary, spouse of a Participant,
Alternate Payee or the representatives of any such persons. Similarly, the
Employer, the Trustee, the Plan Administrator, all fiduciaries with respect to
the Plan and all such other aforementioned persons or entities, each shall have
the right to rely on consents, elections, designations and waivers received, and
may treat any such consent, election, designation or waiver as genuine and as
having been executed with full comprehension of the significance thereof by the
party purported to have signed the same.
15.13 Lost Payees. A benefit shall be deemed forfeited if the
Plan Administrator is unable to locate the person to whom payment is due,
provided, however, that subject to Section 15.14, such benefit shall be
reinstated if a claim is made by the party to whom the forfeited benefit is
properly payable.
15.14 Missing Spouses. If a Participant certifies in writing
to the Plan Administrator that he is unable to locate his spouse after diligent
effort to determine her whereabouts, and if the Plan Administrator, having
written to such spouse at the address at which such spouse was last known to the
Participant or the Plan Administrator to reside (or to the said spouse's legal
representative if the Plan Administrator has been advised of the existence of
such legal representative), receives no response that could reasonably be
expected to result in the location of such spouse, the Participant shall be
treated as an unmarried person for purposes of the Plan, until such time, if
ever, as such spouse is located and his or her whereabouts made known to the
Plan Administrator. If such a missing spouse subsequently appears or is located,
such spouse's rights, if any, to future benefit payments shall be restored, but
such spouse shall have no claim against any party with respect to benefits
already paid, regardless of to whom paid.
15.15 Notices. Each Participant, Beneficiary, Alternate Payee
or other person entitled to benefits under the Plan shall be responsible for
furnishing the Plan Administrator with the current and proper address for the
mailing of notices, statements, reports, other communications from the Plan
Administrator and benefit payments. Any notice, statement, report or
communication required or permitted to be given to any such person shall be
deemed to have been duly given if delivered to, or if mailed by first-class
mail, postage prepaid and addressed to, such person at the address so furnished
to the Plan Administrator. If any check or Employer Securities mailed to such
address is returned as undeliverable to the addressee, mailing of checks or such
Securities shall be suspended until the person entitled to such payment
furnishes, or the Plan Administrator is otherwise furnished, the proper address.
This Section shall not be construed as requiring the mailing of any notice or
communication if the regulations issued under ERISA or the Code deem sufficient
notice to be given by the posting of notice in appropriate places, or by any
other publication method. All elections, designations, requests, notices,
instructions and other communications from a Participant, Beneficiary, Alternate
Payee or other person to the Plan Administrator, required or permitted under the
Plan, shall be in such form as prescribed by the Plan Administrator and shall be
mailed by first-class mail or delivered to such location as prescribed by the
Plan
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Administrator and shall be deemed to have been given and delivered only upon
actual receipt thereof by the Plan Administrator at such location.
IN WITNESS WHEREOF, and as evidence of the adoption of this
amended and restated Plan, the Employer has caused the same to be executed by
its duly authorized officers and its corporate seal to be affixed, as of the
31st day of October, 1995.
CENTRAL SPRINKLER CORPORATION
Attest:
/s/ George G. Meyer /s/ Albert T. Sabol
- ------------------------ ---------------------------
Secretary Vice President, Finance
(Corporate Seal)
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CENTRAL SPRINKLER CORPORATION
1996 EQUITY COMPENSATION PLAN
The purpose of the Central Sprinkler Corporation 1996 Equity
Compensation Plan (the "Plan") is to provide (i) designated key employees of
Central Sprinkler Corporation (the "Company") and its subsidiaries
("Employees"), and (ii) members of the Board of Directors of the Company (the
"Board") who are not employees of the Company or its subsidiaries ("Non-Employee
Directors") with the opportunity to receive grants of incentive stock options
and nonqualified stock options. The Company believes that the Plan will cause
the participants to contribute materially to the growth of the Company, thereby
benefitting the Company's stockholders, and will align the economic interests of
the participants with those of the stockholders.
1. Administration
(a) The Plan shall be administered and interpreted by a committee (the
"Committee") consisting of "outside directors" as defined under section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code") and related
Treasury regulations, and "non-employee directors" as defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
However, notwithstanding anything in the Plan to the contrary, the Board must
ratify or approve any grants made to Non-Employee Directors. References in the
Plan to the "Committee" shall be deemed to include the Board, with respect to
ratification or approval of grants made to Non-Employee Directors.
(b) The Committee shall have the sole authority to (i) determine the
individuals to whom grants shall be made under the Plan, (ii) determine the
type, size and terms of the grants to be made to each such individual, (iii)
determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for vesting
and the acceleration of vesting, (iv) establish the terms of any non-compete
provisions applicable to grants and the terms of any applicable stockholder's
agreement, and (v) deal with any other matters arising under the Plan.
(c) The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and for
the conduct of its business as it deems necessary or advisable, in its sole
discretion. The Committee's interpretations of the Plan and all determinations
made by the Committee pursuant to the powers vested in it hereunder shall be
conclusive and binding on all persons having any interest in the Plan or in any
awards granted hereunder. All powers of the Committee shall be executed in its
sole discretion, in the best interest of the Company and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals.
<PAGE>
2. Grants
Awards under the Plan shall consist of Incentive Stock Options and
Nonqualified Stock Options, as defined in Section 5 ("Options"). All Options
shall be subject to the terms and conditions set forth herein and to those other
terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the individual
in a grant instrument (the "Grant Instrument") or in an amendment to the Grant
Instrument. The Committee shall approve the form and provisions of each Grant
Instrument. Grants under a particular Section of the Plan need not be uniform as
among the grantees.
3. Shares Subject to the Plan
(a) Subject to the adjustment specified below, the aggregate number of
shares of common stock of the Company ("Company Stock") that may be issued under
the Plan is 800,000 shares. The maximum aggregate number of shares of Company
Stock that may be subject to Options granted to any individual during any
calendar year shall be 300,000 shares. The shares may be authorized but unissued
shares of Company Stock or reacquired shares of Company Stock, including shares
purchased by the Company on the open market for purposes of the Plan. If and to
the extent Options granted under the Plan terminate, expire, or are canceled,
forfeited, exchanged or surrendered without having been exercised, the shares
subject to such Options shall again be available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company
Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization,
stock split, or combination or exchange of shares, (ii) by reason of a merger,
reorganization or consolidation in which the Company is the surviving
corporation, (iii) by reason of a reclassification or change in par value, or
(iv) by reason of any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Options, the maximum number of shares of Company Stock for
which any individual participating in the Plan may be granted Options in any
year, the number of shares covered by outstanding Options, the kind of shares
issued under the Plan, and the price per share of such Options shall be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number or kind of issued shares of Company Stock to preclude the enlargement
or dilution of rights and benefits under such Options; provided, however, that
any fractional shares resulting from such adjustment shall be eliminated. The
adjustments determined by the Committee shall be final, binding and conclusive.
4. Eligibility for Participation
(a) All Employees and Non-Employee Directors shall be eligible to
receive Options under the Plan. The Committee shall select the Employees and
Non-Employee Directors to
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receive Options and shall determine the number of shares of Company Stock
subject to a particular grant in such manner as it determines. Employees and
Non-Employee Directors who receive Options under this Plan shall hereinafter be
referred to as "Grantees".
(b) Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to make grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including options
granted to employees thereof who become Employees, or for other proper corporate
purpose, or (ii) limit the right of the Company to grant stock options or make
other awards outside of this Plan.
5. Stock Options
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each grant of Options.
(b) Type of Option and Price.
(i) The Committee may grant Options that are intended to
qualify as "incentive stock options" within the meaning of section 422 of the
Code ("Incentive Stock Options") or options that are not intended so to qualify
("Nonqualified Stock Options") or any combination of Incentive Stock Options and
Nonqualified Stock Options, all in accordance with the terms and conditions set
forth herein. Only persons who are employees of the Company or its parent or
subsidiary corporations may receive Incentive Stock Options.
(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be equal
to, greater than, or less than the Fair Market Value (as defined below) of a
share of Company Stock on the date the Option is granted; provided, however,
that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or
greater than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) an Incentive Stock Option may not be
granted to a person who, at the time of grant, owns stock possessing more than
10 percent of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary of the Company, unless the Exercise Price
per share is not less than 110% of the Fair Market Value of Company Stock on the
date of grant.
(iii) If the Company Stock is traded in a public market, then
the Fair Market Value per share shall be determined as follows: (x) if the
principal trading market for the Company Stock is a national securities exchange
or the National Market segment of the Nasdaq Stock Market, the last reported
sale price thereof on the relevant date or (if there were no trades on that
date) the latest preceding date upon which a sale was reported, or (y) if the
Company Stock is not principally traded on such exchange or market, the mean
between the last reported "bid" and "asked" prices of Company Stock on the
relevant date, as reported on Nasdaq or, if not
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so reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not traded in a public market or
subject to reported transactions or "bid" or "asked" quotations as set forth
above, the Fair Market Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option,
which shall not exceed 10 years from the date of grant. However, an Incentive
Stock Option may not be granted to a person who, at the time of grant, owns
stock possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary of the Company,
unless the Option term does not exceed five years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with the terms and conditions determined by the Committee and
specified in the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided in the Grant Instrument or as otherwise
provided below, an Option may only be exercised while the Grantee is associated
with the Company or any subsidiary of the Company as an Employee or a
Non-Employee Director (a "Company Relationship"). If a Grantee ceases to have a
Company Relationship for any reason other than a "disability", death, or
"termination for cause", any Option which is otherwise exercisable by the
Grantee shall terminate (except as provided in the Grant Instrument) unless
exercised within 90 days of the date on which the Grantee ceases to have a
Company Relationship (or within such other period of time as may be specified in
the Grant Instrument), but in any event no later than the date of expiration of
the Option term. Any of the Grantee's Options that are not otherwise exercisable
as of the date on which the Grantee ceases to have a Company Relationship shall
terminate as of such date.
(ii) If a Grantee ceases to have a Company Relationship on
account of a "termination for cause," any Option held by the Grantee shall
terminate as of the date the Grantee ceases to have a Company Relationship.
(iii) If a Grantee ceases to have a Company Relationship
because the Grantee is "disabled", any Option which is otherwise exercisable by
the Grantee shall terminate (except as provided in the Grant Instrument) unless
exercised within one year after the date on which the Grantee ceases to have a
Company Relationship (or within such other period of time as may be specified in
the Grant Instrument), but in any event no later than the date of expiration of
the Option term. Any of the Grantee's Options which are not otherwise
exercisable as of the date on which the Grantee ceases to have a Company
Relationship shall terminate as of such date.
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(iv) If a Grantee ceases to have a Company Relationship due to
his or her death while a Company Relationship exists or within 90 days after the
termination of a Company Relationship under Section 5(e)(i) above (or within
such other period of time as may be specified in the Grant Instrument), any
Option that is otherwise exercisable by the Grantee shall terminate (except as
provided in the Grant Instrument) unless exercised within one year after the
date on which the Grantee ceases to have a Company Relationship (or within such
other period of time as may be specified in the Grant Instrument), but in any
event no later than the date of expiration of the Option term. Any of the
Grantee's Options that are not otherwise exercisable as of the date on which the
Grantee ceases to have a Company Relationship shall terminate as of such date.
(v) For purposes of this Section 5(e):
(A) "Disability" shall mean a Grantee's becoming
disabled within the meaning of section 22(e)(3) of the Code.
(B) "Termination for cause" shall mean, except to the
extent otherwise provided in a Grantee's Grant Instrument, a finding by
the Committee, after full consideration of the facts presented, that
(i) the Grantee committed a material breach of his or her employment or
service contract with the Grantee's employer, (ii) the Grantee has been
engaged in disloyalty to his or her employer, including, without
limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his or her employment or service,
(iii) the Grantee has disclosed trade secrets or confidential
information of the Company or its subsidiaries to persons not entitled
to receive such information, or (iv) the Committee determines that, for
any other reason, the Grantee's employment should be terminated for
cause. In the event a Grantee's Company Relationship is terminated for
cause, in addition to the immediate termination of all Options, the
Grantee shall automatically forfeit all Option shares for any exercised
portion of an Option for which the Company has not yet delivered the
share certificates, upon refund by the Company of the Exercise Price
paid by the Grantee for such shares.
(f) Exercise of Options. The Grantee shall pay the Exercise Price for
an Option as specified in the Grant Instrument (x) in cash, (y) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (z) by such other method as the Committee may approve, including payment by
tendering the Grantee's promissory note, in such form and on such terms as the
Committee shall determine, or payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board. Shares of
Company Stock used to exercise an Option shall have been held by the Grantee for
the requisite period of time to avoid adverse accounting consequences to the
Company with respect to the Option. The Grantee shall pay the Exercise Price and
the amount of any withholding tax due (pursuant to Section 6) at the time of
exercise. Shares of
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Company Stock shall not be issued upon exercise of an Option until the Exercise
Price is fully paid and any required withholding is made.
(g) Limit on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the option, as to the excess, shall be treated as a Nonqualified Stock
Option.
6. Withholding of Taxes
(a) All grants under the Plan shall be subject to applicable federal
(including FICA), state and local tax withholding requirements. The Company may
require the Grantee or other person receiving shares upon the exercise of an
Option to pay to the Company the amount of any such taxes that the Company is
required to withhold with respect to such Option, or to make other arrangements
satisfactory to the Committee, including, if the Committee so permits, payment
by tendering the Grantee's promissory note in such form and on such terms as the
Committee may determine, or the Company may deduct from other wages paid by the
Company the amount of any withholding taxes due with respect to such Option.
(b) If the Grant Instrument (or an amendment) so provides, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option by having shares withheld up to an amount that does not
exceed the Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Committee and may be subject to the prior approval of the
Committee.
7. Transferability of Options
(a) Except as provided in the Grant Instrument or as otherwise provided
below, (i) only the Grantee may exercise rights under an Option during the
Grantee's lifetime and (ii) the Grantee may not transfer those rights except by
will or by the laws of descent and distribution or, with respect to Nonqualified
Stock Options, if permitted in any specific case by the Committee pursuant to a
domestic relations order (as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder). When a Grantee dies, the representative or other person entitled to
succeed to the rights of the Grantee ("Successor Grantee") may exercise such
rights. A Successor Grantee must furnish proof satisfactory to the Company of
his or her right to receive the Grant under the Grantee's will or under the
applicable laws of descent and distribution.
(b) Notwithstanding the foregoing, the Committee may provide, in a
Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to
family members or other
-6-
<PAGE>
persons or entities according to such terms as the Committee may specify in the
Grant Instrument, provided that the transferred Option continues to be subject
to the same terms and conditions as were applicable to the Option immediately
before the transfer.
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the voting power of the then outstanding
securities of the Company;
(b) The stockholders of the Company approve (or, if stockholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Company with another corporation where the
stockholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such stockholders to more than 50% of all votes to which all
stockholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), or where the members of the Board,
immediately prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the surviving corporation, (ii) the sale or other disposition of all or
substantially all of the assets of the Company, or (iii) a liquidation,
dissolution or statutory exchange of the Company; or
(c) After the date this Plan is approved by the stockholders of the
Company, directors are elected such that a majority of the members of the Board
shall have been members of the Board for less than two years, unless the
election or nomination for election of each new director who was not a director
at the beginning of such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.
9. Consequences of a Change of Control
(a) Upon a Change of Control, unless the Committee determines
otherwise, (i) the Company shall provide each Grantee who holds outstanding
Options written notice of such Change of Control and (ii) all outstanding
Options that are not then exercisable shall automatically accelerate and become
fully exercisable.
(b) Unless the Committee determines otherwise, upon a Change of Control
where the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation), all outstanding Options shall be assumed by,
or replaced with comparable options by, the surviving corporation.
-7-
<PAGE>
(c) Notwithstanding the foregoing, subject to subsection (d) below, in
the event of a Change of Control, the Committee may take one or both of the
following actions: the Committee may (i) require that Grantees surrender their
outstanding Options in exchange for a payment by the Company, in cash or Company
Stock as determined by the Committee, in an amount equal to the amount by which
the then Fair Market Value of the shares of Company Stock subject to the
Grantee's outstanding Options exceeds the Exercise Price of the Options, or (ii)
after giving Grantees an opportunity to exercise their outstanding Options,
terminate any or all unexercised Options at such time as the Committee deems
appropriate. Such surrender or termination shall take place as of the date of
the Change of Control or such other date as the Committee may specify.
(d) Notwithstanding anything in the Plan to the contrary, in the event
of a Change of Control, the Committee shall not have the right to take actions
described in the Plan (including without limitation actions described in
Subsection (c) above) that would make the Change of Control ineligible for
pooling of interests accounting treatment or that would make the Change of
Control ineligible for desired tax treatment if, in the absence of such right,
the Change of Control would qualify for such treatment and the Company intends
to use such treatment with respect to the Change of Control.
10. Requirements for Issuance of Shares
No Company Stock shall be issued or transferred in connection with any
grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of any applicable law, regulation or official interpretation thereof and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued under the
Plan will be subject to such stop-transfer orders and other restrictions as may
be applicable under such laws, regulations and other obligations of the Company,
including any requirement that a legend or legends be placed thereon.
11. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that any amendment that increases the aggregate number of
shares of Company Stock that may be issued under the Plan (other than by
operation of Section 3(b)) shall be subject to approval by the stockholders of
the Company, and provided, further, that the Board shall not amend the Plan
without stockholder approval if such approval is required by Section 162(m) of
the Code.
-8-
<PAGE>
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or unless it is extended by the Board
with the approval of the stockholders.
(c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after a grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 17(b). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant may be terminated
or amended under Section 17(b) or may be amended by agreement of the Company and
the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
12. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any benefits under this Plan. In no event shall
interest be paid or accrued on any grant, including unpaid installments of
Options.
13. Rights of Participants
Nothing in this Plan shall entitle any Employee or Non-Employee
Director or other person to any claim or right to be granted an Option under
this Plan. Neither this Plan nor any action taken hereunder shall be construed
as giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
14. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any gant. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
15. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
-9-
<PAGE>
16. Effective Date of the Plan.
This Plan shall be effective as of December 1, 1996, subject to
approval by the shareholders of the Company.
17. Miscellaneous
(a) Substitute Options. The Committee may make a grant of Options to an
employee of another corporation who becomes an Employee by reason of a corporate
merger, consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company or any of its subsidiaries in substitution for
a stock option granted by such corporation. The terms and conditions of the
substitute grant may vary from the terms and conditions required by the Plan and
from those of the substituted stock incentives. The Committee shall prescribe
the provisions of the substitute Options.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock with
respect to Options shall be subject to all applicable laws and to approvals by
any governmental or regulatory agency as may be required. With respect to
persons subject to Section 16 of the Exchange Act, it is the intent of the
Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under such Act. The
Committee may revoke any grant if it is contrary to law or modify a grant to
bring it into compliance with any valid and mandatory government regulation. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a stockholder with respect to any shares of Company Stock covered by a
Option until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company.
(d) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall exclusively
be governed by and determined in accordance with the law of the Commonwealth of
Pennsylvania.
-10-
<PAGE>
CoreStates Investment Operations Banking Subsidiaries
FC 1-1-8-4 CoreStates Bank, N.A.
PO Box 8590 New Jersey National Bank
Philadelphia, PA 19101-8590 CoreStates Bank of Delaware NA
January 25, 1996
Central Castings Corporation
Att.: Mr. Albert T. Sabol
451 North Cannon Avenue
Lansdale, Pa 19446
Re: Interest Rate Swap Transaction
Dear Counterparty:
The purpose of this document is to confirm the terms and conditions of the Swap
Transaction entered into between us on the Trade Date specified below ("the Swap
Transaction"). This agreement constitutes a "Confirmation" as referred to in
the Agreement specified below.
The definitions and provisions contained in the 1991 Interest Rate and Currency
Exchange Definitions (as published by the International Swap Dealers
Association, Inc. ("ISDA")) are incorporated into this confirmation. In the
event of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern.
If you and we are parties to an Interest Rate Swap Agreement that sets forth the
general terms and conditions applicable to Swap Transactions between us (an
"Agreement"), this Confirmation supplements, forms part of, and will be subject
to, such Agreement, if you and we are not yet parties to an Agreement, this
Confirmation will supplement, form part of, and be subject to an Agreement upon
its execution by you and us. All provisions contained or incorporated by
reference in the Agreement shall govern this Confirmation except as expressly
modified below. In addition, if an Agreement has not been executed, this
Confirmation will itself evidence a complete binding agreement between you and
us as to the terms and conditions of the Swap Transaction to which this
Confirmation relates.
<PAGE>
The terms of the particular Swap Transaction to which this Confirmation relates
are as follows:
TRADE DETAILS
NOTIONAL AMOUNT: See Attached Amortization Schedule
TRADE DATE: 25 January 1996
EFFECTIVE DATE: 01 February 1996
TERMINATION DATE: 01 November 2015
FLOATING RATE PAYOR: CoreStates Bank, N.A.
FLOATING RATE Monthly, commencing 01 March, 1996, to
PAYMENT DATES: and including, 1 November 2015, subject
to adjustment in accordance with the
Modified Following Business Day
Convention
FLOATING RATE: To be determined
FLOATING RATE OPTION: USD-LISOR-BBA
SPREAD: Not Applicable
FLOATING RATE DAY
COUNT FRACTION: Actual/360
DESIGNATED MATURITY: One (1) Month
RESET DATES: Weekly
COMPOUNDING: Not Applicable
BUSINESS DAYS: New York & London
BUSINESS DAY CONVENTION: Modified Following
<PAGE>
FIXED RATE PAYER: Central Castings Corporation
FIXED RATE: Monthly commencing 1 March 1996 to and
PAYMENT DAYS: including, 1 November 2015, subject to
adjustment in accordance with the
Modified Following Business Day
Convention
FIXED RATE: 6.1250%
FIXED RATE
DAY COUNT FRACTION: Actual/360
CALCULATION AGENT: CoreStates Bank, N.A.
PAYMENTS TO CORESTATES BANK:
FRB PHILADELPHIA
ACCOUNT OF CORESTATES BANK, N.A.
ABA 031000011
ACCOUNT #0132-0313
PAYMENTS TO COUNTERPARTY:
PLEASE PROVIDE
PLEASE CONFIRM THAT THE FOREGOING CORRECTLY SETS THE
TERMS OF THE TRANSACTION BY SIGNING AND RETURNING THIS
CONFIRMATION TO US.
ON BEHALF OF CORESTATES BANK, N.A.
/s/ ROBERT O'NEIL
- --------------------------------------
ROBERT O'NEIL, V.P.
ON BEHALF OF THE COUNTERPARTY
(Central Castings Corporation)
/s/ Albert T. Sabol
- --------------------
<PAGE>
Amortization Schedule
Start Dates Notional Amount Outstanding
02/01/96 11,000,000
11/01/96 10,450,000
11/01/97 9,900,000
11/01/98 9,350,000
11/01/99 8,800,000
11/01/00 8,250,000
11/01/01 7,700,000
11/01/02 7,150,000
11/01/03 6,600,000
11/01/04 6,050,000
11/01/05 5,500,000
11/01/06 4,95O,OOO
11/01/07 4,400,000
11/01/08 3,850,000
11/01/09 3,300,000
11/01/10 2,750,000
11/01/11 2,200,000
11/01/12 1,650,000
11/01/13 1,100,000
11/01/14 550,000
11/01/15 0
<PAGE>
CORESTATES BANK N.A.
- -------------------------------------------------------------------------------
D/B/A CoreStates Investment Banking
FC 1-1-9-49
P.O. BOX 7618
Philadelphia, PA 19101-7618
TRADING AUTHORIZATIONS
I hereby certify that I am a Senior Vice President of CoreStates Bank N.A. and
that I have been duly appointed and am serving in that capacity in accordance
with the policies of said Bank.
Through the authority granted me by a resolution of the Board of Directors of
CoreStates Bank, N.A., I hereby authorize each of the persons listed below to do
the following:
I. Authorized to trade (buy and sell) on behalf of CoreStates Bank N.A. the
following securities:
1 U.S. Government Securities, Municipal Securities, Zero Coupon
Securities, Federal Agency Securities, Mortgage Backed Securities,
including (but not limited to) Government National Mortgage Association,
Federal Home Loan Mortgage Corporation and Federal National Mortgage
Association, Collateralized Mortgage Obligations issued by private
issuers, Corporate Bonds and Notes, and Certificates of Deposit and
Deposit Notes.
<TABLE>
<CAPTION>
NAME TITLE NAME TITLE
<S> <C> <C> <C>
Jim Calla Senior Vice President Gladys DeJesus Assistant Vice President
David Schlesinger Senior Vice President Charlie Costello Assistant Vice President
Richard Stoudt Vice President Karen Howard Assistant Vice President
Bill Breesmen Vice President Kevin Lunny Officer
Kevin Sweeney Vice President Jennifer Bailey Officer
Ed Zuk Vice President Laivitia Stone Officer
Brad Geist Vice President Margaret Moser Trader
Peter Cunane Vice President Bertha Trusdell Trader
Daniel Thomas Vice President Frank Weise Trader
Steve Budd Vice President
</TABLE>
II. Authorized to enter into Agreements, covering repurchase, resale, borrowing
and lending of U.S., Government and Federal Agency Securities, Mortgage
Backed Securities, Money Market Instruments and Corporate Bonds and Notes.
Authorized to enter into transactions as prescribed in the Interest Rate
SWAP Agreement and appended schedules.
<TABLE>
<CAPTION>
NAME TITLE NAME TITLE
<S> <C> <C> <C>
Same as I. Above
</TABLE>
III. Authorized to trade Financial Futures and Options Contracts
NAME TITLE
Same as I. Above
IV. Authorized to enter into Loan Sale Agreements
Same as I. Above
<PAGE>
V. Authorized to enter into International Currency Options Market Agreements
and International Foreign Exchange Master Agreements.
<TABLE>
<CAPTION>
NAME TITLE NAME TITLE
<S> <C> <C> <C>
Harry G. Hayman, Ill Senior Vice President Robert J. Celata Vice President
Janice E. Alvarez Vice President Charles J. Daley Vice President
</TABLE>
NOTE: This document supersedes all prior Trading Authorizations. Additionally,
CoreStates reserves the right to periodically alter, amend, or revoke the
Trading Authorizations and/or the authorized individuals as presented herein.
In witness whereof, I have hereunto set my hand this____day of______
/s/ James J. Calla
-------------------------------------------------
James J. Calla, Senior Vice President
I certify that as of the date hereof, James J. Calla is a duly appointed Senior
Vice President of CoreStates Bank N.A. and that he holds all the authority
pertaining thereto including, without limitation, the authority to delegate to
others authority to perform specific functions of the bank. I further certify
that the foregoing is in full force and effect without any alteration or
amendment.
/s/ Jacqueline A. Ballantine
------------------------------------------------
Assistant Secretary, CoreStates Bank N.A.
March 15, 1996
--------------------------------------
Date
<PAGE>
(Local Currency -- Single Jurisdiction)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of JANUARY 25, 1996
...................
CORESTATES BANK, N.A. and CENTRAL CASTINGS CORPORATION
......................................... ............................
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:-
1. Interpretation
(a) Definitions. The terms defined in Section 12 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value on
that date in the place of the account specified in the relevant Confirmation
or otherwise pursuant to this Agreement, in freely transferable funds and in
the manner customary for payments in the required currency. Where settlement
is by delivery (that is, other than by payment), such delivery will be made
for receipt on the due date in the manner customary for the relevant
obligation unless otherwise specified in the relevant Confirmation or
elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
<PAGE>
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of branches or offices through which the parties make
and receive payments or deliveries.
(d) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:-
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of the
jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other agency
of government applicable to it or any of its assets or any contractual
restriction binding on or affecting it or any of its assets;
2
<PAGE>
(iv) Consents. All governmental and other consents that are required to have
been obtained by it with respect to this Agreement or any Credit Support
Document to which it is a party have been obtained and are in full force and
effect and all conditions of any such consents have been complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any Credit
Support Document to which it is a party constitute its legal, valid and
binding obligations, enforceable in accordance with their respective terms
(subject to applicable bankruptcy, reorganisation, insolvency, moratorium
or similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless
of whether enforcement is sought in a proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) Furnish Specified Information. It will deliver to the other party any forms,
documents or certificates specified in the Schedule or any Confirmation by the
date specified in the Schedule or such Confirmation or, if none is specified, as
soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:-
(i) Failure to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(d)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or perform any
agreement or obligation (other than an obligation to make any payment under
this Agreement or delivery under Section 2(a)(i) or 2(d) or to give notice
of a Termination Event) to be complied with or performed
3
<PAGE>
by the party in accordance with this Agreement if such failure is not
remedied on or before the thirtieth day after notice of such failure is
given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party to
comply with or perform any agreement or obligation to be complied with or
performed by it in accordance with any Credit Support Document if such
failure is continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or the
failing or ceasing of such Credit Support Document to be in full force
and effect for the purpose of this Agreement (in either case other than
in accordance with its terms) prior to the satisfaction of all
obligations of such party under each Transaction to which such Credit
Support Document relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity
of, such Credit Support Document;
(iv) Misrepresentation. A representation made or repeated or deemed to have
been made or repeated by the party or any Credit Support Provider of such
party in this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of,
that Specified Transaction, (2) defaults, after giving effect to any
applicable notice requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date of, or any
payment on early termination of, a Specified Transaction (or such default
continues for at least three Local Business Days if there is no applicable
notice requirement or grace period) or (3) disaffirms, disclaims, repudiates
or rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event(however described) in respect
of such party, any Credit Support Provider of such party or any applicable
Specified Entity of such party under one or more agreements or instruments
relating to Specified Indebtedness of any of them (individually or
collectively) in an aggregate amount of not less than the applicable
Threshold Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it
would otherwise have been due and payable or (2) a default by such party,
such Credit Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in an
aggregate amount of not less than the applicable Threshold Amount under such
agreements or instruments (after giving effect to any applicable notice
requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation, amalgamation or
merger); (2) becomes insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they become
due; (3) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (4) institutes or has instituted
against it a proceeding, seeking a judgment of insolvency or bankruptcy
or any other relief under any bankruptcy or insolvency law or other
similar law affecting creditors' rights, or a petition is presented for
its
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winding-up or liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding or petition
(A) results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or restrained in
each case within 30 days of the institution or presentation thereof; (5)
has a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation or
merger); (6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or substantially
all its assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution, attachment,
sequestration or other legal process levied, enforced or sued on or
against all or substantially all its assets and such secured party
maintains possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter; (8) causes
or is subject to any event with respect to it which, under the applicable
laws of any jurisdiction, has an analogous effect to any of the events
specified in clauses ( 1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails to assume all the
obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor
was a party by operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend (without
the consent of the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii) below:-
(i) Illegality. Due to the adoption of, or any change in, any applicable law
after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal
or regulatory authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result of a breach by
the party of Section 4(b)) for such party (which will be the Affected
Party):-
(1) to perform any absolute or contingent obligation to make a payment or
delivery or to receive a payment or delivery in respect of such
Transaction or to comply with any other material provision of this
Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document relating
to such Transaction;
(ii) Credit Event Upon Merger. If "Credit Event Upon Merger", is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the creditworthiness
of the resulting, surviving or transferee entity is materially weaker than
that of X, such Credit Support Provider or such Specified Entity, as the
case may be, immediately prior to such action (and, in such event, X or
its successor or transferee, as appropriate, will be the Affected Party); or
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(iii) Additional Termination Event. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the occurrence of
such event (and, in such event, the Affected Party or Affected Parties shall
be as specified for such Additional Termination Event in the Schedule or
such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will, promptly
upon becoming aware of it, notify the other party, specifying the nature of
that Termination Event and each Affected Transaction and will also give such
other information about that Termination Event as the other party may
reasonably require.
(ii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) occurs
and there are two Affected Parties, each party will use all reasonable
efforts to reach agreement within 30 days after notice thereof is given
under Section 6(b)(i) on action to avoid that Termination Event.
(iii) Right to Terminate. If:--
(1) an agreement under Section 6(b)(ii) has not been effected with
respect to all Affected Transactions within 30 days after an Affected
Party gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section 6(b)(ii), a
Credit Event Upon Merger or an Additional Termination Event occurs,
either party in the case of an Illegality, any Affected Party in the case
of an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under Section
6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
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(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(d) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be determined
pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any Early
Termination Date under Section 6(e) will be payable on the day that notice
of the amount payable is effective (in the case of an Early Termination Date
which is designated or occurs as a result of an Event of Default) and on the
day which is two Local Business Days after the day on which notice of the
amount payable is effective (in the case of an Early Termination Date which
is designated as a result of a Termination Event). Such amount will be paid
together with (to the extent permitted under applicable law) interest
thereon (before as well as after judgment), from (and including) the
relevant Early Termination Date to (but excluding) the date such amount is
paid, at the Applicable Rate. Such interest will be calculated on the basis
of daily compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event
of Default:-
(1) First Method and Market Quotation. If the First Method and Market
Quotation apply, the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the Settlement
Amount (determined by the Non-defaulting Party) in respect of the
Terminated Transactions and the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Unpaid Amounts owing to the Defaulting
Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and Market
Quotation apply, an amount will be payable equal to (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect of
the Terminated Transactions and the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party will pay
it to the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount to the
Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative
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number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:-
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except
that, in either case, references to the Defaulting Party and to the
Non-defaulting Party will be deemed to be references to the Affected
Party and the party which is not the Affected Party, respectively, and,
if Loss applies and fewer than all the Transactions are being terminated,
Loss shall be calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and an
amount will be payable equal to (1) the sum of (a) one-half of the
difference between the Settlement Amount of the party with the higher
Settlement Amount ("X") and the Settlement Amount of the party with
the lower Settlement Amount ("Y") and (b) the Unpaid Amounts owing to
X less (H) the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in respect of
this Agreement (or, if fewer than all the Transactions are being
terminated, in respect of all Terminated Transactions) and an amount
will be payable equal to one-half of the difference between the Loss
of the party with the higher Loss ("X") and the Loss of the party with
the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it is
a negative number, X will pay the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early Termination
Date occurs because "Automatic Early Termination" applies in respect of a
party, the amount determined under this Section 6(e) will be subject to such
adjustments as are appropriate and permitted by law to reflect any payments
or deliveries made by one party to the other under this Agreement (and
retained by such other party) during the period from the relevant Early
Termination Date to the date for payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise provided
in this Agreement neither party will be entitled to recover any additional
damages as a consequence of such losses.
7. Transfer
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party
without the prior written consent of the other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
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8. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by facsimile
transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to this
Agreement. The parties will specify therein or through another effective
means that any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
10. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
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(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's facsimile
machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered or
its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered
(or attempted) or received, as applicable, after the close of business on a
Local Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to thejurisdiction of the English courts, if this Agreement is
expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if this
Agreement is expressed to be governed by the laws of the State of New York;
and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
12. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
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"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illeggality, all Transactions affected by the occurrence of
such Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"law" includes any treaty, law, rule or regulation and "lawful" and
"unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain
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<PAGE>
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or deliverv required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Eariv Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 9. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as is
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to
make an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under
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this Agreement, another contract, applicable law or otherwise) that is
exercised by, or imposed on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Event" means an Illegality or, if specified to be applicable, a
Credit Event Upon Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under
Section 2(a)(i) which was (or would have been but for Section 2(a)(iii))
required to be settled by delivery to such party on or prior to such Early
Termination Date and which has not been so settled as at such Early Termination
Date, an amount equal to the fair market value of that which was (or would have
been) required to be delivered as of the originally scheduled date for delivery,
in each case together with (to the extent permitted under applicable law)
interest, in the currency of such amounts, from (and including) the date such
amounts or obligations were or would have been required to have been paid or
performed to (but excluding) such Early Termination Date, at the Applicable
Rate. Such amounts of interest will be calculated on the basis of daily
compounding and the actual number of days elapsed. The fair market value of any
obligation referred to in clause (b) above shall be reasonably determined
13
<PAGE>
by the party obliged to make the determination under Section 6(e) or, if each
party is so obliged, it shall be the averace of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CORESTATES BANK, N.A. CENTRAL CASTINGS CORPORATION
- ---------------------------------------- ----------------------------
(Name of Party) (Name of Party)
By: /s/ DANIEL J. THOMAS By: /s/ ALBERT T. SABOL
-------------------------- ------------------------
Name: DANIEL J. THOMAS Name: ALBERT T. SABOL
Title: VICE PRESIDENT Title: VICE PRESIDENT
Date: APRIL 29, 1996 Date: MAY 7, 1996
14
<PAGE>
(Local Currency-Single Jurisdiction)
ISDA
International Swap Dealers Association, Inc.
SCHEDULE
Section 5(a)(vii), none
Section 5(b)(ii), none
and in relation to Party B for the purpose of:--
Section 5(a)(v), Central Sprink, Inc., Central Sprinkler Corporation,
Central Sprinkler Company
Section 5(a)(vi), Central Sprink, Inc., Central Sprinkler
Corporation, Central Sprinkler Company
Section 5(a)(vii), Central Sprink, Inc., Central Sprinkler
Corporation, Central Sprinkler Company
Section 5(b)(ii), Central Sprink, Inc., Central Sprinkler
Corporation, Central Sprinkler Company
(b) "Specified Transactions" will have the meaning specified in Section 12 of
this Agreement.
<PAGE>
(c) The "Cross Default" provisions of Section 5(a)(vi)
will apply to Party A
will apply to Party B
If such provisions apply:--
"Specified Indebtedness" will have the meaning specified in Section 12 of
this Agreement except that such term shall not include obligations in
respect of deposits received in the ordinary course of a party's banking
business.
"Threshold Amount" means $10 million.
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(ii)
will apply to Party A
will apply to Party B
(e) The "Automatic Early Termination" provision of Section 6(a)
will not apply to Party A
will not apply to Party B
(f) Payments on Early Termination. For purpose of Section 6(e) of this
Agreement:--
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) Additional Termination Event will not apply.
Part 2. Agreement to Deliver Documents.
For the purpose of Section 4(a) of this Agreement, each party agrees to deliver
the following documents, as applicable:--
Party required to Form/Document/ Date by which Covered by
deliver document Certificate to be delivered Section 3(d)
Representation
Party B Certificate Upon Execution Yes
substantially in of this Agreement
the form of
Exhibit II
Party A & B Opinion of Counsel Upon Execution No
substantially in the of this Agreement
form of Exhibit III
2
<PAGE>
Party B Financial Statements Yes
As Requested
Part 3. Miscellaneous
(a) Addresses for Notices. For the purpose of Section 10(a) of this Agreement:--
Address for notices or communications to Party A:--
CoreStates Bank, N.A.
Street Address: 1345 Chestnut Street, Philadelphia, PA 19107
Mailing Address: P.O. Box 8590, Philadelphia, PA 19101-8590
Attention: Investment Operations, F.C. 1-1-8-4
Attention: Ms. Nancy Doyle
FAX: (215) 973-8388
Phone: (215) 973-1148
Electronic Messaging System Details:.......................................
Address for notices or communications to Party B:--
Address: 451 North Cannon Avenue; Lansdale PA 19446
Attention: Mr. Albert T. Sabol
Telex No.:____________________________ Answerback:_________________________
Facsimile No.: (215) 362-5385 Telephone No.: (215) 362-0700
Electronic Messaging System Details:________________________________________
(b) Calculation Agent. The Calculation Agent is Party A unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(c) Credit Support Document. N/A
(d) Credit Support Provider. Credit Support Provider means in relation to Party
A. None
Credit Support Provider. Credit Support Provider means in relation to Party
B. None
(e) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to
choice of law doctrine).
3
<PAGE>
(f) Netting of Payments. Subparagraph (ii) of Section 2(c)of this Agreement will
not apply to any Transaction unless otherwise specified in a Confirmation in
relation to the relevant Transaction.
(g) "Affillate" will have the meaning specified in Section 12 of this
Agreement.
Part 4. Other Provisions.
(a) Confirmations. Notwithstanding anything to the contrary in this Agreement:
(i) The parties hereto agree that with respect to each Transaction hereunder
a legally binding agreement shall exist from the moment that the parties
hereto agree on the essential terms of such Transaction, which the parties
anticipate will occur by telephone.
(ii) For each Transaction Party A and Party B agree to enter into hereunder,
Party A shall promptly send to Party B a Confirmation, substantially in the
form of Exhibit I setting forth the terms of such Transaction. Party B shall
execute and return the Confirmation to Party A or request correction of any
error within three Business Days of receipt. Failure of Party B to respond
within such period shall not affect the validity or enforceability of such
Transaction and shall be deemed to be an affirmation of such terms.
(b) Additional Agreements.
(i) Each party agrees, upon learning of the occurrence of any event or
commencement of any condition that constitutes (or that with the giving of
notice or passage of time or both would constitute) an Event of Default or
Termination Event with respect to the party, promptly to give the other
party notice of such event or condition (or, in lieu of giving notice of
such event or condition in the case of an event or condition that with the
giving of notice or passage of time or both would constitute an Event of
Default or Termination Event with respect to the party, to cause such event
or condition to cease to exist before becoming an Event of Default or
Termination Event).
(ii) Party B agrees to give all notices described in (b)(i) of this Part 4
with respect to any Credit Support Provider.
(c) Additional Representations. Section 3 of the Agreement is hereby amended by
adding at the end thereof the following subsections (e) and (f):
"(e) Eligible Swap Participant. It is an "eligible swap participant" as
that term is defined by the Commodity Futures Trading Commission at 17
C.F.R. Section 35.1(b)(2)."
4
<PAGE>
"(f) Line of Business. It has entered into this Agreement (including each
Transaction evidenced hereby) in conjunction with its line of business
(including financial intermediation services) or the financing of its
business."
(d) FDIC Requirements. The following Additional Representations and Agreements
will apply to Party A and will not apply to Party B:
(i) The necessary action to authorize referred to in the representation in
Section 3 (a)(ii) of this Agreement includes all authorizations required
under the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 and any regulations and guidelines thereunder.
(ii) At all times during the term of this Agreement, it will continuously
include and maintain as part of its official written books and records, this
Agreement, this Schedule and all other exhibits, supplements, and
attachments hereto and documents incorporated by reference herein, all
Confirmations and evidence of all necessary approvals. In addition to any
other remedies which the other party may have under this Agreement or
otherwise, if it breaches or defaults on any of its obligations set forth in
this subparagraph (ii), the other party shall be entitled to apply to any
court of competent jurisdiction for an order requiring specific performance
of such obligations, and it shall not contest any such application and shall
comply with any such order.
(e) Set-off. Section 6 of the Agreement is amended by adding the following new
subsection 6(f):
"(f) Set-off. Without affecting the provisions of this Agreement requiring
the calculation of certain net payment amounts, all payments under this
Agreement shall be made without set-off or counterclaim and will not be
subject to any conditions except as provided in Section 2 of this Agreement
and except as provided in this Section 6(f). Any amount (the 'Early
Termination Amount') payable to one party (the 'Payee') by the other party
(the 'Payer') under Section 6(e), in circumstances where there is a
Defaulting Party or one Affected Party in the case where a Termination Event
under Section 5(b)(ii) has occurred, will, at the option of the party ('X')
other than the Defaulting Party or the Affected Party (and without prior
notice to the Defaulting Party or the Affected Party), be reduced by its
set-off against any amount(s) (the 'Other Agreement Amount') payable
(whether at such time or in the future or upon the occurrence of a
contingency) by the Payee to the Payer (irrespective of the currency, place
of payment or booking office of the obligation) under any other agreement(s)
between the Payee and the Payer or instrument(s) or undertaking(s) issued
or executed by one party to, or in favor of, the other party (and the Other
Agreement Amount will be discharged promptly and in all respects to the
5
<PAGE>
extent it is so set-off). X will give notice to the other party of any
set-off effected under this Section 6(f).
"For this purpose, either the Early Termination Amount or the Other
Agreement Amount (or the relevant portion of such amounts) may be converted
by X into the currency in which the other is denominated at the rate of
exchange at which such party would be able, acting in a reasonable manner
and in good faith, to purchase the relevant amount of such currency.
"If an obligation is unascertained, X may in good faith estimate that
obligation and set-off in respect of the estimate, subject to the relevant
party accounting to the other when the obligation is ascertained.
"Nothing in this Section 6(f) shall be effective to create a charge or other
security interest. This Section 6(f) shall be without prejudice and in
addition to any right of set-off, combination of accounts, lien or other
right to which any party is at any time otherwise entitled (whether by
operation of law, contract or otherwise)."
(f) Consent to Recording. Each Party (i) consents to the recording of the
telephone conversations of trading and marketing personnel of the Parties
and their Affiliates in connection with this Agreement or any potential
Transaction and (ii) agrees to obtain any necessary consent of, and give
notice of such recording to, such personnel of it and its Affiliates.
(g) No Reliance. In connection with the negotiation of, the entering into, and
the confirming of the execution of this Agreement, each Transaction and any
Credit Support Document to which it is a party, each party agrees and
confirms that: (i) the other party hereto or thereto is not acting as a
fiduciary or financial, investment, or commodity trading advisor for it;
(ii) it is not primarily relying (for purposes of making any investment
decision or otherwise) upon any advice, counsel or representations (whether
written or oral) of the other party hereto or thereto other than the
representations expressly set forth in this Agreement, in such Credit
Support Document, and in any Conformation; (iii) it has consulted with its
own legal, regulatory, tax, business, investment, financial and accounting
advisors to the extent as it has deemed necessary, and it has made its
judgement based primarily upon such advice; and (iv) it understands the
terms, conditions of and risks (economic and otherwise) associated with,
this Agreement, each Transaction and any Credit Support Document to which it
is a party, and it is capable of assuming and willing to assume such risks.
(h) Interest Rate Caps, Collars, Floors and Options. Notwithstanding the terms
of Sections 5 and 6 of this Agreement, if at any time and so long as one of
the parties to this Agreement ("X") shall have
6
<PAGE>
satisfied in full all its payment obligations under 2(a)(i) of this
Agreement and shall at the time have no future payment obligations, whether
absolute or contingent, under such Section, then unless the other party
("Y") is required pursuant to appropriate proceedings to return to X or
otherwise returns to X upon demand of X any portion of any such payment, (a)
the occurrence of an event described in 5(a) of this Agreement with respect
to X or any Specified Entity of X shall not constitute an Event of Default
or a Potential Event of Default with respect to X as the Defaulting Party
and (b) Y shall be entitled to designate an Early Termination Date pursuant
to section 6 of this Agreement only as a result of the occurrence of a
Termination Event set forth in (i) either Section 5(b)(i) or 5(b)(ii) of
this Agreement with respect to Y as the Affected Party or (ii) Section 5(b)
(iii) of this Agreement with respect to Y as the Burdened Party.
(i) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY AND ALL RIGHTS TO
TRIAL BY JURY WITH RESPECT TO ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR ANY TRANSACTION CONTEMPLATED HEREBY.
7
<PAGE>
CONSTRUCTION LOAN AGREEMENT
Dated: December 17, 1996
Among
CENTRAL CPVC CORPORATION, CENTRAL SPRINKLER CORPORATION,
CENTRAL SPRINKLER COMPANY, CENTRAL CASTINGS CORPORATION
and
CORESTATES BANK, N.A.
<PAGE>
TABLE OF CONTENTS
Section Page
SECTION 1. DEFINITIONS........................................... 1
1.1 General Provisions.............................. 1
1.2 Defined Terms................................... 1
SECTION 2. LOAN.................................................. 11
2.1 Loan Advances................................... 11
2.2 Disbursement Requests; Disbursement
Schedule, Etc........................... 11
2.3 Loan Advances................................... 12
2.4 Note............................................ 12
2.5 Loan Account.................................... 12
2.6 Computation of Interest......................... 12
2.7 Payments........................................ 13
2.8 Late Payment Charges............................ 13
2.9 Voluntary Payments.............................. 13
2.10 Default Rate.................................... 13
2.11 Yield Protection; Capital Adequacy.............. 13
2.12 Additional Security............................. 14
2.13 Joinder by Future Subsidiaries.................. 14
SECTION 3. REPRESENTATIONS AND WARRANTIES........................ 14
3.1 Organization; Qualification; Subsidiaries....... 14
3.2 Power and Authority............................. 15
3.3 Enforceability.................................. 15
3.4 Conflict with Other Instruments................. 15
3.5 Litigation...................................... 15
3.6 Title to Assets................................. 15
3.7 Licenses; Intellectual Property................. 15
3.8 Default......................................... 16
3.9 Taxes........................................... 16
3.10 Financial Condition............................. 16
3.11 ERISA........................................... 16
3.12 Regulation U.................................... 17
3.13 No Notices; No Violations....................... 17
3.14 Labor........................................... 17
3.15 Group Health Plans.............................. 17
3.16 Transactions with Affiliates.................... 17
3.17 Fictitious Names................................ 18
3.18 Environmental Matters........................... 18
3.19 Broker's Commissions............................ 18
3.20 Zoning.......................................... 18
3.21 Compliance Matters.............................. 18
3.22 Documents....................................... 18
3.23 No Eminent Domain............................... 18
3.24 No Casualty Damage.............................. 18
3.25 Access.......................................... 18
3.26 Utilities....................................... 18
3.27 Flood Areas; Filled Land........................ 19
3.28 Bonds; Application.............................. 19
3.29 Equipment Schedule.............................. 19
3.30 No Omissions.................................... 19
SECTION 4. CONDITIONS ........................................... 19
4.1 Initial Loan Advances........................... 19
4.2 Periodic Disbursements of Loan Advances......... 22
4.3 Disbursement of Final Payment to Contractor..... 23
SECTION 5. AFFIRMATIVE COVENANTS................................. 24
5.1 Financial Statements; Reports................... 24
5.2 Liabilities..................................... 25
5.3 ERISA........................................... 25
(1)
<PAGE>
5.4 Notices......................................... 25
5.5 Environmental Matters; Compliance with Laws..... 26
5.6 Existence; Properties........................... 28
5.7 Insurance....................................... 28
5.8 Books and Records............................... 28
5.9 Location of Business............................ 29
5.10 Financial Covenants............................. 29
5.11 Group Health Plans.............................. 29
5.12 Location of Collateral.......................... 29
5.13 Deposit Accounts................................ 29
5.14 Mechanic's Liens................................ 29
5.15 Workmanship..................................... 30
5.16 Compliance with Law............................. 30
5.17 Materials Annexed............................... 30
5.18 Title to Materials.............................. 30
5.19 Trust Fund...................................... 30
5.20 Additional Information.......................... 30
5.21 Construction Contract........................... 30
5.22 Plans and Specifications; Change Orders......... 31
5.23 Budget.......................................... 31
5.24 Construction; Installation...................... 31
5.25 Additional Equity Contribution.................. 31
5.26 Construction Period............................. 31
5.27 Inspections..................................... 31
5.28 Release of Liens................................ 32
5.29 Additional Covenants of the Companies........... 32
5.30 Taxes and Claims................................ 32
5.31 Expenses........................................ 32
5.32 Updated Survey.................................. 32
5.33 Utilities....................................... 32
5.34 Assignment of Labor/Material Bond............... 32
SECTION 6. NEGATIVE COVENANTS.................................... 33
6.1 Debt............................................ 33
6.2 Liens........................................... 33
6.3 Disposition of Assets........................... 34
6.4 Disposition of Accounts......................... 34
6.5 Sales and Lease-Backs........................... 34
6.6 Contingent Liabilities.......................... 34
6.7 Continuance of Business......................... 34
6.8 Voluntary Prepayments; Modification of
Certain Debt Instruments................... 34
6.9 Removal and Protection of Property.............. 34
6.10 Transactions with Affiliates.................... 34
6.11 Handling of Hazardous Substances................ 35
6.12 Use of Proceeds................................. 35
6.13 Satisfactory Management......................... 35
SECTION 7. EVENTS OF DEFAULT, REMEDIES........................... 35
7.1 Events of Default............................... 35
7.2 Termination; Acceleration....................... 38
7.3 Possession...................................... 38
7.4 Set-Off......................................... 39
7.5 No Marshalling.................................. 39
7.6 Site Assessments; Appraisals.................... 39
7.7 Additional Remedies............................. 39
SECTION 8. MISCELLANEOUS......................................... 40
8.1 No Third Party Beneficiaries.................... 40
8.2 No Lender Warranties............................ 40
8.3 Survival of Representations and Warranties...... 40
8.4 Participations.................................. 40
8.5 Miscellaneous................................... 40
8.6 Notices......................................... 40
8.7 Conflicts Between Instruments................... 41
(2)
<PAGE>
8.8 Indemnity....................................... 41
8.9 Entire Agreement................................ 42
8.10 Subsidiaries; Successors........................ 42
8.11 Governing Law................................... 42
8.12 Severability.................................... 42
8.13 Headings........................................ 42
8.14 Waiver of Trial by Jury; Jurisdiction........... 42
8.15 Release......................................... 43
8.16 Performance by Lender........................... 43
8.17 Cross-Default................................... 43
(3)
<PAGE>
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT made and entered into this
17th day of December, 1996, by and among CENTRAL CPVC CORPORATION, a an Alabama
corporation, CENTRAL SPRINKLER CORPORATION, a Pennsylvania corporation, CENTRAL
SPRINKLER COMPANY, a Pennsylvania corporation, CENTRAL CASTINGS CORPORATION, an
Alabama corporation, and CORESTATES BANK, N.A., a national banking association.
SECTION 1. DEFINITIONS.
1.1 General Provisions. Unless expressly provided otherwise in
this Agreement or in the Loan Documents, or unless the context requires
otherwise:
(a) all accounting terms used in this Agreement and
in the Loan Documents shall have the meanings given to them in accordance with
GAAP;
(b) all terms used herein and in the Loan Documents
that are defined in the Pennsylvania Uniform Commercial Code, as amended from
time to time, shall have the meanings set forth therein;
(c) all capitalized terms defined in this Agreement
shall have the defined meanings when used in the Loan Documents and in any other
documents made or delivered pursuant to this Agreement;
(d) the singular shall mean the plural, the plural
shall mean the singular, and the use of any gender shall include all genders;
(e) all references to any particular party defined
herein shall be deemed to refer to each and every Person defined herein as such
party individually, and to all of them, collectively, jointly and severally, as
though each were named wherever the applicable defined term is used;
(f) all references to "Sections," "Subsections,"
"Paragraphs" and "Subparagraphs" shall refer to provisions of this Agreement;
(g) all references to time herein shall mean Eastern
Standard Time or Eastern Daylight Time, as then in effect; and
(h) all references to sections, subsections,
paragraphs or other provisions of statutes or regulations shall be deemed to
include successor, amended, renumbered and replacement provisions.
1.2 Defined Terms. As used herein, the following terms shall
have the meanings indicated, unless the context otherwise requires:
"Accumulated Funding Deficiency" shall mean any accumulated
funding deficiency as defined in ERISA ss.302(a).
"Additional Costs" shall have the meaning given to that term
in Section 2.11(a).
"Affiliate" shall mean, as to any Person:
(a) if such Person is an individual, any (i)
relative of such Person, (ii) partnership in which such Person is a general
partner, or (iii) corporation of which such Person is a director, officer, or
person in control;
(b) if such Person is a corporation, any (i)
director of such Person, (ii) officer of such Person, (iii) person in control of
such Person, (iv) partnership in which such Person is a general partner, (v)
joint venturer with such Person, or (vi) relative of a director, officer, or
person in control of such Person; or
1
<PAGE>
(c) if such Person is a partnership, any (i) general
partner in such Person, (ii) relative of a general partner in such Person, (iii)
partnership in which such Person is a general partner, or (iv) person in control
of such Person.
As used in this definition, "control" shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any event, any Person
which owns or holds directly or indirectly five percent (5%) or more of the
voting securities or five percent (5%) or more of the partnership or other
equity interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person.
"Agreement" shall mean this Construction Loan Agreement and
any future amendments, restatements, modifications or supplements hereof or
hereto.
"Architect" shall mean the architect engaged by the Borrower
for the Project.
"Assignment of Agreements Affecting Real Estate" shall mean
the Assignment of Agreements Affecting Real Estate dated the date hereof,
executed by the Borrower in favor of the Lender, pursuant to which the Borrower,
as security for the Obligations, has assigned to the Lender all of its right,
title, and interest (but none of its duties, obligations, or liabilities) in and
to, among other things, the licenses, permits, and contracts described therein
relating to the Facility, together with any future amendments, restatements,
modifications, or supplements thereof or thereto.
"Assignment of Construction Contract" shall mean,
collectively, (i) the Agreement and Assignment of Construction Contract dated
the date hereof by and among the Borrower, the Contractor, and the Lender,
pursuant to which, among other things, the Borrower, as security for the
Obligations, has assigned to the Lender all of its right, title and interest
(but none of its duties, obligations, or liabilities) in, to, and under the
Construction Contract, and any future amendments, restatements, modifications or
supplements thereof or thereto, and (ii) the Modification of Contract dated the
date hereof from the Borrower and the Contractor in favor of the Lender,
pursuant to which, among other things, certain provisions of the Construction
Contract have been modified in connection with the transactions contemplated
hereby, and any future amendments, restatements, modifications or supplements
thereof or thereto.
"Assignment of Leases and Rents" shall mean the Assignment of
Leases and Rents dated the date hereof between the Borrower and the Lender
pursuant to which the Borrower, as security for the Obligations, has assigned to
the Lender all of its rights (but none of its duties) as lessor under and with
respect to any leases for any portion of the Facility, together with any future
amendments, restatements, modifications, or supplements thereof or thereto.
"Assignments" shall mean, collectively, the Assignment of
Agreements Affecting Real Estate, the Assignment of Construction Contract and
the Assignment of Leases and Rents.
"Bankruptcy Code" shall mean the United States Bankruptcy
Code, Title 11 of the United States Code, as amended, or any successor law
thereto, and any rules promulgated in connection therewith.
"Billings" shall have the meaning given to that term in
Section 2.2(b).
2
<PAGE>
"Board" shall mean the Industrial Development Board of the
City of Huntsville of the State of Alabama
"Bonds" shall mean, collectively, the tax-free industrial
revenue bonds to be issued by the Board in the approximate aggregate principal
amount of $7,500,000, for the benefit of the Borrower, the proceeds of which are
to be used, among other things, to refinance the Loan and to construct and equip
a steel tube mill at the Facility, all as set forth in the Inducement Agreement
between the Borrower and the Board, which Agreement remains in effect until
November 30, 1997.
"Borrower" shall mean Central CPVC Corporation, an Alabama
corporation.
"Budget" shall mean the construction budget attached hereto as
Schedule "A" and made a part hereof setting forth, among other things, any and
all costs and expenses to be incurred by the Borrower in connection with the
construction of the Improvements.
"Business Day" shall mean a day other than a Saturday, Sunday
or legal holiday under the laws of the Commonwealth of Pennsylvania, or a day on
which the New York Stock Exchange is not open for the transaction of business.
"Capital Funds" shall mean, with respect to any Person and as
at any applicable time, the sum of (i) Tangible Net Worth, and (ii) Subordinated
Indebtedness.
"Certification" shall mean the certification dated the date
hereof and delivered by the Architect to and in favor of the Lender, pursuant to
which, among other things, the Architect shall permit the Lender to use the
Plans and Specifications following the occurrence of any Default or Event of
Default and shall certify as to such matters as the Lender may reasonably
require, all as more fully set forth therein.
"Closing Date" shall mean the date of this Agreement.
"COBRA Continuation Coverage" shall mean those provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, found in
Code ss.4980B(f), which impose certain continuation coverage requirements upon
group health plans in order for such plans to retain certain tax advantages.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor law thereto, and any regulations promulgated
thereunder.
"Collateral" shall mean, collectively, (i) the Facility
(including the Improvements) and any and all other property mortgaged pursuant
to and in accordance with the Mortgage or in which a lien or security interest
is created pursuant to the Mortgage, (ii) the properties and assets in which
liens and security interests are granted under and pursuant to the Security
Agreement, (iii) the rights and interests assigned to the Lender pursuant to the
Assignments, (iv) the rights and interests in favor of the Lender under the
Suretyship, (v) rights assigned to the Lender pursuant to Section 5.34, and (vi)
any other real or personal property, rights and interests now or hereafter
pledged, mortgaged, or assigned to the Lender, or in which the Lender has or is
granted a security interest, to secure any of the Obligations.
"Commitment Fee" shall mean the fee due and payable by the
Borrower to the Lender pursuant to Section 4.1(t).
"Commitment Letter" shall mean the letter dated October 1,
1996 from the Lender to the Companies and any amendments, restatements,
modifications or supplements thereof or thereto.
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"Companies" and "Company" shall mean, collectively or
individually, as appropriate, the Borrower and/or any or all of the Sureties.
"Consolidated Debt" shall mean the aggregate sum of all Debt
of the Companies on a consolidated basis and after eliminating all intercompany
items.
"Construction Contract" shall mean the Construction Contract
dated July 18, 1996, by and between the Borrower and the Contractor pertaining
and relating to the construction of the Improvements and the management and
supervision thereof, a copy of which is attached hereto as Exhibit "A" and made
a part hereof, and any future amendments, restatements, modifications or
supplements thereof or thereto which have been approved in writing by the
Lender.
"Construction Period" shall mean the period commencing on the
date on which the Borrower commenced construction of the Improvements and ending
on June 30, 1997.
"Contamination" shall mean the presence of any Hazardous
Substance which may require Remedial Actions under applicable law.
"Contractor" shall mean Fite Building Company, Inc., an
Alabama corporation, the general contractor engaged by the Borrower for the
Project.
"Controlled Group Member" shall mean:
(a) any corporation included with any Company in a
controlled group of corporations within the meaning of Code ss.414(b);
(b) any trade or business (whether or not
incorporated) which is under common control with any Company within the meaning
of Code ss.414(c); and
(c) any member of an affiliated service group of
which any Company is a member within the meaning of Code ss.414(m).
"Current Assets" shall mean the aggregate amount carried as
current assets on the books of the Companies, determined on a consolidated basis
after eliminating all intercompany items and pursuant to and in accordance with
GAAP consistently applied.
"Current Liabilities" shall mean the aggregate amount carried
as current liabilities on the books of the Companies, determined on a
consolidated basis after eliminating all intercompany items and pursuant to and
in accordance with GAAP consistently applied.
"Current Ratio" shall mean, as at any applicable time, the
ratio of (i) Current Assets, to (ii) Current Liabilities.
"Debt" shall mean, with respect to any Person and as at any
applicable time:
(a) all items of indebtedness or liability that, in
accordance with GAAP, would be included in determining total liabilities as
shown on the liabilities side of a balance sheet as of the date as of which Debt
is to be determined;
(b) all indebtedness secured by any mortgage,
pledge, lien or security interest existing on any real or personal property
owned by the Person whose Debt is being determined, regardless whether the
indebtedness secured thereby is a recourse or nonrecourse obligation of that
Person or any Subsidiaries; and
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(c) all guaranties, endorsements (other than for
purposes of collection in the ordinary course of business), other contingent
obligations with respect to, or to purchase or to otherwise acquire,
indebtedness of others, and all other contingent obligations of a type described
in Section 6.6.
"Default" shall mean any event specified in Section 7.1,
whether or not any requirement for notice or lapse of time or any other
condition has been satisfied.
"Default Rate" shall mean an annual rate per annum equal to
(i) three percent (3%), plus (ii) the Prime Rate (as in effect from time to
time).
"Employee Pension Plan" shall mean any pension plan which (i)
is maintained by any Company or any Controlled Group Member, and (ii) is
qualified under Code ss.401.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any regulations issued thereunder by the United States
Department of Labor or the PBGC.
"Event of Default" shall mean any event specified in Section
7.1, provided that any requirement for notice or lapse of time or any other
condition has been satisfied.
"Excluded Subsidiaries" shall mean, collectively, (i) CSC
Finance Company, a Delaware corporation and wholly-owned Subsidiary of Central
Sprinkler Corporation, (ii) CSC Investment Company, a Delaware corporation and
wholly-owned Subsidiary of CSC Finance Company, (iii) Spraysafe Automatic
Sprinklers, Ltd., a private company organized under the laws of England, and
(iv) existing Subsidiaries of Spraysafe Automatic Sprinklers, Ltd.
"Existing Loan Documents" shall mean, collectively, any and
all agreements, notes, mortgages, pledges, instruments, documents, assignments,
guarantees and contracts (including any modifications, supplements and
amendments to or restatements of those documents) delivered by or on behalf of
any Company to the Lender in connection with the Existing Loans including,
without limitation, the 1994 Loan Agreement.
"Existing Loans" shall mean, collectively, (i) the line of
credit made available to one or more of the Companies by the Lender on or about
October 31, 1995 in the original principal amount of $20,000,000, (ii) the term
loan made to one or more of the Companies by the Lender on or about November 20,
1992 in the original principal amount of $5,000,000, (iii) the term loan made to
Central Sprinkler Company by the Lender on or about April 29, 1994 in the
original principal amount of $10,000,000, (iv) the mortgage loan made to Central
Sprinkler Company by the Lender on or about January 30, 1987 in the original
principal amount of $1,100,000, (v) the mortgage loan made to Central Sprinkler
Company by the Lender on or about August 9, 1996 in the original principal
amount of $688,000, and (vi) the direct-draw standby letter of credit in the
original stated amount of $11,206,250 issued by First Union National Bank (as
agent) on or about December 5, 1995 for the account of Central Castings
Corporation, in which the Lender has a risk sharing participation interest.
"Facility" shall mean, collectively, the real estate known as
Lot 1, Gateway Industrial Park, Phase 3, in Madison County, Alabama, as shown by
the plat thereof recorded in Plat Book 32, Page 79 in the Probate Records of
Madison County, Alabama, together with the Improvements, and any and all other
buildings, improvements, fixtures, and other property now or hereafter
located thereon or therein.
"Financial Covenants" shall mean, collectively, those
financial and similar covenants set forth and described in Section 5.10,
together with
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any and all other financial or other similar covenants now or hereafter
contained herein.
"Financing Statements" shall mean, collectively, any and all
financing statements and other security instruments creating or perfecting liens
upon any property now or hereafter located upon, the Facility or on or in any of
the other Collateral, as Lender may reasonably require pursuant to the terms and
conditions of this Agreement.
"Funded Debt" shall mean, collectively, as at any applicable
time and for any Person, all obligations of such Person for borrowed money
including, without limitation (and without duplication): (a) all obligations
(contingent or otherwise) of such Person in connection with all letter of credit
facilities (whether or not drawn), acceptance facilities, or other similar
facilities issued for the account of such Person; (b) all obligations of such
Person evidenced by bonds, debentures, or other similar instruments; (c) all
Debt created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person; (d) all capital
lease obligations of such Person; and (e) all other Debt of such Person;
provided, however, that: (i) trade indebtedness, tax and other accruals, and
deferred compensation occurring in the ordinary course of such Person's business
and in each case having a maturing of less than one (1) year shall be
specifically excluded from Funded Debt for purposes hereof; and (ii) the greater
of: (A) the aggregate outstanding amount of Debt under the industrial revenue
bonds described in Section 5.07(9) of the 1994 Term Loan Agreement, and (B) the
maximum aggregate amount of Debt for which any Company is obligated under the
letters of credit which assure repayment of such industrial revenue bonds
described in clause (A), shall be used for purposes of calculation Funded Debt
hereunder.
"GAAP" shall mean, at any particular time, generally accepted
accounting principles as in effect at such time, provided, however, that, if
employment of more than one principle shall be permissible at such time in
respect of a particular accounting matter, "GAAP" shall refer to the principle
which is then employed by the Companies with the agreement of their independent
certified public accountants.
"Hazardous Substances" shall mean any chemical, solid, liquid,
gas, or other substance having the characteristics identified in, listed under,
or designated pursuant to:
(a) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601(14), as a
"hazardous substance;"
(b) the Clean Water Act, 33 U.S.C. ss.1321(b)(2)(A),
as a "hazardous substance;"
(c) the Clean Water Act, 33 U.S.C. ss.ss.1317(a) and
1362(13), as a "toxic pollutant;"
(d) Table 1 of Committee Print Numbered 95-30 of the
Committee on Public Works and Transportation of the United States House of
Representatives, as a "toxic pollutant;"
(e) the Clean Air Act, 42 U.S.C. ss.7412(a)(1), as a
"hazardous air pollutant;"
(f) the Toxic Substances Control Act, 15 U.S.C.
ss.2606(f), as an "imminently hazardous chemical substance or mixture;"
(g) the Resource, Conservation and Recovery Act, 42
U.S.C. ss.ss.6903(5) and 6921, as a "hazardous waste;" or
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(h) any other laws, regulations or governmental
publications, as presenting an imminent and substantial danger to the public
health or welfare or to the environment, or as otherwise requiring special
handling, collection, storage, treatment, disposal, or transportation.
The term "Hazardous Substances" shall also include: (w) petroleum, crude oil,
gasoline, natural gas, liquified natural gas, synthetic fuel, and all other
petroleum, oil, or gas based products; (x) nuclear, radioactive, or atomic
substances, mixtures, wastes, compounds, materials, elements, products or
matters; (y) asbestos, asbestos-containing materials, polychlorinated biphenyls,
and (z) any other substance, mixture, waste, compound, material, element,
product or matter that presents an imminent and substantial danger to the public
health or welfare or to the environment upon its Release.
"Hydric Soils" shall mean, collectively, any soil category
upon which construction would be prohibited or restricted under applicable
governmental requirements, rules or regulations (including, without limitation,
those imposed by or issued pursuant to the U.S. Army Corps of Engineers).
"Improvements" shall mean, collectively, the construction and
equipping of a CPVC manufacturing plant comprising, in the aggregate,
approximately 78,000 square feet and any and all improvements, machinery,
equipment, and other property constructed, installed, or made a part of the
Facility in connection with the Project, as set forth in the Plans and
Specifications.
"Investment" shall mean, with regard to any Person, the
following:
(a) any loan or advance by that Person to, or
guaranty or other contingent liability with regard to the capital stock, debt or
other obligations of, and any contributions to the capital of, the other Person;
(b) any ownership, purchase or other acquisition by
that Person of any interest in any capital or other securities of any other
Person; and
(c) any sale or transfer of property by that Person
to any other Person, except upon full cash payment of not less than the greater
of the full sale price or the fair market value of that property.
"Joinder" shall have the meaning given to that term in Section
2.13.
"Lender" shall mean CoreStates Bank, N.A., a national banking
association.
"Loan" shall mean the non-revolving construction loan facility
in the principal amount of up to Three Million Five Hundred Thousand Dollars
($3,500,000) described in Section 2.1.
"Loan Account" shall mean, collectively, the account or
accounts of the Borrower on the books of Lender in which is recorded the Loan
and the payments of principal and interest made by the Borrower to Lender
thereon.
"Loan Advances" shall mean, collectively, advances under the
Loan.
"Loan Documents" shall mean, collectively, this Agreement, the
Commitment Letter, the Note, the Security Documents, and all other existing and
future agreements, pledges, instruments, documents, assignments, guarantees and
contracts (including any modifications, supplements and amendments to or
restatements of those documents) delivered by or on behalf of the Companies or
any of the Sureties to the Lender in connection with this Agreement.
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"Madison County Records" shall mean the Office of the Probate
Judge for Madison County, Alabama.
"Maturity Date" shall mean the earlier to occur of (i) June
30, 1997, or (ii) the issuance of the Bonds.
"Mortgage" shall mean the first-lien Open-End Mortgage and
Security Agreement dated as of the date hereof, from the Borrower and the Board,
as mortgagor, to the Lender, as mortgagee, covering the Facility and certain
other property described therein, which Open-End Mortgage and Security Agreement
(i) secures the Obligations, and (ii) is intended to be forthwith recorded in
the Madison County Records, and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Multiemployer Plan" shall mean a multiemployer pension plan
as defined in ERISA ss.3(37) to which any Company or any Controlled Group Member
is or has been required to contribute subsequent to September 25, 1980.
"1994 Term Loan Agreement" shall mean the letter agreement
dated April 29, 1994 by and among the Lender, Central Sprinkler Company, Central
Sprinkler Corporation, and Central Sprink Inc., pursuant to which the Lender
agreed to make a term loan to Central Sprinkler Company in the original
principal amount of $10,000,000, on the terms and subject to the conditions set
forth therein, as such letter agreement has been modified through the Closing
Date, and any future amendments, restatements, modifications or supplements
thereof or thereto.
"Note" shall mean the Borrower's promissory note described in
Section 2.4, and any future amendments, restatements, modifications or
supplements thereof or thereto.
"Obligations" shall mean, collectively, all liabilities,
duties and obligations of the Companies to the Lender with respect to any
covenants, representations or warranties herein or in the Loan Documents, with
respect to the principal of and interest on the Note and all other present and
future fixed and/or contingent obligations of the Companies to the Lender
hereunder or under the Loan Documents, including, without limitation,
obligations with respect to interest accruing (or which would accrue but for
ss.502 of the Bankruptcy Code) after the date of any filing by any Company of
any petition in bankruptcy or the commencement of any bankruptcy, insolvency or
similar proceedings with respect to any Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean those liens and
encumbrances described in Schedule 3.6, except to the extent that the Lender
requires the Companies to discharge or satisfy such encumbrances.
"Permitted Indebtedness" shall mean any and all Debt permitted
under Section 6.1.
"Person" shall mean an individual, a corporation, a
partnership, a joint venture, a trust or unincorporated organization, a joint
stock company or other similar organization, a government or any political
subdivision thereof, or any other legal entity.
"Plans and Specifications" shall have the meaning given to
that term in Section 5.22.
"Premises" shall mean, collectively, the Facility and any and
all other real estate, buildings, improvements, and other property in which any
Company has any right, title, or interest, whether as owner, lessee, occupant,
or otherwise.
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"Prime Rate" shall mean the floating annual rate of interest
that is designated from time to time by the Lender as the "Prime Rate" and is
used by the Lender as a reference base with respect to different interest rates
charged to borrowers generally. Such rate of interest shall change
simultaneously and automatically upon the Lender's designation of any change in
such reference rate, and the Lender's determination and designation from time to
time of the reference rate shall not in any way preclude the Lender from making
loans to other borrowers at rates which are higher or lower than or different
from the referenced rate.
"Project" shall mean, collectively, the acquisition,
construction, and equipping of the Improvements.
"Regulatory Change" shall mean (a) any change on or after the
date of this Agreement in United States federal, state, or any foreign, laws or
regulations (including Regulation D of the Board of Governors of the Federal
Reserve System) applying to the class of banks including the Lender or the
Lender's holding company or (b) the adoption or making on or after such date of
any interpretations, directives or requests applying to a class of banks
including the Lender or the Lender's holding company of or under any United
States federal or state, or any foreign, laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, or dumping.
"Remedial Actions" shall mean:
(a) clean-up or removal of Hazardous Substances;
(b) such actions as may be necessary to monitor,
assess, or evaluate the Release or threatened Release of Hazardous Substances;
(c) proper disposal or removal of Hazardous
Substances;
(d) the taking of such other actions as may be
necessary to prevent, minimize, or mitigate the damages caused by a Release or
threatened Release of Hazardous Substances to the public health or welfare or to
the environment; and
(e) the providing of emergency assistance after a
Release.
Remedial Actions include, but are not limited to, such actions at the location
of a Release as: storage; confinement; perimeter protection using dikes,
trenches, or ditches; clay cover; neutralization; clean-up of Hazardous
Substances or contaminated materials; recycling or reuse; diversion;
destruction; segregation of reactive wastes; dredging or excavations; repair or
replacement of leaking containers; collection of leachate and runoff; onsite
treatment or incineration; providing alternative water supplies; and any
monitoring reasonably required to assure that such actions protect the public
health and welfare and the environment.
"Reorganization" shall mean reorganization as defined in ERISA
ss.4241(a).
"Reportable Event" shall mean with respect to any Employee
Pension Plan, an event described in ERISA ss.4043(b).
"Security Agreement" shall mean the Security Agreement dated
as of the date hereof between the Borrower and the Lender, pursuant to which the
Borrower, as security for the Obligations, has granted to the Lender a perfected
first-priority security interest in and lien upon all of its accounts, chattel
paper, documents, equipment, fixtures, general intangibles, goods, instruments,
and inventory, now owned or hereafter acquired, and the
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products and proceeds thereof, and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Security Documents" shall mean, individually and
collectively, the Assignments, the Mortgage, the Security Agreement, the
Suretyship, the Financing Statements, and any other instruments now or hereafter
executed and delivered to the Lender to secure, or to assure, payment or
performance, of the Obligations, and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Senior Debt" shall mean, as at any applicable time, the
amount by which (i) the Consolidated Debt of the Companies, exceeds (ii) the
Subordinated Indebtedness of the Companies.
"Site Assessments" shall have the meaning given to that term
in Section 7.6.
"Site Reviewers" shall have the meaning given to that term in
Section 7.6.
"Subordinated Indebtedness" shall mean, collectively, all Debt
of the Companies for money borrowed, whether now existing or hereafter incurred,
and which is subordinated in right of payment of principal and interest to the
Obligations, either absolutely or upon the occurrence of and during the
continuance of a Default or an Event of Default, and subject to a subordination
agreement with and satisfactory to the Lender, provided that, with regard to all
Subordinated Indebtedness, the Lender shall have approved the same before it was
incurred by any Company.
"Subsidiary" shall mean, with respect to any Person which is a
corporation, any corporation more than fifty percent (50%) of the outstanding
shares of capital stock of which (except for directors' qualifying shares, if
required by law) are at the time owned by such Person and/or one or more
Subsidiaries.
"Sureties" shall mean, collectively, (i) Central Sprinkler
Corporation, a Pennsylvania corporation, (ii) Central Sprinkler Company, a
Pennsylvania corporation, and (iii) Central Castings Corporation, an Alabama
corporation, in their capacities as sureties under the Suretyship, together with
any Subsidiary of any Company which is required to execute and deliver a Joinder
pursuant to Section 2.13.
"Suretyship" shall mean the unlimited Guaranty and Suretyship
dated as of the date hereof from the Sureties in favor of the Lender, pursuant
to which the Sureties have guaranteed and become sureties for the prompt payment
and performance of the Obligations, and any future amendments, restatements,
modifications, or supplements thereof or thereto.
"Tangible Net Worth" shall mean, with respect to the
Companies, at any time, the amount by which (a) the par value (or value stated
on the books) of all classes of the Companies' capital stock, plus (or minus in
the case of deficit) the amount of surplus, whether capital or earned, of the
Companies exceeds (b) the aggregate amount carried as assets on the books of the
Companies for (i) goodwill, licenses, patents, trademarks, treasury stock,
unamortized debt discount and expense and other intangibles, and (ii) the cost
of purchased assets and other investments in excess of the net book value
thereof as of the time of the acquisition by the Companies, all as determined in
accordance with Generally Accepted Accounting Principles applied on a consistent
basis and after eliminating all inter-company items.
"Title Company" shall mean First American Title Insurance
Company.
"Title Policy" shall mean the mortgagee's title insurance
policy issued by the Title Company pursuant hereto to and in favor of the Lender
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insuring the lien of the Mortgage and containing only such exceptions as are
acceptable to the Lender.
"Withdrawal Liability" shall mean any withdrawal liability as
defined in ERISA ss.4201.
SECTION 2. LOAN.
2.1 Loan Advances.
(a) Upon satisfaction of all conditions contained in
this Agreement, but subject to the provisions of this Agreement, the Lender
agrees to advance to the Borrower up to Three Million Five Hundred Thousand
Dollars ($3,500,000) under the Loan for construction of the Improvements or the
repayment of loans made available by the Lender to the Borrower prior to the
Closing Date for construction of the Improvements. All such Loan Advances shall
be evidenced by the Note and secured by the Security Documents. Loan Advances
will be made only to reimburse Borrower for costs of construction to the extent
specified in the Budget, up to the principal amount of the Loan.
(b) Loan Advances for Improvements will be approved
only pursuant to and in accordance with the provisions of Sections 4.1 through
4.3.
(c) Notwithstanding anything contained herein to the
contrary, in no event shall the Lender be required to approve any Loan Advance,
or portion thereof, for any line item or cost category in excess of the amount
budgeted therefor in the Budget, nor shall the Lender be obligated to approve
any Loan Advance, or portion thereof, in respect of any line item if the
unadvanced portion of the Loan Advances budgeted in the Budget shall at any time
appear, in the reasonable judgment of the Lender, to be less than the amount
which will be required for the completion of such item pursuant to the Plans and
Specifications pertaining thereto. The Borrower may not, without the written
approval of the Lender (which approval shall not be unreasonably withheld),
reallocate any funds remaining unused to other line items in the Budget. If, for
any item of work, Loan Advances are disbursed in excess of the amount budgeted
therefor, the Borrower shall immediately remit such excess Loan Advances to the
Lender for disbursement hereunder.
(d) Loan Advances for construction of the
Improvements will be made after the presentation of vouchers presented by any
duly authorized representative of the Borrower based on Billings for labor,
materials incorporated in the Improvements, work completed, and other costs
provided for in the Budget (subject to Section 2.1(c) above), but only after the
Improvements for which a Loan Advance is requested are inspected by or on behalf
of the Lender to verify the completed Improvements and quality of workmanship,
as to the adherence to the presented vouchers and the Plans and Specifications
pertaining thereto, as more fully set forth in Sections 4.1 through 4.3. No Loan
Advances shall be made for any materials delivered but not yet incorporated into
the Improvements.
2.2 Disbursement Requests; Disbursement Schedule, Etc.
(a) Each request for the Lender's approval of a Loan
Advance for costs of construction of the Improvements shall be (i) submitted on
American Institute of Architect's forms approved by the Lender; and (ii)
accompanied by those documents and subject to the satisfaction by the Borrower
of those conditions more fully set forth in Sections 4.1 through 4.3, as
appropriate.
(b) Loan Advances made after the Closing Date shall
be made substantially in accordance with the following schedule: upon the
written request of the Borrower, but in no event more frequently than on a
semi-monthly basis, Loan Advances may be made to reimburse the Borrower for the
costs of labor and materials incorporated in the Improvements up to the first
(1st) or fifteenth (15th) day, as appropriate, of such month, based upon
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the Contractor's, subcontractors' and suppliers' billings (collectively, the
"Billings"). The Billings shall be subject to approval by the Borrower and the
Lender and the aggregate of any previous payments shall be deducted therefrom.
(c) At the Lender's option, the Borrower shall cause
Loan Advances to be made by (i) the issuance of co-payable treasurer's checks to
the Borrower and the Contractor, subcontractors and/or suppliers, as
appropriate, or (ii) by reimbursing the Borrower through the Borrower's regular
checking accounts with the Lender, or (iii) after the occurrence of any Default
or Event of Default only, directly to the Contractor, subcontractors, and
suppliers.
(d) Final payment of each contract shall not be made
until all conditions set forth in Section 4.3 have been satisfied.
(e) The Lender reserves the right to require five
(5) Business Days' notice in writing from the Borrower before being required to
determine whether a Loan Advance should be permitted in order for the Lender to
arrange for the Loan Advance and schedule any inspection of Improvements
required in connection therewith.
2.3 Loan Advances. The Lender's duty and obligation to make
the Loan Advances shall, at all times, be conditioned and contingent upon the
satisfaction by the Companies of the conditions set forth in Section 4 at all
times.
2.4 Note. On the date hereof, the Borrower shall execute and
deliver to the Lender its promissory note, which shall evidence the Loan and
shall:
(a) be dated the Closing Date and be payable to the
Lender's order in the principal amount of Three Million Five Hundred Thousand
Dollars ($3,500,000);
(b) bear interest, payable monthly, on the unpaid
principal amount thereof from the date thereof at a rate per annum equal to the
Prime Rate minus one-half of one percent (1/2%), commencing on January 1, 1997
and continuing on the first day of each month thereafter until the entire
outstanding principal amount thereof, and all accrued interest thereof, is paid
in full;
(c) be payable as to principal in full on the
Maturity Date; and
(d) be secured (and payment thereof shall be
assured, as the case may be) by the Security Documents.
2.5 Loan Account. The Lender shall record, in one or more Loan
Accounts, all payments made by the Borrower on account of the Note and this
Agreement, and all other appropriate debits and credits. Each month the Lender
shall render a statement to the Borrower setting forth the debit balance of the
Loan Account as of the close of the preceding month, together with a statement
of the amount of interest and other charges due the Lender as of that time. Each
statement shall be considered correct and accepted by the Borrower and
conclusively binding upon the Borrower unless the Borrower notifies the Lender
to the contrary in writing within ten (10) days from its receipt of such
statement.
2.6 Computation of Interest. Interest for and with respect to
the Obligations shall be calculated on the basis of a three hundred sixty (360)
day year for actual days elapsed. Any change in the interest rate on the Note
resulting from a change in the Prime Rate shall become effective as of the
opening of business on the day on which such change in the Prime Rate
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shall occur, and the Lender will periodically notify the Borrower of the
effective date and the amount of each change in the Prime Rate.
2.7 Payments.
(a) Except as otherwise provided under Section
2.7(b) hereof, all payments (including prepayments) by the Borrower hereunder
shall be made at any office of the Lender, or such other place or places as the
Lender may direct, prior to 2:00 p.m. Philadelphia, Pennsylvania time on the
date of payment, in lawful money of the United States of America, and in
immediately available funds and, when due or upon instruction from the Borrower,
may be made by debit to the Borrower's general accounts with the Lender.
(b) Unless the Lender otherwise agrees in writing,
any and all payments due and owing by the Borrower to the Lender under the Loan
Documents shall be immediately and automatically deducted from the Borrower's
deposit accounts maintained with the Lender on the due dates thereof and the
Borrower expressly and irrevocably authorizes the Lender to make the deductions
herein described from such accounts in order to make such payments as and when
they become due.
2.8 Late Payment Charges. If the Borrower shall fail to pay
any amount under the Obligations or any other sum due to the Lender under any of
the Loan Documents within fifteen (15) days after the date it is due, the
Borrower shall pay to the order of the Lender, immediately and without notice or
demand, a late charge equal to five percent (5%) of the amount overdue to defray
part of the additional expense incurred by the Lender in connection with the
delinquency and collection of the overdue amount. The provision for such late
charge shall not be construed to permit the Borrower to make any payment after
its due date, obligate the Lender to accept any overdue installment, or affect
the Lender's rights and remedies upon the occurrence of a Default or an Event of
Default.
2.9 Voluntary Payments. The Borrower at any time and from time
to time may voluntarily prepay the Loan, in whole or in part, upon notification
to the Lender of such prepayment not later than 2:00 P.M. on the date of
prepayment, in integral multiples of One Thousand Dollars ($1,000). Any such
prepayment may be made without premium or penalty.
2.10 Default Rate. Following the occurrence of any Event of
Default, the Note shall immediately and automatically bear interest at the
Default Rate until the Note is repaid in full and the Borrower has otherwise
irrevocably satisfied the Obligations.
2.11 Yield Protection; Capital Adequacy.
(a) The Borrower shall pay to the Lender from time
to time such amounts as the Lender may reasonably determine to be necessary to
compensate it for any costs incurred by the Lender or any reduction in any
amount receivable by the Lender hereunder (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to the Lender under this Agreement or the Note (other than
taxes imposed on the overall net income of the Lender by the jurisdiction in
which the Lender has its principal office); or (ii) imposes or modifies any
reserve, special deposit or similar requirements relating to any extensions of
credit, or other assets of, or any deposits with or other liabilities of, the
Lender (but excluding any such requirement to the extent reflected in an
applicable reserve requirement); or (iii) imposes any other condition affecting
this Agreement (or any of such extensions of credit or liabilities). The Lender
will notify the Borrower of any event occurring after the date of this Agreement
that will entitle the Lender to compensation pursuant to this Section 2.11 as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. The Lender will furnish the Borrower
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with a written statement setting forth the basis and amount (including the
calculation thereof) of each such request made by the Lender pursuant to this
Section 2.11(a).
(b) If after the date hereof, the Lender shall have
determined that the adoption of any applicable law, rule, regulation or treaty
regarding capital adequacy, or any Regulatory Change, has or would have the
effect of reducing the rate of return on the Lender's capital as a consequence
of its obligations hereunder to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Lender's policies with respect to capital adequacy) by an amount the Lender
reasonably deems to be material, the Borrower shall pay to the Lender such
additional amount or amounts as will compensate the Lender for such reduction.
The Lender will furnish the Borrower with a written statement setting forth the
basis and amount (including the calculation thereof) of any determination made
by the Lender pursuant to this Section 2.11(b).
(c) In determining the amounts due under this
Section 2.11, the Lender may use any reasonable averaging and attribution
methods. Determination by the Lender for purposes of this Section 2.11 of the
effect of any Regulatory Change on its costs of making or maintaining Loans
hereunder or on amounts receivable by it hereunder and of the additional amounts
required to compensate the Lender shall be conclusive, absent manifest error.
2.12 Additional Security. In addition to the security provided
in the Security Documents, Borrower also grants Lender, as further security for
the prompt payment and satisfaction of the Obligations, a lien upon and security
interest in any and all deposit and other accounts of the Borrower with the
Lender and any other debts or other obligations that the Lender may owe to the
Borrower from time to time.
2.13 Joinder by Future Subsidiaries. The Companies jointly and
severally covenant and agree to cause any Subsidiary of any Company (other than
the Excluded Subsidiaries) to execute and deliver a joinder or similar document
(a "Joinder"), in form and substance satisfactory to the Lender, pursuant to
which such Subsidiary shall (i) join in and become a surety to and under the
Suretyship, and (ii) join in and become a party to this Agreement for the
purpose of making the representations, warranties, covenants, and agreements of
the Companies hereunder as if it were an original party hereto. In connection
with the provisions of this Section 2.13, the Companies shall cause each such
Subsidiary which is required to execute and deliver a Joinder to execute and
deliver any and all additional agreements, documents, and instruments which the
Lender may reasonably request in order to effect the intent and purposes of this
Section 2.13.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement and to make the
Loan, the Companies jointly and severally represent and warrant to Lender that:
3.1 Organization; Qualification; Subsidiaries.
(a) The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Alabama and
is duly qualified as a foreign corporation and in good standing under the laws
of each jurisdiction in which the conduct of its business or the ownership of
its assets requires such qualification.
(b) The Sureties are each corporations duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation, and are duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the conduct of their business or the ownership of their assets requires such
qualification.
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(c) Except as set forth on Schedule 3.1, no Company
has any Subsidiaries.
(d) 1996, Central Sprink, Inc. has been merged with
and into Central Castings Corporation, with Central Castings Corporation being
the surviving corporation as a result of such merger.
3.2 Power and Authority. The Companies have the power to
execute, deliver and perform under, the Loan Documents, and to create the
collateral security interests for which the Security Documents provide, and have
taken all necessary corporate or other appropriate action to authorize the
consummation of the transactions hereunder on the terms and conditions of this
Agreement and the execution and delivery of, and performance under, the Loan
Documents. No consent of any other party and no consent, license, approval or
authorization of, or registration or declaration with, any governmental
authority, bureau or agency is required in connection with the execution,
delivery, performance, validity or enforceability of the Loan Documents.
3.3 Enforceability. The Loan Documents, when executed and
delivered to Lender pursuant to the provisions of this Agreement, will
constitute valid obligations of the Companies legally binding upon them and
enforceable in accordance with their respective terms, except as enforceability
of the foregoing may be limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
3.4 Conflict with Other Instruments. The execution and
delivery of, and performance under, the Loan Documents will not violate or
contravene any provision of any existing law or regulation or decree of any
court, governmental authority, bureau or agency having jurisdiction in the
premises or of the Articles or Certificate of Incorporation, or Charter or other
organizational documents, or of the By-Laws of the Companies, or of any
mortgage, indenture, security agreement, contract, undertaking or other
agreement to which the Companies are a party or which purports to be binding
upon any of them or any of their properties or assets, and will not result in
the creation or imposition of any lien, charge, encumbrance on, or security
interest in, any of their properties or assets pursuant to the provisions of any
such mortgage, indenture, security agreement, contract, undertaking or other
agreement.
3.5 Litigation. Except as set forth on Schedule 3.5, no
actions, suits or proceedings before any court or governmental department or
agency (whether or not purportedly on behalf of any Company) are pending or, to
the knowledge of any Company, threatened (a) with respect to any of the
transactions contemplated by this Agreement, or (b) against or affecting any
Company or any of their properties that, if adversely determined, could
reasonably be expected to have a material adverse effect upon the financial
condition, business or operations of any Company or any Company's ability to
perform any of its obligations under the Loan Documents.
3.6 Title to Assets. Each Company has good and marketable
title in fee to, or valid, enforceable leases of, the Premises and all other
property owned, leased, or otherwise used by such Company, and good and
marketable title to all of its other assets now carried on its books, or used by
it, including those reflected in the most recent balance sheet of each Company
delivered to the Lender or acquired since the date of such balance sheet (except
personal property disposed of since said date in the ordinary course of
business), free of any mortgages, pledges, charges, liens, security interests or
other encumbrances, except those indicated in such balance sheet or on Schedule
3.6.
3.7 Licenses; Intellectual Property. Each Company owns or has
a valid right to use the permits, licenses, trademarks, trademark rights, trade
names or trade name rights, and intellectual property rights being used to
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conduct its business as now operated and as now contemplated to be operated (a
complete list of which rights is attached hereto as Schedule 3.7), the absence
of which could reasonably be expected to have a material adverse effect on such
Company; and the conduct of the business of each Company as now operated and as
now proposed to be operated does not and will not conflict with valid permits,
licenses, trademarks, trademark rights, trade names or trade name rights or
franchises, copyrights, inventions, and intellectual property rights of others.
No claim is pending or, to the knowledge of any Company, threatened to the
effect that any such intellectual property owned or licensed by any Company or
which any Company otherwise has the right to use, is invalid or unenforceable by
such Company, as the case may be. Except as set forth on Schedule 3.7, the
Companies have no obligation to compensate any Person for the use of any such
patents or rights, and no Person has been granted any license or other rights to
use in any manner any of the patents or rights of the Companies, whether
requiring the payment of royalties or not.
3.8 Default. No Company is in default under any material
existing agreement, including the Existing Loan Documents, and no Default or
Event of Default hereunder has occurred and is continuing.
3.9 Taxes. Each Company has filed, or caused to be filed, all
tax returns (including, without limitation, those relating to federal and state
income taxes) required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it (other than those
being contested in good faith by appropriate proceedings for which adequate
reserves have been provided on its books). No tax liens have been filed against
any assets of any Company or any Subsidiary, and no claims are being asserted
with respect to such taxes which could have a material adverse effect upon the
financial condition, business or operations of any Company or any Subsidiary.
3.10 Financial Condition. All balance sheets, profit and loss
statements, and other financial statements of each Company, which have
heretofore been delivered to the Lender, and all financial statements and data
of each Company which will hereafter be furnished to the Lender, are or will be
(when furnished) true and correct and do or will (when furnished) present
fairly, accurately and completely the financial position of such Company and the
results of its operations as of the dates and for the periods for which the same
are furnished. All such financial statements have been prepared in accordance
with GAAP applied on a consistent basis. Except as disclosed on Schedule 3.10,
the Companies do not possess any "loss contingency" (as that term is defined in
Financial Accounting Standards Board, Statement of Financial Accounting
Standards No. 5 - "FASB 5") which is not accrued, reflected, or reserved against
in their balance sheet or disclosed in the footnotes to such balance sheet.
There has been no material adverse change in the business, properties,
operations or condition (financial or otherwise) of any Company since the date
of the financial statements which were most recently furnished by each Company
to Lender. No event has occurred that could reasonably be expected to interfere
substantially with the normal business operations of the Companies. Each of the
Companies is solvent, able to pay its probable liabilities and obligations as
they become absolute and matured, has capital sufficient to carry on its
business and all businesses in which it contemplates engaging, and the fair
saleable value of its assets (on a "going concern" basis) is in excess of the
amount of its existing Debt. No Company has any reason to believe that the
Borrower or any Company, by reason of consummation of the Loan, will incur Debt
beyond the Borrower's or any Company's ability to repay as and when due.
3.11 ERISA.
(a) Except as specifically disclosed to the Lender
in writing prior to the date of this Agreement:
(i) there is no Accumulated Funding Deficiency with respect to
any Employee Pension Plan;
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(ii) no Reportable Event has occurred with respect to any
Employee Pension Plan;
(iii) no violations of the Code have occurred that could
potentially cause the loss of the tax qualified status of any Employee
Pension Plan;
(iv) no Company nor any Controlled Group Member has incurred
Withdrawal Liability with respect to any Multiemployer Plan; and
(v) no Multiemployer Plan is in Reorganization.
(b) No liability (whether or not such liability is
being litigated) has been asserted against any Company or any Controlled Group
Member in connection with any Employee Pension Plan or any Multiemployer Plan by
the PBGC, by the trustee of a trust established pursuant to ERISA ss.4049, by a
trustee appointed pursuant to ERISA ss.4042(b) or (c), or by a sponsor or an
agent of a sponsor of a Multiemployer Plan, and no lien has been attached and no
Person has threatened to attach a lien on any of any Company's or its Controlled
Group Members' property as a result of failure to comply with ERISA or as a
result of the termination of any Employee Pension Plan.
(c) Each Employee Pension Plan, as most recently
amended, including amendments to any trust agreement, group annuity or insurance
contract, or other governing instrument, is or will be the subject of a
favorable determination letter by the Internal Revenue Service with respect to
its qualifications under Code ss.401(a) and such Employee Pension Plan's related
trusts are exempt from taxation under Code ss.501(a). Each Company has furnished
Lender with a copy of the most recent actuarial report for each Employee Pension
Plan which is a defined benefit pension plan and each such report is accurate in
all material respects. No Company nor any Controlled Group Member has an
unfulfilled obligation to contribute to any Multiemployer Plan.
3.12 Regulation U. No Company is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no Loan Advances will be used to purchase or carry any margin stock
or to reduce or retire any indebtedness incurred for such purpose or to extend
credit to others for such purpose.
3.13 No Notices; No Violations. No Company has received any
notice from any federal, state or local authority or any insurance or inspection
body to the effect that any of its properties, facilities, equipment or business
procedures or practices fail to comply with any applicable law, ordinance,
regulation, building or zoning law, judicial or administrative determination, or
any other requirements of any such authority or body, and the Companies, and all
such properties, facilities, equipment, procedures and practices, are in full
compliance in all material respects with all such laws, ordinances,
determinations, regulations and requirements.
3.14 Labor. No Company is involved in any strike, lock-out,
boycott or any other labor trouble, similar or dissimilar, nor is any Company
involved in labor negotiations.
3.15 Group Health Plans. Each Company (a) provides COBRA
Continuation Coverage under group health plans for separating employees in
accordance with the provisions of Code ss.4980B(f), and (b) is in compliance
with the provisions of ss.1862(b)(1) of the Social Security Act.
3.16 Transactions with Affiliates. Except as set forth in
Schedule 3.16, there are no loans, leases, royalty agreements or other
agreements, arrangements or other transactions between the Companies and any
Affiliate.
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3.17 Fictitious Names. No Company operates or does business
under any assumed, trade or fictitious names.
3.18 Environmental Matters. Except as disclosed on Schedule
3.18:
(a) The Facility has never been and is not being
used to make, store, handle, treat, dispose of, generate, or transport Hazardous
Substances in violation of any applicable law. There has never been a Release of
Hazardous Substances on, from, or near the Facility or any other property owned
or used by the Companies in violation of any applicable law or that caused or
might cause Contamination, and no Contamination exists on the Facility.
(b) The Companies have not received any
notification, citation, complaint, violation, or notice of any kind from any
Person relating or pertaining to the making, storing, handling, treating,
disposing, generating, transporting, or Release of any Hazardous Substances, and
neither the Companies nor any property owned or used by the Companies is under
any investigation with respect to any such matters.
(c) There are no underground storage tanks on the
Facility or any other property owned or used by the Companies.
3.19 Broker's Commissions. No brokerage commission or similar
compensation is due or will become due to any Person by reason of the making of
the Loan.
3.20 Zoning. The Improvements, when constructed, and the use
thereof as a manufacturing facility, will comply with all applicable municipal
and other zoning ordinances and requirements, and all other applicable statutes,
ordinances and codes (including, without limitation, building, health, and
safety). There is no legal action pending or, to the best of the Companies'
knowledge, threatened with respect to, or any proposed changes in, any zoning or
other ordinances which, if determined adversely to the interests of the
Companies, could have a material adverse effect on the Companies' ability to
complete the Improvements.
3.21 Compliance Matters. The Facility now complies, in all
material respects, and upon completion of the Improvements and other
Improvements will comply, in all material respects, with all requirements of law
including those relating to building, zoning, subdivision, and environmental
protection.
3.22 Documents. Copies of the documents delivered to Lender
pursuant to Section 4 are or will be, when furnished, true, correct, and
complete copies of the final documents executed (or to be executed) by the
parties thereto.
3.23 No Eminent Domain. No part of the Facility has been
damaged or taken by, or is under cloud of, eminent domain proceedings.
3.24 No Casualty Damage. The Facility is not now damaged or
injured as a result of any fire, explosion, accident, flood, or other casualty.
3.25 Access. The Facility has unqualified access to and from a
public road.
3.26 Utilities. Electricity, potable water, sanitary sewer
collection and treatment facilities, storm water facilities, and fuel are
available at or to the Facility and are sufficient to service all parts of the
Facility (including the Improvements).
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3.27 Flood Areas; Filled Land. No part of the Facility is in
an "area of special flood hazard," as that term is defined in the National Flood
Insurance Act of 1968 (as amended and supplemented by the Flood Disaster
Protection Act of 1973).
3.28 Bonds; Application. All documents, instruments,
information and other materials furnished, or to be furnished, by or on behalf
of the Borrower in connection with the application and approval process for the
issuance of the Bonds are and (when furnished) will be true, complete and
correct in all respects.
3.29 Equipment Schedule. Attached hereto as Schedule 3.29 is a
true, correct, and complete list of all machinery, equipment, and personal
property owned by the Borrower situate at the Facility and subject to the terms
and conditions of the Security Agreement.
3.30 No Omissions. Neither this Agreement, any schedules to
this Agreement, nor any Loan Documents required to be delivered pursuant to this
Agreement contain or will contain any untrue statement of material fact or omit
or will omit to state a material fact required to be stated in order to make
such statement, document or other instrument not misleading.
SECTION 4. CONDITIONS PRECEDENT.
4.1 Initial Loan Advances. The obligation of the Lender to
make the initial Loan Advance for the payment of any costs set forth in the
Budget and incurred as of the Closing Date for which satisfactory invoices are
presented and the obligation of the Lender to make the initial and subsequent
Loan Advances for the purposes herein described are subject to the conditions
set forth in this Section 4.1.
(a) Representations; No Default. The representations
and warranties contained in Section 3 shall be true and correct on and as of the
date of the initial Loan Advance with the same effect as if made on and as of
such date, and no Default or Event of Default shall be in existence on the date
of the making of such initial Loan Advance or shall occur as a result thereof.
(b) Budget. The Companies shall have submitted the
Budget to the Lender and the Lender shall have approved the same and all changes
thereto. The Budget shall be satisfactory, in form and substance, to the Lender.
(c) Construction Contract; Architect's Contract. The
Borrower shall have delivered to Lender a fully executed copy of the
Construction Contract, which shall provide for a guaranteed maximum price and
otherwise be satisfactory, in form and substance, to the Lender, and shall have
executed any modification thereto required by the Lender based upon Lender's
review thereof. The Borrower shall have also delivered to the Lender a copy of
any agreement, contract, or arrangement entered into between the Borrower and
the Architect in connection with the Project.
(d) Highway Access. The Borrower shall have
submitted to the Lender evidence satisfactory to the Lender that the
Improvements have adequate access to a public street. If the Improvements do not
presently abut a public street, the Borrower shall have furnished to the Lender
(i) evidence of the acceptance by local, county, or state authority, of the
dedication to such authority of the roads, streets, or other public
thoroughfares which are to serve the Improvements, or (ii) a municipal
improvements agreement setting forth the terms and conditions required by the
local, county, or state authority in order to obtain such acceptance.
(e) Subdivision Plan; Land Development Plan. The
Borrower shall have submitted to Lender evidence satisfactory to the Lender that
all necessary subdivision and land development plans with respect to the
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Improvements and the construction and development thereof have been approved
and, if required, recorded with the Madison County Records.
(f) Zoning. The Borrower shall have submitted to the
Lender evidence satisfactory to the Lender that all required zoning approvals or
variances necessary for the construction, use, and occupancy of the Improvements
have been obtained.
(g) Permits; Approvals.
(i) The Borrower shall have submitted to the Lender
evidence satisfactory to Lender that the Improvements and the proposed
use thereof complies with all applicable laws and that the Borrower has
validly and irrevocably obtained without qualification a building
permit, zoning permit, and all other required permits, licenses,
consents, certificates and approvals for the construction of the
Improvements, as shown on the Plans and Specifications, and the
occupancy thereof, including, without limitation, those permits,
licenses, consents, and approvals required under all applicable
building and zoning codes, subdivision regulations and other land use
requirements, and all other governmental regulations, statutes or
ordinances. Such permits, licenses, consents and approvals shall be
final, nonappealable and in full force and effect prior to the Closing
Date.
(ii) The Borrower shall have submitted to the Lender
evidence satisfactory to Lender that no payments to public authorities
are required which have not been made or appropriately provided for and
that no construction of any facilities or items of any kind is required
as a condition of obtaining any necessary permit, license, consent or
approval which has not been made or appropriately provided for.
(h) Adequate Funding. The Borrower shall have
submitted to the Lender (i) its certification that the Loan and other resources
of the Borrower will be sufficient to construct the Improvements, and (ii)
evidence satisfactory to the Lender that appropriate approvals and allocations
have been obtained by the applicable governmental agencies and authorities to
provide for the issuance of the Bonds prior to the Take-Out Date and that the
Borrower will, no later than January 10, 1997, make all required applications
for an allocation from the State of Alabama which are required in connection
with the issuance of the Bonds.
(i) Legal Opinions. The law firm of Morgan, Lewis &
Bockius LLP, as legal counsel to the Companies, shall have issued an opinion
letter to the Lender, with respect to the Companies and the Loan Documents,
which is satisfactory, in form and substance, to the Lender. In addition, the
law firm of Lange, Simpson, Robinson & Somerville, as special counsel to the
Companies, shall have issued an opinion letter to the Lender, with respect to
the Mortgage and other matters relating to Alabama law, which is satisfactory,
in form and substance, to the Lender.
(j) Loan Documents, Collateral, Etc. (i) The
Companies shall have delivered, or caused to be delivered, to Lender duly
executed original counterparts of each of the Loan Documents to which they are a
party; (ii) Financing Statements describing the Collateral shall have been filed
in each such jurisdiction and in each such office as shall have been required by
the Lender; (iii) the Mortgage shall have been executed by the Borrower and the
Board and recorded with the Madison County Records; and (iv) all other Loan
Documents shall have been executed and delivered to the Lender.
(k) Soil Condition. The Borrower shall have
submitted to the Lender evidence, satisfactory to the Lender, that the soil
condition at the Facility is suitable for the construction of the Improvements
and does not contain any Hydric Soils.
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(l) Appraisals.
(i) The Borrower shall have furnished to the Lender a
written appraisal of the Facility (including the Improvements) and all
machinery and equipment incorporated therein, prepared on an as-built
basis based upon the Plans and Specifications approved by the Lender,
performed by an MAI appraiser and in a manner satisfactory to the
Lender, reflecting a fair market value of not less than Six Million
Dollars ($6,000,000).
(ii) Notwithstanding anything contained herein to the
contrary, the Lender expressly reserves the right to make any
adjustments it deems necessary or appropriate to the appraisal referred
to above and any such adjustments shall be binding upon the Companies
for the purposes hereof.
(m) Survey. The Borrower shall have submitted to the
Lender a survey of the entire Facility, together with a metes and bounds
description thereof, which survey shall be certified to the Lender and the Title
Company, and shall show, among other things, the dimensions and locations of any
improvements, easements, rights-of-way, adjoining sites, encroachments and the
extent thereof, established building lines and street lines, distance to and
names of the nearest intersecting streets, delineation of all flood plains or
wetlands areas located on or near the Facility, and such other details as the
Lender may request, which survey shall be prepared by a surveyor and in a form
which is satisfactory, in all respects, to the Lender.
(n) Companies' Authorizations. Each Company shall
have delivered to the Lender:
(i) a copy, certified by the Secretary of such Company, of the
resolutions of the Board of Directors of such Company (A) authorizing
and approving (i) its execution and delivery of and performance under
this Agreement and the other Loan Documents, (ii) the Obligations
incurred hereunder, and (iii) the creation of the collateral security
interests for which the Security Documents provide;
(ii) Each Company's articles or certificate of incorporation,
certified by the Secretary of the State of such Company's
incorporation as of a recent date;
(iii) good standing or subsistence certificates with respect
to the Companies certified by the Secretary of the State of each
Company's incorporation as of a recent date;
(iv) a copy of each Company's By-Laws, as currently in effect,
certified by each Company's Secretary; and
(v) the Secretary or Assistant Secretary of each Company shall
have duly executed and delivered to the Lender certificates of
incumbency, in form and substance satisfactory to the Lender, with
respect to those officers of the Company who have executed the Loan
Documents.
(o) Commitment Letter. The Companies shall have
otherwise complied with all of the terms and conditions of the Commitment
Letter, to the extent not inconsistent herewith and to the extent required to be
complied with on or before the Closing Date.
(p) Commitment Fee. The Borrower shall have paid to
Lender a non-refundable commitment fee in the amount of Fifteen Thousand Dollars
($15,000), which fee is due and payable in full upon execution of this
Agreement. Any reasonable costs for appraisals and progress inspections to
verify advance of funds, as well as other reasonable costs incident to
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handling the Loan, shall be in addition to the Commitment Fee described herein.
This Commitment Fee does not include architectural services or any guarantee of
the financial stability of the Contractor or the quality of its workmanship. All
fees payable by the Borrower, whether under this Agreement or otherwise, shall
be in addition to this Commitment Fee. If, for any reason, the financing
contemplated hereunder is not commenced or completed through no fault of the
Lender, the Lender may retain such Commitment Fee as compensation for all costs,
fees and expenses incurred in connection with the extending of the Loan.
(q) Insurance. The Companies shall have satisfied
all insurance requirements described herein.
(r) Title Policy; Lien Searches. The Lender shall
have received the Title Policy insuring the Mortgage as a first-lien and which
shall be satisfactory, in form, substance, and as to exceptions, satisfactory to
the Lender and its counsel. The Title Policy shall be free of any exception for
mechanics' liens, mechanics' lien claims, or similar liens and claims. The
Lender shall have also received current lien, secured transaction, and judgment
searches, with respect to the Companies, the results of which shall be
satisfactory, in form and substance, to the Lender.
(s) Details, Proceedings and Documents. All legal
details and proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory to the Lender and the Lender shall have received
all such counterpart originals or certified or other copies of such documents
and proceedings in connection with such transactions, in form and substance
satisfactory to the Lender, as the Lender may from time to time request.
(t) Projections. The Borrower shall have provided to
the Lender projections regarding the Borrower and its operations and
consolidated projections regarding Central Sprinkler Corporation, all of which
projections shall be satisfactory to the Lender in its sole discretion.
(u) Central Castings Corporation. The Lender shall
have received evidence satisfactory to the Lender that Central Castings
Corporation is operating profitably as of the Closing Date and that Central
Castings Corporation is projected to operate profitably thereafter.
(v) Board Authorization. The Borrower shall have
furnished to the Lender satisfactory evidence that all actions taken by the
Board in connection herewith have been duly authorized.
4.2 Periodic Disbursements of Loan Advances. Subject to the
provisions of Section 4.3, the obligation of the Lender to make subsequent Loan
Advances for Improvements subsequent to the initial Loan Advance described in
Section 4.1 is subject to the satisfaction of each of the conditions precedent
set forth in this Section 4.2 at the time of each such Loan Advance.
(a) Initial Conditions Satisfied. All conditions
precedent described in Section 4.1, with respect to the initial Loan Advances
and initial Loan Advance, shall also have been satisfied with respect to
subsequent Loan Advances subject to this Section 4.2.
(b) Workmanship; Inspections. (i) All work for which
payment is sought relating to such Improvements shall have been constructed in a
good and workmanlike manner, (ii) all materials and fixtures relating to such
Improvements shall have been installed in accordance with the applicable Plans
and Specifications and all rules and regulations of any governmental authority
having jurisdiction, (iii) the requirements of any municipal improvements
agreement shall have been satisfied, and (iv) if required by the Lender after
Loan Advances in an aggregate amount of Two Million Dollars ($2,000,000) have
been disbursed, the Improvements for which a Loan Advance is
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being requested shall have been inspected and the work approved by Lender or
Lender's inspecting engineer (or other qualified Person designated by or
acceptable to Lender).
(c) Certificate of Completion. If required by the
Lender after Loan Advances in an aggregate amount of Two Million Dollars
($2,000,000) have been disbursed, the Borrower shall have caused the Contractor
to execute and deliver a certificate of completion to the Lender, which
certificate shall be in form and substance satisfactory to the Lender, and shall
state that (i) the conditions described in clauses (i) through (iv) of Section
4.2(b) have been satisfied, (ii) the Loan Advance being requested by the
Companies will not be used to fund stored materials, (iv) such Loan Advance
conforms to the Budget, (v) the remaining available Loan Advances, following
such Loan Advance, are sufficient to cover all remaining costs of the
construction of the Improvements in accordance with the Plans and
Specifications, and (vi) the construction of the Improvements is proceeding
satisfactorily and on schedule.
(d) Certification for Payment. If required by the
Lender after Loan Advances in an aggregate amount of Two Million Dollars
($2,000,000) have been disbursed, the Borrower shall have caused the Contractor
to execute and deliver to the Lender an Application and Certification for
payment, AIA Document G702 and AIA Document G703 (or suitable substitute), with
respect to the work for which a Loan Advance is being requested.
(e) No Default, Etc. No Default or Event of Default
shall have occurred or shall occur as a result of such Loan Advance.
4.3 Disbursement of Final Payment to Contractor. The
obligation of the Lender to make the Loan Advance to be disbursed for the final
payment required to be made by the Borrower to the Contractor under the
Construction Contract is subject to the satisfaction of each of the conditions
precedent set forth in this Section 4.3 at the time of such disbursement.
(a) Preliminary Conditions Satisfied. All conditions
precedent described in Sections 4.2(a) and (b) shall have been satisfied with
respect to the Loan Advance to be made in satisfaction and payment of the
Retainage.
(b) Completion of Improvements. The construction of
the Improvements shall have been fully completed in accordance with the Plans
and Specifications and, if required by the Lender, the Borrower shall have
furnished to the Lender a certificate of completion, on the appropriate AIA
Document, which shall have been executed by the Borrower and the Contractor.
(c) Contractor's Affidavits. If required by the
Lender, the Borrower shall have caused the Contractor to have executed and
delivered to the Lender:
(i) A Contractor's Affidavit of Payment of Debts and Claims, AIA
Document G706, from all Persons who have performed work or furnished
labor and/or materials in connection with the construction and
equipping of the Improvements.
(ii) A Contractor's Affidavit of Release of Liens, AIA Document
G706A, from all Persons who have performed work or furnished labor
and/or materials in connection with the construction of the
Improvements.
(d) Acceptance of Improvements by Borrower. The
Borrower shall have executed and delivered to the Lender a certificate executed
by the Borrower to the effect that the construction of the Improvements have
been completed in accordance with the Plans and Specifications and have been
accepted by the Borrower.
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(e) Inspection by Lender. If required by the Lender,
the Improvements shall have been inspected by the Lender or the Lender's
inspecting engineer (or similarly qualified Person designated by Lender), and
the Lender shall be satisfied with the results of such inspection.
(f) Certificates of Occupancy. A state and local
certificate of occupancy shall have been issued with respect to the
Improvements.
(g) Survey. The survey required by Section 5.33
shall have been furnished to the Lender in the form required thereby.
SECTION 5. AFFIRMATIVE COVENANTS.
The Companies covenant and agree that from and after the
effective date of this Agreement and so long as any of the Obligations remain
outstanding and unpaid, in whole or in part, each Company will observe the
following covenants, unless the Lender shall otherwise consent in writing:
5.1 Financial Statements; Reports. The Companies will furnish,
or cause to be furnished, to Lender:
(a) Annual Reports: as soon as available, but in any
event not later than one hundred twenty (120) days after the close of each
fiscal year, the annual consolidated report of the Companies containing a
balance sheet as at the end of such fiscal year, and related statements of
income, shareholders' equity and cash flows of the Companies for such fiscal
year, setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, all in reasonable detail, audited in accordance
with GAAP applied on a consistent basis by independent public accountants
selected by the Companies and satisfactory to the Lender, together with the
management letter issued by the Companies' accountants in connection with such
audit;
(b) Quarterly Reports: as soon as available, but in
any event not later than ninety (90) days after the close of each fiscal
quarter, a balance sheet of the Companies, as at the end of such quarterly
period, and related statements of income, shareholders' equity and cash flows,
together with operating statements and schedules of the Companies for such
period and for the period from the end of the preceding fiscal year to the end
of such period, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and prepared by each Company's Chief Financial Officer in
accordance with GAAP applied on a consistent basis (subject to normal year-end
adjustments);
(c) Financial Officer's Certificate: concurrently
with the delivery of the financial statements referred to in Sections 5.1(a) and
(b), a certificate of each Company's Chief Financial Officer in a form
prescribed by the Lender (as modified from time to time), to the effect that (i)
no Event of Default or Default has occurred and is continuing hereunder (or, if
any such Event of Default or Default exists, specifying the nature thereof, the
period of existence thereof and the action such Company have taken or propose to
take with respect thereto), and (ii) evidence reflecting the calculation of the
Financial Covenants and the Companies' compliance therewith;
(d) Reports to Investors and Lenders: promptly after
the sending or making available or filing the same, copies of all reports and
financial statements required to be or actually delivered or sent by the
Companies to their shareholders or prospective investors or to any other lender
pursuant to the terms of any indenture, loan or credit or similar agreement;
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(e) SEC Reports: promptly after the sending or
filing thereof, copies of all regular, periodic, and special reports, and all
registration statements which any Company files with the Securities and Exchange
Commission; and
(f) Other Information: from time to time, such
additional financial and other information as Lender may reasonably request.
5.2 Liabilities. Each Company will pay and discharge, at or
before their maturity, all its respective obligations and liabilities
(including, without limitation, tax liabilities and all employee wages as
provided in the Fair Labor Standards Act, 29 U.S.C. ss.ss.206-207 and any
successor statute), except those which may be contested in good faith, and
maintain adequate reserves for any of the same in accordance with GAAP. Upon any
Company's failure to pay such wages, or cause such wages to be paid, the Lender
shall have the right, but not the duty, at any time and from time to time, to
pay all or part of such wages directly or indirectly on behalf of and for the
account of such Company. Any such payment by the Lender shall be deemed an
advance under the Note. The Companies' obligations with respect to such advance
shall be evidenced by the Note and the Suretyship, as appropriate, and shall be
secured and guaranteed, as the case may be, by the Security Documents.
5.3 ERISA.
(a) Each Company will furnish to Lender (i) within
thirty (30) days after it has reason to know that it or any Controlled Group
Member has incurred Withdrawal Liability, or that any Multiemployer Plan is in
Reorganization or that any Reportable Event has occurred with respect to any
Employee Pension Plan or that the PBGC has instituted or will institute
proceedings under Title IV of ERISA to terminate any Employee Pension Plan or to
appoint a trustee to administer any Employee Pension Plan, a statement setting
forth the details as to such Withdrawal Liability, Reorganization, Reportable
Event, termination or appointment proceedings and the action which it (or the
Multiemployer Plan sponsor or Employee Pension Plan sponsor other than the
Companies) proposes to take with respect thereto, together with a copy of any
notice of Withdrawal Liability or Reorganization given to the Companies or any
Controlled Group Member and a copy of the notice of such Reportable Event given
to PBGC if a copy of such notice is available to the Companies or any of their
Controlled Group Members; and (ii) promptly after receipt thereof, a copy of any
notice the Companies or any of their Controlled Group Members or the sponsor of
any Employee Pension Plan received from PBGC or the Internal Revenue Service
which sets forth or proposes any action or determination with respect to such
Employee Pension Plan.
(b) Each Company will notify Lender of (i) any
excise taxes which have been assessed or which the Company or any of its
Controlled Group Members have reason to believe may be assessed against such
Company or any of its Controlled Group Members by the Internal Revenue Service
with respect to any Employee Pension Plan or Multiemployer Plan or (ii) any
revocation of qualification under Code ss.401 which has occurred or which the
Company or any of its Controlled Group Members have reason to believe may occur
with respect to any Employee Pension Plan or Multiemployer Plan.
5.4 Notices. Each Company will promptly give notice in
writing to Lender of the occurrence of any of the following:
(a) any Event of Default or Default;
(b) any event of default or similar occurrence under
any instrument or other agreement of the Company entitling any Person to
accelerate the maturity of any obligation of the Company or to exercise any
other remedy against the Company, which could reasonably be expected to result
in an Event of Default or have a material adverse effect upon the financial
condition, business, or prospects (present or prospective) of any Company;
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(c) any strike, lock-out, boycott or any other labor
trouble, which could reasonably be expected to have a material adverse effect
upon the financial condition, business, or prospects (present or prospective) of
any Company;
(d) the commencement of any litigation, proceeding
or dispute affecting any Company, or any dispute between any Company and any
Person, if such litigation, proceeding or dispute could reasonably be expected
to materially interfere with the normal business operations of the Company or,
if resolved other than in the favor of such Company, such litigation, proceeding
or dispute would have a material adverse effect on any Company's financial
condition, business operations, or prospects (present or prospective);
(e) any material and adverse change in the financial
position, operations, business or prospects (present or prospective) of any
Company; or
(f) any changes in the personnel holding executive
management positions with any Company at the time of closing, including but not
limited to, the Company's President and Chief Financial Officer.
5.5 Environmental Matters; Compliance with Laws.
(a) Each Company shall:
(i) immediately notify the Lender (and any other
Person that any Company is required to notify pursuant to any
applicable laws) once it is aware of a Release or threatened Release of
Hazardous Substances on, from, or near any of the properties owned or
used by any Company which might cause Contamination;
(ii) immediately notify the Lender once an
environmental investigation or clean-up proceeding is instituted by any
Person in connection with such properties;
(iii) fully comply with and assist any such
environmental investigation and clean-up proceeding;
(iv) promptly execute and complete any Remedial
Actions necessary to ensure that such properties are in compliance with
all applicable laws and free from Contamination, and to ensure that no
environmental liens or encumbrances are levied against or exist with
respect to such properties, and provide the Lender with a certification
from each agency having jurisdiction that such Remedial Actions have
been completed to all such agencies' satisfaction;
(v) immediately notify the Lender of any citation,
notification, complaint, or violation which any Company receives from
any Person which relates to or pertains to the making, storing,
handling, treating, disposing, generating, transporting or Release of
any Hazardous Substances;
(vi) promptly upon the written request of the Lender,
provide the Lender, from time to time, with an environmental site
assessment or report, in form and substance satisfactory to the Lender,
or at the Lender's option, permit the Lender, its agents, contractors
and other representatives, to enter into any property owned or used by
any Company in order to make such report or assessment, and at such
other times and as often as the Lender may reasonably request, each
Company will make available at its offices to the Lender or its
representatives such historical and operational information (including
the results of all samples sent for analysis), correspondence with
official bodies, and environmental reviews conducted prior to and after
the Closing Date regarding its properties as are within the possession,
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custody or control of any Company or which are reasonably available to
them, and will make appropriate personnel employed by any Company
having knowledge of such matters available for meetings with the Lender
or its representatives; and
(vii) comply, and cause all properties, assets, and
operations owned or used by the Company to comply, in all material
respects, with all applicable federal, state, local and other
environmental, zoning, occupational safety, health, employment,
discrimination, labor and other laws and regulations.
(b) If any Company shall fail to fully execute and
complete any requisite Remedial Action, the Lender may, but is not obligated to,
make advances or payments toward performance or satisfaction of such Remedial
Actions.
(c) If the Lender acquires equitable or legal title
to any of the Premises hereunder or under the Loan Documents, the Lender does
not accept and shall not bear (nor shall any assignee or transferee of the
Lender accept or bear) any responsibility for any Hazardous Substances in or
about the Premises or for the actual or threatened Release thereof from the
Premises. No provisions of the Loan Documents shall be interpreted to absolve or
release the Companies from any liability or responsibility which they may have
to any Person, under any local, state or federal statute or regulation, for
Remedial Actions with respect to any such Hazardous Substances or for the actual
or threatened Release of any such Hazardous Substances.
(d) If any action or claim is brought by the
Environmental Protection Agency or any other regulatory agency against any
Company or the Premises arising from the presence in, or about the Premises, of
Hazardous Substances or from the actual or threatened Release of such Hazardous
Substances, the Companies shall immediately provide the Lender, as the Lender
deems necessary, with a bond, in form and substance satisfactory to the Lender,
against any and all damages or liabilities that may arise from any such action
or claim.
(e) Each Company shall defend, indemnify the Lender
and hold the Lender harmless from and against all loss, liability, damage, cost,
and expense, including without limitation, reasonable attorneys' fees, fines, or
other civil and criminal penalties or payments, for failure of the Premises, the
Collateral or any other operations, assets or property owned or used by such
Company to comply in all respects with all environmental and other laws, caused,
in whole or in part, regardless of fault, by such Company, or by any past,
present or future owner, occupier, tenant, subtenant, licensee, guest or other
person. The provisions of this Section 5.5(e) shall survive payoff, release,
foreclosure, or other disposition of this Agreement, the Premises, the
Collateral, or such other properties hereunder or otherwise. The Companies shall
remain liable hereunder regardless of any other provisions hereof which may
limit any Company's liability.
(f) All sums advanced or paid by the Lender under
this Section 5.5, including sums so advanced or paid in connection with any
judicial or administrative investigation or proceeding relating thereto, and
including, without limitation, reasonable attorneys' fees, fines, or other
penalties or payments, and all of the Companies' obligations to defend,
indemnify and hold harmless the Lender, shall be deemed to be advances under the
Note and shall be at once repayable. The Companies' obligations with respect
thereto shall be evidenced by, and shall bear interest at the Default Rate and
shall be secured and guaranteed, as the case may be, by the Security Documents.
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5.6 Existence; Properties. Each Company will notify the Lender
at least thirty (30) days before any change of name of any Company and will
maintain:
(a) its existence and its qualification to do
business and good standing in each jurisdiction in which qualification is
necessary for the proper conduct of its businesses;
(b) all licenses, permits and other authorizations
necessary for the ownership and operation of its properties and businesses; and
(c) its assets and properties (including all of the
Collateral) in good repair, working order and condition and to make all
necessary or appropriate repairs, renewals, replacements and substitutions, so
that the value and efficiency of all such assets and properties shall at all
times be properly preserved and maintained.
5.7 Insurance.
(a) Each Company shall carry at all times, in
coverage, form and amount satisfactory to the Lender, hazard insurance (with
fire, extended and vandalism and malicious mischief coverage and coverage
against such other hazards as are customarily insured against by companies in
the same or similar business), commercial general liability insurance, worker's
compensation insurance, comprehensive automobile liability insurance, and such
other insurance as the Lender may from time to time reasonably require under the
Mortgage or otherwise, and pay all premiums on the policies for such insurance
when and as they become due and do all other things necessary to maintain such
policies in full force and effect. Each Company shall from time to time, upon
request by the Lender, promptly furnish or cause to be furnished to the Lender
evidence, in form and substance satisfactory to the Lender, of the maintenance
of all insurance required to be maintained by this Section 5.7 including, but
not limited to, such originals or copies, as the Lender may request, of
policies, certificates of insurance, riders and endorsements relating to such
insurance and proof of premium payments.
(b) Each Company shall cause all hazard insurance
policies and any policies insuring personal property covered by the Security
Documents to provide, and the insurers issuing such policies to certify to the
Lender, that:
(i) the interest of the Lender shall be insured regardless of
any breach or violation by either Company or the holder or owner of
the policies of any warranties, declarations or conditions contained
in such policies;
(ii) if such insurance be proposed to be cancelled or
materially changed for any reason whatsoever, such insurer will
promptly notify the Lender and such cancellation or change shall not
be effective, as to the Lender, for thirty (30) days after receipt by
Lender of such notice, unless the effect of such change is to extend
or increase coverage under the policy;
(iii) the Lender will have the right, at its election, to
remedy any default in the payment of premiums within thirty (30) days
of notice from the insurer of such default; and
(iv) loss payments in each instance will be payable solely to
the Lender as mortgagee or secured party, or otherwise.
5.8 Books and Records. Each Company will maintain accurate and
complete records and books of account with respect to all its operations in
accordance with GAAP, and will permit officers or representatives of the Lender
to examine and make excerpts from such books and records and to visit
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and inspect its properties, both real and personal, at all reasonable times. In
connection with any field audit of the Companies' records and books conducted
pursuant hereto, such Company shall pay to the Lender a non-refundable field
audit fee determined by reference to Lender's field audit fee schedule, as in
effect from time to time.
5.9 Location of Business. Each Company will provide sixty (60)
days' advance written notice to Lender of any change in the location of any
place of business of any Company, whether the establishment of a new place of
business or the discontinuance of a present place of business.
5.10 Financial Covenants.
(a) Current Ratio. The Companies, on a consolidated
basis, shall maintain a Current Ratio of not less than 1.75:1.00 as at December
31, 1996 and as at the close of each and every fiscal quarter thereafter.
(b) Liquid Asset Ratio. The Companies, on a
consolidated basis, shall maintain a ratio of (i) the sum of (A) cash, (B)
Investments, and (C) accounts receivable to (ii) Current Liabilities of not less
than 0.87:1.00 as at December 31, 1996 and as at the close of each and every
fiscal quarter thereafter.
(c) Funded Debt to Tangible Net Worth Ratio. The
Companies, on a consolidated basis, shall maintain a ratio of Funded Debt to
Tangible Net Worth of not more than 1.2:1.00 as at December 31, 1996 and as at
the close of each and every fiscal quarter thereafter.
(d) Tangible Net Worth. The Companies, on a
consolidated basis, shall maintain Tangible Net Worth of not less than
$41,000,000 at all times.
(e) Cash and Investments. The Companies, on a
consolidated basis, shall maintain cash and/or Investments in the aggregate
equal to at least $5,000,000 at all times.
5.11 Group Health Plans. Each Company will comply in all
material respects with the group health plan COBRA Continuation Coverage
requirements of Code ss.4980B(f) and with all provisions of ss.1862(b)(1) of the
Social Security Act. Each Company will furnish to Lender, as soon as possible
and in any event within thirty (30) days after any Company knows or has reason
to know, that any Company is not in compliance with any provision of Code
ss.4980B(f) or ss.1862(b)(1) of the Social Security Act.
5.12 Location of Collateral. The Collateral will at all times
be situated at the Facility or as provided under the Security Agreement, and the
Borrower will provide sixty (60) days' advance written notice of any change in
such locations.
5.13 Deposit Accounts. Each Company shall maintain deposit
accounts with the Lender or at a depository institution approved by Lender.
5.14 Mechanic's Liens. If any mechanic's lien or security
interest shall be filed against the Facility or any part thereof, or any
interest therein, by reason of work, labor, services or materials supplied or
claimed to have been supplied, or any municipal lien or other lien or
encumbrance is recorded or filed and is not discharged (or if security therefor
satisfactory to Lender has not been deposited with Lender) within thirty (30)
days after the filing or recording thereof, then Lender may, at its option, pay
and discharge said lien or encumbrance, in which case the sum which Lender shall
have so paid shall be considered as part of the advances then due or thereafter
to become due, as Lender may elect, shall bear interest at the Default Rate from
the date of payment by Lender until the date of
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repayment, shall be evidenced by the Note, and shall be secured by the
Security Documents.
5.15 Workmanship. All work performed on or with respect to the
Facility to construct and equip the Improvements shall be performed in a good
and workmanlike manner utilizing materials which are free from defects. Upon
written notice from the Lender, the Borrower shall proceed with due diligence,
at its own expense, properly to replace or cause the replacement of any
defective material and the performance of any labor necessary to correct any
defect in the work. If the Borrower fails, within thirty (30) days after written
notice from the Lender, to replace or begin to replace defective materials or
perform any labor required under this Section 5.15, the Lender may furnish such
material and labor as is necessary to correct the work and the Borrower shall
immediately reimburse the Lender therefor, together with interest thereon at the
Default Rate.
5.16 Compliance with Law. In the performance of all work
contemplated hereunder, the Borrower shall comply with the laws of the State of
Alabama and the ordinances, regulations, and rules of any Federal or State
agency and of any municipal or public authority of the municipality in which the
Improvements may be erected and its various boards and departments which apply
to or affect the Improvements or Facility, even though the particulars may not
be set forth in the Plans and Specifications approved by Lender. The Borrower
shall save the Lender harmless from all annoyances and fines, shall give the
proper authorities all requisite notice relative to the work, and shall procure
and pay for all necessary licenses and permits with respect thereto.
5.17 Materials Annexed. All materials delivered upon the
Facility or upon the lots or highways nearby for the purpose of being used in
the erection of the Improvements shall be considered annexed thereto and shall
become a part of the Premises as if actually incorporated therein, and shall be
subject, as against the Borrower and all Persons acting or claiming under them,
to the rights, conditions, and covenants to which the Facility is subject under
this Agreement. Nothing herein contained shall be construed to make Lender
responsible for any loss, damage, or injury to the said materials nor for
payment for the same.
5.18 Title to Materials. Without the written consent of the
Lender, the Borrower shall not make or cause to be made or permit any contract
for materials or equipment of any kind or nature whatsoever to be incorporated
in or to become part of the Improvements, title to which is reserved under
conditional sale, chattel mortgage, bailment lease, secured transaction, or
otherwise in favor of a third person.
5.19 Trust Fund. To the extent applicable, the Borrower agrees
to receive all Loan Advances to be made hereunder as a trust fund to be applied
to, or to reimburse the Borrower for, the payment of the cost of the
constructing and equipping of the Improvements as provided herein together with
interest, fees, and any other charges due to the Lender, and such Loan Advances
shall not be used for any other purpose.
5.20 Additional Information. The Borrower shall disclose to
Lender, within one (1) Business Day of demand therefor, the names of all Persons
with whom the Borrower has contracted or intends to contract in connection with
the construction and equipping of the Improvements or the furnishing of any
labor, materials, or services in connection therewith.
5.21 Construction Contract. The Borrower shall, on or before
the execution hereof, execute and deliver the Construction Contract, which shall
be subject to the review and approval by the Lender, which review and approval
shall not be considered a substitute for the Company's review and approval. All
change orders in the Construction Contract relating to the construction of the
Improvements increasing or decreasing the cost thereof equal to or in excess of
five percent (5%), individually or in the aggregate, must first
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receive written approval from the Lender before implementation, which approval
may be withheld in Lender's sole discretion.
5.22 Plans and Specifications; Change Orders. Upon the request
of the Lender, the Borrower shall provide to the Lender complete plans and
specifications (collectively, the "Plans and Specifications") for the
construction of the Improvements prior to the Closing Date, signed by the
Company, the Contractor, and the Architect, and which Plans and Specifications
shall set forth the layout, design, and dimensions of all Improvements. All
change orders in the Plans and Specifications increasing or decreasing costs
equal to or in excess of five percent (5%) of the amount of construction costs,
individually or in the aggregate, or any change in specifications or materials
used which significantly alters the construction of any of the Improvements
and/or the Project as first presented to the Lender, must first receive written
approval from the Lender before implementation, which approval may be withheld
in Lender's sole discretion.
5.23 Budget. The Borrower shall provide the Budget to the
Lender, which shall include a detailed breakdown of the estimated costs to be
covered by the Loan Advances, which Budget shall be subject to review and
approval by Lender. Any such review and approval by Lender shall be for the
Lender's purposes only and shall not be considered a substitute for the
Borrower's review and approval.
5.24 Construction; Installation. The Borrower shall diligently
proceed to complete the Improvements within the Construction Period, employing
sufficient workmen and supplying sufficient materials for that purpose. The
Borrower shall substantially complete, or cause the completion of, the
Improvements with any sewers, laterals, water and all other public utility
connections, grading, paving, curbing and all other improvements, as may be
required, ready for occupancy, within the Construction Period. If the Plans and
Specifications do not fully provide for the completed Improvements or do not
fully provide for all labor and materials necessary to provide such completed
Improvements by the end of the Construction Period, or should the Plans and
Specifications be inadequate in any respect, the Companies shall provide without
delay all labor, materials, and whatever else is necessary to fully complete the
Improvements.
5.25 Additional Equity Contribution. The Borrower shall
provide, from sources other than the Loan, the funds necessary to pay the total
construction costs of the Improvements in excess of the amounts available to the
Borrower from the Loan Advances. If, at any time, the Lender shall determine
that the undisbursed balance of the Loan Advances will be insufficient to pay
the total cost of constructing the Improvements, the Borrower shall promptly
provide the Lender with evidence satisfactory to the Lender that the Borrower
has sufficient funds available to pay the increased costs as they are incurred,
and the Lender reserves the right to require the Borrower to deposit with the
Lender, within fifteen (15) Business Days after any request by Lender,
sufficient funds to complete the construction of the Improvements prior to
consenting to any further Loan Advances.
5.26 Construction Period. The Borrower shall complete the
construction of the Improvements on or before the expiration of the Construction
Period, in accordance with the Plans and Specifications, rules and regulations
of any governmental authority having jurisdiction, and requirements of Lender.
5.27 Inspections. The Companies acknowledge and agree that the
Lender, the Lender's inspecting engineer (or other qualified Person selected by
the Lender) and other agents of the Lender are permitted to inspect the
Improvements and the work being completed thereon at all reasonable times and
the Company covenants and agrees to pay any and all standard and customary
inspection fees charged by the Lender in connection with the foregoing.
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5.28 Release of Liens. The Borrower shall, upon completion of
the Improvements, furnish Lender or its counsel a complete release of liens by
the Contractor and all Subcontractors and materialmen for the Improvements.
5.29 Additional Covenants of the Companies. So long as any
amount is due and owing to the Lender hereunder and under the Note or the other
Loan Documents, the Companies will, unless the Lender shall otherwise consent in
writing:
(a) Comply with all of the covenants of the
Companies set forth herein; and
(b) Take any and all actions necessary or
appropriate to cause, or assist in causing, the issuance of the Bonds.
5.30 Taxes and Claims. The Companies will pay and discharge
all taxes, assessments and governmental charges or levies imposed upon them or
upon their income or profits, or upon any properties or assets belonging to
them, prior to the date on which penalties attach thereto, except for any such
tax, assessment, charge, levy or other claim the payment of which is being
contested in good faith and by proper proceedings and against which they
maintain adequate reserves.
5.31 Expenses. The Companies shall be liable for and shall
promptly pay all fees, expenses and charges in connection with the Project,
including, but not limited to, recording fees, filing fees, escrow fees, closing
costs, appraisal fees, appraisal review fees, inspection fees, environmental
inspection fees and other environmental costs, survey costs, Lender's
architectural and engineering expenses, mortgage taxes, documentary stamps,
revenue stamps and any other charges applicable to the transactions described
herein. The Companies also agree to reimburse the Lender for its out-of-pocket
expenses, including reasonable counsel fees, incurred in connection with the
development, preparation, negotiation, execution, amendment, extension,
modification, and enforcement of this Agreement, the other Loan Documents and
all related documents, and, with respect to any amendment or modification,
regardless of whether the amendment or modification is requested or initiated by
the Companies or the Lender. At the time of the Closing, the Companies shall pay
all such fees, expenses, and charges which have then been incurred. All such
expenses incurred thereafter shall be paid within fifteen (15) days after notice
by Lender.
5.32 Updated Survey. Within thirty (30) days following
completion of the Improvements, the Borrower shall have caused the survey
delivered to the Lender pursuant to Section 4.1(q) to be updated to reflect the
completion of the Improvements pursuant hereto, which updated survey shall be
satisfactory, in all respects, to the Lender and reflect, among other things,
that the Facility is in compliance with all setback requirements, zoning
regulations, and all other laws, rules, and regulations pertaining thereto.
5.33 Utilities. Upon the request of the Lender at any time
after the Closing Date, the Borrower shall submit to the Lender evidence,
satisfactory to the Lender, that electric, gas, sewer, water and all other
necessary utility services are available at the Facility to efficiently serve
the Improvements with sufficient capacity.
5.34 Assignment of Labor/Material Bond. At the request of the
Lender at any time after the Closing Date, the Borrower shall, as additional
security for the Obligations, pledge, assign and transfer to the Lender all of
its right, title, and interest (but none of its duties, obligations, or
liabilities) in and to any and all payment, performance, and other bonds
obtained at any time by the Borrower or any other Company which, directly or
indirectly, assure the payment and/or completion of the Improvements, all of
which shall be completed pursuant to and in accordance with agreements,
documents, and instruments which are satisfactory, in form and substance, to
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the Lender and its counsel and which shall, upon execution, be deemed to be a
part of the Collateral and the Security Documents, as appropriate.
SECTION 6. NEGATIVE COVENANTS.
The Companies covenant and agree that from and after the
effective date of this Agreement and so long as any of the Obligations remain
outstanding and unpaid, in whole or in part, the Companies will observe the
following covenants unless the Lender shall otherwise consent in writing:
6.1 Debt. The Companies will not create, incur, assume or
suffer or permit to exist any Debt, including indebtedness for borrowed money or
any indebtedness constituting the deferred portion of the purchase price of any
property, except:
(a) any Obligations, whether evidenced by the Note
or any other instruments;
(b) any Debt to the Lender;
(c) Debt to suppliers and other trade creditors
incurred in the ordinary course of business by each Company;
(d) Subordinated Indebtedness; and
(e) any other Debt permitted under the Existing Loan
Documents.
6.2 Liens. The Companies will not create, assume, or suffer to
exist, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind upon the Facility or any of their other assets, whether now owned or
hereafter acquired, except:
(a) (i) the liens and security interests created or
permitted by the Security Documents, and (ii) the liens and security interests
in existence as of the Closing Date which are described on Schedule 6.2(a)(ii);
(b) purchase money liens on and security interests
in equipment hereafter acquired securing Debt permitted by Section 6.1(e),
provided that such liens and security interests attach only to the equipment so
acquired and do not encumber any other property of the Companies;
(c) liens for taxes not yet payable or being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided on the books of the Companies;
(d) mechanics', materialmen's, warehousemen's,
carriers' or other like liens arising in the ordinary course of business of the
Companies, arising with respect to obligations which are not overdue for a
period longer than thirty (30) days or which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided on
the books of the Companies;
(e) deposits or pledges to secure the performance of
bids, tenders, contracts, leases, public or statutory obligations, surety or
appeal bonds or other deposits or pledges for purposes of a like general nature
or given in the ordinary course of business by the Companies;
(f) other encumbrances consisting of zoning
restrictions, easements, restrictions on the use of real property or minor
irregularities in the title thereto, which do not arise in connection with the
borrowing of, or any obligation for the payment of, money and which, in the
aggregate, do not materially detract from the value of the Premises or the
business, properties or assets of the Companies; and
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(g) any other liens permitted under the Existing
Loan Documents.
6.3 Disposition of Assets. The Companies will not liquidate or
dissolve themselves (or suffer any liquidation or dissolution), or convey, sell,
lease, pledge, or otherwise transfer or dispose of all or any substantial part
of their properties, assets or business except that (a) any Company may merge
into or transfer assets to its parent corporation (so long as it is another
Company), and (b) any Company (other than Central Sprinkler Company) may merge
into or consolidate with or transfer assets to any other Company.
6.4 Disposition of Accounts. The Companies will not sell,
discount or otherwise dispose of its notes, accounts, chattel paper, documents,
general intangibles or instruments, except to or with the Lender hereunder.
6.5 Sales and Lease-Backs. The Companies will not enter into
any arrangement, directly or indirectly, with any Person, whereby the Companies
shall sell or transfer any property, real or personal, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which the Companies intend to use for substantially the same purpose or purposes
as the property being sold or transferred.
6.6 Contingent Liabilities. Except as set forth on Schedule
6.6 and except as permitted under the terms of the Existing Loan Documents, the
Companies will not become or remain liable, directly or indirectly, in
connection with the obligations, stock or dividends of any Person, whether by
guarantee, suretyship, posting of bond or other security, endorsement, agreement
to supply or advance funds, agreement to maintain working capital or net worth,
agreement to purchase or repurchase goods or services whether or not such goods
or services are actually acquired, "take-or-pay" or other arrangement to protect
any obligee from loss or otherwise, except that the Companies may endorse
negotiable instruments for collection in the ordinary course of their business.
6.7 Continuance of Business. The Companies will not engage in
any line of business other than those in which the Companies are actively
engaged on the Closing Date.
6.8 Voluntary Prepayments; Modification of Certain Debt
Instruments. The Companies will not (a) prepay, purchase, redeem or otherwise
acquire for value prior to the stated maturity thereof all or any part of any
Debt of the Companies for borrowed money (other than the Obligations as provided
herein or Debt to the Lender in the manner provided therein), or (b) amend,
modify or supplement in any way, or request any waiver of the provisions of, any
instrument providing for or evidencing any Debt of Companies for borrowed money
or constituting the deferred purchase price of property or assets.
6.9 Removal and Protection of Property. The Companies will not
remove (other than in the ordinary course of business) any equipment, inventory,
or general intangibles from the place of business where presently located, nor
permit the value of any property to be impaired or any equipment to become a
fixture or an accession to other goods.
6.10 Transactions with Affiliates. Except as expressly
permitted by this Agreement or the Existing Loan Documents, the Companies will
not, directly or indirectly:
(a) make any investment in, or loan or advance to,
an Affiliate except for advances and loans between or among the Companies which
are made in the ordinary course of the Companies' business as heretofore
conducted so long as no Default or Event of Default has occurred prior thereto
or would be caused thereby;
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(b) transfer, sell, lease, assign or otherwise
dispose of any assets to an Affiliate;
(c) merge into or consolidate with or purchase or
acquire assets from an Affiliate; or
(d) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate (including, without
limitation, any guarantees or assumptions of obligations of an Affiliate);
provided that the Companies may enter into any transaction with an Affiliate for
the leasing of property, the rendering or receipt of services or the purchase or
sale of assets in the ordinary course of business for a consideration which is
substantially as advantageous to the Companies as the consideration which it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
6.11 Handling of Hazardous Substances. The Companies will not
permit to be used in its business or operations, or produce as a result or as a
by-product of their business or operations, or store or hold at any site or
location at which they conduct their business or operations, or at any other
property, Hazardous Substance unless the Companies strictly and fully comply
with all requirements of any applicable law, regulation, decision or edict
relating to the special handling, collection, storage, treatment, disposal, or
transportation of such Hazardous Substance. The Companies will not permit the
Release or threatened Release of any Hazardous Substance on, from, or near their
respective properties which might cause Contamination.
6.12 Use of Proceeds. The Companies will not directly or
indirectly, apply any part of the Loan Advances to the purchasing or carrying of
any "margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System, or any regulations, interpretations or rulings
thereunder.
6.13 Satisfactory Management. The Companies acknowledge that
the Lender is relying upon the abilities of the Companies' senior executive
management as a material inducement for the Lender to enter into this Agreement.
Therefore, the Companies shall, at all times, maintain management which is
acceptable to the Lender in its reasonable discretion. In particular, the
Companies shall not cause or permit George G. Meyer to cease to be active in
Central Sprinkler Corporation's senior executive management for any reason
(including death or disability) unless replaced with a similarly qualified
person who is reasonably satisfactory to the Lender.
SECTION 7. EVENTS OF DEFAULT, REMEDIES.
7.1 Events of Default. Any one or more of the following events
shall constitute an Event of Default:
(a) Voluntary Bankruptcy. (i) The commencement by
any Company of a voluntary case under the Bankruptcy Code, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency, reorganization, rehabilitation, or other similar law; (ii) the
consent by any Company to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of such Company or for any substantial part of its respective property
or assets; or (iii) the making by any Company of any assignment for the benefit
of creditors; or (iv) the failure of any Company generally to pay its debts as
such debts become due; or (v) the taking of any action by any Company in
furtherance of any of the foregoing.
(b) Involuntary Bankruptcy. The entry of a decree or
order for relief by a court having jurisdiction in respect of any Company in an
involuntary case under the Bankruptcy Code, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency,
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or other similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of any Company or for any
substantial part of its property or assets, or ordering the winding-up or
liquidation of their respective affairs and the continuance of any such decree
or order unstayed and in effect for a period of thirty (30) consecutive days.
(c) Levies. The issuance of any writ of execution
against the Facility or against any other property of any Company and the
continuance of such writ of execution unstayed and in effect for a period of
fifteen (15) days.
(d) Governmental Requirements. The failure of the
Borrower to comply with any requirements of any governmental authority
concerning the Facility within fifteen (15) days after notice in writing of such
requirements shall have been given to the Borrower; provided, however, that the
Borrower may in good faith contest such requirement with the prior written
consent of the Lender, which consent may be granted or withheld at the Lender's
sole discretion.
(e) Non-payment. (i) The failure by the Borrower to
pay the principal or interest or other sum on the Loan Documents when it becomes
due and payable, at maturity or otherwise, or (ii) the failure of any Company to
pay when due any other amount payable to Lender, whether under this Agreement or
otherwise, when due and payable, and such failure, in the case of either clause
(i) or (ii), shall continue unremedied for a period of five (5) days after
written notice has been given to such Company by the Lender.
(f) Falsity of Representations and Warranties. Any
representation or warranty made by any Company in this Agreement or in any Loan
Document or in any certificate, financial or other statement furnished at any
time under or in connection with this Agreement or any Loan Document shall be
false or misleading in any material respect.
(g) Failure to Perform Certain Covenants. Any
failure of any Company to observe or perform each and every one of the terms,
covenants, promises, and agreements on its part to be observed and performed
under any of the Loan Documents or any of the other documents delivered to
Lender in connection herewith and, except for breaches of Financial Covenants,
the continuation of such failure for a period of thirty (30) days after the
earlier of (i) written notice thereof from Lender to such Company or (ii) the
date as of which an executive officer of any Company becomes aware of such
failure.
(h) Default Under Other Obligations. Any Company (i)
defaults in the payment of principal or interest on any material obligations for
borrowed money (including, without limitation, any Debt due and owing to the
Lender) or for the deferred purchase price of property beyond any period of
grace provided with respect thereto, or (ii) defaults in the performance of any
other material agreement, term, or condition contained in any such obligation or
in any material agreement relating thereto, if the effect of such default is to
cause, or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to then cause, such obligation to become due
prior to its stated maturity.
(i) Default Under the Loan Documents. The occurrence
of any default under any of the other Loan Documents, including the Note and
Mortgage.
(j) Default Under the Existing Loan Documents. The
occurrence of a default or event of default under or as defined in any of the
Existing Loan Documents (including, without limitation, the occurrence of any
Event of Default under and as defined in the 1994 Term Loan Agreement).
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(k) ERISA.
(i) (A)(1) Any Employee Pension Plan of any Company is terminated
within the meaning of Title IV of ERISA, or (2) a trustee is appointed
by the appropriate United States District Court to administer any such
Employee Pension Plan, or (3) the PBGC institutes proceedings to
terminate any such Employee Pension Plan, or (4) any Reportable Event
occurs which the Lender determines in good faith indicates a
substantial likelihood that an event described in (1), (2), or (3)
above will occur, or (5) any Company or any of its Controlled Group
Members incur any Withdrawal Liability with respect to any such
Multiemployer Plan or (6) any such Multiemployer Plan enters
Reorganization, and (B) with respect to events described in (1)-(4)
above only, the benefit liabilities (within the meaning of ERISA
ss.4001(a)(16)) exceed the market value of the assets in the fund
under such Employee Pension Plan by five percent (5%) or more of any
Company's or its Controlled Group Members' tangible net worth;
(ii) There occurs an Accumulated Funding Deficiency with respect
to any such Employee Pension Plan;
(iii) There occurs any Accumulated Funding Deficiency with
respect to any such Employee Pension Plan and any Company or any of
its Controlled Group Members fail to correct such Accumulated Funding
Deficiency prior to the end of the taxable period within the meaning
of Code ss.4971(c)(3); or
(iv) Any such Employee Pension Plan loses its tax-qualified
status.
(l) Group Health Plans. Failure by any Company to
provide COBRA Continuation Coverage under group health plans for separating
employees in accordance with Section 4980B(f) of the Code at the time
continuation coverage is to be made available, or any failure by any Company to
comply with Section 1862(b)(1) of the Social Security Act.
(m) Unenforceability. (i) Any material provision of
any of the Loan Documents shall at any time for any reason cease to be a valid
and binding obligation of any Company, or shall be declared to be null and void
and, in either such event, such Company cannot or will not enter into identical
documents which in the judgment of the Lender will constitute binding
obligations of such Company or (ii) the validity or enforceability thereof shall
be contested by any Company or any governmental agency or authority, or any
Company shall deny that it has any further liability or obligation under any
Loan Document to which it is a party.
(n) Security Interests. The security interests
granted by any Company to the Lender under the Security Documents shall at any
time fail to be priority perfected security interests in accordance with the
lien priorities set forth herein.
(o) Judgments. A final judgment or judgments in
excess of One Hundred Thousand Dollars ($100,000), either singly or in the
aggregate, for the payment of money shall be rendered by a court of record
against any Company and such Company shall not discharge such judgment or
provide its discharge in accordance with its terms, or procure a stay of
execution thereof, within thirty (30) days from the date of the entry of the
judgment and within such period of thirty (30) days, the execution of such
judgment shall have been stayed, appeal therefrom shall have been made by the
Company and the execution thereof shall have been stayed during such appeal
period.
(p) Discontinuance of Construction. A
discontinuation in the construction of any of the Improvements for a period of
fifteen (15) consecutive days for any reason whatsoever, except strikes, acts of
God, or similar elements of force majeure.
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(q) Material Amendments to Construction Contract.
The making by the Borrower of any material amendment in the Construction
Contract or the failure of the Borrower to pursue promptly any remedy under the
Construction Contract in the event of any material default by the Contractor.
(r) Condemnation Proceeding. All or any part of the
Facility shall have been taken in and pursuant to a condemnation or similar
proceeding.
7.2 Termination; Acceleration.
(a) If an Event of Default shall occur and the
Lender shall have given notice to the Borrower of the occurrence of such Event
of Default as provided herein, THEREUPON:
(i) in the case of an Event of Default other than one
referred to in clause (a) or (b) of Section 7.1, the Lender may, (A) by
written notice to the Borrower declare the principal amount then
outstanding of and accrued interest on the Loan to be forthwith due and
payable whereupon such amounts shall be immediately due and payable,
all without presentment, demand, protest or other formalities of any
kind to the Companies, all of which are hereby expressly waived by the
Companies, and (B) by written notice to the Borrower, terminate all
credit availability under the Loan;
(ii) in the case of the occurrence of an Event of
Default referred to in clause (a) or (b) of Section 7.1, (A) the
principal amount then outstanding of and the accrued interest on the
Loan shall become automatically immediately due and payable, all
without presentment, demand, protest or other formalities of any kind
to the Companies, all of which are hereby expressly waived by the
Companies; and
(iii) the Note shall immediately and automatically
begin to bear interest at the Default Rate, which Default Rate shall
remain in effect following the entry of judgment under the Note and
until the payment thereof in full.
(b) If an Event of Default has occurred, the Lender
may exercise, or cause to be exercised, any and all such remedies as the Lender
may have under the Loan Documents or any agreement executed in connection
therewith, or as the Lender may have at law or in equity.
7.3 Possession. Upon the occurrence of an Event of Default, it
shall be lawful for Lender at its discretion to enter upon the Facility and take
possession thereof, and all materials and supplies located on the Facility, and
proceed in its own name or in the name of the Borrower as its attorney in fact,
being so authorized irrevocably by the Borrower to complete any Improvements on
which construction has commenced at the cost and expense of the Borrower
according to the terms and conditions hereof, and to make contracts, which in
its opinion it may deem advisable, and to recover hereunder, or under the Note
and the Mortgage any amount or amounts so expended for such performance,
together with any costs, charges, or expenses incidental thereto or otherwise
incurred or expended by it, or on its behalf, in connection with the
Improvements. In the event of a proceeding under this Agreement or of the entry
of judgment on the Note and the Mortgage for recovery and reimbursement for any
moneys expended by Lender in connection with any Improvements upon the Facility,
a statement of said expenditures verified by the affidavit of an officer of
Lender shall be prima facie evidence of the amounts so expended and of the
propriety and necessity for such expenditures, and the burden of proving the
contrary shall be upon the Borrower. Lender shall have the right to use any
funds or securities or other property in its possession relating to the
construction of such Improvements, to secure the completion of such Improvements
and to pay the debt therefor, and if Lender shall proceed as herein provided,
the Borrower agrees upon
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exhaustion of the moneys or other assets relating to the construction of such
Improvements, to deliver and pay to Lender such sums of money as it may from
time to time demand for the purpose of completing such improvements, or of
paying any liability, charge, or expense which may have been incurred or assumed
by it under or in pursuant hereof, or for the purposes of the construction
thereof.
7.4 Set-Off. Upon the occurrence of an Event of Default, in
addition to all other rights and remedies available, the Companies authorize
Lender to set off against the unpaid balance of the Obligations any debt owing
by them to the Companies and any funds in any deposit account maintained by the
Companies with the Lender.
7.5 No Marshalling. Lender shall not be required to marshal
any present or future security for, or guarantees of, the Obligations held by it
or to resort to any such security or guarantee in any particular order and the
Companies waive, to the fullest extent that they lawfully can, (a) any right
they might have to require Lender to pursue any particular remedy before
proceeding against them, and (b) any right to the benefit of, or to direct the
application of the proceeds of any Collateral until the Obligations have been
paid in full.
7.6 Site Assessments; Appraisals. In connection with Lender's
consideration of enforcement or preservation of rights under any Loan Document,
if an Event of Default shall occur, the Companies shall permit such persons
("Site Reviewers") as Lender may select to visit the Facility and perform such
environmental and other site investigations and assessments thereof ("Site
Assessments") for the purpose of determining whether the Facility are subject to
any Contamination or other condition which could result in any liability, cost
or expense to the owner or occupier thereof relating to Hazardous Substances or
otherwise. Such Site Assessments may include both above- and below-the-ground
sampling and/or testing for Contamination and such other tests as may be
necessary in the opinion of the Site Reviewers. The Companies shall supply to
the Site Reviewers such historical and operational information, including the
results of all samples sent for analysis, correspondence with official bodies
and previous environmental audits or environmental reviews regarding the
Facility as are within their possession, custody or control or which are
reasonably available to it, and will make available for meetings with the Site
Reviewers appropriate personnel employed by the Companies having knowledge of
such matters. The Companies shall also permit the Lender and its agents and
representatives to enter upon the Facility for the purpose of performing an
appraisal of the Facility, in such form and manner as the Lender may deem
reasonably appropriate. The cost of performing all Site Assessments and
appraisals shall be paid by the Companies within five (5) days after demand by
Lender. The provisions of this Section 7.6 are in addition to all other rights
of Lender under this Agreement and the other Loan Documents.
7.7 Additional Remedies. The remedies herein provided shall be
in addition to and not in substitution for the rights and remedies which would
otherwise be vested in Lender in law or equity, all of which rights and remedies
are specifically reserved by Lender, and the failure to exercise the remedies
herein provided shall not preclude the resort to any other appropriate remedy or
remedies nor shall use of the said remedies herein provided prevent the
subsequent or concurrent resort to any other remedy or remedies which by law or
equity shall be vested in Lender for the recovery of damages or otherwise in the
event of a breach of any of the covenants herein contained on the part of the
Companies to be kept, observed and performed. No failure or delay on the part of
Lender in exercising any right, power or privilege hereunder or under the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
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SECTION 8. MISCELLANEOUS.
8.1 No Third Party Beneficiaries. The parties do not intend
the benefits of this Agreement to inure to any third party. Notwithstanding
anything contained herein or in the Mortgage, the Note, any of the other Loan
Documents, or any documents executed in connection with the Project, or any
conduct or course of conduct by any or all of the parties hereto, or their
respective affiliated companies, agents or employees, before or after signing
this Agreement or any of the other aforesaid documents, this Agreement shall not
be construed as creating any rights, claims or causes of action against Lender,
or any of its officers, agents or employees in favor of any contractor,
subcontractor, supplier of labor or materials or any of their respective
creditors, or any person or entity other than the Companies.
8.2 No Lender Warranties. Although Lender, including its
agents, has a right hereunder to inspect the Budget, cost estimates, and other
documents and matters pertaining to the purchase of machinery and equipment at
the Facility and the Improvements, such inspections are solely for the
protection of Lender, and the Companies agree for themselves and anyone claiming
a third-party interest herein, that Lender is not making any implied warranties
or representations as to any matters pertaining to any Improvements, and that
Persons not parties hereto have no right to rely on Lender for any matter
whatsoever. The Companies agree for themselves and anyone claiming a third-party
interest herein, that disbursement of Loan Advances and approval thereof by the
Lender shall neither be evidence of performance by the Companies of their
obligations hereunder or under any other agreements with respect thereto nor
shall such disbursement constitute an acceptance of any defective or faulty work
or improper materials.
8.3 Survival of Representations and Warranties. All
representations, warranties, covenants and agreements made in this Agreement and
in any certificates delivered pursuant thereto shall survive the execution and
delivery of this Agreement and the issuance of the Note.
8.4 Participations. The Lender reserves the absolute right to
assign all or any portion of its interests in the Obligations and/or the Loan
Documents or to participate with other lending institutions in the Loan and the
Loan Documents on such terms and at such times as the Lender may determine from
time to time, all without any consent thereto or notice thereof by or to the
Companies. The Companies hereby grant to each participating lending institution,
to the extent of each institution's participation in the Obligations, the right
to set off deposit accounts maintained by the Companies with such institution.
8.5 Miscellaneous. No failure by Lender to comply with any
provision or provisions of this Agreement, and no waiver on the part of any
party in exercising any rights hereunder, shall operate as a waiver of any
rights of Lender. No waiver of a Default or Event of Default shall affect any
subsequent Default or Event of Default or impair any rights of Lender consequent
thereon. Any approval given by Lender in whole or in part to advance funds
hereunder before the time or times provided herein shall not waive or impair any
of the provisions hereof or any of the rights or remedies of Lender hereunder or
affect the security hereunder given or any of the rights or remedies of Lender
as to such security, nor shall so doing be or be construed to be a variance from
this Agreement. Tardiness in enforcing any provision hereof shall not be set up
as a waiver by Lender of any of its rights hereunder and all covenants on the
part of the Companies hereunder to be kept and performed may be enforced by
Lender at any time until all Obligations are satisfied.
8.6 Notices. All notices, requests and demands to or upon the
respective parties hereto shall, if mailed, be sent postage prepaid, registered
or certified mail, return receipt requested, or may be sent by
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courier system providing for receipt of delivery, or by telecopy, addressed as
follows:
To Companies: Central CPVC Corporation
Central Sprinkler Corporation
Central Sprinkler Company
Central Castings Corporation
451 North Cannon Avenue
Lansdale, Pennsylvania 19446
Telecopy No.: (215) 362-5385
Attention: Mr. Albert T. Sabol,
Executive Vice President
With a copy to: Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Telecopy No.: (215) 963-5299
Attention: Thomas J. Sharbaugh, Esquire
To Lender: CoreStates Bank, N.A.
2240 Butler Pike
Plymouth Meeting, Pennsylvania 19462
Telecopy No.: (610) 834-2069
Attention: Mr. William Johnston,
Vice President
With a copy to: Stevens & Lee, P.C.
One Glenhardie Corporate Center
Suite 202
1275 Drummers Lane
P.O. Box 236
Wayne, Pennsylvania 19087-0236
Telecopy No.: (610) 687-1384
Attention: Steven M. Tyminski, Esquire
All such notices and other communications shall be effective (i) if mailed, on
the earlier of three (3) days after the date when mailed or when received; (ii)
if sent by overnight delivery or sent by courier, or telecopy, when received; or
(iii) if delivered, when delivered.
8.7 Conflicts Between Instruments. In the event of any
conflict between the provisions of this Agreement and the provisions of the
Note, the Mortgage or any other Loan Documents or any other document executed
and/or delivered in connection with the Loan Documents (including, without
limitation, any provisions with respect to the delivery of notice of default and
the granting of any opportunity to cure), the provisions of this Agreement shall
prevail, notwithstanding any provision in any other document to the effect that
such other document shall be deemed controlling.
8.8 Indemnity. The Companies hereby agree, whether or not any
of the transactions contemplated in the Loan Documents shall be consummated, to
pay, assume liability for, and indemnify, protect, defend, save and keep
harmless the Lender from and against, any and all liabilities, obligations,
losses, damages, settlements, claims, actions, suits, penalties, costs and
expenses (including, but not limited to, legal and investigative fees and
expenses) of whatsoever kind and nature, including, but not limited to claims
based upon negligence, strict or absolute liability, liability in tort, latent
and other defects (whether or not discoverable), and any claim for patent,
trademark or copyright infringement which may from time to time be imposed on,
incurred by or asserted against the Lender (whether or not any such claim is
also indemnified or insured against by any other Person) in any way relating
41
<PAGE>
to or resulting from this Agreement, any Loan Document, or any of the
transactions contemplated herein or therein excluding, however, any of the
foregoing which is caused by the gross negligence or willful misconduct of the
Lender, as determined by a final judgment of a court of competent jurisdiction.
The provisions of this subsection shall survive the payoff, release, foreclosure
or other disposition, as applicable, of this Agreement, the Obligations or the
Collateral.
8.9 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto, and there have not been nor are there oral
agreements between the parties of any kind whatsoever as a condition precedent
to or as an inducement for anyone to sign this Agreement. This Agreement may not
be changed or amended in any manner whatsoever except with the written consent
of the parties hereto.
8.10 Subsidiaries; Successors.
(a) The Companies covenant and agree to cause any
Subsidiaries of the Companies to be in full and complete compliance with the
affirmative and negative covenants of Sections 5 and 6, whether or not such
Subsidiaries are expressly referred to therein.
(b) The terms, conditions, covenants, agreements,
powers, privileges, notices and authorizations herein contained, mentioned or
referred to, shall extend to, be binding upon and available for the successors
and, to the extent permitted hereunder, upon the assigns of each of the
respective parties hereto.
8.11 Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the domestic internal laws of the Commonwealth
of Pennsylvania (other than any Loan Documents which by their express terms are
intended to be governed by the laws of the State of Alabama) without regard to
its rules pertaining to conflict of laws.
8.12 Severability. Any provision of any of the Loan Documents
which is prohibited or unenforceable in any jurisdiction shall be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such Loan Document or affecting the
validity or enforceability of such provision in any other jurisdiction.
8.13 Headings. Article and Section headings in this Agreement
and the Loan Documents are included therein for the convenience of reference
only and shall not constitute a part of the applicable documents for any other
purpose.
8.14 Waiver of Trial by Jury; Jurisdiction.
(a) Each party to this Agreement agrees that any
suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by either party hereto or any successor or assign of any party on or
with respect to this Agreement or any other Loan Document or which in any way
relates, directly or indirectly, to the Loan, or any event, transaction, or
occurrence arising out of or in any way in connection with the Loan, or the
dealings of the parties with respect thereto, shall be tried only by a court and
not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY SUCH SUIT, ACTION, OR PROCEEDING. THE COMPANIES ACKNOWLEDGE AND AGREE
THAT THIS SECTION 8.14 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT
BETWEEN THE PARTIES AND THAT THE LENDER WOULD NOT MAKE THE LOAN IF THIS WAIVER
OF JURY TRIAL SECTION WERE NOT A PART OF THIS AGREEMENT.
(b) For the purpose of any suit, action or
proceeding arising out of or relating to this Agreement, the Note, or Loan
Documents, the Companies hereby irrevocably consent and submit to the
jurisdiction and venue of any of the Courts of the Commonwealth of Pennsylvania
including, without
42
<PAGE>
limitation, the Court of Common Pleas of Montgomery County and the Federal
District Court for the Eastern District of Pennsylvania, and appoint and
constitute the Secretary of State of the Commonwealth of Pennsylvania as their
agent to accept and acknowledge on their behalf all service of process in
connection with any such matter, copies of which process shall be mailed or
delivered to the Companies. The Companies irrevocably waive any objection which
they may now or hereinafter have to the laying of the venue of any suit, action
or proceeding brought in such a court has been brought in an inconvenient forum
and agrees that service of process in accordance with the foregoing sentence
shall be deemed in every respect effective and valid personal service of process
upon the Companies. The provisions of this Section 8.14 shall not limit or
otherwise affect the right of the Lender to institute and conduct action in any
other appropriate manner, jurisdiction or court.
8.15 Release. Upon full payment and satisfaction of the
Obligations and the interest thereof, as provided in Section 2 hereof, the
parties shall thereupon automatically each be fully, finally, and forever
released and discharged from any further claim, liability or obligation in
connection with the Loan except as expressly set forth herein, and also except
to the extent a payment received by the Lender is determined to be a preference
or similar voidable transfer.
8.16 Performance by Lender. If the Companies shall fail to
observe or perform any of the terms, agreements or covenants contained in this
Agreement, or in any other Loan Document, the Lender may, in its discretion, but
without any obligation or duty to do so, and without waiving any Default, or
Event of Default, perform any of such terms, agreements or covenants, in part or
in whole, and any money advanced or expended by the Lender in or toward the
fulfillment of such terms, agreements or covenants, shall be due on demand and
become a part of and be added to the indebtedness due under the Note and secured
as herein provided with interest thereon at the rate specified in such Note from
the date of the respective advance or expenditure. Lender's rights contained in
this Section 8.16 shall be an addition to all of Lender's rights under Section
5.5(b) and otherwise, and Lender may, at its sole election, exercise any one or
more, or all, of such rights alternatively or concurrently.
8.17 Cross-Default. The Companies expressly acknowledge and
agree that a default or event of default under or as defined in the Existing
Loan Documents shall be an Event of Default under this Loan Agreement, and that
a Default or Event of Default under this Loan Agreement shall be an event of
default under or as defined in the Existing Loan Documents. Each of the
43
<PAGE>
Existing Loan Documents shall be deemed, and hereby is, modified and amended to
provide for the cross-default provisions set forth herein.
IN WITNESS WHEREOF the parties have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CENTRAL CPVC CORPORATION, an Alabama
corporation
By /s/ Albert T. Sabol
---------------------------------------
Albert T. Sabol, Executive Vice
President - Finance and
Administration
CENTRAL SPRINKLER CORPORATION, a
Pennsylvania corporation
By /s/ Albert T. Sabol
---------------------------------------
Albert T. Sabol, Executive Vice
President - Finance and
Administration
CENTRAL SPRINKLER COMPANY, a Pennsylvania
corporation
By /s/ Albert T. Sabol
---------------------------------------
Albert T. Sabol, Executive Vice
President - Finance and
Administration
CENTRAL CASTINGS CORPORATION, an Alabama
corporation
By /s/ Albert T. Sabol
---------------------------------------
Albert T. Sabol, Executive Vice
President - Finance and
Administration
("Companies")
CORESTATES BANK, N.A., a national banking
association
By /s/ William Johnston,
---------------------------------------
William Johnston,
Vice President
("Lender")
44
<PAGE>
SCHEDULES:
A - Budget
3.1 Subsidiaries
3.2 Required Consents
3.5 Litigation
3.6 Permitted Encumbrances
3.7 Licenses; Intellectual Property
3.10 Loss Contingencies
3.16 Transactions With Affiliates
3.18 Environmental Matters
3.29 Equipment Schedule
6.2(a)(ii) Existing Liens
6.6 Contingent Liabilities
Exhibits:
A - Construction Contract
45
<PAGE>
Page 1 of 2
*Schedule A
CPVC Expansion
Fixed Assets
Investment for CPVC Project:
Land $ 287,000
Building $2,570,000
Fire Production $ 120,000
Equipment Moving $ 75,000
Silo $ 180,000
Silo Sale ($90,000)
Landscape/Signage $ 13,000
Engineering $ 40,000
Total Building Cost $3,195,000
Equipment Purchases:
Maching Shop Equipment
Manual Lathes $ 35,000
CNC Lathe $ 100,000
CNC Mill $ 135,000
Manual Mills $ 40,000
Sub Total $ 310,000
Plant Equipment:
Air Compressors $ 40,000
Fork Trucks $ 30,000
Conveyors $ 50,000
Rack Equipment $ 30,000
Office Furniture $ 25,000
<PAGE>
Page 2 of 2
Extrusion Line $ 175,000
Injection Molding $ 130,000
Sub Total $ 480,000
Total Plant & EQ $ 790,000
Total Cost $ 3,985,000
Tube Mill & Blazemaster II:
Building $ 700,000
M & E $ 2,815,000
Grand Total $ 7,500,000
-----------
*to the extent the costs set forth herein related to the Improvements
<PAGE>
SCHEDULE 3.1
CORPORATE STRUCTURE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
________________________
| |
| CENTRAL SPRINKLER CORP |
|________________________|
|
|
|
__________________100%___________________________________________________
____________|____________ _____________|__________ __________|__________
|Central Sprinkler Company| | CSC Finance Company | | Spraysafe Automatic |
| | | | | Sprinklers Ltd. |
|_________________________| |________________________| |_____________________|
| |
| |
100% 100%
________|________ |
| | |
___________|______ ______|________________ __________|____________
| | | | | |
|Central CPVC Corp.| | Central Castings Corp.| |CSC Investment Company |
|__________________| |_______________________| |_______________________|
</TABLE>
<PAGE>
SCHEDULE 3.2
Required Consents
None
<PAGE>
SCHEDULE 3.5
Litigation
While there are various claims pending and threatened against the Company
pursuant to the ordinary conduct of business, these claims are not expected to
have any material adverse effect on the consolidated financial position of the
Company.
<PAGE>
SCHEDULE 3.6
Permitted Encumbrances
Those permitted under Section 5.11 of the loan agreement dated 4/14/94 between
Fidelity Bank and Central Sprinkler Company and those permitted under Section
5.06 of the loan agreement dated 4/29/94 with CoreStates Bank N.A.
<PAGE>
SCHEDULE 3.7
Licenses: Intellectual Property
The Company is a party to patent licensing agreements. Refer to
Schedule 6.6 for footnote #15 of the Annual Report to shareholders for
discussion.
The Company is also party to a license agreement with CSC Finance
Company; a copy of which is attached.
<PAGE>
ASSIGNMENT
THIS ASSIGNMENT is made by Central Sprinkler Corporation as of the 1st
day of November 1988 pursuant to the terms set forth below:
Background
The Assignor has certain rights to the tradenames and trademarks shown
on Exhibit A hereto, and the Assignor desires to assign all of such rights (the
"Rights") to CSC Finance Company (the "Assignee") in connection with a proposed
Trademark License Agreement (the "Agreement").
NOW, THEREFORE, the Assignor, intending to be legally bound hereby and
in consideration of the Agreement and other good and valuable consideration, the
receipt of which is hereby acknowledged, hereby assigns to the Assignee all of
its right, title and interest in and to the Rights.
The Assignor agrees to take such further action and execute such
additional documents as the Assignee may deem necessary in order to carry out
the actions contemplated by this Assignment.
IN WITNESS WHEREOt, this Assignment is executed and delivered by the
undersigned as of the date first written above.
CENTRAL SPRINKLER CORPORATION
By: /s/ George G. Meyer
---------------------------------
<PAGE>
TRADEMARK LICENSE AGREEMENT
Trademark License Agreement made as of the 16th day of May, 1984
between CSC Holding Corporation, a corporation organized under the laws of the
State of Pennsylvania, U.S.A. ("Licensor") and Central Sprinkler Corporation, a
corporation organized under the laws of tile State of Pennsylvania, U.S.A.
("Licensee").
WHEREAS, Licensor has acquired Licensee and the trademarks and trade
names (and applications and registrations therefor) set forth in Schedule A
hereto, together with the goodwill of the business associated therewith (the
"Trademarks"); and
WHEREAS, Licensor desires to promote the manufacture, distribution,
sale and use of goods and services bearing such Trademarks ("Products") by
licensing the continued use of the Trademarks to Licensee; and
WHEREAS, the Trademarks are significant to the manufacture,
distribution, sale and use of Products and to the conduct of the business
contemplated by the Licensee in the Territory (as hereinafter defined) and,
therefore, Licensee desires to obtain such license;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt-and adequacy
of which are hereby acknowledged, the smarties agree:
1. Exclusive Rights. Licensor hereby grants Licensee the exclusive
Fl-ght to use the Trademarks in connection with Products in the United States
(the "Territory.")
2. Royalty. Licensee shall pay Licensor, as a royalty for the right to
use the Trademarks, three percent (3%) of Licensee's Sales Receipts,
excluding,taxes, from.sales; of any and all Products sold by Licensee. For
purposes of this Section 2, "Sales Receipts" shall mean the amount actually
billed by Li.censee on sales of Products after deducting sales returns. The
royalty shall be paid in arrears on a. calendar quarter basis within thirty days
after the end of each calendar quarter or at such time as the parties otherwise
agree in writing. The royalty shall be paid in United States Dollars. A detailed
computation of the basis for and amount of the royalty paid shall accompany each
payment. Licensor shall have the right at any time to inspect the books and
records of Licensee to verify proper computation and payment of the royalty.
1
<PAGE>
3. Manufacture and Sale. Licensee shall use its best efforts to further
the production and sale of Products under the Trademarks in the Territory and to
maintain an efficient organization for the production and sale of high quality
Products under the Trademarks. Subject to the provisions of Section 4 hereof,
the manufacture, pricing, sale and promotion of Products under the Trademarks
shall be controlled by the Licensee.
4. Supervision of Licensee. For the purpose of protecting and
maintaining the standards of quality established by Licensor for Products sold
under the Trademarks:
A. Licensor shall have the right to supervise the production and
packaging of Products and to inspect and test all Products produced and offered
for sale by Licensee on which, or in connection with which, the Trademarks are
used.
B. Licensee agrees to permit Licensor's authorized personnel to
enter Licensee's premises at all reasonable times, with or without advance
notice, to inspect Licensee's production and packaging facilities and
operations, and to inspect and test all Products produced for sale under the
Trademarks for the purpose of determining the quality of such Products.
C. Licensee agrees to furnish samples of Products and of all related
literature, packaging and labels, to Licensor not less than yearly and at more
frequent intervals at the request of Licensor, for inspection, testing and
review.
5. Maintenance of Trademarks; No Sublicense. Licensor will use its
best efforts to register and maintain, or cause to be registered and maintained,
the Trademarks in the Territory to enable Products to be distributed and sold in
the Territory under the Trademarks as provided herein. Licensor will not permit
any other person to use Trademarks in the Territory in connection with Products.
Licensee shall not, directly or indirectly, license or attempt to license,
whether orally or in writing, any other person to use the Trademarks without the
prior approval in writing of the Licensor.
6. Indemnity. Licensor assumes no liability to Licensee or third
part@@ies with respect ot tI;e efficacy, safety or performance characteristics
of Products manufactured or sold by Licensee under the Trademarks, and Licensee
will indemnify Licensor against all costs, losses and expenses arising as a
result of claims of third persons against Licensor involving the manufacture or
sale of Products under the Trademarks.
7. ownership of Trademarks. Licensee acknowledges Licensor's exclusive
right, title, and interest in and to the Trademarks and will
2
<PAGE>
not at any time do or cause to be done any act or thing contesting or in any way
impairing or tending to impair any part of such right., title and interest. In
connection with the use of the Trademarks, Licensee shall not in any manner
represent that it has any ownership in the Trademarks, and Licensee acknowledges
that use of the Trademarks shall not create in Licensee's favor any right, title
or interest in or to the Trademarks. Upon termination of this Agreement in any
manner provided herein, Licensee will cease and desist from all use of the
Trademarks in any way (and will deliver up to the Licensor, or its duly
authorized represenatives, all material and papers upon which the Trademarks
appear) and furthermore the Licensee will at no time adopt or use, without the
Licensor's prior written consent, any word or mark which is likely to be similar
to or confusing with the Trademarks.
8. Termination. This Agreement shall be subject to termination by the
matual consent of the partiles or by either party upon default by the other
party in the performance of any of the terms, conditions and covenants of this
Agreement and failure to remedy such default within 30 days after notice or
demand. If Licensee makes any assignment of assets or business for the benefit
of creditors, or if a trustee or receiver is appointed to administer or conduct
its business or affairs, or if it is adjudged in any legal proceeding to be
either a voluntary or involuntary bankrupt, then the rights granted herein shall
forthwith cease and terminate without prior notice or legal action by Licensor.
9. Term of License. This Agreement shall, unless otherwise'
terminated, exist for a term of ten years from the date hereof, but shall be
renewable for additional ten-year terms at the option of the Licensee by giving
Licensor written notice of such intent on or before six months prior to the
expiration of each and every ten-year term.
10. Governing Law. This Agreement shall be construed in accordance with
the laws of the United States of America and the State of Pennsylvania.
11. Admendments. The provisions of this Agreement may be amended,
modified, supplemented or changed, but only upon the written consent of both
parties hereto.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Trademark License
Agreement as of the date first above written.
Central Sprinkler Corporation Central Sprinkler Company
(Formerly (Formerly
CSC Holding Corporation) Central Sprinkler Corporation)
By /s/ William J. Meyer By /s/ George G. Meyer
-------------------------------- ------------------------------
William J. Meyer, President George G. Meyer, President
4
<PAGE>
Exhibit A
Trademark License Agreement
Listing of Trade Names and Trademarks
"Central"
"Central Sprinkler"
"CSC"
"Omega"
"Flow Control"
"Protector"
"Prohibitor"
"Ident-A-Fire"
"GB"
"Mini"
"SprinkCad"
<PAGE>
SCHEDULE 3.10
Loss Contingencies
In October 1996, the Company recorded an unusual non-recurring charge to the
income statement. Discussion is presented on Schedule 6.6 Contingencies.
Disclosure was made in the SEC Form 1 O-Q dates July 31, 1996.
<PAGE>
SCHEDULE 3.16
Transactions with Affiliates
Central Sprinkler Company purchases all the CPVC production from Central CPVC
Corporation.
Central Castings Corporation sells most of their production to Central Sprinkler
Company.
Central Sprinkler Company pays a royalty to CSC Finance Company.
There are intercompany receivable and payables and intercompany loans between
the companies.
<PAGE>
SCHEDULE 3.18
Environmental Matters
A. For property to be mortgaged by Central CPVC Corporation, please refer to
separate Environmental Report furnished to CoreStates.
B. Environmental matters affecting Central Sprinkler Company are discussed in
footnote #15 of the Annual Report, included under Schedule 6.6 attached.
<PAGE>
Central CPVC Corporation
A/C: 201-001
New Building in Process:
Mo Yr Invoice # Vendor Amount
- -- -- --------- ------ ------
8 96 IN01 Fite Bldg Company 195,168.48
8 96 1LC033979 Sherman International 2,387.23
8 96 1LC033977 Sherman International 2,229.89
8 96 1LC033985 Sherman International 1,347.2
9 96 1QQ176439 Sherman International 2,670.60
9 96 100396 Fite Building Company 36,190.71
9 96 1QQ176863 Sherman International 22.75
9 96 1QQ176624 Sherman International 40.00
9 96 1QQ177015 Sherman International 1,289.40
9 96 1QQ177293 Sherman International 135.30
9 96 1LC034504 Sherman International 2,196.64
9 96 1LC034509 Sherman International 2,069.60
9 96 1LC034517 Sherman International 2,069.60
9 96 1LC034531 Sherman International 116.16
9 96 1LC034545 Sherman International 2,069.60
9 96 1LC034540 Sherman International 2,069.60
9 96 1LC034546 Sherman International 2,049.12
9 96 1LC034551 Sherman International 2,013.12
9 96 1LC034553 Sherman International 2,110.56
9 96 1LC034567 Sherman International 2,266.56
9 96 2131457 Gobble-Fite Lumber Co 282.80
9 96 58092 Gobble-Fite Lumber Co. 36.43
9 96 58524 Gobble-Fite Lumber Co. 15.00
9 96 2133390 Gobble-Fite Lumber Co. 1,269.35
9 96 734926 RAM Tool & Supply . 163.91
9 96 735788 RAM Tool & Supply 50.69
9 96 743315 RAM Tool & Supply 52.00
9 96 744820 RAM Tool & Supply 7,932.50
10 96 2010130 Varco-Pruden 16,523.00
10 96 2010129 Varco-Pruden 247,385.00
10 96 711265 Ram Tool 50.69
10 96 Fite Building Co. 209,688.30
10 96 2134537 Gobble Fite Lumber 1,010.18
10 96 411508 Koorsen Protection 800.00
10 96 321783 Park Supply 997.57
10 96 321881 Park Supply 550.00
10 96 321864 Park Supply 17,000.00
10 96 314333 Park Supply 532.93
10 96 314670 Park Supply 2,111.12
10 96 319716 Park Supply 22.95
10 96 750578 Ram Tool 413.70
10 96 726779 Ram Tool 558.78
10 96 750579 Ram Tool 438.00
1
<PAGE>
Mo Yr Invoice # Vendor Amount
- -- -- --------- ------ ------
10 96 749719 Ram Tool 1,010.20
10 96 745559 Ram Tool 109.72
10 96 747847 Ram Tool 46.05
10 96 753058 Ram Tool 1,663.20
10 96 726713 Ram Tool 1,976.30
10 96 754009 Ram Tool 268.00
10 96 754008 Ram Tool 648.50
10 96 755687 Ram Tool 343.94
10 96 756299 Ram Tool 313.10
10 96 756300 Ram Tool 86.96
10 96 758027 Ram Tool 301.37
10 96 758026 Ram Tool 403.38
10 96 760490 Ram Tool (313.10)
10 96 763685 Ram Tool 579.73
10 96 1QQ177605 Sherman International 2,330.40
10 96 1QQ178135 Sherman International 173.60
10 96 1QQ094623 Sherman International 8,713.20
10 96 1QQ094624 Sherman International 244.50
10 96 1QQ094672 Sherman International 8,802.00
10 96 1QQ094734 Sherman International 391.20
10 96 1QQ094709 Sherman International 342.30
10 96 1QQ094751 Sherman International 9,975.60
10 96 1QQ094816 Sherman International 10,562.40
10 96 1QQ094837 Sherman International 6,357.00
----------
Do not use
823,726.57
==========
2
<PAGE>
_______________________________________________________________________________
Central CPVC Corp.
Deposits on Fixed Assets - 202D
10/31/96
Conveyors(0016 & 0017)
Eagle Plastic Equip 2,686.00
Eagle Plastic Equip 2,686.00
Do not use 0.00
5,372.00
Engineering for New Bldg RECLASSED TO 201-001
Smith, Grace, & Savage 14,887.75
Smith, Grace, & Savage 7,686.50
Smith, Grace, & Savage 48,122.27
Smith, Grace, & Savage 4,874.50
Smith, Grace, & Savage 487.50
Fite Building 10,000.00
Do not use 0.00
86,058.52
Asphalt Roadway-TPI
Smith, Grace, & Savage 6,837.00
Electrical Sys Add for Molding Mach
Allied Electric 10,500.00
Extruder System for BMII
Southern Power 81,407.29
Southern Power 1,083.35
Do not use 0.00
82,490.64
Electrical Work-Warehouse
Phase II Electric 17,918.00
Phase II Electric 5,684.00
Huntsville Utilities 3,627.00
Do not use 0.00
27,229.00
Captal Labor
Cap labor 15,000.00
BMII Install
Southland Precision 5,478.00
Southland Precision 576.00
Southland Precision 4,960.00
11,014.00
Chop Saw for BMII
OEM 5,125.00
OEM 5,125.00
Do not use 0.00
10,250.00
New Bldg Electric
Mayer Electric 350.97
Do not use 0.00
350.97
Capstan for BMII
Southern Power 21,972.36
Do not use 0.00
21,972.36
Silos for new bldg
Walton-Stout 55,154.00
Do not use 0.00
55,154.00
Weld Steel Tanks
Walton-Stout 28,500.00
Do not use 0.00
28,500.00
Mazak VTC20B Vertical
Drake Atwood 96,480.00
Drake Atwood- Square Transformer 2,000.00
BMSI-Labor to Off Load 1,456.00
Mayer Electric Supply 617.44
3
<PAGE>
_____________________________________________________________________________
Truckers Express- Freight 675.00
Do not use 0.00
101,228.44
Square Wave Tig 355 (Welding Mach)
Standard Welders Supply 4,728.64
Do not use 0.00
4,728.64
Fite Building Co.Inc. - RECLASSED TO 201-001
Fite Building Co.Inc. 30,000.00
Do not use 0.00
30,000.00
Inter Company Activity
Inter-Co. Aug 96 10,000.00
Do not use 0.00
10,000.00
FVB 300 Mill
Drake Atwood 13,310.00
Do not use 0.00
13,310.00
New Building - RECLASSED TO 201-001 865.82
Grainger 1,083.39
Mayer Electric 301.75
Mayer Electric 0.00
Do not use 2,250.96
Incline Conveyors
LaRos Eqipment Co 23,456.00
Mayer Electric 85.03
Mayer Electric 153.65
Do not use 0.00
23,694.68
Pipe Line
Mayer Electric 151.53
Mayer Electric 67.88
Mayer Electric 383.29
Mayer Electric 101.58
Do not use 0.00
704.28
Dock Leveler
Southern Industrial Sales 10,085.00
Computers
Consumer Expo 916.92
947.16
1,864.08
Metal Separator
T&T Technology 6,218.80
Label Printer
MB & Assoc 2,651.58
20 Bushel Trucks (4)
LETCO Distributors 1,154.61
Patterns & Tooling
American Precision 11,656.00
D&S Consulting 2,553.00
Earle M. Jorgensen 505.89
Earle M. Jorgensen 1,118.69
Corr,Stevens,& Fenn 1,242.50
City Clerk 6,480.00
Central Castings 7,455.04
Thompson Plastic 1,845.00
Tooling Reclass 31,848.44
Tooling 79,785.00
Tooling 75,666.36
Do not use 0.00
220,155.92
Total 202D 788,775.48
202D Ledger Bal 10/31/96 787,994.19
Cushion in 202D 781.29
4
<PAGE>
<TABLE>
<CAPTION>
Central CPVC Corp
FY96 Depreciation Schedule Useful Life = 8 or 5 Years
Account 202 Machinery & Equipment Assets cap after FY94 use 5 yr life
MO YR Asset # Cost Description Cost Basis Nov Dec Jan Feb Mar Apr May
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Do not use 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4 92 Various Tools 3,922.00 40.85 40.85 40.85 40.85 40.85 40.85 40.85
7 92 Granulator 600C 19,446.00 202.56 202.56 202.56 202.56 202.56 202.56 202.56
7 92 Portable Chiller 13,541.00 141.05 141.05 141.05 141.05 141.05 141.05 141.05
8 92 Vacuum Loader 1,341.00 13.97 13.97 13.97 13.97 13.97 13.97 13.97
8 92 CM Downstem Ext 58,748.00 611.96 611.96 611.96 611.96 611.96 611.96 611.96
8 92 Powder Loader 2,560.00 26.67 26.67 26.67 26.67 26.67 26.67 26.67
8 92 Vacuum Loader 1,341.00 13.97 13.97 13.97 13.97 13.97 13.97 13.97
9 92 Mon Sys 4102T 49,892.00 519.71 519.71 519.71 519.71 519.71 519.71 519.71
9 92 Adj Ext Pointerr(4) 612.00 6.38 6.38 6.38 6.38 6.38 6.38 6.38
9 92 EQ356650-12 PKD 17,527.00 182.57 182.57 182.57 182.57 182.57 182.57 182.57
9 92 Sept92 Use Tax 2,961.00 30.84 30.84 30.84 30.84 30.84 30.84 30.84
9 92 Acguer Loadmatic 9,945.00 103.59 103.59 103.59 103.59 103.59 103.59 103.59
10 92 HC Inj Mold Mach. 153,242.00 1,596.27 1,596.27 1,596.27 1,596.27 1,596.27 1,596.27 1,596.27
10 92 Oct92 Use Tax 3,890.00 40.52 40.52 40.52 40.52 40.52 40.52 40.52
10 92 HC Inj Mold Mach. 132,789.00 1,383.22 1,383.22 1,383.22 1,383.22 1,383.22 1,383.22 1,383.22
11 92 Shp-Mold Mach. 1,252.00 13.04 13.04 13.04 13.04 13.04 13.04 13.04
12 92 Ratio Loader 1,440.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00
3 93 2 Conveyors 4,018.00 41.85 41.85 41.85 41.85 41.85 41.85 41.85
6 93 Frt Mazak 925.00 9.64 9.64 9.64 9.64 9.64 9.64 9.64
7 93 Mazak VTC-41 93,547.00 974.45 974.45 974.45 974.45 974.45 974.45 974.45
7 93 Mazak QT15NB 91,320.00 951.25 951.25 951.25 951.25 951.25 951.25 951.25
10 93 DP Monitor Sys 15,000.00 156.25 156.25 156.25 156.25 156.25 156.25 156.25
10 93 Granultr & Access 10,600.00 110.42 110.42 110.42 110.42 110.42 110.42 110.42
11 93 Printer 16,445.00 171.30 171.30 171.30 171.30 171.30 171.30 171.30
11 93 Mch. Track 953.00 9.93 9.93 9.93 9.93 9.93 9.93 9.93
11 93 Powder Loader 2,490.00 25.94 25.94 25.94 25.94 25.94 25.94 25.94
11 93 Port Chiller 8,424.00 87.75 87.75 87.75 87.75 87.75 87.75 87.75
11 93 Chiller \a20A0603 8,678.00 90.40 90.40 90.40 90.40 90.40 90.40 90.40
11 93 Twin Screw Extr. 124,960.00 1,301.67 1,301.67 1,301.67 1,301.67 1,301.67 1,301.67 1,301.67
12 93 OEM Vacuum Tank 23,025.00 239.84 239.84 239.84 239.84 239.84 239.84 239.84
12 93 Inj Screw & Tip 6,730.00 70.10 70.10 70.10 70.10 70.10 70.10 70.10
12 93 Pipe Extr. Head 5,857.00 61.01 61.01 61.01 61.01 61.01 61.01 61.01
12 93 Command Knob 147.00 1.53 1.53 1.53 1.53 1.53 1.53 1.53
12 93 Screw Extruder 43,471.00 452.82 452.82 452.82 452.82 452.82 452.82 452.82
1 94 4100T Mon Sys 34,592.00 360.33 360.33 360.33 360.33 360.33 360.33 360.33
1 94 Misc Assets 102.00 1.06 1.06 1.06 1.06 1.06 1.06 1.06
1 94 Circuit Breaker 1,077.00 11.22 11.22 11.22 11.22 11.22 11.22 11.22
2 94 Printer Mod 170I 15,380.00 160.21 160.21 160.21 160.21 160.21 160.21 160.21
2 94 Printer Mod 170I(2) 27,838.00 289.98 289.98 289.98 289.98 289.98 289.98 289.98
2 94 Printer Mod 170I 14,019.00 146.03 146.03 146.03 146.03 146.03 146.03 146.03
2 94 Screw Extruder 37,410.00 389.69 389.69 389.69 389.69 389.69 389.69 389.69
2 94 Screw Extruder 37,410.00 389.69 389.69 389.69 389.69 389.69 389.69 389.69
2 94 Barrel & Screw 6,841.00 71.26 71.26 71.26 71.26 71.26 71.26 71.26
2 94 Spec Char. Proms 1,603.00 16.70 16.70 16.70 16.70 16.70 16.70 16.70
3 94 4100T Mon Sys. 15,147.00 157.78 157.78 157.78 157.78 157.78 157.78 157.78
3 94 Screw Extruder 41,338.00 430.60 430.60 430.60 430.60 430.60 430.60 430.60
3 94 Consulting-NDC 854.00 8.90 8.90 8.90 8.90 8.90 8.90 8.90
4 94 Powder Loader 2,490.00 25.94 25.94 25.94 25.94 25.94 25.94 25.94
4 94 Inj Screw Tip 5,129.00 53.43 53.43 53.43 53.43 53.43 53.43 53.43
4 94 DP-Inj Mold Mach 16,899.00 176.03 176.03 176.03 176.03 176.03 176.03 176.03
5 94 Chrome Mach Prts 1,800.00 18.75 18.75 18.75 18.75 18.75 18.75 18.75
5 94 Storage Silos-2 28,619.00 298.11 298.11 298.11 298.11 298.11 298.11 298.11
6 94 2 Cooling Towers 6,696.00 69.75 69.75 69.75 69.75 69.75 69.75 69.75
6 94 4102T Mon Sys 35,401.00 368.76 368.76 368.76 368.76 368.76 368.76 368.76
6 94 DP Extruder 37,042.00 385.85 385.85 385.85 385.85 385.85 385.85 385.85
6 94 Pumps-Cooling 592.00 6.17 6.17 6.17 6.17 6.17 6.17 6.17
7 94 Hyd Inj Mold Mach 152,091.00 1,584.28 1,584.28 1,584.28 1,584.28 1,584.28 1,584.28 1,584.28
7 94 Chuck Holder 589.00 6.14 6.14 6.14 6.14 6.14 6.14 6.14
7 94 Supermax Milling 9,469.00 98.64 98.64 98.64 98.64 98.64 98.64 98.64
7 94 M-500 Lathe 34,938.00 363.94 363.94 363.94 363.94 363.94 363.94 363.94
7 94 Frt Harrison Lathe 725.00 7.55 7.55 7.55 7.55 7.55 7.55 7.55
7 94 Wire & Conduit 1,150.00 11.98 11.98 11.98 11.98 11.98 11.98 11.98
7 94 Frt - Inj Mold Mach 1,405.00 14.64 14.64 14.64 14.64 14.64 14.64 14.64
8 94 Vac Spray Tanks 100,120.00 1,042.92 1,042.92 1,042.92 1,042.92 1,042.92 1,042.92 1,042.92
8 94 17I Std Printer 19,769.00 205.93 205.93 205.93 205.93 205.93 205.93 205.93
8 94 Frt Machine Trans 987.00 10.28 10.28 10.28 10.28 10.28 10.28 10.28
8 94 Hopper & Filter 1,740.00 18.13 18.13 18.13 18.13 18.13 18.13 18.13
8 94 Sound Enclosure 5,775.00 60.16 60.16 60.16 60.16 60.16 60.16 60.16
8 94 Screw Extruder 37,412.00 389.71 389.71 389.71 389.71 389.71 389.71 389.71
8 94 DP Extruder 37,042.00 385.85 385.85 385.85 385.85 385.85 385.85 385.85
8 94 DP Silo 57,238.00 596.23 596.23 596.23 596.23 596.23 596.23 596.23
8 94 Start NDC Equip 798.00 8.31 8.31 8.31 8.31 8.31 8.31 8.31
8 94 DP Extruder 36,672.00 382.00 382.00 382.00 382.00 382.00 382.00 382.00
8 94 Hoppers-2 454.00 4.73 4.73 4.73 4.73 4.73 4.73 4.73
8 94 Monitoring System 16,047.00 167.16 167.16 167.16 167.16 167.16 167.16 167.16
8 94 Monitoring System 16,047.00 167.16 167.16 167.16 167.16 167.16 167.16 167.16
8 94 DP Extruder 36,672.00 382.00 382.00 382.00 382.00 382.00 382.00 382.00
8 94 H300-32 Inj Mold 18,272.00 190.33 190.33 190.33 190.33 190.33 190.33 190.33
8 94 Various Fittings 744.00 7.75 7.75 7.75 7.75 7.75 7.75 7.75
9 94 Rigger Rentals 1,408.00 14.67 14.67 14.67 14.67 14.67 14.67 14.67
9 94 H300-32 Inj Mold 164,448.00 1,713.00 1,713.00 1,713.00 1,713.00 1,713.00 1,713.00 1,713.00
9 94 2 Storage Silos 9,540.00 99.38 99.38 99.38 99.38 99.38 99.38 99.38
9 94 Grinder 2,045.00 21.30 21.30 21.30 21.30 21.30 21.30 21.30
9 94 Yam Lathe 6,000.00 62.50 62.50 62.50 62.50 62.50 62.50 62.50
9 94 Frt-MM7 Delivery 1,288.00 13.42 13.42 13.42 13.42 13.42 13.42 13.42
9 94 Mod Chg Printers 8,920.00 92.92 92.92 92.92 92.92 92.92 92.92 92.92
9 94 Rigger Rentals 1,128.00 11.75 11.75 11.75 11.75 11.75 11.75 11.75
9 94 Screw Extruder 37,412.00 389.71 389.71 389.71 389.71 389.71 389.71 389.71
9 94 4 Videojet Printers 38,624.00 402.33 402.33 402.33 402.33 402.33 402.33 402.33
9 94 Rigger Rentals 1,128.00 11.75 11.75 11.75 11.75 11.75 11.75 11.75
9 94 Frt-Machinery 762.00 7.94 7.94 7.94 7.94 7.94 7.94 7.94
10 94 4100 Monitor Sys 75,008.00 781.33 781.33 781.33 781.33 781.33 781.33 781.33
10 94 2 Conveyors 4,616.00 48.08 48.08 48.08 48.08 48.08 48.08 48.08
11 94 Loading System 13,013.00 216.88 216.88 216.88 216.88 216.88 216.88 216.88
12 94 Cntrl Loading Sys 26,027.00 433.78 433.78 433.78 433.78 433.78 433.78 433.78
12 94 Cntrl Loading Sys 4,338.00 72.30 72.30 72.30 72.30 72.30 72.30 72.30
1 95 Cress Heat Treat 500.00 8.33 8.33 8.33 8.33 8.33 8.33 8.33
2 95 Heat Sealer 735.00 12.25 12.25 12.25 12.25 12.25 12.25 12.25
2 95 Rotary Travers(2) 319.00 5.32 5.32 5.32 5.32 5.32 5.32 5.32
3 95 Pump #6010883 439.00 7.32 7.32 7.32 7.32 7.32 7.32 7.32
3 95 Lathe 2,000.00 33.33 33.33 33.33 33.33 33.33 33.33 33.33
3 95 Bridgeport Mill 8,000.00 133.33 133.33 133.33 133.33 133.33 133.33 133.33
4 95 Band Saw 5,460.00 91.00 91.00 91.00 91.00 91.00 91.00 91.00
5 95 Table Conveyor 335.00 5.58 5.58 5.58 5.58 5.58 5.58 5.58
5 95 Sizing Rolls 5,042.00 84.03 84.03 84.03 84.03 84.03 84.03 84.03
5 95 4 Meg Memory Md 1,520.00 25.33 25.33 25.33 25.33 25.33 25.33 25.33
5 95 Bar-Brackett 506.00 8.43 8.43 8.43 8.43 8.43 8.43 8.43
5 95 Draw Bar-Trolley 2,478.00 41.30 41.30 41.30 41.30 41.30 41.30 41.30
5 95 Misc Assets 200.00 3.33 3.33 3.33 3.33 3.33 3.33 3.33
5 95 Poly Rod 42.00 0.70 0.70 0.70 0.70 0.70 0.70 0.70
6 95 Lathe-Victor 8,216.00 136.93 136.93 136.93 136.93 136.93 136.93 136.93
6 95 Cylinders 267.00 4.45 4.45 4.45 4.45 4.45 4.45 4.45
7 95 Fume Absorbers 2,413.00 40.22 40.22 40.22 40.22 40.22 40.22 40.22
9 95 MD-Mill-Mod 13,645.00 227.42 227.42 227.42 227.42 227.42 227.42 227.42
9 95 Sony Millman 1,505.00 25.08 25.08 25.08 25.08 25.08 25.08 25.08
10 95 Load Sys Expan. 5,881.00 98.02 98.02 98.02 98.02 98.02 98.02 98.02
10 95 Lathe-Clausing 31,425.00 523.75 523.75 523.75 523.75 523.75 523.75 523.75
11 95 x 170I Printers-2 pcs. 30,669.00 511.15 511.15 511.15 511.15 511.15 511.15 511.15
12 95 x Port Chiller 8,856.00 0.00 147.60 147.60 147.60 147.60 147.60 147.60
11 95 x Wash Unit w/cnvyr 30,365.00 506.08 506.08 506.08 506.08 506.08 506.08 506.08
11 95 x 2nd Rinse Station 16,700.00 278.33 278.33 278.33 278.33 278.33 278.33 278.33
12 95 Y 15 HP Compressor 3,033.13 0.00 50.55 50.55 50.55 50.55 50.55 50.55
2 96 Y Twin Screw Extr. 122,023.38 0.00 0.00 0.00 2,033.72 2,033.72 2,033.72 2,033.72
2 96 Y TP88 Line Equip 58,770.00 0.00 0.00 0.00 979.50 979.50 979.50 979.50
2 96 Y 5 Ton Chiller 9,039.80 0.00 0.00 0.00 150.66 150.66 150.66 150.66
3 96 Z Clark-Forklift 19,652.00 0.00 0.00 0.00 0.00 327.53 327.53 327.53
3 96 Y Granulator 13,214.00 0.00 0.00 0.00 0.00 220.23 220.23 220.23
3 96 Y Clausing Lathe 18,475.90 0.00 0.00 0.00 0.00 307.93 307.93 307.93
3 96 Y Addns to MM7&8 1,026.48 0.00 0.00 0.00 0.00 17.11 17.11 17.11
3 96 Y Mach Shop Mill 13,500.00 0.00 0.00 0.00 0.00 225.00 225.00 225.00
3 96 Y Grinder 22,000.00 0.00 0.00 0.00 0.00 366.67 366.67 366.67
3 96 Y Granulator 10,899.05 0.00 0.00 0.00 0.00 181.65 181.65 181.65
5 96 Y Inj Mold Mach (120) 208,626.50 0.00 0.00 0.00 0.00 0.00 0.00 3,477.11
5 96 Y Inj Mold Mach (121) 217,126.50 0.00 0.00 0.00 0.00 0.00 0.00 3,618.78
5 96 Y Mold Temp Units 4,410.00 0.00 0.00 0.00 0.00 0.00 0.00 73.50
5 96 Y Cooling Tower 2,064.96 0.00 0.00 0.00 0.00 0.00 0.00 34.42
5 96 Y Machining Center 126,960.00 0.00 0.00 0.00 0.00 0.00 0.00 2,116.00
5 96 Y Air Hopper Dryer 1,630.00 0.00 0.00 0.00 0.00 0.00 0.00 27.17
5 96 Y MM10/11 Line Equip 5,710.00 0.00 0.00 0.00 0.00 0.00 0.00 95.17
5 96 Y Barrel Cooling-MM10 7,956.26 0.00 0.00 0.00 0.00 0.00 0.00 132.60
5 96 Y Barrel Cooling-MM11 7,912.56 0.00 0.00 0.00 0.00 0.00 0.00 131.88
6 96 Y Mazak Lathe 140,186.70 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6 96 Y Tooling - Lathe 3,194.84 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6 96 Y CM-55 Screw Extr-0009 120,772.37
6 96 Y BM II Spray Cool Tank 21,395.00
6 96 Y Del Optical Comparator 17,830.00
-------------------------------------------------------------------------------------
3,636,106.43 26,844.43 27,042.58 27,042.58 30,206.47 31,852.59 31,852.59 41,559.20
=====================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Central CPVC Corp
FY96 Depreciation Schedule
Account 202 Machinery & Equipment Deprec
MO YR Asset # Cost Description Jun Jul Aug Sep Oct NBV 10/31/96 Prior Yrs
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Do not use 0.00 0.00 0.00 0.00 0.00 0.00
4 92 Various Tools 40.85 40.85 40.85 40.85 40.85 1,715.87 1,225.63
7 92 Granulator 600C 202.56 202.56 202.56 202.56 202.56 8,507.62 6,076.88
7 92 Portable Chiller 141.05 141.05 141.05 141.05 141.05 5,924.18 4,231.57
8 92 Vacuum Loader 13.97 13.97 13.97 13.97 13.97 586.68 419.07
8 92 CM Downstem Ext 611.96 611.96 611.96 611.96 611.96 25,702.25 18,358.75
8 92 Powder Loader 26.67 26.67 26.67 26.67 26.67 1,120.00 800.00
8 92 Vacuum Loader 13.97 13.97 13.97 13.97 13.97 586.68 419.07
9 92 Mon Sys 4102T 519.71 519.71 519.71 519.71 519.71 21,827.75 15,591.25
9 92 Adj Ext Pointerr 6.38 6.38 6.38 6.38 6.38 267.75 191.25
9 92 EQ356650-12 PKD 182.57 182.57 182.57 182.57 182.57 7,668.05 5,477.20
9 92 Sept92 Use Tax 30.84 30.84 30.84 30.84 30.84 1,295.43 925.32
9 92 Acguer Loadmatic 103.59 103.59 103.59 103.59 103.59 4,350.93 3,107.82
10 92 HC Inj Mold Mach 1,596.27 1,596.27 1,596.27 1,596.27 1,596.27 67,043.37 47,888.13
10 92 Oct92 Use Tax 40.52 40.52 40.52 40.52 40.52 1,701.87 1,215.63
10 92 HC Inj Mold Mach. 1,382.22 1.382.22 1,382.22 1,382.22 1,382.22 58,095.18 41,496.57
11 92 Shp-Mold Mach. 13.04 13.04 13.04 13.04 13.04 704.25 234.75
12 92 Ratio Loader 15.00 15.00 15.00 15.00 15.00 810.00 270.00
3 93 2 Conveyors 41.85 41.85 41.85 41.85 41.85 2,260.12 753.38
6 93 Frt Mazak 9.64 9.64 9.64 9.64 9.64 520.31 173.44
7 93 Mazak VTC-41 974.45 974.45 974.45 974.45 974.45 52,620.18 17,540.07
7 93 Mazak QT15NB 951.25 951.25 951.25 951.25 951.25 51,367.50 17,122.50
10 93 DP Monitor Sys 156.25 156.25 156.25 156.25 156.25 8,437.50 2,812.50
10 93 Granultr & Access 110.42 110.42 110.42 110.42 110.42 5,962.50 1,987.50
11 93 Printer "16,445.00 171.30 171.30 171.30 171.30 171.30 11,305.94 1,027.81
11 93 Mch. Track 9.93 9.93 9.93 9.93 9.93 655.19 59.56
11 93 Powder Loader 25.94 25.94 25.94 25.94 25.94 1,711.87 155.63
11 93 Port Chiller 87.75 87.75 87.75 87.75 87.75 5,791.50 526.50
11 93 Chiller \a20A0603 90.40 90.40 90.40 90.40 90.40 5,966.12 542.38
11 93 Twin Screw Extr. 1,301.67 1,301.67 1,301.67 1,301.67 1,301.67 85,910.00 7,810.00
12 93 OEM Vacuum Tank 239.84 239.84 239.84 239.84 239.84 15,829.69 1,439.06
12 93 Inj Screw & Tip 70.10 70.10 70.10 70.10 70.10 4,626.87 420.63
12 93 Pipe Extr. Head 61.01 61.01 61.01 61.01 61.01 4,026.69 366.06
12 93 Command Knob 1.53 1.53 1.53 1.53 1.53 101.06 9.19
12 93 Screw Extruder 452.82 452.82 452.82 452.82 452.82 29,886.31 2,716.94
1 94 4100T Mon Sys 360.33 360.33 360.33 360.33 360.33 23,782.00 2,162.00
1 94 Misc Assets 1.06 1.06 1.06 1.06 1.06 70.12 6.38
1 94 Circuit Breaker 11.22 11.22 11.22 11.22 11.22 740.44 67.31
2 94 Printer Mod 170I 160.21 160.21 160.21 160.21 160.21 10,573.75 961.25
2 94 Printer Mod 170I(2) 289.98 289.98 289.98 289.98 289.98 19,138.62 1,739.88
2 94 Printer Mod 170I 146.03 146.03 146.03 146.03 146.03 9,638.06 876.19
2 94 Screw Extruder 389.69 389.69 389.69 389.69 389.69 25,719.37 2,338.13
2 94 Screw Extruder 389.69 389.69 389.69 389.69 389.69 25,719.37 2,338.13
2 94 Barrel & Screw 71.26 71.26 71.26 71.26 71.26 4,703.19 427.56
2 94 Spec Char. Proms 16.70 16.70 16.70 16.70 16.70 1,102.06 100.19
3 94 4100T Mon Sys. 157.78 157.78 157.78 157.78 157.78 10,413.56 946.69
3 94 Screw Extruder 430.60 430.60 430.60 430.60 430.60 28,419.87 2,583.63
3 94 Consulting-NDC 8.90 8.90 8.90 8.90 8.90 587.12 53.38
4 94 Powder Loader 25.94 25.94 25.94 25.94 25.94 1,711.87 155.63
4 94 Inj Screw Tip 53.43 53.43 53.43 53.43 53.43 3,526.19 320.56
4 94 DP-Inj Mold Mach 176.03 176.03 176.03 176.03 176.03 11,618.06 1,056.19
5 94 Chrome Mach Prts 18.75 18.75 18.75 18.75 18.75 1,237.50 112.50
5 94 Storage Silos-2 298.11 298.11 298.11 298.11 298.11 19,675.56 1,788.69
6 94 2 Cooling Towers 69.75 69.75 69.75 69.75 69.75 4,603.50 418.50
6 94 4102T Mon Sys 368.76 368.76 368.76 368.76 368.76 24,338.19 2,212.56
6 94 DP Extruder 385.85 385.85 385.85 385.85 385.85 25,466.37 2,315.13
6 94 Pumps-Cooling 6.17 6.17 6.17 6.17 6.17 407.00 37.00
7 94 Hyd Inj Mold Mach 1,584.28 1,584.28 1,584.28 1,584.28 1,584.28 104,562.56 9,505.69
7 94 Chuck Holder 6.14 6.14 6.14 6.14 6.14 404.94 36.81
7 94 Supermax Milling 98.64 98.64 98.64 98.64 98.64 6,509.94 591.81
7 94 M-500 Lathe 363.94 363.94 363.94 363.94 363.94 24,019.87 2,183.63
7 94 Frt Harrison Lathe 7.55 7.55 7.55 7.55 7.55 498.44 45.31
7 94 Wire & Conduit 11.98 11.98 11.98 11.98 11.98 790.62 71.88
7 94 Frt - Inj Mold Mach 14.64 14.64 14.64 14.64 14.64 965.94 87.81
8 94 Vac Spray Tanks 1,042.92 1,042.92 1,042.92 1,042.92 1,042.92 68,832.50 6,257.50
8 94 17I Std Printer 205.93 205.93 205.93 205.93 205.93 13,591.19 1,235.56
8 94 Frt Machine Trans 10.28 10.28 10.28 10.28 10.28 678.56 61.69
8 94 Hopper & Filter 18.13 18.13 18.13 18.13 18.13 1,196.25 108.75
8 94 Sound Enclosure 60.16 60.16 60.16 60.16 60.16 3,970.31 360.94
8 94 Screw Extruder 389.71 389.71 389.71 389.71 389.71 25,720.75 2,338.25
8 94 DP Extruder 385.85 385.85 385.85 385.85 385.85 25,466.37 2,315.13
8 94 DP Silo 596.23 596.23 596.23 596.23 596.23 39,351.12 3,577.38
8 94 Start NDC Equip 8.31 8.31 8.31 8.31 8.31 548.62 49.88
8 94 DP Extruder 382.00 382.00 382.00 382.00 382.00 25,212.00 2,292.00
8 94 Hoppers-2 4.73 4.73 4.73 4.73 4.73 312.12 28.38
8 94 Monitoring System 167.16 167.16 167.16 167.16 167.16 11,032.31 1,002.94
8 94 Monitoring System 167.16 167.16 167.16 167.16 167.16 11,032.31 1,002.94
8 94 DP Extruder 382.00 382.00 382.00 382.00 382.00 25,212.00 2,292.00
8 94 H300-32 Inj Mold 190.33 190.33 190.33 190.33 190.33 12,562.00 1,142.00
8 94 Various Fittings 7.75 7.75 7.75 7.75 7.75 511.50 46.50
9 94 Rigger Rentals 14.67 14.67 14.67 14.67 14.67 968.00 88.00
9 94 H300-32 Inj Mold 1,713.00 1,713.00 1,713.00 1,713.00 1,713.00 113,058.00 10,278.00
9 94 2 Storage Silos 99.38 99.38 99.38 99.38 99.38 6,558.75 596.25
9 94 Grinder 21.30 21.30 21.30 21.30 21.30 1,405.94 127.81
<PAGE>
9 94 Yam Lathe 62.50 62.50 62.50 62.50 62.50 4,125.00 375.00
9 94 Frt-MM7 Delivery 13.42 13.42 13.42 13.42 13.42 885.50 80.50
9 94 Mod Chg Printers 92.92 92.92 92.92 92.92 92.92 6,132.50 557.50
9 94 Rigger Rentals 11.75 11.75 11.75 11.75 11.75 775.50 70.50
9 94 Screw Extruder 389.71 389.71 389.71 389.71 389.71 25,720.75 2,338.25
9 94 4 Videojet Printers 402.33 402.33 402.33 402.33 402.33 26,554.00 2,414.00
9 94 Rigger Rentals 11.75 11.75 11.75 11.75 11.75 775.50 70.50
9 94 Frt-Machinery 7.94 7.94 7.94 7.94 7.94 523.87 47.63
10 94 4100 Monitor Sys 781.33 781.33 781.33 781.33 781.33 51,568.00 4,688.00
10 94 2 Conveyors 48.08 48.08 48.08 48.08 48.08 3,173.50 288.50
11 94 Loading System 216.88 216.88 216.88 216.88 216.88 7,807.80 0.00
12 94 Cntrl Loading Sys 433.78 433.78 433.78 433.78 433.78 16,049.98 0.00
12 94 Cntrl Loading Sys 72.30 72.30 72.30 72.30 72.30 2,675.10 0.00
1 95 Cress Heat Treat 8.33 8.33 8.33 8.33 8.33 316.67 0.00
2 95 Heat Sealer 12.25 12.25 12.25 12.25 12.25 477.75 0.00
2 95 Rotary Travers(2) 5.32 5.32 5.32 5.32 5.32 207.35 0.00
3 95 Pump #6010883 7.32 7.32 7.32 7.32 7.32 292.67 0.00
3 95 Lathe 33.33 33.33 33.33 33.33 33.33 1,333.33 0.00
3 95 Bridgeport Mill 133.33 133.33 133.33 133.33 133.33 5,333.33 0.00
4 95 Band Saw 91.00 91.00 91.00 91.00 91.00 3,731.00 0.00
5 95 Table Conveyor 5.58 5.58 5.58 5.58 5.58 234.50 0.00
5 95 Sizing Rolls 84.03 84.03 84.03 84.03 84.03 3,529.40 0.00
5 95 4 Meg Memory Md 25.33 25.33 25.33 25.33 25.33 1,064.00 0.00
5 95 Bar-Brackett 8.43 8.43 8.43 8.43 8.43 354.20 0.00
5 95 Draw Bar-Trolley 41.30 41.30 41.30 41.30 41.30 1,734.60 0.00
5 95 Misc Assets 3.33 3.33 3.33 3.33 3.33 140.00 0.00
5 95 Poly Rod 0.70 0.70 0.70 0.70 0.70 29.40 0.00
6 95 Lathe-Victor 136.93 136.93 136.93 136.93 136.93 5,888.13 0.00
6 95 Cylinders 4.45 4.45 4.45 4.45 4.45 191.35 0.00
7 95 Fume Absorbers 40.22 40.22 40.22 40.22 40.22 1,769.53 0.00
9 95 MD-Mill-Mod 227.42 227.42 227.42 227.42 227.42 10,461.17 0.00
9 95 Sony Millman 25.08 25.08 25.08 25.08 25.08 1,153.83 0.00
10 95 Load Sys Expan. 98.02 98.02 98.02 98.02 98.02 4,606.78 0.00
10 95 Lathe-Clausing 523.75 523.75 523.75 523.75 523.75 24,267.08 0.00
11 95 x 170I Printers-2 pcs. 511.15 511.15 511.15 511.15 511.15 24,535.20 0.00
12 95 x Port Chiller 147.60 147.60 147.60 147.60 147.60 7,232.40 0.00
11 95 x Wash Unit w/cnvyr 506.80 506.80 506.80 506.80 506.80 24,292.00 0.00
11 95 x 2nd Rinse Station 278.33 278.33 278.33 278.33 278.33 13,360.00 0.00
12 95 Y 15 HP Compressor 50.55 50.55 50.55 50.55 50.55 2,477.06 0.00
2 96 Y Twin Screw Extr. 2,033.72 2,033.72 2,033.72 2,033.72 2,033.72 103,719.87 0.00
2 96 Y TP88 Line Equip 979.50 979.50 979.50 979.50 979.50 49,954.50 0.00
2 96 Y 5 Ton Chiller 150.66 150.66 150.66 150.66 150.66 7,683.83 0.00
3 96 Z Clark-Forklift 327.53 327.53 327.53 327.53 327.53 17,031.73 0.00
3 96 Y Granulator 220.23 220.23 220.23 220.23 220.23 11,452.13 0.00
3 96 Y Clausing Lathe 307.93 307.93 307.93 307.93 307.93 16,012.45 0.00
3 96 Y Addns to MM7&8 17.11 17.11 17.11 17.11 17.11 889.62 0.00
3 96 Y Mach Shop Mill 225.00 225.00 225.00 225.00 225.00 11,700.00 0.00
3 96 Y Grinder 366.67 366.67 366.67 366.67 366.67 19,066.67 0.00
3 96 Y Granulator 181.65 181.65 181.65 181.65 181.65 9,445.84 0.00
5 96 Y Inj Mold Mach (120) 3,477.11 3,477.11 3,477.11 3,477.11 3,477.11 187,763.85 0.00
5 96 Y Inj Mold Mach (121) 3,618.78 3,618.78 3,618.78 3,618.78 3,618.78 195,413.85 0.00
5 96 Y Mold Temp Units 73.50 73.50 73.50 73.50 73.50 3,969.00 0.00
5 96 Y Cooling Tower 34.42 34.42 34.42 34.42 34.42 1,858.46 0.00
5 96 Y Machining Center 2,116.00 2,116.00 2,116.00 2,116.00 2,116.00 114,264.00 0.00
5 96 Y Air Hopper Dryer 27.17 27.17 27.17 27.17 27.17 1,467.00 0.00
5 96 Y MM10/11 Line Equip 95.17 95.17 95.17 95.17 95.17 5,139.00 0.00
5 96 Y Barrel Cooling-MM10 132.60 132.60 132.60 132.60 132.60 7,160.63 0.00
5 96 Y Barrel Cooling-MM11 131.88 131.88 131.88 131.88 131.88 7,121.30 0.00
6 96 Y Mazak Lathe 2,336.45 2,336.45 2,336.45 2,336.45 2,336.45 128,504.48 0.00
6 96 Y Tooling - Lathe 53.25 53.25 53.25 53.25 53.25 2,928.60 0.00
6 96 Y CM-55 Screw Extr-0009 2,012.87 2,012.87 2,012.87 2,012.87 2,012.87 110,708.01 0.00
6 96 Y BM II Spray Cool Tank 356.58 356.58 356.58 356.58 356.58 19,612.08 0.00
6 96 Y Del Optical Comparator 297.17 297.17 297.17 297.17 297.17 16,344.17 0.00
-----------------------------------------------------------------------------------
46,615.52 46,615.52 46,615.52 46,615.52 46,615.52 2,608,042.69 285,064.74
===================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Central CPVC Corp
FY96 Depreciation Schedule
Account 202 Machinery & Equipment Deprec Deprec
MO YR Asset # Cost Description 10/31/95 10/31/96
<S> <C> <C> <C> <C> <C> <C>
Do not use 0.00
4 92 Various Tools 490.25 490.25
7 92 Granulator 600C 2,430.75 2,430.75
7 92 Portable Chiller 1,692.63 1,692.63
8 92 Vacuum Loader 167.63 167.63
8 92 CM Downstem Ext 7,343.50 7,343.50
8 92 Powder Loader 320.00 320.00
8 92 Vacuum Loader 167.64 167.64
9 92 Mon Sys 4102T 6,236.50 6,236.50
9 92 Adj Ext Pointerr 76.50 76.50
9 92 EQ356650-12 PKD 2,190.88 2,190.88
9 92 Sept92 Use Tax 370.13 370.13
9 92 Acguer Loadmatic 1,243.13 1,243.13
10 92 HC Inj Mold Mach 19,155.25 19,155.25
10 92 Oct92 Use Tax 486.25 486.25
10 92 HC Inj Mold Mach. 16,598.63 16,598.63
11 92 Shp-Mold Mach. 156.50 156.50
12 92 Ratio Loader 180.00 180.00
3 93 2 Conveyors 502.25 502.25
6 93 Frt Mazak 115.63 115.63
7 93 Mazak VTC-41 11,693.38 11,693.38
7 93 Mazak QT15NB 11,415.00 11,415.00
10 93 DP Monitor Sys 1,875.00 1,875.00
10 93 Granultr & Access 1,325.00 1,325.00
11 93 Printer "16,445.00 2,055.63 2,055.63
11 93 Mch. Track 119.13 119.13
11 93 Powder Loader 311.25 311.25
11 93 Port Chiller 1,053,00 1,053.00
11 93 Chiller \a20A0603 1,084.75 1,084.75
11 93 Twin Screw Extr. 15,620.00 15,620.00
12 93 OEM Vacuum Tank 2,878.13 2,878.13
12 93 Inj Screw & Tip 841.25 841.25
12 93 Pipe Extr. Head 732.13 732.13
12 93 Command Knob 18.38 18.38
12 93 Screw Extruder 5,433.88 5,433.88
1 94 4100T Mon Sys 4,324.00 4,324.00
1 94 Misc Assets 12.75 12.75
1 94 Circuit Breaker 134.63 134.63
2 94 Printer Mod 170I 1,922.50 1,922.50
2 94 Printer Mod 170I(2) 3,479.75 3,479.75
2 94 Printer Mod 170I 1,752.38 1,752.38
2 94 Screw Extruder 4,676.25 4,676.25
2 94 Screw Extruder 4,676.25 4,676.25
2 94 Barrel & Screw 855.13 855.13
2 94 Spec Char. Proms 200.38 200.38
3 94 4100T Mon Sys. 1,893.38 1,893.38
3 94 Screw Extruder 5,167.25 5,167.25
3 94 Consulting-NDC 106.75 106.75
4 94 Powder Loader 311.25 311.25
4 94 Inj Screw Tip 641.13 641.13
4 94 DP-Inj Mold Mach 2,112.38 2,112.38
5 94 Chrome Mach Prts 225.00 225.00
5 94 Storage Silos-2 3,577.38 3,577.38
6 94 2 Cooling Towers 837.00 837.00
6 94 4102T Mon Sys 4,425.13 4,425.13
6 94 DP Extruder 4,630.25 4,630.25
6 94 Pumps-Cooling 74.00 74.00
7 94 Hyd Inj Mold Mach 19,011.38 19,011.38
7 94 Chuck Holder 73.63 73.63
7 94 Supermax Milling 1,183.63 1,183.63
7 94 M-500 Lathe 4,367.25 4,367.25
7 94 Frt Harrison Lathe 90.63 90.63
7 94 Wire & Conduit 143.75 143.75
7 94 Frt - Inj Mold Mach 175.63 175.63
8 94 Vac Spray Tanks 12,515.00 12,515.00
8 94 17I Std Printer 2,471.13 2,471.13
8 94 Frt Machine Trans 123.38 123.38
8 94 Hopper & Filter 217.50 217.50
8 94 Sound Enclosure 721.88 721.88
8 94 Screw Extruder 4,676.50 4,676.50
8 94 DP Extruder 4,630.25 4,630.25
8 94 DP Silo 7,154.75 7,154.75
8 94 Start NDC Equip 99.75 99.75
8 94 DP Extruder 4,584.00 4,584.00
8 94 Hoppers-2 56.75 56.75
8 94 Monitoring System 2,005.88 2,005.88
8 94 Monitoring System 2,005.88 2,005.88
8 94 DP Extruder 4,584.00 4,584.00
8 94 H300-32 Inj Mold 2,284.00 2,284.00
8 94 Various Fittings 93.00 93.00
9 94 Rigger Rentals 176.00 176.00
9 94 H300-32 Inj Mold 20,556.00 20,556.00
9 94 2 Storage Silos 1,192.50 1,192.50
9 94 Grinder 255.63 255.63
<PAGE>
9 94 Yam Lathe 750.00 750.00
9 94 Frt-MM7 Delivery 161.00 161.00
9 94 Mod Chg Printers 1,115.00 1,115.00
9 94 Rigger Rentals 141.00 141.00
9 94 Screw Extruder 4,676.50 4,676.50
9 94 4 Videojet Printers 4,828.00 4,828.00
9 94 Rigger Rentals 141.00 141.00
9 94 Frt-Machinery 95.25 95.25
10 94 4100 Monitor Sys 9,376.00 9,376.00
10 94 2 Conveyors 577.00 577.00
11 94 Loading System 2,602.60 2,602.60
12 94 Cntrl Loading Sys 4,771.62 5,205.40
12 94 Cntrl Loading Sys 795.30 867.60
1 95 Cress Heat Treat 83.33 100.00
2 95 Sealer 110.25 147.00
2 95 Rotary Travers(2) 47.85 63.80
3 95 Pump #6010883 58.53 87.80
3 95 Lathe 266.67 400.00
3 95 Bridgeport Mill 1,066.67 1,600.00
4 95 Band Saw 637.00 1,092.00
5 95 Table Conveyor 33.50 67.00
5 95 Sizing Rolls 504.20 1,008.40
5 95 4 Meg Memory Md 152.00 304.00
5 95 Bar-Brackett 50.60 101.20
5 95 Draw Bar-Trolley 247.80 495.60
5 95 Misc Assets 20.00 40.00
5 95 Poly Rod 4.20 8.40
6 95 Lathe-Victor 684.67 1,643.20
6 95 Cylinders 22.25 53.40
7 95 Fume Absorbers 160.87 482.60
9 95 MD-Mill-Mod 454.83 2,729.00
9 95 Sony Millman 50.17 301.00
10 95 Load Sys Expan. 98.02 1,176.20
10 95 Lathe-Clausing 872.92 6,285.00
11 95 x 170* Printers- 2 pcs. 0.00 6,133.80
12 95 x Port Chiller 0.00 1,623.60
11 95 x Wash Unit w/ cnvyr 0.00 6,073.00
11 95 x 2nd Rinse Station 0.00 3,340.00
12 95 Y 15 HP Compressor 0.00 556.07
2 96 Y Twin Screw Extr. 0.00 18,303.51
2 96 Y TP88 Line Equip 0.00 8,815.50
2 96 Y 5 Ton Chiller 0.00 1,355.97
3 96 Z Clark-Forklift 0.00 2,620.27
3 96 Y Granulator 0.00 1,761.87
3 96 Y Clausing Lathe 0.00 2,463.45
3 96 Y Addns to MM7&8 0.00 136.86
3 96 Y Mach Shop Mill 0.00 1,800.00
3 96 Y Grinder 0.00 2,933.33
3 96 Y Granulator 0.00 1,453.21
5 96 Y Inj Mold Mach (120) 0.00 20,862.65
5 96 Y Inj Mold Mach (121) 0.00 21,712.65
5 96 Y Mold Temp Units 0.00 441.00
5 96 Y Cooling Tower 0.00 206.50
5 96 Y Machining Center 0.00 12,696.00
5 96 Y Air Hopper Dryer 0.00 163.00
5 96 Y MM10/11 Line Equip 0.00 571.00
5 96 Y Barrel Cooling-MM10 0.00 795.63
5 96 Y Barrel Cooling-MM11 0.00 791.26
6 96 Y Mazak Lathe 0.00 11,682.23
6 96 Y Tooling - Lathe 0.00 266.24
6 96 Y CM-55 Screw Extr-0009 0.00 10,064.36
6 96 Y BM II Spray Cool Tank 0.00 1,782.92
6 96 Y Del Optical Comparator 0.00 1,485.83
----------------------------
293,520.98 449,478.02
============================
</TABLE>
<PAGE>
Central CPVC Corporation
FY96 Depreciation Schedule
Account 203 - Tools, Dies & Patterns
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date Asset # Cost Center Description Cost Basis Nov Dec Jan Feb Mar
Do not use
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 92 3.70501E+11 Var. Tools @Thompson 6,816.00 142.00 142.00 142.00 142.00 142.00
6 92 3.70501E+11 Tools and Molds 350,146.00 7,294.71 7,294.71 7,294.71 7,294.71 7,294.71
7 92 3.70501E+11 Var. Machine Parts 1,455.00 30.31 30.31 30.31 30.31 30.31
8 92 3.70501E+11 1" 90 deg elbow 7,106.00 148.04 148.04 148.04 148.04 148.04
8 92 3.70501E+11 1" Tee 7,682.00 160.04 160.04 160.04 160.04 160.04
8 92 3.70501E+11 1.5" Tee 10,136.00 211.17 211.17 211.17 211.17 211.17
9 92 3.70002E+11 Use Tax Sept92 5,750.00 119.79 119.79 119.79 119.79 119.79
10 92 3.70501E+11 2" Tee 8,189.00 170.60 170.60 170.60 170.60 170.60
10 92 3.70501E+11 2" cap 5,465.00 113.85 113.85 113.85 113.85 113.85
10 92 3.70501E+11 1" Cap 6,885.00 143.44 143.44 143.44 143.44 143.44
10 92 3.70501E+11 2" Coupling 7,983.00 166.31 166.31 166.31 166.31 166.31
10 92 3.70501E+11 1.5" 90 deg elbow 8,787.00 183.06 183.06 183.06 183.06 183.06
10 92 3.70501E+11 Refurb 1X1X3/4 Tee 8,667.00 180.56 180.56 180.56 180.56 180.56
10 92 3.70501E+11 Refurb 3/4 Tee 7,649.00 159.35 159.35 159.35 159.35 159.35
10 92 3.70501E+11 1.5" 45 deg elbow 8,694.00 181.13 181.13 181.13 181.13 181.13
10 92 3.70501E+11 3/4" 90 deg elbow 8,898.00 185.38 185.38 185.38 185.38 185.38
10 92 3.70501E+11 1.5" cap 7,151.00 148.98 148.98 148.98 148.98 148.98
10 92 3.70501E+11 1.5" Coupling 7,759.00 161.65 161.65 161.65 161.65 161.65
10 92 3.70501E+11 1" Coupling 12,889.00 268.52 268.52 268.52 268.52 268.52
10 92 3.70501E+11 1 1/4' 90 deg elbow 8,272.00 172.33 172.33 172.33 172.33 172.33
10 92 3.70002E+11 Use Tax Oct92 1,609.00 33.52 33.52 33.52 33.52 33.52
11 92 3.72773E+11 Refurb 1 1/4 X 1 RT 8,926.00 185.96 185.96 185.96 185.96 185.96
11 92 3.72773E+11 3/4 Coupling 8,933.00 186.10 186.10 186.10 186.10 186.10
1 93 3.72773E+11 Refurb 1X3/4 Bushing 5,064.00 105.50 105.50 105.50 105.50 105.50
2 93 3.01101E+11 Refurb. 1" 45 deg elbow 10,540.00 219.58 219.58 219.58 219.58 219.58
3 93 3.70773E+11 Pipe Dies 7,692.00 160.25 160.25 160.25 160.25 160.25
4 93 3.72773E+11 Refurb 1-1/2X1 RT 10,328.00 215.17 215.17 215.17 215.17 215.17
4 93 3.72773E+11 Cplg/long-short/Cores 1,666.00 34.71 34.71 34.71 34.71 34.71
4 93 3.72773E+11 Long/Short Couplings 1,620.00 33.75 33.75 33.75 33.75 33.75
4 93 3.72773E+11 1" Caps 1,080.00 22.50 22.50 22.50 22.50 22.50
4 93 3.72773E+11 Elb/Tee Cores 2,700.00 56.25 56.25 56.25 56.25 56.25
4 93 3.72773E+11 Chr Cplg Core 311.00 6.48 6.48 6.48 6.48 6.48
4 93 3.72773E+11 Cplg/Elbow Long-Short 2,970.00 61.88 61.88 61.88 61.88 61.88
4 93 3.72773E+11 Cplg/Cap/Elbow 2,700.00 56.25 56.25 56.25 56.25 56.25
6 93 3.72773E+11 Frt- Mold Mach Parts 824.00 17.17 17.17 17.17 17.17 17.17
6 93 3.72773E+11 Labor -Mold Modify 5,181.00 107.94 107.94 107.94 107.94 107.94
7 93 3.72773E+11 Rework 2X1 Budh Mold 5,048.00 105.17 105.17 105.17 105.17 105.17
7 93 3.72773E+11 Refurb 1 1/4 Cap 6,623.00 137.98 137.98 137.98 137.98 137.98
7 93 3.72773E+11 Refurb 1 1/4 X 1 14,015.00 291.98 291.98 291.98 291.98 291.98
7 93 3.72773E+11 NS Car17603 1,715.00 35.73 35.73 35.73 35.73 35.73
7 93 3.72773E+11 Refurb 1 1/4 Tee 10,147.00 211.40 211.40 211.40 211.40 211.40
7 93 3.72773E+11 Refurb 1 1/4 X 3/4 9,101.00 189.60 189.60 189.60 189.60 189.60
7 93 3.72773E+11 Rework 1" Elbow 1,680.00 35.00 35.00 35.00 35.00 35.00
7 93 3.72773E+11 Rework 1 1/4 Elbow 3,049.00 63.52 63.52 63.52 63.52 63.52
7 93 3.72773E+11 Refurb 1 1/4 Cplg 5,069.00 105.60 105.60 105.60 105.60 105.60
7 93 3.72773E+11 Refurb 3/4 Elbow 13,797.00 287.44 287.44 287.44 287.44 287.44
7 93 3.72773E+11 Refurb 3/4 Cap 5,494.00 114.46 114.46 114.46 114.46 114.46
8 93 3.72773E+11 Frt Molding Mold 422.00 8.79 8.79 8.79 8.79 8.79
8 93 3.72773E+11 Rework 1 1/4 Crs Mold 5,363.00 111.73 111.73 111.73 111.73 111.73
8 93 3.72773E+11 Rework 4 cavity 2" 11,789.00 245.60 245.60 245.60 245.60 245.60
8 93 3.72773E+11 Rework 2 X 1 1/2 5,208.00 108.50 108.50 108.50 108.50 108.50
8 93 3.72773E+11 Rework 1 1/4 X 3/4 6,917.00 144.10 144.10 144.10 144.10 144.10
8 93 3.72773E+11 Rework 2 X 1 1/4 6,598.00 137.46 137.46 137.46 137.46 137.46
8 93 3.72773E+11 Rework 1 1/4 Elbow 12,004.00 250.08 250.08 250.08 250.08 250.08
8 93 3.72773E+11 Rework 2" Elbow 7,249.00 151.02 151.02 151.02 151.02 151.02
8 93 3.72773E+11 Rework 2 X 3/4 5,019.00 104.56 104.56 104.56 104.56 104.56
8 93 3.72773E+11 Rework 2" Crs Mold 5,183.00 107.98 107.98 107.98 107.98 107.98
8 93 3.72773E+11 Rework 11/2 Crs Mold 6,350.00 132.29 132.29 132.29 132.29 132.29
8 93 3.72773E+11 Rework 1 1/2 X 3/4 9,337.00 194.52 194.52 194.52 194.52 194.52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Date Asset # Cost Center Description Apr May Jun Jul Aug Sep Oct
Do not use
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 92 3.70501E+11 Var. Tools @Thompson 142.00 0.00 0.00 0.00 0.00 0.00 0.00
6 92 3.70501E+11 Tools and Molds 7,294.71 0.00 0.00 0.00 0.00 0.00 0.00
7 92 3.70501E+11 Var. Machine Parts 30.31 0.00 0.00 0.00 0.00 0.00 0.00
8 92 3.70501E+11 1" 90 deg elbow 148.04 0.00 0.00 0.00 0.00 0.00 0.00
8 92 3.70501E+11 1" Tee 160.04 0.00 0.00 0.00 0.00 0.00 0.00
8 92 3.70501E+11 1.5" Tee 211.17 0.00 0.00 0.00 0.00 0.00 0.00
9 92 3.70002E+11 Use Tax Sept92 119.79 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 2" Tee 170.60 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 2" cap 113.85 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 1" Cap 143.44 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 2" Coupling 166.31 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 1.5" 90 deg elbow 183.06 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 Refurb 1X1X3/4 Tee 180.56 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 Refurb 3/4 Tee 159.35 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 1.5" 45 deg elbow 181.13 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 3/4" 90 deg elbow 185.38 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 1.5" cap 148.98 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 1.5" Coupling 161.65 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 1" Coupling 268.52 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70501E+11 1 1/4' 90 deg elbow 172.33 0.00 0.00 0.00 0.00 0.00 0.00
10 92 3.70002E+11 Use Tax Oct92 33.52 0.00 0.00 0.00 0.00 0.00 0.00
11 92 3.72773E+11 Refurb 1 1/4 X 1 RT 185.96 185.96 185.96 185.96 185.96 185.96 185.96
11 92 3.72773E+11 3/4 Coupling 186.10 186.10 186.10 186.10 186.10 186.10 186.10
1 93 3.72773E+11 Refurb 1X3/4 Bushing 105.50 105.50 105.50 105.50 105.50 105.50 105.50
2 93 3.01101E+11 Refurb. 1" 45 deg elbow 219.58 219.58 219.58 219.58 219.58 219.58 219.58
3 93 3.70773E+11 Pipe Dies 160.25 160.25 160.25 160.25 160.25 160.25 160.25
4 93 3.72773E+11 Refurb 1-1/2X1 RT 215.17 215.17 215.17 215.17 215.17 215.17 215.17
4 93 3.72773E+11 Cplg/long-short/Cores 34.71 34.71 34.71 34.71 34.71 34.71 34.71
4 93 3.72773E+11 Long/Short Couplings 33.75 33.75 33.75 33.75 33.75 33.75 33.75
4 93 3.72773E+11 1" Caps 22.50 22.50 22.50 22.50 22.50 22.50 22.50
4 93 3.72773E+11 Elb/Tee Cores 56.25 56.25 56.25 56.25 56.25 56.25 56.25
4 93 3.72773E+11 Chr Cplg Core 6.48 6.48 6.48 6.48 6.48 6.48 6.48
4 93 3.72773E+11 Cplg/Elbow Long-Short 61.88 61.88 61.88 61.88 61.88 61.88 61.88
4 93 3.72773E+11 Cplg/Cap/Elbow 56.25 56.25 56.25 56.25 56.25 56.25 56.25
6 93 3.72773E+11 Frt- Mold Mach Parts 17.17 17.17 17.17 17.17 17.17 17.17 17.17
6 93 3.72773E+11 Labor -Mold Modify 107.94 107.94 107.94 107.94 107.94 107.94 107.94
7 93 3.72773E+11 Rework 2X1 Budh Mold 105.17 105.17 105.17 105.17 105.17 105.17 105.17
7 93 3.72773E+11 Refurb 1 1/4 Cap 137.98 137.98 137.98 137.98 137.98 137.98 137.98
7 93 3.72773E+11 Refurb 1 1/4 X 1 291.98 291.98 291.98 291.98 291.98 291.98 291.98
7 93 3.72773E+11 NS Car17603 35.73 35.73 35.73 35.73 35.73 35.73 35.73
7 93 3.72773E+11 Refurb 1 1/4 Tee 211.40 211.40 211.40 211.40 211.40 211.40 211.40
7 93 3.72773E+11 Refurb 1 1/4 X 3/4 189.60 189.60 189.60 189.60 189.60 189.60 189.60
7 93 3.72773E+11 Rework 1" Elbow 35.00 35.00 35.00 35.00 35.00 35.00 35.00
7 93 3.72773E+11 Rework 1 1/4 Elbow 63.52 63.52 63.52 63.52 63.52 63.52 63.52
7 93 3.72773E+11 Refurb 1 1/4 Cplg 105.60 105.60 105.60 105.60 105.60 105.60 105.60
7 93 3.72773E+11 Refurb 3/4 Elbow 287.44 287.44 287.44 287.44 287.44 287.44 287.44
7 93 3.72773E+11 Refurb 3/4 Cap 114.46 114.46 114.46 114.46 114.46 114.46 114.46
8 93 3.72773E+11 Frt Molding Mold 8.79 8.79 8.79 8.79 8.79 8.79 8.79
8 93 3.72773E+11 Rework 1 1/4 Crs Mold 111.73 111.73 111.73 111.73 111.73 111.73 111.73
8 93 3.72773E+11 Rework 4 cavity 2" 245.60 245.60 245.60 245.60 245.60 245.60 245.60
8 93 3.72773E+11 Rework 2 X 1 1/2 108.50 108.50 108.50 108.50 108.50 108.50 108.50
8 93 3.72773E+11 Rework 1 1/4 X 3/4 144.10 144.10 144.10 144.10 144.10 144.10 144.10
8 93 3.72773E+11 Rework 2 X 1 1/4 137.46 137.46 137.46 137.46 137.46 137.46 137.46
8 93 3.72773E+11 Rework 1 1/4 Elbow 250.08 250.08 250.08 250.08 250.08 250.08 250.08
8 93 3.72773E+11 Rework 2" Elbow 151.02 151.02 151.02 151.02 151.02 151.02 151.02
8 93 3.72773E+11 Rework 2 X 3/4 104.56 104.56 104.56 104.56 104.56 104.56 104.56
8 93 3.72773E+11 Rework 2" Crs Mold 107.98 107.98 107.98 107.98 107.98 107.98 107.98
8 93 3.72773E+11 Rework 11/2 Crs Mold 132.29 132.29 132.29 132.29 132.29 132.29 132.29
8 93 3.72773E+11 Rework 1 1/2 X 3/4 194.52 194.52 194.52 194.52 194.52 194.52 194.52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Deprec. Deprec. Deprec.
Date Asset # Cost Center Description NBV 10/31/96 Prior Yrs 1995 1996
Do not use
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4 92 3.70501E+11 Var. Tools @Thompson 0.00 4,260.00 1,704.00 852.00
6 92 3.70501E+11 Tools and Molds 0.00 218,841.25 87,536.50 43,768.25
7 92 3.70501E+11 Var. Machine Parts (0.00) 909.38 363.75 181.87
8 92 3.70501E+11 1" 90 deg elbow 0.00 4,441.25 1,776.50 888.25
8 92 3.70501E+11 1" Tee 0.00 4,801.25 1,920.50 960.25
8 92 3.70501E+11 1.5" Tee (0.00) 6,335.00 2,534.00 1,267.00
9 92 3.70002E+11 Use Tax Sept92 0.00 3,593.75 1,437.50 718.75
10 92 3.70501E+11 2" Tee (0.01) 5,118.13 2,047.25 1,023.63
10 92 3.70501E+11 2" cap (0.01) 3,415.63 1,366.25 683.13
10 92 3.70501E+11 1" Cap (0.01) 4,303.13 1,721.25 860.63
10 92 3.70501E+11 2" Coupling (0.01) 4,989.38 1,995.75 997.88
10 92 3.70501E+11 1.5" 90 deg elbow (0.01) 5,491.88 2,196.75 1,098.38
10 92 3.70501E+11 Refurb 1X1X3/4 Tee (0.01) 5,416.88 2,166.75 1,083.38
10 92 3.70501E+11 Refurb 3/4 Tee (0.01) 4,780.63 1,912.25 956.13
10 92 3.70501E+11 1.5" 45 deg elbow 0.00 5,433.75 2,173.50 1,086.75
10 92 3.70501E+11 3/4" 90 deg elbow 0.00 5,561.25 2,224.50 1,112.25
10 92 3.70501E+11 1.5" cap (0.01) 4,469.38 1,787.75 893.88
10 92 3.70501E+11 1.5" Coupling (0.01) 4,849.38 1,939.75 969.88
10 92 3.70501E+11 1" Coupling (0.01) 8,055.63 3,222.25 1,611.13
10 92 3.70501E+11 1 1/4' 90 deg elbow 0.00 5,170.00 2,068.00 1,034.00
10 92 3.70002E+11 Use Tax Oct92 (0.00) 1,005.63 402.25 201.12
11 92 3.72773E+11 Refurb 1 1/4 X 1 RT 1,115.75 3,347.25 2,231.50 2,231.50
11 92 3.72773E+11 3/4 Coupling 1,116.62 3,349.88 2,233.25 2,233.25
1 93 3.72773E+11 Refurb 1X3/4 Bushing 633.00 1,899.00 1,266.00 1,266.00
2 93 3.01101E+11 Refurb. 1" 45 deg elbow 1,317.50 3,952.50 2,635.00 2,635.00
3 93 3.70773E+11 Pipe Dies 961.50 2,884.50 1,923.00 1,923.00
4 93 3.72773E+11 Refurb 1-1/2X1 RT 1,291.00 3,873.00 2,582.00 2,582.00
4 93 3.72773E+11 Cplg/long-short/Cores 208.25 624.75 416.50 416.50
4 93 3.72773E+11 Long/Short Couplings 202.50 607.50 405.00 405.00
4 93 3.72773E+11 1" Caps 135.00 405.00 270.00 270.00
4 93 3.72773E+11 Elb/Tee Cores 337.50 1,012.50 675.00 675.00
4 93 3.72773E+11 Chr Cplg Core 38.87 116.63 77.75 77.75
4 93 3.72773E+11 Cplg/Elbow Long-Short 371.25 1,113.75 742.50 742.50
4 93 3.72773E+11 Cplg/Cap/Elbow 337.50 1,012.50 675.00 675.00
6 93 3.72773E+11 Frt- Mold Mach Parts 103.00 309.00 206.00 206.00
6 93 3.72773E+11 Labor -Mold Modify 647.62 1,942.88 1,295.25 1,295.25
7 93 3.72773E+11 Rework 2X1 Budh Mold 631.00 1,893.00 1,262.00 1,262.00
7 93 3.72773E+11 Refurb 1 1/4 Cap 827.87 2,483.63 1,655.75 1,655.75
7 93 3.72773E+11 Refurb 1 1/4 X 1 1,751.87 5,255.63 3,503.75 3,503.75
7 93 3.72773E+11 NS Car17603 214.37 643.13 428.75 428.75
7 93 3.72773E+11 Refurb 1 1/4 Tee 1,268.37 3,805.13 2,536.75 2,536.75
7 93 3.72773E+11 Refurb 1 1/4 X 3/4 1,137.62 3,412.88 2,275.25 2,275.25
7 93 3.72773E+11 Rework 1" Elbow 210.00 630.00 420.00 420.00
7 93 3.72773E+11 Rework 1 1/4 Elbow 381.12 1,143.38 762.25 762.25
7 93 3.72773E+11 Refurb 1 1/4 Cplg 633.62 1,900.88 1,267.25 1,267.25
7 93 3.72773E+11 Refurb 3/4 Elbow 1,724.62 5,173.88 3,449.25 3,449.25
7 93 3.72773E+11 Refurb 3/4 Cap 686.75 2,060.25 1,373.50 1,373.50
8 93 3.72773E+11 Frt Molding Mold 52.75 158.25 105.50 105.50
8 93 3.72773E+11 Rework 1 1/4 Crs Mold 670.37 2,011.13 1,340.75 1,340.75
8 93 3.72773E+11 Rework 4 cavity 2" 1,473.62 4,420.88 2,947.25 2,947.25
8 93 3.72773E+11 Rework 2 X 1 1/2 651.00 1,953.00 1,302.00 1,302.00
8 93 3.72773E+11 Rework 1 1/4 X 3/4 864.62 2,593.88 1,729.25 1,729.25
8 93 3.72773E+11 Rework 2 X 1 1/4 824.75 2,474.25 1,649.50 1,649.50
8 93 3.72773E+11 Rework 1 1/4 Elbow 1,500.50 4,501.50 3,001.00 3,001.00
8 93 3.72773E+11 Rework 2" Elbow 906.12 2,718.38 1,812.25 1,812.25
8 93 3.72773E+11 Rework 2 X 3/4 627.37 1,882.13 1,254.75 1,254.75
8 93 3.72773E+11 Rework 2" Crs Mold 647.87 1,943.63 1,295.75 1,295.75
8 93 3.72773E+11 Rework 11/2 Crs Mold 793.75 2,381.25 1,587.50 1,587.50
8 93 3.72773E+11 Rework 1 1/2 X 3/4 1,167.12 3,501.38 2,334.25 2,334.25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date Asset # Cost Center Description Cost Basis Nov Dec Jan Feb Mar
Do not use
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9 93 3.72773E+11 Rework 1 1/2 X 1 1/4 15,162.00 315.88 315.88 315.88 315.88 315.88
9 93 3.72773E+11 Rework 3/4 Crs Mold 7,073.00 147.35 147.35 147.35 147.35 147.35
9 93 3.72773E+11 Rework 1" CRS Mold 6,455.00 134.48 134.48 134.48 134.48 134.48
9 93 3.72773E+11 Rework 1 1/2 X 3/4 10,072.00 209.83 209.83 209.83 209.83 209.83
9 93 3.72773E+11 Rework 1 1/2 X 1 14,118.00 294.13 294.13 294.13 294.13 294.13
11 93 3.72773E+11 Brass Ext Plugs 203.00 4.23 4.23 4.23 4.23 4.23
12 93 3.70993E+11 Misc. Tool Parts 778.00 16.21 16.21 16.21 16.21 16.21
1 94 3.70773E+11 Caliper - Digimatic 667.00 13.90 13.90 13.90 13.90 13.90
1 94 3.70773E+11 Misc. Radius Cutters 26.00 0.54 0.54 0.54 0.54 0.54
1 94 3.72773E+11 Misc. Pins, Screws, Bush 613.00 12.77 12.77 12.77 12.77 12.77
1 94 3.70773E+11 Misc. Radius Cutters 87.00 1.81 1.81 1.81 1.81 1.81
1 94 3.70773E+11 Serrated Clamp 30.00 0.63 0.63 0.63 0.63 0.63
1 94 3.70773E+11 Plates - Mold Base 3,512.00 73.17 73.17 73.17 73.17 73.17
1 94 3.01773E+11 Mold - 2" Reducing Tee 1,809.00 37.69 37.69 37.69 37.69 37.69
1 94 3.70773E+11 20 Milling Inserts 340.00 7.08 7.08 7.08 7.08 7.08
1 94 3.01773E+11 Design CPVC molds 891.00 18.56 18.56 18.56 18.56 18.56
2 94 3.72773E+11 Tool Material - New Pipe 283.00 5.90 5.90 5.90 5.90 5.90
2 94 3.72773E+11 Tool Material - New Pipe 681.00 14.19 14.19 14.19 14.19 14.19
2 94 3.72773E+11 Ground Mold Plates 281.00 5.85 5.85 5.85 5.85 5.85
2 94 3.01773E+11 SS Bars- Mold Cores 1,604.00 33.42 33.42 33.42 33.42 33.42
2 94 3.72773E+11 Tool Material - New Pipe 1,644.00 34.25 34.25 34.25 34.25 34.25
2 94 3.70773E+11 Bars - Mold Cores 516.00 10.75 10.75 10.75 10.75 10.75
2 94 3.72773E+11 Mold Mach Mods 4,444.00 92.58 92.58 92.58 92.58 92.58
4 94 3.70773E+11 Frt - tools 81.00 1.69 1.69 1.69 1.69 1.69
5 94 3.72773E+11 Mold Plates 6,622.00 137.96 137.96 137.96 137.96 137.96
5 94 3.01101E+11 429 Retainer Rings 206.00 4.29 4.29 4.29 4.29 4.29
5 94 3.72773E+11 Mold Plates 406.00 8.46 8.46 8.46 8.46 8.46
5 94 3.72773E+11 Spec Mold Plate 1,648.00 34.33 34.33 34.33 34.33 34.33
5 94 3.72773E+11 Spec Mold Plate 1,283.00 26.73 26.73 26.73 26.73 26.73
5 94 3.72773E+11 Pillow Blocks 933.00 19.44 19.44 19.44 19.44 19.44
6 94 3.01101E+11 420 Retainer Rings 481.00 10.02 10.02 10.02 10.02 10.02
6 94 3.70773E+11 Jaw Chuck - 8" 2,531.00 52.73 52.73 52.73 52.73 52.73
7 94 3.70773E+11 Various Steel Tools 1,819.00 37.90 37.90 37.90 37.90 37.90
9 94 3.72773E+11 Sine Plateau 1,900.00 39.58 39.58 39.58 39.58 39.58
9 94 3.72773E+11 Tools 1,325.00 27.60 27.60 27.60 27.60 27.60
9 94 3.72773E+11 Various Tools 1,209.00 25.19 25.19 25.19 25.19 25.19
11 94 3.70773E+11 Hook Up Inj Mold Mach 2,326.00 48.46 48.46 48.46 48.46 48.46
1 95 3.70773E+11 Parts - tools 2,730.00 56.88 56.88 56.88 56.88 56.88
1 95 3.72773E+11 Mold Bases 4,358.00 90.79 90.79 90.79 90.79 90.79
2 95 3.70773E+11 Mold Plate 1,040.00 21.67 21.67 21.67 21.67 21.67
2 95 3.70773E+11 Blazemaster Molds 1,000.00 20.83 20.83 20.83 20.83 20.83
3 95 3.72773E+11 Extrusion Pin 1,281.00 26.69 26.69 26.69 26.69 26.69
6 95 3.70773E+11 360Fc Brass Rod Hex 442.00 9.21 9.21 9.21 9.21 9.21
6 95 3.70773E+11 Support Collar 1,040.00 21.67 21.67 21.67 21.67 21.67
6 95 3.70773E+11 O-Rings 117.00 2.44 2.44 2.44 2.44 2.44
6 95 3.70773E+11 O-Rings 52.00 1.08 1.08 1.08 1.08 1.08
6 95 3.70773E+11 954 Alum Bronze 454.00 9.46 9.46 9.46 9.46 9.46
6 95 3.70773E+11 954 Alum Bronze 255.00 5.31 5.31 5.31 5.31 5.31
6 95 3.70773E+11 954 Alum Bronze 587.00 12.23 12.23 12.23 12.23 12.23
6 95 3.70773E+11 303 CD Ann Bars 409.00 8.52 8.52 8.52 8.52 8.52
6 95 3.70773E+11 0-100f, 8-14um, ds=50 1,002.00 20.88 20.88 20.88 20.88 20.88
7 95 3.70773E+11 DT Prof Service 1,819.00 37.90 37.90 37.90 37.90 37.90
7 95 3.70773E+11 Maxell Tooling Alloy 305.00 6.35 6.35 6.35 6.35 6.35
7 95 3.70773E+11 Various Tools 2,880.00 60.00 60.00 60.00 60.00 60.00
7 95 3.70773E+11 Maxell Tooling Alloy 276.00 5.75 5.75 5.75 5.75 5.75
7 95 3.70773E+11 Nudie V RTA 105.00 2.19 2.19 2.19 2.19 2.19
7 95 3.70773E+11 Rigid Support Collars 200.00 4.17 4.17 4.17 4.17 4.17
7 95 3.70773E+11 Rigid Support Collars 100.00 2.08 2.08 2.08 2.08 2.08
8 95 3.70773E+11 Stainless Tubing 210.00 4.38 4.38 4.38 4.38 4.38
8 95 3.70773E+11 Various Tools 2,551.00 53.15 53.15 53.15 53.15 53.15
8 95 3.70773E+11 SS Flat Plate 451.00 9.40 9.40 9.40 9.40 9.40
8 95 3.70773E+11 Various wrenches 820.00 17.08 17.08 17.08 17.08 17.08
8 95 3.70773E+11 17-4 Bar Sol Ann 392.00 8.17 8.17 8.17 8.17 8.17
8 95 3.70773E+11 Brass Pipe 97.00 2.02 2.02 2.02 2.02 2.02
8 95 3.70773E+11 CSM 420XL 248.00 5.17 5.17 5.17 5.17 5.17
9 95 3.70773E+11 Extinguisher Right Purch 32,244.00 671.75 671.75 671.75 671.75 671.75
1 96 Southland Precision 10,514.00 219.04 219.04 219.04
9 96 Capitalized Tooling 101,118.00
- -----------------------------------------------------------------------------------------------------------------------------------
988,856.00 18,275.50 18,275.50 18,275.50 18,275.50 18,275.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Asset # Cost Center Description Apr May Jun Jul Aug Sep Oct
Do not use
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9 93 3.72773E+11 Rework 1 1/2 X 1 1/4 315.88 315.88 315.88 315.88 315.88 315.88 315.88
9 93 3.72773E+11 Rework 3/4 Crs Mold 147.35 147.35 147.35 147.35 147.35 147.35 147.35
9 93 3.72773E+11 Rework 1" CRS Mold 134.48 134.48 134.48 134.48 134.48 134.48 134.48
9 93 3.72773E+11 Rework 1 1/2 X 3/4 209.83 209.83 209.83 209.83 209.83 209.83 209.83
9 93 3.72773E+11 Rework 1 1/2 X 1 294.13 294.13 294.13 294.13 294.13 294.13 294.13
11 93 3.72773E+11 Brass Ext Plugs 4.23 4.23 4.23 4.23 4.23 4.23 4.23
12 93 3.70993E+11 Misc. Tool Parts 16.21 16.21 16.21 16.21 16.21 16.21 16.21
1 94 3.70773E+11 Caliper - Digimatic 13.90 13.90 13.90 13.90 13.90 13.90 13.90
1 94 3.70773E+11 Misc. Radius Cutters 0.54 0.54 0.54 0.54 0.54 0.54 0.54
1 94 3.72773E+11 Misc. Pins, Screws, Bush 12.77 12.77 12.77 12.77 12.77 12.77 12.77
1 94 3.70773E+11 Misc. Radius Cutters 1.81 1.81 1.81 1.81 1.81 1.81 1.81
1 94 3.70773E+11 Serrated Clamp 0.63 0.63 0.63 0.63 0.63 0.63 0.63
1 94 3.70773E+11 Plates - Mold Base 73.17 73.17 73.17 73.17 73.17 73.17 73.17
1 94 3.01773E+11 Mold - 2" Reducing Tee 37.69 37.69 37.69 37.69 37.69 37.69 37.69
1 94 3.70773E+11 20 Milling Inserts 7.08 7.08 7.08 7.08 7.08 7.08 7.08
1 94 3.01773E+11 Design CPVC molds 18.56 18.56 18.56 18.56 18.56 18.56 18.56
2 94 3.72773E+11 Tool Material - New Pipe 5.90 5.90 5.90 5.90 5.90 5.90 5.90
2 94 3.72773E+11 Tool Material - New Pipe 14.19 14.19 14.19 14.19 14.19 14.19 14.19
2 94 3.72773E+11 Ground Mold Plates 5.85 5.85 5.85 5.85 5.85 5.85 5.85
2 94 3.01773E+11 SS Bars- Mold Cores 33.42 33.42 33.42 33.42 33.42 33.42 33.42
2 94 3.72773E+11 Tool Material - New Pipe 34.25 34.25 34.25 34.25 34.25 34.25 34.25
2 94 3.70773E+11 Bars - Mold Cores 10.75 10.75 10.75 10.75 10.75 10.75 10.75
2 94 3.72773E+11 Mold Mach Mods 92.58 92.58 92.58 92.58 92.58 92.58 92.58
4 94 3.70773E+11 Frt - tools 1.69 1.69 1.69 1.69 1.69 1.69 1.69
5 94 3.72773E+11 Mold Plates 137.96 137.96 137.96 137.96 137.96 137.96 137.96
5 94 3.01101E+11 429 Retainer Rings 4.29 4.29 4.29 4.29 4.29 4.29 4.29
5 94 3.72773E+11 Mold Plates 8.46 8.46 8.46 8.46 8.46 8.46 8.46
5 94 3.72773E+11 Spec Mold Plate 34.33 34.33 34.33 34.33 34.33 34.33 34.33
5 94 3.72773E+11 Spec Mold Plate 26.73 26.73 26.73 26.73 26.73 26.73 26.73
5 94 3.72773E+11 Pillow Blocks 19.44 19.44 19.44 19.44 19.44 19.44 19.44
6 94 3.01101E+11 420 Retainer Rings 10.02 10.02 10.02 10.02 10.02 10.02 10.02
6 94 3.70773E+11 Jaw Chuck - 8" 52.73 52.73 52.73 52.73 52.73 52.73 52.73
7 94 3.70773E+11 Various Steel Tools 37.90 37.90 37.90 37.90 37.90 37.90 37.90
9 94 3.72773E+11 Sine Plateau 39.58 39.58 39.58 39.58 39.58 39.58 39.58
9 94 3.72773E+11 Tools 27.60 27.60 27.60 27.60 27.60 27.60 27.60
9 94 3.72773E+11 Various Tools 25.19 25.19 25.19 25.19 25.19 25.19 25.19
11 94 3.70773E+11 Hook Up Inj Mold Mach 48.46 48.46 48.46 48.46 48.46 48.46 48.46
1 95 3.70773E+11 Parts - tools 56.88 56.88 56.88 56.88 56.88 56.88 56.88
1 95 3.72773E+11 Mold Bases 90.79 90.79 90.79 90.79 90.79 90.79 90.79
2 95 3.70773E+11 Mold Plate 21.67 21.67 21.67 21.67 21.67 21.67 21.67
2 95 3.70773E+11 Blazemaster Molds 20.83 20.83 20.83 20.83 20.83 20.83 20.83
3 95 3.72773E+11 Extrusion Pin 26.69 26.69 26.69 26.69 26.69 26.69 26.69
6 95 3.70773E+11 360Fc Brass Rod Hex 9.21 9.21 9.21 9.21 9.21 9.21 9.21
6 95 3.70773E+11 Support Collar 21.67 21.67 21.67 21.67 21.67 21.67 21.67
6 95 3.70773E+11 O-Rings 2.44 2.44 2.44 2.44 2.44 2.44 2.44
6 95 3.70773E+11 O-Rings 1.08 1.08 1.08 1.08 1.08 1.08 1.08
6 95 3.70773E+11 954 Alum Bronze 9.46 9.46 9.46 9.46 9.46 9.46 9.46
6 95 3.70773E+11 954 Alum Bronze 5.31 5.31 5.31 5.31 5.31 5.31 5.31
6 95 3.70773E+11 954 Alum Bronze 12.23 12.23 12.23 12.23 12.23 12.23 12.23
6 95 3.70773E+11 303 CD Ann Bars 8.52 8.52 8.52 8.52 8.52 8.52 8.52
6 95 3.70773E+11 0-100f, 8-14um, ds=50 20.88 20.88 20.88 20.88 20.88 20.88 20.88
7 95 3.70773E+11 DT Prof Service 37.90 37.90 37.90 37.90 37.90 37.90 37.90
7 95 3.70773E+11 Maxell Tooling Alloy 6.35 6.35 6.35 6.35 6.35 6.35 6.35
7 95 3.70773E+11 Various Tools 60.00 60.00 60.00 60.00 60.00 60.00 60.00
7 95 3.70773E+11 Maxell Tooling Alloy 5.75 5.75 5.75 5.75 5.75 5.75 5.75
7 95 3.70773E+11 Nudie V RTA 2.19 2.19 2.19 2.19 2.19 2.19 2.19
7 95 3.70773E+11 Rigid Support Collars 4.17 4.17 4.17 4.17 4.17 4.17 4.17
7 95 3.70773E+11 Rigid Support Collars 2.08 2.08 2.08 2.08 2.08 2.08 2.08
8 95 3.70773E+11 Stainless Tubing 4.38 4.38 4.38 4.38 4.38 4.38 4.38
8 95 3.70773E+11 Various Tools 53.15 53.15 53.15 53.15 53.15 53.15 53.15
8 95 3.70773E+11 SS Flat Plate 9.40 9.40 9.40 9.40 9.40 9.40 9.40
8 95 3.70773E+11 Various wrenches 17.08 17.08 17.08 17.08 17.08 17.08 17.08
8 95 3.70773E+11 17-4 Bar Sol Ann 8.17 8.17 8.17 8.17 8.17 8.17 8.17
8 95 3.70773E+11 Brass Pipe 2.02 2.02 2.02 2.02 2.02 2.02 2.02
8 95 3.70773E+11 CSM 420XL 5.17 5.17 5.17 5.17 5.17 5.17 5.17
9 95 3.70773E+11 Extinguisher Right Purch 671.75 671.75 671.75 671.75 671.75 671.75 671.75
1 96 Southland Precision 219.04 219.04 219.04 219.04 219.04 219.04 219.04
9 96 Capitalized Tooling 2,106.63 2,106.63
- ------------------------------------------------------------------------------------------------------------------------------------
18,275.50 7,900.75 7,900.75 7,900.75 7,900.75 7,900.75 7,900.75
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Deprec. Deprec. Deprec.
Date Asset # Cost Center Description NBV 10/31/96 Prior Yrs 1995 1996
Do not use
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
9 93 3.72773E+11 Rework 1 1/2 X 1 1/4 1,895.25 5,685.75 3,790.50 3,790.50
9 93 3.72773E+11 Rework 3/4 Crs Mold 884.12 2,652.38 1,768.25 1,768.25
9 93 3.72773E+11 Rework 1" CRS Mold 806.87 2,420.63 1,613.75 1,613.75
9 93 3.72773E+11 Rework 1 1/2 X 3/4 1,259.00 3,777.00 2,518.00 2,518.00
9 93 3.72773E+11 Rework 1 1/2 X 1 1,764.75 5,294.25 3,529.50 3,529.50
11 93 3.72773E+11 Brass Ext Plugs 76.12 25.38 50.75 50.75
12 93 3.70993E+11 Misc. Tool Parts 291.75 97.25 194.50 194.50
1 94 3.70773E+11 Caliper - Digimatic 250.12 83.38 166.75 166.75
1 94 3.70773E+11 Misc. Radius Cutters 9.75 3.25 6.50 6.50
1 94 3.72773E+11 Misc. Pins, Screws, Bush 229.87 76.63 153.25 153.25
1 94 3.70773E+11 Misc. Radius Cutters 32.62 10.88 21.75 21.75
1 94 3.70773E+11 Serrated Clamp 11.25 3.75 7.50 7.50
1 94 3.70773E+11 Plates - Mold Base 1,317.00 439.00 878.00 878.00
1 94 3.01773E+11 Mold - 2" Reducing Tee 678.37 226.13 452.25 452.25
1 94 3.70773E+11 20 Milling Inserts 127.50 42.50 85.00 85.00
1 94 3.01773E+11 Design CPVC molds 334.12 111.38 222.75 222.75
2 94 3.72773E+11 Tool Material - New Pipe 106.12 35.38 70.75 70.75
2 94 3.72773E+11 Tool Material - New Pipe 255.37 85.13 170.25 170.25
2 94 3.72773E+11 Ground Mold Plates 105.37 35.13 70.25 70.25
2 94 3.01773E+11 SS Bars- Mold Cores 601.50 200.50 401.00 401.00
2 94 3.72773E+11 Tool Material - New Pipe 616.50 205.50 411.00 411.00
2 94 3.70773E+11 Bars - Mold Cores 193.50 64.50 129.00 129.00
2 94 3.72773E+11 Mold Mach Mods 1,666.50 555.50 1,111.00 1,111.00
4 94 3.70773E+11 Frt - tools 30.37 10.13 20.25 20.25
5 94 3.72773E+11 Mold Plates 2,483.25 827.75 1,655.50 1,655.50
5 94 3.01101E+11 429 Retainer Rings 77.25 25.75 51.50 51.50
5 94 3.72773E+11 Mold Plates 152.25 50.75 101.50 101.50
5 94 3.72773E+11 Spec Mold Plate 618.00 206.00 412.00 412.00
5 94 3.72773E+11 Spec Mold Plate 481.12 160.38 320.75 320.75
5 94 3.72773E+11 Pillow Blocks 349.87 116.63 233.25 233.25
6 94 3.01101E+11 420 Retainer Rings 180.37 60.13 120.25 120.25
6 94 3.70773E+11 Jaw Chuck - 8" 949.12 316.38 632.75 632.75
7 94 3.70773E+11 Various Steel Tools 682.12 227.38 454.75 454.75
9 94 3.72773E+11 Sine Plateau 712.50 237.50 475.00 475.00
9 94 3.72773E+11 Tools 496.87 165.63 331.25 331.25
9 94 3.72773E+11 Various Tools 453.37 151.13 302.25 302.25
11 94 3.70773E+11 Hook Up Inj Mold Mach 1,163.00 581.50 581.50
1 95 3.70773E+11 Parts - tools 1,478.75 568.75 682.50
1 95 3.72773E+11 Mold Bases 2,360.58 0.00 907.92 1,089.50
2 95 3.70773E+11 Mold Plate 585.00 195.00 260.00
2 95 3.70773E+11 Blazemaster Molds 562.50 187.50 250.00
3 95 3.72773E+11 Extrusion Pin 747.25 0.00 213.50 320.25
6 95 3.70773E+11 360Fc Brass Rod Hex 285.46 46.04 110.50
6 95 3.70773E+11 Support Collar 671.67 108.33 260.00
6 95 3.70773E+11 O-Rings 75.56 12.19 29.25
6 95 3.70773E+11 O-Rings 33.58 5.42 13.00
6 95 3.70773E+11 954 Alum Bronze 293.21 47.29 113.50
6 95 3.70773E+11 954 Alum Bronze 164.69 26.56 63.75
6 95 3.70773E+11 954 Alum Bronze 379.10 61.15 146.75
6 95 3.70773E+11 303 CD Ann Bars 264.15 42.60 102.25
6 95 3.70773E+11 0-100f, 8-14um, ds=50 647.12 104.38 250.50
7 95 3.70773E+11 DT Prof Service 1,212.67 151.58 454.75
7 95 3.70773E+11 Maxell Tooling Alloy 203.33 25.42 76.25
7 95 3.70773E+11 Various Tools 1,920.00 240.00 720.00
7 95 3.70773E+11 Maxell Tooling Alloy 184.00 23.00 69.00
7 95 3.70773E+11 Nudie V RTA 70.00 8.75 26.25
7 95 3.70773E+11 Rigid Support Collars 133.33 16.67 50.00
7 95 3.70773E+11 Rigid Support Collars 66.67 8.33 25.00
8 95 3.70773E+11 Stainless Tubing 144.37 13.13 52.50
8 95 3.70773E+11 Various Tools 1,753.81 159.44 637.75
8 95 3.70773E+11 SS Flat Plate 310.06 28.19 112.75
8 95 3.70773E+11 Various wrenches 563.75 51.25 205.00
8 95 3.70773E+11 17-4 Bar Sol Ann 269.50 24.50 98.00
8 95 3.70773E+11 Brass Pipe 66.69 6.06 24.25
8 95 3.70773E+11 CSM 420XL 170.50 15.50 62.00
9 95 3.70773E+11 Extinguisher Right Purch 22,839.50 1,343.50 8,061.00
1 96 Southland Precision 8,323.58 2,190.42
9 96 Capitalized Tooling 96,904.75 4,213.25
- ----------------------------------------------------------------------------------------------------------------------------
194,491.77 421,321.37 209,581.69 163,461.17
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Central CPVC Corp
Central CPVC Corp.
FY96 Depreciation Schedule
Account 205 - Furniture and Fixtures
<TABLE>
<CAPTION>
Mo. Yr Asset # Cost Center Description Cost Basis Nov Dec Jan Feb Mar Apr May
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Do not use 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4 93 5.72002E+11 Storage Racks 1,150.00 13.69 13.69 13.69 13.69 13.69 13.69 13.69
1 94 5.70773E+11 Drafting Table 339.00 4.04 4.04 4.04 4.04 4.04 4.04 4.04
3 94 5.72773E+11 3 Kenn Workstations 776.00 9.24 9.24 9.24 9.24 9.24 9.24 9.24
4 94 5.72773E+11 3 Ergo Workstations 318.00 3.79 3.79 3.79 3.79 3.79 3.79 3.79
4 94 5.72773E+11 Mold Racks 13,310.00 158.45 158.45 158.45 158.45 158.45 158.45 158.45
5 94 5.72773E+11 Frt - Beams & Deck 975.00 11.61 11.61 11.61 11.61 11.61 11.61 11.61
6 94 5.70773E+11 Workbench 505.00 6.01 6.01 6.01 6.01 6.01 6.01 6.01
6 94 5.72773E+11 Mold Racks 292.00 3.48 3.48 3.48 3.48 3.48 3.48 3.48
6 94 5.72773E+11 Pallet Rack 600.00 7.14 7.14 7.14 7.14 7.14 7.14 7.14
7 94 5.70773E+11 Work Station - Ergon 111.00 1.32 1.32 1.32 1.32 1.32 1.32 1.32
7 94 5.72773E+11 Printer - Tharo 2,772.00 33.00 33.00 33.00 33.00 33.00 33.00 33.00
7 94 5.72773E+11 2 Workstations 644.00 7.67 7.67 7.67 7.67 7.67 7.67 7.67
8 94 5.70773E+11 Storage Cabinet 595.00 7.08 7.08 7.08 7.08 7.08 7.08 7.08
9 94 5.70773E+11 Office Furniture 565.00 6.73 6.73 6.73 6.73 6.73 6.73 6.73
11 94 5.70773E+11 Blueprint Machine 1,641.00 27.35 27.35 27.35 27.35 27.35 27.35 27.35
11 94 5.70773E+11 Desk, Files, Chairs 1,656.00 27.60 27.60 27.60 27.60 27.60 27.60 27.60
2 95 5.70002E+11 Bookcase, File, Chair 1,500.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00
3 95 5.70773E+11 File-Flat 5 Drawer 632.00 10.53 10.53 10.53 10.53 10.53 10.53 10.53
3 95 5.72773E+11 Hyd Hand Truck 977.00 16.28 16.28 16.28 16.28 16.28 16.28 16.28
4 95 5.72702E+11 5 Chairs - gray 875.00 14.58 14.58 14.58 14.58 14.58 14.58 14.58
4 95 5.72701E+11 Copier-Toshiba 8510 1,500.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00
12 95 x Fax-Toshiba 651 1,999.00 0.00 33.32 33.32 33.32 33.32 33.32 33.32
12 95 x MSI-Telephone Sys. 473.85 0.00 7.90 7.90 7.90 7.90 7.90 7.90
12 95 x MSI-Phone Cables 500.00 0.00 8.33 8.33 8.33 8.33 8.33 8.33
12 95 x MSI-Infinite DVXII Phone 6,393.00 0.00 106.55 106.55 106.55 106.55 106.55 106.55
1 96 x Shelvings-Bay Area 3,605.60 0.00 0.00 60.09 60.09 60.09 60.09 60.09
3 96 x Storage Bins-Yellow 1,702.32 0.00 0.00 0.00 0.00 28.37 28.37 28.37
4 96 x Work Station 2,066.50 0.00 0.00 0.00 0.00 0.00 34.44 34.44
5 96 x MSI-Telephone set 441.01 0.00 0.00 0.00 0.00 0.00 0.00 7.35
6 96 x Work Stations 3,863.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6 96 x Work Stations 3,863.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6 96 x Chairs -8Nos. 1,252.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6 96 x Chairs-2Nos. 259.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7 96 x Computer Cabinet 983.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7 96 x Reed's Office 54.00
7 96 MSI-Telephone Set 315.15 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7 96 MSI-Telephone Set-3pcs 1,091.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7 96 System Night Bell 209.94 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7 96 Y Furniture - Eng office 2,061.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00
9 96 Y Work Stations 4,214.58 0.00 0.00 0.00 0.00 0.00 0.00 0.00
----------- ------- ------- ------- ------- ------- ------- -------
67,082.06 419.59 575.69 635.78 635.78 664.15 698.59 705.94
=========== ======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Mo. Yr Asset # Cost Center Description Jun Jul Aug Sep Oct NBV 10/31/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Do not use 0.00 0.00 0.00 0.00 0.00 0.00
4 93 5.72002E+11 Storage Racks 13.69 13.69 13.69 13.69 13.69 575.00
1 94 5.70773E+11 Drafting Table 4.04 4.04 4.04 4.04 4.04 217.93
3 94 5.72773E+11 3 Kenn Workstations 9.24 9.24 9.24 9.24 9.24 498.86
4 94 5.72773E+11 3 Ergo Workstations 3.79 3.79 3.79 3.79 3.79 204.43
4 94 5.72773E+11 Mold Racks 158.45 158.45 158.45 158.45 158.45 8,556.43
5 94 5.72773E+11 Frt - Beams & Deck 11.61 11.61 11.61 11.61 11.61 626.79
6 94 5.70773E+11 Workbench 6.01 6.01 6.01 6.01 6.01 324.64
6 94 5.72773E+11 Mold Racks 3.48 3.48 3.48 3.48 3.48 187.71
6 94 5.72773E+11 Pallet Rack 7.14 7.14 7.14 7.14 7.14 385.71
7 94 5.70773E+11 Work Station - Ergon 1.32 0.50 0.00 0.00 0.00 (0.00)
7 94 5.72773E+11 Printer - Tharo 33.00 33.00 33.00 33.00 33.00 2,162.14
7 94 5.72773E+11 2 Workstations 7.67 7.67 7.67 7.67 7.67 110.00
8 94 5.70773E+11 Storage Cabinet 7.08 7.08 7.08 7.08 7.08 382.50
9 94 5.70773E+11 Office Furniture 6.73 6.73 6.73 6.73 6.73 363.21
11 94 5.70773E+11 Blueprint Machine 27.35 27.35 27.35 27.35 27.35 984.60
11 94 5.70773E+11 Desk, Files, Chairs 27.60 27.60 27.60 27.60 27.60 993.60
2 95 5.70002E+11 Bookcase, File, Chair 25.00 25.00 25.00 25.00 25.00 975.00
3 95 5.70773E+11 File-Flat 5 Drawer 10.53 10.53 10.53 10.53 10.53 421.33
3 95 5.72773E+11 Hyd Hand Truck 16.28 16.28 16.28 16.28 16.28 651.33
4 95 5.72702E+11 5 Chairs - gray 14.58 14.58 14.58 14.58 14.58 597.92
4 95 5.72701E+11 Copier-Toshiba 8510 25.00 25.00 25.00 25.00 25.00 1,025.00
12 95 x Fax-Toshiba 651 33.32 33.32 33.32 33.32 33.32 1,632.52
12 95 x MSI-Telephone Sys. 7.90 7.90 7.90 7.90 7.90 386.98
12 95 x MSI-Phone Cables 8.33 8.33 8.33 8.33 8.33 408.33
12 95 x MSI-Infinite DVXII Phone 106.55 106.55 106.55 106.55 106.55 5,220.95
1 96 x Shelvings-Bay Area 60.09 60.09 60.09 60.09 60.09 3,004.67
3 96 x Storage Bins-Yellow 28.37 28.37 28.37 28.37 28.37 1,475.34
4 96 x Work Station 34.44 34.44 34.44 34.44 34.44 1,825.41
5 96 x MSI-Telephone set 7.35 7.35 7.35 7.35 7.35 396.91
6 96 x Work Stations 64.38 64.38 64.38 64.38 64.38 3,541.08
6 96 x Work Stations 64.38 64.38 64.38 64.38 64.38 3,541.08
6 96 x Chairs -8Nos. 20.88 20.88 20.88 20.88 20.88 1,148.40
6 96 x Chairs-2Nos. 4.32 4.32 4.32 4.32 4.32 237.60
7 96 x Computer Cabinet 0.00 16.38 16.38 16.38 16.38 917.52
7 96 x Reed's Office 0.90 0.90 0.90 0.90 50.40
7 96 MSI-Telephone Set 0.00 5.25 5.25 5.25 5.25 294.14
7 96 MSI-Telephone Set-3pcs 0.00 18.19 18.19 18.19 18.19 1,018.50
7 96 System Night Bell 0.00 3.50 3.50 3.50 3.50 195.94
7 96 Y Furniture - Eng office 0.00 34.36 34.36 34.36 34.36 1,924.35
9 96 Y Work Stations 0.00 0.00 0.00 70.24 70.24 4,074.09
-------- -------- -------- -------- --------- ----------
859.91 937.67 937.17 1,007.42 1,007.42 51,538.36
======== ======== ======== ======== ======== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Deprec. Deprec Deprec
Mo. Yr Asset # Cost Center Description Prior Yrs 10/31/95 10/31/96
<S> <C> <C> <C> <C> <C> <C> <C>
Do not use 0.00 0.00
4 93 5.72002E+11 Storage Racks 246.43 164.29 164.29
1 94 5.70773E+11 Drafting Table 24.21 48.43 48.43
3 94 5.72773E+11 3 Kenn Workstations 55.43 110.86 110.86
4 94 5.72773E+11 3 Ergo Workstations 22.71 45.43 45.43
4 94 5.72773E+11 Mold Racks 950.71 1,901.43 1,901.43
5 94 5.72773E+11 Frt - Beams & Deck 69.64 139.29 139.29
6 94 5.70773E+11 Workbench 36.07 72.14 72.14
6 94 5.72773E+11 Mold Racks 20.86 41.71 41.71
6 94 5.72773E+11 Pallet Rack 42.86 85.71 85.71
7 94 5.70773E+11 Work Station - Ergon 7.93 92.00 11.07
7 94 5.72773E+11 Printer - Tharo 198.00 15.86 396.00
7 94 5.72773E+11 2 Workstations 46.00 396.00 92.00
8 94 5.70773E+11 Storage Cabinet 42.50 85.00 85.00
9 94 5.70773E+11 Office Furniture 40.36 80.71 80.71
11 94 5.70773E+11 Blueprint Machine 328.20 328.20
11 94 5.70773E+11 Desk, Files, Chairs 331.20 331.20
2 95 5.70002E+11 Bookcase, File, Chair 225.00 300.00
3 95 5.70773E+11 File-Flat 5 Drawer 84.27 126.40
3 95 5.72773E+11 Hyd Hand Truck 130.27 195.40
4 95 5.72702E+11 5 Chairs - gray 102.08 175.00
4 95 5.72701E+11 Copier-Toshiba 8510 175.00 300.00
12 95 x Fax-Toshiba 651 366.48
12 95 x MSI-Telephone Sys. 86.87
12 95 x MSI-Phone Cables 91.67
12 95 x MSI-Infinite DVXII Phone 1,172.05
1 96 x Shelvings-Bay Area 600.93
3 96 x Storage Bins-Yellow 226.98
4 96 x Work Station 241.09
5 96 x MSI-Telephone set 44.10
6 96 x Work Stations 321.92
6 96 x Work Stations 321.92
6 96 x Chairs -8Nos. 104.40
6 96 x Chairs-2Nos. 21.60
7 96 x Computer Cabinet 65.54
7 96 x Reed's Office 3.60
7 96 MSI-Telephone Set 21.01
7 96 MSI-Telephone Set-3pcs 72.75
7 96 System Night Bell 14.00
7 96 Y Furniture - Eng office 137.45
9 96 Y Work Stations 140.49
-------- -------- --------
1,803.71 4,654.87 9,085.11
======== ======== ========
</TABLE>
<PAGE>
Central CPV
FY95 Depreciation Schedule Useful Life = 3 Years or **7 Years
Account 207 - Systems Equipment
<TABLE>
<CAPTION>
Mo. Yr Asset # Cost Cen Description Cost Basis Nov Dec Jan Feb
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 93 7E+11 Custom Config Kit 1,160.00 13.81 13.81 13.81 13.81
9 93 7.7E+11 3D V5.51 Upgrade 11,853.00 141.11 141.11 141.11 141.11
3 94 7.7E+11 Exec 4876 PC 2,375.00 28.27 28.27 28.27 28.27
4 94 7.7E+11 Terminal-3486 825.00 9.82 9.82 9.82 9.82
9 94 7.7E+11 CAD Invty Trsfer 2,894.00 34.45 34.45 34.45 34.45
9 94 7.7E+11 Word Proc-Smith 280.00 3.33 3.33 3.33 3.33
10 94 7.7E+11 Contr. Interface 5,333.00 63.49 63.49 63.49 63.49
11 94 7.7E+11 Plotter-Calcomp 5,130.00 142.50 142.50 142.50 142.50
1 95 7.7E+11 2 Pentium66 PCs 7,428.00 0.00 0.00 206.33 206.33
3 95 7.7E+11 Mass Med Card 2,141.00 0.00 0.00 0.00 0.00
5 95 7.7E+11 Var Comp Equip 850.00 0.00 0.00 0.00 0.00
7 95 7.7E+11 CTC 486/66 PC 2,145.00 0.00 0.00 0.00 0.00
Do not use 0.00 0.00 0.00 0.00 0.00
42,414.00 436.79 436.79 643.12 643.12
Mo. Yr Asset # Cost Cen Description Mar Apr May Jun July Aug
6 93 7E+11 Custom Config Kit 13.81 13.81 13.81 13.81 13.81 13.81
9 93 7.7E+11 3D V5.51 Upgrade 141.11 141.11 141.11 141.11 141.11 141.11
3 94 7.7E+11 Exec 4876 PC 28.27 28.27 28.27 28.27 28.27 28.27
4 94 7.7E+11 Terminal-3486 9.82 9.82 9.82 9.82 9.82 9.82
9 94 7.7E+11 CAD Invty Trsfer 34.45 34.45 34.45 34.45 34.45 34.45
9 94 7.7E+11 Word Proc-Smith 3.33 3.33 3.33 3.33 3.33 3.33
10 94 7.7E+11 Contr. Interface 63.49 63.49 63.49 63.49 63.49 63.49
11 94 7.7E+11 Plotter-Calcomp 142.50 142.50 142.50 142.50 142.50 142.50
1 95 7.7E+11 2 Pentium66 PCs 206.33 206.33 206.33 206.33 206.33 206.33
3 95 7.7E+11 Mass Med Card 59.47 59.47 59.47 59.47 59.47 59.47
5 95 7.7E+11 Var Comp Equip 0.00 0.00 23.61 23.61 23.61 23.61
7 95 7.7E+11 CTC 486/66 PC 0.00 0.00 0.00 0.00 0.00 59.58
Do not use 0.00 0.00 0.00 0.00 0.00 0.00
702.59 702.59 726.20 726.20 726.20 785.79
Deprec Acc Deprec
Mo. Yr Asset # Cost Cen Description Sep Oct BV 10/31/95 Prior yrs. 10/31/95
6 93 7E+11 Custom Config Kit 13.81 13.81 745.72 248.57 165.71
9 93 7.7E+11 3D V5.51 Upgrade 141.11 141.11 7,619.78 2,539.93 1,693.29
3 94 7.7E+11 Exec 4876 PC 28.27 28.27 1,866.07 169.64 339.29
4 94 7.7E+11 Terminal-3486 9.82 9.82 707.14 117.86
9 94 7.7E+11 CAD Invty Trsfer 34.45 34.45 2,273.86 206.71 413.43
9 94 7.7E+11 Word Proc-Smith 3.33 3.33 220.00 20.00 40.00
10 94 7.7E+11 Contr. Interface 63.49 63.49 4,190.21 380.93 761.86
11 94 7.7E+11 Plotter-Calcomp 142.50 142.50 3,420.00 1,710.00
1 95 7.7E+11 2 Pentium66 PCs 206.33 206.33 5,364.67 2,063.33
3 95 7.7E+11 Mass Med Card 59.47 59.47 1,665.22 475.78
5 95 7.7E+11 Var Comp Equip 23.61 23.61 708.33 141.67
7 95 7.7E+11 CTC 486/66 PC 59.58 59.58 1,966.25 178.75
0.00 0.00
0.00 0.00
Do not use 0.00 0.00 0.00 0.00
785.79 785.79 30,747.26 3,565.78 8,100.96
</TABLE>
<PAGE>
SCHEDULE 6.2(A)(ii)
Indebtedness
All items disclosed in the October 31, 1995 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> <C> <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 08-01-06
10. 11,750,000 L/C - IRB F. Union/CoreSt. 10,450,000 11-01-15
Central CPVC Corp.
1. $ 2,000,000 Demand Note CoreStates $ 1,182,530 Demand
Spraysafe Ltd:
1. $ 2,624,500 Line of Credit Nat'l Westminster 2,624,500 on going
2. 1,110,000 Term Note RoyalBank 1,110,000 7 years
on Scotland
</TABLE>
Guarantees
All items disclosed in the October 31, 1995 financial statements included with
Form 1 O-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> <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.
<PAGE>
SCHEDULE 6.2(a)(ii)
Liens
All items disclosed in the October 31, 1995 financial statements included with
Form 1-OK and the notes thereto, as well as the following (certain of which may
be included in such financial statements)
Company
-------
1 . Mortgage Lien - CoreStates Security Interest on
451 North Cannon Avenue
Lansdale, PA
Mortgage Lien - CoreStates Security Interest on
2nd & Towamencin Avenues
Lansdale, PA
2. All Warehouse Leases - lien upon property held at warehouse (does not
include following)
3. All Auto Leases - lien upon autos under lease
4. All Auto Loans - lien upon autos subject to loan
5. Lien of First Union Bank, National Association ("Fidelity") in and to any
property, credits, securities or monies in the possession of Fidelity from
time to time, as provided in Section 6.02 of the Term Loan Agreement
dated as of April 15, 1994.
<PAGE>
SCHEDULE 6.6. 000's omitted
15. Commitments and Contingent Liabilities:
Agreements and Contracts
The Company is a party to patent licensing agreements to manufacture
and sell certain types of sprinkler devices. Under the terms of the agreements,
the Company is required to pay a royalty on net commissioned sales (as defined
in the agreements) of the licensed product during the terms of the patents. The
expense under these agreements was $323,000 $417 and $380 for the years ended
October 31, 1996, 1995 and 1994, respectively.
The Company has employment contracts with certain officers under which
their employment could not be terminated without five years prior notice. The
Company also has various purchase commitments for materials, supplies, machinery
and equipment incident to the ordinary conduct of business. Such commitments are
not at prices in excess of current market.
The Company, in the normal course of business, is party to various
claims and lawsuits with regard to its products and other matters. Management
believes that the ultimate resolution of these matters will not have a material
impact on the Company's financial position.
The Company has made certain commitments to 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 and will be financed by a long-term IRB. Capital
expenditures incurred in fiscal 1996 amounted to $1,300 and are expected to be
$2,200 in fiscal 1997 and $4,000 in fiscal 1998. These commitments are for
buildings and various machinery and equipment. As of October 31, 1996, the open
commitments relating to this facility were approximately $6.2 million in fiscal
1997 and 1998. It is expected that a portion of the facility will be completed
and in operation in fiscal 1997. A second phase will be additional building,
machinery and
<PAGE>
Exhibit "A"
A copy of the Construction Contract was previously delivered to the Lender.
<PAGE>
Exhibit 11
CENTRAL SPRINKLER CORPORATION
EARNINGS PER COMMON SHARE
(Amounts in thousands, except per share amounts)
Year Ended Year Ended Year Ended
October 31, October 31, October 31,
1996 1995 1994
----------- ----------- -----------
Income before cumulative effect
of accounting change $3,763 $8,458 $3,780
Cumulative effect of accounting
change to SFAS No. 109-
Income Taxes - - 238
------ ------ ------
Net income $3,763 $8,458 $4,018
====== ====== ======
Average number of common shares
outstanding 3,793 3,902 4,953
Adjustment to exclude average
unallocated common shares in ESOP (640) (672) -
Adjustment for assumed conversion
of stock options 177 152 51
------ ------ ------
Average number of common shares 3,330 3,382 5,004
====== ====== ======
Net Income per common share:
Before cumulative effect of
accounting change $1.13 $2.50 $.75
Cumulative effect of accounting
change for income taxes - - .05
------ ------ ------
Net income per common share $1.13 $2.50 $.80
====== ====== ======
<PAGE>
Exhibit 21
CENTRAL SPRINKLER CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Names
Jurisdiction of Under Which
Name Organization Doing Business
- ---- ------------ --------------
CSC Finance Company Delaware Corporate Name
CSC Investment Company Delaware Corporate Name
Central Sprinkler Company Pennsylvania Corporate Name
Spraysafe Automatic
Sprinklers Limited United Kingdom Corporate Name
Central Sprink Inc. California Corporate Name
Central Castings Corporation Alabama Corporate Name
Central CPVC Corporation Alabama Corporate Name
Central Sprinkler Export
Corporation Barbados Corporate Name
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed Form S-8
Registration Statement File No. 33-30092.
Arthur Andersen LLP
Philadelphia, Pa.
January 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000766041
<NAME> CENTRAL SPRINKLER
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 2,884
<SECURITIES> 12,466
<RECEIVABLES> 43,140
<ALLOWANCES> 4,622
<INVENTORY> 43,414
<CURRENT-ASSETS> 105,137
<PP&E> 60,166
<DEPRECIATION> 18,807
<TOTAL-ASSETS> 150,918
<CURRENT-LIABILITIES> 69,615
<BONDS> 24,674
0
0
<COMMON> 55
<OTHER-SE> 54,337
<TOTAL-LIABILITY-AND-EQUITY> 150,918
<SALES> 187,220
<TOTAL-REVENUES> 187,220
<CGS> 134,995
<TOTAL-COSTS> 134,995
<OTHER-EXPENSES> 43,226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,939
<INCOME-PRETAX> 6,060
<INCOME-TAX> 2,297
<INCOME-CONTINUING> 3,763
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,763
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
</TABLE>
