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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission file number 33-10740
AMSTAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3382652
(State of Incorporation) (I.R.S. Employer Identification No.)
Long Wharf Maritime Center, 555 Long Wharf Drive, Suite 12
New Haven, CT 06511
(Address of principal executive offices)
(203) 777-2274
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No_______ (2) Yes X No_______
As of March 24, 1995, the aggregate market value of the
voting stock held by nonaffiliates of the registrant was $-0-.
As of March 24, 1995, a total of 1,000 shares of common
stock of the Company was outstanding. All of the common stock is
owned by ESSTAR Incorporated.
Documents Incorporated by Reference:
None
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PART I
Item 1. Description of Business
Amstar Corporation (the "Company" or "Amstar") is a
privately held Delaware corporation which was formed in l986 for
the purpose of effecting the merger (the "Merger") of its wholly
owned indirect subsidiary ("Acquisition") with and into AHI,
Inc., a Delaware corporation ("AHI"). On November 21, 1986,
Acquisition merged with and into AHI and AHI became a wholly
owned indirect subsidiary of the Company. AHI acquired the
former Amstar Corporation in a leveraged buy-out in February
1984.
On December 5, 1986, AHI adopted a plan of complete
liquidation pursuant to Section 332 of the Internal Revenue Code
of 1954, as amended, and, effective December 31, 1986, the assets
of AHI were distributed to wholly owned subsidiaries of the
Company which together owned all the outstanding shares of
capital stock of AHI.
On July 30, 1987, the Company sold its Spreckels sugar beet
processing operations and its Industrial Products Group to a
leveraged buy-out group including certain managers of those
units. The purchase price was approximately $170 million,
including the discharge of certain indebtedness, $15 million of
preferred stock, and warrants to purchase common stock of the new
corporation. On December 22, 1988, the Company sold the capital
stock of Amstar Sugar Corporation and other subsidiaries engaged
in the cane sugar refining and related packaging businesses to an
affiliate of Tate & Lyle PLC, London, England for approximately
$310 million. On March 28, 1991, the Company sold the capital
stock of Milford Products Corporation ("Milford"), a subsidiary
engaged in the manufacture and sale of saw blades and
accessories, to a U.S. subsidiary of Sandvik AB of Sweden, for
approximately $19.7 million in cash. The Company had three
subsidiaries engaged in the manufacture and sale of specialized
electronic equipment. Those units, all of which have been sold,
were Aiken Advanced Systems, Inc., California Instruments
Corporation and Keltec Florida, Inc. Those units constituted the
Amstar Electronics Group (the "Electronic Group").
On June 30, 1989, the holders of all the then outstanding
shares of common stock of Amstar exchanged (the "Amstar
Exchange") such shares for shares of common stock of ESSTAR
Holdings Inc., a Delaware corporation, now known as ESSTAR
Incorporated ("Esstar"). Simultaneously with the Amstar
Exchange, the holders of all the then outstanding shares of
common stock of EI Holdings Corp., a Delaware corporation ("EI
Holdings"), exchanged such shares for shares of Esstar common
stock (together with the Amstar Exchange, the "Combination"). As
a result of the Combination, Amstar and EI Holdings each became
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direct, wholly owned subsidiaries of Esstar. Affiliates of
Merrill Lynch Capital Partners, Inc. ("ML Capital Partners"), a
subsidiary of Merrill Lynch & Co., Inc., hold an aggregate of
approximately 91.3% of the voting power of Esstar, and
approximately 67.7% of the total common equity of Esstar
including the shares of stock issuable upon exercise of
outstanding employee stock options exercisable within 60 days,
but not including shares issuable upon conversion of outstanding
shares of preferred stock and non-voting common stock into voting
common stock. The Company has an investment in certain
securities of ESSEX Holdings, Inc., a subsidiary of EI Holdings.
(See "Long-Term Investments" at page 16.) ESSEX Holdings, Inc.,
referred to herein as "Essex", changed its name from ESSEX
Industries, Inc., effective January 23, 1992.
In the Combination, Amstar issued (i) an aggregate of
413,362 shares of Amstar Common Stock to certain institutional
investors for $40.00 per share or an aggregate purchase price of
approximately $16.5 million in cash and (ii) an aggregate of
22,285 shares of Amstar Common Stock to certain other
institutional investors for $40.00 per share or an aggregate
purchase price of approximately $0.9 million in cash. In
addition, certain institutional investors purchased (i) an
aggregate of 404,050 shares of Amstar Common Stock held by Amstar
management investors for $40.00 per share or an aggregate
purchase price of approximately $16.2 million and (ii) an
aggregate of 32,599 shares of Amstar Common Stock for $40.00 per
share from an affiliate of ML Capital Partners for an aggregate
purchase price of approximately $1.3 million. Certain
institutional investors also purchased an aggregate of 435,750
shares of Amstar Common Stock held by certain Amstar management
investors for $40.00 per Amstar share for an aggregate purchase
price of approximately $17.4 million.
In connection with the Combination, Amstar (i) repurchased
49,550 shares of Amstar Common Stock from two former members of
Amstar management for $40.00 per share or an aggregate purchase
price of approximately $2.0 million, (ii) repurchased 250,000
shares of Amstar Common Stock from affiliates of ML Capital
Partners for $40.00 per share or an aggregate purchase price of
approximately $10.0 million, (iii) made a supplemental payment
aggregating approximately $0.5 million to two former Amstar
management investors, (iv) canceled an aggregate of 422,325
options to purchase Amstar Common Stock held by certain members
and former members of Amstar management for an aggregate payment
of approximately $12.8 million and (v) paid a dividend of
approximately $2.3 million to Esstar.
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Segment Information
The Company's business consists of one industry segment:
heavy-duty portable electric power tools. The power tools
segment is composed of Milwaukee Electric Tool Corporation
("METCO"). METCO is one of the three largest manufacturers and
distributors in the United States of heavy-duty portable electric
power tools and accessories sold to professional tradesmen and
consumers. METCO'S products include over 300 models of heavy-duty
portable electric tools and accessories, such as drills,
grinders, saws, blades, routers and hammers, substantially all of
which it manufactures.
Major METCO products include the following:
Diamond Drilling Equipment Saws
Band saws
Drills Chain saws
Pistol drills Circular saws
D-handle drills Jig saws
Right angle drills Miter saws
Compact drills Reciprocating saws
Super hole-shooters (Sawzall )
Cordless drills Worm drive saws
Screwdrivers
Screw-shooters, nut runners
Electromagnetic drill presses Adjustable clutch
screwdrivers
Grinders Drywall screwdrivers
Bench grinders Self-drilling, self-tapping
Right angle sander-grinders screwdrivers
Straight and die grinders Cordless screwdrivers
Hammers Power tool accessories
Hammer drills Selfeed bits
Rotary hammers Band saw blades
Hole saw blades
Reciprocating saw blades
Polishers
Sanders
Belt sanders
Circular sanders
Orbital sanders
Random orbit sanders
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Marketing and Distribution
The METCO sales organization includes a U.S. sales group; a
national accounts/home center sales group; a Canadian subsidiary
located in Scarborough, Ontario; a Mexican subsidiary located in
Mexico City; and an international sales operation located in
Brookfield, Wisconsin. The Mexican subsidiary, which was formed
in 1994, entered the Mexican market by acquiring the business of
a Mexican distributor of METCO's products.
METCO has company-operated service centers in 21 major U.S.
metropolitan areas, one in the Toronto, Canada area and one in
Mexico City, Mexico. These branches repair and service METCO's
products, sell parts and accessories, and handle order entry for
the field sales force. METCO also has a network of 522
independently-owned authorized service stations in the United
States and Canada to provide customers with post-sale warranty
and repair service.
METCO's products are sold throughout the U.S. and Canada to
distributors reaching the industrial and construction markets and
service trades. METCO also markets its tools and accessories
through hardware chains and building supply home centers. During
1994, The Home Depot accounted for approximately 11% of METCO's
net sales. All products are shipped from METCO's Distribution
Center in Olive Branch, Mississippi.
The markets in which METCO competes are highly competitive,
as portable electric tools are manufactured by a number of other
companies, both domestic and foreign. METCO competes primarily
on quality and, to a lesser extent, on price. METCO's end users
are primarily professional tradesmen.
Patents
The Company does not believe that any single patent is of
material importance to its business.
Research and Development
The Company's research and development costs amounted to
$5,782,000 for the year ended December 31, 1994, $4,531,000 for
the year ended December 31, 1993, and $3,986,000 for the year
ended December 31, 1992.
Employees
On March 1, 1995, the Company had approximately 2,100
employees. The Company regards relations with its employees to
be satisfactory.
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Environmental Matters
The Company believes that it is in compliance in all
material respects with applicable environmental laws and
regulations. The Company expended approximately $0.3 million for
environmental quality projects in the year ended December 31,
1994, and anticipates the expenditure of approximately $0.6
million for environmental quality projects in the year ending
December 31, 1995.
Item 2. Properties
PROPERTIES OF THE COMPANY
Amstar Corporation Executive office New Haven, CT
Milwaukee Electric Tool General office Brookfield, WI
Corporation
Plants Blytheville, AR;
Brookfield, WI; Pewaukee, WI;
Jackson, MS; Kosciusko, MS
Technical center Brookfield, WI
Distribution center Olive Branch, MS
Sales and service Anaheim, CA; Atlanta, GA;
offices Boston, MA; Brookfield, WI;
Chicago, IL; Cincinnati, OH;
Cleveland, OH; Dallas, TX;
Denver, CO; Detroit, MI;
Houston, TX; Kansas City,
MO; Miami, FL; Minneapolis,
MN; New Orleans, LA; New
York, NY; Philadelphia, PA;
Phoenix, AZ; San Francisco,
CA; Seattle, WA; St. Louis,
MO
Milwaukee Electric Tool Sales and service Scarborough, Ontario, Canada
(Canada) Ltd. office
Milwaukee Electric Tool, Sales and service Mexico City, Mexico
S.A. de C.V. office
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METCO's general offices and plant in Brookfield, Wisconsin,
are owned. METCO's plants in Jackson, Mississippi; Blytheville,
Arkansas; and Pewaukee, Wisconsin; its distribution center in
Olive Branch, Mississippi; and its technical center in
Brookfield, Wisconsin; are leased under leases which give METCO
options to purchase the properties. Manufacturing facilities
have an aggregate of approximately 475,000 square feet of area
and distribution facilities have an aggregate of approximately
150,000 square feet of area. In January 1995, METCO commenced
manufacturing operations in a leased facility with approximately
75,000 square feet of manufacturing area (which is included in
the aggregate manufacturing area figure given above), located in
Kosciusko, Mississippi.
Item 3. Legal Proceedings
(a) The Company is involved in various matters of
litigation incidental to the normal conduct of its business. In
management's opinion the disposition of that litigation will not
have a material adverse impact on the financial condition of the
Company.
(b) Not applicable.
Item 4. Submission of Matters to a Vote of
Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters
There is no established public trading market for the common
stock.
Item 6. Selected Financial Data
See page 8.
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<TABLE>
AMSTAR CORPORATION AND SUBSIDIARIES
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(dollars in thousands)
The following selected historical financial data are derived from the consolidated financial statements of
Amstar Corporation and its subsidiaries. The Company's continuing operations include the operations of METCO
for all periods presented and the operations of Milford and its subsidiary through March 28, 1991 (the date
on which the Company sold the stock of Milford).
The Selected Historical Consolidated Financial Data should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto.
<CAPTION>
Year Ended December 31,
Income Statement Data 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net sales $367,377 $306,441 $266,405 $242,008 $276,127
Costs of products sold 243,446 207,752 180,480 168,655 183,697
Selling, general and administrative expenses 61,936 58,023 49,272 50,687 50,505
Depreciation expense 6,975 6,439 5,494 5,311 4,146
Amortization of goodwill and other
intangibles 4,609 4,609 4,520 4,088 4,086
Operating income 50,411 29,618 26,639 13,267 33,693
Interest income 419 14,869 13,109 28,806 29,022
Interest expense (24,274) (23,591) (23,626) (36,076) (38,369)
Other income (expense), net (829) (21) (35) 311 (2,645)
Income before provision for income taxes,
extraordinary gains and cumulative
effects of changes in accounting
principles 25,727 20,875 16,087 6,308 21,701
Provision for income taxes 12,892 10,649 6,934 4,959 10,483
Income before extraordinary gains, and
cumulative effects of changes in
accounting principles $ 12,835 $ 10,226 $ 9,153 $ 1,349 $ 11,218
Balance Sheet Data:
Working capital $ 46,069 $ 48,515 $ 44,302 $ 49,979 $ 67,876
Total assets 284,195 262,881 350,758 349,737 505,276
Capitalization:
Long-term debt 195,300 201,800 195,300 204,530 332,589
Common stockholder's equity (deficit) (8,038) (20,873) 95,117 85,964 114,566
</TABLE> 8
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Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition
The following Summary of Operations with respect to the
Company's continuing operations for the years ended December 31,
1994, 1993, and 1992 is presented to accompany management's
discussion of results of operations. The Company's continuing
operations for the periods set forth above include METCO and its
subsidiaries.
During the last several years the Company divested several
operating units including the Spreckels Operations, the Industrial
Products Group, Amstar Sugar Corporation and the Electronics Group.
Historically, these operations have been reflected as Discontinued
Operations in the Company's financial statements. On April 15,
1992, the Company sold Keltec Florida, Inc., the last of its
operations which had been classified as Discontinued Operations in
its historical financial statements. (See discussion at page 2.)
The Summary of Operations should be read in conjunction with
the Consolidated Financial Statements.
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AMSTAR CORPORATION
SUMMARY OF OPERATIONS
(dollars in millions)
Year Ended December 31,
1994 1993 1992
Net sales $367.4 $306.4 $266.4
Costs of products sold 250.4 214.1 186.0
Gross profit 117.0 92.3 80.4
Selling, general and
administrative expenses 62.0 58.1 49.3
Amortization of goodwill and
other intangibles 4.6 4.6 4.5
Operating income 50.4 29.6 26.6
Interest income .4 14.9 13.1
Interest expense (24.3) (23.6) (23.6)
Other expense (.8) - -
Income before provision for
income taxes and cumulative
effect of changes in
accounting principles 25.7 20.9 16.1
Income tax provision 12.9 10.7 6.9
Income before cumulative
effects of changes in
accounting principles 12.8 10.2 9.2
Cumulative effects of changes
in accounting principles - (10.9) -
Net income (loss) $ 12.8 $ (0.7) $ 9.2
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Results of Operations
Year Ended December 31, 1994 Compared with
Year Ended December 31, 1993
Sales
Amstar's net sales were $367.4 million during the year ended
December 31, 1994, an increase of $61.0 million or 19.9% over the
preceding year. The increase is due to a 13.6% increase in unit
sales of tools and accessories, and a 5.5% increase in the
average tool unit and accessory selling price.
Income from Operations
Operating income was $50.4 million during the year ended
December 31, 1994, compared with $29.6 million during 1993.
Operating income increased as a result of higher gross profit,
partially offset by increased selling, general and administrative
expenses during 1994.
During 1994, gross profit of $117.0 million was $24.7
million greater than the preceding year as a result of higher
sales volume and improved gross margin. The greater sales volume
resulted in $18.4 million of additional gross profit. An
improvement in gross margin to 31.8% of net sales from 30.1%
during the prior year resulted in $6.3 million of additional
gross profit. The improved gross margin is due mainly to higher
production levels during 1994. Higher production levels resulted
in the spreading of fixed overhead costs over a larger number of
units, thus reducing the per unit cost of products sold, and
increasing gross margin during 1994.
Selling, general and administrative expenses, including
corporate expenses, increased $3.9 million during 1994, in
comparison with the prior year. These expenses increased
primarily as a result of greater costs incurred related to
selling and marketing programs. However, selling, general and
administrative expenses have decreased 2.1% as a percentage of
sales, because of greater sales volume.
Other Items
Interest expense, which primarily reflects $22.2 million of
interest on the 11-3/8% Senior Subordinated Notes (the "Notes"),
increased by $0.7 million during 1994 as a result of greater
average outstanding balances on the Company's revolving credit
facility and higher interest rates during the current period.
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Interest income, which primarily represents interest from
loans and advances to related parties, decreased by $14.5 million
during the current year. Subsequent to December 31, 1993, the
Company classified the Senior Subordinated Discount Notes due in
1997 (the "Discount Notes") as an offset to stockholder's equity
in the consolidated balance sheets as of December 31, 1993, and
thereafter, and has reserved in full against the accretion of
interest on the Discount Notes subsequent to December 31, 1993.
(See "Long-Term Investments" on page 16.)
The effective consolidated federal income tax rate for
continuing operations was 34.9% in 1994, compared with 38.2% in
1993. (See note 8 to the Consolidated Financial Statements
starting at page S-14.)
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Year Ended December 31, 1993, Compared with
Year Ended December 31, 1992
Sales
Amstar's net sales were $306.4 million during the year ended
December 31, 1993, an increase of $40.0 million or 15.0%, over
the preceding year. The increase is due to a 12.4% increase in
unit sales of tools and accessories, and a 2.3% increase in the
average tool unit and accessory selling price.
Income from Operations
Income from operations was $29.6 million during the year
ended December 31, 1993, compared with $26.6 million during 1992.
The improvement was due primarily to greater sales volume during
1993.
Gross margin was 30.1% of net sales during the year ended
December 31, 1993, as compared with 30.2% during 1992. Effective
January 1, 1993, Amstar adopted Financial Accounting Standard No.
109, "Accounting for Income Taxes" ("FAS 109") (See note 8 to
Consolidated Financial Statements at page S-14). This accounting
change resulted in additional depreciation included in costs of
products sold of $0.6 million during 1993. Exclusive of this
accounting change, gross margin was 30.3% of net sales, a slight
increase over 1992.
Selling, general, and administrative expenses, including
corporate expenses, increased 0.4% to 18.9% as a percentage of
sales during the year ended December 31, 1993, as compared with
the preceding year. Effective January 1, 1993, Amstar adopted
Financial Accounting Standard No. 106, "Accounting for
Postretirement Benefits Other Than Pensions" ("FAS 106") (See
note 7 to Consolidated Financial Statements at page S-12). This
accounting change resulted in additional selling and
administrative expense of $0.8 million during 1993. Exclusive of
FAS 106 charges and corporate expenses, selling and
administrative expenses increased by $8.6 million. This
represents an increase of 0.6% as a percentage of sales,
resulting from the expansion of sales and marketing programs.
Other Items
Interest expense, which primarily reflects $22.2 million of
interest on the Notes, remained unchanged from the preceding year
at $23.6 million.
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Interest income, including $14.1 million of interest from
loans and advances to related parties, increased by $1.8 million
during the current year to $14.9 million. This increase is
primarily the result of additional accretion of interest on the
Discount Notes.
The effective consolidated federal income tax rate for
continuing operations was 38.2% in 1993 compared with 30.9% in
1992, (See note 8 to the Consolidated Financial Statements
starting at page S-14.)
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Financial Condition
Years Ended December 31, 1994, 1993, and 1992
Working Capital
The working capital of the Company was $46.1 million on
December 31, 1994, $48.5 million on December 31, 1993, and $44.3
million on December 31, 1992. All working capital changes,
excluding an increase in the current portion of long-term debt of
$10 million during 1994, were normal period-to-period variations.
The accounting change caused by the adoption of FAS 109
effective January 1, 1993, resulted in a $6.3 million increase in
the carrying value of the inventory as compared to the balance at
December 31, 1992. The accounting change also resulted in the
reclassification of approximately $11.2 million of current tax
liabilities to noncurrent liabilities, and the recording of a
current deferred tax liability of $3.5 million. Additionally,
during the year ended December 31, 1993, the Company transferred
$4.0 million of noncurrent tax liabilities to Esstar, resulting
in a reduction in the Company's Receivable from Esstar. All
other working capital changes during 1993 were normal period-to-period
variations.
The Company's current ratio was 1.7 to 1.0 at December 31,
1994, as compared to 2.0 to 1.0 at December 31, 1993, and 1.9 to
1.0 at December 31, 1992. The change in the ratio during 1994 is
primarily the result of the change in the current portion of
long-term debt. (See "Leverage, Credit Availability, and
Liquidity" at page 16.)
Under the terms of the tax sharing agreement with Esstar,
the Company provides and pays income taxes as if it files its own
consolidated return. During the year ended December 31, 1994,
the Company paid Esstar $13.5 million of such taxes. During the
years ended December 31, 1993 and 1992, $6.8 million and $6.6
million, respectively, of such taxes were paid.
Receivable from Esstar represents advances made to Esstar,
which primarily result from normal period-to-period cash
management operations of the Company, and which are due and
payable to the Company on demand and bear interest at 10% per
annum. Additionally, during 1993, the Company transferred $4.0
million of noncurrent tax liabilities to Esstar, resulting in a
reduction in the Company's receivable from Esstar.
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Long-Term Investments
On June 30, 1989, in connection with the Combination, the
Company made an intercompany loan to Essex (the "Intercompany
Loan"). The Intercompany Loan was evidenced by $152.7 million
aggregate principal amount of Discount Notes due 1997 (the
"Discount Notes") and $100.0 million aggregate principal amount
of 14% Subordinated Debentures due 1997 (the "Debentures").
Interest on the Debentures was payable semi-annually, on August 1
and February 1 of each year. Essex paid the Company $1.2
million, due on August 1, 1989, and $7.0 million each due on
February 1, 1990, August 1, 1990, February 1, 1991 and August 1,
1991, of interest in cash on the Debentures, as required under
the terms thereof. On December 31, 1991, the indenture governing
the Discount Notes (the "Discount Note Indenture") was amended to
provide that, among other things, at the option of Essex, the
date from and after which cash interest must be paid on the
Discount Notes may be extended to the maturity of the Discount
Notes, February 1, 1997. Pursuant to the Debt Exchange Agreement
dated as of December 31, 1991, between Amstar and Essex, Amstar
exchanged $100.0 million aggregate principal amount of the
Debentures, plus the right to receive accrued interest thereon,
and $25.0 million accreted value of the Discount Notes, for $86.6
million of the Notes (the "Debt Swap"). As of December 31, 1993,
the Company held approximately $107.8 million accreted value of
Discount Notes. Subsequent to December 31, 1993, Essex informed
the Company that as of December 31, 1993, Essex wrote off the
remaining balance of its goodwill of $82.3 million. Based on
this information, the Company determined that, as of December 31,
1993, the ultimate realization of a portion of the Discount Notes
may be in doubt. Accordingly, the Company has classified the
accreted value of the Discount Notes as of December 31, 1993, as
an offset to stockholder's equity in the consolidated balance
sheets and statements of changes in stockholder's equity as of
December 31, 1993, and thereafter, and has reserved in full
against the accretion of interest on the Discount Notes
subsequent to December 31, 1993. As a result, the Company has
not included Essex's financial statements or a discussion of the
results of operations and financial condition of Essex.
Leverage, Credit Availability and Liquidity
As of December 31, 1994, the Company's debt included $195.3
million principal amount of the Notes (excluding $3.5 million
principal amount of Notes beneficially owned by the Company that
are held pursuant to an escrow agreement to secure certain
obligations of a subsidiary of the Company). Subsequent to
December 31, 1993, Essex informed the Company that Essex wrote
off the remaining balance of its goodwill. Accordingly, as of
December 31, 1993 and thereafter, the Company has classified the
Discount Notes as an offset to stockholder's equity in the
consolidated financial statements, resulting in a reduction in
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net equity of $107.8 million. Exclusive of this reduction, the
total debt to equity ratio was 2.1 to 1.0 on December 31, 1994,
as compared to 2.3 to 1.0 on December 31, 1993, and 2.1 to 1.0 on
December 31, 1992. The adoption of FAS 106 and FAS 109 had a
cumulative effect of reducing equity by $10.9 million during the
year ended December 31, 1993. Additionally, the Company declared
a dividend of $7.5 million on May 10, 1993 (See "Dividend" at
page 19.)
On December 31, 1991, METCO entered into a credit agreement
(the "Credit Agreement") with Heller Financial, Inc. ("Heller").
The Credit Agreement provides for a primary letter of credit
facility of $15.0 million, a primary revolving facility of $45.0
million (up to $15.0 million of which may be used for letters of
credit) and, effective January 15, 1993, a secondary revolving
loan facility of $10.0 million which was amended and increased to
$15.0 million effective October 26, 1993 (collectively the
"Credit Facility"). The Credit Agreement expires and all
obligations outstanding thereunder become due and payable on
December 31, 1995. All amounts outstanding under the Credit
Facility are Senior Indebtedness for purposes of the Indenture,
dated as of February 15, 1987, between Amstar and Chemical Bank,
as Trustee (the "Indenture").
Borrowings under the primary revolving facility are limited
to 90% of eligible accounts receivable of METCO, as defined, 65%
of eligible inventory, as defined, and the primary letter of
credit borrowing base of $15.0 million, as defined. Borrowings
under the Credit Facility bear interest at either the London
Interbank Offered Rate (LIBOR) plus 3.0% to 3.75%, or the prime
rate plus 1.75% to 2.5%, with borrowings under the secondary
revolving loan facility bearing the higher interest rates. There
is a 2.0% per annum fee on all outstanding letters of credit and
a 0.5% per annum fee on the unused portion of the Credit
Facility. In addition, if METCO's operating cash flow, as
defined, does not meet certain minimum ratios for a specified
period of time, these interest rates will increase by 1.0% on the
Credit Facility borrowings and by 0.5% on the outstanding letters
of credit. As of February 28, 1995, METCO's operating cash flow
met those ratios.
The loans made pursuant to the Credit Facility are secured
by a first security interest in substantially all the real and
personal property of METCO, the capital stock of METCO and 65% of
the capital stock of METCO's subsidiaries. Additionally, Amstar
has guaranteed the indebtedness of METCO under the Credit
Agreement pursuant to the terms of a secured guaranty, executed
in connection with the Credit Facility, as amended on December
31, 1992 and on June 7, 1994 (the "Secured Guaranty"). METCO has
granted a security interest in all of its intellectual property
pursuant to a copyright assignment agreement, a patent assignment
agreement, and a trademark assignment agreement. The obligations
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of Amstar under the Secured Guaranty are secured by a pledge of
all the capital stock of METCO pursuant to a pledge agreement
between Amstar and Heller. METCO's pledge of 65% of the capital
stock of its subsidiaries is evidenced by subsidiary pledge
agreements.
On December 31, 1994, there was $17.5 million outstanding
under the primary revolving facility, including $7.5 million of
letters of credit, and there were letters of credit of $15.0
million outstanding under the primary letter of credit facility.
As of the same date, there was $42.5 million of available credit
remaining under the terms of the Credit Agreement.
The Credit Agreement expires on December 31, 1995 and all
obligations outstanding thereunder become due and payable at that
time. As such, outstanding obligations under the Credit
Agreement of $10.0 million have been reflected as a current
obligation in the balance sheet of the Company as of December 31,
1994.
As of March 24, 1995, there was $41.6 million outstanding
under the primary revolving facility, including $7.5 million of
letters of credit, and there were $15.0 million of letters of
credit outstanding under the primary letter of credit facility.
There was $18.4 million of availability remaining under the terms
of the primary revolving facility as of the same date.
The Indenture for the Notes and the Credit Agreement contain
various covenants that restrict the business activities of the
Company. As of February 28, 1995, Amstar was in compliance with
the covenants in those agreements. The Company anticipates that
the Company and its subsidiaries will remain in compliance with
all such covenants during the next twelve months.
Management believes that funds generated by the operations
of the Company combined with its credit availability are adequate
to meet its working capital, capital expenditures and other
funding requirements.
Debt and preferred stock agreements of Esstar require that
the Company apply the proceeds of certain asset sales to reduce
the Company's indebtedness. These agreements may require Amstar
to repurchase a portion of the outstanding Notes as well as
repaying other borrowings which may be outstanding.
The Company is in the process of reviewing various
alternatives to its present capital structure, including the
potential refinancing of indebtedness outstanding under the
Notes. The availability of refinancing, if pursued, would be
subject to a number of factors, including market conditions,
economic conditions and the Company's operating performance.
While the Company believes that the positive trends reflected in
18
<PAGE>
its fiscal 1994 operating results have continued into the first
quarter of fiscal 1995, there can be no assurance as to the
Company's operating performance in 1995 or as to the other
conditions necessary to consummate a refinancing. Therefore,
there can be no assurance that a refinancing or other
transaction, if pursued, would occur. Esstar has advised the
Company that it is reviewing potential alternatives with respect
to its consolidated financial and corporate structure.
Cash Interest Expense
During each of the years ended December 31, 1994, 1993 and
1992, the Company's cash interest expense related to the Notes
was $22.2 million.
Dividend
On May 10, 1993, the Company declared, and subsequently paid
on June 28, 1993, a dividend in the aggregate amount of $7.5
million on its issued and outstanding shares of capital stock,
all of which are owned by Esstar. The Company did not declare
any dividends during 1992 or 1994.
On March 27, 1995, the Company declared, and subsequently
paid on March 29, 1995, a dividend in the aggregate amount of
$10.0 million on its issued and outstanding shares of capital
stock.
Inflation
Inflation has not had a significant effect on the Company's
operations during the 1992 through 1994 fiscal periods.
Capital Expenditures
Capital expenditures for continuing operations were $15.1
million, $8.3 million, and $6.8 million during the years ended
December 31, 1994, 1993 and 1992, respectively. Expenditures
during 1993 and 1992 include a portion of a project to further
increase the automation of motor manufacturing and other projects
related to new product development and cost reduction.
Environmental Remediation
In connection with the sale of Milford in 1991, the Company
entered into an agreement with the buyer under which it agreed to
provide, through a wholly owned subsidiary, for the remediation
of certain environmental conditions found on Milford's Branford,
Connecticut plant site during an investigation carried out by the
buyer prior to the sale. It is presently estimated that the cost
of remediation will not exceed $1.5 million. The Company's
obligations are secured in part by the pledge by the Company of
19
<PAGE>
$3.5 million aggregate principal amount of the Notes. In
addition, the Company agreed to assume the responsibility for all
workers' compensation claims incurred by Milford through March
28, 1991, which are estimated to be $2.2 million, as of December
31, 1994. A wholly owned subsidiary of the Company has recorded
a reserve for the estimated costs of the remediation and the
Company has recorded a reserve for the workers' compensation
liability. As of December 31, 1994, the Company had expended
$0.5 million on the environmental remediation and $1.9 million in
workers' compensation claims.
Cuban Claim
The Company holds a claim for compensation for operations of
a predecessor corporation seized by Cuba in 1960. The amount of
the claim, certified at approximately $81.0 million in 1969 by
the Foreign Claims Settlement Commission of the United States,
plus interest accrued in accordance with the terms of the
certification, currently is up to approximately $623.0 million.
There is no assurance that the Company will ever receive
compensation in settlement of the claim, and no value is recorded
on the Company's financial statements for this claim. The
receipt of consideration in satisfaction of such claim will
depend on a number of uncertainties, including economic and
political conditions in Cuba and the policies of the United
States government.
20
<PAGE>
Item 8. Financial Statements and Supplementary Data
(a) Financial Statements
See Item 14(a)(1) for the reference made therein to the
financial statements.
(b) Supplementary Data
Not applicable.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors1 and Executive Officers of the Registrant
Name Age Position
Howard B. Wentz, Jr. (65) Chairman of the Board
and Director
Robert A. Haversat (58) President, Chief
Executive Officer
and Director
Roger D. Chesley (51) Vice President and
General Counsel
Jeffrey A. Mereschuk (42) Vice President, Treasurer
and Chief Financial
Officer
James J. Burke, Jr. (43) Director
A. J. Fitzgibbons, III (49) Director
Alexis P. Michas (37) Director
Jerry G. Rubenstein (64) Director
__________________________
1Each of the Directors of the Company is also a Director of
Esstar. Richard Grove, President of METCO, was elected a
Director, and Executive Vice President of Esstar on March 2,
1995. Directors of the Company do not receive any retainer or
meeting fees from the Company. Mr. Rubenstein receives an annual
retainer of $20,000 from Esstar for his service as a Director of
Esstar.
21
<PAGE>
Mr. Wentz joined Duff-Norton Company, Inc. in 1969, the year
after that former subsidiary was acquired by Amstar, as Vice
President-Operations. He became President of Duff-Norton in
1970, and its Chief Executive Officer in 1972. Elected as Vice
President of Amstar in 1972, Mr. Wentz has been a member of its
Board of Directors since 1976. He served Amstar as Executive
Vice President and Chief Operating Officer from January 1979
until January 1981, and President and Chief Operating Officer
from January 1981 until July 1, 1982. He was named Chief
Executive Officer of Amstar on July 1, 1982, and elected to the
additional post of Chairman of the Board effective February 1,
1983. Mr. Wentz holds a B.S.E. degree from Princeton University
and an M.B.A. from the Harvard Graduate School of Business
Administration. He retired from Amstar on June 30, 1989, and
relinquished his positions of Chairman of the Board, President
and Chief Executive Officer. He continued as a director. On
July 27, 1989, Mr. Wentz was elected Chairman of the Board of
Amstar. Mr. Wentz is Chairman of the Board and a director of
Esstar, and was elected to those positions in June 1989. He also
is a director of Colgate-Palmolive Company and Tambrands, Inc.
He was elected Chairman of the Board of Tambrands, Inc. in June
1993.
Mr. Haversat was elected President and Chief Executive
Officer and a Director of Amstar in July 1989. He is President
and Chief Executive Officer of Esstar, and was elected to those
positions in June 1989. Since January 1989 he also has been
Chairman of the Board, President and Chief Executive Officer of
Essex and EI Holdings. From August 1987 to January 1989, Mr.
Haversat was President, Chief Executive Officer and a director of
a predecessor of Essex. From September 1986 to August 1987, Mr.
Haversat was Group Vice President of ESSEX Hardware, Inc.
("EHI"), formerly Foster Hardware and Bank Equipment Corporation,
and a Vice President of four subsidiaries of EHI. Previously, he
was President and Chief Executive Officer of McKinney Products
Company and its predecessors since 1978. On May 22, 1990, a
federal grand jury indicted McKinney, and three unrelated
corporations, for allegedly violating the antitrust laws. Five
present or former executives of three of the indicated
corporations, including Mr. Haversat also were indicted. On
April 1, 1993, following entry of a plea of nolo contendere, Mr.
Haversat was fined $250,000. On appeal, the United States Court
of Appeals found that the District Court Judge failed to properly
apply the sentencing guidelines and remanded Mr. Haversat's case
to the District Court for resentencing. In the resentencing, Mr.
Haversat was sentenced to eight months confinement and twelve
months probation, with a recommendation that the initial four
months be subject to work release. In resentencing Mr. Haversat,
the District Court Judge stated that he would have reconsidered
his earlier findings that were relied upon by the Court of
Appeals in ordering the remand but for the limitations imposed on
him in the order of the Court of Appeals. Notice of appeal of
22
<PAGE>
Mr. Haversat's sentence has been filed. Mr. Haversat is a member
of the Board of Trustees of Quinnipiac College and of Yale-New
Haven Hospital.
Mr. Chesley joined Amstar as a member of the Law Department
in 1977. He was elected Assistant Secretary in 1978 and
appointed General Attorney in 1981. He was elected Assistant
General Counsel in 1982. In 1985, Mr. Chesley was elected Vice
President and General Counsel. Mr. Chesley also is Vice
President and General Counsel of Esstar. He was elected to those
positions in June 1989. He is a member of the New York Bar and
holds an LL.B from Harvard Law School. He received a B.S. in
economics from the Wharton School of the University of
Pennsylvania.
Mr. Mereschuk was elected a Vice President of Amstar on July
27, 1989, and Chief Financial Officer on October 1, 1989, and
Treasurer on June 30, 1993. He also is Vice President,
Treasurer, Chief Financial Officer and Assistant Secretary of
Esstar, having been elected to those positions, except Treasurer,
in June 1989. He was elected Treasurer on June 30, 1993. He
also is Treasurer of METCO, having been elected to that position
on December 31, 1991. Since January 1989, Mr. Mereschuk has been
Vice President-Finance and Secretary of Essex and EI Holdings.
Mr. Burke has been a Director of Amstar since 1986. He is
a Managing Partner and a Director of First Capital Partners,
Inc., a private investment firm, a position he had held since
1993. He also has been a Director of ML Capital Partners, a
private investment firm affiliated with Merrill Lynch & Co.,
Inc., since 1987. He was the Managing Partner of ML Capital
Partners from 1993 to July 1994 and President of ML Capital
Partners from 1987 to 1993. ML Capital Partners is the general
partner of several limited partnership investment funds which own
shares of common stock and preferred stock of Esstar. Mr. Burke
was also a Managing Director of the Investment Banking Division
of Merrill Lynch & Co. from 1985 to 1994. Mr. Burke is a
director of Esstar, as well as a director of Borg-Warner Security
Corporation, Pathmark Stores, Inc., Supermarkets General Holdings
Corporation, AnnTaylor Stores Corporation, United Artists Theatre
Circuit, Inc., World Color Press, Inc. and Wherehouse
Entertainment, Inc. Mr. Burke holds a B.A. degree from Brown
University and an M.B.A. degree from the Harvard Graduate School
of Business Administration.
Mr. Fitzgibbons has been a Director of Amstar since July
1989. He is a Partner and a Director of First Capital Partners,
Inc., a position that he has held since 1993. He also has been a
Director of ML Capital Partners since 1988. He was a Partner of
ML Capital Partners from 1993 to 1994 and Executive Vice
President from 1988 to 1993. He was also a Managing Director of
the Investment Banking Division of Merrill Lynch & Co. from 1978
23
<PAGE>
to 1994. Mr. Fitzgibbons is a director of Essex, EI Holdings and
Esstar. He is also a director of Eckerd Corporation, Borg-Warner
Security Corporation, Borg-Warner Automotive, Inc. and United
Artists Theatre Circuit, Inc. Mr. Fitzgibbons holds a B.A.
degree from Boston College and an M.B.A. degree from the Columbia
University Graduate School of Business.
Mr. Michas has been a Director of Amstar since July 1989.
He is a Partner and a Director of First Capital Partners, Inc., a
position he has held since 1993. He also has been a director of
ML Capital Partners since 1989. He was a Partner of ML Capital
Partners from 1993 to 1994 and Senior Vice President of ML
Capital Partners from 1989 to 1993. Mr. Michas also was a
Director of the Investment Banking Division of Merrill Lynch &
Co. from 1990 to 1991 and a Managing Director from 1991 to 1994.
Mr. Michas is a Director of Essex, EI Holdings and Esstar. He is
also a director of Eckerd Corporation, Borg-Warner Security
Corporation, Borg-Warner Automotive, Inc., Blue Bird Corporation,
Pathmark Stores, Inc. and Supermarkets General Holdings
Corporation. Mr. Michas holds a B. A. degree from Harvard
College and an M.B.A. degree from the Harvard Graduate School of
Business Administration.
Mr. Rubenstein has been a Director of Amstar since 1986.
Mr. Rubenstein was employed by IU International Corporation
("IU") from 1966 through 1975 and was elected President of such
entity in 1973. Mr. Rubenstein left IU in 1975 and since that
time has been the President, and has had the controlling interest
in, Omni Management Associates, a private investment company, and
its predecessor firms. Mr. Rubenstein is a Director of Esstar
and Supermarkets General Holdings Corporation. Mr. Rubenstein
holds a B.B.A. from the City College of New York.
24
<PAGE>
<TABLE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of plan and non-plan compensation provided or arranged
for by the Company or a subsidiary of the Company that was awarded to, earned by, or paid to (i)
the chief executive officer of the Company, and (ii) the five most highly compensated executive
officers of the Company or a subsidiary of the Company for the years ended December 31, 1994,
1993 and 1992.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<CAPTION> OTHER ANNUAL ALL OTHER(3)
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION COMPENSATION
<S> <C> <C> <C> <C> <C>
ROBERT A. HAVERSAT(1) 1994 - - - -
PRESIDENT AND CEO 1993 - - - -
OF THE COMPANY 1992 - - - -
JOHN W. AMES 1994 $125,742 $ 71,585 $10,000 $ 16,875
VICE PRESIDENT 1993 133,667 67,164 8,756 20,812
ADMINISTRATION OF METCO 1992 130,000 48,943 7,830 18,310
RICHARD C. GROVE 1994 $246,782 $163,625 $23,756 $109,945
PRESIDENT AND CEO 1993 234,504 120,729 19,573 125,303
OF METCO 1992 225,004 93,089 18,573 111,455
DANIEL R. PERRY 1994 $115,117 $ 65,040 $ 9,225 $ 16,875
VICE PRESIDENT - SALES 1993 107,318 49,086 5,886 15,997
OF METCO 1992 100,022 33,742 7,925 13,632
DENNIS L. SCHMIDT 1994 $120,667 $ 62,675 $10,828 $ 16,875
VICE PRESIDENT - FINANCE 1993 115,117 50,048 9,475 17,482
AND CONTROLLER OF METCO 1992 110,006 36,203 8,293 15,528
MICHAEL A. SCHMIDT 1994 $115,117 $ 65,040 $ 8,202 $ 16,875
VICE PRESIDENT - MARKETING 1993 107,318 49,086 6,269 15,931
OF METCO 1992 100,022 32,742 7,127 13,597
1. The Company has been a holding company, without any employees, since June 30, 1989. Mr.
Haversat is employed by ESSTAR, the parent corporation of the Company, as President and CEO.
All of Mr. Haversat's compensation is provided by ESSTAR. The Company, and other
subsidiaries of ESSTAR, are charged by ESSTAR on a proportionate basis for the services
provided them by Mr. Haversat. The charge to the Company for Mr. Haversat was $277,600,
$245,180 and $145,600 in 1994, 1993 and 1992, respectively.
(Notes continued on next page)
25
</TABLE>
<PAGE>
2. Amounts of bonus in the Bonus column are reported for the
year for which they were earned. Bonus payments are made in
March of the year following the year for which the bonus was
earned.
3. All Other Compensation for Messrs. Ames, D. Schmidt, M.
Schmidt and Perry, for each year shown, was the contribution
by METCO to their respective participant accounts held by the
trustee under METCO's Employees' Profit Sharing Retirement
Plan (the "Retirement Plan"), a defined contribution plan
that provides retirement benefits for salaried and hourly
employees of METCO. Under the terms of the Retirement Plan,
25% of a participant's share of METCO's contribution under
the Retirement Plan for a year is paid directly to the
participant in cash, before the end of the year, rather than
to the trustee for the Retirement Plan. The cash payments
received by Messrs. Ames, Grove, D. Schmidt, M. Schmidt and
Perry, for the years 1994, 1993 and 1992 as a result of their
participation in the Retirement Plan are included in the
table above under Bonus and not under All Other Compensation.
For Mr. Grove, All Other Compensation consists of the
following amounts for 1994, 1993 and 1992, respectively:
$16,875, $26,531 and $25,749 contributed to his account held
by the trustee under the Retirement Plan; $70,809, $76,511
and $63,706 accrued for the benefit of his account under the
Supplemental Retirement Benefit Program ("SERP"); $22,261,
$22,261 and $22,000, which are the amounts of premiums paid
by Esstar with respect to Mr. Grove under an executive split-
dollar life insurance policy. Under the terms of the policy,
a portion of those amounts will be recovered by Esstar upon
Mr. Grove's termination of employment. For 1994, 1993 and
1992, the term-life insurance economic value of the split-
dollar life insurance premium for Mr. Grove were the
following respective amounts: $2,042, $1,899 and $1,712.
Since the inception of the SERP in 1989, a total of $343,264
has been accrued for the benefit of Mr. Grove's account under
the SERP. Of that total amount, a total of $211,026 was
accrued in the years 1992 through 1994 and has been reported
on Form 10-K as All Other Compensation for Mr. Grove for the
year of accrual. In 1993, Mr. Grove received a distribution
of $112,291 of the total of $272,455 that had been accrued
for his benefit as of December 31, 1993. That distribution
is not included in All Other Compensation for 1993 because of
the prior reporting of accruals.
Effective on December 31, 1992, grants of options to purchase
class A common stock of Esstar were made by the Board of
Directors of Esstar under the Esstar Incorporated 1992
Management Investors Stock Option Plan to employees of Esstar
and its subsidiaries. The total number of options granted to
all employees consisted of grants of 134,544 Basic Options
and 2,000,000 Additional Options. The option grants made to
26
<PAGE>
Messrs. Haversat, Ames, Grove, D. Schmidt, M. Schmidt and
Perry were as follows: Mr. Haversat, 34,789 Basic Options
and 250,000 Additional Options; Mr. Ames, 74,000 Additional
Options; Mr. Grove, 170,000 Additional Options; Mr. D.
Schmidt, 4,349 Basic Options and 35,000 Additional Options;
Mr. M. Schmidt, 729 Basic Options and 35,000 Additional
Options; and Mr. Perry, 664 Basic Options and 35,000
Additional Options. Basic Options were immediately
exercisable. Additional Options became exercisable on
December 31, 1994. The options all expire on December 31,
2001. The option price for all option grants was $0.01 per
share, which Esstar has stated was not materially different
from the fair market value of the related stock at the date
of grant. No amount has been recorded under All Other
Compensation with respect to the option grants.
Employment Agreement
Mr. Grove entered into an employment agreement with Esstar,
effective as of June 30, 1989, which agreement is to be adopted
by METCO. Mr. Grove's employment agreement provides that upon
his resignation during the initial term of the agreement under
circumstances that make his resignation not wholly voluntary, he
will be entitled to receive a lump-sum severance payment equal to
his then annual base salary and the highest award received by him
under the METCO Bonus Plan or a bonus plan of the Company or its
predecessors, multiplied by the greater of (i) the number of
years, including fractional portions thereof, remaining in the
initial term, and (ii) one and one-half. The initial term of the
agreement was from June 30, 1989 to June 30, 1992, and extends
automatically for successive one year periods thereafter unless
earlier terminated. In the event of Mr. Grove's disability or
death during the initial term or an extended term he or his
estate would be entitled to receive his salary and accrued
benefits earned up to the last day of the month of his death and
for six months thereafter and a bonus prorated for the portion of
the year for which his salary is paid.
Retirement Benefits (Defined Benefit)
The Company's pension plan for salaried employees terminated
on June 30, 1989. No service under the plan accrued after that
date and benefits payable under the plan became fixed on that
date. The plan provided non-contributory benefits based upon
both years of service and the employee's highest consecutive 3-
year average annual compensation during the last 10 years of
service, including bonuses. Payment of benefits remaining to be
paid under the plan has been funded through the purchase of
annuities with assets held in the trust for the plan. Mr. Grove
will be entitled to receive at age 60 monthly pension payments of
$4,433, assuming he elects a single life basis of payment.<PAGE>
27
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Esstar owns 1,000 shares of common stock, par value $0.01 per
share, of the Company, which constitutes all of the shares of
capital stock of the Company which were outstanding as of March
24, 1995. No director or executive officer of the Company owns
any shares of common stock of the Company.
Item 13. Certain Relationships and Related Transactions
All of the Directors of the Company are also Directors of
Esstar.
In connection with the Combination, the Company entered into
a tax sharing agreement with Esstar. See "Working Capital" at
page 15.)
28
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) Documents filed as part of this Form 10-K
(1) Financial Statements
The consolidated financial statements,
together with the report thereon of Arthur
Andersen LLP dated February 17, 1995, filed with
this report are listed in the accompanying Index
to Consolidated Financial Statements and Schedules
(S-1).
(2) Financial Statement Schedules
The financial statement schedules filed with
this Report are listed in the accompanying Index
to Consolidated Financial Statements and Schedules
(S-1).
(3) Exhibits
The Exhibits filed with this report are
listed in the Exhibit Index commencing at page 32.
Each management contract or compensatory plan
or arrangement required to be filed as an exhibit
to this Report pursuant to Item 14(C) identified
in the Exhibit Index by the sign # immediately
beneath the numerical listing of the filing in the
Index.
(b) Reports on Form 8-K
None
29
<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.
AMSTAR CORPORATION
By /s/ Jeffrey A. Mereschuk
Jeffrey A. Mereschuk
Vice President and
Chief Financial Officer
Dated: March 30, 1995
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 on
the dates indicated.
* President and Director
Robert A. Haversat (Principal Executive Officer)
/s/ Jeffrey A. Mereschuk Vice President and Chief
Jeffrey A. Mereschuk Financial Officer
(Principal Financial Officer)
/s/ John D. Speridakos Controller
John D. Speridakos (Principal Accounting Officer)
Dated: March 30, 1995
30
<PAGE>
Directors:
*
James J. Burke, Jr.
*
A. J. Fitzgibbons, III
*
Alexis P. Michas
*
J. G. Rubenstein
*
Howard B. Wentz, Jr.
*By /s/ Kenneth J. Jones
Kenneth J. Jones
Attorney-in-Fact
March 30, 1995
31
<PAGE>
EXHIBIT INDEX
(2)* - Agreement and Plan of Merger, dated as of November 14,
1986, by and among the Registrant, Acquisition and AHI.
(3) (I)(1)* - Restated Certificate of Incorporation of the Registrant.
(I)(2)* - Certificate of Amendment, effective December 9, 1986.
(I)(3)* - Certificate of Amendment, effective December 31, 1986.
(I)(4) - Certificate of Amendment, effective July 23, 1992.
(Incorporated by reference to exhibit (3) to Form 10-Q
of the Registrant for the quarter ended June 30, 1992)
(ii)(1)* - By-Laws of the Registrant, as amended to January 28,
1987.
(ii)(2) - Amendment to the By-Laws, effective July 27, 1989.
(Incorporated by reference to the same numbered exhibit
to Form 10-K of the Registrant for the year ended June
30, 1989.)
(4)* - Indenture dated as of February 15, 1987, between the
Company and Chemical Bank, as Trustee.
(10) (ix)(8)** - Milwaukee Electric Tool Corporation Bonus Plan.
#
(x)*** - Supplementary Retirement Benefit Program for Certain
# Key Executives of ESSTAR Incorporated and its
Subsidiaries.
_____________
* Incorporated by reference to the same numbered exhibit to
Registration Statement of the Registrant on Form S-1 (File No. 33-
10740).
** Incorporated by reference to the same numbered exhibit to Form
10-K of the Registrant for the transition period from July 1,
1989, to December 31, 1989.
*** Incorporated by reference to the same numbered exhibit to Form 10-K
of the Registrant for the year ended December 31, 1992.
# Required to be filed as an exhibit pursuant to Item 14(c).
32
<PAGE>
(xiii)(3) - Indenture dated as of June 30, 1989, between ESSEX
Industries, Inc. and ____________________, as Trustee,
and acknowledged by Amstar Corporation, relating to
Senior Subordinated Discount Notes due 1997.
(Incorporated by reference to Exhibit 3 to Form 8-K of
the Registrant, Date of Report: June 30, 1989.)
(xiii)(4)* - First Supplemental Indenture dated as of June 30, 1989,
between ESSEX Industries, Inc. and____________________, as
Trustee, and acknowledged by Amstar Corporation,
relating to Senior Subordinated Discount Notes due 1997.
(xiii)(5)** - Second Supplemental Indenture dated as of December 31, 1991,
between ESSEX Industries, Inc. and ____________, as Trustee,
and acknowledged by Amstar Corporation, relating to Senior
Subordinated Discount Notes due 1997.
(xiv)** - The Credit Agreement, dated as of December 31, 1991, between
Milwaukee Electric Tool Corporation, as borrower and Heller
Financial, Inc., as agent and lender.
(xv)(1)*** - Waiver and First Amendment to Credit Agreement dated
December 31,1992, between Milwaukee Electric Tool
Corporation and Heller Financial, Inc., as agent and lender.
(xv)(2) - Second Amendment, dated October 26, 1993, to Credit
Agreement dated as of December 31, 1991, between Milwaukee
Electric Tool Corporation, as borrower and Heller Financial
Inc., as agent and lender. (Incorporated by reference to
Exhibit 10(I) to Form 10-Q of the Registrant for the quarter
ended September 30, 1993.)
(xv)(3) - Reaffirmation, dated October 26, 1993, of Amstar
Corporation, acknowledging the Second Amendment to Credit
Agreement and reaffirming its obligations under the Secured
Guaranty dated as of December 31, 1991, in favor of Heller
Financial, Inc. (Incorporated by reference to Exhibit
10(ii) to Form 10-Q of the Registrant for the quarter ended
September 30, 1993.)
__________________
* Incorporated by reference to the same numbered exhibit to Form
10-K of the Registrant for the year ended June 30, 1989.
** Incorporated by reference to the same numbered exhibit to Form 8-K
of the Registrant, Date of Report: December 31, 1991.
*** Incorporated by reference to the same numbered exhibit to Form 10-K of
the Registrant for the year ended December 31, 1992.
33
<PAGE>
(xv)(4) - Waiver and Third Amendment to Credit Agreement, dated June
7, 1994, between Milwaukee Electric Tool Corporation and
Heller Financial, Inc., as agent and lender.
(xv)(5) - Fourth Amendment to Credit Agreement, dated as of January
26, 1995, between Milwaukee Electric Tool Corporation and
Heller Financial, Inc., as agent and lender.
(xvi)** - The Secured Guaranty of Amstar Corporation, dated as of
December 31, 1991, in favor of Heller Financial, Inc. as
agent, and the lenders specified therein.
(xvi)(1)* - Amended and Restated Secured Guaranty of Amstar Corporation
dated as of December 31, 1992, in favor of Heller Financial,
Inc. as agent, and the lenders specified therein.
(xvi)(2) - First Amendment to Amended and Restated Secured Guaranty,
dated June 7, 1994, of Amstar Corporation, in favor of
Heller Financial, Inc. as agent and specified lenders.
(xvii)** - Assignment of Copyrights and Licenses, dated as of December
31, 1991, between Milwaukee Electric Tool Corporation and
Heller Financial, Inc. as agent.
(xviii)** - Assignment of Patents, dated as of December 31, 1991,
between Milwaukee Electric Tool Corporation and Heller
Financial, Inc. as agent.
(xix)** - Assignment of Trademarks, dated as of December 31, 1991,
between Milwaukee Electric Tool Corporation and Heller
Financial, Inc. as agent.
(xx)** - Pledge Agreement, dated as of December 31, 1991, between
Amstar Corporation and Heller Financial, Inc. as agent.
(xxi)** - Subsidiary Pledge Agreement, dated as of December 31, 1991,
between Milwaukee Electric Tool Corporation and Heller
Financial, Inc. as agent.
(xxii) - Subsidiary Pledge Agreement, dated as of June 7, 1994,
between Milwaukee Electric Tool Corporation and Heller
Financial, Inc. as agent.
__________________
* Incorporated by reference to the same numbered exhibit to Form 10-K
of the Registrant for the year ended December 31, 1992.
** Incorporated by reference to the same numbered exhibit to Form 8-K
of the Registrant, Date of Report: December 31, 1991.
34
<PAGE>
(xxiii)** - Post-Closing Agreement, dated as of December 31, 1991,
between Milwaukee Electric Tool Corporation and Heller
Financial, Inc. as agent.
(xxiv)** - Debt Exchange Agreement, dated as of December 31, 1991,
between Amstar Corporation and ESSEX Industries, Inc.
(22) - List of subsidiaries of the Registrant.
(25) - Power of attorney.
(28)* - ESSTAR Incorporated 1992 Management Investors Stock
# Option Plan
(28)(viii)*** - Agreement entered into by ESSTAR Incorporated with Richard
# C. Grove, as of June 30, 1989.
_____________________
* Incorporated by reference to the same numbered exhibit to Form 10-K
of the Registrant for the year ended December 31, 1992.
** Incorporated by reference to the same numbered exhibit to Form 8-K
of the Registrant, Date of Report: December 31, 1991.
*** Incorporated by reference to the same numbered exhibit to Registration
Statement of the Registrant on Form S-1 (Regis. No. 33-10740).
# Required to be filed as an exhibit pursuant to Item 14(c).
35
<PAGE>
S-1
AMSTAR CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements
and Schedules
Page
Report of Independent Public Accountants S-2
Statements:
Amstar Corporation and Subsidiaries Consolidated
Balance Sheets as of December 31, 1994 and December
31, 1993. S-3
Amstar Corporation and Subsidiaries Consolidated
Statements of Operations for the years ended
December 31, 1994, 1993, and 1992. S-4
Amstar Corporation and Subsidiaries Consolidated
Statements of Changes in Stockholder's Equity (Deficit)
for the years ended December 31, 1994, 1993, and 1992. S-5
Amstar Corporation and Subsidiaries Consolidated
Statements of Cash Flows for the years ended December
31, 1994, 1993, and 1992. S-6
Notes to Consolidated Financial Statements S-7
Schedules - For the Years Ended December 31, 1992,
1993, and 1994
VIII Valuation and Qualifying Accounts S-19
Separate financial statements of the Registrant have been omitted
because (I) the consolidated statements of the Registrant and its
subsidiaries are filed, and (ii) the Registrant is primarily an
operating company and all subsidiaries are wholly owned and are
not indebted to any person other than the Registrant in an amount
which is material in relation to the total consolidated assets,
as of December 31, 1994, excepting indebtedness incurred in the
ordinary course of business which is not overdue and which
matures within one year from the date of its creation. Schedules
other than those listed in the index are omitted because they are
not required or are not applicable or because the required
information is included in the financial statements or notes
thereto.
<PAGE>
S-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholder of Amstar Corporation:
We have audited the accompanying consolidated balance sheets of
Amstar Corporation (a Delaware corporation and wholly-owned
subsidiary of ESSTAR Incorporated) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated
statements of operations, changes in stockholder's equity
(deficit) and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are
the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Amstar Corporation and subsidiaries as of December 31, 1994
and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Notes 7 and 8 to the consolidated financial
statements, effective January 1, 1993, the Corporation changed
its methods of accounting for postretirement benefits other than
pensions and 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 to consolidated financial statements is presented
for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. This 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
New Haven, Connecticut
February 17, 1995
<PAGE> S-3
AMSTAR CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of ESSTAR Incorporated)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
(dollar amounts in thousands)
1994 1993
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,065 $ 2,554
Accounts receivable, net of allowance
for doubtful accounts of $829
and $788 61,694 54,943
Receivable from ESSTAR Incorporated 5,194 946
Inventories 47,155 38,671
Other current assets 783 861
Total current assets 116,891 97,975
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 1,464 1,578
Buildings and structures 9,799 9,627
Machinery and equipment 93,473 81,218
--------- ---------
104,736 92,423
Less - accumulated depreciation
and amortization 33,685 28,328
--------- ---------
71,051 64,095
--------- ---------
GOODWILL AND OTHER INTANGIBLES, net of
accumulated amortization of $33,845
and $29,236 95,178 99,787
--------- ---------
OTHER ASSETS 1,075 1,024
--------- ---------
$ 284,195 $ 262,881
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 10,000 $ -
Accounts payable 21,312 15,895
Accrued interest 8,331 8,331
Accrued income taxes 1,973 1,179
Accrued payroll and benefits 13,607 11,223
Deferred income taxes 3,349 3,467
Accrued distributor rebates 4,975 2,535
Other accrued expenses 7,275 6,830
--------- ---------
Total current liabilities 70,822 49,460
--------- ---------
LONG-TERM DEBT, net of current maturities 195,300 201,800
--------- ---------
DEFERRED INCOME TAXES 4,200 9,851
--------- ---------
OTHER NONCURRENT LIABILITIES 21,911 22,643
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 10)
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock $.01 par value, 1,000 shares
authorized, issued and outstanding - -
Additional paid-in capital 64,814 64,814
Retained earnings 34,907 22,072
Notes and accrued interest receivable from
related party (107,759) (107,759)
--------- ---------
Total stockholder's equity (deficit) (8,038) (20,873)
--------- ---------
$284,195 $262,881
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
S-4
AMSTAR CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of ESSTAR Incorporated)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(amounts in thousands)
1994 1993 1992
Net sales $367,377 $306,441 $266,405
Costs of products sold 250,421 214,191 185,974
-------- -------- --------
Gross profit 116,956 92,250 80,431
Selling, general and administrative
expenses 61,936 58,023 49,272
Amortization of goodwill and other
intangibles 4,609 4,609 4,520
-------- -------- --------
Operating income 50,411 29,618 26,639
Interest income 419 14,869 13,109
Interest expense (24,274) (23,591) (23,626)
Other expense (829) (21) (35)
-------- -------- --------
Income before provision for
income taxes and cumulative
effects of changes in
accounting principles 25,727 20,875 16,087
-------- -------- --------
Provision for income taxes:
Federal 8,990 7,970 4,971
State and local 3,902 2,679 1,963
-------- -------- --------
12,892 10,649 6,934
-------- -------- --------
Income before cumulative
effects of changes in
accounting principles 12,835 10,226 9,153
Cumulative effects of changes in
accounting principles - (10,957) -
-------- -------- --------
Net income (loss) $ 12,835 $ (731) $ 9,153
======== ======== ========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
S-5
AMSTAR CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of ESSTAR Incorporated)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(dollar amounts in thousands)
Notes and
Additional Accrued Interest
Common Stock Paid-in Retained Receivable From
Shares Amount Capital Earnings Related Party
Balance, January 1, 1992 1,000 $ - $64,814 $21,150 $ -
Net income - - - 9,153 -
----- --- ------- ------- ---------
Balance,
December 31, 1992 1,000 - 64,814 30,303 -
Dividend paid to ESSTAR
Incorporated - - - (7,500) -
Net loss - - - (731) -
Reclassification of notes
and accrued interest
receivable from related
party - - - - (107,759)
----- --- ------- ------- ---------
Balance,
December 31, 1993 1,000 - 64,814 22,072 (107,759)
Net income - - - 12,835 -
----- --- ------- ------- ---------
Balance,
December 31, 1994 1,000 $ - $64,814 $34,907 $(107,759)
===== === ======= ======= =========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE> S-6
AMSTAR CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of ESSTAR Incorporated)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(amounts in thousands)
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before cumulative
effects of changes in
accounting principles $ 12,835 $ 10,226 $ 9,153
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation 6,975 6,439 5,494
Amortization of goodwill
and other intangibles 4,609 4,609 4,520
Accretion of non-cash
interest - (14,056) (12,222)
Provision for deferred taxes (5,477) 193 -
Loss on disposal of fixed
assets 1,182 - -
Changes in operating assets
and liabilities:
Accounts receivable (10,999) (6,320) (5,504)
Inventories (8,484) 4,282 (2,691)
Refundable income taxes - - 15,750
Other current assets 78 94 222
Other assets (51) (418) (198)
Accounts payable 5,417 867 (63)
Accrued income taxes 794 (9,079) 1,709
Accrued payroll and
employee benefit costs 2,384 2,199 785
Deferred income taxes (292) (3,026) -
Other current liabil-
ities 2,885 1,518 1,780
Other noncurrent
liabilities (732) 7,854 (3,103)
-------- -------- --------
Net cash provided by operating
activities 11,124 5,382 15,632
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of discontinued
operations - - 6,695
Purchases of property, plant
and equipment, net (15,113) (8,311) (6,786)
-------- -------- --------
Net cash used in investing
activities (15,113) (8,311) (91)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in revolving
credit agreement 3,500 6,500 (8,951)
Repayment of capital lease
obligations - - (289)
Dividend paid - (7,500) -
-------- -------- --------
Net cash provided by (used in)
financing activities 3,500 (1,000) (9,240)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (489) (3,929) 6,301
CASH AND CASH EQUIVALENTS,
beginning of period 2,554 6,483 182
-------- -------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 2,065 $ 2,554 $ 6,483
======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest $ 24,197 $ 23,520 $ 23,626
======== ======== ========
Income taxes $ 17,728 $ 14,928 $ 17,354
======== ======== ========
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
S-7
AMSTAR CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of ESSTAR Incorporated)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1. Organization:
On June 30, 1989, the holders of all the outstanding shares of
common stock of Amstar Corporation (the Corporation) exchanged
(the Amstar Exchange) such shares for shares of common stock of
ESSTAR Incorporated (ESSTAR). Simultaneously with the Amstar
Exchange, the holders of all the outstanding shares of common
stock of EI Holdings Corp. (EIH) exchanged (the ESSEX Exchange
and together with the Amstar Exchange, the Combination) such
shares for shares of ESSTAR common stock. As a result of the
Combination, the Corporation and EIH each became direct,
wholly-owned subsidiaries of ESSTAR. The Combination was treated
as a pooling-of-interests.
2. Summary of Significant Accounting Policies:
Principles of consolidation -
The accompanying consolidated financial statements include the
accounts of Amstar Corporation and its wholly-owned subsidiaries
Milwaukee Electric Tool Corporation (Metco) and Milrem Corp.
(Milrem). All significant intercompany transactions and accounts
have been eliminated in consolidation.
Depreciation and amortization -
Property, plant and equipment are depreciated or amortized, using
the straight-line method, over the estimated useful lives of the
assets ranging from 20 to 45 years for buildings and structures
and 3 to 16 years for machinery and equipment. Leasehold
improvements are amortized over the shorter of the lease term or
the estimated useful lives.
Expenditures for repairs and maintenance are charged against
income as incurred. Renewals and betterments are capitalized.
Goodwill and other intangibles -
Goodwill and other intangibles represent the excess of cost over
the fair value of assets acquired and liabilities assumed related
to a previous acquisition of the Corporation and are being
amortized, on a straight-line basis, over 40 years for goodwill
and 7.5 to 10 years for other intangible assets. The unamortized
balances of goodwill and other intangibles were $92,336,000 and
$2,842,000, respectively, at December 31, 1994 and $95,242,000
and $4,545,000, respectively, at December 31, 1993.
<PAGE>
S-8
-2-
The Corporation continually evaluates whether events and
circumstances have occurred which indicate that the remaining
estimated useful life of goodwill may warrant revision or that
the remaining balance of goodwill may not be recoverable. The
Corporation uses an estimate of its related business segment's
undiscounted net income over the remaining life of goodwill in
measuring whether the goodwill is recoverable.
Research and development -
The Corporation's research and development costs are charged
to costs of products sold as incurred and amounted to $5,782,000,
$4,531,000 and $3,986,000 for the years ended December 31, 1994,
1993 and 1992, respectively.
Product liability and workers' compensation -
The Corporation is partially self-insured for product liability
and workers' compensation claims. The Corporation accrues for
its product liability and workers' compensation claims based on
an assessment of claims outstanding, as well as an estimate,
based on experience, of incurred workers' compensation claims
which have not yet been reported.
Stockholder's equity -
Effective on July 23, 1992, through a reverse stock split, the
Corporation converted the then issued and outstanding 6,118,097
shares of common stock to 1,000 shares of common stock. The
number of shares as presented in the accompanying consolidated
financial statements has been retroactively restated to reflect
the reverse stock split.
Cash and cash equivalents -
The Corporation considers all highly liquid debt instruments with
an original maturity of three months or less to be cash
equivalents.
3. Inventories:
Substantially all inventories are valued at the lower of cost,
under the last-in, first-out method (LIFO), or market and include
materials, labor and manufacturing overhead. As a result of the
application of purchase accounting in 1986, the financial
accounting basis of the inventories changed, while the basis for
federal income tax reporting purposes did not. Accordingly, as
of December 31, 1994 and 1993 the LIFO inventories reflected in
the accompanying consolidated balance sheets are stated at an
amount $17,952,000 greater than the LIFO inventories reported for
federal income tax purposes.
At December 31, 1994 and 1993, the LIFO inventories reflected in
the consolidated balance sheets are $5,765,000 and $5,721,000,
respectively, less than current costs.
<PAGE>
S-9
-3-
Inventories at December 31, 1994 and 1993 consisted of the
following:
1994 1993
(amounts in thousands)
Raw materials and parts $24,672 $21,660
Work-in-process 1,423 1,167
Finished goods 21,060 15,844
------- -------
$47,155 $38,671
======= =======
4. Notes Receivable from Related Party:
Concurrent with the Combination, ESSEX Holdings, Inc. (formerly
ESSEX Industries, Inc.) (ESSEX) issued, and the Corporation
purchased, $152,733,000 aggregate principal amount of Senior
Subordinated Discount Notes due 1997 and $100,000,000 aggregate
principal amount of 14% Subordinated Debentures due 1997, for an
aggregate cash purchase price of $175,000,000.
The Senior Subordinated Discount Notes bear interest at 15% per
annum, payable semi-annually. At the option of ESSEX, the
payment of interest in cash may be deferred until the February 1,
1997 maturity date of these notes. If the cash interest payments
are deferred, the Corporation will receive additional securities
in lieu of cash. These notes are subject to redemption after
August 1, 1994, in whole or in part, at the election of ESSEX, at
a redemption price equal to 102.14% and 100% of the outstanding
principal balance as of the first day of August 1995 and 1996,
respectively.
On December 31, 1991, EIH, through its wholly-owned subsidiary
ESSEX, purchased in the open market $86,600,000 principal amount
of the Corporation's 11.375% Senior Subordinated Notes for
$64,950,000. Concurrent with the purchase, ESSEX exchanged the
Senior Subordinated Notes for its outstanding indebtedness due
the Corporation of $100,000,000 of Subordinated Debentures,
$5,833,000 of related accrued interest and $25,000,000 of Senior
Subordinated Discount Notes (the Debt Swap).
As of December 31, 1993, ESSEX wrote off the remaining balance of
its goodwill of $82,287,000 based on ESSEX's projections of
future net income. Based on this information, the Corporation
determined that, as of December 31, 1993, the ultimate
realization of a portion of the Senior Subordinated Discount
Notes may be in doubt. Accordingly, the Corporation has
classified the amount due as of December 31, 1993 under the
Senior Subordinated Discount Notes as an offset to stockholder's
equity in the accompanying consolidated balance sheets and
statements of changes in stockholder's equity (deficit). As of
December 31, 1994, the fully accreted value of the Senior
Subordinated Discount Notes was $123,921,000.
<PAGE> S-10
-4-
For the years ended December 31, 1993 and 1992, the Corporation
recognized $14,056,000 and $12,222,000 of interest income,
respectively, related to these notes receivable from affiliate.
This interest income was added to the carrying value of the
Senior Subordinated Discount Notes during the years ended
December 31, 1993 and 1992, respectively. During 1994, the
Corporation fully reserved the $16,162,000 of interest accretion
recorded during 1994 on the Senior Subordinated Discount Notes.
5. Long-Term Debt:
Long-term debt at December 31, 1994 and 1993 consisted of the
following:
1994 1993
(amounts in thousands)
11.375% Senior Subordinated Notes $195,300 $195,300
Bank debt 10,000 6,500
-------- --------
205,300 201,800
Less - current maturities 10,000 -
-------- --------
$195,300 $201,800
======== ========
Bank debt -
On December 31, 1991, Metco entered into a credit agreement with
a lending institution which provides for a primary letter of
credit facility of $15,000,000, a primary revolving facility of
$45,000,000 (of which up to $15,000,000 may be used for
additional letters of credit) and a secondary revolving loan
facility of $15,000,000 (collectively the Credit Facility).
Borrowings under the revolving facilities are limited to 90% of
eligible accounts receivable and 65% of eligible inventory, as
defined. At December 31, 1994, additional borrowings of
$42,455,000 were available under the Credit Facility. The Credit
Agreement expires and all obligations outstanding thereunder
become due and payable on December 31, 1995. Interest on
outstanding borrowings is payable at either the London Interbank
Offered Rate (6.25% at December 31, 1994) plus 3.0% to 3.75% or
the prime rate (8.5% at December 31, 1994) plus 1.75% to 2.50%,
depending upon the nature of the borrowing. If Metco's operating
cash flow, as defined, does not meet certain minimum ratios for a
specified period of time, then interest rates will be increased by 1.0%.
Borrowings under the Credit Facility are secured by a first
security interest on substantially all of the real and personal
property of Metco, the capital stock of Metco, and 65% of the
capital stock of Metco's sole subsidiary. Additionally, the
Corporation has guaranteed the indebtedness of Metco.
The Credit Facility contains certain restrictive provisions on
both Metco and the Corporation. The Metco restrictive provisions
include, among others, that Metco may not incur certain
additional indebtedness, incur certain contingent liabilities,
sell or dispose of certain assets, or make certain investments.
<PAGE> S-11
-5-
Metco is also subject to financial covenants including maximum
annual capital expenditures ($15,000,000 during 1994 and
$25,000,000 during 1995; provided that up to $2,000,000 not
expended in any fiscal year may be carried over and expended in
the next fiscal year), consolidated net income before interest,
depreciation, amortization and taxes (EBIDAT), as defined,
($41,000,000 in 1994 increasing to $42,000,000 in 1995), EBIDAT
as a ratio of interest expense, as defined (5.0 to 1.0 in 1994
and 1995), and EBIDAT as a ratio of fixed charges, as defined
(1.0 to 1.0 in 1994 and 1995).
The Corporation's restrictive provisions include, among others,
that the Corporation may not incur certain additional
indebtedness, incur certain contingent liabilities, or pay
dividends or certain other payments to ESSTAR except as set forth
in the Credit Facility. In addition, the Corporation is also
subject to a financial covenant that the ratio of certain of its
income divided by certain of its interest expense, as defined,
must not be less than 1.0 to 1.0. At December 31, 1994, Metco
and the Corporation were in compliance with the covenants in the
Credit Facility.
This Agreement provides for a 2.0% per annum fee on all
outstanding letters of credit and a 0.5% per annum fee on the
unused portion of the Credit Facility. The outstanding standby
letters-of-credit at December 31, 1994 were $22,545,000.
11.375% Senior Subordinated Notes -
The indenture agreement under which the 11.375% Senior
Subordinated Notes (the Notes) were issued does not require
sinking fund payments. Interest is payable semi-annually and the
Notes are due on February 15, 1997. The Notes are redeemable at
the option of the Corporation at a redemption price of 101.3% of
the principal amount in 1995 and 100% of the principal amount
thereafter.
The indenture agreement limits the amount of dividends which the
Corporation can pay to ESSTAR to 50% of cumulative net income, as
defined, as adjusted for certain equity transactions. As of
December 31, 1994, approximately $11,530,000 was available for
future distribution.
Maturities under the debt instruments may be accelerated upon the
occurrence of certain events as defined in the respective
agreements including, but not limited to, failure to make
principal and interest payments when due and breach of certain
covenants in the agreements.
6. Commitments and Related Matters:
Leases -
The Corporation and its subsidiaries lease property, plant and
equipment under a number of leases extending for varying periods
of time. Operating lease rental expense amounted to
approximately $3,589,000, $3,480,000 and $3,435,000 for the years
ended December 31, 1994, 1993 and 1992, respectively.
<PAGE> S-12
-6-
Minimum rental commitments as of December 31, 1994, under
non-cancellable leases with terms of more than one year, are as
follows:
Year Ending Amount
December 31, (in thousands)
1995 $2,439
1996 1,660
1997 839
1998 513
1999 440
Thereafter 521
Environmental liabilities -
The Corporation has incurred certain environmental obligations
incidental to the normal conduct of its business. The estimated
costs associated with such known obligations have been recognized
in the accompanying consolidated financial statements.
7. Retirement Benefits:
Profit sharing plans -
Metco has a profit sharing plan for substantially all of its
employees. Expense for this plan amounted to $9,469,000,
$8,221,000 and $7,381,000, for the years ended December 31, 1994,
1993 and 1992, respectively.
Other postretirement benefits -
Employees retiring from the Corporation on or after attaining age
55 and meeting certain criteria are entitled to postretirement
health care coverage and life insurance benefits. These benefits
are subject to certain limitations and the Corporation reserves
the right to change or terminate the benefits at any time.
Effective January 1, 1993, the Corporation adopted Statement
of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other than Pensions (SFAS 106). SFAS
106 requires that the cost of postretirement benefits be
recognized in the financial statements during the years employees
render service. The Corporation accrues an actuarially
determined charge for postretirement benefits during the period
in which active employees become eligible for such future
benefits. The $8,324,000 cumulative effect of adopting this
accounting change, net of a tax benefit of $2,911,000, is
reflected as a decrease to 1993 net income. Additionally, the
effect of this change during the year ended December 31, 1993 was
to reduce net income by $776,000.
<PAGE> S-13
-7-
The following table reconciles the accrued postretirement benefit
liability as reflected on the accompanying consolidated balance
sheets as of December 31, 1994 and 1993 (in thousands):
1994 1993
Retirees $5,756 $6,314
Other fully eligible participants 893 1,074
Other active participants 2,395 2,418
------ ------
Accrued postretirement benefit liability $9,044 $9,806
====== ======
Net postretirement benefit expense for 1994 and 1993 included the
following components (in thousands):
1994 1993
Service cost $ 167 $ 152
Interest cost on accumulated postretirement
benefit obligation 722 732
Change in actuarial assumptions (954) (259)
----- -----
Net postretirement benefit (income) expense $ (65) $ 625
===== =====
For measurement purposes, as of December 31, 1994, a 10% annual
rate of increase in the per capita cost of covered health care
claims was assumed for 1995, with the rate assumed to decrease
gradually to 5% for 2004 and remain at that level thereafter.
The health care cost trend rate assumption has a significant
effect on the amounts reported. Increasing the assumed health
care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of
December 31, 1994 by $776,000 and the aggregate of the service
and interest cost components of net postretirement health care
cost for the year then ended by $86,000. The weighted-average
discount rate used in determining the accumulated postretirement
benefit liability was 8.5% and 7.25% as of December 31, 1994 and
1993, respectively.
Prior to 1993, the Corporation recognized postretirement health
care benefits on a modified cash basis. Postretirement health
care benefits charged to expense was $404,000 in 1992. Prior year
financial statements have not been restated to reflect this new
method of accounting.
<PAGE> S-14
-8-
8. Income Taxes:
Under the terms of the tax sharing agreement with ESSTAR,
the Corporation provides income taxes as if it files its own
consolidated return.
Effective January 1, 1993, the Corporation adopted the provisions
of Statement of Financial Accounting Standards 109, Accounting
for Income Taxes (SFAS 109). SFAS 109 utilizes the liability
method and deferred taxes are determined based on the estimated
future tax effects of differences between the financial statement
and tax bases of assets and liabilities given the provisions of
enacted tax laws. Prior to the implementation of SFAS 109, the
Corporation accounted for income taxes using Accounting
Principles Board Opinion No. 11. The cumulative effect of
adopting this accounting change as of January 1, 1993, was to
reduce net income by $5,544,000. Prior year financial statements
have not been restated to reflect this new method.
The provisions for income taxes for the years ended December 31,
1994, 1993 and 1992 were as follows (in thousands):
1994 1993 1992
Current:
Federal $14,374 $ 7,736 $4,971
State and local 3,995 2,720 1,963
------- ------- ------
18,369 10,456 6,934
Deferred:
Federal (5,384) 234 -
State and local (93) (41) -
------- ------- ------
(5,477) 193 -
------- ------- ------
Total provision $12,892 $10,649 $6,934
======= ======= ======
<PAGE>
S-15
-9-
The tax effect of the primary temporary differences giving rise
to the Corporation's consolidated deferred tax assets and
liabilities at December 31, 1994 and 1993 are as follows (in
thousands):
1994
Current Asset Long-Term Asset
(Liability) (Liability)
Inventory related $(7,091) $ -
Post-retirement benefits - 4,055
Depreciation and amortization - (15,340)
Interest from affiliate - 6,874
State net operating losses - 3,416
Federal net operating losses 1,050 -
Other, net 3,859 1,185
------- --------
(2,182) 190
Valuation allowance (1,167) (4,390)
------- --------
Total deferred income taxes $(3,349) $ (4,200)
======= ========
1993
Current Asset Long-Term Asset
(Liability) (Liability)
Inventory related $(6,667) $ -
Post-retirement benefits - 4,104
Depreciation and amortization - (15,472)
State net operating losses - 1,150
Federal net operating losses - 1,050
Other, net 3,499 1,319
------- -------
(3,168) (7,849)
Valuation allowance (299) (2,002)
------- --------
Total deferred income taxes $(3,467) $ (9,851)
======= ========
Gross deferred tax assets of $21,013,000 and $12,708,000, net of
a valuation allowance of $5,557,000 and $2,301,000 and gross
deferred tax liabilities of $23,005,000 and $23,725,000 are
included in the deferred tax balances as of December 31, 1994 and
1993, respectively.
<PAGE>
S-16
-10-
The difference between the Corporation's Federal effective tax
rate and the statutory tax rate for the years ended December 31,
1994, 1993 and 1992 arises from the following:
1994 1993 1992
Federal statutory rate 35.0% 35.0% 34.0%
Increase (decrease) resulting from:
Goodwill amortization not
deductible 3.9 4.9 6.1
State income taxes (5.3) (4.5) (4.1)
Non-deductible depreciation - - 2.1
Reduction of prior year tax
liability - - (2.7)
Deductible reserves - - (4.5)
Statutory rate change - 1.9 -
Other, net 1.3 .9 -
---- ---- ----
Effective Federal tax rate 34.9% 38.2% 30.9%
==== ==== ====
As a result of differences in the recognition of expenses for tax
and financial statement purposes, the 1992 provision for Federal
income taxes are more than the amount currently payable due to
the following (in thousands):
1992
Accelerated depreciation $ (714)
Employee benefit reserves (86)
Insurance reserves (275)
Disposition of assets 1,768
Other 350
------
$1,043
======
At December 31, 1994, the Corporation had approximately
$3,000,000 of Federal net operating loss carryforwards which can
be used, subject to certain limitations, to offset future Federal
taxable income, if any. The carryforwards expire beginning in
the year 2007. As of December 31, 1994, the Corporation had
approximately $29,000,000 of state net operating loss
carryforwards which can be used, subject to certain limitations,
to offset future state taxable income, if any. These
carryforwards expire beginning in the year 1997.
For the year ended December 31, 1993, additional depreciation and
amortization expense of $614,000 was recognized as a result of
the adoption of SFAS 109.
<PAGE> S-17
-11-
9. Litigation:
The Corporation is involved in various matters of litigation
incidental to the normal conduct of its business. In
management's opinion, the disposition of that litigation will not
have a material adverse impact on the Corporation's financial
condition or results of operations.
10. Related Party Transactions:
In connection with the Combination, ESSTAR and its subsidiaries
incurred certain advisory, legal and financing fees. As a
result, the Corporation paid $975,000 of such fees to an
affiliate of a primary stockholder of ESSTAR. Of these fees,
$118,000 and $164,000 are included in goodwill and other
intangible assets in the accompanying consolidated balance sheets
as of December 31, 1994 and 1993, respectively, and are being
amortized over eight years, concurrent with the length of the respective debt.
During the year ended December 31, 1993, the Corporation paid a
dividend to its parent in the amount of $7,500,000. There were
no dividends declared or paid in 1994 or 1992.
The Corporation, ESSEX and ESSTAR share facilities and personnel
related to corporate administrative activities. Charges of
$3,960,000, for these costs have been allocated to the
Corporation for the years ended December 31, 1994, 1993 and 1992,
and are based on time and expenses incurred by ESSTAR.
Certain members of management of the Corporation participate in
ESSTAR's stock option plans.
Receivable from ESSTAR represents advances by the Corporation to
ESSTAR. The advances bear interest at 10% of the average
outstanding monthly balance.
11. Disclosures about Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and cash equivalents, accounts receivable and payable, and
accrued current obligations -
For these short-term account balances, the carrying amount is a
reasonable estimate of fair value.
11.375% Senior Subordinated Notes -
The fair value of the Notes is estimated to be $192,371,000,
based on the most recent traded price known at December 31, 1994.
<PAGE>
S-18
-12-
Bank loans -
The carrying value is a reasonable estimate of fair value as the
debt is frequently repriced based on prime and London Interbank
Offered rates, and there has been no significant change in credit
risks since the financing was obtained in 1991.
12. Concentrations of Credit Risk:
Financial instruments which potentially subject the Corporation
to concentration of credit risk consist principally of temporary
cash investments and trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to the
large number of customers comprising the Corporation's customer
base.
13. Significant Customers:
For the year ended December 31, 1994, sales to one customer
comprised 11% of revenues.
14. Industry Segment Data:
The Corporation's products are all included in one segment, the
power tool segment. The Corporation's principal plants and other
facilities are located in the United States, with a smaller
installation located in Canada.
<PAGE>
<TABLE>
S-19
SCHEDULE VIII
AMSTAR CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFY ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(thousands of dollars)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
(1) (2)
Balance at Charged to Charged to Deductions Balance
Beginning Costs and Other Write-Off at End
of Period Expenses Accounts of Bad Debts of Period
<S> <C> <C> <C> <C> <C>
DESCRIPTION
Fiscal Year 1992
Allowance for
Doubtful Accounts 729 183 -- (187) 725
Fiscal Year 1993
Allowance for
Doubtful Accounts 725 783 -- (720) 788
Fiscal Year 1994
Allowance for
Doubtful Accounts 788 311 -- (270) 829
</TABLE>
EXHIBIT (10) (XV) (4)
WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT
THIS WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment")
is dated this 7th day of June, 1994 by and among MILWAUKEE ELECTRIC TOOL
CORPORATION, a Delaware corporation ("Borrower"), and HELLER FINANCIAL, INC.,
a Delaware corporation with an office at 500 West Monroe Street, Chicago,
Illinois 60661 ("Agent"), individually and as Agent for the other Lenders
(as defined in the hereinafter defined Credit Agreement).
WITNESSETH:
WHEREAS, Borrower, Agent and Lenders are parties to that certain Credit
Agreement dated as of the 31st day of December, 1991 (as heretofore amended,
the "Credit Agreement"), pursuant to which Lenders have made and may
hereafter make loans and advances and other extensions of credit to Borrower;
and
WHEREAS, Borrower has sought Agent's and Lenders' consent to the creation
of a new subsidiary of Borrower to be located in Mexico; and
WHEREAS,
subject to the terms set forth in this Third Amendment, Borrower, Agent and
Lenders wish to amend certain provisions of the Credit Agreement and to waive
compliance by the Borrower with certain provisions contained in the Loan
Documents so as to allow Borrower to establish a new subsidiary in Mexico,
all on the terms and conditions set forth in this Third Amendment; and
NOW, THEREFORE, in consideration of the terms and conditions contained herein,
and of any loans, advances or extensions of credit heretofore, now or hereafter
made to or for the benefit of Borrower by Agent and Lenders, the parties hereto
agree as follows:
1. Amendment of Section 1 of the Credit Agreement. Unless otherwise specified
herein, capitalized terms used but not otherwise defineded herein shall have
the same meaning assigned thereto in the Credit Agreement.
1.1. There shall be added to the list of definitions appearing in Section 1.1
of the Credit Agreement the following definition in its proper alphabetical
order:
<PAGE>
"Metco Mexico" means a wholly-owned subsidiary of Borrower organized under the
laws of Mexico and formed by Borrower to acquire substantially all of the assets
of Herpromil, S.A. de C.V. and Industrial AR, S.A. de C.V.
1.2. The definition of "Loan Party" set forth in Section 1.1 of the Credit
Agreement is hereby amended by adding the words "Metco Mexico" after the
comma (,) following the word "Borrower" in the first line of said definition.
1.3. The definition of "Pledge Agreements" set forth in Section 1.1 of the
Credit Agreement is hereby amended by deleting the words "Subsidiary Pledge
Agreement" and substituting in their place the words "Subsidiary Pledge
Agreements."
1.4. The definition of "Subsidiary Pledge Agreement" set forth in Section 1.1
of the Credit Agreement is hereby deleted in its entirety and the following
shall be inserted in substitution therefor:
"Subsidiary Pledge Agreements" means each of the stock pledge agreements to
be executed by Borrower with respect to sixty-five percent (65%) of the
outstanding capital stock of Metco Canada and Metco Mexico, each in form and
substance satisfactory to Agent.
1.5. The Credit Agreement is hereby amended by inserting the following
definition in Section 1.1 in proper alphabetical order:
"Third Amendment Effective Date" means June 7, 1994.
1.6. Borrower's Fiscal Year 1994 Capital Expenditure limitation set forth in
Section 6.1 of the Credit Agreement is hereby amended by deleting the amount
"$8,500,000" and substituting the amount "$15,000,000" therefor.
1.7. Section 7.3 of the Credit Agreement is hereby amended by deleting clause
in its entirety and substituting in its place the following:
(c)Borrower may make Investments in or to its Subsidiary and Borrower's
Subsidiary may make Investments in or to Borrower; provided, however, with
respect to Investments by Borrower in or to Metco Mexico, such Investments
shall be limited to an aggregate amount not to exceed $10,000,000.
2
<PAGE>
1.8. Section 7.5 of the Credit Agreement is hereby amended by adding the words
"or Metco Mexico" after the words 'Metco Canada" in the second line of clause
(b) of said Section.
1.9. Section 7.19 of the Credit Agreement is hereby amended by adding the words
"and Metco Mexico" after the words "Metco Canada" and before the period (.) in
the last line of said Section.
1.10. The Credit Agreement and each of the other Loan Documents, as applicable
is hereby amended by deleting the word "Subsidiary" wherever it appears and by
substituting in all such places the word "Subsidiaries."
2. Waiver. Agent and Lenders hereby waive all Defaults or Events of Default, if
any, under the Loan Documents existing as of the date hereof; provided, however,
that this waiver shall not be construed as a continuing waiver of compliance
with any of the other terms of the Credit Agreement, the Holdings Guaranty
or any other Loan Document and nothing contained herein shall be deemed to
constitute a waiver of any other term or condition contained in the Credit
Agreement, the Holdings Guaranty or any other Loan Document.
3. Conditions to Effectiveness. This Third Amendment shall become effective
upon satisfaction of the following conditions:
(a) With respect to the amendments to subsection 6.1 of the Credit Agreement
set forth in subsection 1.6 of this Third Amendment, immediately upon
execution and delivery of this Third Amendment by Borrower to Agent and
provided no Default or Event of Default shall then exist; and
(b) With respect to the remainder of this Third Amendment, each of the
following conditions shall have been satisfied:
(1) Agent shall have received counterparts of this Third Amendment duly
executed by Borrower and each of the Requisite Lenders;
(2) Agent shall have received a duly executed copy of an amended Holdings
Guaranty in the form attached as Exhibit 1 hereto;
(3) Agent shall have received a duly executed copy of a Pledge Agreement
with respect to sixty-five percent (65%) of the outstanding capital stock of
Metco Mexico in the form of Exhibit 2 hereto.
(4) Borrower and Holdings shall have obtained all consents (including, without
limitation, any consent required from any holder of any of Borrower's or
holdings' capital stock) necessary in connection with the
3
<PAGE>
execution and delivery of this Third Amendment and any other document,
instrument or agreement contemplated hereunder, and shall have provided
satisfactory evidence thereof to Agent;
(5) No Default or Event of Default shall exist under the Loan Documents, after
giving effect to the terms of this Third Amendment and the transactions
contemplated herein;
(6) Agent shall have received the following updated Schedules to the Credit
Agreement from Borrower each certified by the Chief Financial Officer of
Borrower and each containing such revisions as Borrower deems appropriate to
give effect to the creation of and Investment in Metco Mexico by Borrower
and the other transactions contemplated by this Third Amendment: 4.1(A).
4.1(B). 4.1(C). 4.1(E). 4.4. 4.9. 4.13 4.22 and 4.24.
(7) Agent shall have received certified resolutions of the Board of Directors
of each of Borrower and Holdings authorizing the execution and delivery of
this Third Amendment and each of the other agreements or documents referred to
herein to which such Person is a party;
(8) Agent shall have received such other documents, instruments or agreements
as Agent may reasonably request.
4. Representations and Warranties of Borrower. In order to induce
Agent and Lenders to enter into this Third Amendment, Borrower represents
and warrants to Agent and Lenders that:
(a) After giving effect to each part of this Third Amendment:
(i) No Default or Event of Default (other than as specifically waived herein)
has occurred and is continuing; and
(ii) The representations and warranties of Borrower contained in the Loan
Documents are true and correct on and as of the date hereof to the same extent
as though made on and as of the date hereof except to the extent such
representations and warranties specifically relate to an earlier date.
(b) The execution, delivery and performance by Borrower of this Third Amendment
and each of the documents and agreements described herein to which Borrower is
a party are within its corporate powers and have been duly authorized by
all necessary corporate action on the part of Borrower, and this Third
Amendment and such documents and agreements are the legal, valid and binding
obligation of the Borrower enforceable against Borrower in accordance with
their respective terms.
4
<PAGE>
5. Reference to and Effect on the Credit Agreement.
5.1. Except as specifically amended above, the Credit Agreement shall remain
in full force and effect and is hereby ratified and confirmed.
5.2. The execution, delivery and effectiveness of this Third Amendment shall
not operate as a waiver of any right, power or remedy of Lenders or Agent
under the Credit Agreement or any of the other Loan Documents, or constitute a
waiver of any provision of the Credit Agreement or any of the other Loan
Documents. Upon the effectiveness of this Third Amendment, each reference in
the Credit Agreement to "this Agreement," "hereunder," "hereof," or words of
similar import shall mean and be a reference to the Credit Agreement as amended
hereby.
6. Miscellaneous.
6.1. Entire Agreement. This Third Amendment, including all schedules and other
documents attached hereto or incorporated by reference herein, constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
6.2. Counterparts. Third Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original,
but all such counterparts shall constitute one and the same instrument.
6.3. Costs and Expenses. As provided in subsection 10.1 of the Credit
Agreement, Borrower agrees to pay on demand all fees, costs and expenses
incurred by Agent in connection with the preparation, execution and
delivery of this Third Amendment, together with all fees, costs and expenses
incurred by Agent prior to the date hereof which are payable by Borrower
pursuant to subsection 10.1 of the Credit Agreement.
6.4. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS
OF LAW PROVISIONS) OF THE STATE OF ILLINOIS.
6.5. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Third
Amendment for any other purpose.
5
<PAGE>
6.6. Successors and Assigns. This Third Amendment shall be binding upon each
of the parties hereto and their respective successors and assigns, except that
Borrower may not assign its rights or obligations hereunder without the
written consent of all Lenders.
IN WITNESS WHEREOF, this Third Amendment has been duly executed as of the day
and year first above written.
MILWAUKEE ELECTRIC TOOL
CORPORATION
By /c/JEFFREY A. MERESCHUK
Title: TREASURER
Attest: KENNETH J. JONES
Title: SECRETARY
HELLER FINANCIAL, INC.,
individually and as Agent
By: ANDRE D. MAREK
Title: VICE PRESIDENT
BANK OF BOSTON
By: Title:
BANK ONE MILWAUKEE. N.A.
By:Title:
6
EXHIBIT (10) (XV) (5)
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of January 2 It, 1995
(this "Agreement") is between MILWAUKEE ELECTRIC TOOL CORPORATION, a Delaware
corporation ("Borrower") and HELLER FINANCIAL, INC., a Delaware corporation
with an office at 500 West Monroe Street, Chicago, Illinois 06601 ("Agent")
individually and as Agent for the other lenders (as defined in the hereinafter
defined Credit Agreement).
WITNESSETH:
WHEREAS, Borrower and Lender are parties to that certain Credit Agreement
dated as of the 31st day of December, 1991 (as heretofore amended, the
"Credit Agreement"; capitalized terms not otherwise defined herein having
the definitions provided therefor in the Credit Agreement) and to certain
other documents executed in connection with the Credit Agreement; and
WHEREAS, the parties hereto wish to amend the Credit Agreement as provided
herein;
NOW, THEREFORE, in consideration of the terms and conditions contained herein,
and of any loans, advances or extensions of credit heretofore, now or hereafter
made to or for the benefit of Borrower, Agent and Lenders, the parties hereto
agree as follows:
1. Amendments to the Credit Agreement.
a. Section 6. 1 of the Credit Agreement setting forth Borrower' s Capital
Expenditure covenant is hereby amended by deleting the amount "$8,500,000" and
substituting the amount "$25,000,000" therefor.
b. Section 7.8 of the Credit Agreement setting forth the Borrower' s lease
restriction covenant is hereby amended to increase the aggregate allowed lease
liability from $3,500,000 to $4,500,000.
2. Representations and Warranties. To induce Lender to enter into this
Agreement, Borrower represents and warrants to Agent and Lenders that the
execution, delivery and performance by Borrower of this Agreement are
within its powers as a Delaware Corporation, have been duly authorized by all
necessary corporate action (including, without limitation, shareholder
approval), have received all necessary governmental approval (if any shall be
required), and do not and will not contravene or conflict with any provision
of law applicable to Borrower, or the Certificate of Incorporation or Bylaws
of Borrower, or any order, judgment or decree of any court or other agency of
government or any contractual obligation binding upon Borrower; and the Credit
Agreement as amended as of the date hereof is the legal, valid and binding
obligation of Borrower enforceable against Borrower in accordance with its
terms.
2
<PAGE>
3. Conditions. The effectiveness of the amendments stated in this Agreement
is subject to the following conditions precedent or concurrent:
(a) No Default. No Default or Event of Default under the Credit Agreement, as
amended hereby, shall have occurred and be continuing;
(b) Warranties and Representations. The warranties and representations of
Borrower contained in this Agreement, the Credit Agreement, as amended hereby,
and the Loan Documents, shall be true and correct as of the effective date
hereof, with the same effect as though made on such date; and
4. Miscellaneous.
(a) Captions. Section captions used in this Agreement are for convenience only,
and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made under and governed
by the laws of the State of Illinois, without regard to conflict of laws
principles. Whenever possible each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(c)Counterparts. This Agreement may be executed in any number of counterparts
and by the different parties on separate counterparts, and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Agreement.
(d) Successors and Assigns. This Agreement shall be binding upon Borrower,
Agent and Lenders and their respective successors and assigns, and
shall inure to the sole benefit of Borrower, Agent and Lenders and
the successors and assigns of Borrower, Agent and Lenders.
(e) References. Any reference to the Credit Agreement contained in any notice,
request, certificate, or other document executed concurrently with or after
the execution and delivery of this Agreement shall be deemed to
include this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein, the
terms of this Agreement are not intended to and do not serve to effect a
notation as to the Credit Agreement. The parties hereto expressly do
not intend to extinguish the Credit Agreement. Instead, it is the express
intention of the parties hereto to reaffirm the
<PAGE> 3
indebtedness created under the Credit Agreement which is evidenced by the
Revolving Loan and the Term Loan and secured by the Collateral. The Credit
Agreement as amended hereby and each of the Loan Documents remain in full force
and effect
(g) Costs Expenses and Taxes. Borrower affirms and acknowledges that Section
10.1 of the Credit Agreement applies to this Agreement and the transactions-and
agreements and documents contemplated thereunder.
Delivered at Chicago, Illinois, as of the day and year first above written.
MILWAUKEE ELECTRIC TOOL CORPORATION
By: /S/JEFFREY A. MERESCHUK
Title: TREASURER
Name Printed: JEFFREY A. MERESCHUK
Attest: /S/KENNETH J. JONES
Title: SECRETARY
Name Printed: KENNETH J. JONES
HELLER FINANCIAL, INC.,
Individually and as Agent
By:
Name Printed:
Title:
BANK OF BOSTON
By:
Name Printed:
Title:
BANK ONE, MILWAUKEE, N.A.
By:
Name Printed:
Title:
4
EXHIBIT (10) (XVi) (2)
FIRST AMENDMENT TO AMENDED AND RESTATED SECURED GUARANTY
THIS FIRST AMENDMENT TO AMENDED AND RESTATED SECURED GUARANTY (this "First
Amendment") is made as of this June 7, 1994, by Amstar Corporation,
a Delaware corporation, with an office at 555 Long Wharf Maritime
Center, Suite 12, New Haven, Connecticut 06511 (the "Guarantor"), in favor of
Heller Financial, Inc., a Delaware corporation, with an office at 500 West
Monroe Street, Chicago, Illinois 60661 (the "Agent") and each of the
lenders listed from time to time in the Credit Agreement (together with the
Agent, the "Lenders") dated as of December 31, 1991, by and among Milwaukee
Electric Tool Corporation, a Delaware corporation ("Borrower"), Agent and
Lenders (as amended, supplemented, restated or otherwise modified from time to
time, the "Credit Agreement").
WHEREAS, the Guarantor issued an Amended and Restated Secured Guaranty dated as
of December 31, 1992 (the "Secured Guaranty") in favor of the Agent; and
reflect the terms and provisions herein set forth;
NOW, THEREFORE, in consideration of the provisions set forth above and as an
inducement to Agent and Lenders to enter into the transactions therein
described, the Guarantor agrees as follows:
1. Amendment to Secured Guaranty.
1.1 Subsection 8.9 of the Secured Guaranty is hereby amended by inserting
"Metco Mexico,"immediately in front of the words "Metco Canada" in the third
line of said subsection.
2. Representations and Warranties. To induce Agent and Lenders to enter into
this First Amendment, Guarantor represents and warrants to Agent that the
execution, delivery and performance by Guarantor of this First Amendment are
within its corporate powers, have been duly authorized by all necessary
corporate action (including, without limitation, shareholder approval),
have received all necessary governmental approval (if any shall be required),
and do not and will not contravene or conflict with any provision of law
applicable to Guarantor, the Certificate of Incorporation or Bylaws
of Guarantor, or any order, judgment or decree of any court or other
agency of government or any Contractual Obligation binding upon Guarantor;
and the Secured Guaranty as amended as of the date hereof is the legal,valid and
<PAGE>
binding obligation of Guarantor enforceable against Guarantor in accordance
with its terms.
3. Conditions. The effectiveness of the amendments stated in this First
Amendment is subject to the following conditions precedent or concurrent:
(a) No Default. No Default or Event of Default under the Secured Guaranty, as
amended hereby, shall have occurred and be continuing;
(b) Warranties and Representations. The warranties and representations of
Guarantor contained in this First Amendment, the Secured Guaranty, as amended
hereby, and the other Loan Documents to which Guarantor is a party, shall be
true and correct as of the effective date hereof, with the same effect
as though made on such date; and Agent shall have received from Borrower an
executed copy of the Third Amendment to Credit Agreement of even date
herewith together with all exhibits and schedules annexed thereto.
4. Miscellaneous.
(a) Captions. Section captions used in this First Amendment are for convenience
only, and shall not affect the construction of this First Amendment.
(b) Governing Law. This First Amendment shall be a contract made under and
governed by the laws of the State of Illinois, without regard to conflict of
laws principles. Whenever possible each provision of this First
Amendment shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this First Amendment shall be
prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(c)Counterparts. This First Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same First Amendment.
(d) Successors and Assigns. This First Amendment shall be binding upon
Guarantor, Agent and Lenders and their respective successors
2
<PAGE>
and assigns, and shall inure to the sole benefit of Guarantor, Agent and
Lenders and the successors and assigns of Guarantor, Agent and Lender.
(e) References. Any reference to the Secured Guaranty contained in any notice,
request,certificate, or other document executed concurrently with or after the
execution and delivery of this First Amendment shall be deemed to include this
First Amendment unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein, the
terms of this First Amendment are not intended to and do not serve to effect a
novation as to the Secured Guaranty. The parties hereto expressly do not intend
to extinguish the Secured Guaranty. Instead, it is the express intention of
the parties hereto to reaffirm the guaranty created under the Secured
Guaranty which is evidenced by the Secured Guaranty and secured by the
Collateral. The Secured Guaranty as amended hereby and each of the Loan
Documents remain in full force and effect.
(g) Costs. Expenses and Taxes. Guarantor affirms and acknowledges that
Section 10.1 of the Credit Agreement applies to this First Amendment and the
transactions and agreements and documents contemplated hereunder.
Delivered at Chicago, Illinois, as of the date and year first above written.
AMSTAR CORPORATION
Address: BY:/S/ JEFFREY A. MERESCHUK
555 LONG WHARF DRIVE NAME PRINTED:JEFFREY A. MERESCHUK
NEW HAVEN, CT 06511 TITLE: TREASURER
HELLER FINANCIAL, INC., as Agent
Address: By: ANDREW D. MAREK
500 West Monroe Street Name Pnnted:ANDREW D. MAREK
Chicago, Illinois 60661 Title: VICE PRESIDENT
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EXHIBIT (10) (XXii)
SUBSIDIARY PLEDGE AGREEMENT
THIS SUBSIDIARY PLEDGE AGREEMENT made as of this 7th day of June, 1994 (this
"Agreement"), is between MILWAUKEE ELECTRIC TOOL CORPORATION, a Delaware
corporation having its principal place of business and chief executive
office at 13135 West Lisbon Road, Brookfield, Wisconsin 5300S,
("Pledgor") and HELLER FINANCIAL, INC., a Delaware
corporation, having an office at 500 West Monroe Street, Chicago,
Illinois 60661, as Agent on behalf of Agent and the Lenders under the
Credit Agreement (in such capacity as Agent on behalf
of the Lenders, "Pledgee").
WHEREAS, Pledgor is the legal and beneficial owner of 98% of the issued and
outstanding capital stock of Milwaukee Electric Tool, S.A. de C.V., a Mexico
corporation organized under the laws of Mexico (the "Subsidiary"),
all of which stock is described on Exhibit A hereto;
WHEREAS, Pledgee and Pledgor have entered into that certain Credit Agreement
dated as of December 31, 1991 (as the same may have been heretofore amended or
as may hereafter be amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement");
WHEREAS, the Pledgor has received, and may hereafter receive, loans and other
financial accommodations from the Pledgee under the Credit Agreement, as a
result of which it has incurred, and expect simultaneously with the delivery of
this Agreement to, and will hereafter, incur, "Obligations" (as that term
is defined in the Credit Agreement) to the Pledgee;
WHEREAS, Pledgor wishes to grant further security and assurance to Pledgee, in
order to secure the performance of its Obligations under the Credit Agreement
and the other Loan Documents, and to that effect to pledge to Pledgee sixty-
five percent (65%) of the present and future capital stock of the
Subsidiary owned by Pledgor;
NOW, THEREFORE, in consideration of the premises and in order to induce the
Pledgee to make the loans under the Credit Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Pledgor hereby agrees with Pledgee, as follows:
1. Defined Terms. Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings given them in the Credit Agreement.
<PAGE>
2. Pledge. Pledgor hereby pledges, assigns, hypothecates, transfers, delivers
and grants to Pledgee, under the Credit Agreement, a first lien on and first
security interest in sixty-five percent (65%) of the outstanding capital stock
of the Subsidiary (the "Pledged Shares"), all other property
hereafter delivered to Pledgor in substitution for or in addition to the
Pledged Shares and in all proceeds thereof, and any other property
of Pledgor, as described in Section 4 below or otherwise
hereunder, now or hereafter delivered to, or in the possession or in the
custody of, Pledgee and any and all proceeds thereof, as collateral security
for (i) the prompt and complete payment when due (whether at the
stated maturity, by acceleration or otherwise) of all the Obligations of Pledgor
regardless of whether the Credit Agreement shall have terminated; and (ii) the
due and punctual payment and performance by Pledgor of its obligations and
liabilities under, arising out of or in connection with this
Agreement (all of the foregoing being referred to hereinafter, collectively, as
the "Liabilities"). All of the outstanding capital stock of the Subsidiary is
presently represented by
the stock certificates listed on Exhibit A hereto; and stock certificates
representing not less than sixty-five percent (65%) of such capital stock,
with undated stock powers duly executed in blank by Pledgor, are being
delivered to Pledgee simultaneously herewith. Pledgee shall maintain
possession and custody of the certificates representing the Pledged Shares in
accordance with Section 5 below and shall return the Pledged Shares in
accordance with said section.
3. ReDresentations and Warranties of Pledgor. Pledgor represents and warrants
to Pledgee that:
(a) Exhibit B sets forth (i) the authorized capital stock of the Subsidiary;
and (ii) the number of shares of capital stock of the Subsidiary that are
issued and outstanding as of the date hereof and
the number of shares of capital stock of the Subsidiary held in its treasury.
Pledgor is the record and beneficial owner of, and has good and marketable
title to, the Pledged Shares, and such shares, and all other capital
stock of the Subsidiary, are and will remain free and clear of all
pledges, liens, security interests and other encumbrances and restrictions
whatsoever, except the liens and security interests created by this Agreement;
(b) Pledgor has full corporate power, authority and legal right to execute the
pledge provided for herein and to pledge the Pledged Shares to Pledgee;
(c) this Agreement has been duly authorized, executed and delivered by Pledgor
and constitutes a legal, valid and binding obligation of Pledgor enforceable i
n accordance with its terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other
similar laws relating to or limiting creditors' rights generally and general
principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity);
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(d) there are no outstanding options, warrants or other agreements with
respect to the Pledged Shares and there are no outstanding options, warrants
or other agreements with respect to any other shares of capital
stock, or rights with respect to capital stock of the Subsidiary;
(e) the Pledged Shares have been duly and validly authorized and issued, are
fully paid and nonassessable and represent sixty-five percent (65%) of the
issued and outstanding shares of capital stock of the Subsidiary;
(f) no consent, approval or authorization of or designation or filing with
any authority on the part of Pledgor or otherwise is required in
connection with the pledge and security interest granted under
this Agreement;
(g) the execution, delivery and performance of this Agreement will not violate
any provision of any applicable law or regulation, or of any order, judgment,
writ, award or decree of any court, arbitrator or governmental
authority, domestic or foreign, or of the charter or by-laws of Pledgor or
the Subsidiary or of any securities issued by Pledgor or the Subsidiary or of
any material mortgage,indenture, lease, contract, or other agreement,
instrument or undertaking to which Pledgor or the Subsidiary is a party
or which purports to be binding upon Pledgor or the Subsidiary or upon any of
their respective assets, and will not result in the creation or imposition of
any lien, charge or encumbrance on or security interest in any of the assets
of Pledgor or the Subsidiary except as contemplated by this
Agreement; and
(h) the pledge, assignment and delivery of such Pledged Shares pursuant to
this Agreement creates a valid first lien on and a first perfected security
interest in such Pledged Shares and the proceeds thereof in favor of
Pledgee subject to no prior pledge, lien, mortgage, hypothecation,
security interest, charge, option or encumbrance or to any agreement
purporting to grant to any third party a security interest in the property or
assets of Pledgor which would include the Pledged Shares. Pledgor covenants
and agrees that it will defend Pledgee's right, title and security interest
in and to the Pledged Shares and the proceeds thereof against the claims and
demands of all persons whomsoever.
4. Stock Dividends. Distributions. Etc. If, while this Agreement is in effect,
Pledgor shall become entitled to receive or shall receive any stock
certificate evidencing capital stock of the Subsidiary
(including, without limitation, any such certificate representing a stock
dividend or a stock distribution in connection with any reclassification,
increase or reduction of capital, or issued in connection with any
reorganization), or any options or rights to acquire any capital stock of the
Subsidiary, whether as an addition to, in substitution for, or in exchange for
any of the Pledged Shares, or otherwise, Pledgor agrees to accept the same as
Pledgee's agent and to hold the same in trust for Pledgee, and to deliver
the same forthwith
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to Pledgee in the exact form received, with the endorsement of Pledgor when
necessary and/or appropriate undated stock powers duly executed in blank, to
be held by Pledgee subject to the terms hereof, as additional collateral
security for the Liabilities. In case any distribution of capital
shall be made on or in respect of the Pledged Shares or any property shall be
distributed upon or with respect to the Pledged Shares pursuant to the
recapitalization or reclassification of the capital
of the issuer thereof or pursuant to the reorganization thereof, the property
so distributed shall, subject to Section 5 below, be delivered to
Pledgee to be held by it as additional collateral security
for the Liabilities. All sums of money and property so paid or distributed in
respect of the Pledged Shares which are received by Pledgor shall,
until paid or delivered to Pledgee, be held by Pledgor
in trust as additional collateral security for the Liabilities.
5. Administration of Securitv. The following provisions shall govern the
administration of the Pledged Shares:
(a) so long as no Event of Default has occurred and is continuing and
until Pledgor has received notice from Pledgee as provided hereinbelow,
pledgor shall be entitled (subject to the other provisions hereof, including,
without limitation, Section 8 below) (i) to vote or consent with respect
to the Pledged Shares and otherwise exercise the incidents of ownership
thereof in any manner not inconsistent with this Agreement,
the Credit Agreement, or any note, document or instrument
delivered or to be delivered pursuant to or in connection with the Credit
Agreement; and (in) to receive cash dividends or other distributions made in
respect of the Pledged Shares. Pledgor hereby grants to Pledgee or
its nominee an irrevocable proxy to exercise all voting and corporate
rights relating to the Pledged Shares in any instance, including, without
limitation, to approve any merger or amalgamation involving
the Subsidiary as a constituent corporation, which proxy shall be
effective upon five (5) Business Days' prior written notice to Pledgor after
the occurrence of an Event of Default and shall remain in effect
for so long as such Event of Default is continuing. After
the occurrence and during the continuance of an Event of Default and upon five
(5) Business Days' prior written notice to Pledgor after request of Pledgee,
Pledgor agrees to deliver to Pledgee such further evidence of such
irrevocable proxy or such further irrevocable proxies to vote the Pledged
Shares as Pledgee may request.
b) Upon the occurrence and during the continuance of an Event of Default, in
the event that Pledgor, as record and beneficial owner of the Pledged Shares,
shall have received or shall have become entitled to receive,
any cash dividends or other distributions in the ordinary course,
Pledgor shall deliver to Pledgee and Pledgee shall be entitled to receive and
retain, all such cash or other distributions as additional security
for the Liabilities.
(c) Subject to any sale or other disposition by Pledgee of the Pledged Shares
or other property pursuant to this Agreement, upon full payment,
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<PAGE>
satisfaction and termination of all of the Liabilities and the termination
pursuant to Section 14 hereof of the liens and security interests
hereby granted, the Pledged Shares and any other property then held as
part of the Pledged Shares in accordance with the provisions of this
Agreement shall be returned to Pledgor.
6. Rights of Pledgee. The Pledgee shall not be liable for failure to collect
or realize upon the Obligations or any collateral
security or guaranty therefor, or any part thereof, or for any delay in so
doing, nor shall Pledgee be under any obligation to take any action whatsoever
with regard thereto. Any or all of the Pledged Shares held
by Pledgee hereunder may, if an Event of Default has
occurred and is continuing, upon five (5) Business Days prior written notice
to Pledgor, be registered in the name of Pledgee or its nominee and Pledgee
or its nominee may thereafter exercise all voting and corporate
rights at any meeting with respect to the Subsidiary and exercise
any and all rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Pledged Shares as if it were
the absolute owner thereof, including, without limitation, the
right to vote in favor of, and to exchange at its discretion any and all of
the Pledged Shares upon, the merger, consolidation, reorganization,
recapitalization or other readjustment with respect to the Subsidiary
or upon the exercise by the Subsidiary or Pledgee of any right, privilege or
option pertaining to any of the Pledged Shares, and in connection therewith,
to deposit and deliver any and all of the Pledged Shares with any committee,
depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as Pledgee may reasonably determine, all
without liability except to account for property actually received by Pledgee,
but Pledgee shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for
any failure to do so or delay in so doing.
7. Remedies. Upon the occurrence and during the continuance of an Event of
Default, Pledgee without demand of performance or other demand, advertisement
or notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon Pledgor or any other
person (all and each of which demands, advertisements and/or notices are hereby
expressly waived), may forthwith collect, receive, appropriate and realize
upon the Pledged Shares, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase, contract to
sell or otherwise dispose of (including the disposition by merger) and deliver
said Pledged Shares, or any part thereof, in one or more
portions at public or private sale or sales or transactions, at any
exchange, broker's board or at any of Pledgee's offices or elsewhere upon such
terms and conditions as Pledgee may deem advisable and at such prices as it
may deem best, for any combination of cash and/or securities or other property
or on credit or for future delivery without assumption of any credit
risk, with the right to Pledgee upon any such sale or sales, public or
private, to purchase the whole or any part of said Pledged Shares so sold,
free of any right or equity of redemption in Pledgor, which right or equity
is hereby expressly waived or released. Pledgee shall apply the net
5
<PAGE>
proceeds of any such collection, recovery, receipt, appropriation, realization,
sale or disposition, after deducting all reasonable costs and expenses of
every kind incurred therein or incidental to the safekeeping or otherwise
of any and all of the Pledged Shares or in any way relating to the
rights of the Pledgee hereunder, including reasonable attorneys' fees and
legal expenses, first to the payment, in whole or in part, of the Obligations
incurred under or pursuant to the Credit Agreement in such order
(unless a court of competent jurisdiction shall otherwise direct) as
Pledgee may elect. To the maximum extent permitted by law, Pledgor shall
remain liable for any deficiency remaining unpaid after
such application. Only after so paying over such net proceeds
and after the payment by Pledgee of any other amount required by any provision
of law, including, without limitation, Section 9-504(1) (c)
of the Uniform Commercial Code of the State of Illinois,
need Pledgee account for the surplus, if any, to the Pledgor. Pledgor
agrees that Pledgee need not give more than ten days notice
of the time and place of any public sale or of the time after
which a private sale or other intended disposition is to take place
and that such notice shall constitute reasonable notification
of such matters. No notification need be given to Pledgor if it has
signed after default a statement renouncing or modifying any right
to notification of sale or other intended disposition. In addition
to the rights and remedies granted to Pledgee in this Agreement
and in any other instrument or agreement securing, evidencing or
relating to any of the Obligations or the Liabilities, the
Pledgee shall have all the rights and remedies of a secured party under the
Uniform Commercial Code of the State of Illinois and under any
other applicable law. Pledgor shall be liable for the deficiency
if the proceeds of any sale or other disposition of the Pledged Shares
are insufficient to pay all amounts to which the Pledgee is entitled,
and the reasonable fees of any attorneys employed by the
Pledgee to collect such deficiency and any other costs and expenses
incurred by the Pledgee.
8. No Disposition. Etc. Without the prior written consent of Pledgee,
Pledgor agrees that it will not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Pledged Shares or any other capital stock of the Subsidiary, nor
will Pledgor create, incur or permit to exist any pledge, lien,
mortgage, hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the Pledged Shares or any other
capital stock of the Subsidiary, or any interest therein, or any
proceeds thereof, except for the lien and security interest
provided for by this Agreement. Without the prior written consent
of Pledgee, Pledgor agrees that it will not vote to enable,
and will not otherwise permit, the Subsidiary to (a) issue any stock or other
securities of any nature in addition to or in exchange or
substitution for the Pledged Shares or any other capital stock
of the Subsidiary; or (b) dissolve, liquidate, retire any of its capital
stock, reduce its capital or merge or consolidate with any other Person.
9. Sale of Pledged Shares. (a) Pledgor recognizes that Pledgee may
be unable to effect a public sale or disposition (including,
without limitation, any disposition in connection with a merger of a
subsidiary) of any or all of the Pledged
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<PAGE>
Shares as permitted hereunder by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Act"),
and applicable foreign or state securities laws, but may be
compelled to resort to one or more private sales or dispositions
thereof to a restricted group of purchasers who will be obliged
to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution
or resale thereof Pledgor acknowledges and agrees that any such
private sale or disposition may result in prices and other
terms (including the terms of any securities or other property
received in connection therewith) less favorable to the seller
than if such sale or disposition were a public sale or disposition and,
notwithstanding such circumstances, agrees that any such private
sale or disposition shall be deemed to be reasonable and affected
in a commercially reasonable manner. Pledgee shall be
under no obligation to delay a sale or disposition of any of
the Pledged Shares in order to permit Pledgor or the Subsidiary
to register such securities for public sale under the Act, or under
applicable state or foreign securities laws, even if Pledgor or the Subsidiary
would agree to do so.
(b) Pledgor further agrees to do or cause to be done all such
other acts and things as may be necessary to make such sale
or sales or dispositions of any portion or all of the Pledged Shares
valid and binding and in compliance with any and all applicable
laws, regulations, orders, writs, injunctions, decrees or awards
of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales
or dispositions, all at Pledgor's
expense, provided that Pledgor shall be under no obligation to
take any action to enable any or all of the Pledged Shares to
be registered under the provisions of the Act or to prepare and file a
prospectus in connection therewith. Pledgor further agrees that
a breach of any of the covenants contained in Sections 4, 5(b),
8, 9 and 10 will cause irreparable injury to the Pledgee, that the
Pledgee has no adequate remedy at law in respect of such breach
and, as a consequence, agrees, without limiting the right
of Pledgee to seek and obtain specific performance of other
obligations of Pledgor contained in this Agreement, that each
and every covenant above referenced shall be specifically
enforceable against Pledgor, and Pledgor hereby waives and
agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no
Event of Default has occurred under the Credit Agreement.
(c) Pledgor further agrees to indemnify and hold harmless
Pledgee, its respective successors and assigns, each of
Pledgee's officers, directors, employees and agents, and any Person in control
of any thereof, from and against any loss, liability, claims damage
and expense, including, without limitation, counsel fees
(in this paragraph collectively called the "Indemnified Liabilities"), under
federal, state or foreign securities laws or otherwise insofar
as such loss, liability, claims damage or expense (i) arises
out of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement, prospectus
or offering memorandum or in any preliminary prospectus or
preliminary offering
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memorandum or in any amendment or supplement to any thereof or in
any other writing prepared in connection with the offer,
sale or resale of all or any portion of the Pledged Shares or other
Collateral unless such untrue statement of material fact was
expressly provided in writing by Pledgee specifically for
inclusion therein; or (ii) arises out of or is based upon any omission or
alleged omission to state therein a material fact required to be
stated or necessary to make the statements therein not
misleading, such indemnification to remain operative regardless of any
investigation made by or on behalf of Pledgee or any successors
thereof, or any Person in control of any thereof In connection
with a public sale or other distribution, Pledgor will provide customary
indemnification to underwriters, their respective successors and
assigns, their respective officers and directors and each Person
who controls such underwriters (within the meaning of the Act). If
and to the extent that the foregoing undertakings in this paragraph
may be unenforceable for any reason, Pledgor agrees to make
maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under
applicable law. The obligations of Pledgor under this clause (c)
shall survive any termination of this Agreement.
(d) Pledgor further agrees to waive any and all rights of subrogation
it may have against the subsidiary upon the sale or
sales or dispositions of any portion or all of the Pledged Shares by
Pledgee.
10. Further Assurances. Pledgor agrees that at any time and from
time to time upon the written request of Pledgee, Pledgor will
execute and deliver all stock powers, financing statements and
such further documents and do such further acts and things as
Pledgee may reasonably request consistent with the provisions
hereof in order to effect the purposes of this Agreement.
11. Severabilitv. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition hereof, and
any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision
in any other jurisdiction.
12. No Waiver: Cumulative Remedies. Pledgee shall not by any act, delay,
omission or otherwise be deemed to have waived any of its
remedies hereunder, and no waiver by Pledgee shall be valid
unless in writing and signed by Pledgee and then only to the
extent therein set forth. A waiver by Pledgee of any right or
remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Pledgee would otherwise have on any
further occasion. No course of dealing between Pledgor and
Pledgee and no failure to exercise, nor any delay in exercising on the
part of Pledgee any right, power or privilege hereunder or under the
Credit Agreement or the other Loan Documents shall impair
such right or remedy or operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or
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<PAGE>
the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
13. Successors: Applicable Law. This Agreement and all obligations
of Pledgor hereunder shall be binding upon the successors and
assigns of Pledgor, and shall, together with the nghts and
remedies of Pledgee hereunder, inure to the benefit of Pledgee and
its successors and assigns, except that Pledgor shall not have
any right to assign its rights or obligations under this Agreement
or any interest herein without the prior written consent of Pledgee.
THIS AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED
TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.
14. Termination. This Agreement and the liens and security interests
granted hereunder shall terminate upon full and complete
performance and satisfaction of the Liabilities
15. Possession of Collateral. Beyond the exercise of reasonable
care to assure the safe custody of the Pledged Shares in the
physical possession of Pledgee pursuant hereto, neither Pledgee nor
any nominee shall have any duty or liability to collect any sums
due in respect thereof or to protect, preserve or exercise
any rights pertaining thereto, and shall be relieved of all responsibility
for the Pledged Shares upon surrendering them to Pledgor.
16. Survival of Representations. All representations and warranties
of Pledgor contained in this Agreement shall survive the
execution and delivery of this Agreement.
17. Taxes and ExDenses. Pledgor will upon demand pay to Pledgee
(a) any taxes (excluding income taxes, franchise taxes or
other taxes levied on gross earnings, profits or the like) payable or
ruled payable by any federal or state authority in respect of
this Agreement, together with interest and penalties, if any;
and (b) all reasonable expenses, including the reasonable fees and expenses
of counsel for Pledgee and of any experts and agents that Pledgee
may incur in connection with (i) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Pledged Shares; (ii) the exercise or enforcement of any of
the rights of Pledgee hereunder; or (iiu) the failure of
Pledgor to perform or observe any of the provisions hereof.
18. Agent Appointed Attornev-in-Fact. Pledgor hereby irrevocably
appoints Pledgee, effective upon the occurrence and during
the continuance of an Event of Default, as Pledgor's attorney-in-fact,
with full authority in the place and stead of Pledgor and in the
name of Pledgor or otherwise, from time to time in Pledgee's
discretion reasonably exercised, to take any action and to execute any
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instrument that Pledgee deems reasonably necessary or advisable
to accomplish the purposes of this Agreement, including,
without limitation, to receive, endorse and collect all instruments made
payable to Pledgor representing any dividend, interest payment
or other distribution in respect of the Pledged Shares or any
part thereof and to give full discharge for the same, when and to the
extent permitted by this Agreement.
19. Notices. Unless otherwise specifically provided herein, any
notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied, telexed or sent
by overnight courier service or United States mail certified or
registered and shall be deemed to have been given (a) if delivered in
person, when delivered; (b) if delivered by telecopy or telex,
on the date of transmission if transmitted on a Business Day
before 5:00 p.m. (Chicago time) or, if not, on the next succeeding
Business Day; (c) if delivered by overnight courier, two Business
Days after delivery to such courier properly addressed; or
(d) if by United States mail, four Business Days after depositing in the
United States mail, with postage prepaid and oroserlv addressed.
Notices shall be addressed as follows:
(a) If to Pledgor:
Milwaukee Electric Tool Corporation
13135 West Lisbon Road
Brookfield, Wisconsin 53005
Attention: Dennis Schmidt, Controller and Chief Financial Officer
Telecopy: (414) 781-5359
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022-3897
Attention: Charles M. Fox, Esq. T
elecopy: (212) 735-2000
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(b) If to Pledgee:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
Attention: Portfolio Manager
Portfolio Organization
Corporate Finance Group Telecopy: (312) 441-7367
With a copy to:
Heller Financial, Inc.
500 West Monroe Street
Chicago, Elinois 60661
Attention: Legal Department
Corporate Finance Group
or in any case, to such other address as the party addressed shall
have previously designated by written notice to the serving
party, given in accordance with this Section 19. A notice not given as
provided above shall, if it is in writing, be deemed given if and
when actually received by the party to whom given.
20. Changes in Writing. No amendment, modification, termination or
waiver of any provision of this Agreement or consent to any
departure by Pledgor therefrom, shall in any event be effective
without the written concurrence of Pledgee and Pledgor, and then
only to the extent specifically set forth in such writing.
21. Headings. Section and subsection headings in this Agreement
are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.
22. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may
execute this Agreement by signing anv such counterpart
23. Entire Agreement. This Agreement embodies the entire agreement
and understanding between Pledgor and Pledgee and
supersedes all prior oral and written agreements and
understandings between Pledgor and Pledgee relating to the subject
matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their duly authonzed
officers on the date first above written.
MILWAUKEE ELECTRIC TOOL
CORPORATION
By JEFFREY A. MERESCHUK
TITLE:TREASURER
HELLER FINANCLAL, INC., as Agent
By:ANDREW D. MAREK
TITLE: VICE PRESIDENT
12
EXHIBIT B
to Subsidiarv Pledge Agreement
DESCRIPTION OF STOCK
Exhibit (22)
AMSTAR CORPORATION
Subsidiaries
JURISDICTION OF
NAME INCORPORATION
Amstar Technical Products
Company, Inc. Delaware
Akadvans Corporation Delaware
Milrem Corp. Delaware
Milwaukee Electric Tool Delaware
Corporation
Milwaukee Electric Tool (Canada) Ltd. Canada
Milwaukee Electric Tool, Mexico
S.A. de C.V.
Teckel, lnc. Delaware
POWER OF ATTORNEY
EXHIBIT (25)
Each person whose signature appears below constitutes and appoints
Roger D. Chesley, Kenneth J. Jones and Jeffrey A. Mereschuk,
each of them, his true and lawful attorney-in-fact and agents
for him and in his name, place and stead, and in the capacities
indicated below, to sign the Annual Report on Form 10-K of
Amstar Corporation for the year ended December 31, 1994, and to sign
any and all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission.
Signature Title Date
/S/ H. B. Wentz. Jr. Chairman of the Board March 28, 1995
Howard B. Wentz, Jr. and Director
/S/ Robert A. Haversat President and Director March 13, 1995
Robert A. Haversat (Principal Executive
Officer)
/S/ Jeffrey A. Mereschuk Vice President, March 13, 1995
Jeffrey A. Mereschuk Chief Financial Officer
and Treasurer
/S/ John D. Speridakos Controller (Principal March 13, 1995
John D. Speridakos Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,065
<SECURITIES> 0
<RECEIVABLES> 61,694
<ALLOWANCES> 829
<INVENTORY> 47,155
<CURRENT-ASSETS> 116,891
<PP&E> 71,051
<DEPRECIATION> 0
<TOTAL-ASSETS> 284,195
<CURRENT-LIABILITIES> 70,822
<BONDS> 195,300
<COMMON> 0
0
0
<OTHER-SE> (8,038)
<TOTAL-LIABILITY-AND-EQUITY> 284,195
<SALES> 367,377
<TOTAL-REVENUES> 367,377
<CGS> 250,421
<TOTAL-COSTS> 250,421
<OTHER-EXPENSES> 66,545
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,274
<INCOME-PRETAX> 25,727
<INCOME-TAX> 12,892
<INCOME-CONTINUING> 12,835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,835
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
