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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 29, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-10182
SCOTSMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3635892
(State of incorporation) (I.R.S. Employer
Identification No.)
775 Corporate Woods Parkway, Vernon Hills, Illinois 60061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 215-4500
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
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<S> <C>
Common stock, $0.10 par value New York Stock Exchange
Common stock purchase rights,
no par value New York Stock Exchange
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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.
Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
At March 17, 1997 there were 10,545,664 shares of registrant's common stock
outstanding, and the aggregate market value of the voting stock held by
nonaffiliates of the registrant as of such date was approximately $276.2
million.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's 1996 Annual Report to Shareholders for the fiscal year ended
December 29, 1996 (the "1996 Annual Report"): Parts I, II, and IV.
Registrant's definitive Proxy Statement for its 1997 Annual Meeting of
Shareholders to be held on May 15, 1997 (the "1997 Proxy Statement"): Part III.
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PART I
ITEM 1. BUSINESS
The registrant, Scotsman Industries, Inc. (hereinafter referred to, together
with its subsidiaries, as "Scotsman" or the "Company"), is a holding company
with subsidiaries engaged in the manufacture and marketing of refrigeration
products primarily for the foodservice industry, including ice machines, food
preparation and storage equipment, and drink dispensing equipment.
Scotsman was organized under the laws of the state of Delaware on January 26,
1989. Effective April 14, 1989, Scotsman was spun-off from Household
International, Inc. ("Household") through the issuance of one share of Scotsman
common stock for every five shares of Household common stock then outstanding
to Household shareholders. As of such date, Scotsman became a publicly traded
company listed on the New York Stock Exchange, and its operations ceased to be
owned by Household.
Scotsman conducts its domestic ice machine business through the Scotsman Ice
Systems division ("Scotsman Ice Systems") of its wholly-owned subsidiary,
Scotsman Group Inc. ("SGI"), and through the Crystal Tips product line of its
wholly-owned subsidiary, Booth, Inc. ("Booth"). Booth acquired substantially
all of the assets of Crystal Tips, Inc. in April of 1992. Scotsman conducts
its European ice machine business through two Italian subsidiaries, Frimont
S.p.A. ("Frimont") and Castel MAC S.p.A. ("Castel MAC"). In January of 1993,
Frimont acquired the assets of Simag, an Italian ice machine manufacturer,
further expanding the Company's European ice machine line. In June of 1995,
Scotsman also entered into a joint venture with Shenyang Xinle Precision
Machinery Company in Shenyang, China to produce ice machines for the Chinese
market. During 1996, Scotsman increased its ownership interest in the joint
venture company from 40 to 60 percent.
Scotsman manufactures and markets food preparation and storage equipment,
including food preparation workstations, refrigerators and freezers and other
equipment, through its wholly-owned subsidiary, The Delfield Company
("Delfield"), which was acquired on April 29, 1994. Scotsman also
manufactures, through Castel MAC, and markets, through Castel MAC and Frimont,
a limited line of refrigerated cabinets, dough retarders and blast freezers in
Europe. Scotsman had previously manufactured and sold refrigerators and
freezers in the United States through its Glenco-Star Division, which was sold
in September 1992.
Scotsman manufactures and markets drink dispensing equipment in the United
States through Booth and in Europe through Whitlenge Drink Equipment Limited
("Whitlenge") and through Hartek Beverage Handling GmbH and its Austrian
distributor, Hartek Awagem Vertriebsges m.b.H. (collectively, "Hartek" or the
"Hartek entities"). Whitlenge was acquired by Scotsman on April 29, 1994.
Hartek was acquired by Scotsman on December 31, 1995.
Scotsman manufactures and markets niche products through Delfield, including
air ventilating equipment, ice cream dispensing equipment and iced drink mixing
and dispensing machines. Scotsman also manufactures and markets a limited line
of water coolers through its Italian subsidiaries, Frimont and Castel MAC.
RECENT ACQUISITION OF KYSOR INDUSTRIAL CORPORATION
In March of 1997, the Company completed the acquisition of Kysor Industrial
Corporation ("Kysor") a major manufacturer and marketer of refrigerated display
cases, commercial refrigeration systems and insulated panels primarily serving
the supermarket industry. Prior to the acquisition, Kysor also manufactured
and marketed components for the medium and heavy-duty commercial vehicle market
through its transportation products group
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(the "Transportation Products Group"). The Company purchased Kysor's
common and preferred stock for an aggregate purchase price of approximately $309
million. Such amount includes the aggregate purchase price paid for all shares
of common and preferred stock acquired by the Company (including shares
converted into a right to receive cash pursuant to the merger which followed
the tender offer for such shares) and for options to acquire shares of common
stock, offset by the net amount of a loan repaid by Kysor's employee stock
ownership plan on behalf of Kysor. Concurrent with the purchase, Kysor sold all
of the assets of its Transportation Products Group to a third party for an
aggregate purchase price of $86 million plus the assumption of liabilities
related to such assets. The Company retained possession of Kysor's commercial
products group through which it manufactures and markets commercial
refrigeration products (the "Commercial Products Group"). The method of
accounting used for the combination was the purchase method. Goodwill relating
to the acquisition of Kysor will be finalized within twelve months of the
acquisition date and will be amortized for book purposes over 40 years using the
straight-line method.
Kysor is headquartered in Cadillac, Michigan. Kysor reported total sales of
$381 million in 1996, of which $245 million related to its Commercial Products
Group.
1996 STRATEGIC ALLIANCE
In August of 1996, the Company acquired 50 percent of the outstanding shares of
SAW Technologies Limited, a U.K.-based joint venture company ("SAW"). Aztec
Developments Limited ("Aztec") is the other 50 percent shareholder. Under the
terms of the joint venture agreement, Aztec sold its technologically advanced
beverage dispensing valve, patents, and manufacturing capability to SAW, and
the Company contributed capital to SAW. The cost incurred by the Company in
1996 relating to SAW was approximately $2.0 million.
PRODUCTS AND DISTRIBUTION
Scotsman manufactures refrigeration products that are marketed primarily to the
foodservice industry (restaurants, cafeterias, convenience stores and bars),
the supermarket and lodging industries, food processors and beverage companies.
The principal commercial products of Scotsman are ice machines, food
preparation workstations, refrigerators and freezers, refrigerated bakery
equipment, drink dispensing equipment, self-leveling tray and plate dispensers
and ventilation systems. Through Kysor, Scotsman also manufactures
refrigerated display cases, condensing units and insulated panels and doors for
refrigerated building systems and walk-in coolers. In addition to commercial
refrigeration products, Scotsman manufactures compact consumer ice machines and
refrigerators for the luxury segment of the consumer appliance market.
ICE MACHINES. The Company manufactures and markets commercial ice-making
machines under the Scotsman and Crystal Tips trademarks worldwide, under the
Icematic and Simag trademarks in Europe and Asia, and under various brands
through other dealer networks. The Company's ice machines produce four forms
of ice: cubes (consisting of contour, lenticular, gourmet, and square),
flakes, scale and nuggets. Each of these forms of ice is designed and marketed
for specific applications. Scotsman ice machines are either self-contained
units, which make, store and, in some cases, dispense ice, or modular units,
which make but do not store ice. Scotsman also manufactures and sells ice
storage bins to accompany modular units.
A significant percentage of the sales of Scotsman commercial ice machines are
to the full service and fast-food restaurant industry. Other major end-users
include schools, government and military facilities, grocery stores, health
care facilities, hotels and motels, and convenience stores.
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Scotsman commercial ice machines are sold both through a system of distributors
and directly by Scotsman to national customers, contractors, and governmental
and military buyers. Scotsman Ice Systems presently has approximately 85
distributors in the United States, and Frimont and Castel MAC combined have
approximately 80 distributors in Europe and Asia. The Crystal Tips line also
has its own distribution network consisting of approximately 68 distributors in
the United States. The distributors generally do not carry competing brands of
ice machines. Independent service dealers also install and service the
equipment. The servicing functions performed by dealers are particularly
important because ice machines typically require more service, due to variable
water conditions, than other major appliances such as refrigerators. Scotsman
also maintains inventories of replacement parts to support its ice machine
product line.
Scotsman sells directly to national customers such as large hotel chains,
fast-food franchisers and convenience stores. Sales to federal and state
governments are also made directly by Scotsman for use in employee dining,
health care and military facilities. Scotsman Ice Systems also owns and
operates one of its largest distributors in Southern California, which it
purchased upon the retirement of the former owners.
Scotsman is the only United States ice machine company with management and
production facilities in Europe. Scotsman manufactures and markets commercial
ice machines and related components through its Italian subsidiaries, Castel
MAC and Frimont, under the Icematic trademark and the Scotsman and Simag
trademarks, respectively, for sale in Italy and for export primarily to Eastern
and Western Europe, the Middle East, Africa and the Far East. In the majority
of countries served, Castel MAC and Frimont each sell through separate
distribution channels. The Company also markets the Crystal Tips line
internationally through three export marketing firms based in the United States
and Canada.
Scotsman manufactures ice machines for the Chinese market through Shenyang
Scotsman-Xinle Refrigeration Equipment Manufacturing Co. Ltd., its Chinese
joint venture company. Such products are distributed and sold through the
joint venture company's distribution network.
In November of 1992, Scotsman entered into distribution and trademark licensing
agreements with Howe Corporation. Under these agreements, Scotsman has the
exclusive right to distribute Howe industrial flakers in all foreign and
domestic markets for a five-year period, subject to renewal. Scotsman also has
the right to use the trademarks HOWE and Rapid Freeze in connection with the
marketing and distribution of these products.
In addition to commercial ice machines, Scotsman also manufactures compact
consumer ice machines and refrigerators for the luxury segment of the consumer
appliance markets. These products are sold primarily through luxury consumer
appliance distributors who sell to dealers.
Scotsman's commercial ice machine business accounted for 49 percent, 52
percent, and 57 percent of the Company's sales in fiscal years 1996, 1995 and
1994, respectively.
FOOD PREPARATION & STORAGE EQUIPMENT. In the United States, Scotsman
manufactures and markets a wide range of commercial food preparation and
storage equipment through Delfield under the Delfield, Shelleyglas and
Shelleymatic trademarks. Delfield's principal products include customized and
standard food preparation workstations, commercial up-right and
under-the-counter refrigerators and freezers, mobile cafeteria systems and
self-leveling tray and plate dispensers. Delfield sells its equipment to
various purchasers in the foodservice industry, including dealers, wholesalers,
major chain restaurants, fast-food franchises and government entities.
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Delfield sells directly to national accounts, including major retail chain
restaurants. Delfield also sells equipment domestically through over 2,000
non-exclusive dealers and dealer buying groups and through a network of
approximately 26 independent sales representative firms. Such dealers
generally carry competing lines of equipment. The sales representative firms
typically carry complementary foodservice equipment, but carry only Delfield
refrigeration equipment.
Delfield sells in South America and Asia through an export agent. Export sales
are less than 5 percent of Delfield's total sales.
In Europe, Castel MAC manufactures and markets a line of refrigerated cabinets
under the Icematic brand name and a line of dough retarders and blast freezers
under the Tecnomac brand name, and Frimont markets a line of refrigerators
manufactured by Castel MAC under the Scotsman brand name. Tecnomac dough
retarders and blast freezers are sold primarily to the European commercial
bakery industry through dealers and agents specializing in that industry.
Sales of food preparation and storage equipment accounted for approximately 29
percent, 32 percent and 28 percent of Scotsman's sales in fiscal years 1996,
1995 and 1994, respectively.
DRINK DISPENSING EQUIPMENT. In the United States, Scotsman manufactures
soft-drink beverage dispensing equipment through Booth. Booth manufactures and
markets a complete line of non-coin operated soft-drink dispensing products and
accessories. Booth offers both pre-mix and post-mix dispensers which can
either be icecooled or electrically-cooled, ice and drink dispensers,
hand-operated valves and other related accessory products used in the fountain
market. Booth sells its dispensing equipment primarily to soft drink bottlers
franchised by The Coca- Cola Company, Pepsico, Inc., Dr. Pepper and 7-Up, often
labeling the equipment with the customer's name or trademark and the names of
the beverages that will be dispensed. Major end-users of Booth dispensing
equipment are in the foodservice industry.
In Europe, Whitlenge manufactures and markets soft drink dispensing equipment,
draft beer cooling equipment and related ancillary equipment. Whitlenge
specializes in remote and under-the-counter beverage cooling installations,
including large installations for foodservice restaurants, and also makes a
range of mechanically refrigerated over and under the counter soft-drink units.
Whitlenge sells directly to soft-drink bottlers and brewers in the United
Kingdom. Sales to export markets are made both by direct sales to bottlers and
brewers and through distributors and local agents in various markets throughout
Western and Central Europe and the Middle East.
Also in Europe, Hartek manufactures and markets soft drink dispensing
equipment, draft beer cooling equipment and related ancillary equipment which
is sold primarily in Germany, as well as Central and Eastern Europe and the
Middle East. Hartek sells directly to soft-drink bottlers and to brewers in
Germany. Sales to export markets are made both by direct sales to bottlers and
brewers and through distributors and local agents in various markets throughout
Western and Central Europe and the Middle East. Hartek's products are sold
under the Hartek brand name.
SAW is primarily engaged in the design of technologically advanced electronic
beverage dispensing valves which, in the future, will be incorporated in
Scotsman's drink dispensing equipment. SAW currently manufactures, for a
major U.K. bottler, a dispensing product using an electronic valve designed by
SAW.
Sales of drink dispensing equipment accounted for approximately 19 percent, 12
percent and 12 percent of Scotsman's sales in fiscal years 1996, 1995 and 1994,
respectively.
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KYSOR PRODUCTS. Kysor's principal products are refrigerated display cases,
condensing units, and insulated panels and doors for refrigerated building
systems and walk-in coolers. The principal markets for Kysor's products
include supermarkets, convenience stores, food processors and restaurants in
the United States. Refrigerated display cases, refrigerated building systems
and sundry food store, food processing and restaurant equipment are sold
directly to supermarkets and convenience stores, as well as through independent
commercial refrigeration distributors.
Kysor also owns 24.255% of the outstanding shares of Austral Refrigeration Pty.
Ltd. ("Austral"), which it acquired in February of 1996. Austral is
headquartered in Sydney, Australia, and is the parent company of Kysor/Warren
Australia Pty. Ltd. ("Kysor-Warren Australia"), which has been a licensee and
manufacturer of Kysor refrigerated display cases for over 25 years. Through
Kysor-Warren Australia, Kysor manufactures refrigerated display cases which are
sold primarily in Australia but also in other Asian markets. Austral also
includes other businesses which install and maintain refrigeration products in
those same markets.
NICHE PRODUCTS. Scotsman also manufactures and markets a line of niche
products, primarily through Delfield, including air ventilating equipment under
the Air Tech trademark, ice cream dispensing equipment, and iced drink mixing
and dispensing machines. Scotsman also manufactures and markets water coolers
through Frimont and Castel MAC, and small industrial applications through
Whitlenge.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Financial information pertaining to the Company's foreign and domestic
operations is incorporated herein by reference from Note 15, "Geographic
Information," in the 1996 Annual Report.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
The Company's products and manufacturing processes are subject to various
environmental, health and safety regulations and standards. Such regulations
and standards, from time to time, may require significant changes in products
or manufacturing methods. The Company believes that environmental, health and
safety matters will not have a material effect on its business or financial
condition. However, legal and regulatory requirements in this area are
increasing, and there can be no assurance that significant costs and
liabilities will not be incurred as a result of currently unidentified or
future problems or new regulatory developments.
The Company also is, or may be, subject from time to time to claims and
litigation arising under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") and similar state statutes. The Company has been
identified by the United States Environmental Protection Agency, state
regulatory agencies or private parties as a potentially responsible party
("PRP") under CERCLA and similar state statutes in connection with a number of
hazardous waste sites.
Under existing environmental laws, PRPs are jointly and severally responsible
for the cost of clean-up and other remedial action at these sites, and each PRP
is therefore potentially responsible for the full cost of remediation. As a
practical matter, however, costs are generally shared with other PRPs, based
on each PRP's relative contribution to the problem. The purchaser of Kysor's
Transportation Products Group has, moreover, assumed all environmental
liabilities associated with that business in connection with the purchase and
sale of the Transportation Products Group, which include liabilities relating
to some of the sites for which Kysor has been named as a PRP. Based on the
foregoing factors, the relative size of the Company's contribution to the sites
for which it has been named as a PRP, currently available information about the
cost of remediation at such sites, and the probability that other PRPs, many of
which are large, solvent public companies, will pay the costs apportioned to
them, the Company does not
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believe that any liability imposed in connection with such environmental
proceedings, either individually or in the aggregate, will have a material
adverse effect upon the Company's financial condition or its results of
operations.
COMPETITION
The primary markets for Scotsman's products are highly competitive. The most
significant competitive factors are price, product reliability and performance
and service, with the relative importance of such factors varying among
products. Delfield also relies on its computer- assisted design and
manufacturing system and its design library in competing in the market for
custom and standard food preparation workstations.
Scotsman has a number of competitors in each product line that it offers.
Scotsman believes that IMI Cornelius, plc, is the leading supplier of beverage
dispensing equipment in continental Europe, one of the markets in which
Whitlenge and Hartek compete, and that Hussmann Corporation, a subsidiary of
Whitman Corporation, is the leading supplier of supermarket display cases and
related equipment in the United States, the primary market in which Kysor
competes. Scotsman does not believe that another single competitor or group of
competitors dominates any market for any other product line in which it
competes. Most of Scotsman's competitors are small, privately owned companies,
although a few are divisions of larger companies.
RESEARCH AND DEVELOPMENT
Scotsman conducts an extensive research and development program in its product
fields. These programs seek to develop product improvements and achieve cost
reductions, as well as develop new products. Scotsman's total research and
development expenditures for fiscal years 1996, 1995 and 1994 were
approximately $5.6 million, $4.8 million and $5.1 million, respectively.
RAW MATERIALS
The principal materials used in the manufacture of Scotsman's products are
refrigeration components, including compressors, condensers, motors and
controls. Other raw materials include stainless steel, galvanized steel,
aluminum, copper, plastics, glass, foam insulation, brass, and wood. These
materials are readily available from several sources, and Scotsman has not
experienced difficulties with respect to their availability.
GENERAL
CUSTOMERS. Scotsman is not dependent upon any single customer, or upon any
single group of customers, and no single customer or related group of customers
accounted for 10 percent or more of Scotsman's consolidated revenues in 1996.
Delfield, Booth, Whitlenge, Hartek and Kysor are, however, each dependent upon
a limited number of major customers. Although the loss of one or more of such
customers could have a material adverse effect on the sales of Delfield, Booth,
Whitlenge, Hartek or Kysor, Scotsman does not believe that such a loss would
have a material adverse effect on Scotsman as a whole. No material portion of
Scotsman's business is subject to renegotiation of profits or termination of
contracts at the election of the government.
BACKLOG OF ORDERS. The backlog of unshipped orders at the end of fiscal years
1996 and 1995 was $24.8 million and $29.3 million, respectively. Scotsman
expects that all of the orders in the backlog at the end of fiscal year 1996
will be shipped during 1997.
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SEASONALITY. The volume of sales for ice machines and drink dispensing
equipment sold by Scotsman is somewhat higher in the second and third quarters,
corresponding with the major selling season for refrigeration products. Sales
of Kysor's refrigeration products are also subject to seasonal fluctuations,
with sales being somewhat stronger in the third and weaker in the first
quarter. In addition, Delfield has experienced significant quarterly
fluctuations in the sales of foodservice equipment because of the irregularity
of large orders from major chain restaurants.
PATENTS AND TRADEMARKS. Scotsman holds or is licensed under many United States
and foreign patents covering various design features used in its products, and
also holds a number of other patents and patent applications, licenses,
trademarks and trade names including the trademarks and trade names mentioned
herein. Scotsman does not believe that any of the foregoing, considered
individually, is material to its business, with the exception of the Scotsman,
Delfield and Kysor trademarks. Scotsman believes it possesses adequate
protection with respect to these trademarks.
EMPLOYEES. As of December 31, 1996, Scotsman employed approximately 2,250
people, approximately 1,087 of whom were covered by collective bargaining
agreements with various labor unions. As a result of the recent acquisition of
Kysor, Scotsman currently has 3,855 employees, 1,606 of whom are covered by
collective bargaining agreements. Relationships with employees of Scotsman
have been satisfactory.
ITEM 2. PROPERTIES
Scotsman's corporate headquarters and Scotsman Ice Systems division's
headquarters are located in a 36,000 square foot facility in Vernon Hills,
Illinois which is leased through November 1998. Since 1993, Scotsman has had
an option to purchase this property. Scotsman has facilities located in
Fairfax, South Carolina, consisting of a 247,000 square foot plant built in
1980 and an 80,000 square foot separate warehouse. The Fairfax facilities are
owned by Scotsman and produce ice making machines and commercial refrigeration
equipment. Scotsman leases for storage, on a monthly basis, a 3,000 square
foot section of a building located in Fairfax. Scotsman also leases a 13,000
square foot distribution facility near Los Angeles under a lease which expires
in March 1998.
In June 1993, Booth began leasing 170,000 square feet of a facility located in
Dallas, Texas, under a ten-year lease which expires in June 2003. During 1994,
the Company completed the relocation of the manufacturing operations of both
Booth and Crystal Tips to this facility. Scotsman owns a 65,000 square foot
facility near Dallas, Texas, which housed Booth's operations prior to the
relocation and has leased this facility to a tenant under a lease which expires
in 2005.
Delfield's main headquarters are located in Mt. Pleasant, Michigan, where it
occupies a 347,000 square foot facility consisting of plant and office
facilities. A section of the facility is subject to a lien securing industrial
revenue bonds issued by Isabella County. Delfield also leases a 188,000 square
foot plant and office facility in Covington, Tennessee under a lease which will
expire in September 2006. Upon expiration of the lease, Delfield will have the
option to purchase the property for a nominal sum. The Tennessee facility was
financed by the issuance of industrial revenue bonds by the town of Covington,
Tennessee and is subject to a lien securing the bonds. Delfield also leases
warehouses on a month-to-month basis in approximately ten states, including
Michigan and Tennessee, for the storage of finished goods inventory.
The Company operates two plants in Italy which contain 242,000 and 152,000
square feet, respectively. The larger of these facilities is owned, and the
smaller consists of a number of buildings leased under separate leases which
expire between December 31, 1998, and December 31, 2006.
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Whitlenge's main headquarters and its operations are located in a 76,000 square
foot building in Halesowen, England. The building is leased under separate
leases which expire from March 24, 2004, through June 24, 2006.
Hartek's main headquarters and its operations are located in a 35,000 square
foot building in Radevormwald, Germany which is owned by the Company. Hartek
also leases 19,000 square feet of warehousing space in Radevormwald, Germany
which is renewable annually until December 1998. Hartek's Austrian
distributorship occupies 11,000 square feet in Vienna, Austria which is used
primarily for office and warehousing and is leased on an annual basis.
Kysor currently owns or leases the following offices and manufacturing
facilities:
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Location Description Interest
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Cadillac, Michigan Former executive office; Owned in fee simple
23,000 square feet on 102-acre site
Conyers, Georgia Plant & office; 480,000 Owned in fee simple
square feet on 50-acre site
Conyers, Georgia Warehouse; 110,000 square feet Leased
Columbus, Georgia Plant & office; 295,826 Owned in fee simple
square feet on 22.7-acre site
Fort Worth, Texas Plant & office; 118,162 Owned in fee simple
square feet on 11-acre site
Duncan, Oklahoma (1) Plant, warehouse & office; Owned in fee simple
93,000 square feet on 22.1-acre site
Portland, Oregon Plant & office; 84,000 Owned in fee simple
square feet on 5.7-acre site
Goodyear, Arizona Plant & office; 50,000 Leased
square feet on 5.0-acre site
South Bend, Indiana Plant & office; 90,000 Owned in fee simple
square feet on 4.0-acre site
Pyuallup, Washington Plant & office; 40,000 Owned in fee simple
square feet on 2.0- acre site
Piney Flats, Tennessee Plant & office; 60,000 square feet Leased
on 10.0-acre site
Des Moines, Iowa Plant, warehouse & office; 93,000 square feet Leased
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(1) Facility is currently leased by Kysor to a third party.
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Kysor is also constructing a manufacturing facility in Columbus, Georgia, which
is expected to be completed in 1997.
Scotsman considers the condition of its plants and other properties to be
generally good and believes the capacity of its plants, as increased by the
plant under construction in Georgia, to be adequate for the current needs of
its business. Except as described above, none of the principal properties
owned by Scotsman are subject to encumbrances material to the operations of
Scotsman.
ITEM 3. LEGAL PROCEEDINGS
MANITOWOC PATENT LITIGATION. On September 17, 1996, The Manitowoc Company,
Inc. ("Manitowoc") filed a lawsuit against the Company in United States
District Court for the Northern District of Illinois, entitled The Manitowoc
Company, Inc. v. Scotsman Industries. Inc. In its Complaint, Manitowoc alleges
that the Company's CM3 ice machine, a cuber machine introduced by the Company
during the first quarter of 1996, infringed two patents owned by Manitowoc
relating to a cleaning feature on an ice machine. On January 14, 1997,
Manitowoc filed an Amended Complaint in this case, adding a claim that the CM3
machine also infringed a third patent covering an ice machine cleaning feature
which the United States Patent and Trademark Office issued to Manitowoc on
December 24, 1996. The time for the Company to file its Answer in this case
has been extended while the parties have engaged in settlement discussions.
The Company has advised Manitowoc that it does not believe the cleaning feature
on its CM3 machine infringes any of Manitowoc's patents. In November 1996, the
Company nonetheless informed Manitowoc that the Company planned to make a
design change to the cleaning feature on its CM3 machine in the interests of
attempting to avoid litigation over Manitowoc's patents. Manitowoc responded
in December 1996 by offering to dismiss the above- entitled lawsuit if the
Company implemented the design change described by the Company, agreed to
provide Manitowoc with a sample of the redesigned control board, and agreed to
communicate with a particular ice machine customer and the Company's field
service force about the operation of the CM3 machine's cleaning system. The
Company accepted Manitowoc's settlement proposal in January 1997, subject to
certain clarifications. On February 25, 1997, Manitowoc's counsel orally
advised counsel for the Company that the sample of the redesigned control board
which the Company had provided was acceptable to Manitowoc. The Company has
satisfied the remaining conditions of settlement by implementing the design
change and sending the communications referenced above to the Company's
customer and field service force. Manitowoc has requested that the parties'
settlement agreement be formally memorialized in writing before dismissing the
case. While no assurances can be given, the Company does not believe that this
lawsuit will have a material adverse effect on the financial condition of the
Company or its results of operations.
LITIGATION RELATING TO INDIANAPOLIS ATHLETIC CLUB FIRE. Delfield, which was
acquired by the Company on April 29, 1994, was originally named as a defendant
in two cases filed in Marion County Superior Court, Indianapolis, Indiana,
arising out of a fire at the Indianapolis Athletic Club (the "IAC") on February
5, 1992. Those cases are Indianapolis Athletic Club, Inc. v. The Delfield
Company, et al, in which the IAC seeks to recover property damages of between
$10 to $12 million allegedly incurred in the fire, and Mutz v. The Delfield
Company, et al, brought by the estate of Thomas R. Mutz alleging damages for
the alleged wrongful death of Mr. Mutz in the fire. The plaintiffs allege, in
their actions, that the fire was caused by a refrigerator manufactured by
Delfield. Delfield was dismissed as a defendant in both cases, following an
investigation of its claim that the refrigerator in the IAC was manufactured,
not by Delfield, but by the Delfield Division of Alco Standard Corporation
("Alco") prior to the acquisition of the Delfield Division by DFC Holding
Corporation ("DFC") which was, in turn, acquired by Scotsman. Such dismissals
-10-
<PAGE> 11
were, however, without prejudice to the rights of the plaintiffs to reinstate
their claims against Delfield. The plaintiffs in the IAC and the Mutz actions
continued to pursue their claims against the Delfield Division of Alco, and the
Company has continued to monitor the actions.
Alco and the Delfield Division have denied that the refrigerator caused the
fire. The suit filed by the IAC was tried in early 1997, and on February 17,
1997, a jury verdict was returned, and judgment was entered, in favor of Alco
and the Delfield Division. On March 17, 1997, the IAC filed notice of an
appeal of the decision with the Indiana court of appeals.
Although the case has not yet been dismissed, Alco and the other defendants in
Mutz have agreed to enter into a settlement agreement with the estate of Mr.
Mutz resolving all of the claims of the estate against such defendants. Under
the terms of the settlement agreement, Alco and/or its insurer have agreed to
pay a total of $200,000 as Alco's share of the settlement amount.
Pursuant to the agreement by which DFC acquired the Delfield Division, Alco is
obligated to indemnify Delfield for all losses to Delfield resulting from
product liability claims relating to products manufactured by the Delfield
Division prior to its acquisition by DFC. Alco has agreed that its indemnity
applies to the action brought by the IAC, and Delfield believes that its
insurance should cover any claims that are not covered by Alco's indemnity.
Moreover, under the terms of the agreements pursuant to which the Company
acquired Delfield and Whitlenge, the former shareholders of DFC and Whitlenge
Acquisition Limited ("WAL"), an affiliate of DFC, are also required to
indemnify the Company for up to $30 million in losses and expenses arising out
of, among other things, suits, claims or proceedings arising out of the IAC
fire. While no assurances can be given, the Company does not believe that
either of the actions arising out of the IAC fire is likely to have a material
adverse effect upon the financial condition of the Company or its results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last fiscal
quarter of 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of all executive
officers of Scotsman, the period that each has held his position with the
Company, and a brief account of each such officer's business experience during
the past five years. Executive officers are appointed annually at a meeting of
the Board of Directors of the Company held as soon as practicable after each
annual meeting of the Company's shareholders. Officers of the Company are
appointed to serve until the next annual election of officers and until their
respective successors are chosen.
<TABLE>
<CAPTION>
NAME AND AGE OFFICE AND EXPERIENCE
- ------------ ---------------------
<S> <C>
Richard C. Osborne, 53 Mr. Osborne is Chairman of the Board and has held that position since
May 1991. He is also President, Chief Executive Officer and a
director of the Company and has held those positions since April
1989.
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
NAME AND AGE OFFICE AND EXPERIENCE
- ------------ ---------------------
<S> <C>
Emanuele Lanzani, 62 Mr. Lanzani is an Executive Vice President of the Company and has
held that position since April 1989. He is also the Managing
Director, Frimont and Castel MAC. Mr. Lanzani has been Managing
Director of Castel MAC since its acquisition by a wholly-owned
subsidiary of Household in October 1985 and has been Managing
Director of Frimont since 1968.
Paolo Faenza, 57 Mr. Faenza is General Manager, Castel MAC, and has held that
position since 1986.
Richard M. Holden, 46 Mr. Holden is Vice President-Human Resources of the Company and has
held that position since January 1990.
Donald D. Holmes, 59 Mr. Holmes is Vice President-Finance and Secretary of the Company and
has held those positions since April 1989.
Christopher D. Hughes, 50 Mr. Hughes is a Vice President of the Company and has held that
position since June 1994. He is also President of Booth and has held
that position since May 1994. From 1993 to May 1994, he was Vice
President/General Manager of the Central and Western Transit
Operations of Morrison Knudsen Corporation, a division engaged in the
business of assembling new and overhauling used passenger rail cars.
From 1991 to 1993, Mr. Hughes was Vice President of Operations of
Scotsman Ice Systems and Scotsman's former Glenco-Star division.
Ludwig H. Klein, 54 Mr. Klein is a Vice President of the Company and has held that
position since February 1996. He is also Managing Director of Hartek
and has held that position since February 1995. From June 1994 until
February 1995, he worked as an independent consultant and provided,
during that period, consulting services to Hartek and in the capital
goods industry. From July of 1986 until June of 1994, Mr. Klein held
the position of General Manager of Haacon Hebetechnik GmbH, a
manufacturer of industrial lifting equipment.
Gerardo Palmieri, 57 Mr. Palmieri is Director-Sales and Marketing, Frimont, and has held
that position since 1980.
Randall C. Rossi, 45 Mr. Rossi is a Vice President of the Company and has held that
position since January 1995. He is also President of Scotsman Ice
Systems and has held that position since January 1995. From January
1994 to January 1995, he was an Executive Vice President of Scotsman
Ice Systems. From 1989 to January 1994, he was Vice President-Sales
and Marketing of Scotsman Ice Systems.
</TABLE>
-12-
<PAGE> 13
<TABLE>
<CAPTION>
NAME AND AGE OFFICE AND EXPERIENCE
- ------------ ---------------------
<S> <C>
William J. Rotenberry, 42 Mr. Rotenberry is Vice President - Business Development. He has been
employed by the Company since January 1996 and became a Vice
President of the Company in February 1996. From 1990 until January
1996, he was Director of Corporate Development for Joslyn
Corporation, a diversified manufacturer.
Michael de St. Paer, 51 Mr. de St. Paer is a Vice President of the Company and has held that
position since April 1994. He is also Managing Director of Whitlenge
and has held that position since April 1993. From June 1992 to April
1993 he was Assistant Managing Director of Whitlenge. From 1991
until June 1992, he was the Managing Director and a Group Technical
Director of Hartek.
</TABLE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The information contained in the table entitled "Common Stock" in the 1996
Annual Report and in Note 16 of the "Notes to Consolidated Financial
Statements" in the 1996 Annual Report is incorporated herein by reference.
Non-employee directors of the Company are compensated for their services in the
form of shares of the Company's common stock, value $.10 per share (the" Common
Stock"). The offer and sale of such shares has not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and is made in reliance
upon the private placement exemption under Section 4(2) of the 1933 Act. A
total of eight persons have thus far acquired Common Stock under the plan, all
of whom have access to full financial and other information about the Company.
Under the terms of the directors' compensation plan, non-employee directors of
the Company currently receive for their services an annual retainer fee paid
in shares of Common Stock with a total market value of approximately $16,000,
determined as of the day immediately preceding the date of the annual meeting.
Any non-employee director who serves as chairman of the Audit, Compensation,
Executive or Governance Committees of the Board of Directors receives, as
compensation for those services, additional shares of Common Stock with a total
market value of approximately $2,000, determined as of the same valuation date
used in determining the number of shares to be granted to the directors as
annual retainer fees. All of the shares are issued from treasury stock.
Within the last three fiscal years, the Company has issued the following number
of shares on the dates indicated:
<TABLE>
<CAPTION>
DATE OF ISSUANCE TOTAL NUMBER OF SHARES AGGREGATE MARKET VALUE
---------------- ---------------------- ----------------------
<S> <C> <C>
May 16, 1996 5,965 $119,300
May 18, 1995 6,219 $120,493
June 10, 1994 8,038 $118,561
</TABLE>
-13-
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data contained in the table entitled "Five Year Summary"
in the 1996 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 1996 Annual Report are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of Arthur Andersen LLP, independent public accountants, and the
consolidated financial statements together with the notes thereto (as set forth
in the List of Financial Statements in Part IV, Item 14 (a)(1), below) in the
1996 Annual Report are incorporated herein by reference. The selected
financial data contained in the table entitled "Selected Quarterly Financial
Data" in the 1996 Annual Report are also incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements with accountants on
accounting and financial disclosures during 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained in "Information Regarding Nominees and Directors" and
"Compliance with Section 16(a) of the Exchange Act" in the 1997 Proxy Statement
is incorporated herein by reference. See also "Executive Officers of the
Registrant," Part I, above.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the sections entitled "Executive Compensation,"
"Options and Stock Appreciation Rights," "Pension Plan," "Executive
Compensation and Severance Agreements, Including Change of Control Provisions,"
and "Directors' Fees and Compensation" in the 1997 Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained in the sections entitled "Security Ownership of
Management" and "Security Ownership of Certain Beneficial Owners" in the 1997
Proxy Statement is incorporated herein by reference.
-14-
<PAGE> 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained in the sections entitled "Executive Compensation,"
"Executive Compensation and Severance Agreements, Including Change of Control
Provisions" and "Other Agreements" in the 1997 Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM
8-K
(A)(1) LIST OF FINANCIAL STATEMENTS
The following financial statements, together with the report thereon of Arthur
Andersen LLP dated February 4, 1997, appearing in the Company's 1996 Annual
Report, are incorporated herein by reference.
Scotsman Industries, Inc. and Subsidiaries:
Report of Independent Public Accountants
Consolidated Statement of Income for each of the three years ended
December 29, 1996, December 31, 1995, and January 1, 1995.
Consolidated Balance Sheet as of December 29, 1996, and December 31,
1995.
Consolidated Statement of Cash Flows for each of the three years ended
December 29, 1996, December 31, 1995, and January 1, 1995.
Consolidated Statement of Shareholders' Equity for each of the three
years ended December 29, 1996, December 31, 1995, and January 1, 1995.
Notes to Consolidated Financial Statements.
Five Year Summary.
Selected Quarterly Financial Data (Unaudited).
(A)(2) LIST OF FINANCIAL STATEMENT SCHEDULE
Report of Independent Public Accountants.
II - Valuation and Qualifying Accounts
-15-
<PAGE> 16
(A)(3) LIST OF EXHIBITS
The following exhibits are filed as part of this report. Each management
contract or compensatory plan or arrangement required to be filed as an exhibit
to this report has been marked with an asterisk. Unless otherwise indicated,
all documents incorporated by reference to prior filings have been filed under
Commission File No. 1-10182.
Exhibit 2.1 - Agreement and Plan of Merger, dated as of February 2, 1997,
among the Company, K Acquisition Corp., and Kysor
Industrial Corporation (incorporated herein by reference from
Exhibit (c)(1) to the Company's Tender Offer Statement on
Schedule 14D-1, filed with the Commission on February 7,
1997), as amended by the First Amendment to Agreement and Plan
of Merger, dated as of March 7, 1997 (incorporated herein by
reference to the Company's 8-K, dated March 8, 1997).
Exhibit 2.2 - Agreement for the Sale, Purchase and Assignment of the
Entire Share Capital of Hartek Beverage Handling GmbH
and Hartek Awagem Vertriebsges, m.b.H., dated December 31,
1995, among Hartek Beverage Handling B.V., Hartwall Bolagen
AB, Scotsman Group Inc. and Scotsman Industries, Inc.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1995).
Exhibit 2.3 - Agreement and Plan of Merger, dated as of January 11, 1994,
among Scotsman Industries, Inc., Scotsman Acquisition
Corporation, DFC Holding Corporation, The Delfield Company,
Onex Corporation, Onex DHC LLC, Pacific Mutual Life Insurance
Co., PM Group Life Insurance Co., EJJM, Matthew O. Diggs, Jr.,
Timothy C. Collins, W. Joseph Manifold, Charles R. McCollom,
Anita J. Moffatt Trust, Anita J. Moffatt, Remo Panella, Teddy
F. Reed, Robert L. Schafer, Graham E. Tillotson, John A.
Tilmann Trust, John A. Tilmann, Kevin E. McCrone, Michael P.
McCrone, Ronald A. Anderson and Continental Bank N.A.
(incorporated herein by reference to the Company's 8-K, dated
January 13, 1994), as amended by the First Amendment thereto,
dated as of March 17, 1994 (incorporated herein by reference
to the Company's 10-K for the fiscal year ended January 2,
1994).
Exhibit 2.4 - Share Acquisition Agreement, dated as of January 11, 1994,
among Scotsman Industries, Inc., Whitlenge Acquisition
Limited, Whitlenge Drink Equipment Limited, Timothy C.
Collins, Graham F. Cook, Christopher R.L. Wheeler, Michael de
St. Paer and John Rushton (incorporated herein by reference to
the Company's 8-K, dated January 13, 1994), as amended by the
First Amendment thereto, dated as of March 17, 1994
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended January 2, 1994).
Exhibit 3.1 - Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company's 10-K
for the fiscal year ended December 31, 1989).
Exhibit 3.2 - By-Laws of the Company, as amended (incorporated herein by
reference to the Company's 8-K, dated June 21, 1991).
-16-
<PAGE> 17
Exhibit 4 - Rights Agreement dated as of April 14, 1989 between Scotsman
Industries, Inc. and Harris Trust & Savings Bank
(incorporated herein by reference to the Company's 8-K, dated
April 25, 1989), as amended by Amendment No. 1 thereto, dated
as of January 11, 1994 (incorporated herein by reference to
Scotsman Industries, Inc. Amendment No. 4 to General Form for
Registration of Securities on Form 10/A, as filed with the
Commission on January 27, 1994).
Exhibit 10.1 - Reorganization and Distribution Agreement dated as of
March 15, 1989 by and among Household International,
Inc., Eljer Industries, Inc., Schwitzer, Inc. and Scotsman
Industries, Inc. (incorporated herein by reference to the
Company's 8-K, dated April 25, 1989).
Exhibit 10.2 - Tax Sharing Agreement dated as of March 15, 1989 among
Household International, Inc., Eljer Industries, Inc.,
Schwitzer, Inc. and Scotsman Industries, Inc. (incorporated
herein by reference to the Company's 8-K, dated April 25,
1989).
Exhibit 10.3 - Benefits and Labor Agreement dated as of March 15, 1989
among Household International, Inc., Eljer Industries,
Inc., Schwitzer, Inc. and Scotsman Industries, Inc.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989).
Exhibit 10.4 - Credit Agreement dated March 12, 1997 among Scotsman Group
Inc. and the other parties named therein, as Borrowers,
the Lenders named therein, and The First National Bank of
Chicago, as Agent.
Exhibit 10.5 - Promissory Note in the principal amount of $15,000,000,
made as of March 12, 1997 by Scotsman Group Inc. to
Comerica Bank, together with the related Reaffirmation of
Guaranty and Consent, dated March 12, 1996, by Scotsman
Industries, Inc. in favor of Comerica Bank, Guaranty
Agreement, dated June 30, 1996, by Scotsman Industries, Inc.
in favor of Comerica Bank (incorporated herein to the
Company's 10-Q, dated June 30, 1996) and Guaranty by Booth,
Inc., DFC Holding Corporation, The Delfield Company and Kysor
Industrial Corporation, dated March 12, 1997, in favor of
Comerica Bank.
Exhibit 10.6 - Reimbursement Agreement, dated March 1, 1988, among
Household Manufacturing, Inc., King-Seeley Thermos Co.
and the National Westminster Bank PLC, as amended by the
Amendments dated as of April 14, 1989, December 12, 1989, June
26, 1992, November 20, 1992, March 17, 1993, among Scotsman
Group Inc., Scotsman Industries, Inc. and The Bank of Nova
Scotia (incorporated herein by reference to the Company's 10-K
for the fiscal year ended January 3, 1993), the Amendment
dated April 29, 1994 (incorporated herein by reference to the
Company's 10-Q for the quarter ended April 3, 1994), and
Amendment No. 7 thereto, dated March 12, 1997, among Scotsman
Group Inc., Scotsman Industries, Inc., The Bank of Nova Scotia
and The First National Bank of Chicago.
Exhibit 10.7 - ISDA Master Agreement, dated as of March 3, 1994, including
the Schedule and Amended Confirmation (2) thereto,
between The First National Bank of Chicago and Scotsman Group
Inc. (incorporated herein by reference to the Company's 10-K
for the fiscal year ended January 1, 1995).
-17-
<PAGE> 18
Exhibit 10.8* - Long-Term Executive Incentive Compensation Plan of Scotsman
Industries, Inc., as amended February 13, 1997.
Exhibit 10.9* - Scotsman Industries, Inc., Executive Incentive Compensation
Program, Plans B-1 (incorporated herein by reference to
the Company's 10-K for the fiscal year ended December 31,
1995) and AA, A-1 and A-2.
Exhibit 10.10* - Scotsman Group Inc. Supplemental Tax Reduction Investment
Plan, dated as of April 14, 1989 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 30, 1990).
Exhibit 10.11* - Non-Employee Directors Stock Option Plan, effective as of
August 11, 1994 (incorporated herein by reference to the
Company's Registration Statement on Form S-8, No. 33-59397).
Exhibit 10.12* - Employment Agreement dated September 16, 1991 between
Scotsman Group Inc. and Richard C. Osborne (incorporated
herein by reference to the Company's 10-Q for the quarter
ended September 29, 1991).
Exhibit 10.13* - Employment Agreement dated September 16, 1991 between
Scotsman Group Inc. and Emanuele Lanzani (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended December 29, 1991).
Exhibit 10.14* - Employment Agreement dated September 16, 1991 between
Scotsman Group Inc. and Donald D. Holmes (incorporated
herein by reference to the Company's 10-Q for the quarter
ended September 29, 1991).
Exhibit 10.15* - Employment Agreement dated October 17, 1996 between
Scotsman Group Inc. and Michael de St. Paer.
Exhibit 10.16* - Service Agreement dated February 1, 1995, as amended by the
Service Agreement Addendum, dated January 31, 1997,
between Hartek Beverage Handling GmbH and Ludwig H. Klein.
Exhibit 10.17* - Executive Severance Agreement dated as of September 16,
1991 between Richard C. Osborne and Scotsman Group Inc.
(incorporated herein by reference to the Company's 10-Q for
the quarter ended September 29, 1991), as amended by
Amendment No. 1 thereto, dated as of January 11, 1994
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended January 2, 1994).
Exhibit 10.18* - Executive Severance Agreement dated as of September 16,
1991 between Emanuele Lanzani and Frimont S.p.A.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 29, 1991), as amended by
Amendment No.
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<PAGE> 19
1 thereto, dated as of January 11, 1994 (incorporated
herein by reference to the Company's 10-K for the fiscal year
ended January 2, 1994).
Exhibit 10.19* - Executive Severance Agreement dated as of September 16,
1991 between Donald D. Holmes and Scotsman Group Inc.
(incorporated herein by reference to the Company's 10-Q for
the quarter ended September 29, 1991), as amended by
Amendment No. 1 thereto, dated as of January 11, 1994,
between Donald D. Holmes and Scotsman Group Inc.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended January 2, 1994).
Exhibit 10.20* - Retirement Program for Emanuele Lanzani of Frimont, S.p.A.,
Subsidiary of King-Seeley Thermos Co. dated July 25,
1984 (incorporated herein by reference to the Company's 10-K
for the fiscal year ended December 31, 1989).
Exhibit 10.21 - Agreement dated March 27, 1981 by and between Emanuele
Lanzani and King-Seeley Thermos Co. and Frimont, S.p.A.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989), as amended by the
Amendment dated March 20, 1990 (incorporated herein by
reference to the Company's 10-Q for the quarter ended
September 30, 1990).
Exhibit 10.22 - Industrial Building Lease Agreement dated September 21,
1988 by and between American National Bank and Trust
Company of Chicago, as Trustee under Trust Agreement No.
64661 dated June 17, 1985, and Household Manufacturing, Inc.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989).
Exhibit 10.23 - Lease Agreement, dated as of April 16, 1993, by and between
the Western and Southern Life Insurance Company and
Booth, Inc. together with the related Guaranty by Scotsman
Group Inc. dated as of April 8, 1993 (incorporated herein by
reference to the Company's 10-Q for the quarter ended October
2, 1993), as amended by First Amendment to the Lease
Agreement, dated October 27, 1993, (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
January 1, 1995) and Second Amendment to the Lease Agreement,
dated December 3, 1993, (incorporated herein by reference to
the Company's 10-K for the fiscal year ended January 1,
1995).
Exhibit 13 - Those portions of Scotsman's 1996 Annual Report to
Shareholders which are incorporated herein by reference
under Part I, Item 1, "Financial Information about Foreign
and Domestic Operations," and Part II, Items 5, 6, 7, and 8
of the Form 10-K, consisting of "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
the report of Arthur Andersen LLP and the consolidated
financial statements, together with the notes thereto (as set
forth in the list of financial statements under Item
14(a)(1)), "Five Year Summary," "Selected Quarterly Financial
Data" and "Common Stock."
Exhibit 21 - List of Subsidiaries.
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<PAGE> 20
Exhibit 23 - Consent of Arthur Andersen LLP.
Exhibit 27 - Article 5 Financial Data Schedule for the Fiscal
Year Ended December 29, 1996.
Exhibit 99 - Cautionary Statements.
Copies of the exhibits referred to above will be furnished to shareholders upon
written request at a cost of fifteen cents per page. Requests should be made to
Scotsman Industries, Inc. 775 Corporate Woods Parkway, Vernon Hills, Illinois
60061, Attention: Donald D. Holmes, Secretary.
(B) REPORTS ON FORM 8-K
The Registrant filed no reports on Form 8-K during the quarterly period ended
December 29, 1996.
(C) EXHIBITS
The exhibits required under this Item 14(c) are filed as a separate section of
this report.
(D) FINANCIAL STATEMENT SCHEDULES
See pages 22 and 23 of this report.
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<PAGE> 21
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.
Dated: March 27, 1997 SCOTSMAN INDUSTRIES, INC.
BY: /s/ R. C. Osborne
-------------------------------------
R.C. Osborne, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Scotsman and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R. C. Osborne , Chairman of the Board, President, March 27, 1997
- ----------------------------------
(R.C. Osborne) Chief Executive Officer & Director
(Principal Executive Officer) Director
/s/ D. C. Clark , Director March 27, 1997
- ----------------------------------
(D.C. Clark)
/s/ T. C. Collins , Director March 27, 1997
- ----------------------------------
(T.C. Collins)
/s/ F. W. Considine , Director March 27, 1997
- ----------------------------------
(F.W. Considine)
/s/ M. O. Diggs, Jr. , Director March 27, 1997
- ----------------------------------
(M.O. Diggs, Jr.)
/s/ G. D. Kennedy , Director March 27, 1997
- ----------------------------------
(G.D. Kennedy)
/s/ R. G. Rettig , Director March 27, 1997
- ----------------------------------
(R.G. Rettig)
/s/ D. D. Holmes , Vice President-Finance and March 27, 1997
- ---------------------------------- Secretary (Principal Financial &
(D.D. Holmes) Accounting Officer)
</TABLE>
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<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Shareholders of Scotsman Industries, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in Scotsman Industries, Inc.'s 1996
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 4, 1997. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in Item 14(a)(2) Financial Statement Schedule is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated 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 consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 4, 1997
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<PAGE> 23
SCOTSMAN INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Additions
---------
Charged Charged
Balance at to to Balance
Beginning Costs/ Other at End
of Period Expenses Accounts (A) Deductions of Period
--------- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
1994-
Accounts Receivable
Reserves $1,548 $ 430 $ 716 $ (398) $2,296
===== ==== ==== ===== =====
1995-
Accounts Receivable
Reserves $2,296 $ 645 $ 572 $ (553) $2,960
===== ==== ==== ===== =====
1996-
Accounts Receivable
Reserves $2,960 $ 435 $(128) $ (489) $2,778
===== ==== ==== ===== =====
</TABLE>
_________________________
(A) Includes the translation impact and also includes increases due to
inclusion of the accounts receivable reserves of the acquired
businesses as of the date of their acquisition by the Company.
-23-
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of February 2, 1997, among the
Company, K Acquisition Corp., and Kysor Industrial Corporation (incorporated
herein by reference from Exhibit (c)(1) to the Company's Tender Offer
Statement on Schedule 14D-1, filed with the Commission on February 7, 1997),
as amended by the First Amendment to Agreement and Plan of Merger, dated as
of March 7, 1997 (incorporated herein by reference to the Company's 8-K,
dated March 8, 1997).
2.2 Agreement for the Sale, Purchase and Assignment of the Entire Share Capital
of Hartek Beverage Handling GmbH and Hartek Awagem Vertriebsges, m.b.H.,
dated December 31, 1995, among Hartek Beverage Handling B.V., Hartwall
Bolagen AB, Scotsman Group Inc. and Scotsman Industries, Inc. (incorporated
herein by reference to the Company's 10-K for the fiscal year ended December
31, 1995).
2.3 Agreement and Plan of Merger, dated as of January 11, 1994, among Scotsman
Industries, Inc., Scotsman Acquisition Corporation, DFC Holding Corporation,
The Delfield Company, Onex Corporation, Onex DHC LLC, Pacific Mutual Life
Insurance Co., PM Group Life Insurance Co., EJJM, Matthew O. Diggs, Jr.,
Timothy C. Collins, W. Joseph Manifold, Charles R. McCollom, Anita J.
Moffatt Trust, Anita J. Moffatt, Remo Panella, Teddy F. Reed, Robert L.
Schafer, Graham E. Tillotson, John A. Tilmann Trust, John A. Tilmann, Kevin
E. McCrone, Michael P. McCrone, Ronald A. Anderson and Continental Bank N.A.
(incorporated herein by reference to the Company's 8-K, dated January 13,
1994), as amended by the First Amendment thereto, dated as of March 17, 1994
(incorporated herein by reference to the Company's 10-K for the fiscal year
ended January 2, 1994).
2.4 Share Acquisition Agreement, dated as of January 11, 1994, among Scotsman
Industries, Inc., Whitlenge Acquisition Limited, Whitlenge Drink Equipment
Limited, Timothy C. Collins, Graham F. Cook, Christopher R.L. Wheeler,
Michael de St. Paer and John Rushton (incorporated herein by reference
herein to the Company's 8-K, dated January 13, 1994), as amended by the
First Amendment thereto, dated as of March 17, 1994 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended January 2, 1994).
3.1 Restated Certificate of Incorporation of the Company (incorporated herein by
reference to the Company's 10-K for the fiscal year ended December 31,
1989).
</TABLE>
-24-
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C>
3.2 By-Laws of the Company, as amended (incorporated herein by reference to the
Company's 8-K, dated June 21, 1991).
4 Rights Agreement dated as of April 14, 1989 between Scotsman Industries,
Inc. and Harris Trust & Savings Bank (incorporated herein by reference to
the Company's 8-K, dated April 25, 1989), as amended by Amendment No. 1
thereto, dated as of January 11, 1994 (incorporated herein by reference to
Scotsman Industries, Inc. Amendment No. 4 to General Form for Registration
of Securities on Form 10/A, as filed with the Commission on January 27,
1994).
10.1 Reorganization and Distribution Agreement dated as of March 15, 1989 by and
among Household International, Inc., Eljer Industries, Inc., Schwitzer, Inc.
and Scotsman Industries, Inc. (incorporated herein by reference to the
Company's 8-K, dated April 25, 1989).
10.2 Tax Sharing Agreement dated as of March 15, 1989 among Household
International, Inc., Eljer Industries, Inc., Schwitzer, Inc. and Scotsman
Industries, Inc. (incorporated herein by reference to the Company's 8-K,
dated April 25, 1989).
10.3 Benefits and Labor Agreement dated as of March 15, 1989 among Household
International, Inc., Eljer Industries, Inc., Schwitzer, Inc. and Scotsman
Industries, Inc. (incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989).
10.4 Credit Agreement dated March 12, 1997 among Scotsman Group Inc. and the
other parties named therein, as Borrowers, the Lenders named therein, and
The First National Bank of Chicago, as Agent.
10.5 Promissory Note in the principal amount of $15,000,000, made as of March 12,
1997 by Scotsman Group Inc. to Comerica Bank, together with the related
Reaffirmation of Guaranty and Consent, dated March 12, 1996, by Scotsman
Industries, Inc. in favor of Comerica Bank, Guaranty Agreement, dated June
30, 1996, by Scotsman Industries, Inc. in favor of Comerica Bank
(incorporated herein to the Company's 10-Q, dated June 30, 1996) and
Guaranty by Booth, Inc., DFC Holding Corporation, The Delfield Company and
Kysor Industrial Corporation, dated March 12, 1997, in favor of Comerica
Bank.
</TABLE>
-25-
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C>
10.6 Reimbursement Agreement, dated March 1, 1988, among Household Manufacturing,
Inc., King-Seeley Thermos Co. and the National Westminster Bank PLC, as
amended by the Amendments dated as of April 14, 1989, December 12, 1989,
June 26, 1992, November 20, 1992, March 17, 1993, among Scotsman Group Inc.,
Scotsman Industries, Inc. and The Bank of Nova Scotia (incorporated herein
by reference to the Company's 10-K for the fiscal year ended January 3,
1993), the Amendment dated April 29, 1994 (incorporated herein by reference
to the Company's 10-Q for the quarter ended April 3, 1994) , and Amendment
No. 7 thereto, dated March 12, 1997, among Scotsman Group Inc., Scotsman
Industries, Inc., The Bank of Nova Scotia and The First National Bank of
Chicago.
10.7 ISDA Master Agreement, dated as of March 3, 1994, including the Schedule and
Amended Confirmation (2) thereto, between The First National Bank of Chicago
and Scotsman Group Inc. (incorporated herein by reference to the Company's
10-K for the fiscal year ended January 1, 1995).
10.8 Long-Term Executive Incentive Compensation Plan of Scotsman Industries,
Inc., as amended February 13, 1997.
10.9 Scotsman Industries, Inc., Executive Incentive Compensation Program, Plans
B-1 (incorporated herein by reference to the Company's 10-K for the fiscal
year ended December 31, 1995) and AA, A-1 and A-2.
10.10 Scotsman Group Inc. Supplemental Tax Reduction Investment Plan, dated as of
April 14, 1989 (incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 30, 1990).
10.11 Non-Employee Directors Stock Option Plan, effective as of August 11, 1994
(incorporated herein by reference to the Company's Registration Statement on
Form S-8, No. 33-59397).
10.12 Employment Agreement dated September 16, 1991 between Scotsman Group Inc.
and Richard C. Osborne (incorporated herein by reference to the Company's
10-Q for the quarter ended September 29, 1991).
10.13 Employment Agreement dated September 16, 1991 between Scotsman Group Inc.
and Emanuele Lanzani (incorporated herein by reference to the Company's 10-K
for the fiscal year ended December 29, 1991).
10.14 Employment Agreement dated September 16, 1991 between Scotsman Group Inc.
and Donald D. Holmes (incorporated herein by reference to the Company's 10-Q
for the quarter ended September 29, 1991).
10.15 Employment Agreement dated October 17, 1996 between Scotsman Group Inc. and
Michael de St. Paer.
</TABLE>
-26-
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C>
10.16 Service Agreement dated February 1, 1995, as amended by the Service
Agreement Addendum, dated January 31, 1997, between Hartek Beverage Handling
GmbH and Ludwig H. Klein.
10.17 Executive Severance Agreement dated as of September 16, 1991 between Richard
C. Osborne and Scotsman Group Inc. (incorporated herein by reference to the
Company's 10-Q for the quarter ended September 29, 1991), as amended by
Amendment No. 1 thereto, dated as of January 11, 1994 (incorporated herein
by reference to the Company's 10-K for the fiscal year ended January 2,
1994).
10.18 Executive Severance Agreement dated as of September 16, 1991 between
Emanuele Lanzani and Frimont S.p.A. (incorporated herein by reference to the
Company's 10-K for the fiscal year ended December 29, 1991), as amended by
Amendment No. 1 thereto, dated as of January 11, 1994 (incorporated herein
by reference to the Company's 10-K for the fiscal year ended January 2,
1994).
10.19 Executive Severance Agreement dated as of September 16, 1991 between Donald
D. Holmes and Scotsman Group Inc. (incorporated herein by reference to the
Company's 10-Q for the quarter ended September 29, 1991), as amended by
Amendment No. 1 thereto, dated as of January 11, 1994, between Donald D.
Holmes and Scotsman Group Inc (incorporated herein by reference to the
Company's 10-K for the fiscal year ended January 2, 1994).
10.20 Retirement Program for Emanuele Lanzani of Frimont, S.p.A., Subsidiary of
King-Seeley Thermos Co. dated July 25, 1984 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended December 31,
1989).
10.21 Agreement dated March 27, 1981 by and between Emanuele Lanzani and King-
Seeley Thermos Co. and Frimont, S.p.A. (incorporated herein by reference to
the Company's 10-K for the fiscal year ended December 31, 1989), as amended
by the Amendment dated March 20, 1990 (incorporated herein by reference to
the Company's 10-Q for the quarter ended September 30, 1990).
10.22 Industrial Building Lease Agreement dated September 21, 1988 by and between
American National Bank and Trust Company of Chicago, as Trustee under Trust
Agreement No. 64661 dated June 17, 1985, and Household Manufacturing, Inc.
(incorporated herein by reference to the Company's 10-K for the fiscal year
ended December 31, 1989).
</TABLE>
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<PAGE> 28
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
------ ----------- ----------
<S> <C>
10.23 Lease Agreement, dated as of April 16, 1993, by and between the Western and
Southern Life Insurance Company and Booth, Inc. together with the related
Guaranty by Scotsman Group Inc. dated as of April 8, 1993 (incorporated
herein by reference to the Company's 10-Q for the quarter ended October 2,
1993), as amended by First Amendment to the Lease Agreement, dated October
27, 1993, (incorporated herein by reference to the Company's 10-K for the
fiscal year ended January 1, 1995) and Second Amendment to the Lease
Agreement, dated December 3, 1993, (incorporated herein by reference to the
Company's 10-K for the fiscal year ended January 1, 1995).
13 Those portions of Scotsman's 1996 Annual Report to Shareholders which are
incorporated herein by reference under Part I, Item 1, "Financial
Information about Foreign and Domestic Operations," and Part II, Items 5, 6,
7, and 8 of the Form 10-K, consisting of "Management's Discussion and
Analysis of Financial Condition and Results of Operations, " the report of
Arthur Andersen LLP and the consolidated financial statements, together with
the notes thereto (as set forth in the list of financial statements under
Item 14(a)(1)), "Five Year Summary," "Selected Quarterly Financial Data" and
"Common Stock."
21 List of Subsidiaries.
23 Consent of Arthur Andersen LLP.
27 Article 5 Financial Data Schedule for the Fiscal Year Ended December 29,
1996.
99 Cautionary Statements.
- -------------------
</TABLE>
(1) Unless otherwise indicated, all documents incorporated herein by
reference to prior filings have been incorporated by reference to
filings made under Commission File No 1-10182.
-28-
<PAGE> 1
EXHIBIT 10.4
CREDIT AGREEMENT
AMONG
SCOTSMAN GROUP INC.
AND THE OTHER PARTIES NAMED HEREIN,
as Borrowers,
SCOTSMAN INDUSTRIES, INC.,
THE LENDERS NAMED HEREIN
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
DATED AS OF
March 12, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE CREDITS
2.1. Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.2. Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3. Swing Line Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3.1 Making of Swing Line Loans . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3.2 Conversions of and Participations in Swing Line Loans . . . . . . . . . . . 29
2.4. Ratable Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.5. Types of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.6. Fees; Reductions in Aggregate Revolving Loan Commitment . . . . . . . . . . . . . 30
2.7. Minimum Amount of Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.8. Optional Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.9. Mandatory Prepayments and Commitment Reductions . . . . . . . . . . . . . . . . . 32
2.9.1 Asset Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.9.2 Excess Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.9.3 Debt and Equity Issuances . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.9.4 Revolving Commitment Reductions . . . . . . . . . . . . . . . . . . . . . . 34
2.9.5 Application of Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.9.6 Permitted Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.10. Method of Selecting Types and Interest Periods for New Advances . . . . . . . . . 34
2.11. Conversion and Continuation of Outstanding Advances . . . . . . . . . . . . . . . 35
2.12. Changes in Interest Rate, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.13. Rates Applicable After Default . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.14. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.15. Notes; Telephonic Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.16. Interest Payment Dates; Interest and Fee Basis . . . . . . . . . . . . . . . . . . 39
2.17. Notification by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.18. Lending Installations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.19. Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . 39
2.20. Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.21. Agent's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.22. Determination, Denomination and Redenomination of
Alternative Currency Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.23. Facility Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.23.1 Issuance of Facility Letters of Credit . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<TABLE>
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2.23.2 Participating Interests . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.23.3 Facility Letter of Credit Reimbursement Obligations . . . . . . . . . . . 42
2.23.4 Procedure for Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.23.5 Nature of the Lenders' Obligations . . . . . . . . . . . . . . . . . . . . 45
2.23.6 Facility Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.2. Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.3. Changes in Capital Adequacy Regulations . . . . . . . . . . . . . . . . . . . . . 48
3.4. Availability of Types of Advances . . . . . . . . . . . . . . . . . . . . . . . . 49
3.5. Funding Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.6. Lender Statements; Survival of Indemnity . . . . . . . . . . . . . . . . . . . . . 49
3.7. Replacement of Certain Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.8. Availability of Alternative Currency . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Loan and Facility Letter of Credit Issuance . . . . . . . . . . . . . . . 50
4.2. Each Future Advance and Facility Letter of Credit Issuance . . . . . . . . . . . . 54
4.3. Each Advance on the Merger Date . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Existence and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.2. Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.3. Compliance with Laws and Contracts . . . . . . . . . . . . . . . . . . . . . . . . 55
5.4. Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.6. Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.8. Litigation and Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . 57
5.9. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.10. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.11. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.12. Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.13. Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.14. Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.15. Representations and Warranties Incorporated From
Asset Purchase Agreement and Acquisition Agreement . . . . . . . . . . . . . . . . 59
5.16. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.17. Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
iii
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5.18. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.19. Employee Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.20. Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.21. Acquisition and Asset Purchase Documents . . . . . . . . . . . . . . . . . . . . . 60
5.22. Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.23. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.24. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
5.25. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.26. Representations in Other Loan Documents True and Correct . . . . . . . . . . . . . . 62
ARTICLE VI
COVENANTS
6.1. Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.2. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.3. Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.4. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.7. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.8. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.9. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.10. Capital Stock and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.11. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.12. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.13. Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.14. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.15. Investments and Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.16. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.17. Kysor Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.18. Lease Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.19. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.20. Amendments to Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.21. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.22. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.23. Change in Corporate Structure; Fiscal Year . . . . . . . . . . . . . . . . . . . . 72
6.24. Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.25. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.25.1 Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . 73
6.25.2 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . 74
6.25.3 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.26. Tax Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
6.27. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.28. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C>
6.29. Required Hedging Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.30. Financial Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.31 UK Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE VII
DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.3. Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.4. Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.2. Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.3. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9.5. Several Obligations; Benefits of this Agreement . . . . . . . . . . . . . . . . . 81
9.6. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.7. Numbers of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.8. Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.9. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.10. Nonliability of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.11. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.12. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.14. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE X
THE AGENT
10.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.2. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.3. General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.4. No Responsibility for Loans, Recitals, etc. . . . . . . . . . . . . . . . . . . . 85
10.5. Action on Instructions of Lenders . . . . . . . . . . . . . . . . . . . . . . . . 86
10.6. Employment of Agents and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.7. Reliance on Documents; Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.8. Agent's Reimbursement and Indemnification . . . . . . . . . . . . . . . . . . . . 86
10.9. Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
</TABLE>
v
<PAGE> 6
<TABLE>
<S> <C>
10.10. Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.11. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.12. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.2. Ratable Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
12.2. Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
12.2.1 Permitted Participants; Effect. . . . . . . . . . . . . . . . . . . . . 88
12.2.2 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
12.2.3 Benefit of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
12.3. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
12.3.1 Permitted Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . 89
12.3.2 Effect; Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . 89
12.4. Dissemination of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
12.5. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE XIII
NOTICES
13.1. Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
13.2. Change of Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
</TABLE>
vi
<PAGE> 7
EXHIBITS
Exhibit A-1 - Domestic Guaranty
Exhibit A-2 - Foreign Guaranty
Exhibit B-1 - Revolving Note
Exhibit B-2 - Swing Line Note
Exhibit B-3 - Term Note
Exhibit C-1 - Application and Reimbursement Agreement for Standby
Letter of Credit
Exhibit C-2 - Application and Reimbursement Agreement for
Commercial Letter of Credit
Exhibit D - Compliance Certificate
Exhibit E - Privity Letter
Exhibit F - Assignment and Acceptance
Exhibit G - Agreement of Joinder
SCHEDULES
---------
Schedule 1.1 - Revolving and Term Loan Commitments
Schedule 2.10 - Lending Installations
Schedule 5.3 - Approvals and Consents
Schedule 5.4 - Governmental Consents
Schedule 5.5 - Opening Financial Statements
Schedule 5.8 - Litigation and Material Contingent Obligations
Schedule 5.9 - Subsidiaries
Schedule 5.10 - ERISA
Schedule 5.17(a) - Owned and Leased Properties
Schedule 5.17(b) - Intellectual Property
Schedule 5.18 - Indebtedness
Schedule 5.22 - Environmental
Schedule 5.23 - Insurance
Schedule 6.11 - Permitted Existing Indebtedness
Schedule 6.15 - Investments
Schedule 6.16 - Liens
vii
<PAGE> 8
CREDIT AGREEMENT
This Credit Agreement, dated as of March 12, 1997, is among Scotsman
Group Inc., a Delaware corporation, The Delfield Company, a Delaware
corporation, Scotsman Drink Limited, a private company limited by shares
registered in England, Whitlenge Drink Equipment Limited, a private company
limited by shares registered in England, Frimont S.p.A., a societa per azioni
incorporated with limited liability in the Republic of Italy, Castel MAC
S.p.A., a societa per azioni incorporated with limited liability in the
Republic of Italy, and Kysor Industrial Corporation, a Michigan corporation,
Scotsman Industries, Inc., a Delaware corporation, the institutions from time
to time parties hereto as Lenders and The First National Bank of Chicago,
individually and as Agent.
RECITALS
A. Industries (as this and other capitalized terms used in
these recitals are hereinafter defined) is party to the Acquisition Agreement,
pursuant to which Acquisition Co., an indirect wholly-owned subsidiary of
Industries, is making a cash tender offer for all of the capital stock of Kysor
to be followed by a merger of Acquisition Co. with and into Kysor, with Kysor
being the surviving corporation in such merger; and
B. The Borrowers have requested the Lenders to make financial
accommodations to them in the aggregate principal amount of $415,000,000, the
proceeds of which will be used (a) to finance the cash payments to be made
pursuant to the Acquisition Agreement and to pay related fees and expenses, (b)
to refinance certain outstanding Indebtedness of Industries and its
Subsidiaries, (c) to finance acquisitions to be made by Industries and its
Subsidiaries, all in accordance with the terms and conditions hereof, and (d)
for the working capital needs and other general corporate purposes of Group and
its Subsidiaries, all in accordance with the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Group, Delfield,
Scotsman Drink, Whitlenge, Frimont, Castel MAC, Kysor, Industries, the Lenders
and the Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Accounts" means all present and future rights of a Person to payment
for goods sold or leased or for services rendered, whether or not they have
been earned by performance.
"Acquisition" means the acquisition by Acquisition Co. of all of the
outstanding capital stock of Kysor pursuant to the Acquisition Agreement.
<PAGE> 9
"Acquisition Agreement" means that certain Agreement and Plan of Merger
dated as of February 2, 1997 among Industries, Acquisition Co. and Kysor as the
same may be amended, supplemented or modified in accordance with Section 6.20.
"Acquisition Co." means K Acquisition Corp., a Michigan corporation.
"Acquisition Documents" means the Acquisition Agreement together with
the certificate of ownership and merger filed with the Secretary of State of
Michigan to effectuate such merger and the other documents, certificates and
agreements delivered in connection therewith.
"Additional Borrowing Subsidiary" means any Subsidiary (i) that is a
Wholly-Owned Subsidiary of Industries and (ii) as to which each Lender has
given its consent pursuant to Section 2.2(d) and as to which an Agreement of
Joinder shall have been delivered to the Agent pursuant to Section 2.2(d), duly
executed by Group, such Subsidiary and the Agent, prior to the first date on
which a Borrowing Notice has been delivered by Group pursuant to Section 2.10
requesting that an Advance be made to such Subsidiary, in form and substance
satisfactory to the Agent.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made on the same Borrowing Date by the Lenders to
the same Borrower of the same Type and, in the case of Eurocurrency Advances,
denominated in the same Permitted Currency and for the same Interest Period.
"Affected Lender" is defined in Section 3.7.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
A Person shall be deemed to control another Person if the controlling Person
owns ten percent (10%) or more of any class of voting securities (or other
ownership interests) of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Agent" means First Chicago in its capacity as agent for the Lenders
pursuant to Article X, and not in its individual capacity as a Lender, and any
successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the sum of the Aggregate Revolving Loan
Commitment and the Aggregate Term Loan Commitment.
"Aggregate Revolving Loan Commitment" means the aggregate of the
Revolving Loan Commitments of all of the Lenders having Revolving Loan
Commitments, as such amount may be further modified from time to time pursuant
to the terms hereof. The initial Aggregate Revolving Loan Commitment is
$265,000,000.
"Aggregate Term Loan Commitment" means the aggregate of the Term Loan
Commitments of all of the Lenders having Term Loan Commitments. The Aggregate
Term Loan Commitment is $150,000,000.
2
<PAGE> 10
"Agreement" means this Credit Agreement, as it may be amended,
modified, supplemented or restated and in effect from time to time.
"Agreement Accounting Principles" means generally accepted United
States accounting principles as in effect from time to time, applied in a
manner consistent with that used in preparing the financial statements referred
to in Section 5.5; provided, that for purposes of determining compliance with
the financial covenants set forth in Section 6.25, "Agreement Accounting
Principles" shall mean such accounting principles as in effect on the date of
this Agreement, together with any such other accounting principles which take
effect after the date of this Agreement to the extent agreed to by Group and
the Required Lenders.
"Agreement of Joinder" means an agreement substantially in the form of
Exhibit G hereto.
"Alternative Currency" shall mean, subject to availability pursuant to
Section 3.8 and to the extent freely transferable and convertible into Dollars,
the lawful currencies of France, Germany, Italy, Japan, Switzerland, Canada and
the United Kingdom and, subject to availability and to the terms and conditions
of this Agreement, such other freely transferable and convertible foreign
currencies as requested by Group and acceptable to Agent and the Required
Lenders, in their reasonable discretion.
"Applicable Margin" means, with respect to the Commitment Fee and each
Type of Loan described below, the rate of interest per annum shown below for
the range of Leverage Ratio specified below:
<TABLE>
<CAPTION>
Level 1 Level 2 Level 3 Level 4 Level 5 Level 6
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leverage Ratio >= 4.0 >= 3.5< >= 3.0 < >= 2.5 < 3.0 >= 2.0 < 2.5 < 2.0
4.0 3.5
Floating Rate 0.375% 0.250% 0.125% 0% 0% 0%
Advances
Eurocurrency 1.375% 1.25% 1.125% 0.875% 0.750% 0.50%
Advances
Commitment Fee 0.35% 0.35% 0.30% 0.25% 0.20% 0.175%
</TABLE>
For the period commencing on the Closing Date and ending on the date which
occurs nine (9) days after the Agent receives the financial statements and the
related Compliance Certificate required to be delivered pursuant to Section
6.1(b) and Section 6.1(d) with respect to the third Fiscal Quarter of 1997, the
Applicable Margin set forth in Level 1 above shall apply to all Advances and
Commitment Fees. Thereafter, the Leverage Ratio shall be calculated as of the
end of each Fiscal Quarter, commencing with the third Fiscal Quarter of 1997,
and shall be reported to the Agent pursuant to a Compliance Certificate
executed by an Authorized Officer of Industries and delivered by Industries in
accordance with Section 6.1(d) hereof. Not later than five (5) Business Days
after
3
<PAGE> 11
receipt by the Agent of each Compliance Certificate delivered by Industries in
accordance with Section 6.1(d) for each Fiscal Quarter or Fiscal Year, as
applicable, the Agent shall determine the Leverage Ratio for the applicable
period and shall promptly notify Industries and the Lenders of such
determination and of any change in each Applicable Margin resulting therefrom.
Each Applicable Margin shall be adjusted (upwards or downwards, as
appropriate), if necessary, based on the Leverage Ratio as of the end of the
Fiscal Quarter immediately preceding the date of determination. The
adjustment, if any, to the Applicable Margin shall be effective as to all
Advances and Commitment Fees commencing on the tenth (10th) Business Day after
the delivery of such quarterly or annual financial statements delivered in
accordance with Sections 6.1(a) and 6.1(b) and such related Compliance
Certificate of an Authorized Officer of Industries delivered in accordance with
Section 6.1(d) and shall be effective from and including the tenth (10th)
Business Day after the date the Agent receives such Compliance Certificate to
but excluding the tenth (10th) Business Day after the date on which the next
Compliance Certificate is required to be delivered pursuant to Section 6.1(d);
provided however, that, in the event that Industries shall fail at any time to
furnish to the Lenders such financial statements and any such Compliance
Certificate required to be delivered pursuant to Sections 6.1(a), 6.1(b) and
6.1(d), the Applicable Margin set forth in Level 1 above shall apply until the
tenth (10th) Business Day after such time as all such financial statements and
each such Compliance Certificate are so delivered to the Agent and the Lenders.
Each determination of the Leverage Ratio and each Applicable Margin by the
Agent in accordance with this definition shall be conclusive and binding on the
Borrowers and the Lenders absent manifest error.
"Arranger" means First Chicago Capital Markets, Inc.
"Article" means an article of this Agreement unless another document
is specifically referenced.
"Asset Disposition" means any sale, lease or other disposition of any
asset of Industries or any Subsidiary in a single transaction or in a series of
related transactions, other than (a) the sale of inventory in the ordinary
course of business, (b) sales, leases or other dispositions (i) by Industries
or any Domestic Subsidiary to Industries or any Wholly-Owned Domestic
Subsidiary or (ii) by any Foreign Subsidiary to Industries or any Wholly-Owned
Subsidiary, (c) sales, leases or other dispositions of used, worn-out or
surplus equipment in the ordinary course of business and (d) other sales,
leases and dispositions of any Property in a single transaction or series of
related transactions to the extent that (x) the fair market value of the
Property transferred in any such single transaction or series of related
transactions does not exceed $100,000 and (y) the aggregate fair market value
of all such Property transferred after the date hereof does not exceed
$2,000,000.
"Asset Purchase" means the sale of certain assets of Kysor pursuant to
the Asset Purchase Documents.
"Asset Purchase Agreement" means that certain Asset Purchase Agreement
dated as of February 2, 1997 among Kuhlman Corporation, Transpro Group, Inc.,
Kysor and certain Subsidiaries of Kysor, as the same may be amended,
supplemented or modified after the date hereof in accordance with Section 6.20.
4
<PAGE> 12
"Asset Purchase Documents" means the Asset Purchase Agreement and the
other documents, certificates and agreements delivered in connection with the
Asset Purchase Agreement.
"Assignment and Acceptance" is defined in Section 12.3.1.
"Authorized Officer" means, with respect to Industries or any
Borrower, any of its chief financial officer, chief executive officer or chief
operating officer, acting singly.
"Available Net Equity Proceeds" is defined in Section 2.9.3.
"Bankruptcy Code" means Title 11, United States Code, sections 1 et
seq., as the same may be amended or modified from time to time, and any
successor thereto or replacement therefor which may be hereafter enacted.
"Booth" means Booth, Inc., a Texas corporation.
"Borrowers" means, collectively, Group, Delfield, Scotsman Drink,
Whitlenge, Frimont, Castel MAC, Kysor and each Additional Borrowing Subsidiary
admitted as a borrower hereunder pursuant to Section 2.2(d).
"Borrowing Date" means a date on which an Advance is made or a
Facility Letter of Credit is issued hereunder.
"Borrowing Notice" is defined in Section 2.10.
"Bridge Credit Agreement" means that certain Bridge Loan Agreement
dated as of March 12, 1997 among Group, Industries, the lenders from time to
time party thereto and First Chicago, as Agent, as the same may be amended,
restated, supplemented or otherwise modified from time to time with the prior
written consent of the Required Lenders.
"Bridge Documents" means "Loan Documents" as such term is defined in
the Bridge Credit Agreement, as the same may be amended, restated, supplemented
or otherwise modified from time to time with the prior written consent of the
Required Lenders.
"Bridge Lenders" means the "Lenders" as defined in the Bridge Credit
Agreement.
"Bridge Loan" means the "Loan" as defined in the Bridge Credit
Agreement.
"Bridge Loan Commitment" means, with respect to the initial Bridge
Lender, the obligation of such Bridge Lender to make its Bridge Loan pursuant
to the terms and conditions of the Bridge Credit Agreement, as such amount may
be modified from time to time pursuant to the terms of the Bridge Credit
Agreement. The Bridge Loan Commitment is $85,000,000.
"Bridge Obligations" means the "Obligations" as such term is defined
in the Bridge Credit Agreement.
5
<PAGE> 13
"Business Day" means (a) with respect to any borrowing, payment or
rate selection of Eurocurrency Advances, a day (other than a Saturday or
Sunday) on which banks generally are open in Chicago, New York, London and for
currencies other than Eurodollars, the principal financial center of the
country in whose currency the Advance is to be funded, for the conduct of
substantially all of their commercial lending activities and on which dealings
in the relevant Permitted Currency are carried on in the London interbank
market, and (b) for all other purposes, a day (other than a Saturday or Sunday)
on which banks generally are open in Chicago for the conduct of substantially
all of their commercial lending activities.
"Capital Expenditures" means, without duplication, any expenditures
for any purchase or other acquisition for value of any asset that is classified
on a consolidated balance sheet of Industries and its Subsidiaries prepared in
accordance with Agreement Accounting Principles as a fixed or capital asset,
excluding (a) the cost of assets acquired under Capitalized Lease Obligations,
(b) expenditures of insurance proceeds to rebuild or replace any asset after a
casualty loss, (c) leasehold improvement expenditures for which Industries or a
Subsidiary is reimbursed promptly by the lessor and (d) assets acquired
pursuant to a merger permitted under Section 6.12 or a Purchase or Investment
permitted under Section 6.15.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Castel MAC" means Castel MAC S.p.A., a societa per azioni
incorporated with limited liability in the Republic of Italy.
"Change" is defined in Section 3.3.
"Change in Control" means (a) the acquisition by any Person, or two or
more Persons acting in concert, including without limitation any acquisition
effected by means of any transaction contemplated by Section 6.12, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of thirty
percent (30%) or more of the outstanding shares of voting stock of Industries
or (b) during any period of twenty-five (25) consecutive calendar months,
commencing on the date of this Agreement, the ceasing of those individuals (the
"Continuing Directors") who (i) were directors of Industries on the first day
of each such period or (ii) subsequently became directors of Industries and
whose initial election or initial nomination for election subsequent to that
date was approved by a majority of the Continuing Directors then on the board
of directors of Industries, to constitute a majority of the board of directors
of Industries.
"Closing Date" means the date on which all conditions precedent to the
making of the initial Loans hereunder have occurred and the initial Loans
hereunder are made.
6
<PAGE> 14
"Closing Transactions" is defined in Section 4.1(e).
"Code" means the Internal Revenue Code of 1986, as the same may be
amended or modified from time to time and any successor thereto or replacement
therefor which may be hereafter enacted.
"Commitment" means, for each Lender, collectively, such Lender's
Revolving Loan Commitment and Term Loan Commitment.
"Commitment Fee" is defined in Section 2.6.
"Commitment Sublimit" means, with respect to the Foreign Borrowers,
the limitation of $70,000,000 on the principal amount of Loans and Facility
Letter of Credit Obligations that may be outstanding in respect of such Foreign
Borrowers in the aggregate at any time.
"Compliance Certificate" is defined in Section 6.1(d).
"Condemnation" is defined in Section 7.8.
"Consolidated" or "consolidated", when used in connection with any
calculation, means a calculation to be determined on a consolidated basis for
Industries and its Subsidiaries in accordance with Agreement Accounting
Principles.
"Consolidated Current Assets" means, at any time, the current assets
other than cash and cash equivalents of Industries and its Subsidiaries at such
time determined on a consolidated basis in accordance with Agreement Accounting
Principles.
"Consolidated Current Liabilities" means, at any time, the current
liabilities of Industries and its Subsidiaries at such time other than the
current portion of all long-term Indebtedness and any Revolving Loans included
in those current liabilities of Industries and its Subsidiaries at such time
determined on a consolidated basis in accordance with Agreement Accounting
Principles.
"Consolidated Income Tax Expense" means, for any period, total income
tax expense of Industries and its Subsidiaries, whether paid or accrued,
deducted in determining Net Income of Industries and its Subsidiaries on a
consolidated basis for such period, all as determined in accordance with
Agreement Accounting Principles.
"Consolidated Interest Expense" means for any period, total interest
expense of Industries and its Subsidiaries, whether paid or accrued, deducted
in determining Net Income of Industries and its Subsidiaries on a consolidated
basis for such period, all as determined in accordance with Agreement
Accounting Principles.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of Industries and its Subsidiaries determined in
accordance with Agreement Accounting Principles, without giving effect to any
changes in the accumulated translation adjustments account of any such Person
(on a cumulative basis) after December 29, 1996.
7
<PAGE> 15
"Consolidated Person" means, for the taxable year of reference, each
Person which is a member of the affiliated group of Industries if Consolidated
returns are or shall be filed for such affiliated group for federal income tax
purposes or any combined or unitary group of which Industries or any Subsidiary
is a member for state income tax purposes.
"Consolidated Total Indebtedness," on any date, means all Indebtedness
of Industries and its Subsidiaries (without duplication) described in clauses
(a) through (f) of the definition of "Indebtedness" set forth herein.
"Consolidated Working Capital" means the excess of Consolidated
Current Assets over Consolidated Current Liabilities.
"Contingent Obligation" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person,
or agrees to maintain the net worth or working capital or other financial
condition of any other Person, or otherwise assures any creditor of such other
Person against loss, including, without limitation, any comfort letter,
operating agreement, take-or-pay contract or application for a Letter of
Credit, but excluding any endorsements of other items for collection or deposit
in the ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Industries or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.11.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Current Dollar Equivalent" shall mean at any date, (a) with respect
to Advances denominated in Dollars, the principal amount outstanding as of such
date and (b) with respect to Advances denominated in an Alternative Currency,
the amount of Dollars into which the principal amount of such Advance
outstanding as of such date may be converted at the spot rate at which Dollars
are offered to the Agent in London for the Alternative Currency in which such
Advance is denominated in an amount comparable to the amount of such Advance at
approximately 11:00 a.m. (London time) on the second Business Day prior to such
date. Determination of the Current Dollar Equivalent of Facility Letter of
Credit Obligations shall be made using the procedures set forth above, but
based upon the outstanding amount thereof in the Permitted Currency in which
such obligations have accrued.
8
<PAGE> 16
"Default" means an event described in Article VII.
"Delfield" means The Delfield Company, a Delaware corporation.
"DFC" means DFC Holding Corporation, a Delaware corporation.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Dollar Amount" shall mean (a) with respect to each Advance to be
made, continued or converted in Dollars, the principal amount thereof and (b)
with respect to each Advance to be made, continued or converted in an
Alternative Currency, the amount of Dollars into which the principal amount of
such Advance may be converted at the spot rate at which Dollars are offered to
the Agent in London for the Alternative Currency in which such Advance is to be
denominated in an amount comparable to the amount of such Advance at
approximately 11:00 a.m. (London time) two (2) Business Days before such
Advance is to be made, continued or converted, as the case may be.
"Domestic Subsidiary" means a Subsidiary organized under the laws of
the United States or any political subdivision or any agency, department or
instrumentality thereof.
"Domestic Transfer" means any (a) payment of a dividend by any Foreign
Subsidiary to Industries or any Domestic Subsidiary, (b) sale, lease or other
disposition of Property in which (i) assets are transferred or services are
rendered by any Foreign Subsidiary to Industries or any Domestic Subsidiary for
less then fair market value or (ii) assets are transferred or services are
rendered by Industries or any Domestic Subsidiary to any Foreign Subsidiary for
greater than fair market value, (c) any repayment by any Foreign Subsidiary to
Industries or any Domestic Subsidiary of any Investment thereby or (d) any sale
of assets or stock of any Foreign Subsidiary by Industries or any Domestic
Subsidiary. For the purposes of clause (b) of this definition: (x) the fair
market value of each sale, lease or other disposition of manufactured products
shall be equal to the sum of (i) the variable costs of manufacturing such
product (determined in each case in accordance with the methods used as of the
date hereof by the Foreign Subsidiaries to determine such variable costs) plus
(ii) ten percent (10%) of such variable costs; and (y) any royalty charged by
any Foreign Subsidiary to Industries or a Domestic Subsidiary for the use of a
trademark, trade name or service mark shall be deemed to have been charged at
fair market value.
"Double Taxation Treaty" means a treaty by virtue of which a Lender is
entitled to receive payments of interest under this Agreement without any
deduction or withholding in respect of United Kingdom Taxes.
"EBITDA" means, for any period, on a consolidated basis for Industries
and its Subsidiaries, the sum of the amounts for such period of (a) Net Income
of Industries and its Subsidiaries, plus (b) Consolidated Income Tax Expense,
plus (c) Consolidated Interest Expense, plus (d) depreciation expense, plus (e)
amortization expense, including amortization of goodwill and other intangible
assets, plus (f) other non-cash charges, minus (g) interest income, minus (h)
equity in income of Affiliates of Industries or any of its Subsidiaries that
are included in the consolidated financial statements of Industries using the
equity method of accounting (in the case of clauses (b) through
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<PAGE> 17
(h) above, to the extent reflected in determining Net Income of Industries and
its Subsidiaries for such period).
"EBITDAR" means, for any period, the sum of (a) EBITDA plus (b)
Rentals.
"Entitled Person" is defined in Section 2.14(b).
"Environmental Laws" is defined in Section 5.22.
"Environmental Permits" is defined in Section 5.22.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended or modified from time to time, and any successor
thereto or replacement therefor which may be hereafter enacted.
"Eurocurrency Advance" means an Advance in a Permitted Currency which
bears interest at the Eurocurrency Rate, including without limitation,
Eurodollar Advances.
"Eurocurrency Base Rate" means, for any specified Interest Period, the
rate of interest per annum determined by the Agent to be the rate at which
deposits in the applicable Permitted Currency are offered by the Agent to
first-class banks in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for delivery on such day, in the approximate amount of the Agent's pro-rata
share of such Eurocurrency Advance and having a maturity equal to such Interest
Period.
"Eurocurrency Loan" means a Loan denominated in a Permitted Currency
which bears interest at the Eurocurrency Rate, including without limitation,
Eurodollar Loans.
"Eurocurrency Rate" means, with respect to a Eurocurrency Advance for
the relevant Interest Period, the sum of (a) the quotient of (i) the
Eurocurrency Base Rate applicable to such Eurocurrency Advance and Interest
Period, divided by (ii) either (A) for any Eurodollar Advance, a number equal
to one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurocurrency Advance and Interest Period or (B) for any other Eurocurrency
Advance, the number one, plus (b) the Applicable Margin. The Eurocurrency Rate
shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not
such a multiple.
"Eurocurrency Sublimit" means $70,000,000.
"Eurodollar Advance" means a Eurocurrency Advance denominated in
Dollars.
"Eurodollar Loan" means a loan denominated in Dollars which bears
interest at the Eurocurrency Rate.
"Excess Cash Flow" shall mean, with respect to any fiscal period of
Industries and its Subsidiaries, a positive number, if any, equal to (i) Net
Income, plus (ii) amortization expense (to the extent deducted in determining
such Net Income), plus (iii) depreciation expense (to the extent
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<PAGE> 18
deducted in determining such Net Income), plus (iv) other non-cash charges (to
the extent deducted in determining such Net Income), minus (v) any cash
dividends paid by Industries permitted to be paid by this Agreement, plus (or
minus) (vi) decreases (or increases) in Consolidated Working Capital from the
last day of the preceding fiscal period to the last day of such fiscal period
(provided that for the Fiscal Year ending December 31, 1997, decreases (or
increases) in Consolidated Working Capital shall be measured from the Closing
Date using the Opening Financial Statements to December 31, 1997), minus (vii)
the aggregate amount actually paid in cash by the Borrower and its Subsidiaries
during such fiscal period for Capital Expenditures, minus (viii) all principal
repayments and prepayments of the Loans and the Bridge Loans made during such
fiscal period (including prepayments made pursuant to Section 2.9.2) provided
that repayments or prepayments of Revolving Loans or Swing Line Loans other
than pursuant to Section 2.9.4(a) shall not be included in the computation of
Excess Cash Flow, minus (ix) all regularly scheduled principal payments made
during such fiscal period in respect of other Indebtedness for borrowed money
(other than the Loans and the Bridge Loans) to the extent such Indebtedness and
payments are permitted to be incurred and made by this Agreement, minus (x) the
aggregate amount of cash and cash equivalents on the balance sheet of all of
the Foreign Subsidiaries of Industries on a consolidated basis up to
$25,000,000 as of the last day of such fiscal period.
"Excess Cash Flow Amount" is defined in Section 2.9.2.
"Excess Interest" is defined in Section 2.12(b).
"Excluded Taxes" is defined in Section 3.1(a).
"Existing Letter of Credit" means that certain letter of credit no.
00326192 issued by First Chicago to NBD Bank, N.A., as the beneficiary, for the
account of Delfield in connection with a letter of credit issued by NBD Bank,
N.A. for the account of Delfield in connection with workers' disability
compensation in the State of Michigan.
"Facility Letter of Credit" means any letter of credit denominated in
Dollars or any Alternative Currency and issued at the request of any Borrower
and for the account of such Borrower in accordance with Section 2.23.1,
including without limitation the IRB Facility Letter of Credit.
"Facility Letter of Credit Obligations" means, as at the time of
determination thereof, all liabilities, whether actual or contingent, of the
Borrowers with respect to Facility Letters of Credit, including the sum of (a)
Facility Letter of Credit Reimbursement Obligations and (b) the aggregate
undrawn face amount of outstanding Facility Letters of Credit.
"Facility Letter of Credit Reimbursement Obligations" means, at any
time, the aggregate (without duplication) of the obligations of the Borrowers
to the Lenders, the Issuers and the Agent under all Reimbursement Agreements
and otherwise in respect of all unreimbursed payments or disbursements made by
the Lenders, the Issuers and/or the Agent under or in respect of draws made
under Facility Letters of Credit.
"Facility Letter of Credit Sublimit" means $40,000,000.
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"Facility Termination Date" means the later of the Revolving Loan
Termination Date or the Term Loan Termination Date.
"Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:00
a.m. (Chicago time) on such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent in its
sole discretion.
"Financial Contract" means (i) any exchange-traded or over-the-counter
futures, forward, swap or option contract or other financial instrument with
similar characteristics or (ii) any agreements, devices or arrangements (other
than promissory notes based on customary market interest rate indices)
providing for payments related to fluctuations of commodity prices, interest
rates, exchange rates or forward rates, including, but not limited to, interest
rate exchange agreements, forward currency exchange agreements, interest rate
cap or collar protection agreements, forward rate currency or interest rate
options, puts and warrants.
"Financial Statements" is defined in Section 5.5.
"First Chicago" means The First National Bank of Chicago in its
individual capacity and its successors.
"Fiscal Quarter" means one of the four 13 week (or, with respect to
the fourth such period in each Fiscal Year which has 53 weeks, 14 week)
accounting periods in each Fiscal Year.
"Fiscal Year" means the accounting period ending on the Sunday nearest
to December 31 of each year.
"Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal
Quarter, the ratio of (a) EBITDAR minus Capital Expenditures to (b) Fixed
Charges, in each case determined as of the last day of such Fiscal Quarter for
the period of four (4) consecutive Fiscal Quarters most recently ended on or
prior to such date (except as otherwise provided in Section 6.25.2).
"Fixed Charges" means, for any period, without duplication, the sum of
(a) Consolidated Interest Expense, plus (b) regularly scheduled principal
payments made with respect to the Term Loans and the Revolving Loans (with
respect to Revolving Loans, including only such payments made due to scheduled
commitment reductions during such period) and regularly scheduled principal
payments made with respect to all other Indebtedness of Industries and its
Subsidiaries during such period, plus (c) Consolidated Income Tax Expense, plus
(d) Rentals, plus (e) cash dividends paid during such period by Industries or
any of its Subsidiaries, minus (f) cash dividends received during such period
by Industries or any of its Subsidiaries.
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"Floating Rate" means, for any day, a rate of interest per annum equal
to the sum of (a) the higher of (i) the Corporate Base Rate for such day, and
(ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per
annum plus (b) the Applicable Margin.
"Floating Rate Advance" means an Advance in Dollars which bears
interest at the Floating Rate.
"Foreign Asset" means any Property of Industries or any of its
Subsidiaries that is located outside of the United States, or is used or to be
used in operations of Industries or any of its Subsidiaries outside of the
United States.
"Foreign Borrowers" means, at any time, collectively, the Borrowers
hereunder which are Foreign Subsidiaries and "Foreign Borrower" means a
reference to any one of them.
"Foreign Guarantor" means any Foreign Subsidiary which at the relevant
time of determination (i) is party to a Guaranty and (ii) is a Wholly-Owned
Subsidiary of Industries.
"Foreign Person" means a Person organized under the laws of any
jurisdiction other than the United States or any political subdivision or any
agency, department or instrumentality thereof.
"Foreign Plan" means any Plan that is not subject to Title I of ERISA
by reason of Section 4(b)(4) of ERISA.
"Foreign Subsidiary" means a Subsidiary which is not a Domestic
Subsidiary.
"Frimont" means Frimont S.p.A., a societa per azioni incorporated with
limited liability in the Republic of Italy.
"Governmental Agency" means any government (foreign or domestic) or
any state or other political subdivision thereof or any governmental body,
agency, authority, department or commission (including without limitation any
taxing authority or political subdivision) or any instrumentality or officer
thereof (including without limitation any court or tribunal) exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation, partnership or other entity
directly or indirectly owned or controlled by or subject to the control of any
of the foregoing.
"Group" means Scotsman Group Inc., a Delaware corporation.
"Guaranties" means, collectively, (a) those certain Guaranties in the
form of Exhibit A-1 hereto, duly executed and delivered by Industries and each
Guarantor which is a Domestic Subsidiary and (b) those certain Guaranties in
the form of Exhibit A-2 hereto, duly executed and delivered by each Guarantor
which is a Foreign Subsidiary, in each case in favor of the Agent, on behalf of
the Lenders, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
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"Guarantors" means, collectively, Industries, Group, Delfield, DFC,
Scotsman Drink, Whitlenge, Frimont, Castel MAC, Kysor, Booth and the other
Persons that execute Guaranties in accordance with Section 6.28 hereof.
"Hazardous Materials" is defined in Section 5.22.
"Hedging Agreements" means any and all interest rate, exchange rate
and commodity price protection agreements, including, without limitation, any
interest rate and exchange rate swaps, caps, floors, collars and similar
agreements and commodity swaps and commodity options.
"HI Indemnity" means that certain Indemnity Agreement dated April 14,
1989 between Group and Household International, Inc.
"Indebtedness" of a Person means (without duplication) such Person's
(a) obligations for borrowed money, (b) obligations representing the deferred
purchase price of Property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens (other than
Liens described under Section 6.16(a)-(d)) or payable out of the proceeds or
production from Property now or hereafter owned or acquired by such Person, (d)
obligations which are evidenced by notes, acceptances, or other instruments,
(e) Capitalized Lease Obligations, (f) Contingent Obligations, (g) Rate Hedging
Obligations and (h) obligations for which such Person is obligated pursuant to
or in respect of a Letter of Credit, in each case other than Indemnified Debt.
"Indemnified Debt" means all Indebtedness as to which Industries and
its Subsidiaries are indemnified against pursuant to the HI Indemnity and as to
which any claims for indemnification thereunder are actually paid to such
Persons within one (1) year following the making of any claim therefor.
"Industries" means Scotsman Industries, Inc., a Delaware corporation.
"Intercompany Note" means a revolving note payable on demand executed
by a Foreign Subsidiary payable to the order of Group evidencing all
Indebtedness owed by such Foreign Subsidiary to Group as required pursuant to
Section 6.11(f).
"Interest Period" means, with respect to a Eurocurrency Advance, a
period of one, two, three or six months commencing on a Business Day selected
by Group pursuant to this Agreement; provided, however, that for the first
ninety (90) day period after the Closing Date, no Interest Period shall exceed
fourteen (14) days in length. Such Interest Period (other than any Interest
Period which is fourteen (14) days or less in length) shall end on (but
exclude) the day which corresponds numerically to such date one, two, three or
six months thereafter; provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day; provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
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"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade), deposit account or contribution of capital by such Person to any other
Person or any investment in, or purchase or other acquisition of, the stock,
partnership interests, notes, debentures or other securities of any other
Person made by such Person.
"IRB Facility Letter of Credit" means that certain $9,597,645.82
Letter of Credit issued by First Chicago, as of the date hereof in connection
with the $9,250,000 Industrial Revenue Refunding Bonds Series 1988 (King-Seeley
Thermos Co. Project), as amended, restated, supplemented or modified from time
to time.
"IRB Facility Letter of Credit Documents" means the IRB Facility
Letter of Credit, that certain Reimbursement Agreement dated as of the date
hereof between First Chicago, and Group, as amended, supplemented or modified
from time to time, and the other documents and agreements executed in
connection therewith.
"Issuer" means the Lender which has been requested by Group to act as
the issuer of a Facility Letter of Credit.
"Judgment Currency" is defined in Section 2.14(b).
"Kysor " means Kysor Industrial Corporation, a Michigan corporation.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and permitted assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
any office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Leverage Ratio" means, with respect to Industries on a consolidated
basis with its Subsidiaries, at any date, the ratio of (a) the Consolidated
Total Indebtedness of Industries and its Subsidiaries at such date to (b)
EBITDA for the period of four (4) consecutive Fiscal Quarters most recently
ended on or prior to such date (except as otherwise provided in Section
6.25.3).
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, collateral assignment, encumbrance or other security agreement
or similar arrangement of any kind or nature whatsoever (including, without
limitation, the interest of a vendor or lessor under any conditional sale,
Capitalized Lease or other title retention agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance made pursuant to Section 2.1, 2.2 or Section 2.3, as applicable, and
"Loans" means, collectively, with
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respect to the Lenders, all Term Loans, all Revolving Loans and all Swing Line
Loans whether made or continued as or converted to Floating Rate Loans or
Eurocurrency Loans.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Pledge Agreement, the Reimbursement Agreements, the IRB Facility Letter of
Credit Documents, each Agreement of Joinder and the other documents and
agreements contemplated hereby and executed by the Borrowers and the Guarantors
in favor of the Agent or any Lender or otherwise in connection with any
Facility Letter of Credit, as the same may be amended, restated, supplemented
or otherwise modified from time to time.
"Loan Party" means each of Industries, Group, DFC, Delfield, Scotsman
Drink, Whitlenge, Frimont, Castel MAC, Kysor, Booth, each Additional Borrowing
Subsidiary and each other Person that executes a Guaranty pursuant to Section
6.28 hereof.
"Margin Stock" has the meaning assigned to that term under Regulation
U.
"Material Adverse Effect" means (a) a material adverse effect on (i)
the business, Property, condition (financial or other), performance or results
of operations of Industries and its Subsidiaries taken as a whole, (ii) the
ability of the Loan Parties, taken as a whole, to repay when due any of their
obligations under the Loan Documents, or (iii) the validity or enforceability
of any of the Loan Documents or the rights or remedies of the Agent or the
Lenders thereunder and (b) a "Material Adverse Effect" as such term is defined
in the Bridge Credit Agreement.
"Material Foreign Asset" is defined in Section 6.15.
"Maximum Rate" is defined in Section 2.12(b).
"Merger" means the merger of Acquisition Co. with and into Kysor
pursuant to the Acquisition Documents.
"Merger Date" means the date on which the Merger shall be consummated.
"Multiemployer Plan" means a Plan which is a " multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"Net Available Proceeds" means, with respect to the Transportation
Sale or any other Asset Disposition, the sum of cash or readily marketable cash
equivalents received (including by way of a cash generating sale or discounting
of a note or receivable, but excluding any other consideration received in the
form of assumption by the acquiring Person of debt or other obligations
relating to the properties or assets so disposed of or received in any other
non-cash form) therefrom, whether at the time of such disposition or subsequent
thereto, net of all legal, title and recording tax expenses, commissions and
other fees and all costs and expenses incurred and all federal, state, local
and other taxes required to be accrued as a liability as a consequence of such
transactions and of all payments made by Industries or any of its Subsidiaries
on any Indebtedness which is secured by such assets pursuant to a permitted
Lien upon or with respect to such assets or which must by the terms of such
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Lien, or in order to obtain a necessary consent to such Asset Disposition or by
applicable law be repaid out of the proceeds from such Asset Disposition.
"Net Debt Proceeds" means all cash proceeds received by Industries or
any of its Subsidiaries from the incurrence of, or the issuance of any
instruments relating to, any Indebtedness (other than Indebtedness borrowed by
the Borrowers under this Agreement or permitted to be borrowed by Industries or
any Subsidiary of Industries pursuant to Section 6.11), in each case net of
underwriting discounts, commissions and other reasonable costs and expenses
directly attributable to such incurrence or issuance.
"Net Equity Proceeds" shall mean all cash proceeds received by
Industries or any of its Subsidiaries from any capital contribution or the
issuance of any common stock, preferred stock, warrant or other equity
securities (other than (a) the issuance of common stock, preferred stock,
warrants or other equity securities of Industries upon exercise of stock
options issued to employees or directors of Industries or any of its
Subsidiaries pursuant to an employee stock option plan or other employee
compensation plan approved by the Board of Directors of Industries, but only to
the extent the cash proceeds from any such issuances of common stock do not
exceed $5,000,000 in the aggregate after the Closing Date and (b) any capital
contribution by Industries or any of its Subsidiaries to any Subsidiary of
Industries, or any issuance of common stock, preferred stock, warrant or other
equity security to Industries or any of its Subsidiaries by any Subsidiary of
Industries, but only to the extent such capital contribution or issuance is
permitted by the terms of this Agreement), net of any brokerage commissions
and any other reasonable costs or expenses directly attributable to such
issuance.
"Net Income" means, for any period, with respect to Industries on a
consolidated basis with its Subsidiaries, cumulative net income earned during
such period determined in accordance with Agreement Accounting Principles.
"Notes" means the Revolving Notes, the Swing Line Notes and the Term
Notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Notice of Issuance" is defined in Section 2.23.4.
"Notice of Swing Line Loan" has the meaning provided in Section 2.3.2
hereof.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, the Facility Letter of Credit Obligations and all other
liabilities (if any), whether actual or contingent, of the Borrowers with
respect to Facility Letters of Credit, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the Borrowers to
the Lenders or to any Lender, the Agent or any indemnified party hereunder
arising under any of the Loan Documents and any Rate Hedging Obligations or
foreign exchange contracts of the Borrowers owing to the Agent or any Lender.
"Opening Financial Statements" is defined in Section 5.5.
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"Participants" is defined in Section 12.2.1.
"Payment Date" means the fifteenth (15th) day of each calendar month.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Currencies" shall mean (a) Dollars with respect to Floating
Rate Advances and (b) Dollars or any Alternative Currency with respect to
Eurocurrency Advances.
"Person" means any natural person, corporation, firm, limited
liability company, joint venture, partnership, association, enterprise, trust
or other entity or organization, or any government or political subdivision or
any agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan, as defined in Section
3(2) of ERISA, as to which Industries or any member of the Controlled Group may
have any liability.
"Pledge Agreement" means that certain Note Pledge Agreement dated as
of the date hereof between Group and the Agent, as amended, restated,
supplemented or modified from time to time.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
"Pro Rata Shares" means:
(i) with respect to all payments, computations and
determinations relating to the Term Loan Commitment or the Term Loan
of any Lender, the percentage obtained by dividing (A) the outstanding
principal balance of such Lender's Term Loan (or the amount of such
Lender's Term Loan Commitment, if the Term Loans have not been made)
by (B) the aggregate outstanding principal balance of the Term Loans
(or the Aggregate Term Loan Commitment, if the Term Loans have not
been made),
(ii) with respect to all payments, computations and
determinations relating to the Revolving Loan Commitment or the
Revolving Loans of any Lender or such Lender's interest in Facility
Letters of Credit or the Swing Line Loans (including without
limitation determinations of the commitment fee under Section 2.6),
the percentage obtained by dividing (A) such Lender's Revolving Loan
Commitment (or the Current Dollar Equivalent of the outstanding
principal balance of such Lender's Revolving Loans and all Facility
Letter of Credit Obligations in which such Lender has an interest, if
the Revolving Loan Commitments have been terminated pursuant to the
terms of this Agreement) by (B) the Aggregate Revolving Loan
Commitment (or the Current Dollar Equivalent of the aggregate
outstanding principal balance of the Revolving Loans and all Facility
Letter of Credit Obligations, if the Revolving Loan Commitments have
been terminated pursuant to the terms of this Agreement), and
(iii) for all determinations of "Required Lenders"
pursuant to the definition of such term herein, with respect to each
Lender and each Bridge Lender, the percentage
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obtained by dividing (A) the sum of (1) the outstanding principal
balance of such Lender's Term Loan (or such Lender's Term Loan
Commitment, if the Term Loans have not been made), (2) such Lender's
Revolving Loan Commitment (or the Current Dollar Equivalent of the
outstanding principal balance of such Lender's Revolving Loans and all
Facility Letter of Credit Obligations in which such Lender has an
interest, if the Revolving Loan Commitments have been terminated
pursuant to the terms of this Agreement) and (3) the outstanding
principal balance of such Bridge Lender's Bridge Loans (or such Bridge
Lender's Bridge Loan Commitment, if the Bridge Loans have not been
made) by (B) the sum of (1) the aggregate outstanding principal
balance of the Term Loans (or the Aggregate Term Loan Commitment, if
the Term Loans have not been made), (2) the Aggregate Revolving Loan
Commitment (or the Current Dollar Equivalent of the aggregate
outstanding principal balance of the Revolving Loans and all Facility
Letter of Credit Obligations, if the Revolving Loan Commitments have
been terminated pursuant to the terms of this Agreement) and (3) the
aggregate outstanding principal balance of the Bridge Loans (or the
Bridge Loan Commitment, if the Bridge Loans have not been made).
(iv) for all other purposes with respect to each
Lender, the percentage obtained by dividing (A) the sum of (1) the
outstanding principal balance of such Lender's Term Loan (or such
Lender's Term Loan Commitment, if the Term Loans have not been made)
and (2) such Lender's Revolving Loan Commitment (or the Current Dollar
Equivalent of the aggregate outstanding principal balance of such
Lender's Revolving Loans and all Facility Letter of Credit Obligations
in which such Lender has an interest, if the Revolving Loan
Commitments have been terminated pursuant to the terms of this
Agreement) by (B) the sum of (1) the aggregate outstanding principal
balance of the Term Loans (or the Aggregate Term Loan Commitment, if
the Term Loans have not been made) and (2) the Aggregate Revolving
Loan Commitment (or the Current Dollar Equivalent of the aggregate
outstanding principal balance of the Revolving Loans and all Facility
Letter of Credit Obligations, if the Revolving Loan Commitments have
been terminated pursuant to the terms of this Agreement).
"Purchase" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which
Industries or any of its Subsidiaries (a) acquires any going business or all or
substantially all of the assets of any Person or division thereof, whether
through purchase of assets, merger or otherwise, or (b) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.
"Purchasers" is defined in Section 12.3.1.
"Qualifying Lender" means a Lender which is:
(a) (i) a "bank" within the meaning of Section 840A of the
English Income and Corporation Taxes Act 1988;
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(ii) at the time interest is paid, beneficially
entitled to that interest and within the charge to UK
corporation tax with respect to such interest for the purposes
of Section 349(3) of the Income and Corporation Taxes Act 1988;
(iii) properly takes any interest received by it in
the United Kingdom under this Agreement into account as a trading
receipt of such banking business; and
(iv) makes and books its Loans to UK Borrowers
through a Lending Installation located in the United Kingdom; or
(b) a Lender to which a Double Taxation Treaty applies;
and for the purposes of this definition, if a Lender is a Qualifying Lender in
respect of one or more of its Lending Installations, but not in respect of the
Lending Installation which makes and books the Loan in question to a UK
Borrower, then such Lender shall not be deemed to be a Qualifying Lender with
respect to such Loan; provided, that if any of the acts or regulations
referenced in clause (a) is amended or repealed, this definition shall be
amended in such manner as the Agent and the Lenders, after consultation with
Group, shall determine to be necessary in order to define the persons of the
relevant equivalent category.
"Rate Hedging Obligations" of a Person means any and all net
obligations of such Person, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (a) any
and all agreements, devices or arrangements designed to protect at least one of
the parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing, determined with respect to interest rate agreements, by multiplying
two percent (2%) of the notional amount thereof times the number of years
remaining to maturity.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to depositary institutions.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by Persons other than banks,
brokers and dealers for the purpose of purchasing or carrying margin stocks
applicable to such Persons.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation
20
<PAGE> 28
of said Board of Governors relating to the extension of credit by banks for the
purpose of purchasing or carrying margin stocks applicable to such Persons.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by the specified lenders for the
purpose of purchasing or carrying margin stocks applicable to such Persons.
"Reimbursement Agreement" means a reimbursement agreement,
substantially in such form as the Issuer may employ in the ordinary course of
its business, with such modifications thereto as may be agreed upon by the
Issuer and Group; provided, however, that in the event of any conflict between
the terms of any Reimbursement Agreement and this Agreement, the terms of this
Agreement shall control.
"Release" is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section Section 39601 et
seq.
"Rentals" of a Person means the aggregate fixed amounts payable by
such Person under any operating lease of Property having an original term
(including any required renewals or any renewals at the option of the lessor or
lessee) of one year or more.
"Replacement Lender" is defined in Section 3.7.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within thirty
(30) days of the occurrence of such event; provided, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of
the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Required Lenders" means Lenders and Bridge Lenders whose Pro Rata
Shares, in the aggregate, are equal to or greater than sixty-six and two-thirds
percent (66-2/3%). For the purposes of this definition, in addition to
Revolving Loans that are actually outstanding, each Lender with a Revolving
Loan Commitment shall be deemed to have outstanding Revolving Loans in an
amount equal to its Pro Rata Share of any outstanding Facility Letter of Credit
Obligations.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
"Eurocurrency Liabilities" with a maturity equal to that of such Eurodollar
Advance for such Interest Period.
"Revolving Loan" is defined in Section 2.2.
"Revolving Loan Commitment" means, for each Lender, the obligation of
such Lender to make Revolving Loans and to purchase participations in Facility
Letters of Credit pursuant to the
21
<PAGE> 29
terms and conditions of this Agreement not exceeding the amount set forth on
Schedule 1.1 to this Agreement opposite its name thereon, or in the Assignment
and Acceptance by which it became a Lender, as such amount may be modified from
time to time pursuant to the terms of this Agreement or modified to give effect
to any applicable Assignment and Acceptance.
"Revolving Loan Obligations" means, at any particular time, the sum of
(i) the outstanding principal amount of the Revolving Loans at such time, plus
(ii) the outstanding principal amount of the Swing Line Loans at such time,
plus (iii) the Facility Letter of Credit Obligations at such time.
"Revolving Loan Termination Date" means the earlier of (a) March 12,
2004 and (b) the date of termination of the Commitments pursuant to Section
2.6(b) or Section 8.1.
"Revolving Note" means a revolving credit note in substantially the
form of Exhibit B-1 hereto, with appropriate insertions, duly executed and
delivered to the Agent by each Borrower and payable to the order of a Lender in
the amount of its Revolving Loan Commitment, including any amendment,
restatement, modification, renewal or replacement of such promissory note and
"Revolving Notes" means all such notes collectively.
"Risk-Based Capital Guidelines" is defined in Section 3.3.
"Scotsman Drink" means Scotsman Drink Limited, a private company
limited by shares registered in England.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Senior Debt" means any Indebtedness of Industries or any of its
Subsidiaries which ranks pari passu to the Indebtedness under the Loan
Documents and which is permitted to be incurred pursuant to Section 6.11.
"Senior Debt Documents" means all agreements evidencing Senior Debt.
"Senior Notes" is defined in Section 4.1(p).
"Single Employer Plan" means a Plan subject to Title IV of ERISA
maintained by Industries or any member of the Controlled Group for employees of
Industries or any member of the Controlled Group, other than a Multiemployer
Plan.
"Solvent" means, when used with respect to a Person, that (a) the fair
saleable value of the assets of such Person is in excess of the total amount of
the present value of its liabilities (including for purposes of this definition
all liabilities (including loss reserves as determined by Industries), whether
or not reflected on a balance sheet prepared in accordance with Agreement
Accounting Principles and whether direct or indirect, fixed or contingent,
secured or unsecured, disputed or undisputed), (b) such Person is able to pay
its debts or obligations in the ordinary course as they mature and (c) such
Person does not have unreasonably small capital to carry out its business as
conducted and as proposed to be conducted. "Solvency" shall have a correlative
meaning.
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<PAGE> 30
"Specified Currency" is defined in Section 2.14(b).
"Specified Place" is defined in Section 2.14(b).
"Subsidiary" of a Person means (a) any corporation more than fifty
percent (50%) of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or indirectly, by such
Person or by one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries, or (b) any partnership, association, joint venture or
similar business organization more than fifty percent (50%) of the ownership
interests having ordinary voting power of which shall at the time be so owned
or controlled. Unless otherwise expressly provided, all references herein to a
"Subsidiary" shall mean a Subsidiary of Industries. Notwithstanding the
foregoing, "Subsidiary" shall not include the joint venture, Shenyang
Scotsman-Xinle Refrigeration Manufacturing Co. Ltd., between Group and Xinle
Precision Machinery Company entered into for the purpose of producing
commercial ice machines for sale in the People's Republic of China (the "Joint
Venture"), but only so long as the Joint Venture (together with any
Subsidiaries thereof) shall have aggregate assets of less than $10,000,000.
"Substantial Annual Portion" means, with respect to the Property of
Industries and its Subsidiaries, Property which (a) (as such Property is
measured by its book value) represents more than ten percent (10%) of the
consolidated assets of Industries and its Subsidiaries, as would be shown in
the consolidated financial statements of Industries and its Subsidiaries as at
the end of the Fiscal Quarter next preceding the date on which such
determination is made, or (b) is responsible for more than ten percent (10%) of
the consolidated net sales or of the consolidated Net Income of Industries and
its Subsidiaries for the 12-month period ending as of the end of the Fiscal
Quarter next preceding the date of determination; provided, that, if the
Transportation Sale is consummated on or before the Closing Date or within
forty- five (45) days after the Closing Date, then the Property subject to the
Transportation Sale shall not be included as Property in determining the
Substantial Annual Portion and if the Transportation Sale is not consummated
within forty-five days after the Closing Date, then the Property subject to the
Transportation Sale shall be included in all determinations of Substantial
Annual Portion from and after the last day of such forty-five day period.
"Substantial Cumulative Portion" means, with respect to the Property
of Industries and its Subsidiaries, Property which (a) (as such Property is
measured by its book value) represents more than twenty percent (20%) of the
consolidated assets of Industries and its Subsidiaries, as would be shown in
the consolidated financial statements of Industries and its Subsidiaries as at
the end of the Fiscal Quarter next preceding the date on which determination
thereof is made, or (b) is responsible for more than twenty percent (20%) of
the consolidated net sales or of the consolidated Net Income of Industries and
its Subsidiaries for the period commencing on the Closing Date and ending as of
the end of the Fiscal Quarter next preceding the date of determination;
provided, that, if the Transportation Sale is consummated on or before the
Closing Date or within forty-five (45) days after the Closing Date, then the
Property subject to the Transportation Sale shall not be included as Property
in determining the Substantial Cumulative Portion and if the Transportation
Sale is not consummated within forty-five days after the Closing Date, then the
Property subject to the Transportation Sale shall be included in all
determinations of Substantial Cumulative Portion from and after the last day of
such forty-five day period.
23
<PAGE> 31
"Swing Line Commitment" means $20,000,000, as the same may be reduced
pursuant to the terms of this Agreement.
"Swing Line Lender" means First Chicago.
"Swing Line Loan" is defined in Section 2.3.1 hereof.
"Swing Line Note" means a promissory note, in substantially the form
of Exhibit B-2 hereto, duly executed by each Borrower which is a Domestic
Subsidiary and payable to the order of the Swing Line Lender in the amount of
the Swing Line Commitment, including any amendment, restatement, modification,
renewal or replacement of such Swing Line Note.
"Taxes" is defined in Section 3.1(a).
"Term Loan" is defined in Section 2.1.
"Term Loan Commitment" means, with respect to any Lender, the
obligation of such Lender to make its Term Loan pursuant to the terms and
conditions of this Agreement, and which shall not exceed the principal amount
set forth opposite such Lender's name under the heading "Term Loan Commitment"
on Schedule 1.1 hereof opposite its name thereon, or in the Assignment and
Acceptance by which it became a Lender, as such amount may be modified from
time to time pursuant to the terms of this Agreement or modified to give effect
to any applicable Assignment and Acceptance.
"Term Loan Termination Date" means March 12, 2004.
"Term Note" means a promissory note, in substantially the form of
Exhibit B-3 hereto, duly executed by Group and payable to the order of a Lender
in the amount of its Term Loan Commitment, including any amendment,
restatement, modification, renewal or replacement of such Term Note.
"Termination Event" means, with respect to a Plan which is subject to
Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of Industries or
any other member of the Controlled Group from such Plan during a plan year in
which Industries or any other member of the Controlled Group was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under
Section 4062(e) of ERISA, (c) the termination of such Plan, the filing of a
notice of intent to terminate such Plan or the treatment of an amendment of
such Plan as a termination under Section 4041 of ERISA, (d) the institution by
the PBGC of proceedings to terminate such Plan, (e) any event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or appointment of a trustee to administer, such Plan, (f) the partial or
complete withdrawal by Industries or any other member of the Controlled Group
from a Multiemployer Plan, (g) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or
4245 of ERISA or (h) any event or condition which results in the termination of
a Multiemployer Plan under Section 4041A of ERISA or the institution by the
PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of
ERISA.
24
<PAGE> 32
"Transaction Documents" means the Loan Documents, the Bridge
Documents, the Acquisition Documents, the Asset Purchase Documents and all
other documents executed in connection with the Transportation Sale.
"Transferee" is defined in Section 12.4.
"Transportation Sale" means the Asset Purchase or, if the Asset
Purchase is not consummated, the sale or other disposition of all of the
properties, assets, rights, claims and goodwill relating exclusively to the
Business (as defined in the Asset Purchase Agreement).
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or Eurocurrency Advance.
"UK Borrower" means any Borrower treated, for the purposes of United
Kingdom Taxes and for the purposes of eligibility for benefits under the
relevant Double Tax Treaty between the United Kingdom and the country of
residence of the relevant Lender, as resident in the United Kingdom.
"Unfunded Liability" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under a Single Employer Plan
exceeds the fair market value of assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans using
actuarial assumptions used in determining the Plans' normal cost for purpose of
Section 412(b)(2)(A) of the Code.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"WAL" means Whitlenge Acquisition, Ltd., a private company limited by
shares registered in England.
"Whitlenge" means Whitlenge Drink Equipment Limited, a private company
limited by shares registered in England.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (b) any partnership, association, joint venture
or similar business organization 100% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. Each accounting term
referenced herein shall be determined in accordance with Agreement Accounting
Principles as in effect as of the date hereof unless otherwise specified.
25
<PAGE> 33
ARTICLE II
THE CREDITS
2.1. Term Loan. (a) Subject to the terms and conditions set forth
in this Agreement, each Lender having a Term Loan Commitment severally and not
jointly agrees to make a single term loan on the Closing Date, in Dollars, to
Group in an amount equal to such Lender's Term Loan Commitment (each such term
loan a "Term Loan"). The Term Loan of each Lender shall be made by each Lender
on the Closing Date simultaneously and ratably in accordance with their
respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any failure by any other Lender to perform its obligation to
make any Term Loan hereunder, nor shall the Term Loan Commitment of any Lender
be increased or decreased as a result of any such failure. Any unutilized Term
Loan Commitment shall expire simultaneously with the making of the Term Loans
on the Closing Date.
(b) On the Closing Date, Group shall deliver a Borrowing
Notice to the Agent. Such Borrowing Notice shall also specify (i) the
aggregate amount of the Term Loans and (ii) instructions for the disbursement
of the proceeds of the Term Loans. Subject to the Agent receiving the
appropriate Borrowing Notice as required pursuant to Section 2.10, the Term
Loans shall initially be Floating Rate Loans or Eurodollar Loans, and
thereafter may be continued as Floating Rate Loans or converted in whole or in
part into or continued as Eurodollar Loans in the manner provided in Section
2.11 and subject to the other conditions and limitations therein set forth and
set forth in this Article II. Any Borrowing Notice given pursuant to this
Section 2.1(b) shall be irrevocable.
(c) Promptly after the Agent receives the Borrowing
Notice under Section 2.1(b) in respect of the Term Loans, the Agent shall
notify each Lender of the proposed Term Loan by telex, telecopy, or other
similar form of transmission. Each Lender shall deposit an amount equal to its
Pro Rata Share of the Term Loans with the Agent at its office in Chicago,
Illinois, in immediately available funds, on the Closing Date specified in the
Borrowing Notice. Subject to the fulfillment of the conditions precedent set
forth in Article IV, the Agent shall make the proceeds of such amounts received
by it available to Group at the Agent's office in Chicago, Illinois on such
Closing Date and shall disburse such proceeds in accordance with the Group's
disbursement instructions set forth in such Borrowing Notice. Any Lender's
failure to deposit the amount described above with the Agent on the Closing
Date shall not relieve any other Lender of its obligation to make its Term
Loans on the Closing Date.
(d) (i) The Term Loans shall be repaid in semi-annual
installments commencing on December 31, 1997 and continuing thereafter until
the Term Loan Termination Date. The installments shall be in the aggregate
amounts set forth below on the dates set forth below:
<TABLE>
<CAPTION>
Installment Date Installment Amount
---------------- ------------------------
<S> <C>
12/31/97 $10,000,000
06/30/98 $ 7,500,000
12/31/98 $ 7,500,000
06/30/99 $ 7,500,000
</TABLE>
26
<PAGE> 34
<TABLE>
<S> <C>
12/31/99 $ 7,500,000
06/30/00 $12,500,000
12/31/00 $12,500,000
06/30/01 $12,500,000
12/31/01 $12,500,000
06/30/02 $15,000,000
12/31/02 $15,000,000
06/30/03 $15,000,000
Term Loan Termination Date $15,000,000
</TABLE>
(ii) Notwithstanding the foregoing clause (i), the final
installments shall be in the amount of the then outstanding principal
balance of the Term Loan. In addition, the then outstanding principal
balance of the Term Loan shall be due and payable on the Term Loan
Termination Date. No installment of any Term Loan shall be reborrowed
once repaid.
(iii) In addition to the scheduled payment on the Term Loan,
Group may make the voluntary prepayments described in Section 2.8 and
shall make the mandatory prepayments prescribed in Section 2.9, for
credit against such scheduled payments on the Term Loans pursuant to
Section 2.9.
2.2. Revolving Loans. (a) From and including the Closing Date to but
not including the Revolving Loan Termination Date, each Lender having a
Revolving Loan Commitment severally and not jointly agrees, subject to the
terms and conditions set forth in this Agreement, to make Revolving Loans in
any one or more of the Permitted Currencies to the Borrowers from time to time
in amounts, based on the Dollar Amount of any Revolving Loans outstanding in
Dollars and the Dollar Amount of any Revolving Loans outstanding in Alternative
Currencies, not to exceed in the aggregate at any one time outstanding the
amount of (i) its Revolving Loan Commitment existing at such time minus (ii)
its Pro-Rata Share of Facility Letter of Credit Obligations then outstanding
minus (iii) the amount of its Pro Rata Share of Swing Line Loans at such time
(each individually, a "Revolving Loan" and collectively, the "Revolving
Loans"); provided, that, no Revolving Loan shall be made to any Foreign
Borrower hereunder if, after giving effect to all Revolving Loans made to all
of the Foreign Borrowers, the aggregate Revolving Loan Obligations of the
Foreign Borrowers would exceed the Commitment Sublimit. Subject to the terms
of this Agreement, the Borrowers may borrow, repay and reborrow Revolving Loans
at any time prior to the Revolving Loan Termination Date. For purposes of this
Agreement, Revolving Loans in Alternative Currencies shall be determined,
denominated and redenominated as set forth in Section 2.22 hereof.
(b) Group hereby agrees that if at any time, after determining the
Current Dollar Equivalent thereof, the sum of the aggregate balance of the
Revolving Loans made to the Foreign Borrowers plus the aggregate Facility
Letter of Credit Obligations owing by all Foreign Borrowers exceeds the
Commitment Sublimit, then in any such case, Group shall or shall cause the
Foreign Borrowers to repay immediately the outstanding Revolving Loans in an
amount as may be necessary to eliminate such excess. Group hereby further
agrees that if at any time, after determining the Current Dollar Equivalent
thereof, the aggregate balance of the Revolving Loan Obligations exceeds the
Aggregate Revolving Loan Commitment, then in any such case, Group shall or
shall cause the Borrowers to repay immediately the outstanding Revolving Loans
and Swing Line Loans in such
27
<PAGE> 35
amount as may be necessary to eliminate any such excess; provided, that if (x)
an excess remains after repayment of all outstanding Revolving Loans and Swing
Line Loans or (y) the aggregate Facility Letter of Credit Obligations
outstanding exceeds the Facility Letter of Credit Sublimit, then Group shall or
shall cause the other Borrowers to cash collateralize the Facility Letter of
Credit Obligations in such amount as may be necessary to eliminate such excess.
Such cash collateralization shall be provided to the Agent, for the benefit of
the Lenders, pursuant to documentation in form and substance acceptable to the
Agent.
(c) The Revolving Loans shall mature, and the outstanding
principal amount thereof and the unpaid accrued interest thereon shall be due
and payable, on the Revolving Loan Termination Date.
(d) Group may at any time make a request to the Agent (on behalf
of the Lenders) that any Subsidiary that is a Wholly-Owned Subsidiary of
Industries be admitted as a borrower to borrow Revolving Loans under this
Agreement. If the Agent and each Lender consent to such request, and in the
case of the Lenders, if they notify the Agent in writing of such consent, the
Agent may enter into an Agreement of Joinder with Group (for itself and on
behalf of the other then existing Borrowers) and such Subsidiary. Upon
execution and delivery of such Agreement of Joinder by such Subsidiary, Group
and the Agent, subject to the terms thereof and of this Section 2.2(d) and
provided such Subsidiary has delivered a Guaranty or an Intercompany Note
pursuant to Section 6.28, such Subsidiary shall become a Borrower hereunder and
shall become a party to this Agreement. The Agent shall notify each Lender of
such request and the execution of such Agreement of Joinder.
2.3. Swing Line Loans.
2.3.1 Making of Swing Line Loans. (a) Subject to the terms and
conditions of this Agreement, the Swing Line Lender agrees, at any
time and from time to time on and after the Closing Date and prior to
the Revolving Loan Termination Date, to make a loan or loans on a
revolving basis, in Dollars, each, a "Swing Line Loan") to the
Borrowers which are Domestic Subsidiaries, which Swing Line Loans in
the aggregate shall not exceed at any time the Swing Line Commitment;
provided that no Swing Line Loan shall be made hereunder if, after
giving effect to any Swing Line Loan and the use of proceeds thereof,
the aggregate outstanding balance of Revolving Loan Obligations would
exceed the Aggregate Revolving Loan Commitment. Notwithstanding the
foregoing, no Swing Line Loans shall be made hereunder if, after
giving effect to any Swing Line Loan and the use of proceeds thereof,
the aggregate outstanding principal amount of Swing Line Loans would
exceed the Swing Line Commitment, or to the extent that the Swing Line
Commitment of the Swing Line Lender would exceed the Revolving Loan
Commitment of such Lender at such time. The Swing Line Commitment
shall terminate on the Revolving Loan Termination Date without further
action being required on the part of the Agent or the Swing Line
Lender. No more than five (5) Swing Line Loans shall be outstanding
at any time.
(b) Swing Line Loans may, subject to the terms of this Agreement,
be repaid and reborrowed. All Swing Line Loans shall be made as Floating Rate
Loans and shall not be entitled
28
<PAGE> 36
to be converted into Eurodollar Loans. Swing Line Loans made on any date shall
be in an aggregate minimum amount of $250,000 and integral multiples of
$100,000 in excess of that amount.
(c) If after giving effect to any assignment pursuant to Section
12.3 or reduction in Revolving Loan Commitments pursuant to the terms of this
Agreement, the remaining Commitment of the Swing Line Lender is less than the
Swing Line Commitment, the Swing Line Commitment shall be permanently reduced
by an amount equal to such difference.
(d) Whenever any Borrower which is a Domestic Subsidiary desires
to make a borrowing of Swing Line Loans under Section 2.3.1, Group shall give
the Agent and the Swing Line Lender (no later than 1:00 p.m. (Chicago time) on
the proposed date for such Advance) notice by telephone (confirmed promptly in
writing) or notice in writing of such Advance (a "Notice of Swing Line Loan"),
which shall be irrevocable and shall specify (i) the aggregate principal amount
of the Swing Line Loans to be made pursuant to such Advance, (ii) the date of
such Advance (which shall be a Business Day), (iii) the maturity date for such
Swing Line Loan (which shall be on demand and in any event no later than seven
days after the making thereof or, if earlier, the Revolving Loan Termination
Date), (iv) the Borrower (which shall be a Domestic Subsidiary) which is to
receive such Advance and the account to which such Advance is to be funded and
(v) confirming that such Swing Line Loan shall be a Floating Rate Loan.
2.3.2 Conversions of and Participations in Swing Line Loans.
(a) The Swing Line Lender shall, in its sole and absolute
discretion, be entitled to require an Advance of Revolving Loans hereunder, the
proceeds of which shall be applied to the pro rata prepayment of all Swing Line
Loans then outstanding by giving notice (by telephone promptly confirmed in
writing or in writing) to the Agent, Group and the Lenders to such effect,
which notice shall set forth the aggregate outstanding principal amount of such
Swing Line Loans. Upon the giving of such notice, the Borrowers shall be
deemed to have timely given a Borrowing Notice to the Agent requesting
Revolving Loans which are Floating Rate Loans on the Business Day following
such notice, Group shall, on such date, make Revolving Loans which are Floating
Rate Loans in the amount of such Swing Line Loans, the proceeds of which shall
be applied by the Agent to the prepayment of such Swing Line Loans; provided
that for the purposes solely of such Advance the conditions precedent set forth
in Section 4.2 shall not be applicable. Unless Group shall have notified the
Agent and the Swing Line Lender prior to 11:00 a.m. (Chicago time) on the date
which is six days following the date on which any Swing Line Loan has been made
by the Swing Line Lender that the Borrowers which are Domestic Subsidiaries
intend to reimburse the Swing Line Lender with funds other than the proceeds of
Revolving Loans, the Agent shall give such notice on behalf of the Swing Line
Lender.
(b) Upon the giving of notice to the following effect to the Agent
and each Lender by the Swing Line Lender in its sole and absolute discretion,
any deemed Borrowing Notice given under this Section 2.3.2 pursuant to which no
Advance has been made shall be deemed cancelled and each Lender shall be deemed
to, and hereby agrees to, have irrevocably purchased from the Swing Line Lender
a participation in Swing Line Loans made by the Swing Line Lender in an
aggregate outstanding principal amount equal to such Lender's Pro Rata Share of
the aggregate principal amount of such Swing Line Loans, and shall make
available to the Swing Line Lender an amount
29
<PAGE> 37
equal to its respective participation in the Swing Line Lender's Swing Line
Loans in Dollars and immediately available funds, at the office of the Swing
Line Lender specified by notice to the Agent and each Lender in such notice,
not later than 1:00 p.m. (Chicago time) on the second Business Day after the
giving of such notice. In the event that any Lender fails to make available to
the Swing Line Lender the amount of such Lender's participation as provided in
this Section 2.3.2(b), the Swing Line Lender shall be entitled to recover such
amount on demand from such Lender together with interest at the interbank
compensation rate set by the Agent for three Business Days and thereafter at
the Floating Rate, and the Swing Line Lender shall, until such time as all such
amounts have been paid, be deemed to have outstanding a Swing Line Loan in the
amount of such unpaid participation for all purposes of this Agreement other
than those provisions requiring Lenders to purchase an interest therein. The
Swing Line Lender shall distribute to each other Lender which has paid all
amounts payable by it under this Section 2.3.2(b) with respect to Swing Line
Loans made by the Swing Line Lender such other Lender's Pro Rata Share of all
payments received by the Swing Line Lender in respect of such Swing Line Loans
when such payments are received.
(c) The obligations of the Lenders under Section 2.3.2(b) above
shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including, without
limitation, the fact that a Default or Unmatured Default shall have occurred
and be continuing or any other circumstance or happening whatsoever.
2.4. Ratable Loans. Each Advance under Section 2.2 shall consist
of Revolving Loans made by each Lender ratably in proportion to such Lender's
Pro Rata Share. Any reduction in the Aggregate Revolving Loan Commitment shall
ratably reduce the Revolving Loan Commitment of each Lender.
2.5. Types of Advances. Subject to the other terms of this
Agreement, the Advances may be Floating Rate Advances or Eurocurrency Advances,
or a combination thereof, selected by the applicable Borrower in accordance
with Sections 2.10 and 2.11; provided, that (a) at the time of the making or
continuation of any Eurocurrency Advance, the Current Dollar Equivalent of the
aggregate Eurocurrency Advances denominated in Alternative Currencies (after
giving effect to such making, conversion or continuation) shall not exceed the
Eurocurrency Sublimit and (b) Eurocurrency Advances denominated in an
Alternative Currency may be outstanding in not more than six Alternative
Currencies at any one time.
2.6. Fees; Reductions in Aggregate Revolving Loan Commitment. (a)
Group shall or shall cause the other Borrowers to pay to the Agent for the
account of each Lender in accordance with their Pro Rata Share a commitment fee
(the "Commitment Fee") for each day accruing at a rate per annum equal to the
Applicable Margin (determined for the Commitment Fee in accordance with the
definition of Applicable Margin) multiplied by the average daily amount by
which (A) the Aggregate Revolving Loan Commitment in effect from time to time
exceeds (B) the principal amount of the Revolving Loan Obligations in effect
from time to time (based on the Current Dollar Equivalent thereof), from the
date hereof to and excluding the Revolving Loan Termination Date, payable
quarterly in arrears on the last Business Day of each calendar quarter
hereafter and on the Revolving Loan Termination Date. All accrued commitment
fees shall be payable on the effective date of any termination of the Agreement
made in accordance with the terms hereof of the obligations of the Lenders to
make Loans hereunder.
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<PAGE> 38
(b) Group may permanently reduce the Aggregate Revolving Loan
Commitment in whole, or in part ratably among the Lenders in a minimum
aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess
thereof, upon at least five (5) days' written notice to the Agent, which notice
shall specify the amount of any such reduction; provided, however, that the
amount of the Aggregate Revolving Loan Commitment may not be reduced below the
sum of the Current Dollar Equivalent of Revolving Loans and Swing Line Loan
Obligations at any time. Such reductions shall be in addition to reductions
occurring pursuant to Section 2.6(c) or Section 2.9.
(c) On each date specified below, the Aggregate Revolving Loan
Commitment shall be permanently reduced, ratably among the Lenders, by the
amount specified for such date below:
<TABLE>
<CAPTION>
Date Reduction Amount
-------------- ----------------
<S> <C>
December 31, 1998 $10,000,000
December 31, 1999 15,000,000
December 31, 2000 15,000,000
December 31, 2001 15,000,000
December 31, 2002 15,000,000
December 31, 2003 15,000,000
Revolving Loan such
Termination Date amount as shall then be
outstanding
</TABLE>
Concurrently with each such reduction, Group shall, or shall cause the other
Borrowers to, make such payments and provide such cash collateralization as may
be required by Section 2.2(b).
2.7. Minimum Amount of Each Advance. Each Eurocurrency Advance
shall be in the minimum amount having a Dollar Amount of not less than
$3,000,000 (and, if in excess thereof, in multiples of $1,000,000), and each
Floating Rate Advance shall be in the minimum amount of $5,000,000 (and in
multiples of $1,000,000 if in excess thereof); provided, however, that (a) any
Floating Rate Advance with respect to a Revolving Loan may be in the amount of
the unused Aggregate Revolving Loan Commitment, (b) in no event shall more than
twelve (12) Eurocurrency Advances be permitted to be outstanding at any time,
(c) subject to the other terms of this Agreement, Eurocurrency Advances in
Alternative Currencies may be made or continued in amounts having a Dollar
Amount of not less than $1,500,000 (and, if in excess thereof, in multiples of
$1,000,000) solely in order to allow the Borrowers to maintain a maximum of two
Eurocurrency Advances in Alternative Currencies outstanding at any one time in
minimum amounts having Dollar Amounts of not less than $1,500,000 as permitted
pursuant to Section 2.8 and (d) the Agent and Group may make immaterial
mutually convenient adjustments to the thresholds and multiples set forth above
in respect of Eurocurrency Advances denominated in Alternative Currencies.
2.8. Optional Principal Payments. The Borrowers may from time to
time pay, without penalty or premium, all outstanding Floating Rate Advances,
or, in a minimum aggregate amount of $5,000,000 or any integral multiple of
$1,000,000 in excess thereof, any portion of the outstanding Floating Rate
Advances upon two Business Days' prior notice to the Agent. Subject to the
payment by the Borrowers of breakage costs pursuant to Section 3.5, the
Borrowers may from time to time repay or prepay a Eurodollar Advance in full
prior to the last day of the applicable
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<PAGE> 39
Interest Period upon at least five (5) days' written notice to the Agent;
provided that any such repayment shall be in a minimum amount of $2,000,000 or
any integral multiple of $1,000,000 in excess thereof except that Eurocurrency
Advances in Alternative Currencies may be repaid in a minimum amount of
$1,500,000 or any integral multiple of $1,000,000 in excess thereof solely with
respect to the maximum of two Eurocurrency Advances in Alternative Currencies
permitted to be borrowed and maintained pursuant to Section 2.7 and this
Section 2.8; provided, further, that after giving effect to any such optional
prepayment, each outstanding Eurodollar Advance shall be in a minimum amount of
$3,000,000 except that the Borrowers in the aggregate may have a maximum of two
Eurocurrency Advances in Alternative Currencies outstanding at any one time in
minimum amounts having Dollar Amounts of not less than $1,500,000 (and, if in
excess thereof, in multiples of $1,000,000). Each voluntary prepayment of a
Term Loan shall be applied to the installments of such Term Loan in the inverse
order of maturity.
2.9. Mandatory Prepayments and Commitment Reductions.
2.9.1 Asset Dispositions. On each date after the Closing
Date on which Industries or any of its Subsidiaries receives any Net
Available Proceeds upon any Asset Disposition which (a) on a
cumulative basis with all other Asset Dispositions made during the
period beginning on the Closing Date and ending on the Facility
Termination Date, exceed a Substantial Cumulative Portion (determined
as of the date of each Asset Disposition) or (b) on a cumulative basis
with all other Asset Dispositions made during the current Fiscal Year,
exceed a Substantial Annual Portion (determined as of the date of each
Asset Disposition) (other than an Asset Disposition by Industries or
by Group which is permitted under Section 6.12 but subject, in the
case of the Transportation Sale, to the last proviso at the end of
this Section 2.9.1), Group shall prepay or shall cause the other
Borrowers to prepay the outstanding Bridge Obligations, the
Obligations and Senior Debt in an aggregate amount equal to 100% of
the amount of such Net Available Proceeds as follows: first to
prepayment of the Bridge Obligations until all such Bridge Obligations
have been paid in full and second, to prepayment of the Obligations in
accordance with the terms of Section 2.9.5 and to any Senior Debt that
remains outstanding (but only to the extent any such Senior Debt
requires a prepayment thereof out of Net Available Proceeds) on a
ratable basis determined according to the principal amount of the
Loans and the Facility Letter of Credit Obligations and the principal
amount of such Senior Debt (and premium, if any), in each case
outstanding as of such date; provided that any Net Available Proceeds
not applied to prepayment of the Senior Debt shall be applied to
prepayment of the Obligations in accordance with Section 2.9.5; and
provided, further, that to the extent an amount equal to any Net
Available Proceeds are applied by Industries or such Subsidiary of
Industries within the period from 90 days prior to such Asset
Disposition to 180 days after such disposition, to acquire assets of a
like kind or nature to those assets disposed of in such Asset
Disposition which assets will be used in the business of Industries or
any of its Subsidiaries, such Net Available Proceeds shall not be
subject to the prepayment provisions of this Section 2.9.1; and
provided, further, that if the Transportation Sale is consummated on
or prior to the Closing Date or within forty-five (45) days after the
Closing Date, then the sale of the Property pursuant to the
Transportation Sale shall not be deemed to be an Asset Disposition
pursuant to the terms of this Section 2.9.1 and if the Transportation
Sale is not consummated within forty-five (45) days after the Closing
Date, then the disposition of the Property pursuant to the
Transportation Sale shall
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<PAGE> 40
be deemed to be an Asset Disposition pursuant to this Section 2.9.1
and the Net Available Proceeds received by Industries or any of its
Subsidiaries from the Transportation Sale shall be applied in
accordance with the terms of this Section 2.9.
2.9.2 Excess Cash Flow. On the date Industries is required
to deliver the financial statements referred to in Section 6.1(a) for
any Fiscal Year, commencing with the Fiscal Year ending on December
31, 1997, if the Leverage Ratio as determined by the Agent as of the
end of such Fiscal Year based on such financial statements is greater
than or equal to 3.0, Group shall prepay or cause the other Borrowers
to prepay the outstanding Bridge Obligations, the Obligations and
Senior Debt in an aggregate amount equal to 50% of Excess Cash Flow
for such Fiscal Year (the "Excess Cash Flow Amount") as follows: first
to prepayment of the Bridge Obligations until all such Bridge
Obligations have been paid in full and second, to prepayment of the
Obligations in accordance with the terms of Section 2.9.5 and to any
Senior Debt that remains outstanding (but only to the extent any such
Senior Debt requires a prepayment thereof out of Excess Cash Flow) on
a ratable basis determined according to the principal amount of the
Loans and the Facility Letter of Credit Obligations and the principal
amount of such Senior Debt (and premium, if any), in each case
outstanding as of such date; provided that any Excess Cash Flow Amount
not applied to prepayment of the Senior Debt shall be applied to
prepayment of the Loans in accordance with Section 2.9.5.
2.9.3 Debt and Equity Issuances. On each date after the
Closing Date on which Industries or any of its Subsidiaries receives
any Net Equity Proceeds or any Net Debt Proceeds, Group shall prepay
or shall cause the other Borrowers to prepay the outstanding Bridge
Obligations, the Obligations and Senior Debt (a) with respect to Net
Equity Proceeds, in an amount equal to 50% of any Net Equity Proceeds
received by Industries or any of its Subsidiaries (the "Available Net
Equity Proceeds") and (b) with respect to Net Debt Proceeds, in an
amount equal to 100% of such Net Debt Proceeds as follows: first to
prepayment of the Bridge Obligations until all such Bridge Obligations
have been paid in full and second, to prepayment of the Obligations in
accordance with the terms of Section 2.9.5 and to any Senior Debt that
remains outstanding (but only to the extent any such Senior Debt
requires a prepayment thereof out of Available Net Equity Proceeds or
Net Debt Proceeds, respectively) on a ratable basis determined
according to the principal amount of the Loans and the Facility Letter
of Credit Obligations and the principal amount (and premium, if any)
of such Senior Debt, in each case outstanding as of such date;
provided that any Available Net Equity Proceeds or Net Debt Proceeds
not applied to prepayment of the Senior Debt shall be applied to
prepayment of the Obligations in accordance with Section 2.9.5.
2.9.4 Revolving Commitment Reductions. (a) On each day on
which the Aggregate Revolving Loan Commitment is reduced for any
reason, Group shall prepay or shall cause the other Borrowers to
prepay, the Revolving Loans and/or the Swing Line Loans to the extent,
if any, that the sum of the outstanding principal amount of (i) the
Revolving Loans plus (ii) the Swing Line Loans exceeds such reduced
Aggregate Revolving Loan Commitment minus the Facility Letter of
Credit Obligations at such time.
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<PAGE> 41
(b) Group shall prepay or shall cause the other Borrowers
to prepay the Revolving Loans and/or the Swing Line Loans as required
pursuant to Section 2.2(b). In addition, to the extent, at any time
and for any reason, the Aggregate Revolving Loan Commitment minus the
sum of the outstanding aggregate principal amount of (i) the Revolving
Loans plus (ii) the Swing Line Loans is less than the Facility Letter
of Credit Obligations at such time, Group shall or shall cause the
other Borrowers to cash collateralize the Facility Letter of Credit
Obligations in such amount as may be necessary to eliminate such
excess. Such cash collateralization shall be provided to the Agent,
for the benefit of the Lenders, pursuant to documentation in form and
substance acceptable to the Agent.
2.9.5 Application of Prepayments. All prepayments of the
Loans required by Section 2.9.1 and 2.9.3 shall be applied first, to
prepay the outstanding principal amount of the Term Loan until such
Term Loan shall have been repaid in full, together with accrued and
unpaid interest thereon, second, to prepay the Revolving Loans until
such Revolving Loans shall have been repaid in full, together with
accrued and unpaid interest thereon, third, to cash collateralize the
then outstanding Facility Letters of Credit, and, fourth, to all other
outstanding Obligations; provided, that (i) any Revolving Loans repaid
pursuant to this Section 2.9.5 may be reborrowed, subject to the other
terms of this Agreement and (ii) the amount of any cash collateral
paid pursuant to this Section 2.9.5 shall be promptly released so long
as no Default or Unmatured Default then exists, in each case only to
the extent of the excess of the Aggregate Revolving Loan Commitment
then in effect minus the Revolving Loan Obligations then outstanding.
All prepayments of the Term Loan shall be applied to the scheduled
installments of principal thereof in the inverse order of maturity.
2.9.6 Permitted Transactions. Nothing in this Section 2.9
shall be construed to constitute the Lenders' consent to any
transactions referred to in Section 2.9.1 or Section 2.9.3 above which
is not expressly permitted by the terms of this Agreement.
2.10. Method of Selecting Types and Interest Periods for New
Advances. Group shall select the Type of Advance and, in the case of each
Eurocurrency Advance, the Interest Period and Permitted Currency applicable to
each Advance from time to time. Group shall give the Agent irrevocable notice
(a "Borrowing Notice") not later than 10:00 a.m. (Chicago time) at least one
(1) Business Day before the Borrowing Date of each Floating Rate Advance and at
least three (3) Business Days before the Borrowing Date for each Eurocurrency
Advance, specifying:
(a) the Borrowing Date, which shall be a Business Day, of
such Advance;
(b) the Borrower which is to receive such Advance and the
account to which such Advance is to be funded;
(c) the aggregate principal amount of such Advance;
(d) the Type of Advance selected; and
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<PAGE> 42
(e) in the case of each Eurocurrency Advance, the
Interest Period applicable thereto and, with respect to Revolving
Loans, the Permitted Currency in which such Advance is to be made.
In the case of Eurocurrency Advances (other than Eurodollar Advances), not
later than 11:00 a.m. (London time) on the Borrowing Date thereof, each Lender
shall make available its Eurocurrency Loan or Eurocurrency Loans, in funds
immediately available in London, in (with respect to Revolving Loans) the
Permitted Currency selected by Group, from the Lending Installation specified
in Schedule 2.10 to the Agent at its London address specified in Schedule 2.10
or at any other Lending Installation of the Agent specified in writing by the
Agent to the Lenders. In the case of Floating Rate Advances and Eurodollar
Advances, not later than noon (Chicago time) on each Borrowing Date, each
Lender shall make available its Loan or Loans, in funds immediately available
in Chicago, in Dollars, to the Agent at its Chicago address specified in
Schedule 2.10 or at any other Lending Installation of the Agent specified in
writing by the Agent to the Lenders. The Agent will make the funds so received
from the Lenders available to the applicable Borrower to the account specified
in the Borrowing Notice, by 1:00 p.m. (Chicago time), with respect to Floating
Rate Advances and Eurodollar Advances, and promptly following the receipt of
the related Loan from each Lender, with respect to all other Advances.
2.11. Conversion and Continuation of Outstanding Advances. (a)
Floating Rate Advances shall continue as Floating Rate Advances unless and
until such Floating Rate Advances are repaid or converted into Eurodollar
Advances. Each Eurodollar Advance shall continue as a Eurodollar Advance until
the end of the then applicable Interest Period therefor, at which time such
Eurodollar Advance shall be automatically converted into a Floating Rate
Advance unless repaid or unless Group shall have given the Agent a
Conversion/Continuation Notice requesting that, at the end of such Interest
Period, such Eurodollar Advance either continue as a Eurodollar Advance for the
same or another Interest Period or be converted into a Floating Rate Advance.
Subject to the terms of Sections 2.7 and 3.4, Group may elect from time to time
to convert all or any part of an Advance in Dollars of any Type into any other
Type or Types of Advances in Dollars.
(b) Each Eurocurrency Advance in an Alternative Currency
shall continue as such until the end of the then applicable Interest Period
therefor, at which time such Eurocurrency Advance shall, unless repaid,
automatically be deemed to be continued as a Eurocurrency Advance in the same
amount and the same Alternative Currency with an Interest Period of one month
(commencing on the last day of the expiring Interest Period) unless Group shall
have given the Agent a Conversion/Continuation Notice requesting that, at the
end of such Interest Period, such Eurocurrency Advance continue as a
Eurocurrency Advance in the same Alternative Currency for the same or another
Interest Period.
(c) Group shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an Advance or
continuation of a Eurocurrency Advance (as permitted by paragraphs (a) and (b)
above) not later than 10:00 a.m. (Chicago time) at least one (1) Business Day,
in the case of a conversion into a Floating Rate Advance, or at least three (3)
Business Days, in the case of a conversion into or continuation of a
Eurocurrency Advance, prior to the date of the requested conversion or
continuation, specifying:
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<PAGE> 43
(i) the requested date which shall be a Business
Day, of such conversion or continuation;
(ii) the aggregate amount, Permitted Currency and
Type of the Advance which is to be converted or continued; and
(iii) the amount and Type(s) of Advance(s) into
which such Advance is to be converted or continued and, in the case of
a conversion into or continuation of a Eurocurrency Advance, the
duration of the Interest Period applicable thereto.
Notwithstanding the provisions of paragraphs (a) and (b) above, no Eurocurrency
Advance shall be continued as or converted into a Eurocurrency Advance for a
new Interest Period if the Current Dollar Equivalent (determined as of the date
of any proposed conversion or continuation thereof) of the aggregate Revolving
Loan Obligations to be outstanding after giving effect to such continuation or
conversion would exceed the Aggregate Revolving Loan Commitment then in effect.
The Borrowers shall reimburse the Agent on demand for any costs incurred by the
Agent resulting from the conversion pursuant to this Section 2.11 of
Eurocurrency Advances payable in an Alternative Currency to Floating Rate
Advances.
2.12. Changes in Interest Rate, etc. (a) Each Floating Rate
Advance shall bear interest at the Floating Rate from and including the date of
such Advance or the date on which such Advance was converted into a Floating
Rate Advance to (but not including) the date on which such Floating Rate
Advance is paid or converted to a Eurodollar Advance. Changes in the rate of
interest on that portion of any Advance maintained as a Floating Rate Advance
will take effect simultaneously with each change in the Floating Rate. Each
Eurocurrency Advance shall bear interest from and including the first day of
the Interest Period applicable thereto to, but not including, the last day of
such Interest Period at the Eurocurrency Rate applicable to such Eurocurrency
Advance. No Interest Period may end after the Facility Termination Date. The
Borrowers shall select Interest Periods so that it is not necessary to repay
any portion of a Eurocurrency Advance prior to the last day of the applicable
Interest Period in order to make a mandatory repayment required pursuant to
Section 2.1, 2.2 or Section 2.9.
(b) Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, the Borrowers shall
not be required to pay, and neither the Agent nor any Lender shall be permitted
to collect, any amount of interest in excess of the maximum amount of interest
permitted by law ("Excess Interest"). If any Excess Interest is provided for
or determined by a court of competent jurisdiction to have been provided for
under this Agreement or in any of the other Loan Documents then in such event:
(i) the provisions of this paragraph shall govern and control; (ii) the
Borrowers shall not be obligated to pay any Excess Interest; (iii) any Excess
Interest that the Agent or any Lender may have received hereunder shall be, at
the Agent's option, (A) applied as a credit against the outstanding principal
balance of the Obligations or accrued and unpaid interest (not to exceed the
maximum amount permitted by law), (B) refunded to the payor thereof, or (C) any
combination of the foregoing; (iv) the interest rate(s) provided for herein
shall be automatically reduced to the maximum lawful rate allowed from time to
time under applicable law (the "Maximum Rate"), and this Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (v) the Borrowers shall not
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<PAGE> 44
have any cause of action against the Agent or any Lender for any damages
arising out of the payment or collection of any Excess Interest.
Notwithstanding the foregoing, if for any period of time interest on any
Obligations is calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on such Obligations shall remain at
the Maximum Rate until each Lender shall have received the amount of interest
which such Lender would have received during such period on such Obligations
had the rate of interest not been limited to the Maximum Rate during such
period.
2.13. Rates Applicable After Default. Notwithstanding anything to
the contrary contained in Section 2.7, 2.10 or 2.11, no Advance may be made as,
converted into or continued as a Eurocurrency Advance (except with the consent
of the Required Lenders) when any Default or Unmatured Default has occurred and
is continuing. During the continuance of a Default, each Eurocurrency Advance
shall bear interest for the remainder of the applicable interest period at a
rate per annum equal to the higher of the rate otherwise applicable to such
Advance or the Floating Rate, plus two percent (2.0%) per annum and each
Floating Rate Advance shall bear interest at a rate per annum equal to the
Floating Rate plus two percent (2.0%) per annum, unless the Lenders shall
determine otherwise. The Agent shall give Group notice of any such changes
promptly following the effectiveness thereof.
2.14. Method of Payment. (a) All payments of the Obligations
hereunder shall be made, without setoff, deduction or counterclaim, in Dollars
in immediately available funds to the Agent at the Agent's address specified
pursuant to Schedule 2.10 in respect of Advances in Dollars (or, in the case of
payments of principal of and interest on Advances denominated in Alternative
Currencies, in the Alternative Currency borrowed, at the Agent's address for
Advances of Alternative Currencies, as specified in Schedule 2.10), or, subject
to Section 3.6, at any other Lending Installation of the Agent specified in
writing by the Agent to Group by noon (Chicago time) on the date when due and
shall be applied ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds that the Agent
received, at its address for Dollar Advances or for Alternative Currency
Advances as specified in Schedule 2.10 or at any other Lending Installation
specified in a notice received by the Agent from such Lender. The Agent is
hereby authorized to charge the account of Group or any Borrower maintained
with First Chicago for each payment of principal, interest and fees as it
becomes due hereunder.
(b) All payments of principal of and interest on any
Advance or of Facility Letter of Credit Reimbursement Obligations or any other
Obligations hereunder shall be made by the Borrower responsible therefor in the
currency borrowed (the "Specified Currency") in the manner and at the address
(the "Specified Place") specified in Section 2.14(a). Payment of the
Obligations shall not be discharged by an amount paid in another currency or in
another place, whether pursuant to a judgment or otherwise, to the extent that
the amount so paid on conversion to the Specified Currency and transferred to
the Specified Place under normal banking procedures does not yield the amount
of the Specified Currency at the Specified Place due hereunder. If, for the
purpose of obtaining judgment in any court, it is necessary to convert a sum
due hereunder in the Specified Currency into another currency (the "Judgment
Currency"), the rate of exchange which shall be applied shall be that at which
in accordance with normal banking procedures the Agent could purchase the
Judgment Currency with that amount of the Specified Currency on the Business
Day
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<PAGE> 45
next preceding that on which such judgment is rendered. The obligation of each
Borrower in respect of any such sum due from it to the Agent or any Lender
hereunder (an "Entitled Person") shall, notwithstanding the rate of exchange
actually applied in rendering such judgment, be discharged only to the extent
that on the Business Day following receipt by such Entitled Person of any sum
adjudged to be due hereunder or under the Notes in the Judgment Currency, such
Entitled Person may in accordance with normal banking procedures purchase and
transfer to the Specified Place the Specified Currency with the amount of the
Judgment Currency so adjudged to be due; and each Borrower hereby, as a
separate Obligation and notwithstanding any such judgment, agrees to indemnify
such Entitled Person against, and to pay such Entitled Person on demand, in the
Specified Currency, any difference between the sum originally due to such
Entitled Person in the Specified Currency and the amount of the Specified
Currency so purchased and transferred.
2.15. Notes; Telephonic Notices. (a) The Borrowers' obligation
to pay the principal of, and interest on, each Lender's Loans shall be
evidenced by (i) in the case of such Lender's Term Loan, a Term Note duly
executed and delivered by Group in a principal amount equal to such Lender's
Term Loan with blanks appropriately completed in conformity herewith, (ii) in
the case of such Lender's Revolving Loans, a Revolving Note duly executed and
delivered by each Borrower in a principal amount equal to such Lender's
Revolving Loan Commitment (as adjusted for the Commitment Sublimit for each
Foreign Subsidiary), with blanks appropriately completed in conformity herewith
and (iii) with respect to the Swing Line Lender, in the case of Swing Line
Loans, a Swing Line Note duly executed and delivered by each Borrower which is
a Domestic Subsidiary in a principal amount equal to the Swing Line Commitment.
Each Note issued to a Lender shall (x) be payable to the order of such Lender,
(y) be dated the Closing Date, and (z) mature on the Term Loan Termination Date
or the Revolving Loan Termination Date, as the case may be.
(b) Each Lender is hereby authorized to record the
principal amount of each of its Loans and each repayment on the schedule
attached to its Note or otherwise in accordance with its usual practices;
provided, however, that neither the failure to so record nor any error in such
recordation shall affect any Borrower's obligations under any such Note. Each
Borrower hereby authorizes the Lenders and the Agent to extend, convert or
continue Advances, effect selections of Types of Advances and to transfer funds
and each Issuer to issue Facility Letters of Credit for its account where
applicable based on telephonic notices made by any person or persons the Agent
or any Lender in good faith believes to be an Authorized Officer of such
Borrower. Each Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by an Authorized Officer. If the written
confirmation differs in any material respect from the action taken by the Agent
and the Lenders, the records of the Agent and the Lenders shall govern absent
manifest error.
2.16. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Floating Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any date
on which a Floating Rate Advance is permanently prepaid, whether due to
acceleration or otherwise, and at maturity. Interest accrued at the Floating
Rate on that portion of the outstanding principal amount of any Floating Rate
Advance converted into a Eurocurrency Advance on a day other than a Payment
Date shall be payable on the next Payment Date. Interest accrued on each
Eurocurrency Advance shall be payable in the currency in which such Advance is
denominated on the last day of its applicable Interest Period, on any date on
which the
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Eurocurrency Advance is prepaid, whether by acceleration or otherwise, and at
maturity. Interest accrued on each Eurocurrency Advance having an Interest
Period longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest accrued on each
Eurocurrency Advance and Commitment Fees shall be calculated for actual days
elapsed on the basis of a 360-day year (except with respect to Loans
denominated in pounds sterling, which shall be calculated for actual days
elapsed on the basis of 365-day year). Interest accrued on each Floating Rate
Advance shall be calculated for actual days elapsed on the basis of a 365/6-day
year. Interest shall be payable for the day an Advance is made but not for the
day of any payment on the amount paid if payment is received prior to noon
(Chicago time) at the place of payment. If any payment of principal of or
interest on an Advance shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and, in the case
of a principal payment, such extension of time shall be included in computing
interest in connection with such payment.
2.17. Notification by Agent. Promptly after receipt thereof, the
Agent will notify each Lender of the contents of each Aggregate Revolving Loan
Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice,
request for a Facility Letter of Credit, Notice of Issuance and repayment
notice received by it hereunder. The Agent will notify each Lender and Group
of the interest rate applicable to each Eurocurrency Advance promptly upon
determination of such interest rate and will give each Lender and Group prompt
notice of each change in the Floating Rate.
2.18. Lending Installations. Subject to Section 3.6, each Lender
may book its Loans at any Lending Installation selected by such Lender and may
change its Lending Installation from time to time; provided, that such Lender
shall remain the legal entity exclusively entitled to all rights and
responsible for all obligations of a Lender hereunder unless such Lender enters
into an assignment in compliance with Section 12.3. All terms of this
Agreement shall apply to any such Lending Installation and the Notes shall be
deemed held by each Lender for the benefit of such Lending Installation.
Subject to Section 3.6, each Lender may, by written or telex notice to the
Agent and Group, designate a Lending Installation through which Loans will be
made by it and for whose account Loan payments are to be made.
2.19. Non-Receipt of Funds by the Agent. Unless the applicable
Borrower or a Lender, as the case may be, notifies the Agent prior to the date
on which it is scheduled to make payment to the Agent of (a) in the case of a
Lender, the proceeds of a Loan, or (b) in the case of such Borrower, a payment
of principal, interest or fees to the Agent for the account of the Lenders,
that it does not intend to make such payment, the Agent may assume that such
payment has been made. The Agent may, but shall not be obligated to, make the
amount of such payment available to the intended recipient in reliance upon
such assumption. If such Borrower has not in fact made such payment to the
Agent, the Lenders shall, on demand by the Agent, repay to the Agent the amount
so made available together with interest thereon in respect of each day during
the period commencing on the date such amount was so made available by the
Agent until the date the Agent recovers such amount at a rate per annum equal
to (i) the Federal Funds Effective Rate for such day for amounts denominated in
or calculated with reference to Dollars and (ii) the Eurocurrency Base Rate for
amounts denominated in or calculated with reference to Alternative Currencies.
If any Lender has not in fact made such payment to the Agent, such Lender or
the Borrowers shall, on demand by the Agent, repay to the Agent the amount so
made available together with interest thereon in respect of
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each day during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to (a) in the case of payment by a Lender, the Federal Funds
Effective Rate for such day for amounts denominated in or calculated with
reference to Dollars and the Eurocurrency Base Rate for such day for amounts
denominated in or calculated with reference to Alternative Currencies, or (b)
in the case of payment by the Borrowers, the interest rate applicable to the
relevant Loan.
2.20. Withholding Tax Exemption. (a) At least five Business Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver
to each of Group and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes.
Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver
to each of Group and the Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by Group or the Agent, in
each case certifying that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless an event (including, without limitation,
any change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises Group and
the Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
(b) Each Lender agrees promptly to notify Group if it is not, or
ceases to be, a Qualifying Lender. If any Lender (i) is not a Qualifying
Lender on the date on which it makes a Loan to a UK Borrower (or, where the
Lender would only qualify as a Qualifying Lender by virtue of paragraph (b) of
the definition thereof, at the date (the "Critical Date") five (5) business
days prior to the date on which such Lender is first entitled to receive any
payment from a UK Borrower in respect of a Loan to such UK Borrower) or (ii)
ceases to be a Qualifying Lender at any time after the date on which it has
made such a Loan or the Critical Date (as the case may be) but prior to the
repayment of all amounts in respect of such Loan, otherwise than by reason of
any change in law (which term shall include any change in the terms of any
relevant Double Taxation Treaty) or in its application or interpretation, such
Borrower shall not be liable to pay to such Lender any amount greater than the
amount which such Borrower would have been liable to pay to such Lender if such
Lender had been a Qualifying Lender or, as the case may be, had not ceased to
be a Qualifying Lender. When any Lender is or becomes a Qualifying Lender
pursuant to paragraph (b) of the definition of "Qualifying Lender," such Lender
hereby undertakes to claim promptly, following the date on which it makes a
Loan to a UK Borrower, exemption from United Kingdom withholding tax to which
such Lender is entitled by virtue of the relevant Double Taxation Treaty and if
such Lender fails promptly to make such claim, any sum due to the Qualifying
Lender under this Agreement shall not be increased until such claim has been
submitted. Each Borrower undertakes to do all things as shall be reasonably
required of it in order to assist any such Lender in claiming such exemption.
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2.21. Agent's Fees. The Borrowers shall pay to the Agent those
fees, in addition to the fees referenced in Section 2.6(a), in the amounts and
at the times separately agreed to between the Agent and Group pursuant to that
certain letter agreement dated January 31, 1997 among the Agent, the Arranger
and Group.
2.22. Determination, Denomination and Redenomination of
Alternative Currency Advances. Whenever, pursuant to any provision of this
Agreement:
(a) an Advance is initially funded, as opposed to any
continuation or conversion thereof, in an Alternative Currency, the
amount to be advanced hereunder will be the equivalent in such
Alternative Currency of the Dollar Amount of such Advance; and
(b) an existing Advance denominated in an Alternative
Currency is to be continued, in whole or in part, the amount of the
new Advance shall be continued in the same amount of the same
Alternative Currency.
2.23. Facility Letters of Credit.
2.23.1. Issuance of Facility Letters of Credit. (a) On
the Closing Date, the Existing Letter of Credit shall be deemed for
all purposes of this Agreement to be a Facility Letter of Credit and
the Issuing Bank with respect thereto shall be deemed to have sold to
each Lender, and each Lender shall be deemed, without further action
by any party hereto, to have purchased from such Issuing Bank, a
participation interest equal to its Pro Rata Share of the principal
amount of the Existing Letter of Credit and the related Facility
Letter of Credit Obligations. From and after the date hereof, the
Issuer agrees, upon the terms and conditions set forth in this
Agreement, to issue at the request of Group and for the account of any
Borrower, one or more Facility Letters of Credit; provided, however,
that the Issuer shall not be under any obligation to issue, and shall
not issue, any Facility Letter of Credit if (i) any order, judgment or
decree of any Governmental Agency shall purport by its terms to enjoin
or restrain such Issuer from issuing such Facility Letter of Credit,
or any law or governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) from any
Governmental Agency with jurisdiction over the Issuer shall prohibit,
or request that the Issuer refrain from, the issuance of Facility
Letters of Credit in particular or shall impose upon the Issuer with
respect to any Facility Letter of Credit any restriction or reserve or
capital requirement (for which the Issuer is not otherwise
compensated) or any unreimbursed loss, cost or expense which was not
applicable, in effect as of the date of this Agreement and which the
Issuer in good faith deems material to it; (ii) one or more of the
conditions to such issuance contained in Section 4.2 is not then
satisfied; or (iii) after giving effect to such issuance and after
determining the Current Dollar Equivalent thereof, (A) the aggregate
outstanding amount of the Facility Letter of Credit Obligations would
exceed the Facility Letter of Credit Sublimit, (B) the aggregate
balance of the Revolving Loans made to the Foreign Borrowers plus the
aggregate Facility Letter of Credit Obligations owing by all Foreign
Borrowers would exceed the Commitment Sublimit or, (C) the aggregate
balance of the Revolving Loan Obligations would exceed the Aggregate
Revolving Loan Commitment; provided, that if any circumstances arise
which result in any payment being required or in the unavailability of
any Facility Letter of Credit due to any circumstance set
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forth in clause (i) above, then the Issuer shall take such steps as it
determines are reasonably available to it to mitigate the effect of
such circumstances so long as taking such steps is not disadvantageous
to such Lender.
(b) In no event shall: (i) the aggregate amount of the
Facility Letter of Credit Obligations at any time exceed the Facility
Letter of Credit Sublimit; (ii) the sum at any time of (A) the
aggregate amount of Revolving Loan Obligations exceed (B) the amount
of the Aggregate Revolving Loan Commitment; or (iii) the expiration
date of any Facility Letter of Credit (including, without limitation,
Facility Letters of Credit issued with an automatic "evergreen"
provision providing for renewal absent advance notice by the
applicable Borrower or the Issuer), or the date for payment of any
draft presented thereunder and accepted by the Issuer, be later than
the Revolving Loan Termination Date.
2.23.2. Participating Interests. Immediately upon the
issuance by the Issuer of a Facility Letter of Credit in accordance
with Section 2.23.4, each Lender shall be deemed to have irrevocably
and unconditionally purchased and received from the Issuer, without
recourse, representation or warranty, an undivided participation
interest equal to its Pro-Rata Share of the principal amount of such
Facility Letter of Credit and each draw paid by the Issuer thereunder.
Each Lender's obligation to pay its proportionate share of all draws
under the Facility Letters of Credit shall be absolute, unconditional
and irrevocable and in each case shall be made without counterclaim or
set-off by such Lender.
2.23.3. Facility Letter of Credit Reimbursement
Obligations. (a) Each Borrower agrees to pay to the Issuer of a
Facility Letter of Credit with respect to each Facility Letter of
Credit issued for the account of such Borrower (i) on each date that
any amount is drawn under each Facility Letter of Credit a sum (and
interest on such sum as provided in clause (ii) below) equal to the
amount so drawn plus all other charges and expenses with respect
thereto specified in Section 2.23.6 or in the applicable Reimbursement
Agreement and (ii) interest on any and all amounts remaining unpaid
under this Section 2.23.3 until payment in full at the Floating Rate
plus the margin specified in Section 2.13. Each Borrower agrees to
pay to the Issuer the amount of all Facility Letter of Credit
Reimbursement Obligations owing in respect of any Facility Letter of
Credit issued for the account of such Borrower immediately when due,
under all circumstances, including, without limitation, any of the
following circumstances: (a) any lack of validity or enforceability
of this Agreement or any of the Loan Documents; (b) the existence of
any claim, set-off, defense or other right which the applicable
Borrower may have at any time against a beneficiary named in a
Facility Letter of Credit, any transferee of any Facility Letter of
Credit (or any Person for whom any such transferee may be acting), any
Lender or any other Person, whether in connection with this Agreement,
any Facility Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction
between the applicable Borrower and the beneficiary named in any
Facility Letter of Credit); (c) the validity, sufficiency or
genuineness of any document which the Issuer has determined in good
faith complies on its face with the terms of the applicable Facility
Letter of Credit, even if such document should later prove to have
been forged, fraudulent, invalid or insufficient in any respect or any
statement therein shall have been untrue or inaccurate in any respect;
or (d)
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the surrender or impairment of any security for the performance or
observance of any of the terms hereof.
(b) Notwithstanding any provisions to the contrary in any
Reimbursement Agreement, each Borrower agrees to reimburse the Issuer
for amounts which the Issuer pays under each Facility Letter of Credit
issued for the account of such Borrower no later than the time
specified in this Agreement. If the applicable Borrower does not pay
any such Facility Letter of Credit Reimbursement Obligations when due,
Group and such Borrower shall be deemed to have immediately requested
that the Lenders make a Floating Rate Advance under Section 2.2 of
this Agreement in a principal amount equal to such unreimbursed
Facility Letter of Credit Reimbursement Obligations. The Agent shall
promptly notify the Lenders of such deemed request and, without the
necessity of compliance with the requirements of Sections 2.7 and
4.2, each Lender shall make available to the Agent its Pro Rata Share
of the Revolving Loan in the manner prescribed for Floating Rate
Advances. The proceeds of such Revolving Loans shall be paid over by
the Agent to the Issuer for the account of the applicable Borrower in
satisfaction of such unreimbursed Facility Letter of Credit
Reimbursement Obligations, which shall thereupon be deemed satisfied
by the proceeds of, and replaced by, such Floating Rate Advance. In
the case of any Facility Letter of Credit Obligations arising under a
Facility Letter of Credit denominated in an Alternative Currency, the
applicable Borrower shall pay to the Issuer the equivalent of the
amount paid by the Issuer in Dollars at the rate of exchange then
current in Chicago, as reasonably determined by the Issuer. If at any
time there is no rate of exchange generally current in Chicago, then
the applicable Borrower shall pay the Issuer an amount in Dollars
equivalent to the actual cost of settlement.
(c) If the Issuer makes a payment on account of any
Facility Letter of Credit and is not concurrently reimbursed therefor
by the applicable Borrower and if for any reason a Floating Rate
Advance may not be made pursuant to paragraph (b) above, then as
promptly as practical during normal banking hours on the date of its
receipt of such notice or, if not practicable on such date, not later
than noon (Chicago time) on the Business Day immediately succeeding
such date of notification, each Lender shall deliver to the Agent for
the Account of the Issuer, in immediately available funds, the
purchase price for such Lender's interest in such unreimbursed
Facility Letter of Credit Obligations, which shall be an amount equal
to such Lender's Pro-Rata Share of such payment. Each Lender shall,
upon demand by the Issuer, pay the Issuer interest on such Lender's
Pro-Rata Share of such draw from the date of payment by the Issuer on
account of such Facility Letter of Credit until the date of delivery
of such funds to the Issuer by such Lender at a rate per annum,
computed for actual days elapsed based on a 360-day year, equal to the
Federal Funds Effective Rate for such period; provided, that such
payments shall be made by the Lenders only in the event and to the
extent that the Issuer is not reimbursed in full by the applicable
Borrower for interest on the amount of any draw on the Facility
Letters of Credit.
(d) At any time after the Issuer has made a payment on
account of any Facility Letter of Credit and has received from any
other Lender such Lender's Pro-Rata Share of such payment, such Issuer
shall, forthwith upon its receipt of any reimbursement (in whole or in
part) by the applicable Borrower for such payment, or of any other
amount from the
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applicable Borrower or any other Person in respect of such payment
(including, without limitation, any payment of interest or penalty
fees and any payment under any collateral account agreement of the
applicable Borrower or any Loan Document but excluding any transfer of
funds from any other Lender pursuant to Section 2.23.3(b), transfer to
such other Lender such other Lender's ratable share of such
reimbursement or other amount; provided, that interest and penalty
fees shall accrue for the benefit of such Lender from the time such
Issuer has made a payment on account of any Facility Letter of Credit;
provided, further, that in the event that the receipt by the Issuer of
such reimbursement or other amount is found to have been a transfer in
fraud of creditors or a preferential payment under the United States
Bankruptcy Code or is otherwise required to be returned, such Lender
shall promptly return to the Issuer any portion thereof previously
transferred by the Issuer to such Lender, but without interest to the
extent that interest is not payable by the Issuer in connection
therewith.
2.23.4 Procedure for Issuance. Prior to the issuance of
each Facility Letter of Credit, and as a condition of such issuance,
the applicable Borrower shall deliver to the Issuer an application and
Reimbursement Agreement, substantially in the form of Exhibit C-1 or
Exhibit C-2 hereto, as applicable (or in such other form as shall then
represent the standard forms of the Issuer and as shall be reasonably
acceptable to Group), signed by such Borrower, together with such
other documents or items as may be required pursuant to the terms
thereof, and the proposed form and content of such Facility Letter of
Credit shall be reasonably satisfactory to the Issuer. Each Facility
Letter of Credit shall be issued no earlier than two (2) Business Days
after delivery of the foregoing documents, which delivery may be by
the applicable Borrower to the Issuer by telecopy, telex or other
electronic means, followed by delivery of executed originals within
five (5) days thereafter. The documents so delivered shall be in
compliance with the requirements set forth in Section 2.23.1(b), and
shall specify therein (i) the stated amount of the Facility Letter of
Credit requested, (ii) the effective date of issuance of such
requested Facility Letter of Credit, which shall be a Business Day,
(iii) the date on which such requested Facility Letter of Credit is to
expire, which shall be a Business Day prior to the Revolving Loan
Termination Date, and (iv) the account party for whose benefit the
requested Facility Letter of Credit is to be issued, which shall be
Group or another Borrower. The delivery of the foregoing documents
and information shall constitute a " Notice of Issuance" for purposes
of this Agreement. Subject to the terms and conditions of Section
2.23.1 and provided that the applicable conditions set forth in
Section 4.2 hereof have been satisfied, the Issuer shall, on the
requested date, issue a Facility Letter of Credit on behalf of the
applicable Borrower in accordance with the Issuer's usual and
customary business practices. In addition, any amendment of an
existing Facility Letter of Credit shall be deemed to be an issuance
of a new Facility Letter of Credit and shall be subject to the
requirements set forth herein pursuant to a form of application
acceptable to the Issuer.
2.23.5 Nature of the Lenders' Obligations. (a) As between
each Borrower and the Lenders, such Borrower assumes all risks of the
acts and omissions of, or misuse of the Facility Letters of Credit by,
the respective beneficiaries of the Facility Letters of Credit. In
furtherance and not in limitation of the foregoing, the Lenders shall
not be responsible for (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document
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submitted by any party in connection with the application for an
issuance of a Facility Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign a Facility Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (iii) the failure of the
beneficiary of a Facility Letter of Credit to comply fully with
conditions required to be satisfied by any Person other than the
Issuer in order to draw upon such Facility Letter of Credit; (iv)
errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable, telegraph, telex or otherwise; (v)
errors in the interpretation of technical terms; (vi) the
misapplication by the beneficiary of a Facility Letter of Credit of
the proceeds of any drawing under such Facility Letter of Credit; or
(vii) any consequences arising from causes beyond control of the
Issuer.
(b) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by the Issuer under or in connection with the Facility Letters
of Credit or any related certificates, if taken or omitted in good
faith, shall not put the Agent or any Lender under any resulting
liability to any Borrower or relieve any Borrower of any of its
obligations hereunder to the Issuer or any such Person.
2.23.6 Facility Letter of Credit Fees. Group shall or
shall cause the other Borrowers to pay letter of credit fees with
respect to each standby Facility Letter of Credit equal to (a) .15% of
the face amount of such Facility Letter of Credit, payable to the
Issuer upon issuance, and (b) a per annum rate equal to the then
effective Applicable Margin for Eurocurrency Loans times the
outstanding undrawn face amount of such standby Facility Letter of
Credit, payable to the Agent for the account of the Lenders, in each
case payable in arrears on the last Business Day of each calendar
quarter. In addition to the foregoing, (x) Group shall or shall cause
the other Borrowers to pay to the Issuer any other processing,
issuance, amendment and other similar fees customarily charged by it
in respect of Facility Letters of Credit issued by it, including,
without limitation, customary fees charged by it in connection with
commercial Facility Letters of Credit, together with the Issuer's
out-of-pocket costs of issuing and servicing Facility Letters of
Credit, and (y) Group shall or shall cause the other Borrowers to pay
to the Agent for the account of the Issuer, upon any transfer of any
Facility Letter of Credit by the beneficiary thereof to a new
beneficiary, a transfer commission equal to the greater of $100 or
.25% of the amount transferred which shall not in any event exceed
$750.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Taxes. (a) Except as otherwise required by applicable law,
all sums payable by any Borrower whether in respect of principal, interest,
fees or otherwise shall be paid without deduction for any present and future
taxes, levies, assessments, imposts, deductions, charges or withholdings
imposed by any country, any Governmental Agency thereof or therein, any
jurisdiction from which any or all such payments are made and any political
subdivision or taxing authority thereof or
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therein, excluding income and franchise taxes (and deductions and
withholdings therefor) imposed on the Agent or any Lender (i) by the
jurisdiction under the laws of which the Agent or such Lender is organized or
any Governmental Agency or taxing authority thereof or therein, or (ii) by any
jurisdiction in which the Agent's or such Lender's Lending Installations are
located or any Governmental Agency or taxing authority thereof or therein (such
excluded taxes, deductions and withholdings, collectively, "Excluded Taxes", and
all such taxes, levies, imposts, deductions, charges and withholdings (including
Excluded Taxes), collectively, " Taxes"), which amounts shall be paid by such
Borrower as provided in Section 3.1(b).
(b) If (i) any Borrower or any other Person is required
by law to make any deduction or withholding on account of any Tax (other than
Excluded Taxes) or other amount from any sum paid or expressed to be payable by
any Borrower to any Lender under this Agreement; or (ii) any party to this
Agreement (or any Person on its behalf) other than any Borrower is required by
law to make any deduction or withholding from, or (other than on account of any
Excluded Tax) any payment on or calculated by reference to the amount of, any
such sum received or receivable by any Lender under this Agreement, then,
subject to Section 2.20(b):
(A) Group shall notify the Agent of any such requirement or
any change in any such requirement as soon as any Borrower becomes aware of it;
(B) Group shall or shall cause the other Borrowers to pay
any such Tax or other amount before the date on which penalties attached
thereto become due and payable, such payment to be made (if the liability to
pay is imposed on Group or such Borrowers) for its own account or (if that
liability is imposed on any other party to this Agreement) on behalf of and in
the name of that party;
(C) the sum payable by Group or such Borrowers in respect
of which the relevant deduction, withholding or payment is required shall
(except, in the case of any such payment, to the extent that the amount thereof
is not ascertainable when that sum is paid) be increased to the extent
necessary to ensure that, after the making of that deduction, withholding or
payment, that party receives on the due date and retains (free from any
liability in respect of any such deduction, withholding or payment) a sum equal
to that which it would have received and so retained had no such deduction,
withholding or payment been required or made; and
(D) within thirty (30) days after payment of any sum from
which such Borrower is required by law to make any deduction or withholding,
and within thirty (30) days after the due date of payment of any Tax or other
amount which it is required by clause (B) above to pay, it shall deliver to the
Agent all such certified documents and other evidence as to the making of such
deduction, withholding or payment as (1) are reasonably satisfactory to other
affected parties as proof of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority and (2) are
reasonably required by any such party to enable it to claim a tax credit with
respect to such deduction, withholding or payment.
3.2. Yield Protection. (a) If, after the date hereof, the
adoption of any change in any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether
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or not having the force of law), or any interpretation thereof, or the
compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending
Installation to any Tax on or from payments due from any Borrower (excluding
Excluded Taxes), or changes the basis of taxation of payments to any Lender or
Lending Installation in respect of its Loans or its interest in the Facility
Letters of Credit or other amounts due it hereunder (excluding Excluded Taxes),
or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender or any applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest rate applicable to
Eurocurrency Advances), or
(iii) imposes any other condition (except with respect to
Excluded Taxes) the result of which is to increase the cost to any Lender or
any applicable Lending Installation of making, funding or maintaining Loans or
issuing Facility Letters of Credit or reduces any amount receivable by any
Lender or any applicable Lending Installation in connection with Loans or
Facility Letters of Credit, or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount of Loans
held, or interest received by it thereon, or Facility Letters of Credit issued
or participated in by it by an amount reasonably deemed material by such
Lender, then, within fifteen (15) days of demand by such Lender, Group shall or
shall cause the other Borrowers to pay such Lender that portion of such
increased expense incurred or reduction in an amount received which such Lender
reasonably determines is attributable to making, funding and maintaining its
Loans, its Commitment or its interest in Facility Letters of Credit.
(b) In addition to any other amounts payable by the
Borrowers hereunder, each Lender may require the relevant Borrower to pay,
contemporaneously with each payment of interest on Eurocurrency Advances of
such Borrower which are denominated in pounds sterling, additional interest on
the related Eurocurrency Loan of such Lender at the percentage calculated from
time to time by such Lender to be the percentage required to fully compensate
such Lender for all reserve costs, liabilities, expenses and assessments (other
than reserve costs, liabilities, expenses and assessments taken into account in
determining the interest rate applicable to such Eurocurrency Advance) which
have been incurred by such Lender (or its applicable Lending Installation)
regarding the making, funding or maintaining of such Eurocurrency Loan
(including, without limitation, any and all liquid asset maintenance
requirements of the Bank of England). A certificate of any Lender claiming
compensation under the preceding sentence, setting forth the additional
interest to be paid to it thereunder and setting forth in reasonable detail a
reasonable basis therefor, shall be conclusive in the absence of manifest
error, and in determining the amount of such interest, such Lender may use any
reasonable averaging and attribution methods. Any Lender wishing to require
payment of such additional interest (i) shall so notify Group and the Agent, in
which case such additional interest on the Eurocurrency Loans of such Lender
denominated in pounds sterling shall be payable in pounds sterling to such
Lender at the place indicated in such notice with respect to each Interest
Period commencing at least five Business Days after the giving of such notice
and (ii) shall notify Group at least five Business Days prior to each date on
which interest is payable on such Eurocurrency Loans of the amount then due it
under this Section 3.2(b). Following Group's request
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made at least two (2) Business Days prior to the delivery of any Borrowing
Notice relating thereto, the Agent and the Lenders shall, prior to the making
of a proposed Eurocurrency Advance denominated in pounds sterling, provide
notice to Group of any such additional interest known at such time to be
payable with respect thereto.
3.3. Changes in Capital Adequacy Regulations. If a Lender
reasonably determines the amount of capital required or expected to be
maintained by such Lender, any applicable Lending Installation of such Lender
or any corporation controlling such Lender is increased as a result of a
Change, then, within fifteen (15) days of demand by such Lender, Group shall or
shall cause the other Borrowers to pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender reasonably determines is attributable to
this Agreement, its Loans, its interest in Facility Letters of Credit or its
obligation to make Loans or to participate in or issue Facility Letters of
Credit hereunder (after taking into account such Lender's policies as to
capital adequacy). "Change" means (a) any change after the date of this
Agreement in the Risk-Based Capital Guidelines, or (b) any adoption of or
change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the
force of law) after the date of this Agreement which affects the amount of
capital required or expected to be maintained by any Lender or any Lending
Installation or any corporation controlling any Lender. "Risk-Based Capital
Guidelines" means (a) the risk-based capital guidelines in effect in the United
States on the date of this Agreement, including transition rules, and (b) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices entitled "International
Convergence of Capital Measurements and Capital Standards," including
transition rules, and any amendments to such regulations adopted prior to the
date of this Agreement.
3.4. Availability of Types of Advances. If any Lender reasonably
determines that maintenance of its Eurocurrency Advances at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders determine
that (a) deposits of a type and maturity appropriate to match fund Eurocurrency
Advances are not available, or (b) the interest rate applicable to a Type of
Advance does not accurately or fairly reflect the cost of making or maintaining
such Advance, then the Agent shall suspend the availability of the affected
Type of Advance and (other than for matters described in the foregoing clauses
(a) and (b)) require any Eurocurrency Advances of the affected Type to be
repaid.
3.5. Funding Indemnification. If any payment of a Eurocurrency
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurocurrency Advance is not made on the date specified by Group for any reason
other than default by the Lenders, Group shall or shall cause the other
Borrowers to indemnify the Agent and each Lender for any loss or cost incurred
by it resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the Eurocurrency
Advance. In connection with any assignment by First Chicago of any portion of
the Loans or the Revolving Loan Commitment made pursuant to Section 12.3 and
made on or prior to the completion of the initial syndication of the Loans and
the Revolving Loan Commitments, the Borrowers shall be deemed to have repaid
all outstanding Eurocurrency Advances
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as of such date and reborrowed such amount as a Floating Rate Advance and/or
Eurocurrency Advance (chosen in accordance with the provisions of Section 2.5)
and the indemnification provisions under this Section 3.5 shall apply.
3.6. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to the making and repayment of Eurocurrency Advances
or take such other steps as it determines are reasonably available to it to
reduce any liability of the Borrowers to such Lender under Sections 3.1, 3.2
and 3.3 or to avoid the unavailability of a Type of Advance under Section 3.4,
so long as such designation or other step is not disadvantageous to such
Lender. Each Lender shall deliver a written statement of such Lender to Group
(with a copy to the Agent) as to the amount due, if any, under Sections 3.1,
3.2, 3.3 or 3.5. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be
final, conclusive and binding on the Borrowers in the absence of manifest
error. Determination of amounts payable under such Sections in connection with
a Eurocurrency Loan shall be calculated as though each Lender funded its
Eurocurrency Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the
Eurocurrency Rate applicable to such Loan, whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in the written
statement of any Lender shall be payable on demand after receipt by Group of
the written statement. The obligations of the Borrowers under Sections 3.1,
3.2, 3.3 and 3.5 shall survive payment of the Obligations and termination of
this Agreement.
3.7. Replacement of Certain Lenders. If a Lender ("Affected
Lender") shall have requested compensation from the Borrowers under Sections
3.1, 3.2 or 3.3 to recover Taxes or other additional costs incurred by such
Lender which are not being incurred generally by the other Lenders, or
delivered a notice pursuant to Section 3.4 claiming that such Lender is unable
to extend Eurocurrency Advances to the Borrowers for reasons not generally
applicable to the other Lenders, then, in any such case, so long as no Default
or Unmatured Default exists, Group may make written demand on such Affected
Lender (with a copy to the Agent) for the Affected Lender to assign, and such
Affected Lender shall assign pursuant to one or more duly executed assignment
and acceptance agreements in substantially the form of Exhibit F thirty (30)
Business Days after the date of such demand, to one or more financial
institutions that comply with the provisions of Section 12.3 (and that are
reasonably acceptable to the Agent) which Group shall have engaged for such
purpose ("Replacement Lender"), all of such Affected Lender's rights and
obligations under this Agreement and the other Loan Documents (including its
Revolving Loan Commitment, all Loans owing to it, all of its participation
interests in outstanding Facility Letters of Credit, and its obligation to
participate in additional Facility Letters of Credit hereunder) in accordance
with Section 12.3. Further, with respect to any such assignment the Affected
Lender shall have concurrently received, in cash, all amounts due and owing to
such Affected Lender hereunder or under any other Loan Document, including the
aggregate outstanding principal amount of the Loans owed to such Lender,
together with accrued interest thereon through the date of such assignment from
the Replacement Lender, amounts payable under Sections 3.1, 3.2 and 3.3 with
respect to such Affected Lender and compensation payable under Section 2.6;
provided that upon such Affected Lender's replacement, such Affected Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 3.1, 3.2, 3.3, 3.5 and 9.6 accruing with respect to such
Affected Lender prior to the date
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such Affected Lender is replaced, as well as to any fees accrued for its
account hereunder prior to being replaced and not yet paid, and shall continue
to be obligated under Section 10.8.
3.8. Availability of Alternative Currency. The Lenders shall not
be required to make or continue any Advance requested to be made or continued
in an Alternative Currency if, at any time prior to making or continuing such
Advance, any Lender (after consultation with the Agent) shall determine, in its
sole discretion, that (a) deposits in the applicable Alternative Currency in
the amounts and maturities required to fund such Advance will not be available
to such Lender; (b) a fundamental change has occurred in the foreign exchange
or interbank markets with respect to the applicable Alternative Currency
(including, without limitation, changes in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls); or (c) it has become otherwise materially impractical for such
Lender to make or continue such Advance in the applicable Alternative Currency.
The Agent shall promptly notify Group and each Lender of any such
determination.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Loan and Facility Letter of Credit Issuance. The
Lenders shall not be required to make the initial Advances or issue the initial
Facility Letter of Credit hereunder unless the Borrowers have furnished to the
Agent with sufficient copies for the Lenders:
(a) Good Standing. With respect to Industries and its
Domestic Subsidiaries, a certificate of good standing, in each case certified
as of a date not more than five (5) Business Days prior to the initial
Borrowing Date by the appropriate governmental officer in its jurisdiction of
incorporation or formation.
(b) Charter, By-Laws and Resolutions. Copies of the
charter or equivalent constitutive documents of each Loan Party, together with
all amendments through the initial Borrowing Date, certified by an officer or
director of such Loan Party to the effect that there have been no changes
therein since the date of the most recent certification thereof by the
appropriate governmental officer in its respective jurisdiction of
incorporation or formation. Copies, certified by an officer or director of
each Loan Party as of the initial Borrowing Date, of its by-laws or equivalent
constitutive documents (where applicable) and of resolutions of its board of
directors and, where required, its shareholders, authorizing the execution,
delivery and performance of the Loan Documents to which such Loan Party is a
party.
(c) Officer's Certificate. A certificate, dated the
initial Borrowing Date, executed by an officer of each of Group, Kysor and
Industries certifying the resolutions of the board of directors of each of
Group, Kysor and Industries, respectively, in each case approving and
authorizing the Acquisition and the Asset Purchase.
(d) Officer's Certificate. An incumbency certificate,
executed by an officer or director of each Loan Party, which shall identify by
name and title and bear the signature of the
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officers of such Loan Party authorized to sign the Loan Documents and (with
respect to each of Group, Delfield, Scotsman Drink, Whitlenge, Frimont, Castel
MAC and Kysor) to make borrowings hereunder, upon which certificate the Agent
and the Lenders shall be entitled to rely until informed of any change in
writing by such Borrower.
(e) Officer's Certificate. A certificate, dated the
initial Borrowing Date, signed by an Authorized Officer of Industries, in form
and substance satisfactory to the Agent, to the effect that: (i) on the initial
Borrowing Date (after giving effect to the consummation of the Acquisition, the
making of the Loans hereunder and the making of the Bridge Loan) no Default or
Unmatured Default has occurred and is continuing; (ii) no injunction or
temporary restraining order which would prohibit the making of the Loans, the
making of the Bridge Loan, the consummation of any part of the Acquisition, the
Merger, the Asset Purchase or any of the other transactions contemplated by any
of the Transaction Documents (collectively the "Closing Transactions"), or
other litigation which could reasonably be expected to have a Material Adverse
Effect is pending or, to the best of such Person's knowledge, threatened; (iii)
all orders, consents, approvals, licenses, authorizations or validations of, or
filings, recordings or registrations with, or exemptions by, any governmental
or public body or authority, or any subdivision thereof (including, without
limitation, all approvals required under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended), required to make or consummate the
Closing Transactions have been or, prior to the time required, will have been,
obtained, given, filed or taken and are or will be in full force and effect (or
the applicable Loan Party has obtained effective judicial relief with respect
to the application thereof) and that all applicable waiting periods have
expired; (iv) the Transaction Documents are in full force and effect and no
material term or condition thereof has been amended, modified or waived after
the execution thereof except with the written consent of the Agent; (v) no Loan
Party has failed to perform any material obligation or covenant required in
connection with any Closing Transaction to be performed or complied with by it
on or before the initial Borrowing Date; (vi) each of the representations and
warranties set forth in Article V of this Agreement is true and correct on and
as of the date hereof; and (vii) since September 29, 1996, no event or change
has occurred that has caused or evidences a Material Adverse Effect.
(f) Officer's Certificate. A certificate, dated the
initial Borrowing Date, signed by an officer of Industries, certifying that no
material adverse change has occurred in the business, condition (financial or
otherwise), operations, performance or properties of (i) Industries and its
Subsidiaries, taken as a whole, from that reflected in Industries' consolidated
financial statements dated as of September 29, 1996; (ii) Kysor and its
Subsidiaries, taken as a whole, from that reflected in Kysor's consolidated
financial statements dated as of September 30, 1996; or (iii) Industries and
Kysor and their respective subsidiaries, taken as a whole, on a combined basis
after giving effect to the Acquisition, from that reflected in the consolidated
opening financial statements (giving effect to the Acquisition) delivered to
the Agent prior to the initial Borrowing Date.
(g) Legal Opinions. (i) A written opinion of Schiff
Hardin & Waite, counsel to Industries and its Subsidiaries, addressed to the
Agent and the Lenders in form and substance acceptable to the Agent and its
counsel and (ii) written opinions of Wragge & Co., special English counsel to
Industries and its Subsidiaries, Besana Studio Legale Associato, special
Italian counsel to Industries and its Subsidiaries, and Warner, Norcross & Judd
LLP, special Michigan counsel to
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Kysor in each case addressed to the Agent and the Lenders in form and substance
acceptable to the Agent and its counsel.
(h) Notes. Revolving Notes and Term Notes payable to the
order of each of the Lenders duly executed by each Borrower and a Swing Line
Note payable to the order of the Swing Line Lender duly executed by each
Borrower which is a Domestic Subsidiary.
(i) Loan Documents. Executed originals of this
Agreement, each of the Guaranties (executed by each Guarantor), the Pledge
Agreement and each of the other Loan Documents, which shall be in full force
and effect, together with all schedules, exhibits, certificates, instruments,
opinions, documents and financial statements required to be delivered pursuant
hereto and thereto.
(j) Letters of Direction. Written money transfer
instructions with respect to the initial Advances and to future Advances in
form and substance acceptable to the Agent and its counsel addressed to the
Agent and signed by an Authorized Officer, together with such other related
money transfer authorizations as the Agent may have reasonably requested.
(k) Asset Purchase Documents. An executed copy of the
Asset Purchase Agreement, together with a certificate of Industries certifying
that (A) the representations and warranties contained in the Asset Purchase
Agreement are true and correct in all material respects as of the initial
Borrowing Date, (B) all conditions to closing contained in the Asset Purchase
Agreement have been satisfied and none of such conditions has been waived and
(C) no amendments of any material terms contained in the Asset Purchase
Agreement have been made (unless consented to by the Agent).
(l) Acquisition Documents. A copy of the Acquisition
Documents, together with a certificate of Industries certifying that (A) the
representations and warranties contained in the Acquisition Agreement are true
and correct in all material respects as of the initial Borrowing Date, (B) all
conditions to closing contained in the Acquisition Agreement have been
satisfied and none of such conditions has been waived and the Acquisition has
been consummated in accordance with the Acquisition Agreement and (C) no
amendments of any material terms contained in the Acquisition Agreement have
been made (unless consented to by the Agent).
(m) Solvency Certificate. A written solvency certificate
from the chief financial officer of Industries in form and content satisfactory
to the Agent, dated the initial Borrowing Date, with respect to the value,
Solvency and other factual information of, or relating to, as the case may be,
Industries and its Subsidiaries (including Kysor and its Subsidiaries) on a
consolidated basis, both before and after giving effect to all of the Closing
Transactions contemplated by the Transaction Documents, and the incurrence of
all other Indebtedness of Industries and its Subsidiaries in connection with
the Acquisition and the Transportation Sale.
(n) Accountants' Letter. A signed letter from Arthur
Andersen & Co. in form and substance satisfactory to the Agent acknowledging
that the Lenders may rely on current financial statements audited by such firm.
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(o) Opening Financial Statements. (i) Opening
consolidated financial statements of Industries and its Subsidiaries as of the
Closing Date, dated as of February 18, 1997, giving effect to the Acquisition,
certified by the chief financial officer of Industries, which financial
statements (A) shall not contain financial information materially less
favorable, in the Agent's and the Required Lender's reasonable judgment, than
that contained in the projections previously provided to the Agent and (B)
shall indicate, together with all other information then available to the
Agent, that Industries and its Subsidiaries and Kysor and its Subsidiaries are
Solvent and can comply with the financial covenants contained in this Agreement
and (ii) such other information as the Agent may reasonably request to confirm
the tax, legal and business assumptions made in such financial statements.
(p) Evidence of Termination. Evidence of the termination
of the commitments of the lenders under, the payment in full of all obligations
under and where applicable all liens securing each of (i) the $90,000,000
facility under Group's existing credit agreement, (ii) all existing credit
facilities of Kysor and its Subsidiaries and (iii) the $20,000,000 11.43%
Senior Notes due May 1, 1998 issued pursuant to those certain Note Purchase
Agreements dated as of April 17, 1989 among Industries, Group and the
purchasers named therein (the "Senior Notes") and the related Intercreditor
Agreement.
(q) Existing Letters of Credit. The IRB Facility Letter
of Credit shall have been issued concurrently herewith in substitution for the
letter of credit previously issued by The Bank of Nova Scotia, Atlanta Agency
and that certain $1,300,000 Facility Letter of Credit issued by First Chicago
for the benefit of Employers Insurance of Wausau-A Mutual Company shall have
been issued concurrently herewith in substitution for that certain letter of
credit no. 7524 previously issued by Old Kent Bank and Trust Company.
(r) Tender Offer. Evidence, satisfactory to the Agent,
that the minimum number of shares required to consummate a merger by any
applicable corporate statute, anti-takeover statute, or provision in Group's or
Kysor's articles of incorporation, by-laws, or other constitutive documents
have been tendered.
(s) Closing Date. The Closing Date shall in no event be
later than May 31, 1997.
(t) Asset Purchase Proceeds. Evidence, satisfactory to
the Agent, that Kysor has deposited any proceeds from the Asset Purchase into
an account of Kysor with NBD Bank, N.A. and that such amounts have not been
withdrawn except to the extent applied to repay existing Indebtedness of Kysor.
(u) Other. Such other documents as the Agent, any Lender
or their counsel may have reasonably requested.
4.2. Each Future Advance and Facility Letter of Credit Issuance.
The Lenders shall not be required to make any Advance or issue any Facility
Letter of Credit unless on the applicable Borrowing Date:
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(a) There exists no Default or Unmatured Default and none would
result from such Advance or Facility Letter of Credit;
(b) The representations and warranties contained in Article V are
true and correct in all material respects as of such Borrowing Date;
(c) A Borrowing Notice or Notice of Issuance, as applicable, shall
have been properly submitted;
(d) For the first Advance made hereunder to each Additional Borrowing
Subsidiary, an Agreement of Joinder shall have been duly executed and delivered
by such Additional Borrowing Subsidiary and Group to the Agent and all of the
requirements therein shall have been satisfied; and
(e) All legal matters incident to the making of such Advance or
issuance of such Facility Letter of Credit shall be reasonably satisfactory to
the Lenders and their counsel.
4.3. Each Advance on the Merger Date. The Lenders shall not be
required to make any Advance on the Merger Date unless substantially
simultaneously therewith, the Merger shall be consummated in accordance with
the terms of the Acquisition Agreement.
Each Borrowing Notice with respect to each such Advance and Notice of
Issuance with respect to each such Facility Letter of Credit shall constitute a
representation and warranty by the applicable Borrower that the conditions
contained in Section 4.2 have been satisfied. Any Lender may require a duly
completed Compliance Certificate as a condition to making an Advance or issuing
a Facility Letter of Credit.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each of Industries and each Borrower represents and warrants to the
Lenders that, both before and after giving effect to the Closing Transactions
(except, with respect to Sections 5.8, 5.9, 5.10, 5.17, 5.18 and 5.23, only
after giving effect thereto):
5.1. Existence and Standing. Each of Industries and each
Domestic Subsidiary which is a corporation (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and (b) is duly qualified and in good
standing as a foreign corporation (other than the jurisdiction of its
incorporation) and is duly authorized to conduct its business in each
jurisdiction in which the failure to be so qualified or authorized,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Each Foreign Subsidiary and each Domestic Subsidiary
which is a Person other than a corporation (a) is a Person duly formed, validly
existing and in good standing under the laws of its jurisdiction of formation
and (b) is duly qualified and in good standing and is duly authorized to
conduct its business in each United States jurisdiction (other than in the
jurisdiction of its formation) in which the failure to be so qualified or
authorized could reasonably be expected to have a Material Adverse
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Effect. Each of Industries and each of its Subsidiaries have obtained and hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted, except where the failure to
obtain and hold the same, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
5.2. Authorization and Validity. Industries and each Subsidiary
have all requisite power and authority (corporate and otherwise) and legal
right to execute and deliver (or file, as the case may be) each of the Loan
Documents and the other Transaction Documents to which it is a party and to
perform its obligations thereunder. The execution and delivery (or filing, as
the case may be) by Industries and each Subsidiary of the Loan Documents and
the other Transaction Documents to which it is a party and the performance of
their respective obligations thereunder have been duly authorized by proper
proceedings (corporate and otherwise) and the Loan Documents and the other
Transaction Documents constitute legal, valid and binding obligations of
Industries or such Subsidiary, as applicable, enforceable against Industries or
such Subsidiary, as applicable, in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity.
5.3. Compliance with Laws and Contracts. Industries and its
Subsidiaries have complied in all material respects with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or
foreign government or any instrumentality or agency thereof, having
jurisdiction over the conduct of their respective businesses or the ownership
of their respective properties, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect. Except as disclosed
on Schedule 5.3, neither the execution and delivery by Industries and each
Subsidiary of the Loan Documents and the other Transaction Documents to which
it is a party, the application of the proceeds of the Loans, the consummation
of the Closing Transactions or any other transaction contemplated in the Loan
Documents or the other Transaction Documents, nor compliance with the
provisions of the Loan Documents or the other Transaction Documents will, or at
the relevant time did, (a) violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Industries or any Subsidiary
or Industries' or any Subsidiary's charter, articles or certificate of
incorporation or by-laws, (b) violate the provisions of or require the approval
or consent of any party to any indenture, instrument or agreement to which
Industries or any Subsidiary is a party or is subject, or by which it, or its
property, is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien (other than Liens permitted by
the Loan Documents) in, of or on the property of Industries or any Subsidiary
pursuant to the terms of any such indenture, instrument or agreement, or (c)
require any consent of the stockholders of any Person, except (with respect to
any violation or failure described in the foregoing clauses (a), (b) and (c))
for any violation of, or failure to obtain an approval or consent required
under, any such indenture, instrument or agreement that could not reasonably be
expected to have a Material Adverse Effect.
5.4. Governmental Consents. No order, consent, approval,
qualification, license, authorization, or validation of, or filing, recording
or registration with, or exemption by, or other action in respect of, any
court, governmental or public body or authority, or any subdivision thereof,
any securities exchange or other Person is or at the relevant time was required
to authorize, or is or
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at the relevant time was required in connection with the execution, delivery,
consummation or performance of, or the legality, validity, binding effect or
enforceability of, any of the Loan Documents or the Transaction Documents, the
application of the proceeds of the Loans or the consummation of the
Acquisition, the Merger, the Asset Purchase or any other transaction
contemplated in the Loan Documents or the Transaction Documents, except solely
with respect to the consummation of the Asset Purchase, the Merger and the
Acquisition, such consents, approvals and filings which have already been
obtained or made and are in full force and effect. Neither Industries nor any
Subsidiary is in default under or in violation of any foreign, federal, state
or local law, rule, regulation, order, writ, judgment, injunction, decree or
award binding upon or applicable to Industries or such Subsidiary, in each case
the consequences of which default or violation could reasonably be expected to
have a Material Adverse Effect. The waiting period with respect to the
Acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, has expired.
5.5. Financial Statements. Industries has heretofore furnished
to each of the Lenders (a) the audited consolidated financial statements of
Industries and its Subsidiaries for the Fiscal Year ended December 31, 1995,
(b) the audited consolidated financial statements of Kysor for the year ended
December 31, 1995 (collectively, the "Financial Statements"). The pro forma
balance sheet and related profit and loss statement (the "Opening Financial
Statements") of Industries and its Subsidiaries, giving effect to the
Acquisition, on a consolidated basis as of February 18, 1997 is attached hereto
as Schedule 5.5. As of the date of this Agreement, the Opening Financial
Statements fairly present Industries' and the Subsidiaries' assets,
liabilities, financial condition and results of operations on a consolidated
basis in accordance with Agreement Accounting Principles, consistently applied,
and taking into account the Closing Transactions and the other transactions and
actions contemplated by this Agreement, the Loan Documents and the Transaction
Documents. Each of the Financial Statements was prepared in accordance with
Agreement Accounting Principles and fairly presents the consolidated financial
condition and operations of Industries and its Subsidiaries or Kysor and its
Subsidiaries, as applicable, at such dates and the consolidated results of
their operations for the respective periods then ended (except, in the case of
such unaudited statements, for normal year-end audit adjustments).
5.6. Material Adverse Change. No material adverse change in the
business, Property, condition (financial or otherwise), performance or results
of operations of Industries and its Subsidiaries, taken as a whole, has
occurred since September 29, 1996.
5.7. Taxes. Industries and its Subsidiaries have filed or caused
to be filed on a timely basis and in correct form all United States federal and
applicable foreign, state and local tax returns and all other tax returns which
are required to be filed and have paid all taxes due pursuant to said returns
or pursuant to any assessment received by Industries or any Subsidiary, except
(a) such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no Lien exists and (b) where the failure to do so
could not reasonably be expected to have a Material Adverse Effect. As of the
date hereof, (x) the United States income tax returns of Industries on a
consolidated basis have been audited by the Internal Revenue Service through
Fiscal Year 1985 and (y) with respect to periods after the date on which the
shares of common stock of Industries were distributed to the holders of common
stock of Household International, Inc., there are no material pending audits or
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investigations regarding Industries' or its Subsidiaries' federal, foreign,
state or local tax returns. No tax liens have been filed and no claims are
pending or, to the knowledge of Industries or any Subsidiary, threatened, with
respect to any such taxes which could reasonably be expected to have a Material
Adverse Effect. The charges, accruals and reserves on the books of Industries
and its Subsidiaries in respect of any taxes or other governmental charges are
in accordance with Agreement Accounting Principles.
5.8. Litigation and Contingent Obligations. There is no
litigation, arbitration, proceeding, inquiry or governmental investigation
(including, without limitation, by the Federal Trade Commission) pending or, to
the knowledge of any of their officers, threatened against or directly
affecting Industries or any Subsidiary or any of their respective properties
(a) which could reasonably be expected to have a Material Adverse Effect or to
prevent, enjoin or unduly delay the making of the Loans or Advances under this
Agreement or (b) which otherwise exists as of the date hereof and which relates
to a dollar amount in question of more than $100,000, except (i) any such
matter involving either (A) workers compensation or personal injury matters
which occur in the ordinary course of business or (B) a product liability
claim, as to which, in each such case, Industries or the applicable Subsidiary
is fully insured (except as to the payment of any required deductible), and
(ii) as set forth on Schedule 5.8. As of the date hereof, neither Industries
nor any Subsidiary has any Contingent Obligation relating to an amount in
excess of $2,000,000 except as set forth on Schedule 5.8.
5.9. Subsidiaries. Schedule 5.9 hereto contains an
organizational chart of all of the existing Subsidiaries (other than
Subsidiaries of Kysor) and, to the best knowledge of Industries, all of the
Subsidiaries of Kysor, as of the date of this Agreement after giving effect to
the Acquisition, setting forth their respective jurisdictions of incorporation
or formation and the percentage of their capital stock owned by Industries or
Subsidiaries. All of the issued and outstanding shares of capital stock of
Industries and of each Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable, and all such shares of each Domestic
Subsidiary are free and clear of all Liens. As of the date hereof, neither
Industries nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any convertible securities, rights or options, except as
otherwise set forth on Schedule 5.9.
5.10. ERISA. As of the date hereof, except as disclosed on
Schedule 5.10, (a) neither Industries nor any other member of the Controlled
Group maintains a Single Employer Plan, (b) no Single Employer Plan has any
Unfunded Liability, and (c) neither Industries nor any other member of the
Controlled Group maintains, or is or has at any time within the immediately
preceding six (6) years been obligated to contribute to, any Multiemployer Plan
or has incurred, or is reasonably expected to incur, any withdrawal liability
to any Multiemployer Plan. Each Plan complies with all applicable requirements
of law and regulations, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect. Neither Industries
nor any member of the Controlled Group has, with respect to any Plan, failed to
make any contribution or pay any amount required under Section 412 of the IRC
or Section 302 of ERISA or the terms of such Plan. There are no pending or, to
the knowledge of Industries or any Subsidiary, threatened claims, actions,
investigations or lawsuits against any Plan, any fiduciary thereof, or
Industries or any member of the Controlled Group with respect to a Plan, except
for such which could not reasonably be expected to have a Material Adverse
Effect. As of the date hereof, neither Industries nor any
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member of the Controlled Group has engaged in any prohibited transaction (as
defined in Section 4975 of the Code or Section 406 of ERISA) in connection with
any Plan which would subject any such Person to any liability which could
reasonably be expected to have a Material Adverse Effect. As of the date
hereof, except as disclosed on Schedule 5.10, within the last five years
neither Industries nor any member of the Controlled Group has engaged in a
transaction which resulted in a Single Employer Plan with an Unfunded Liability
being transferred out of the Controlled Group. Except as described in Section
5 of Schedule 5.10, as of the date hereof, no Termination Event has occurred or
is reasonably expected to occur with respect to any Plan and neither Industries
nor any other member of the Controlled Group could reasonably be expected to
incur any liability with respect to any of the events described therein.
Neither Industries nor any Subsidiary has any liability (contingent or
otherwise) with respect to any Foreign Plan that individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect. With
respect to any Foreign Plan, reasonable reserves have been established to the
extent necessary in accordance with prudent business practice.
5.11. Defaults. No Default or Unmatured Default has occurred and
is continuing.
5.12. Federal Reserve Regulations. Neither Industries nor any
Subsidiary is engaged, directly or indirectly, principally, or as one of its
important activities, in the business of extending, or arranging for the
extension of, credit for the purpose of purchasing or carrying Margin Stock.
No part of the proceeds of any Loan will be used in a manner which would
violate, or result in a violation of, Regulation G, Regulation U or Regulation
X. Neither the making of any Advance hereunder, the use of the proceeds
thereof, nor any other aspect of the financing of the Acquisition and the
Merger will violate or be inconsistent with the provisions of Regulation G,
Regulation U or Regulation X. Following the application of the proceeds of
each Advance, less than 25% of the value (as determined by any reasonable
method) of the assets of Industries and its Subsidiaries (on a consolidated and
an unconsolidated basis) which are subject to any limitation on sale, pledge,
or other restriction hereunder taken as a whole have been, and will continue to
be, represented by Margin Stock (other than the stock of Kysor prior to the
Merger).
5.13. Investment Company. Neither Industries nor any Subsidiary
is, or after giving effect to any Advance will be, an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
5.14. Certain Fees. Each Borrower hereby agrees to indemnify the
Agent and the Lenders against and agrees that it will hold each of them
harmless from any claim, demand or liability for broker's or finder's fees or
commissions alleged to have been incurred by Industries or any Subsidiary in
connection with any of the transactions (including, without limitation, the
Acquisition and the Merger) contemplated by this Agreement or the Transaction
Documents and any expenses (including, without limitation, reasonable
attorneys' fees and time charges of attorneys for the Agent or any Lender,
which attorneys may be employees of the Agent or any Lender) arising in
connection with any such claim, demand or liability.
5.15. Representations and Warranties Incorporated From Asset
Purchase Agreement and Acquisition Agreement. Each of the representations and
warranties given by Industries or any
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Subsidiary of Industries or of Kysor or any of its Subsidiaries in the Asset
Purchase Agreement and the Acquisition Agreement is true and correct in all
material aspects as of the date hereof.
5.16. Solvency. As of the date hereof, after giving effect to the
consummation of the transactions contemplated by the Loan Documents and the
Transaction Documents and the payment of all fees, costs and expenses payable
by Industries and its Subsidiaries with respect to the transactions
contemplated by the Loan Documents and the Transaction Documents, each of
Industries and each Subsidiary is Solvent.
5.17. Ownership of Properties. As of the date hereof, except as
set forth on Schedule 5.17(a) hereto, Industries and its Subsidiaries have a
subsisting leasehold interest in, or good and marketable title, free of all
Liens, other than those permitted by Section 6.16 or by any of the other Loan
Documents, to all of the properties and assets reflected in the Financial
Statements as being owned by it, except for assets sold, transferred or
otherwise disposed of in the ordinary course of business since the date
thereof. To the knowledge of Industries and each Subsidiary, there are no
actual, threatened or alleged defaults with respect to any leases of real
property under which Industries or any Subsidiary is lessee or lessor which
could reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule 5.17(b), Industries and its Subsidiaries own or possess
rights to use all material licenses, patents, patent applications, copyrights,
service marks, trademarks and trade names necessary to continue to conduct
their business as heretofore conducted, and no such license, patent or
trademark, the loss of the rights to or use of which could reasonably be
expected to have a Material Adverse Effect, has been declared invalid, been
limited by order of any court or by agreement or is the subject of any
infringement, interference or similar proceeding or challenge.
5.18. Indebtedness. Attached hereto as Schedule 5.18 is a
complete and correct list of all Indebtedness of Industries and its
Subsidiaries outstanding as of the date of this Agreement (other than
Indebtedness in a principal amount not exceeding $500,000 for a single item of
Indebtedness and $2,500,000 in the aggregate for all such Indebtedness listed
and other than the Obligations), showing the aggregate principal amount which
was outstanding on such date after giving effect to the making of the Loans.
5.19. Employee Controversies. There are no strikes, work
stoppages or controversies pending or, to the knowledge of Industries or any
Subsidiary, threatened between Industries or any Subsidiary and any of its
employees, other than employee grievances arising in the ordinary course of
business, which, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
5.20. Material Agreements. Neither Industries nor any Subsidiary
is a party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither Industries nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect.
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5.21. Acquisition and Asset Purchase Documents. Industries has
delivered to the Agent true, complete and correct copies of the Acquisition
Documents and the Asset Purchase Agreement (including all schedules, exhibits,
annexes, amendments, supplements and modifications thereto). The Acquisition
Documents and the Asset Purchase Agreement as originally executed and delivered
by the parties thereto, the material terms of which have not been amended,
supplemented or modified without the consent of the Required Lenders. As of the
date hereof, neither Industries nor any other party thereto is in default in
the performance of or compliance with any provisions thereof. The Acquisition
is being consummated in accordance with applicable laws and regulations
contemporaneously with the initial Advance. The Acquisition Documents are in
form and substance satisfactory for effecting the Merger pursuant to such
agreements under the laws of the State of Michigan.
5.22. Environmental Laws. Except as set forth on Schedule 5.22,
there are no claims, investigations, litigation, administrative proceedings,
notices, requests for information, pending or, to the knowledge of Industries
or any Subsidiary, threatened, or judgments or orders asserting violations of
applicable federal, state and local environmental, health and safety statutes,
regulations, ordinances, codes, rules, orders, decrees, directives and
standards ("Environmental Laws") or relating to any toxic or hazardous waste,
substance or chemical or any pollutant, contaminant, chemical or other
substance defined or regulated pursuant to any Environmental Law, including,
without limitation, asbestos, petroleum, crude oil or any fraction thereof
("Hazardous Materials") asserted against Industries or any of its Subsidiaries
that could reasonably be expected to have a Material Adverse Effect. Neither
Industries nor any Subsidiary has caused or permitted any Hazardous Materials
to be released, either on or under real property, currently or, to the
knowledge of Industries or any Subsidiary, formerly, legally or beneficially
owned or operated by Industries or any Subsidiary or on or under real property
to which Industries or any of its Subsidiaries transported, arranged for the
transport or disposal of, or disposed of Hazardous Materials that in any such
event could reasonably be expected to have a Material Adverse Effect. Except
as disclosed on Schedule 5.22, no real property currently or, to the knowledge
of Industries or any Subsidiary, formerly owned or operated by Industries or
any Subsidiary has ever been used as a dump or disposal site or as a treatment
or storage site for Hazardous Materials where such use could reasonably be
expected to have a Material Adverse Effect. Except as disclosed on Schedule
5.22, Industries and each of its Subsidiaries have obtained and are in
compliance with all permits, certificates, licenses, approvals and other
authorizations ("Environmental Permits") required for the operation of their
business and have filed all required notifications or reports relating to
chemical substances, air emissions, effluent discharges and the storage,
treatment, transport and disposal of Hazardous Materials except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect. No asbestos containing materials, polychlorinated biphenyls or
underground storage tanks are or have been located in, on or under real
property owned or operated by Industries or any of its Subsidiaries (to the
knowledge of Industries and each Subsidiary with respect to any period prior to
such Person's ownership of such real property) except those which could not
reasonably be expected to have a Material Adverse Effect. There are no Liens
arising under any Environmental Law which have attached to real property owned
or operated by Industries or any of its Subsidiaries and, to the knowledge of
Industries and each Subsidiary, there is no threat to so attach any such Liens
thereto. Industries and its Subsidiaries do not have liabilities in the
aggregate for all of them with respect to compliance with applicable
Environmental Laws and Environmental Permits or related to the generation,
treatment, storage, disposal, release, investigation or cleanup of Hazardous
Materials that
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could reasonably be expected to have a Material Adverse Effect, and no facts or
circumstances exist which could reasonably be expected to give rise to such
liabilities with respect to compliance with applicable Environmental Laws and
Environmental Permits and the generation, treatment, storage, disposal,
release, investigation or cleanup of Hazardous Materials. Neither the
compliance by any such Person with applicable Environmental Laws and
Environmental Permits nor the generation, treatment, storage, disposal,
release, investigation or cleanup of Hazardous Materials will affect the
operation and production of Industries and its Subsidiaries in a manner which
could reasonably be expected to have a Material Adverse Effect.
5.23. Insurance. As of the date hereof, Schedule 5.23 summarizes
in reasonable detail the property and casualty insurance in existence and
carried by Industries and its Subsidiaries, and such insurance is adequate to
protect Industries and its Subsidiaries. This summary also describes any
reserves relating to any self-insurance program that is in effect.
5.24. Disclosure. None of the (a) information, exhibits or
reports furnished or to be furnished by Industries or any Subsidiary (other
than any Person which became a Subsidiary upon the consummation of the Closing
Transactions) to the Agent or to any Lender in connection with the negotiation
of the Loan Documents, or (b) representations or warranties of Industries or
any such Subsidiary contained in this Agreement, the other Loan Documents, the
Transaction Documents or any other document, certificate or written statement
furnished to the Agent or the Lenders by or on behalf of Industries or any such
Subsidiary for use in connection with the transactions contemplated by this
Agreement or the Transaction Documents, as the case may be, contained, contains
or will contain (when taken as a whole) any untrue statement of a material fact
or omitted, omits or will omit to state a material fact necessary in order to
make the statements contained herein or therein not misleading at the time made
in light of the circumstances in which the same were made. The pro forma
financial information contained in such materials and furnished by Industries
or any such Subsidiary is based upon good faith estimates and assumptions
believed by Industries to be reasonable at the time made. There is no fact
known to Industries or any Subsidiary (except, for the purposes of
representations made as of the Closing Date, for any Person which became a
Subsidiary upon the consummation of the Closing Transactions), other than
matters of a general economic nature, that has had or could reasonably be
expected to have a Material Adverse Effect and that has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Lenders for use in connection with the transactions contemplated by this
Agreement.
5.25. Public Utility Holding Company Act. Neither Industries nor
any Subsidiary of Industries is a "holding company" or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
5.26. Representations in Other Loan Documents True and Correct.
Each of the representations and warranties of each Loan Party contained in the
other Loan Documents is true and correct in all material respects.
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ARTICLE VI
COVENANTS
During the term of this Agreement on and after the Closing Date and so
long as any Commitments or any Facility Letters of Credit are outstanding and
until all Obligations (other than those Obligations which are expressly stated
herein to survive termination of this Agreement which are not then due and
payable) have been paid in full, unless the Required Lenders shall otherwise
consent in writing:
6.1. Financial Reporting. Industries will maintain or cause to
be maintained, for itself and each Subsidiary, a system of accounting
established and administered in accordance with generally accepted United
States accounting principles, consistently applied, with appropriate records
and books of account in which complete entries are to be made reflecting its
and their financial transactions, and will furnish to the Lenders:
(a) As soon as practicable and in any event on or before
the 92nd day after the close of each of its Fiscal Years (or if such
ninety-second (92nd) day is not a Business Day, the next following Business
Day), the consolidated balance sheet of Industries and its Subsidiaries as at
the end of such Fiscal Year and the related consolidated statements of income
and consolidated statement of cash flow for such Fiscal Year, in each case
setting forth in comparative form the figures for the previous Fiscal Year,
together with an audit report certified by Arthur Andersen & Co. or other
independent certified public accountants of nationally recognized standing,
indicating that such audit was conducted in accordance with generally accepted
United States auditing standards and is without qualification with respect to
(i) the continuance of each of Industries as a going concern and (ii)
departures from generally accepted United States accounting principles other
than departures which (A) are immaterial, (B) will not cause the financial
statements to fail to meet the requirements of the Securities and Exchange
Commission for financial information to be contained or incorporated by
reference in registration statements and (C) do not cause the financial
statements to fail to accurately reflect the financial condition of Industries
and its Subsidiaries on a consolidated basis and without qualification as to
scope of examination resulting from the failure of Industries or any Subsidiary
to give access to books, records or other information and accompanied by a
certificate of such accounting firm stating that in the course of its audit of
the financial statements of Industries and its Subsidiaries, such accounting
firm has obtained no knowledge of any Default or Unmatured Default, or if, in
the opinion of such accounting firm any Default or Unmatured Default shall
exist, stating the nature and status thereof. Group shall use its reasonable
efforts to cause such accounting firm to deliver a letter, substantially in the
form of Exhibit E hereto, upon the delivery of each such audit report which
acknowledges that the Lenders are extending credit in primary reliance on such
financial statements and authorizes such reliance.
(b) As soon as practicable and in any event within
forty-seven (47) days after the close of the first three Fiscal Quarters of
each of its Fiscal Years, for itself and its Subsidiaries, consolidated
unaudited balance sheets as at the close of each such period and consolidated
(describing information through the line item indicating operating income)
income statements and a consolidated statement of cash flows for the period
from the beginning of such Fiscal Year to the end of such Fiscal Quarter, all
certified by an Authorized Officer.
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(c) At a meeting with the Lenders which shall occur
during the second Fiscal Quarter of each year commencing with Fiscal Year 1998,
an analysis of the financial performance of Industries and its Subsidiaries
during the previous Fiscal Year and a discussion of expected results of
operations of such entities for such Fiscal Year.
(d) Together with the financial statements required by
clauses (a) and (b) above, a compliance certificate in substantially the form
of Exhibit D hereto (a "Compliance Certificate") signed by an Authorized
Officer of Industries showing the calculations necessary to determine
compliance with this Agreement and stating that no Default or Unmatured Default
exists, or if any Default or Unmatured Default exists, stating the nature and
status thereof.
(e) As soon as possible and in any event within ten (10)
days after receipt by Industries or any of its Subsidiaries, a copy of (i) any
notice, claim, complaint or order to the effect that Industries or any of its
Subsidiaries is or may be liable to any Person as a result of the release by
Industries, any of its Subsidiaries or any other Person of any Hazardous
Materials into the environment or requiring that action be taken to respond to
or clean up a Release of Hazardous Materials into the environment, and (ii) any
notice, complaint or citation alleging any violation of any Environmental Law
or Environmental Permit by Industries or any of its Subsidiaries, which in any
case references an event described in clause (i) or (ii) above which could
reasonably be expected to have a Material Adverse Effect. Within ten days of
Industries or any Subsidiary having knowledge of the proposal, enactment or
promulgation of any Environmental Law which could reasonably be expected to
have a Material Adverse Effect, Industries shall provide the Agent with written
notice thereof.
(f) Promptly upon the furnishing thereof to the
shareholders of Industries, copies of all financial statements, reports and
proxy statements so furnished.
(g) Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly or other regular reports
which Industries or any of its Subsidiaries files with the Securities and
Exchange Commission.
(h) Promptly and in any event within ten (10) days after
learning thereof, notification of (i) any tax assessment, demand, notice of
proposed deficiency or notice of deficiency received by Industries or any other
Consolidated Person or (ii) the filing of any tax Lien or commencement of any
judicial proceeding by or against any such Consolidated Person, if any such
assessment, demand, notice, Lien or judicial proceeding relates to tax
liabilities in excess of ten percent (10%) of the net worth (determined
according to generally accepted accounting standards and without reduction for
any reserve for such liabilities) of Industries and its Subsidiaries taken as a
whole.
(i) Promptly after (i) the occurrence thereof, notice of
the institution of or any development in any action, suit or proceeding or any
governmental investigation or any arbitration, before any court or arbitrator
or any governmental or administrative body, agency or official, against
Industries, any of its Subsidiaries or any material property of any thereof
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, or (ii) actual
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knowledge thereof, notice of the threat of any such action, suit, proceeding,
investigation or arbitration.
(j) As soon as possible and in any event within 10 days
after Industries or any Subsidiary knows that any Termination Event has
occurred with respect to any Plan, a statement, signed by an Authorized Officer
of Industries, describing said Termination Event and the action which
Industries or such Subsidiary proposes to take with respect thereto.
(k) Such other information (including non-financial
information) as the Agent or any Lender may from time to time reasonably
request.
6.2. Use of Proceeds. Industries will, and will cause each
Subsidiary to, use the proceeds of the Revolving Loans and the Term Loans to
provide funds for the Acquisition and the Merger and the payment of related
fees and expenses and to refinance certain outstanding Indebtedness of
Industries and its Subsidiaries and Kysor and its Subsidiaries. Industries
will, and will cause each Subsidiary to, in addition to the uses set forth in
the immediately preceding sentence, use the proceeds of the Revolving Loans to
make Purchases permitted by Section 6.15, to meet the working capital needs of
Group and its Subsidiaries and for general corporate purposes. Industries will
not, nor will it permit any Subsidiary to, use any of the proceeds of the
Advances (a) to purchase or carry any Margin Stock in violation of Regulation U
or Regulation G or (b) in connection with a transaction that has not been
approved by the board of directors (or other governing body, if applicable) of
the Person which is the subject of such Purchase. Industries will not, nor
will it permit any Subsidiary to, own any Margin Stock (other than the stock of
Kysor prior to the Merger) to the extent the value of all Margin Stock of
Industries and its Subsidiaries would equal or exceed 25% of the value (as
determined by any reasonable method) of the assets of Industries and its
Subsidiaries (on a consolidated and an unconsolidated basis).
6.3. Notice of Default. Industries will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence
of any Default or Unmatured Default (and the action which Industries proposes
to take with respect thereto) and of any other development, financial or
otherwise (other than general economic conditions), which could reasonably be
expected to have a Material Adverse Effect.
6.4. Conduct of Business. Industries will, and will cause each
Subsidiary (a) to engage in substantially the same fields of enterprise as it
is presently conducted, (b) to do all things necessary to remain duly
organized, validly existing and in good standing in its jurisdiction of
incorporation and (c) to maintain all requisite authority to conduct its
business in each jurisdiction in which its business is conducted except with
respect to the foregoing clause (c) where the failure to maintain such
authority could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect; provided, that the existence of any
Subsidiary which is not a Borrower with outstanding Loans hereunder may be
terminated if such termination (a) is in the best interest of Industries and
its Subsidiaries, as determined in the good faith judgment of Industries, and
(b) could not reasonably be expected to have a Material Adverse Effect.
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6.5. Taxes. Except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect, Industries will, and
will cause each Subsidiary to, timely file complete and correct United States
federal and applicable foreign, state and local tax returns required by
applicable law and pay when due all taxes, assessments and governmental charges
and levies upon it or its income, profits or Property, except those which are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside.
6.6. Insurance. Industries will, and will cause each Subsidiary
to, maintain with financially sound and reputable insurance companies insurance
on all their Property in such amounts and covering such risks as is consistent
with sound business practice, and Industries will furnish to the Agent and any
Lender upon request full information as to the insurance carried.
6.7. Compliance with Laws. Industries will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, the
failure to comply with which could reasonably be expected to have a Material
Adverse Effect.
6.8. Maintenance of Properties. Industries will, and will cause
each Subsidiary to, do all things necessary to maintain, preserve, protect and
keep its Property in good repair, working order and condition in accordance
with its customary practices.
6.9. Inspection. Industries will, and will cause each Subsidiary
to, permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the Property, corporate books and financial records
of Industries and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of Industries and each Subsidiary, and to
discuss the affairs, finances and accounts of Industries and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Lenders may designate with reasonable
notice.
6.10. Capital Stock and Dividends. If a Default or an Unmatured
Default has occurred and is continuing or would occur after giving effect
thereto, Industries will not, nor will it permit any Subsidiary to, (a) declare
or pay any dividends on its capital stock or make any other distribution on
account of its capital stock other than (i) dividends payable in its own
capital stock, (ii) dividends payable by any Foreign Subsidiary or any Domestic
Subsidiary to Group or to any Wholly-Owned Subsidiary of Group which is a
Domestic Subsidiary, and (iii) dividends payable by any Foreign Subsidiary to
any Wholly-Owned Subsidiary which is a Foreign Subsidiary or (b) redeem,
repurchase or otherwise acquire or retire any of its capital stock (or any
warrants, rights or options to acquire such capital stock) at any time
outstanding; provided, that in no event (regardless of whether a Default or
Unmatured Default has occurred or is continuing) shall (x) Group pay dividends
to Industries in excess of such amount as may be required by Industries to pay
(A) dividends to its stockholders which have been declared prior to the
occurrence of any such Default or Unmatured Default in accordance with all
applicable laws and (B) reasonable expenses in accordance with past practices,
except that Group may pay Industries any dividend required to consummate the
Closing Transactions or (y) Industries or any Domestic Subsidiary pay dividends
to any Foreign Subsidiary; provided, further, that notwithstanding clause (a)
above, (1) Industries may pay any dividend to its stockholders which has been
declared prior to the occurrence of any
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such Default or Unmatured Default in accordance with all applicable laws and
with clause (a) above and (2) each Subsidiary may pay any dividend which is
necessary to allow the payment of dividends under clause (1).
6.11. Indebtedness. Industries will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(a) the Loans and the Obligations owing with respect to
Facility Letters of Credit;
(b) Indebtedness (including commitments therefor)
existing on the date hereof and described in Schedule 6.11 hereto;
(c) Rate Hedging Obligations related to the Loans and
required pursuant to Section 6.29;
(d) Rate Hedging Obligations pursuant to Hedging
Agreements permitted pursuant to Section 6.30;
(e) extensions, renewals, refundings and refinancings of
the Indebtedness described in clause (b) above, so long as the aggregate
principal amount of such Indebtedness after giving effect thereto does not
exceed the aggregate principal amount outstanding as of the date hereof;
(f) Indebtedness of (i) Industries to any Subsidiary
provided that any such Indebtedness is subordinated to the Obligations on
subordination terms satisfactory to the Agent, (ii) any Subsidiary to any other
Subsidiary and (iii) any Subsidiary to Industries; provided, that, in each
case, (A) such Indebtedness is permitted as an Investment pursuant to Section
6.15(c) and (B) to the extent any such Indebtedness is Indebtedness of a
Foreign Subsidiary which is not a Foreign Guarantor and such Foreign Subsidiary
is required to deliver an Intercompany Note to Group pursuant to Section 6.28,
all such Indebtedness incurred by such Foreign Subsidiary pursuant to clause
(f)(ii) above shall be incurred and owing by such Foreign Subsidiary in favor
of and to Group and all such Indebtedness shall be evidenced by an Intercompany
Note;
(g) additional Indebtedness of Industries and its
Subsidiaries (i) which is not described in clause (d) above and (ii) with an
aggregate principal amount at any time outstanding not to exceed the lesser of
(A) forty percent (40%) of the Consolidated Net Worth (as of the last day of
the Fiscal Quarter immediately preceding any date of determination) of
Industries and its Subsidiaries and (B) $100,000,000; and
(h) Indebtedness incurred pursuant to the Bridge
Documents in a maximum principal amount not in excess of $85,000,000.
6.12. Merger. Industries will not, nor will it permit any
Subsidiary to, merge or consolidate with or into or sell, assign, lease,
transfer or otherwise dispose of all or substantially all of its assets to any
other Person other than the dissolution of a Subsidiary in accordance with
Section 6.4 and other than in connection with the Merger and the Asset
Purchase; provided, that Industries
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or any Subsidiary may enter into any merger or consolidation with or sell all
or substantially all of its assets to, a corporation organized under the laws
of any state of the United States or, with respect to any Foreign Subsidiary, a
comparable entity organized elsewhere, so long as (a) any entity with or into
which any such Person which is a Loan Party is being merged or consolidated or
to which all or substantially all of its assets are being sold assumes the
Obligations of such Loan Party under the Loan Documents by written instrument
reasonably acceptable in form and substance to the Required Lenders (and with
respect to any Borrower, all of the Lenders), (b) no Default or Unmatured
Default has occurred and is continuing or would occur after giving effect
thereto, including without limitation any Default or Unmatured Default under
Section 7.11, (c) Group has provided the Lenders with pro forma financial
statements giving effect thereto which evidence compliance with Section 6.25
hereof for the remaining term of this Agreement, (d) the entity with or into
which Industries or such Subsidiary is being merged or consolidated or to which
all or substantially all of the assets of Industries or such Subsidiary are
being sold is in substantially the same or a similar type of business as
Industries or such Subsidiary and (e) such transaction is not the type of
transaction described in Section 6.2(b); provided, that the requirements set
forth in clauses (c) and (d) above need not be satisfied in respect of any such
consolidation or merger with or sale, assignment, lease or other disposition to
Industries or any Subsidiary.
6.13. Sale of Assets. Industries will not, nor will it permit any
Subsidiary to, make an Asset Disposition of any Property, except for (a) an
Asset Disposition by Industries or Group which is permitted under Section 6.12,
(b) sales of Margin Stock to the extent that the value of such Margin Stock of
Industries and its Subsidiaries when taken together with all other Margin Stock
of Industries and its Subsidiaries exceeds 25% of the value (determined by any
reasonable method) of the total assets of Industries and its Subsidiaries
subject to this Section 6.13 and (c) Asset Dispositions of Property that,
together with all other Property previously subject to an Asset Disposition
made in accordance with this Section 6.13 since the date hereof, does not
constitute a Substantial Cumulative Portion of the Property of Industries and
its Subsidiaries taken as a whole (determined as of the date of any proposed
disposition), in each case so long as no Default or Unmatured Default has
occurred and is continuing or would occur after giving effect thereto;
provided, that in no event may (x) Industries or any Domestic Subsidiary make
any Asset Disposition to any Foreign Subsidiary which is not a Foreign
Guarantor for consideration less than the fair market value of the Property
subject to such Asset Disposition, or (y) any Foreign Subsidiary which is not a
Foreign Guarantor make any Asset Disposition to Industries or any Domestic
Subsidiary for consideration that is greater than the fair market value of such
Property subject to such Asset Disposition or (z) Industries or any Subsidiary
sell or otherwise dispose of any Accounts, notes receivable or accounts
receivable, with or without recourse, except sales or other dispositions of
such Property to Affiliates made in accordance with Section 6.19; provided
further that for the purposes of the foregoing clauses (x) and (y): (1) the
fair market value of each sale, lease or other disposition of manufactured
products shall be equal to the sum of (A) the variable costs of manufacturing
such product (determined in each case in accordance with the methods used as of
the date hereof by Industries and its Domestic Subsidiaries to determine such
variable costs) plus (B) ten percent (10%) of such variable costs; and (2) any
royalty charged by Industries or any Domestic Subsidiary to a Foreign
Subsidiary for the use of any trademark, trade name or service mark shall be
deemed to have been charged at fair market value.
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6.14. Sale and Leaseback. Industries will not, nor will it permit
any Subsidiary to, sell or transfer any of its Property with a fair market
value in excess of $2,000,000 in the aggregate after the date hereof in order
to concurrently or subsequently lease as lessee such or similar Property.
6.15. Investments and Purchases. Industries will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments (including,
without limitation, loans and advances to Industries or any Subsidiary, and
other Investments in Subsidiaries), or commitments therefor, or to create any
Subsidiary or to become or remain a partner in any partnership or joint
venture, or to make any Purchases of any Person or, with respect to Industries
or any Domestic Subsidiary, make any purchase or other acquisition in any one
transaction or series of related transactions of any Foreign Assets that
individually or in the aggregate would be material to the business, operations,
Property or financial condition of Industries or any of its Subsidiaries
("Material Foreign Assets"), except:
(a) (i) Investments in existence on the date hereof in
Subsidiaries and (ii) other Investments in existence on the date hereof and
described in Schedule 6.15 hereto;
(b) Purchases by Industries or any Subsidiary, so long as
(i) no Default or Unmatured Default has occurred and is continuing or would
occur after giving effect thereto, (ii) Group has provided the Lenders with pro
forma financial statements giving effect thereto which evidence compliance with
Section 6.25 for the remaining term of this Agreement, (iii) the entity being
acquired is in substantially the same or a similar type of business as
Industries and its Subsidiaries and (iv) such transaction is not the type of
transaction described in Section 6.2(b);
(c) Additional Investments by Industries or any of its
Subsidiaries in Industries or any Wholly-Owned Subsidiary of Industries and the
creation of new Subsidiaries by Industries or any Subsidiary; provided that
Industries shall and shall cause its Subsidiaries (including any newly formed
Subsidiary) to comply with the other provisions of this Agreement in connection
with any such Investment including without limitation the provisions of Section
6.28;
(d) Investments in commercial paper maturing in 270 days
or less from the date of issuance which, at the time of acquisition, is rated
at least A-1 by Standard & Poor's Ratings Group ("S&P") or at least P-1 by
Moody's Investors Service, Inc. ("Moody's"), or the equivalent thereof;
(e) Investments in direct obligations of the United
States of America or, with respect to the Foreign Subsidiaries, of the central
government of the applicable jurisdiction, or any agency thereof, maturing in
twelve months or less from the date of acquisition thereof and which are backed
by the full faith and credit of the United States of America or such other
applicable jurisdiction, as aforesaid, provided that such direct obligations of
any central government other than the United States of America or of any agency
of any central government other than the United States of America have implied
ratings of at least A-1 by S&P or P-1 by Moody's, or the equivalent thereof, at
the time of the acquisition of such obligations by Industries or any
Subsidiary;
(f) Investments in certificates of deposit maturing
within one year from the date of origin, bankers' acceptances, repurchase
agreements or other similar instruments issued by (i) any
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Lender or (ii) any other bank or trust company organized under the laws of the
United States or any state thereof with capital, surplus and undivided profits
aggregating at least $100,000,000 and whose commercial paper (or that of its
parent corporation) is rated at least A-1 by S&P or at least P-1 by Moody's, or
the equivalent thereof at the time of such Investment;
(g) Investments in certificates of deposit maturing
within one year from the date of origin, issued by a bank or trust company
organized under the laws of any jurisdiction other than that of the United
States of America or any state thereof and whose short-term debt rating at the
time of such Investment is rated at least A-1 by S&P or at least P-1 by Moody's
or the equivalent thereof by another comparable rating service;
(h) Temporary advances to officers and employees of
Industries or any Subsidiary for travel and other business expenses in the
ordinary course of business;
(i) Loans to officers and employees of Industries or any
Subsidiary, including but not limited to loans for relocation expenses, in an
aggregate amount (including unpaid principal and accrued interest) not to
exceed $2,000,000 at any one time outstanding;
(j) Investments in the ordinary course of business made
in order to hedge the exposure of Industries or any Subsidiary to fluctuations
in foreign currencies in which Industries or any Subsidiary has currency
exposure in the ordinary course of business;
(k) Investments in demand deposit accounts maintained in
the ordinary course of business;
(l) Investments in any fund or other pooling arrangement
which holds at least ninety percent (90%) of its assets in the investments
itemized in (d) through (g) above;
(m) purchases or other acquisitions by Industries or any
Domestic Subsidiary of Material Foreign Assets; and
(n) Investments not otherwise permitted by subsections
(a) through (m) of this Section 6.15 in an aggregate outstanding amount not to
exceed at any one time ten percent (10%) of the Consolidated Net Worth,
determined as of the last day of the Fiscal Quarter immediately preceding any
date of determination;
provided, however, in any such case, (x) no such Investment, Purchase or
purchase or other acquisition may be made if (after giving effect to any such
Investment, Purchase or purchase or other acquisition) the sum of the aggregate
amount of (i) Investments in Foreign Subsidiaries, (ii) Investments in other
Foreign Persons, (iii) Purchases of assets not located in the United States,
(iv) Purchases of securities or other equity interests of a Foreign Person and
(v) purchases or other acquisitions by Industries or any Domestic Subsidiary of
Material Foreign Assets, made by Industries or any of its Subsidiaries from and
after the Closing Date would in the aggregate exceed twenty-five percent (25%)
of the total assets of Industries and its Subsidiaries on a consolidated basis,
determined in accordance with Agreement Accounting Principles as of the date of
such proposed Investment, Purchase or other purchase or acquisition, as the
case may be, and (y) no
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Subsidiary shall make any payment to Industries which constitutes an Investment
unless such payment is required (i) to pay any dividend permitted under clause
(1) of the second proviso of Section 6.10 or (ii) to effect any transaction
otherwise expressly permitted hereunder.
6.16. Liens. Industries will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the
Property of Industries or any of its Subsidiaries (including without limitation
the stock of any Subsidiary), except:
(a) Liens for taxes, assessments or governmental charges
or levies on its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith
and by appropriate proceedings and for which adequate reserves in accordance
with generally accepted principles of accounting shall have been set aside on
its books;
(b) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than
ninety (90) days past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on its books;
(c) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(d) Utility easements, building restrictions and such
other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character and which
do not in any material way affect the marketability of the same or interfere
with the use thereof in the business of Industries or any of its Subsidiaries;
(e) Liens existing on the date hereof and described in
Schedule 6.16 hereto and Liens arising out of any transaction contemplated by
Section 6.11(e) as long as no additional Property becomes subject to any such
replacement Lien;
(f) Liens arising under the Pledge Agreement;
(g) Liens arising under any Reimbursement Agreement;
(h) additional Liens securing Indebtedness permitted
under Section 6.11(g) but only to the extent that such Liens secure such
Indebtedness in a maximum principal amount not in excess of twenty-five percent
(25%) of the aggregate amount of Indebtedness permitted to be outstanding
pursuant to Section 6.11(g);
(i) Liens on Property of Industries and its Subsidiaries
securing Indebtedness permitted under Section 6.11(h), provided that all
Obligations are secured by a Lien on such Property that is equal and ratable
with such other Lien; and
(j) Liens on Margin Stock, if and to the extent that the
value of such Margin Stock of Industries and its Subsidiaries when taken
together with all other Margin Stock of Industries
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and its Subsidiaries exceeds 25% of the value (determined by any reasonable
method) of the total assets of Industries and its Subsidiaries subject to this
Section 6.16.
6.17. Kysor Merger. Industries and its Subsidiaries will use
their best efforts to cause the Merger to be consummated in accordance with the
Acquisition Agreement at the earliest practicable time.
6.18. Lease Rentals. Industries will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist obligations for Rentals in
excess of $10,000,000 during any one Fiscal Year on a non-cumulative basis in
the aggregate for Industries and its Subsidiaries.
6.19. Affiliates. Industries will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of Industries' or such Subsidiary's
business and upon fair and reasonable terms no less favorable to Industries or
such Subsidiary than Industries or such Subsidiary would obtain in a comparable
arms' length transaction; provided, that the foregoing provisions of this
Section 6.19 shall not prohibit (i) the declaration or payment of any lawful
dividend or other payment ratably in respect of all of its capital stock of the
relevant class, (ii) Industries or any Domestic Subsidiary from selling,
leasing or otherwise transferring Property or rendering services to a Foreign
Guarantor for other than fair market value, (iii) any Foreign Guarantor from
selling, leasing or otherwise transferring Property or rendering services to
Industries or any Domestic Subsidiary for other than fair market value or (iv)
any Wholly-Owned Subsidiary which is a Domestic Subsidiary of Industries from
entering into any such transaction with or making any such payment or transfer
to any other Wholly-Owned Subsidiary which is a Domestic Subsidiary of
Industries; provided, further, that for purposes of the foregoing clauses (ii)
and (iii): (a) the fair market value of each sale, lease or other disposition
of manufactured products shall be equal to the sum of (1) the variable costs of
manufacturing such product (determined in each case in accordance with the
methods used as of the date hereof by Industries and its Domestic Subsidiaries
to determine such variable costs) plus (2) ten percent (10%) of such variable
costs; (b) any royalty charged by Industries or any Domestic Subsidiary to a
Foreign Subsidiary for the use of any trademark, trade name or service mark
shall be deemed to have been charged at fair market value; and (c) any routine
management services rendered in the ordinary course of business by Industries
or any Domestic Subsidiary to any Foreign Subsidiary shall be deemed to have
been rendered at fair market value.
6.20. Amendments to Agreements. Industries will not, and will not
permit any Subsidiary to, amend, waive or modify or terminate any material
provision of any Asset Purchase Document or Acquisition Document.
6.21. Environmental Matters. Industries shall and shall cause
each of its Subsidiaries to (a) at all times comply in all material respects
with all applicable Environmental Laws and (b) promptly take any and all
remedial actions required under applicable Environmental Laws in response to
the presence, storage, use, disposal, transportation or Release of any
Hazardous Materials on, under or about any real property owned, leased or
operated by Industries or any of its Subsidiaries, except in any case where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect. In the event that Industries or any Subsidiary undertakes any remedial
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action with respect to any Hazardous Material on, under or about any real
property, Industries or such Subsidiary shall conduct and complete such
remedial action in material compliance with all applicable Environmental Laws
and in accordance with the applicable policies, orders and directives of all
foreign federal, state and local governmental authorities, except where the
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. If the Agent or any Lender at any
time has a reasonable basis to believe that there may be a material violation
of any Environmental Law by Industries or any of its Subsidiaries, or any
material liability arising thereunder or related to a Release of Hazardous
Materials on any real property owned, leased or operated by Industries or any
of its Subsidiaries or a Release on real property adjacent to such real
property, then Industries shall, upon the reasonable request of the Agent,
provide the Agent with all such reports, certificates, engineering studies and
other written material or data as the Agent or any Lender may reasonably
request.
6.22. [Intentionally Omitted].
6.23. Change in Corporate Structure; Fiscal Year. Industries
shall not, nor shall it permit any Subsidiary to, (a) permit any amendment or
modification to be made to its charter or certificate or articles of
incorporation or by-laws which could reasonably be expected to have a Material
Adverse Effect (provided that Group shall notify the Agent of any other
amendment or modification thereto which could reasonably be expected to have an
adverse effect on any Loan Party's ability to perform any of its obligations
under any Loan Document as soon as practicable thereafter) or (b) have a fiscal
year which ends on any date other than the Sunday nearest to December 31 of
each year; provided, that (x) any Person acquired by Industries or any
Subsidiary may maintain the fiscal year which it employed prior to such
Purchase (a) during such period as may be reasonably necessary to complete the
conversion of such fiscal year to a fiscal year ending on the Sunday nearest to
December 31 and (b) so long as the maintenance of such fiscal year would not
materially affect the information included in any of the financial statements
required to be delivered by Industries pursuant hereto and (y) any Person which
becomes a Subsidiary as a result of the Closing Transactions and which has a
fiscal year-end other then that described in clause (b) above may maintain such
fiscal year-end.
6.24. Restrictive Agreements. Industries shall not, nor shall it
permit any Subsidiary to, enter into, assume or suffer to exist, any agreement
with any Person, other than the Loan Documents and the Bridge Documents, which
prohibits or limits the ability of Industries or any Subsidiary to (a) enter
into amendments, modifications or waivers of the Loan Documents or the Bridge
Documents, (b) pay dividends or make other distributions or pay any
Indebtedness owed to Industries or any Subsidiary, (c) make any Investment in
Industries or any Subsidiary, (d) transfer any of its properties or assets to
Industries or any Subsidiary or (e) create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired as security for the obligations of Industries under the Loan
Documents and the Bridge Loan Documents; provided that the foregoing shall not
apply to (i) restrictions in effect on the date of this Agreement contained in
agreements governing Indebtedness outstanding on the date of this Agreement (or
in the case of Indebtedness of a Person which hereafter becomes a Subsidiary,
outstanding on the date such Person becomes a Subsidiary and not created in
contemplation of that event) and, if such Indebtedness is renewed, extended or
refinanced, restrictions in the agreements governing the renewed, extended or
refinancing Indebtedness (as successive renewals, extensions
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and refinancings thereof) if such restrictions are no more restrictive in any
material respect than those contained in the agreements governing the
Indebtedness being renewed, extended or refinanced, (ii) restrictions contained
in agreements governing Indebtedness incurred pursuant to Section 6.11(c), (d),
(g) and (h) provided that such restrictions are no more restrictive in any
material respect than those contained in the Loan Documents or the Bridge Loan
Documents, (iii) customary non-assignment provisions in leases, licenses and
other contracts and (iv) restrictions in agreements establishing consensual
Liens permitted under Section 6.16 with respect to the assets subject to such
Liens.
6.25. Financial Covenants. Subject to normal year-end and closing
audit adjustments for calculations or determinations made in accordance with
Agreement Accounting Principles prior to the end of its fiscal year, Industries
on a consolidated basis with its Subsidiaries shall:
6.25.1. Minimum Consolidated Net Worth. At all times
measured as of the end of each Fiscal Quarter commencing with the
first Fiscal Quarter ending after the Closing Date, maintain a
Consolidated Net Worth equal to or greater than (a) $120,000,000 plus
(b) sixty percent (60%) of the cumulative Net Income of Industries and
its Subsidiaries for the period beginning on December 30, 1996 and
ending on the last day of the Fiscal Quarter immediately preceding the
date of measurement, plus (c) sixty percent (60%) of the net cash
proceeds received after the date hereof by Industries or any
Subsidiary from the issuance of any equity security to any Person
other than Industries or any Subsidiary.
6.25.2. Fixed Charge Coverage Ratio. At all times after
the date hereof, measured as of the end of each Fiscal Quarter
(commencing June 29, 1997) for the period of four Fiscal Quarters then
ended, maintain a Fixed Charge Coverage Ratio for the period of four
Fiscal Quarters ending as of such date of (a) for all Fiscal Quarters
ending in 1997, not less 1.0 to 1 and (b) for all Fiscal Quarters
ending after December 31, 1997, not less than 1.05 to 1; provided,
however, for the first three of such calculations made after the date
of this Agreement, such calculations shall be done based upon the
period commencing on the first day of the second Fiscal Quarter of
1997 and ending with the quarterly period then ended; provided,
further that in no event shall any calculation of Fixed Charges
include the prepayment of the Senior Notes on or about the Closing
Date.
6.25.3 Leverage Ratio. At all times after the date hereof,
measured as of the end of each Fiscal Quarter (commencing June 29,
1997) for the period of four Fiscal Quarters then ended, maintain a
Leverage Ratio of not more than the following during each of the
following periods; provided, however (i) for the period ending on the
last day of the second Fiscal Quarter of 1997, EBITDA will be the
product of (A) actual EBITDA for the second Fiscal Quarter, multiplied
by (B) 4, (ii) for the period ending on the last day of the third
Fiscal Quarter of 1997, EBITDA will be the product of (A) actual
EBITDA for the period from the first day of the second Fiscal Quarter
of 1997 to the last day of the third Fiscal Quarter of 1997,
multiplied by (B) 2, and (iii) for the period ending on the last day
of the fourth Fiscal Quarter of 1997, EBITDA will be the product of
(A) actual EBITDA for the period from the first day of the second
Fiscal Quarter of 1997 to the last day of the fourth Fiscal Quarter of
1997 multiplied by (B) 4/3:
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<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Second, Third and Fourth Fiscal Quarters 4.25:1.0
of 1997
First, Second, Third and Fourth Fiscal 4.00:1.0
Quarters of 1998
First, Second, Third and Fourth Fiscal 3.75:1.0
Quarters of 1999
First, Second and Third Fiscal Quarters of 3.50:1.0
2000
Fourth Fiscal Quarter of 2000 and first 3.25:1.0
three Fiscal Quarters of 2001
Fourth Fiscal Quarter of 2001 and each 3.00:1.0
Fiscal Quarter thereafter
</TABLE>
6.26. Tax Consolidation. Industries will not and will not permit
any of its Subsidiaries to (a) file or consent to the filing of any
consolidated, combined or unitary income tax return with any Person other than
Industries and its Subsidiaries or (b) except for the Tax Sharing Agreement
dated as of March 15, 1989 with Household International, Inc., enter into a tax
sharing agreement or similar arrangement with any Person that is not a
Subsidiary, except in any case as required by applicable law.
6.27. ERISA Compliance.
With respect to any Plan, neither Industries nor any
Subsidiary shall:
(a) engage in any "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) for which a
civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section
4975 of the Code in excess of $1,000,000 is or could reasonably be expected to
be imposed;
(b) incur any "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA) in excess of $1,000,000, whether or
not waived, or permit any Unfunded Liability with respect to any Single
Employer Plan, to exceed the greater of $1,000,000 or 10% of the present value
of all vested and unvested accrued benefits under such Single Employer Plan at
any time or $5,000,000 in the aggregate for all Single Employer Plans;
(c) permit the occurrence of any Termination Event which
results in or could reasonably be expected to result in a liability to the
Borrower or any other member of the Controlled Group in excess of $1,000,000;
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(d) fail to make any contribution or payment to any
Multiemployer Plan which Industries or any other member of the Controlled Group
may be required to make under any agreement relating to such Multiemployer Plan
or any law pertaining thereto which results in or could reasonably be expected
to result in a liability in excess of $1,000,000;
(e) permit the establishment or amendment of any Plan or
fail to comply with the applicable provisions of ERISA and the Code with
respect to any Plan which could result in liability to Industries or any other
member of the Controlled Group which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect; or
(f) incur or permit to exist any liability with respect
to Foreign Plans which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
6.28. Guaranties. Industries shall cause each of its Subsidiaries
in existence as of the Closing Date and each Subsidiary newly acquired or
formed by Industries or any Subsidiary of Industries after the Closing Date to
(a) with respect to any such existing, newly formed or acquired Subsidiary
which is a Domestic Subsidiary, duly execute and deliver a Guaranty
substantially in the form of Exhibit A-1 hereto and (b) with respect to any
such existing, newly formed or acquired Subsidiary which is a Foreign
Subsidiary, duly execute and deliver a Guaranty substantially in the form of
Exhibit A-2 hereto or, if Industries and its Subsidiaries determine in their
reasonable judgment that either (i) Industries and its Subsidiaries on a
consolidated basis would suffer material adverse tax consequences as a direct
result of such Foreign Subsidiary entering into such Guaranty or (ii) that
execution and delivery of such Guaranty by such Foreign Subsidiary would be
illegal under the laws of the jurisdiction of organization of such Foreign
Subsidiary, then such Foreign Subsidiary shall execute an Intercompany Note in
favor of Group to be pledged pursuant to the Pledge Agreement, except that (A)
with the prior written consent of the Required Lenders, such consent not to
unreasonably be withheld, any Subsidiary created in connection with a joint
venture between Industries or any Subsidiary and an unaffiliated third party
shall not be required by this Section 6.28 to execute a Guaranty or revolving
note, (B) any Subsidiary with assets less than or equal to $15,000,000 (a
"Non-Guarantor Subsidiary") shall not be required by this Section 6.28 to
execute a Guaranty or an Intercompany Note; provided, that, if at any time, the
sum of the assets of all Non-Guarantor Subsidiaries shall exceed, in the
aggregate, $55,000,000, Industries shall cause all such Subsidiaries which are
Non-Guarantor Subsidiaries promptly after the time at which such excess arises
or is created to execute a Guaranty or Intercompany Note in accordance with the
requirements of this Section 6.28 and (C) neither Beleggingsmaatschappij
Interrub B.V., a Subsidiary organized under the laws of the Netherlands
("PFIC") nor WAL shall be required by this Section 6.28 to execute a Guaranty
or an Intercompany Note so long as PFIC and WAL, respectively, do not engage in
any activity other than those incidental to its acting as a holding company, do
not incur, assume or become liable with respect to any Indebtedness and do not
own or hold any assets other than stock of other Subsidiaries (and immaterial
assets incidental to such purpose) and so long as no Investment is made in PFIC
or WAL and no assets are transferred to PFIC or WAL, in any case by Industries
or any of its Subsidiaries after the date hereof; provided, further, that if
any Guarantor shall cease to be a Subsidiary as a result of any transaction
permitted hereby, then so long as no Default shall have occurred and be
continuing, such Guarantor shall be released from its Obligations under the
applicable Guaranty promptly following the request of Group and any notes of
such Guarantor pledged for the benefit of the Lenders shall be concurrently
released.
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6.29. Required Hedging Agreements. Within ninety (90) days after
the Closing Date, Industries will enter into, and will thereafter maintain, one
or more Hedging Agreements, with one or more Lenders on terms acceptable to the
Agent in its reasonable discretion, by which Industries and its Subsidiaries
are protected against increases in interest rates from and after the date of
such contracts on a notional amount of at least $150,000,000, for a period of
at least three (3) years.
6.30. Financial Contracts. Industries will not, nor will it permit
any Subsidiary to, enter into or remain liable upon any Financial Contract,
except Hedging Agreements required under Section 6.29 and other Hedging
Agreements pursuant to which Industries and its Subsidiaries have hedged their
reasonably estimated interest rate, exchange rate or commodity price exposure.
6.31. UK Filing. Industries shall or shall cause its Subsidiaries
to present the Credit Agreement for registration pursuant to Section 395 of the
Companies Act of 1985 in England not later than 21 days after the Closing Date
on a "fail safe" basis in accordance with normal practices in England.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on
behalf of Industries or any of its Subsidiaries to the Lenders or the Agent
under or in connection with this Agreement, any Loan, any Note, or any
certificate or other document delivered in connection with this Agreement or
any other Loan Document shall be false in any material respect on the date as
of which made.
7.2. Nonpayment of (a) principal of any Note when due, or (b)
interest upon any Note or any commitment fee or other fee or obligations under
any of the Loan Documents within five days after the same becomes due.
7.3. The breach by any Borrower of any of the terms or provisions
of Section 6.2 or Sections 6.10 through 6.31.
7.4. The breach by any Borrower (other than a breach which
constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or
provisions of this Agreement which is not remedied within five days after
written notice from the Agent or any Lender.
7.5. The default by Industries or any of its Subsidiaries in the
performance of any term, provision or condition contained in any agreement or
agreements under which any Indebtedness aggregating in excess of $10,000,000
was created or is governed, or the occurrence of any other event or existence
of any other condition, the effect of any of which is to cause, or to permit
the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity (other than a default under an
obligation or condition owed to or for the benefit of any Lender or Affiliate
thereof restricting the sale, pledge or other disposition by Industries or any
of its
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Subsidiaries of Margin Stock); or any such Indebtedness of Industries or any of
its Subsidiaries shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled payment and other than as a result
of a default under an obligation or condition owed to or for the benefit of any
Lender or Affiliate thereof restricting the sale, pledge or other disposition
by Industries or any of its Subsidiaries of Margin Stock) prior to the stated
maturity thereof; or Industries or any of its Subsidiaries shall become unable,
not pay, or admit in writing its inability to pay, its debts generally as they
become due.
7.6. Industries or any of its Subsidiaries shall (a) have an order
for relief entered with respect to it under the Federal bankruptcy laws as now
or hereafter in effect, (b) make an assignment for the benefit of creditors,
(c) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it
or any Substantial Portion of its Property, (d) institute any proceeding
seeking an order for relief under the Federal bankruptcy laws as now or
hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file
an answer or other pleading denying the material allegations of any such
proceeding filed against it, (e) take any corporate action to authorize or
effect any of the foregoing actions set forth in this Section 7.6, or (f) fail
to contest in good faith any appointment or proceeding described in Section
7.7.
7.7. Without the application, approval or consent of Industries or
any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for Industries or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(d) shall be instituted against Industries or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of thirty consecutive days.
7.8. Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of Industries and its
Subsidiaries without paying fair consideration therefor which, when taken
together with all other Property of Industries and its Subsidiaries so
condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such Condemnation
occurs, constitutes a Substantial Portion.
7.9. Industries or any of its Subsidiaries shall fail within thirty
days to pay, bond or otherwise discharge any judgment or order for the payment
of money in excess of $500,000 (or multiple judgments or orders for the payment
of an aggregate amount in excess of $2,000,000), which is not stayed on appeal
or otherwise being appropriately contested in good faith.
7.10. Industries or any of its Subsidiaries shall be the subject of
any proceeding or investigation pertaining to the discovery of any Hazardous
Materials on the leased or owned property of Industries or any of its
Subsidiaries, the release by Industries or any of its Subsidiaries or any other
Person of any Hazardous Materials into the environment, or any violation of any
Environmental Law or Environmental Permit, which, in either case, has had a
Material Adverse Effect.
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7.11. Any Change in Control shall occur.
7.12. The occurrence of any "default", as defined in any Loan
Document (other than this Agreement or the Notes) or the breach of any material
term or provision of any Loan Document (other than this Agreement or the
Notes), which default or breach continues beyond any period of grace therein
provided.
7.13. Any Guaranty or the Pledge Agreement shall fail to remain in
full force or effect or any action shall be taken to discontinue or to assert
the invalidity or unenforceability of any Guaranty or the Pledge Agreement, or
any Guarantor shall fail to comply with any of the terms or provisions of any
Guaranty to which it is a party, or Group shall fail to comply with any of the
terms or provisions of the Pledge Agreement or any Guarantor denies that it has
any further liability under the Guaranty to which it is a party, or gives
notice to such effect.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to any Borrower, Industries or any other Guarantor, the
obligations of the Lenders to make Loans or to issue Facility Letters of Credit
hereunder shall automatically terminate (whereupon the Commitments and the
Swing Line Commitment shall terminate immediately) and the Obligations shall
immediately become due and payable without any election or action on the part
of the Agent or any Lender. If any other Default occurs, the Required Lenders
(or the Agent with the consent of the Required Lenders) may terminate or
suspend the obligations of the Lenders to make Loans or to issue Facility
Letters of Credit hereunder (whereupon the Commitments and the Swing Line
Commitment shall terminate immediately), or declare the Obligations to be due
and payable, or both, whereupon the Obligations shall become immediately due
and payable, without presentment, demand, protest or notice of any kind, all of
which each Borrower hereby expressly waives and whether or not any beneficiary
of any Facility Letter of Credit or any transferee thereof shall have
presented, or is permitted at such time to present, the drafts and other
documents required under any Facility Letter of Credit. In addition to the
foregoing, following a Default under Section 7.2, so long as any Facility
Letter of Credit has not been fully drawn and has not been cancelled or
expired, upon written demand by the Agent, the Borrowers shall deposit and
maintain with the Agent an account with cash in an amount equal to the
aggregate undrawn face amount of all outstanding Facility Letters of Credit
issued by the Issuers and all fees and other amounts due or which may become
due with respect thereto. The Borrowers shall have no control over funds in
such cash deposit account, which shall be non-interest bearing. Such funds
shall be promptly transferred by the Agent to the applicable Issuer to
reimburse it for drafts drawn under the Facility Letters of Credit. Such
funds, if any, remaining in such cash deposit account following the payments of
all Obligations in full shall be promptly paid over to the Borrowers.
If, within thirty (30) days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans and
issue Facility Letters of Credit hereunder as a result of any Default (other
than any Default as described in Section 7.6 or 7.7 with respect to any
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Borrower) and before any judgment or decree for the payment of the Obligations
due shall have been obtained or entered, the Required Lenders (in their sole
discretion) shall so direct, the Agent shall, by notice to Group, rescind and
annul such acceleration and/or termination.
8.2. Amendments. Subject to the provisions of this Article VIII,
the Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrowers may enter into agreements supplemental hereto for
the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrowers hereunder or
waiving any Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of each Lender affected thereby and each
Bridge Lender:
(a) Extend the final maturity of any Loan or Note or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest or fees thereon;
(b) Reduce the percentage specified in the definition of
Required Lenders;
(c) Reduce the amount or extend the payment date for the
mandatory payments required under Section 2.1 or 2.9, or increase the amount of
the Commitment of any Lender hereunder, or permit any Borrower to assign its
rights under this Agreement;
(d) Extend the Revolving Loan Termination Date or the
Term Loan Termination Date;
(e) Amend this Section 8.2;
(f) Release any Guarantor from a Guaranty or terminate
the Pledge Agreement or release any note pledged thereunder;
(g) Consent to any assignment by any Borrower of the
Obligations; or
(h) Increase the maximum drawable amount or extend the
expiration date of any outstanding Facility Letter of Credit (except as
expressly permitted by its terms) or reduce the principal amount of or extend
the time of payment of any Facility Letter of Credit Reimbursement Obligation
or fee associated with any Facility Letter of Credit.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive
payment of the fee required under Section 12.3.2 without obtaining the consent
of any other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders
or the Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence therein,
and the making of a Loan notwithstanding the existence of a Default or the
inability of a Borrower to satisfy the conditions precedent to such Loan shall
not constitute any waiver or acquiescence. Any single or partial exercise of
any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Loan Documents
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whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Agent and the
Lenders until the Obligations have been paid in full.
8.4. Application of Funds. Any amounts received by the Agent or
any Lender after a Default has occurred and is continuing shall be applied by
the Agent to payment of the Obligations hereunder and the Bridge Obligations
unless a court of competent jurisdiction or, with respect to clauses (b) and
(c), the Required Lenders shall otherwise direct:
(a) FIRST, to all reasonable costs and expenses of the
Agent, the Lenders and the Bridge Lenders incurred in connection with the
collection and enforcement of the Obligations hereunder and the Bridge
Obligations on a pro rata basis, together with interest at the Default Rate on
such costs, expenses and liabilities and on all advances made by the Agent, any
Lender or any Bridge Lender from the date any such cost, expense or liability
is due, owing or unpaid or any such advance is made, in each case until paid in
full;
(b) SECOND, to payment of that portion of the Obligations
hereunder and the Bridge Obligations on a pro rata basis, in each case
constituting accrued and unpaid interest and fees, together with interest owing
thereon until paid in full;
(c) THIRD, to payment of the principal of the Obligations
hereunder and the Bridge Obligations on a pro rata basis, and net termination
amounts payable in respect of the Rate Hedging Obligations owing to the Lenders
or the Bridge Lenders or any Lender or any Bridge Lender, together with
interest on such unpaid principal and net termination amounts until paid in
full; and
(d) FOURTH, the balance, if any, after all of the
Obligations hereunder and the Bridge Obligations have been satisfied, shall be
remitted as required by law.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and
warranties of the Borrowers contained in this Agreement or of Industries or any
Subsidiary contained in any Loan Document shall survive delivery of the Notes
and the making of the Loans herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, no Lender shall be obligated to extend credit
to any Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.
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9.4. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrowers, the Agent and the Lenders and
supersede all prior agreements and understandings among the Borrowers, the
Agent and the Lenders relating to the subject matter thereof other than the fee
letter dated January 31, 1997 among First Chicago, Group and the Arranger.
9.5. Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and not joint and
no Lender shall be the partner or agent of any other (except to the extent to
which the Agent is authorized to act as such). The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender
from any of its obligations hereunder. This Agreement shall not be construed
so as to confer any right or benefit upon any Person other than the parties to
this Agreement and their respective successors and assigns.
9.6. Expenses; Indemnification. (a) Industries and each Borrower
shall reimburse the Agent for any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges
of attorneys for the Agent, which attorneys may be employees of the Agent) paid
or incurred by the Agent in connection with the preparation, negotiation,
execution, delivery, review, amendment, modification, syndication and
administration of the Loan Documents. Industries and each Borrower also agrees
to reimburse the Agent and the Lenders for any reasonable costs, internal
charges and out-of-pocket expenses (including attorneys' fees and time charges
of attorneys for the Agent and the Lenders, which attorneys may be employees of
the Agent or the Lenders) paid or incurred by the Agent or any Lender in
connection with the collection and enforcement of the Loan Documents.
Industries and each Borrower further agrees to indemnify the Agent, the
Arranger and each Lender, its directors, officers and employees against all
losses, injuries, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all court costs, attorneys' fees,
expenses of litigation or preparation therefor whether or not the Agent, the
Arranger or any Lender is a party thereto) (collectively, "Indemnified
Expenses") which any of them may pay or incur arising out of or relating to
this Agreement, the other Loan Documents or the Transaction Documents, the
transactions contemplated hereby or thereby or the direct or indirect
application or proposed application of the proceeds of any Loan hereunder,
unless it is determined by a judgment of a court that is binding on the Agent,
the Arranger or such Lender, final and not subject to review on appeal, that
such losses were solely the result of acts or omissions on the part of the
Agent, the Arranger or such Lender, as the case may be, constituting gross
negligence, willful misconduct or knowing violations of law. The obligations
of Industries and each Borrower under this Section shall survive the
termination of this Agreement.
(b) Each Borrower shall indemnify, pay and hold the Agent and each
Lender harmless from and against any and all Indemnified Expenses incurred or
suffered by or asserted against the Agent or such Lender by reason of any
violation of any applicable Environmental Law for which Industries or any of
its Subsidiaries is liable or which is related to any real estate owned, leased
or operated by Industries or any of its Subsidiaries, or by reason of the
imposition of any governmental lien for the recovery of environmental cleanup
or response costs expended by reason of any such violation, or by reason of any
breach of any representation, warranty or affirmative or negative covenant of
this Agreement, including, without limitation, by reason of any matter
disclosed in Schedule 5.22 hereto, unless it is determined by a judgment of a
court that is binding on the Agent or such Lender, final and not subject to
review on appeal, that such losses were solely the result of
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acts or omissions on the part of the Agent or such Lender, as the case may be,
constituting gross negligence, willful misconduct or knowing violations of law;
provided, however, that, to the extent that Industries or any of its
Subsidiaries is strictly liable under any such statute, order or regulation,
the Borrowers' obligation to the Agent and each Lender under this indemnity
shall likewise be without regard to fault on the part of Industries or any of
its Subsidiaries with respect to the violation of law which results in
liability to the Agent or any Lender. The provisions of and undertakings and
indemnification set out in this Section 9.6(b) shall survive the termination of
this Agreement and the payment and satisfaction of the Obligations, and shall
continue to be the liability, obligation and indemnification of each Borrower,
binding upon such Borrower.
(c) Industries and each Borrower agrees not to settle any claim,
litigation or proceeding relating to this transaction (whether or not the
Agent, the Arranger or any Lender is a party thereto) unless such settlement
releases all indemnified Persons hereunder from any and all liability in
respect of such transaction.
9.7. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.
9.8. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
9.9. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.10. Nonliability of Lenders. The relationship between the
Borrowers and the Lenders and the Agent shall be solely that of borrower and
lender. Neither the Agent nor any Lender shall have any fiduciary
responsibilities to any Borrower. Neither the Agent nor any Lender undertakes
any responsibility to any Borrower to review or inform such Borrower of any
matter in connection with any phase of such Borrower's business or operations.
Each Borrower shall rely entirely upon its own judgment with respect to its
business, and any review, inspection or supervision of, or information supplied
to any Borrower by the Agent or the Lenders is for the protection of the Agent
and the Lenders and neither any Borrower nor any other Person is entitled to
rely thereon. Each Borrower (a) agrees that neither the Agent nor any Lender
shall have liability to such Borrower (whether sounding in tort, contract or
otherwise) for losses suffered by such Borrower in connection with, arising out
of, or in any way related to, the transactions contemplated and the
relationship established by the Loan Documents, or any act, omission or event
occurring in connection therewith, unless it is determined by a judgment of a
court that is binding on the Agent or such Lender, final and not subject to
review on appeal, that such losses were solely the result of acts or omissions
on the part of the Agent or such Lender, as the case may be, constituting gross
negligence, willful misconduct or knowing violations of law, and (b) waives,
releases and agrees not to sue upon any claim against the Agent or any Lender
(whether sounding in tort, contract or otherwise) except a
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claim based upon gross negligence, willful misconduct or knowing violations of
law. Whether or not such damages are related to a claim that is subject to the
waiver effected above and whether or not such waiver is effective, none of the
Agent, the Arranger nor any Lender shall have any liability with respect to,
and each Borrower hereby waives, releases and agrees not to sue for, any
special, indirect or consequential damages on any theory of liability suffered
by such Borrower in connection with, arising out of, or in any way related to
the transactions contemplated or the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined by a judgment of a court that is binding on the Agent
or such Lender, as the case may be, final and not subject to review on appeal,
that such damages were solely the result of acts or omissions on the part of
the Agent or such Lender, as the case may be, constituting gross negligence,
willful misconduct or knowing violations of law.
9.11. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
9.12. CONSENT TO JURISDICTION. EACH OF INDUSTRIES AND EACH BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND EACH OF
INDUSTRIES AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH BORROWER HEREBY IRREVOCABLY
DESIGNATES AND APPOINTS INDUSTRIES, CURRENTLY LOCATED AT 775 CORPORATE WOODS
PARKWAY, VERNON HILLS, ILLINOIS 60061 AS ITS ATTORNEY-IN-FACT AND AGENT TO
RECEIVE ON BEHALF OF SUCH BORROWER SERVICE OF PROCESS OR OTHER LEGAL SUMMONS
FOR PURPOSES OF ANY SUCH ACTION OR PROCEEDING. AS AN ALTERNATIVE METHOD OF
SERVICE, EACH BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH BORROWER AT ITS ADDRESS SET FORTH
OPPOSITE ITS SIGNATURE BELOW OR IN THE AGREEMENT OF JOINDER EXECUTED BY SUCH
SUBSIDIARY, IF APPLICABLE. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT
OR ANY LENDER TO BRING PROCEEDINGS AGAINST INDUSTRIES OR ANY BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY INDUSTRIES OR ANY
BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY
LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS;
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PROVIDED, THAT SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF JURISDICTION
MAY NOT BE OBTAINED IN A COURT IN CHICAGO, ILLINOIS.
9.13. WAIVER OF JURY TRIAL. INDUSTRIES, EACH BORROWER, THE AGENT
AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
9.14. Disclosure. Each Borrower and each Lender hereby (a)
acknowledge and agree that First Chicago and/or its Affiliates from time to
time may hold other investments in, make other loans to or have other
relationships with Industries and its Subsidiaries, including, without
limitation, in connection with any interest rate hedging instruments or
agreements or swap transactions, and (b) waive any liability of First Chicago
or such Affiliate in connection with the transaction contemplated hereby to
Industries or any of its Subsidiaries or any Lender, respectively, arising out
of or resulting from such investments, loans or relationships other than
liabilities arising out of the gross negligence, willful misconduct or knowing
violation of law by First Chicago or its Affiliates.
9.15. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by
each Borrower, the Agent and the Lenders and each party has notified the Agent
by telex or telephone, that it has taken such action.
ARTICLE X
THE AGENT
10.1. Appointment. First Chicago is hereby appointed Agent
hereunder and under each other Loan Document, and each of the Lenders
authorizes the Agent to act as the agent of such Lender. The Agent agrees to
act as such upon the express conditions contained in this Article X. The Agent
shall not have a fiduciary relationship in respect of any Lender by reason of
this Agreement.
10.2. Powers. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the
terms of each thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties to the Lenders, or any
obligation to the Lenders to take any action thereunder, except any action
specifically provided by the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action
taken or omitted to be taken by it or them hereunder or under any other Loan
Document or in connection herewith or therewith except for its or their own
gross negligence or willful misconduct.
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10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into, or verify (a) any statement,
warranty or representation made in connection with any Loan Document or any
borrowing hereunder, (b) the performance or observance of any of the covenants
or agreements of any obligor under any Loan Document, (c) the satisfaction of
any condition specified in Article IV, except receipt of items required to be
delivered to the Agent and not waived at closing, or (d) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith.
10.5. Action on Instructions of Lenders. The Agent shall in all
cases be fully protected by the Lenders in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance with written
instructions signed by the Required Lenders, and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders and on all holders of Notes. The Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by the
Lenders pro rata against any and all liability, cost and expense that it may
incur by reason of taking or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any
of its duties as Agent hereunder and under any other Loan Document by or
through employees, agents and attorneys-in-fact and shall not be answerable to
the Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled
to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in
respect to legal matters, upon the opinion of counsel selected by the Agent,
which counsel may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (a) for any amounts not reimbursed by the Borrowers for which the
Agent is entitled to reimbursement by the Borrowers under the Loan Documents,
(b) for any other expenses incurred by the Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents, and (c) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith
or the transactions contemplated thereby, or the enforcement of any of the
terms thereof or of any such other documents; provided, that no Lender shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and
termination of this Agreement.
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10.9. Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is
a Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with Industries or any of its Subsidiaries in which Industries or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.
10.10. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by Industries and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and
the other Loan Documents.
10.11. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and Group, and the Agent may be removed
at any time with or without cause by written notice received by the Agent from
the Required Lenders. Upon any such resignation or removal, the Required
Lenders shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Required Lenders and shall have
accepted such appointment within thirty days after the retiring Agent's giving
notice of resignation, then the retiring Agent may appoint a successor Agent.
Such successor Agent shall be a commercial bank having capital and retained
earnings of at least $50,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Agent, and the retiring or removed Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents. After any retiring or removed Agent's resignation or removal
hereunder as Agent, the provisions of this Article X shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent hereunder and under the other Loan Documents.
10.12. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received notice from a Lender or any Borrower
referring to this Agreement describing such Default or Unmatured Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the
Lenders. Subject to the provisions of Section 10.5, the Agent shall take any
action of the type specified in this Agreement with respect to such Default or
Unmatured Default as shall be reasonably directed by the Required Lenders (or,
if so required by Section 8.2, by all Lenders); provided, that unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Unmatured Default as the Agent shall determine is in
the best interests of the Lenders.
86
<PAGE> 94
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights
of the Lenders under applicable law, if any Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender
to or for the credit or account of any Borrower may be offset and applied
toward the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments received
pursuant to Section 3.1, 3.2 or 3.4) in a greater proportion than its Pro-Rata
Share of such Loans, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Loans. In case any
such payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made. If an amount to be setoff is to be applied to
Indebtedness of any Borrower to a Lender, other than Indebtedness evidenced by
any of the Notes held by such Lender, such amount shall be applied ratably to
such other Indebtedness and to the Indebtedness evidenced by such Notes.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Lenders and their respective successors and assigns, except that (a) no
Borrower shall have the right to assign its rights or obligations under the
Loan Documents, and (b) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (b) of this Section, any Lender may
at any time, without the consent of the Borrowers or the Agent, assign all or
any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank; provided, however, that no such assignment to a Federal Reserve
Bank shall release the transferor Lender from its obligations hereunder. The
Agent and the Borrowers may treat the payee of any Note as the owner thereof
for all purposes hereof unless and until such payee complies with Section 12.3
in the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Agent and Group. Any assignee
or transferee of a Note agrees by acceptance thereof to be bound by all the
terms and provisions of the Loan Documents. Any request, authority or consent
of any Person, who at the time of making such request or giving such authority
or consent is the holder of any Note, shall be
87
<PAGE> 95
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in
the ordinary course of its business and in accordance with applicable
law, at any time sell to one or more banks or other entities ("
Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the holder of any such Note for all purposes under
the Loan Documents, all amounts payable by the Borrowers under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrowers and the Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents.
Each Lender shall notify Group of each sale to a Participant (other
than an Affiliate or another Lender); provided, that any failure to
give any such notice shall not give rise to any liability hereunder.
12.2.2. Voting Rights. Each Lender shall retain the sole
right to approve, without the consent of any Participant, any
amendment, modification or waiver of any provision of the Loan
Documents other than any amendment, modification or waiver which
effects any of the modifications referenced in clauses (a) through (g)
of Section 8.2.
12.2.3. Benefit of Setoff. Each Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents; provided, that each Lender shall retain the right of
setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree
to share with each Participant, and each Participant, by exercising
the right of setoff provided in Section 11.1, agrees to share with
each Lender, any amount received pursuant to the exercise of its right
of setoff, such amounts to be shared in accordance with Section 11.2
as if each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time assign to one or more banks or other entities ("
Purchasers") all or any part of its rights and obligations under the
Loan Documents in an amount equal to or greater than $5,000,000;
provided that if such Purchaser is a Lender immediately prior to such
assignment, no such minimum amount shall apply to such assignment.
Such assignment shall be substantially in the form of Exhibit F hereto
(an "Assignment and Acceptance") or in such other form as may be
agreed to by the parties
88
<PAGE> 96
thereto. The consent of Group (unless a Default shall have occurred
and then be continuing) and the Agent shall be required prior to an
assignment becoming effective with respect to a Purchaser which is not
a Lender or an Affiliate thereof. Such consent shall not be
unreasonably withheld.
12.3.2. Effect; Effective Date. Upon (a) delivery to the
Agent of a notice of assignment, substantially in the form attached as
Exhibit I to Exhibit F hereto (a "Notice of Assignment"), together
with any consents required by Section 12.3.1, and (b) payment of a
$3,500 fee to the Agent for processing such assignment (which fee
shall be the sole responsibility of the assigning Lender or the
Purchaser), such assignment shall become effective on the effective
date specified in such Notice of Assignment. On and after the
effective date of such assignment, (a) such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan
Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent
as if it were an original party hereto, and (b) the transferor Lender
shall be released with respect to the percentage of the Aggregate
Commitment and Loans assigned to such Purchaser without any further
consent or action by the Borrowers, the Lenders or the Agent. Upon
the consummation of any assignment to a Purchaser pursuant to this
Section 12.3.2, the transferor Lender, the Agent and the Borrowers
shall make appropriate arrangements so that replacement Notes are
issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their Commitment, as adjusted pursuant to
such assignment.
12.4. Dissemination of Information. Each Borrower authorizes each
Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries. Each of the Agent and each Lender agree that (a) it will keep
all of the information obtained by it from or on behalf of any Loan Party
("Information") confidential and, without Group's prior written consent, it
will not disclose any Information except (i) to its directors, employees,
auditors or counsel (collectively, "Representatives") to whom it is necessary
to show the Information, each of which shall be informed of the confidential
nature of the Information; (ii) in any statement or testimony pursuant to a
subpoena or order by any court, governmental body or other agency asserting
jurisdiction over it, or as otherwise may be required by law (provided that
Group shall be given prior notice of the disclosure permitted by clause (ii)
unless such notice is prohibited by any subpoena, order or law); and (iii) upon
the request or demand of any regulatory agency or authority having jurisdiction
over it; and (b) it will use the Information only for the purposes of
exercising its rights and remedies under this Agreement and the other Loan
Documents. Notwithstanding the foregoing, the restrictions contained in the
preceding sentence shall not apply to Information which (a) is or becomes
generally available to the public other than as a result of a disclosure by the
Agent, any Lender or any of their respective representatives; (b) becomes
available to the Agent or any Lender on a non-confidential basis from a source
other than Group or another Loan Party; or (c) was known to the Agent or a
Lender on a non-confidential basis prior to its disclosure to it by or on
behalf of Group or any other Loan Party.
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<PAGE> 97
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.20.
ARTICLE XIII
NOTICES
13.1. Giving Notice. Except as otherwise permitted by Section 2.15
with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing, by facsimile, first class U.S. mail or overnight courier
and addressed or delivered to such party at its address set forth below its
signature hereto or with respect to each of the Additional Borrowing
Subsidiaries, in its Agreement of Joinder, or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with first class postage prepaid, return receipt
requested, shall be deemed given three (3) Business Days after deposit in the
U.S. mail; any notice, if transmitted by facsimile, shall be deemed given when
transmitted; and any notice given by overnight courier shall be deemed given
when received by the addressee. Wherever under this Agreement or under any
other Loan Document any certificate or other writing is given by any director,
officer or employee of Industries or any Subsidiary, such certificate or other
writing shall be delivered by such director, officer or employee on behalf of
Industries or such Subsidiary in his or her capacity as a director, officer or
employee and not in his or her individual capacity.
13.2. Change of Address. Any Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.
[signature pages to follow]
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<PAGE> 98
IN WITNESS WHEREOF, Group, Delfield, Scotsman Drink,
Whitlenge, Frimont, Castel MAC, Industries, the Lenders and the Agent have
executed this Agreement as of the date first above written.
SCOTSMAN GROUP INC.
By:/s/ D. D. Holmes
----------------------------------------
Print Name:D. D. Holmes
----------------------------------
Title:Vice President - Finance
----------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attn: Donald D. Holmes
Telecopy: (847) 634-8823
Telephone: (847) 215-4447
THE DELFIELD COMPANY
By:/s/ D. D. Holmes
----------------------------------------
Print Name:D. D. Holmes
----------------------------------
Title:Vice President
----------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attn: Donald D. Holmes
Telecopy: (847) 634-8823
Telephone: (847) 215-4447
<PAGE> 99
SCOTSMAN DRINK LIMITED
By:/s/ D. D. Holmes
----------------------------------------
Print Name:D. D. Holmes
-----------------------------
Title:Director
----------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attn: Donald D. Holmes
Telecopy: (847) 634-8823
Telephone: (847) 215-4447
WHITLENGE DRINK EQUIPMENT LIMITED
By:/s/ D. D. Holmes
----------------------------------------
Print Name:D. D. Holmes
-----------------------------
Title:Director
----------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attn: Donald D. Holmes
Telecopy: (847) 634-8823
Telephone: (847) 215-4447
<PAGE> 100
FRIMONT S.P.A
By:/s/ D. D. Holmes
----------------------------------------
Print Name:D. D. Holmes
-----------------------------
Title:Director
----------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attn: Donald D. Holmes
Telecopy: (847) 634-8823
Telephone: (847) 215-4447
CASTEL MAC S.P.A.
By:/s/ D. D. Holmes
---------------------------------------
Print Name:D. D. Holmes
----------------------------
Title:Director
---------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attn: Donald D. Holmes
Telecopy: (847) 634-8823
Telephone: (847) 215-4447
<PAGE> 101
KYSOR INDUSTRIAL CORPORATION
By:/s/ R. C. Osborne
---------------------------------------
Print Name:R. C. Osborne
----------------------------
Title:
---------------------------------
Address:
Attn:
Telecopy:
Telephone:
The undersigned is executing this
Agreement only for purposes of Articles
V, VI, IX and XIII of this Agreement:
SCOTSMAN INDUSTRIES, INC.
By:/s/ D. D. Holmes
---------------------------------------
Print Name:D. D. Holmes
----------------------------
Title:Vice President - Finance
---------------------------------
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Attn: Donald D. Homes
Telecopy: (847) 634-8823
Telephone: (847) 215-4447
<PAGE> 102
Commitments:
$415,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:/s/ Julia Bristow
---------------------------------------
Print Name:Julia Bristow
----------------------------
Title:Vice President
---------------------------------
Address: One First National Plaza
Chicago, Illinois 60670
Attn: Julia Bristow
Telecopy: (312) 732-1117
Telephone: (312) 732-5927
<PAGE> 1
EXHIBIT 10.5
TAX I.D. NO. 36-3635935
PROMISSORY NOTE
$15,000,000.00 Detroit, Michigan
March 12, 1997
On or before March 12, 1998, FOR VALUE RECEIVED, the undersigned,
SCOTSMAN GROUP INC., a Delaware corporation (herein called "Maker") promises to
pay to the order of COMERICA BANK, a Michigan banking corporation (herein
called "Bank"), at the principal office of Bank at Detroit, Michigan in lawful
currency of the United States of America, FIFTEEN MILLION DOLLARS
($15,000,000.00) or so much of said sum as has been advanced and is then
outstanding hereunder, together with interest thereon as hereinafter set forth.
This Note is a note under which advances, repayments and new advances
may be made from time to time, provided that Bank shall not be obligated to
make any advance hereunder. Advances hereunder may be requested in Maker's
discretion by telephonic notice to Bank or by submission of a request for
advance in form annexed hereto as Exhibit "A". Any advance requested by
telephonic notice (i) shall be made only to Account No. 1076111614 with Bank in
the name of Maker or to such other account as Maker shall subsequently
designate by written notice to Bank, and (ii) shall be confirmed by Maker that
same day by submission to Bank by first class mail of the written request for
advance aforementioned. Maker acknowledges that if Bank makes an advance based
on a telephonic request, it shall be for Maker's convenience and all risks
involved in the use of such procedure shall be borne by Maker, and Maker
expressly agrees to indemnify and hold Bank harmless therefor. Bank shall have
no duty to confirm the authority of anyone requesting an advance by telephone.
Each advance outstanding under this Note from time to time shall bear
interest at a per annum rate equal to Bank's prime rate established by Bank
from time to time or such other rate accepted by Bank with respect thereto, and
shall be payable upon the repayment date therefor. The amount, rate and
repayment date of each advance shall be noted on Bank's records, which records
will be prima facie evidence thereof, absent manifest error. Failure to pay any
advance on its repayment date, without Bank's consent, shall constitute a
default and such advance shall thereafter bear interest at three percent (3%)
above said prime rate as it may vary from time to time until paid. Interest
shall be computed on a daily basis using a year of 360 days and assessed for
the actual number of days elapsed. Interest on each advance shall be payable
monthly on the last day of each month in the case of a prime based advance, and
in all other cases on the respective repayment date therefore which date shall
not be later than the maturity date of this Note.
<PAGE> 2
This Note replaces the two Promissory Notes dated June 30, 1996 by
Maker payable to Bank in the principal amounts of $5,000,000 and $6,000,000.
Whenever Bank deems itself insecure, or on default in payment of any
liability hereunder, or upon the occurrence of any Default as defined under
that Scotsman Group Inc. Revolving Credit Agreement dated as of March 12, 1997,
among Maker, certain affiliates of Maker, The First National Bank or Chicago,
as Agent, Bank, as lender, and the various banks listed on the signature pages
thereof, the representations, warranties, covenants and default provisions of
which are hereby incorporated by reference into this Note, notwithstanding the
earlier termination and expiration of said Revolving Credit Agreement, as said
representations, warranties, covenants and default provisions may be amended
from time to time in writing by and between the parties thereto, or upon any
default in payment of any other liability of Maker to Bank and continuance
thereof beyond any period of grace, if any, provided with respect thereto, the
Bank may declare this Note due forthwith. Nothing herein shall limit any right
granted Bank by other instrument or by law.
SCOTSMAN GROUP INC.
By: /s/ D. D. Holmes
----------------------
Its: Vice President-Finance
----------------------
<PAGE> 3
EXHIBIT "A"
REQUEST FOR ADVANCE
TO: COMERICA BANK (the "Bank")
The undersigned hereby requests an advance, or confirms such a request
made by telephone, under the Fifteen Million Dollar ($15,000,000.00) Promissory
Note dated March 12, 1997, made by undersigned to the Bank, pursuant to the
following terms:
Advance Amount: $_________________ Interest Rate: ___________________% per
annum Advance Date:__________________, 19__ Repayment Date :________________,
19__
The proceeds of this advance shall be or have been deposited to the
Account No. __________________ of the undersigned with the Bank or as follows:
_________________.
Undersigned warrant(s) that no condition exists or event has occurred
which constitute or, with the giving of notice or the running of time, or both,
would constitute a default under said promissory Note or any related agreement
with the Bank, and the undersigned further warrants that no Event of Default,
or condition or event which, with the giving of notice or the running of time,
or both, would have otherwise constituted a "Default" under that certain
Scotsman Group Inc. Revolving Credit Agreement dated as of March 12, 1997,
among the undersigned, The First National Bank of Chicago, as Agent, and the
banks and other parties listed on the signature pages thereof (as amended from
time to time in writing by and between the parties thereto), notwithstanding
the earlier termination and expiration of said Credit Agreement, has occurred
and is continuing as of the date hereof.
Dated this ______ day of __________________, 19____.
SCOTSMAN GROUP INC.
By:____________________
Its:___________________
<PAGE> 4
REAFFIRMATION OF GUARANTY AND CONSENT
The UNDERSIGNED has previously executed a Guaranty Agreement dated June 30,
1996 (the "Guaranty") in favor of COMERICA BANK (the "Lender") whereby the
undersigned unconditionally guaranteed to Lender the payment and performance of
any and all indebtedness, obligations and liabilities heretofore, now, or
hereafter owed by Scotsman Group Inc., a Delaware corporation (the "Borrower")
to Lender, including, without limitation, the payment and performance of
Borrower's Promissory Notes dated June 30, 1996 in the principal sum of
$5,000,000 and $6,000,000, respectively, payable to the order of Lender with
interest as therein described, with the entire unpaid principal balance and
accrued interest due on June 30, 1997 (the "Revolving Notes") evidencing an
$11,000,000 guidance line of credit (the "Revolving Loans") extended by Lender
to Borrower, and all loans and advances made by Lender to Borrower thereunder.
The undersigned have been advised that Borrower has asked Lender to increase
the Revolving Loans from $11,000,000 to $15,000,000 and extend the maturity
date thereof to March 12, 1998, which would require the Borrower to execute a
new Promissory Note in the principal sum of $15,000,000 payable to the order of
Lender with interest as therein described and with a maturity date of March 12,
1998 (the "New Note").
The undersigned has reviewed the New Note and fully understands its terms and
provisions.
To induce Lender to increase the Revolving Loan to $15,000,000 and extend the
maturity date thereof to March 12, 1998 as aforesaid, the undersigned
represents and warrants to the Lender with the intent that the Lender rely
thereon, as follows:
1. The Guaranty is in full force and effect and is binding and enforceable
against the undersigned in accordance with its terms;
2. The undersigned irrevocably consents and agrees to Borrower's
execution, delivery and performance of the New Note;
3. The liability of the undersigned to the Lender under the Guaranty shall
in no way he affected, modified, altered, or discharged in any fashion by the
Borrower's execution, delivery or performance of the New Note;
4. The undersigned hereby restates and reaffirms all terms and provisions
of the Guaranty as if set forth in full herein; and
5. The undersigned does not possess any claims, defenses, offsets, or
counterclaims against the enforcement of the Guaranty, and any and all such
claims, defenses, offsets and counterclaims, whether known or unknown, are
forever waived and released, and the undersigned is, and shall remain,
unconditionally liable under the Guaranty for all indebtedness, obligations,
and liabilities heretofore, now or hereafter owed by Borrower to Lender in
accordance with the terms
<PAGE> 5
of the Guaranty, including without limitation, the indebtedness evidenced by
the New Note, and all extensions, renewals, modifications, and refinancings
thereof.
Dated: March 12, 1997
WITNESSES: SCOTSMAN INDUSTRIES, INC.
/s/ R. C. Osborne By: /s/ D. D. Holmes
---------------------------- -------------------
Its: Vice President
-------------------
<PAGE> 6
GUARANTY
(Unlimited)
This Guaranty is executed and delivered an March 12, 1997, by the
undersigned (collectively "Guarantor") whose address is 775 Corporate Woods
Parkway, Vernon Hills, Illinois, to COMERICA BANK, a Michigan banking
corporation ("Bank") of Detroit, Michigan.
WHEREAS, SCOTSMAN GROUP, INC., a Delaware corporation, whose address is
775 Corporate Woods Parkway, Vernon Hills, Illinois ("Borrower") desires to
enter into one or more banking transactions with and thereby become obligated
to Bank, for the payment of one or more Liabilities, as defined below, from
time to time, though it may not be continuously, and/or to obtain other
credit accommodations from Bank from time to time; and
WHEREAS, Guarantor desire(s) to see the success of, and/or receive(s)
direct and/or indirect benefits from the Borrower as general or limited
partner, shareholder, subsidiary, affiliate or otherwise.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which is hereby acknowledged, and to induce Bank to enter into banking
transactions with or otherwise make credit accommodations in favor of the
Borrower, the GUARANTOR HEREBY UNCONDITIONALLY AND ABSOLUTELY GUARANTEES TO
BANK the prompt payment when due, whether at maturity or on any accelerated or
extended payment date or otherwise, of any and all Liabilities, until such
Liabilities are fully paid and satisfied as to principal, interest and other
sums due and payable thereunder. "Liabilities" shall mean all indebtedness and
obligations of Borrower ("Borrower" wherever used herein shall include any
partnership, firm, corporation, or other organization or entity succeeding in
whole or substantial part whether immediately or otherwise to the business
and/or property with or without the liabilities of the above named Borrower) to
Bank whatsoever, present or future, direct or indirect, absolute or contingent,
now or hereafter existing or arising, due or to become due, howsoever arising
or evidenced, including, but not limited to, any borrowings of Borrower
evidenced by Borrower's promissory notes, obligations under reimbursement or
letter of credit agreements naming Borrower as account party, and obligations
of Borrower on any note, draft or other instrument, whether or not negotiable
in form, upon which Borrower is primarily or secondarily liable, which may be
paid, accepted, purchased or discounted by Bank, whether or not such
indebtedness or obligation is known to Guarantor now or at the time such
indebtedness or obligation is incurred, and all amendments, renewals or
extensions, in whole or in part, of any such indebtedness or obligations.
Guarantor shall also pay, on demand, any and all expenses (including without
limitation reasonable attorneys fees) which may be incurred or paid by Bank in
preserving, protecting or enforcing any of its rights or remedies in connection
with or collecting against Guarantor under, this Guaranty (Collection Costs").
<PAGE> 7
Guarantor further agrees as follows:
1. Absolute and Unconditional Obligation. This Guaranty is a
guaranty of payment and not of collection. The obligation of the Guarantor
under this Guaranty (the "Obligation") shall be absolute and primary, and
complete and binding as to each Guarantor and subject to no condition
whatever, precedent or otherwise, irrespective of the validity, regularity
or enforceability of any of the Liabilities, the absence of any action to
enforce the same, any waiver or consent with respect thereto, or any failure or
delay in the enforcement thereof. Notice of acceptance hereof or action in
reliance hereon shall not be required. Bank shall be under no obligation to
give Guarantor notice of Borrower's incurring future Liabilities to Bank or
amendments, renewals or extensions of any Liabilities, or any other fact or
matter pertaining to Borrower. Nor shall the Obligation be affected by the
bankruptcy, insolvency, incompetence or death, or any change in ownership or
control, of the Borrower, or of any other party. The Obligation shall be
independent of and in addition to any similar obligation or other liability of
the Guarantor to Bank.
2. Waiver. Guarantor waives presentment, demand, protest, notice
of protest or dishonor, diligence in collecting the Liabilities, any
requirement first to proceed against the Borrower or against any guarantor or
other party, or to exhaust any security for the performance of any of the
Liabilities. Any collateral or other security of Borrower or any other party or
any guaranty or other obligation of any party which Bank now or subsequently
holds may be released or otherwise dealt with by Bank in all respects as though
this Guaranty were not in existence and the Obligation shall be in no way
affected thereby, Guarantor hereby waiving and foregoing all rights in respect
of any action, or failure to act, by Bank regarding such collateral or other
security.
3. Continuing Obligation. The Obligation shall be continuing and,
irrespective of any statute of limitations otherwise applicable, shall
cover all Liabilities incurred by Borrower before any revocation of this
Guaranty becomes effective as provided below (and shall also include
Liabilities of the Borrower incurred after such revocation pursuant to any
agreement to lend, whether optional or obligatory, existing at the date of
revocation), and as to any Liabilities so incurred, shall continue until the
same are fully paid and satisfied. The bankruptcy or insolvency of any
Guarantor or revocation by any Guarantor shall not affect the Obligation of any
others, but such others shall continue to be liable for the Liabilities
(including future Liabilities) as though such bankrupt, insolvent or revoking
party had not been a party hereto. Bank may, if it so desires (but shall not be
obligated to do so), file a claim under this Guaranty in any such bankruptcy or
insolvency proceeding, provided that the continuance of the Obligation in
accordance with this Guaranty shall not be affected thereby. The Obligation
shall also survive the death of any or all of the undersigned and shall be
binding upon the estate of any deceased party and upon any surviving party for
all Liabilities (including future Liabilities), the same as if such death had
not occurred. Bank shall be under no duty to the estate or to any survivor or
to any other Guarantor, to present any claim based on this Guaranty against the
estate of any deceased party.
<PAGE> 8
4. Revocation. Guarantor (or any of them) may revoke this Guaranty
only as herein provided, and not otherwise. Revocation shall be in writing
signed by the revoking party, or, if deceased, by the personal representative
of such party, and shall be delivered to the President, Secretary, or any Vice
President of Bank in person at Bank, and shall become effective at the opening
of business on the day next succeeding the delivery thereof. Any such
revocation shall have prospective effect only, from and after the effective
date of revocation, and shall not terminate or otherwise affect the Obligation
of the revoking party existing prior to the effective date of revocation.
5. Subrogation. Guarantor expressly waives any claim for
reimbursement, contribution, indemnity, or subrogation which the Guarantor may
have or obtain against the Borrower by reason of payment by the Guarantor of
any of the Liabilities. In the event of the liquidation, reorganization or
bankruptcy of Borrower (whether voluntary or involuntary) or in the event that
Borrower shall make an arrangement or composition with its creditors or become
subject to any receivership or other insolvency proceedings, Bank shall be
entitled to receive all dividends or other payments with respect to the
Liabilities until its claims have been paid in full, and Guarantor shall
continue to be liable to Bank to the extent provided herein for any balance of
the Liabilities which may be owing to Bank. If any amount shall be paid to or
received by Guarantor on account of any subrogation rights arising at any time
when all Liabilities shall not have been paid and discharged in full, such
amount shall be held in trust by Guarantor for the benefit of Bank and shall
forthwith be paid to Bank to be credited and applied against the Obligation.
6. Continued Effectiveness or Reinstatement. Notwithstanding any
prior revocation, termination or discharge hereof, the effectiveness of this
Guaranty shall continue to be reinstated, as the case may be, in the event that
(a) any payment received or credit given by Bank in respect of the Liabilities
is returned, disgorged or rescinded as an avoidable preference, impermissible
setoff, fraudulent conveyance or otherwise under any applicable state or
federal law, including, without limitation, laws pertaining to bankruptcy
or insolvency, in which case this Guaranty shall thereafter be enforceable
against Guarantor as if such returned, disgorged or rescinded payment or credit
had not been received or given by Bank, and whether or not Bank relied upon
such payment or credit or changed its position as a consequence thereof; or (b)
any liability is imposed, or sought to be imposed, against Bank relating to the
environmental condition of, or the present of hazardous or toxic substances on,
in or about, any property mortgaged to Bank by the Borrower, Guarantor or any
other party as collateral (in whole or in part) for any of the Liabilities,
whether such condition is known or unknown, now exists or subsequently arises
(excluding only conditions which arise after any acquisition by Bank of any
such property, by foreclosure, in lieu of foreclosure or otherwise, due to the
wrongful act or omission of Bank), in which case this Guaranty shall thereafter
be enforceable against Guarantor to the extent of all liability, costs and
expenses (including reasonable attorneys fees) incurred by Bank as the direct
or indirect result of any such environmental condition or hazardous or toxic
substances. For purposes of this Guaranty, "environmental condition" includes,
without limitation, conditions existing with respect to the surface or ground
water, drinking water supply, land surface or subsurface strata and the ambient
air; and "hazardous or toxic substances" shall include any and
<PAGE> 9
all substances now or subsequently determined by any federal, state or local
authority to be hazardous or toxic, or otherwise regulated by any such
authority.
7. Joint and Several Guaranty. If signed by more than one
Guarantor, the obligation of the undersigned shall be joint and several, and,
as used herein, "Guarantor" shall refer to the undersigned collectively, and to
either or any of them. Bank, in its sole discretion, may release any one or
more of the undersigned with or without consideration, and may fail or elect
not to prove a claim against the estate of any bankrupt, insolvent, incompetent
or deceased Guarantor, without reducing or otherwise affecting the liability of
any other Guarantor.
8. General. This Guaranty may not be amended except by express
writing instrument executed by Guarantor and Bank, and no waiver by any party
shall be effective unless given in writing by such party. The rights and
remedies provided for in this Guaranty are cumulative, and nothing herein shall
limit any right or remedy granted Bank by other instrument or by law. If any
term or provision of this Guaranty or its application to any circumstance
shall, to any extent, be invalid or unenforceable, the remainder of this
Guaranty, or the application of such term or provision to circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Guaranty shall be valid
and enforceable to the fullest extent permitted by law. Captions have been used
in this Guaranty for convenience of reference only, and shall not be given
substantive effect. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Michigan.
<PAGE> 10
This Guaranty has been duly executed and delivered as of the date set
forth above.
Witnesses: BOOTH, INC.
R. C. Osborne By: /s/ D. D. Holmes
- ------------------------- --------------------------
Its: Vice President
- ------------------------- --------------------------
DFC HOLDING CORPORATION
By: /s/ D. D. Holmes
--------------------------
Its: Vice President
--------------------------
THE DELFIELD COMPANY
By: /s/ D. D. Holmes
--------------------------
Its: Vice President
--------------------------
KYSOR INDUSTRIAL CORPORATION
By: /s/ D. D. Holmes
--------------------------
Its: Vice President
--------------------------
Accepted by:
COMERICA BANK, a Michigan
banking corporation
By: /s/ Gregory N. Block
---------------------
Its: Vice President
---------------------
<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO. 7 TO
REIMBURSEMENT AGREEMENT
This Amendment No. 7 to Reimbursement Agreement (this
"Amendment") is made effective as of March 12, 1997 and is by and among
Scotsman Group Inc., a Delaware corporation ("Scotsman Group"), Scotsman
Industries, Inc., a Delaware corporation and the parent of Scotsman Group
("Scotsman Industries"), The First National Bank of Chicago (the "Bank"), and
The Bank of Nova Scotia ("BNS") for the purpose of evidencing the replacement
of BNS by the Bank under the Reimbursement Agreement (as defined below) .
WITNESSETH:
WHEREAS, Scotsman Group, Scotsman Industries and BNS are
parties to a Reimbursement Agreement dated as of March 1, 1988, as amended (the
"Reimbursement Agreement"), pursuant to which Scotsman Group has agreed to
reimburse BNS for certain payments made by BNS in connection with an
irrevocable letter of credit issued by BNS to provide funds for the payment
when due of all principal of, and premium and interest on (or, in certain
circumstances, the purchase price of) $9,250,000 aggregate principal amount of
Industrial Revenue Refunding Bonds Series 1988 (King-Seeley Thermos Co.
Project) (the "Bonds") issued by Allendale County, South Carolina (the
"Issuer"); and
WHEREAS, the Bank will issue a Substitute Letter of Credit (as
defined in the Reimbursement Agreement) under the Indenture of Trust dated as
of March 1, 1988, between the Issuer and Fleet National Bank, as trustee; and
<PAGE> 2
WHEREAS, Scotsman Group agrees to reimburse the Bank for
payments made under such Substitute Letter of Credit in accordance with the
terms of the Reimbursement Agreement, as amended by this Amendment; and
WHEREAS, Scotsman Group, Scotsman Industries and BNS desire to
amend the Reimbursement Agreement as hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
Section 1. Amendment to Reimbursement Agreement. The
Reimbursement Agreement is, as of the effective date of this Amendment, amended
as follows:
(i) (a) The definition of "Bank" is deleted from ARTICLE I of the
Reimbursement Agreement in its entirety and replaced with the following:
"Bank" means The First National Bank of Chicago.
(b) The definition of "Credit Agreement" is deleted from
ARTICLE I of the Reimbursement Agreement in its entirety and replaced with the
following:
"Credit Agreement" means that certain Credit Agreement dated as
of March 12, 1997 among Scotsman Group Inc. and certain affiliates thereof,
Scotsman Industries, Inc., the financial institutions named therein, and The
First National Bank of Chicago, as Agent, as amended, restated, supplemented or
modified from time to time.
(ii) Paragraph (c) of Section 2.1 of the Reimbursement Agreement is
deleted in its entirety and replaced with the following:
c. Extensions of Letter of Credit At any time prior to
November 1 of each year, the Borrower may request that the Bank extend the
Stated Expiration Date. If the Bank, in its sole discretion exercisable no
later than sixty (60) days after receiving such request, agrees to extend the
Stated Expiration Date as requested by the Borrower, the Bank shall do so by
delivering the notice of extension attached to the Letter of Credit to the
Borrower and the Trustee. Upon the delivery of the aforesaid notice of
2
<PAGE> 3
extension, the Stated Expiration Date shall be deemed to have been
automatically extended for a one-year period from the then Stated Expiration
Date. Each such extension shall, except as otherwise expressly provided in an
amendment to this Agreement, be on the same terms and conditions as those set
forth in this Agreement.
(iii) Paragraph (f) of Section 6.1 of the Reimbursement Agreement is
deleted in its entirety.
(iv) Exhibit I to the Reimbursement Agreement is deleted in its
entirety and there is inserted in its place the Form of Letter of Credit of the
Bank attached to this Amendment as Exhibit A.
Section 2. Assignment. As of the date hereof, BNS, without
any representation, warranty or liability whatsoever, hereby irrevocably
conveys, assigns and transfers to the Bank all of its right, title and interest
under the Reimbursement Agreement and the Bank hereby irrevocably accepts such
assignment from BNS on and as of the date hereof.
Section 3. Reaffirmation. Each of Scotsman Group and Scotsman
Industries hereby (i) acknowledges that the Bank is hereby made a party to the
Reimbursement Agreement and (ii) reaffirms that its obligations under the
Reimbursement Agreement continue in full force and effect (x) with respect to
the Reimbursement Agreement and (y) as to the Bank as if the Bank were an
original party thereto.
Section 4. Representations and Warranties of Scotsman Group
and Scotsman Industries. Scotsman Group and Scotsman Industries represent and
warrant that the execution, delivery and performance by Scotsman Group and
Scotsman Industries, respectively, of this Amendment have been duly authorized
by all corporate action and that this Amendment is a legal, valid and binding
obligation of Scotsman Group and Scotsman Industries, respectively, enforceable
3
<PAGE> 4
against them in accordance with its terms, except as enforcement may be
subject to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforcement
is sought in a proceeding in equity or at law).
Section 5. Additional Indemnification. In addition to any
payments which may be due from time to time pursuant to Section 8.4 of the
Reimbursement Agreement, each of Scotsman Group and Scotsman Industries agrees
to pay any amounts which may be payable to the Bank in connection with the
transactions contemplated by the Reimbursement Agreement, as amended hereby,
pursuant to Section 9.6 of the Credit Agreement, which Section 9.6 (together
with all related definitions), is incorporated by reference herein and made a
part hereof.
Section 6. Reference to and Effect on the Reimbursement
Agreement.
(a) Upon the effectiveness of this Agreement, on and after
the date hereof each reference in the Reimbursement Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import shall mean
and be a reference to the Reimbursement Agreement as amended.
(b) Except as specifically amended, the Reimbursement
Agreement shall remain in full force and effect.
Section 7. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws of the State of Illinois
(without regard to conflicts of laws provisions thereof).
Section 8. Headings. Section headings in this Amendment are
included for convenience of reference only and shall not constitute a part of
this Amendment for any other purposes.
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<PAGE> 5
IN WITNESS WHEREOF, the parties to this Amendment have caused
it to be executed by their duly authorized representative officers as of the
date first above written.
SCOTSMAN INDUSTRIES, INC. SCOTSMAN GROUP INC.
By: /s/ R.C. Osborne By: /s/ R.C. Osborne
-------------------------------- ----------------------------
Title: President & CEO Title: President
----------------------------- -------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Julia A. Bristow
--------------------------------
Title: Vice President
-----------------------------
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
--------------------------------
Title: Senior Manager Loan Operations
-----------------------------
<PAGE> 1
EXHIBIT 10.8
SCOTSMAN INDUSTRIES, INC.
LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
(As Amended February 13, 1997)
1. Purpose
The purpose of the Long-Term Executive Incentive Compensation Plan (the
"Plan") is to further the long-term growth of Scotsman Industries, Inc. (the
"Company") and its divisions and subsidiaries by strengthening the ability of
the Company to attract and retain key employees and to provide additional
motivation and incentives for the performance of key employees.
2. Administration
The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). The Committee shall consist of
at least two such Directors as the Board may from time to time designate.
Membership on the Committee shall be limited to members of the Board of
Directors who meet the definitions of a "non-employee director" under Rule
16b-3 under Section 16 of the Securities Exchange Act of 1934, as amended, and
an "outside director" under Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder. The Committee shall have
such powers to administer the Plan as are delegated to it by the Plan or the
Board of Directors, including the power to interpret the Plan and any
agreements executed thereunder, to prescribe rules and regulations relating to
the Plan, and to make all other determinations necessary or advisable for
administering the Plan.
3. Grant of Awards; Shares Subject to Plan
(a) The Committee may grant any type of award permitted under the
terms of the Plan (all such awards in the aggregate being hereinafter referred
to as "Awards"). Only employees of the Company and its divisions and
subsidiaries may be selected by the Committee for Awards under the Plan.
(b) The maximum number of shares of Common Stock of the Company
that may be issued under the Plan is 1,000,000, all of which shares may be made
subject to Options. The Common Stock issued pursuant to the Plan may consist of
authorized and unissued shares of the Company's Common Stock or Common Stock
held in the Company's treasury. If any Award granted under the Plan shall
terminate or lapse for any reason, any shares of Common Stock subject to such
Award shall again be available for the grant of an Award.
(c) In the event of corporate changes affecting the Company's
Common Stock or this Plan or Awards granted thereunder (including without
limiting the generality of the foregoing, stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, or other relevant
changes in capitalization), the Board of Directors or the Committee shall make
appropriate adjustments in price, number and kind of shares of Common Stock or
other consideration subject to such Awards or in the terms of such Awards,
which it deems equitable to prevent dilution or enlargement of rights under the
Awards. In addition, the Board of Directors or the Committee may from time to
time equitably change the aggregate number or remaining number or kind of
shares which may be issued under the Plan to reflect any such corporate
changes.
<PAGE> 2
4. Options
(a) The Committee may grant any type of statutory or non-statutory
Option to purchase shares of the Company's Common Stock as is permitted by law
at the time the Option is granted. The term of each Option shall not be more
than ten years and one day from the date of grant and may be exercised at the
rate set by the Committee.
(b) The per share purchase price of the Company's Common Stock
which may be acquired pursuant to an Option shall be at least 100% of the fair
market value of one share of Common Stock of the Company on the date on which
the Option is granted. Within this limitation such price shall be determined
by the Committee.
(c) Notwithstanding sub-section (b) above, the Compensation
Committee in its discretion and for Options granted on or prior to April 20,
1989 may grant Options with a per share purchase price less than 100% of the
fair market value of one share of the Company's Common stock on the date on
which the Option is granted; however, the Compensation Committee may only grant
Options pursuant to this sub-section (c) to former employees of Household
Manufacturing, Inc. or its subsidiaries who have forfeited or will be
forfeiting employee stock options previously granted by Household
International, Inc. as a result of termination of employment. The exercise
price for Options granted pursuant to this sub-section (c) at less than fair
market value on the date of grant will be determined by the Compensation
Committee based on the appreciation in value of Household International, Inc.
employee stock options being forfeited. No Option shall be granted to an
employee pursuant to this sub-section (c) unless such employee has agreed to
forfeit any remaining rights such employee may have in options granted by
Household International, Inc.
(d) Payment for shares purchased upon the exercise of an Option
shall be made in cash or, in the discretion of the Committee and subject to
such rules as it may adopt, in shares of Common Stock of the Company valued at
the then fair market of such shares or by a combination of cash and shares of
Common Stock.
(e) The Committee may, in its discretion and subject to such rules
as it may adopt, permit an optionee to satisfy, in whole or in part,
withholding tax obligations incurred in connection with the exercise of an
Option: (1) by electing to have the Company withhold shares of the Company's
Common Stock (otherwise deliverable to the optionee) in payment for such
withholding tax obligation or (2) by delivering shares of the Company's Common
stock owned by such holder in payment for such withholding tax obligation.
5. Stock Appreciation Rights
(a) The Committee may grant stock appreciation rights ("SARs") in
tandem with the grant of an Option under the Plan or with respect to a
previously granted Option under the Plan. In either case the number of shares
in respect of which SARs are granted by the Committee shall not be greater than
the number of shares subject to the related Option. In exchange for the
surrender in whole or in part of the right to exercise the related Option, such
SAR shall entitle the employee to payment of an amount equal to the
appreciation in value of the surrendered Options (the excess of the fair market
value of such Stock subject to Options at the time of surrender over their
aggregate option price). An SAR granted pursuant to this subsection (a) shall
be
2
<PAGE> 3
exercisable to the extent and only to the extent that the related Option is
exercisable, but if an SAR is granted with respect to a previously-granted
Option, the SAR will not be exercisable for a period of twelve months from the
date of grant of such SAR. No such SAR shall be exercisable except upon
surrender of the related Option, and to the extent such Option is surrendered,
the shares covered by such Option shall again be available for purposes of the
Plan to the extent that payment of such SAR is not made in shares of Common
Stock of the Company. The exercise of any Option shall result in the
cancellation of any related SAR.
(b) The Committee may also grant units of SARs on a stand-alone
basis which are not issued in tandem with Options. The term of each such SAR
shall not be more than ten years from the date of grant and may be exercised at
the rate set by the Committee; provided, however, that no such SAR shall be
exercised less than one year from the date of grant. The "base price" of each
unit of a "stand-alone" SAR shall be at least 100% of the fair market value of
one share of Common Stock of the Company on the date on which such SAR is
granted. Within this limitation the base price shall be determined by the
Committee. Each unit of a "stand-alone" SAR entitles the holder, upon
exercise, to payment of an amount equal to the difference between the base
price of such SAR unit and the fair market value on the date of exercise of a
share of Common Stock of the Company.
(c) At the discretion of the Committee, payment upon exercise of
SARs may be made in cash, in shares of Common Stock of the Company valued at
their fair market value as of the date of exercise of the SAR, or partly in
cash and partly in shares of Common Stock of the Company.
(d) The Committee may establish a maximum appreciation value
payable under an SAR.
6. Transfer of Options and Stock Appreciation Rights; Exercise of Options
and Stock Appreciation Rights Following Termination of Employment
(a) Options and SARs may not be transferred except by will or the
laws of descent and distribution, and during the lifetime of the holder may be
exercised only by him. If the holder of an Option or SAR shall cease to be an
employee of the Company, a division, or a subsidiary, and unless otherwise
provided by the Committee or as provided for in Section 8, all rights under
such Option or SAR shall, subject to sub-section (b), terminate, as set forth
below:
(i) in the event of termination of a holder who is
retirement-eligible under the terms of a pension plan of the
Company or a subsidiary, the Option or SAR may be exercised
within three years of the date of termination of employment
(ii) in the event of termination of employment due to
permanent and total disability of a holder who is not
retirement-eligible under the terms of a pension plan of the
Company or a subsidiary, the Option or SAR may be exercised
within twelve months following the date of such termination of
employment.
(iii) in the event of death during employment, the Option or
SAR may be exercised by the executor, administrator, or other
personal representative of the holder within three years
succeeding death if such holder was retirement-eligible under the
terms of a pension plan of the Company or a subsidiary, or twelve
months if such holder was not retirement-eligible under the terms
of a pension plan of the Company or a subsidiary.
(iv) in the event of termination of employment other than as
set forth in subsections (i), (ii) or (iii) above, the Option or
SAR may be exercised within three months following the date of
termination.
3
<PAGE> 4
(v) in the event of death of a holder of an Option or SAR
following termination of employment, the Option or SAR may be
exercised by the executor, administrator, or other personal
representative of the holder, notwithstanding the time period
specified in (i), (ii), (iii) or (iv) above, within (a) twelve
months following death or (b) the remainder of the period in
which the holder was entitled to exercise the Option or SAR,
whichever period is longer.
If the Committee determines that the termination is for cause,
the Option or SAR will not under any circumstances be exercisable following
termination of employment.
(b) Notwithstanding the provisions of sub-section (a), an Option or
SAR may not be exercised pursuant to this Section after the expiration of the
term of such Option or SAR and may be exercised only to the extent that the
holder is entitled to exercise such Option or SAR on the date of termination of
employment.
7. Restricted Stock and Restricted Stock Rights
(a) The Committee from time to time may grant shares of Common
Stock of the Company to any employee selected by the Committee, subject to the
forfeiture of such stock to the Company if such employee fails to remain an
employee of the Company or a division, or any subsidiary for the period of time
established by the Committee ("Restricted Stock"). The Committee may also
grant Restricted Stock Rights ("RSRs") to any employee selected by the
Committee, which would entitle such employee to receive a stated number of
shares of Common Stock of the Company, subject to forfeiture of such RSRs if
such employee fails to remain continuously an employee of the Company, a
division, or any subsidiary for the period of time established by the
Committee.
(b) Restricted Stock and RSRs shall be subject to the following
restrictions and limitations:
(i) Restricted Stock and RSRs may not be transferred
except by will or the laws of descent and distribution;
(ii) Except as otherwise provided in Paragraphs (d) and (e)
of this Section 7, or as provided in Section 8, Restricted Stock
and RSRs and the shares subject to such RSRs shall be
forfeited and all rights of a grantee of such Restricted Stock
and RSRs and shares subject to RSRs shall terminate without any
payment of consideration by the Company if the employee fails to
remain continuously as an employee of the Company, a division, or
any subsidiary for the period of time established by the
Committee (the "Restricted Period"). A grantee shall not be
deemed to have terminated his period of continuous employment
with the Company, a division, or any subsidiary if he leaves the
employ of the Company or any subsidiary for immediate
reemployment with the Company, a division, or any subsidiary.
(c) A holder of RSRs shall not be entitled to any of the rights of
a holder of the Common Stock with respect to the shares subject to such RSRs
prior to the issuance of such shares pursuant to the Plan. At the Committee's
discretion, during the Restricted Period, for each share subject to RSRs, the
Company may pay the holder an amount in cash equal to the cash dividend
declared on a share of Common Stock of the Company during the Restricted Period
on or about the date the Company pays such dividend to its stockholders of
record.
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<PAGE> 5
(d) The Committee in its sole discretion may accelerate the
termination of the Restricted Period with respect to any Restricted Stock and
RSRs.
(e) In the event that the employment of a holder terminates by
reason of death or permanent and total disability, (i) a holder of Restricted
Stock shall be entitled to have the risk of forfeiture removed from the number
of shares of Restricted Stock multiplied by a fraction (x) the numerator of
which shall be the number of full months between the date of grant of such
Restricted Stock and the date of such termination of employment, and (y) the
denominator of which shall be the number of full months in the Restricted
Period; and (ii) a holder of RSRs shall be entitled to receive the number of
shares subject to such RSRs multiplied by a fraction (x) the numerator of which
shall be the number of full months between the date of such RSRs and the date
of such termination of employment, and (y) the denominator of which shall be
the number of full months in the Restricted Period; provided, however, that any
fractional share shall not be awarded. A holder of Restricted Stock or RSRs
whose employment terminates for reasons other than those listed in this
paragraph will forfeit his rights under any outstanding shares of Restricted
Stock or RSRs. This automatic forfeiture may be waived in whole or in part by
the Committee in its sole discretion.
(f) When a grantee shall be entitled to receive shares pursuant to
RSRs, the Company shall issue the appropriate number of shares registered in
the name of the grantee.
8. Change in Control
The following provisions shall apply in the event of a "Change in
Control":
(a) In the event of a Change in Control, as defined in this Section
8:
(i) any SARs outstanding for at least 6 months and any
options not previously exercisable and vested shall become fully
exercisable and vested;
(ii) the restrictions applicable to any Restricted Stock
shall lapse and such Restricted Stock shall be deemed fully
vested; and
(iii) each holder of RSRs shall be entitled to receive the
number of shares subject to such RSRs.
(b) For purpose of this Section 8, "Change in Control" means:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Sections 13(d) (3) or
14(d) (2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of 20% or more of either (i) the then outstanding
shares of Common Stock of the Company (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then outstanding securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (A) any acquisition
directly from the Company (excluding any acquisition resulting from the
exercise of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities), (B) any acquisition by the Company,
(C) any acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
5
<PAGE> 6
Company or (D) any acquisition by any corporation pursuant to a reorganization,
merger or consolidation involving the Company, if immediately after such
reorganization, merger or consolidation, each of the conditions described in
clauses (i), (ii) and (iii) of subsection (3) of this Section 8(b) shall be
satisfied; and provided further that, for purposes of clause (B), if any Person
(other than the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company shall become the beneficial owner of 20% or more of the Outstanding
Company Common Stock or 20% or more of the Outstanding Company Voting
Securities by reason of an acquisition by the Company and such person shall,
after such acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Company Common Stock or any additional
Outstanding Company Voting Securities and such beneficial ownership is publicly
announced, such additional beneficial ownership shall constitute a Change in
Control;
(2) individuals who, as of October 25, 1991, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided, however, that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the vote
of at least a majority of the directors then comprising the Incumbent Board
shall be deemed to have been a member of the Incumbent Board; and provided
further, that no individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act,
or any other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board shall be deemed to have been a member
of the Incumbent Board;
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation unless, in any such case, immediately
after such reorganization, merger or consolidation, (i) more than 60% of the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined
voting power of the then outstanding securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals or
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation and in substantially the
same proportions relative to each other as their ownership, immediately prior
to such reorganization, merger or consolidation, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(ii) no Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or the corporation resulting from
such reorganization, merger or consolidation (or any corporation controlled by
the Company) and any Person which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of such corporation or
20% or more of the combined voting power of the then outstanding securities of
such corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such reorganization, merger or
consolidation; or
(4) approval by the stockholders of the Company of (i) a
plan of complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of all or substantially all of the assets of
6
<PAGE> 7
the Company other than to a corporation with respect to which, immediately
after such sale or other disposition, (A) more than 60% of the then outstanding
shares of common stock thereof and more than 60% of the combined voting
power of the then outstanding securities thereof entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such sale or
other disposition and in substantially the same proportions relative to each
other as their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (B) no Person (other than the Company, any
employee benefit plan (or related trust) sponsored or maintained by the Company
or such corporation (or any corporation controlled by the Company) and any
Person which beneficially owned) immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the Outstanding Company
Common Stock or the Outstanding Company Voting Securities, as the case may be,
beneficially owns, directly or indirectly, 20% or more of the then outstanding
shares of common stock thereof or 20% or more of the combined voting power of
the then outstanding securities thereof entitled to vote generally in the
election of directors and (C) at least a majority of the members of the board
of directors thereof were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
sale or other disposition.
9. Amendment and Termination of the Plan
The Board of Directors or the Committee may amend the Plan or any Award
granted thereunder at any time, except that the Board of Directors or the
Committee may not, except as permitted by Section 3(c), (i) without stockholder
approval, increase the number of shares of Common Stock of the Company which
may be issued pursuant to the Plan, change the purchase price of an Option or
base price of a "stand-alone" SAR, or make any other amendment to the Plan
which is required by law to be approved by the stockholders of the Company;
(ii) amend an Award granted thereunder in a manner materially and adversely
affecting the rights of the holder thereof without such holder's consent. The
Board of Directors may terminate the Plan at any time, but such termination
shall not affect Awards previously granted under the Plan.
7
<PAGE> 1
EXHIBIT 10.9
February 18, 1997
SCOTSMAN INDUSTRIES, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN A-1
PARTICIPANT __________
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel
have contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1997
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman Industries
only if extraordinary factors occur during the year that
would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash to
each participant, or in case of death, to his heirs or personal
representatives, each year following completion of the regular
annual audit by independent public accountants, which normally
is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments applicable
thereto made subsequent to determination of the bonus for
such completed bonus year. No rights of any nature shall
accrue to any participant or employee with respect to any
future bonus year.
(e) The Committee may at any time amend, revise or discontinue the
Executive Incentive Compensation Program as applicable to
subsequent bonus years.
<PAGE> 2
Executive Incentive Compensation Program
Plan A-1
Page 2
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman Industries shall recommend to the Committee
prior to March 1 of each year for its approval, revision or
disapproval, lists of names of employees for participation in
the bonus for the current bonus year.
(b) The Chairman, President and Chief Executive Officer of Scotsman
Industries may at any time during the bonus year recommend to
the Committee additional names of employees for participation
beginning at a fixed date in the year and upon approval by the
Committee such employees shall participate in the bonus for
that portion of the year subsequent to the fixed date.
(c) The Chairman, President and Chief Executive Officer of Scotsman
Industries may at any time during the bonus year recommend to
the Committee the exclusion, for cause, of any employee
from participation in the bonus for the year or for any portion
thereof. Upon approval of the recommendation by the Committee,
any such employee shall not participate in the bonus for such
year or for any portion of the year subsequent to a date fixed
by the Committee.
(d) A participant who is separated from employment, for any reason,
except death, disability, or retirement, prior to the end of
the bonus year shall not participate in the bonus or any part
thereof for the bonus year. However, the Chairman,
President and Chief Executive Officer of Scotsman Industries
may, at his sole discretion, recommend the separated employee
to the Committee for participation for all or part of the bonus
year.
<PAGE> 3
Executive Incentive Compensation Program
Plan A-1
Page 3
3. Computation of Bonus
(a) The actual bonus earned shall consist of three parts. Part I
is discretionary subject to a maximum of 21.0%; Part II is the
percentage of the Net Operating Income objective earned subject
to a maximum bonus of 18.0%, the percentage of the ROI
objective earned subject to a maximum bonus of 12.0% and the
percentage of the Working Capital to Sales objective earned
subject to a maximum of 12.0%. Part III is the percentage of
the Corporate Net Operating Income objective earned subject to
a maximum bonus of 3.0%, the percentage of the Corporate
Earnings Per Share objective earned subject to a maximum bonus
of 2.0% and the percentage of the Corporate Cash Flow objective
earned subject to a maximum bonus of 2.0%. For purposes of
this Plan, the bonus percentages are set at various levels as
follows:
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
-----------------------------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C> <C>
Part I - Individual Performance
Discretionary 0 10.5% 15.7% 21.0%
Part II - Division Team Results
Net Operating Income 0 9.0% 13.5% 18.0%
Return on Investment 0 6.0% 9.0% 12.0%
Working Capital to Sales 0 6.0% 9.0% 12.0%
Part III - Corporate Team Results
Net Operating Income 0 1.5% 2.3% 3.0%
Earnings Per Share 0 1.0% 1.5% 2.0%
Cash Flow 0 1.0% 1.5% 2.0%
--- ----- ----- -----
Total 0 35.0% 52.5% 70.0%
=== ===== ===== =====
</TABLE>
The bonus percentages under Parts II and III for attainment of
objectives between any of the levels will be calculated on a
pro rata basis.
<PAGE> 4
Executive Incentive Compensation Program
Plan A-1
Page 4
(b) The discretionary bonus earned by each participant shall vary
from zero to a maximum of 21.0%. The percentage shall be
recommended by the Chairman, President and Chief Executive
Officer for approval or revision by the Committee.
(c) The Net Operating Income, Return on Investment and Working
Capital to Sales for each Division will be established by the
Committee in the local currency of the participant's
Division.
(d) The Net Operating Income, Earnings Per Share and Cash Flow
objectives for Scotsman Industries will be established by the
Committee in U.S. dollars.
(e) The bonus payable to each participant shall be a percentage, as
determined in paragraphs 3(a), 3(b), and 3(c), of the
participant's bonus base. The maximum bonus payable under
the Plan is 70.0% of the participant's bonus base.
4. Definitions
(a) The Bonus Year is based on the accounting year used by Scotsman
Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
<PAGE> 5
Executive Incentive Compensation Program
Plan A-1
Page 5
(c) Division Net Operating Income (NOI) shall be profit before
taxes on income of each participating division for the bonus
year, as determined in accordance with generally accepted
accounting principles, adjusted to eliminate extraordinary
gains and losses as determined by the Committee and interest
expense/income on debt and investments. NOI will be measured
on a LIFO basis covering U.S. operations and on a FIFO basis
covering foreign operations. However, any U.S. operations with
Corporate approved FIFO inventories will be measured on a FIFO
basis covering those inventories.
(d) Division Average Investment shall be the reported net assets of
the division adjusted to eliminate cash balances, short and
long-term investments including interdivision notes
receivable, short and long-term debt including interdivision
notes payable and obligations under capital leases, and accrued
and deferred taxes on income. Division Average Investment may
be adjusted to reflect extraordinary changes in the net
investment as determined by the Committee. Inventories will be
stated on a LIFO basis covering U.S. operations and on a FIFO
basis covering foreign operations.
(e) Corporate Net Operating Income shall be reported consolidated
profit before taxes on income as determined in accordance with
generally accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee
and interest expense / income on debt and investments.
(f) Corporate Earnings Per Share shall be reported consolidated net
income divided by fully-diluted weighted average Common shares
outstanding, as determined in accordance with generally
accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee.
<PAGE> 6
Executive Incentive Compensation Program
Plan A-1
Page 6
(g) Division Working Capital to Sales shall be the percentage of
the monthly average of the reported division working capital to
the annual sales of the division excluding
inter-division/inter-company transactions. Working Capital is
defined as the net book value of the sum of trade accounts
receivable, inventory and trade accounts payable. Average
working capital will be based on month end balances starting
with the ending balance of the preceding year and ending with
the year end balance of the bonus year (average of 13 monthly
balances), adjusted to eliminate extraordinary gains and losses
determined by the Committee.
(h) Cash Flow shall be consolidated cash flow before acquisitions
and divestitures for the year.
<PAGE> 7
February 18, 1997
SCOTSMAN INDUSTRIES, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN A-2
PARTICIPANT __________
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel have
contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1997
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman
Industries only if extraordinary factors occur during the year
that would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash to
each participant, or in case of death, to his heirs or personal
representatives, each year following completion of the regular
annual audit by independent public accountants, which normally
is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments applicable
thereto made subsequent to determination of the bonus for such
completed bonus year. No rights of any nature shall
accrue to any participant or employee with respect to any
future bonus year.
(e) The Committee may at any time amend, revise or discontinue the
Executive Incentive Compensation Program as applicable to
subsequent bonus years.
<PAGE> 8
Executive Incentive Compensation Program
Plan A-2
Page 2
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman Industries shall recommend to the Committee
prior to March 1 of each year for its approval, revision or
disapproval, lists of names of employees for participation in
the bonus for the current bonus year.
(b) The Chairman, President and Chief Executive Officer of Scotsman
Industries may at any time during the bonus year recommend to
the Committee additional names of employees for participation
beginning at a fixed date in the year and upon approval by the
Committee such employees shall participate in the bonus for
that portion of the year subsequent to the fixed date.
(c) The Chairman, President and Chief Executive Officer of Scotsman
Industries may at any time during the bonus year recommend to
the Committee the exclusion, for cause, of any employee
from participation in the bonus for the year or for any portion
thereof. Upon approval of the recommendation by the Committee,
any such employee shall not participate in the bonus for such
year or for any portion of the year subsequent to a date fixed
by the Committee.
(d) A participant who is separated from employment, for any reason,
except death, disability, or retirement, prior to the end of
the bonus year shall not participate in the bonus or any part
thereof for the bonus year. However, the Chairman, President
and Chief Executive Officer of Scotsman Industries may, at his
sole discretion, recommend the separated employee to the
Committee for participation for all or part of the bonus year.
<PAGE> 9
Executive Incentive Compensation Program
Plan A-2
Page 3
3. Computation of Bonus
(a) The actual bonus earned shall consist of two parts. Part I is
discretionary subject to a maximum of 21.0%; Part II is the
percentage of the Net Operating Income objective earned subject
to a maximum bonus of 21.0%, the percentage of the Earnings Per
Share objective earned subject to a maximum bonus of 14.0%
and the percentage of the Cash Flow objective earned subject to
a maximum bonus of 14.0%. For purposes of this Plan, the bonus
percentages are set at various levels as follows:
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
----------------------------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C> <C>
Part I - Individual Performance
Discretionary 0 10.5% 15.7% 21.0%
Part II - Team Results
Net Operating Income 0 10.5% 15.8% 21.0%
Earnings Per Share 0 7.0% 10.5% 14.0%
Cash Flow 0 7.0% 10.5% 14.0%
-- ----- ----- -----
Total 0 35.0% 52.5% 70.0%
== ===== ===== =====
</TABLE>
The bonus percentage under Part II for attainment of objectives between
any of the levels will be calculated on a pro rata basis.
(b) The discretionary bonus earned by each participant shall vary
from zero to a maximum of 21.0%. The percentage shall be
recommended by the Chairman, President and Chief Executive
Officer for approval or revision by the Committee.
(c) The Net Operating Income, Earnings Per Share and Cash Flow
objectives for Scotsman Industries will be established by the
Committee in U.S. dollars.
(d) The bonus payable to each participant shall be a percentage, as
determined in paragraphs 3(a), 3(b), and 3(c), of the
participant's bonus base. The maximum bonus payable under
the Plan is 70% of the participant's bonus base.
<PAGE> 10
Executive Incentive Compensation Program
Plan A-2
Page 4
4. Definitions
(a) The Bonus Year is based on the accounting year used by Scotsman
Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
(c) Net Operating Income shall be reported consolidated profit
before taxes on income, as determined in accordance with
generally accepted accounting principles, adjusted to
eliminate extraordinary gains and losses as determined by the
Committee and interest expense / income on debt and
investments.
(d) Corporate Earnings Per Share shall be reported consolidated net
income divided by fully-diluted weighted average common shares
outstanding, as determined in accordance with generally
accepted accounting principles, adjusted to eliminate
extraordinary gains and losses as determined by the Committee.
(e) Cash Flow shall be consolidated cash flow before acquisitions
and divestitures for the year.
<PAGE> 11
February 18, 1997
SCOTSMAN INDUSTRIES, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN AA
PARTICIPANT ___________
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel have
contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1997
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman
Industries only if extraordinary factors occur during the year
that would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash to
each participant, or in case of death, to his heirs or personal
representatives, each year following completion of the regular
annual audit by independent public accountants, which normally
is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments applicable
thereto made subsequent to determination of the bonus for such
completed bonus year. No rights of any nature shall
accrue to any participant or employee with respect to any
future bonus year.
<PAGE> 12
Executive Incentive Compensation Program
Plan AA
Page 2
(e) The Committee may at any time amend, revise or discontinue the
Executive Incentive Compensation Program as applicable to
subsequent bonus years.
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman Industries shall recommend to the Committee
prior to March 1 of each year for its approval, revision or
disapproval, lists of names of employees for participation in
the bonus for the current bonus year.
(b) The Chairman, President and Chief Executive Officer of Scotsman
Industries may at any time during the bonus year recommend to
the Committee additional names of employees for participation
beginning at a fixed date in the year and upon approval by the
Committee such employees shall participate in the bonus for
that portion of the year subsequent to the fixed date.
(c) The Chairman, President and Chief Executive Officer of Scotsman
Industries may at any time during the bonus year recommend to
the Committee the exclusion, for cause, of any employee
from participation in the bonus for the year or for any portion
thereof. Upon approval of the recommendation by the Committee,
any such employee shall not participate in the bonus for such
year or for any portion of the year subsequent to a date fixed
by the Committee.
(d) A participant who is separated from employment, for any reason,
except death, disability, or retirement, prior to the end of
the bonus year shall not participate in the bonus or any part
thereof for the bonus year. However, the Chairman, President
and Chief Executive Officer of Scotsman Industries may, at his
sole discretion, recommend the separated employee to the
Committee for participation for all or part of the bonus year.
<PAGE> 13
Executive Incentive Compensation Program
Plan AA
Page 3
3. Computation of Bonus
(a) The actual bonus earned shall consist of two parts. Part I is
discretionary subject to a maximum of 36.0%; Part II is the
percentage of the Net Operating Income objective earned subject
to a maximum bonus of 36.0%, the percentage of the Earnings Per
Share objective earned subject to a maximum bonus of 24.0%
and the percentage of the Cash Flow objective earned subject to
a maximum bonus of 24.0%. For purposes of this Plan, the bonus
percentages are set at various levels as follows:
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
----------------------------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C> <C>
Part I - Individual Performance
Discretionary 0 18.0% 27.0% 36.0%
Part II - Team Results
Net Operating Income 0 18.0% 27.0% 36.0%
Earnings Per Share 0 12.0% 18.0% 24.0%
Cash Flow 0 12.0% 18.0% 24.0%
-- ----- ----- ------
Total 0 60.0% 90.0% 120.0%
== ===== ===== ======
</TABLE>
The bonus percentage under Part II for attainment of objectives
between any three of these levels will be calculated on a pro
rata basis.
(b) The discretionary bonus earned by each participant
shall vary from zero to a maximum of 36.0%. The percentage
shall be recommended by the Chairman, President and
Chief Executive Officer for approval or revision by the
Committee.
(c) The Net Operating Income, Earnings Per Share and Cash
Flow objectives for Scotsman Industries will be established by
the Committee in U.S. dollars.
<PAGE> 14
Executive Incentive Compensation Program
PlanAA
Page 4
(d) The bonus payable to each participant shall be a
percentage, as determined in paragraphs 3(a), 3(b), and 3(c),
of the participant's bonus base. The maximum bonus payable
under the Plan is 120% of the participant's bonus base.
4. Definitions
(a) The Bonus Year is based on the accounting year used by Scotsman
Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
(c) Net Operating Income shall be reported consolidated income
before taxes on income, as determined in accordance with
generally accepted accounting principles, adjusted to
eliminate extraordinary gains and losses as determined by the
Committee and interest expense / income on debt and
investments.
(d) Corporate Earnings Per Share shall be reported consolidated net
income divided by fully-diluted weighted average common shares
outstanding, as determined in accordance with general accepted
accounting principles, adjusted to eliminate extraordinary
gains and losses as determined by the Committee.
(e) Cash Flow shall be consolidated cash flow before acquisitions
and divestitures for the year.
<PAGE> 1
EXHIBIT 10.15
775 Corporate Woods Parkway
Vernon Hills, Illinois 60061-3112
(847) 215-4500
SCOTSMAN Fax (847) 634-8823
- --------------------------------------------------------------------------------
I N D U S T R I E S
October 17, 1996
Mr. Michael de St. Paer
Whitlenge Drink Equipment, Ltd.
Chanel Way - Halesowen Industrial Park
Halesowen, West Midlands
U.K. B628SE
RE: EMPLOYMENT AGREEMENT
Dear Mike:
1. This letter confirms your employment by SCOTSMAN GROUP, INC. ("the
Company") as Managing Director, Whitlenge Drink Equipment. In that
capacity you are entitled to the following:
a. An annual salary of British Pounds .82,000;
b. Benefits as described in, and in accordance with, the Company's
benefit plans; and
c. An annual par bonus equal to 30% of your annual salary. The amount
of bonus that you actually receive, if any, will depend on the
achievement of corporate and your individual goals.
2. During your employment with the Company, you will devote your full time
and energies to the faithful and diligent performance of the duties
inherent in, and implied by, your executive position.
3. In consideration of your having accepted employment with the Company, it
is mutually agreed that:
a. In the event your employment with the company is terminated by the
Company during the period covered by this agreement for any reason
other than:
<PAGE> 2
i. willful and deliberate misconduct; or
ii. inability, for reasons of disability, reasonably to perform your
duties for 6 consecutive calendar months; or
b. In the event you resign your position with the Company during the
period covered by this agreement because:
i. you are assigned to a position of lesser rank or status; or
ii. your annual salary, annual par bonus or your benefits are
reduced; or
iii. you are reassigned to a geographical area more than 50 miles
from your present residence;
the Company shall be required, and hereby agrees, to continue paying your
then annual salary, to pay your then annual bonus at par level and to
provide all pension, profit sharing, deferred compensation, medical and
life insurance benefits under the Company's benefit plans, or the economic
equivalent thereof, for a period of twelve (12) months from the date of
such termination or resignation. If, pursuant to the terms of a benefit
plan, a benefit would be earned or accrued during such 12 month period but
would be payable on a deferred basis (were you to be employed during such
12 month period) the benefit similarly shall be deferred hereunder;
provided, however, that the Company reserves the right to pay the present
value of such benefit to you in cash at the end of such 12 month period.
4. You are not required to mitigate the amount of any payments to be made by
the Company pursuant to this Agreement by seeking other employment, or
otherwise, nor shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you as the result of
self-employment or your employment by another employer after the date of
termination of your employment with the Company.
5. If a dispute arises regarding the termination of your employment or the
interpretation or enforcement of this Agreement and you obtain a final
judgment in your favor form a court of competent jurisdiction from which
no appeal may be taken, whether because the time to do so has expired or
otherwise, or your claim is settled by the Company prior to the rendering
of such a judgement, all reasonable legal and other professional fees and
expenses incurred by you in
<PAGE> 3
Michael de St. Paer
October 17, 1996 - Page 3
contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided for in this Agreement or in
otherwise pursuing your claim will be promptly paid by the Company with
interest thereon at the highest statutory rate of your state of domicile
for interest on judgements against private parties from the date of
payment thereof by you to the date of reimbursement to you by the Company.
6. This agreement shall commence on October 16, 1996 and will continue in
effect for one full calendar year, the last day which shall be October 15,
1997. However, at the end of such year and, if extended, at the end of
each additional year thereafter, the term of this Agreement shall be
extended automatically for one additional year, unless the Compensation
Committee of the Board of Directors delivers written notice three months
prior to the end of such term, or extended term, to you, that this
Agreement will not be extended. In such case, this Agreement will
terminate at the end of the term, or extended term, then in progress.
If the foregoing terms and provisions are acceptable to you, please sign where
indicated on the enclosed copy of this Agreement and return it to me. we look
forward to your many contributions to the success of SCOTSMAN GROUP, INC.
Sincerely,
SCOTSMAN GROUP, INC.
By /s/ R. C. Osborne
----------------------------------------------
ACCEPTED AND AGREED to the date first above set forth.
/s/ M. de St. Paer
- -------------------------------------------------
Employee
<PAGE> 1
EXHIBIT 10.16
UNOFFICIAL TRANSLATION
SERVICE AGREEMENT
BETWEEN
HARTEK BEVERAGE HANDLING GMBH, Otto Hahn-Str. 4, 42477 Radevormwald (the
Company) represented by its sole shareholder HARTEK BEVERAGE HANDLING B.V., the
Netherlands.
AND
MR. LUDWIG HELMUT KLEIN, Amorsbrunnerstr. 27, 63916 Amorbach (the Managing
Director).
IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1 JOB DESCRIPTION AND DUTIES
1. The Managing Director shall have overall control of the Company. To the
extent that there are other managing directors, they shall be bound by his
directions.
2. The Managing Director shall represent the Company alone.
3. The Managing Director shall fulfill his position as employer within the
meaning of the employment and social law.
4. The Managing Director shall make available to the Company his entire
knowledge and ability and his full working capacity. He shall fulfill his
office with the care of a reasonable manager and shall observe the law,
the Articles of Association, and the resolutions of the shareholders and
of the advisory board.
5. The Managing Director can be released from the restrictions of Section 181
BGB from time to time by the meeting of the advisory committee or the
shareholders.
<PAGE> 2
SECTION 2 REMUNERATION
1. The Managing Director shall receive as payment for his services an annual
salary of DM 270,000. The annual salary shall be paid at the end of each
calendar month in twelve equal installments net of all deductions required
by law (Twelve month salary).
2. The Company shall pay the Managing Director's contributions to his
pension-, health-, unemployment- and private nurse insurances to the value
of 50% of the maximum contributions permissible under law.
3. In addition, the Company shall conclude an accident insurance policy in
favour of the Managing Director for the duration of his contract with the
following cover:
in the event of death DM 500,000
in the event of invalidity DM 1,000,000
4. The Company shall continue with the life insurance policy (No. 191537100
with Allianz Lebensversicherung) which was signed by his previous
employer. The annual premiums shall not, however, exceed DM 3,000.
5. The Managing Director shall receive a bonus of 5% of the annual net profit
(after business taxes and before any taxes on income and before the
allocation to retained earnings (reserves).
6. With effect from 1 January 1996 the Company shall increase the salary in
line with the Retail Price Index (Lebenshaltungskosten-Index aller
privaten Haushalte) calculated by the Federal Statistical Office, in each
case, for the previous calendar year.
SECTION 3 OTHER BENEFITS
1. The Company shall provide the Managing Director with a company car, of a
model appropriate to his position, for the duration of this contract, and
the Company shall bear the costs for operation and maintenance (maximum
purchase price 100,000).
<PAGE> 3
2. The Managing Director shall also be entitled to an office telephone at his
private address, and the Company shall bear the costs for operation and
maintenance.
3. The Managing Director may use the company car for private purposes, in
particular also for return trips to his family home and for holiday use.
The Managing Director is also allowed to use the office telephone within
reason for private purposes.
Any income tax payable as a result of the provision of these
payments-in-kind shall be borne by the Managing Director.
4. The reimbursement of expenses which the Managing Director incurs in
carrying out his activities under this agreement, including any travel and
hotel expenses, shall be paid in accordance with the relevant legal
regulations.
5. The Company shall also assume the costs incurred for the provision of
appropriate accommodation for the Managing Director at, or in the vicinity
of, his place of work for a maximum amount of DM 15,000 per annum from the
beginning of the service agreement.
SECTION 4 WORKING HOURS AND HOLIDAY
1. The Managing Director is not restricted to fixed working hours. However,
he shall make his services available to the Company at all times when and
to the extent that it benefits the Company.
2. The Managing Director shall receive thirty days paid holiday. On deciding
when to take his holiday, the requirements of the Company shall be taken
into account.
SECTION 5 PAYMENT OF SALARY ON ILLNESS AND DEATH
1. If the Managing Director is temporarily unable to work due to illness or
for any other reason beyond his control, then the Company shall continue
the monthly payments under Section 2(1) above for the duration of a
maximum of six months.
Page 3
<PAGE> 4
2. The Company may take into account any payments made by third parties,
for example arising from compulsory insurance claims, to the extent
that these are meant for the maintenance of the Managing Director.
The Managing Director shall inform the Company of any such claims
without further request. Payments which the Managing Director has a
right to receive as a result of payments he himself has made in
excess of the above mentioned participation in the health insurance,
are not to be taken into account.
3. If the Managing Director shall die within the duration of this agreement
then his widow shall have a right to receive payments in accordance with
Section 2 above for the month of his death and for the following three
months.
SECTION 6 NON-COMPETITION
For the duration of this contract the Managing Director shall have neither
a direct nor an indirect participation in an undertaking with whom the
Company is in direct competition or with whom the Company has business
interests, and the Managing Director shall neither advise nor support such
an undertaking in any manner, whether directly or indirectly.
SECTION 7 CONFIDENTIALITY
The Managing Director shall not disclose any Company matters to any third
parties. This duty shall continue on termination of this agreement with
the Company.
SECTION 8 COMPANY RECORDS
On termination of the agreement the Managing Director shall return to the
company all documents, certificates, records, notes, drafts, sketches or
any carbon or other copies, without further request. The Managing
Director shall not have any legal right to keep any of the above records.
SECTION 9 DURATION OF THE CONTRACT
1. This agreement commences on 1 February 1995.
Page 4
<PAGE> 5
2. The contractual relationship expires on 31 January 1997. It shall be
extended by two years automatically, unless six months notice to 31
January 1997 or to the end of the following two-year period has been
given.
SECTION 10 MISCELLANEOUS PROVISIONS
1. No oral agreements have been made.
2. Any variations or additions to this agreement shall be made in writing.
3. If a provision of this agreement is or shall become invalid, in whole or
in part, the validity of the other provisions shall not be affected. The
invalid provisions shall be amended or supplemented in such a way that it
shall achieve the intended economic purpose. The same shall apply if, in
performing the agreement, it becomes apparent that there is a matter not
regulated by the agreement which requires supplementary provision.
4. This contract is subject to the jurisdiction of the courts of Dusseldorf.
Radevormwald, dated ____________.
- ---------------------------------------- -----------------------------
Signed for and on behalf of Signed by the
HARTEK Beverage Handling GmbH Managing Director
by the sole shareholder Ludwig H. Klein
HARTEK BEVERAGE HANDLING, B.V.
Page 5
<PAGE> 6
SERVICE AGREEMENT
ADDENDUM
It is hereby agreed that the Service Agreement commencing on February 1, 1995
between Hartek Beverage Handling GmbH and Mr. Ludwig Helmut Klein be modified
and amended as follows:
SECTION 2.1 The amount of the annual salary shall be changed to DM275,000.
SECTION 2.5 The paragraph is hereby deleted in its entirety and
replaced as follows: "The Managing Director shall receive a
bonus equal to 30% of the Annual Salary. In addition, the
Managing Director shall be eligible to receive a
discretionary bonus of up to 20% of his Annual Salary, the
amount of such discretionary bonus to be determined solely
by the President of Scotsman Industries. These bonuses
shall be payable after the close of the 1997 business year
and as soon as administratively practicable."
SECTION 2.6 The date shall be changed from January 1, 1996 to January 1,
1997.
SECTION 9.2 The expiration date shall change to January 31, 1998. The
automatic extension provision is hereby deleted.
Dated:January 31, 1997
-----------------------
Signed and agreed to:
/s/ R. C. Osborne /s/ Ludwig H. Klein
- ------------------------ ----------------------
On behalf of Hartek Ludwig H. Klein
Beverage Handling GmbH Managing Director
<PAGE> 1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operation should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto. In addition to historical
information, the following management's discussion and analysis of financial
condition and results of operations contains forward looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those anticipated as a result of unforeseen factors. For a
discussion of certain factors that could cause actual results to differ from
those anticipated, see the Cautionary Statements included in Exhibit 99 to the
Company's Annual Report on Form 10-K.
RECENT DEVELOPMENT
In March of 1997 the Company completed the acquisition of Kysor Industrial
Corporation ("Kysor"), a major manufacturer and marketer of refrigerated
display cases, commercial refrigeration systems and insulated panels primarily
serving the supermarket industry. The Company purchased Kysor's common and
preferred stock (hereinafter referred to as the "Acquisition") for an aggregate
purchase price of $309 million. Concurrent with the purchase, the Company sold
Kysor's Transportation Products Group to a third party for an aggregate
purchase price of $86 million plus the assumption of certain liabilities. The
Company retained possession of Kysor's Commercial Products Group.
The Acquisition, after giving effect to the divestiture of the Transportation
Products Group and other acquisition related transactions, was financed through
a $415 million loan facility between the Company and the First National Bank of
Chicago (the "FNBC Facility"). The FNBC Facility consists of a $150 million
seven-year term loan and a $265 million seven-year revolving loan facility,
both with an initial interest rate of 1.375 percent above Eurocurrency rates.
The interest rates on both facilities adjust based on a certain ratio tied to
the strength of the Company's balance sheet. The FNBC Facility requires that a
notional amount of $150 million be hedged for three years. In addition to
financing the Acquisition, proceeds from the FNBC Facility were used to repay
existing debt, including borrowings under an earlier $90 million reducing
credit facility with a group of banks ("old credit facility") and a $20 million
private placement of debt, and will be used to pay expenses associated with the
acquisition. The prepayment of the private placement debt resulted in a pre-tax
charge of $0.8 million in the first quarter of 1997.
Due to the significance of the Acquisition to the Company, the Company's future
operating results and capital structure will be materially different from, and
will not be comparable to, prior periods. For fiscal year 1996, Kysor's sales
of commercial refrigeration products were $245.1 million, which when combined
with the comparable period for the Company would have resulted in pro forma
combined sales of $601.4 million, a 69 percent increase over the Company's
reported 1996 sales. The Company's operating income in 1997 is expected to
increase significantly as a result of the Acquisition and associated benefits,
while amortization of goodwill and interest expense also are expected to
increase significantly. Management currently expects that the Acquisition will
not be dilutive to the Company's earnings per share in 1997.
<PAGE> 2
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 29, 1996 ("1996"), COMPARED WITH YEAR ENDED DECEMBER 31,
1995 ("1995")
The Company experienced strong operating results in 1996 compared with 1995.
Sales increased in many of the Company's businesses and operating income as a
percentage of sales increased as well. These positive operating results were
largely attributable to the inclusion of a full year's operations of Hartek
Beverage Handling GmbH ("Hartek"), which was purchased by the Company on
December 31, 1995, strong growth at Whitlenge Drink Equipment Limited
("Whitlenge"), solid sales gains from the Company's European ice machine
businesses and a continued emphasis on cost containment.
The Company's total sales increased by $32.1 million, or 10 percent, to a
record $356.4 million in 1996 from $324.3 million in 1995.
Ice machine sales, which represented 49 percent of total sales of the Company
in 1996, increased by $6.5 million, or 4 percent, to $176.0 million in 1996
from $169.5 million in 1995 primarily due to 15 percent growth in sales from
European operations while domestic sales of ice machines remained relatively
constant.
Food preparation and storage equipment sales, which represented 29 percent of
total sales of the Company in 1996, remained constant compared to 1995,
reflecting a decline in European bakery equipment sales and a modest increase
in sales of food preparation equipment by The Delfield Company ("Delfield"),
which were limited by a slowing of the domestic market for such products. Sales
in this product category are expected to increase in 1997 due to Delfield's
designation by Boston Market as sole supplier of serving line equipment and
certain related products.
Drink dispensing equipment sales, which represented 19 percent of total sales
of the Company in 1996, increased by $27.6 million, or 69 percent, to $67.6
million in 1996 from $40.0 million in 1995, driven primarily by the inclusion
of the operating results of Hartek and growth of 24 percent at Whitlenge due to
increasing their export sales and a strong domestic beer market in the United
Kingdom.
Niche products sales, which represented 3 percent of total company sales in
1996, decreased by $2.3 million, or 21 percent, to $9.2 million in 1996 from
$11.5 million in 1995, driven primarily by a lower volume of certain contract
products and ventilation equipment.
The Company's gross profit increased by $10.5 million, or 12 percent, to $98.4
million in 1996 from $87.9 million in 1995. The Company's gross profit margin
increased to 27.6 percent of total sales in 1996 from 27.1 percent of total
sales in 1995 due to selling price increases in certain products, moderating
material costs and the impact of higher sales in relation to a base of certain
fixed production costs. These gains were partially offset by higher production
costs at Delfield due to inefficiencies incurred while implementing process
improvements and organizational changes in anticipation of future growth
requirements.
<PAGE> 3
Selling and administrative expenses increased $4.7 million, or 9 percent, to
$58.1 million in 1996 from $53.4 million in 1995. Although selling and
administrative expenses increased due to the inclusion of Hartek, selling and
administrative expenses as a percentage of total sales of the Company declined
to 16.3 percent in 1996 from 16.5 percent in 1995, primarily due to higher
overall sales and lower advertising costs.
Income from operations increased by $5.8 million, or 17 percent, to $40.3
million in 1996 from $34.5 million in 1995 primarily due to increased sales
with higher associated gross margins and the continued benefit of cost
containment plans initiated during 1996 and in prior years.
Net interest expense decreased by $1.0 million, or 17 percent, to $5.3 million
in 1996 from $6.3 million in 1995 primarily due to the Company's lower average
debt levels and a favorable interest rate environment.
Income taxes increased by $3.7 million to $16.4 million in 1996 from $12.7
million in 1995 due to higher income from operations and a higher effective tax
rate. The Company's tax rate increased to 47.0 percent in 1996 from 45.2
percent in 1995 primarily due to the higher percentages of sales generated from
foreign operations with higher relative tax rates.
Overall, net income increased by $3.2 million, or 21 percent, to $18.6 million
in 1996 from $15.4 million in 1995. On a fully-diluted basis, earnings per
share increased by $0.28, or 19 percent, to $1.73 in 1996 from $1.45 in 1995.
Of note, the effects of fluctuations in currency exchange rates on the
Company's results of operations were immaterial.
<PAGE> 4
YEAR ENDED DECEMBER 31, 1995 ("1995"), COMPARED WITH YEAR ENDED JANUARY 1, 1995
("1994") Scotsman Industries sales increased 22 percent in 1995, to $324.3
million, compared with $266.6 million in 1994. Strong gains in worldwide ice
machine sales and the inclusion of Delfield and Whitlenge results for the full
year were primary contributors to this growth.
Ice machine sales increased 13 percent from the prior year and represented 52
percent of total sales in 1995. Domestic ice machine sales were up 7 percent, a
significantly greater gain than the market as a whole. New products and
expansion of the distribution system contributed to the share gain. Sales of
ice machines outside the U.S. increased more than 20 percent due to improvement
in Western European markets and substantial sales increases to the Asia-Pacific
region. In December 1995 the Company's joint venture in Shenyang, China began
production of ice machines to be sold in the domestic China market.
Sales of food preparation and storage equipment increased 39 percent from 1994
to 1995 due to the inclusion of results for Delfield for a full year in 1995
versus a partial year (from April 29, 1994) for 1994. Pro forma full-year sales
of these products, as if Delfield had been acquired at the beginning of 1994,
were up 1 percent. Reduced sales from Delfield to a few large national accounts
were largely offset by sales to other customers. Food preparation and storage
equipment represented approximately one-third of total Company sales in 1995.
The Company's 1995 worldwide drink dispensing equipment sales increased 23
percent versus the prior year due to the inclusion of Whitlenge's sales for
only eight months of 1994. On a full-year basis, drink dispensing equipment
realized increased sales of 5 percent, compared with the prior year, primarily
due to Whitlenge's increased penetration of continental European markets. Sales
of this equipment accounted for 12 percent of 1995 Company sales. Niche
products, including ventilation equipment and certain contract products,
comprised the balance of the Company's sales.
Gross profit increased significantly in dollars but declined as a percentage of
sales, to 27.1 percent in 1995 from 28.5 percent in 1994, as a result of the
full-year inclusion of Delfield and Whitlenge results, which historically have
had lower gross profit margins. The impact of the increases of cost of
materials and a shift in sales mix at Delfield toward customers served by
higher-cost distribution channels also impacted gross profit in 1995.
Selling and administrative expenses for the year were up substantially in
dollars, again due in large measure to acquisitions. As a percentage of sales,
however, selling and administrative costs declined to 16.5 percent from 18.0
percent in the prior year due to lower litigation-related costs, favorable
health claims costs and the full-year inclusion of Delfield and Whitlenge and
their historically lower ratios.
Income from operations increased $6.2 million, or 22 percent, from the prior
year as a result of the above mentioned factors.
Interest expense, net, increased $0.9 million due to the higher average debt
levels associated with the Delfield and Whitlenge acquisitions. A higher
effective income tax rate of 45.2 percent in 1995, compared with 43.9 percent
in 1994, reflects a greater proportion of income from the Company's
higher-taxed Italian subsidiaries.
<PAGE> 5
1995 net income of $15.4 million and fully-diluted net income per share of
$1.45 were record highs for Scotsman Industries. Hartek, acquired on December
31, 1995, had no impact on the income statement for the year. The effect of
changes in currency exchange rates was immaterial on the Company's results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's liquidity requirements have arisen primarily from
the need to fund its working capital, capital expenditures, acquisitions and
interest expense, including fixed obligations associated with debt or lease
obligations. The Company has met these liquidity requirements through use of
funds generated from operations, along with financing through various sources.
The Company expects to continue to generate significant cash flow from
operations, which will be used to run the Company's businesses and fund further
growth. Increased levels of working capital, capital expenditures and interest
expense associated with the Acquisition are not expected to adversely impact
the Company's liquidity and access to capital. The Company expects its needs,
including those associated with the Acquisition, to be satisfied from operating
activities and borrowings available under its existing loan facilities,
including the FNBC Facility. Subsequent to the Acquisition, the Company's
total debt will increase by approximately $293.4 million to approximately
$370.0 million from $76.6 million at December 29, 1996, and the Company's total
debt to book capitalization will increase to approximately 74 percent from 37
percent at December 29, 1996.
The Company generated cash from operating activities of $23.5 million in 1996,
which was identical to the cash generated from operating activities in 1995.
Net income plus depreciation and amortization increased by $4.4 million, or 19
percent, to $27.4 million in 1996 from $23.0 million in 1995.
Accounts receivable, excluding the effects of changes in exchange rates,
increased by $3.3 million compared with year-end 1995 due to strong sales
growth in many of the Company's businesses along with the impact of extended
payment programs in certain of the Company's businesses. Inventories, excluding
the effect of changes in exchange rates, declined $0.2 million, which reflects
an improvement in the inventory turnover ratio. Trade accounts payable and
other liabilities decreased by $1.9 million, excluding the effects of changes
in exchange rates, primarily due to payment of acquisition costs.
Capital expenditures, including those funded through capital leases, decreased
$0.4 million, or 6 percent, to $6.2 million in 1996 from $6.6 million in 1995.
Capital expenditures in 1996 were made primarily to fund productivity
improvements, new product tooling, and maintenance and replacement items.
Capital expenditures for the Company's current operations (excluding Kysor) are
expected to increase moderately in 1997.
In 1996 the Company acquired 50 percent of the outstanding shares of newly
formed SAW Technologies Limited ("SAW") with Aztec Developments Limited
("Aztec") as the other 50 percent shareholder in the U.K.-based joint venture
company. Under the terms of the joint venture agreement, Aztec sold its
technologically advanced beverage dispensing valve, patents and manufacturing
capability to SAW and the Company contributed capital to SAW. The cost incurred
by the Company in 1996 relating to SAW was approximately $2.0 million. The
Company also increased its investment in the joint venture in China at a
<PAGE> 6
cost of $0.4 million during 1996. The Company financed these capital
contributions to the joint ventures through its old credit facility.
Cash and cash equivalents, which consist primarily of cash held by foreign
subsidiaries, increased by $0.7 million to $16.5 million at December 29, 1996,
from $15.8 million at December 31, 1995.
Long-term debt and capital leases outstanding decreased by $4.5 million to
$70.5 million at December 29, 1996, from $75.0 million at December 31, 1995.
Of this amount, $35.5 million consisted of borrowings issued under the
Company's old credit facility. In addition, as of December 29, 1996, the
Company also had $20.0 million of outstanding indebtedness under a private
placement agreement and $12.9 million in industrial revenue bonds. As of
December 29, 1996, the Company was subject to various covenants as part of its
outstanding indebtedness including a covenant which had the effect of
restricting the amount of the Company's dividends to its shareholders. Under
such a covenant, $45.4 million of retained earnings were restricted as of
December 29, 1996. The Company was in compliance with these covenants related
to its long-term debt as of December 29, 1996.
The interest rates under the old credit facility were floating and the interest
rate on the private placement was fixed at 11.43 percent. The interest rates on
the industrial revenue bonds are floating. The Company also has entered into
certain interest rate swap agreements pertaining to certain of its indebtedness
to reduce the impact of changes in interest rates.
Total debt, including capitalized leases, decreased by $11.2 million to $76.6
million at December 29, 1996, from $87.8 million at December 31, 1995.
Correspondingly, the Company's debt to book capitalization ratio decreased to
37 percent at December 29, 1996, from 44 percent at December 31, 1995.
Since its first quarter as a publicly-held company, the Company has paid a
quarterly dividend of $0.025 per share. The continuation, amount and timing of
this dividend will be determined by the Board of Directors and may change as
conditions warrant.
<PAGE> 7
Scotsman Industries, Inc.
Consolidated Statement of Income
(Amounts in thousands, except per-share data)
For the Fiscal Years Ended
<TABLE>
<CAPTION>
Dec. 29, Dec. 31, Jan. 1,
1996 1995 1995
<S> <C> <C> <C>
Net sales $356,373 $324,291 $266,632
Cost of sales 257,942 236,402 190,518
-------- -------- --------
Gross profit 98,431 87,889 76,114
Selling and administrative
expenses 58,135 53,435 47,900
-------- -------- --------
Income from operations 40,296 34,454 28,214
Interest expense, net 5,279 6,326 5,416
-------- -------- --------
Income before income taxes 35,017 28,128 22,798
Income taxes 16,449 12,720 10,013
-------- -------- --------
Net income $ 18,568 $ 15,408 $ 12,785
Preferred stock dividends 813 1,240 885
-------- -------- --------
Net income available to
common shareholders $ 17,755 $ 14,168 $ 11,900
======== ======== ========
Net income per share:
Primary $ 1.85 $ 1.58 $ 1.49
-------- -------- --------
Fully diluted $ 1.73 $ 1.45 $ 1.35
-------- -------- --------
The accompanying notes to consolidated financial statements are an integral
part of this statement.
</TABLE>
<PAGE> 8
Scotsman Industries, Inc.
Consolidated Balance Sheet
(Amounts in thousands)
<TABLE>
<CAPTION>
Dec. 29, Dec. 31,
1996 1995
<S> <C> <C>
Assets
Current Assets:
Cash and temporary cash investments $ 16,501 $ 15,808
Trade accounts and notes receivable, net of
allowances of $2,778 in 1996 and $2,960 in 1995 58,734 54,500
Inventories 52,530 52,251
Deferred income taxes 4,708 5,690
Other current assets 5,101 3,093
-------- --------
Total current assets 137,574 131,342
Properties and equipment, net 46,659 46,373
Goodwill, net 94,975 94,732
Other noncurrent assets 4,056 3,496
-------- --------
Total assets $283,264 $275,943
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt and current maturities of
capitalized lease obligations and
long-term debt $ 16,317 $ 13,037
Trade accounts payable 22,344 24,174
Accrued income taxes 6,302 4,491
Accrued expenses 33,290 34,812
-------- --------
Total current liabilities 78,253 76,514
Long-term debt and capitalized lease obligations 60,289 74,719
Deferred income taxes 3,710 3,814
Other noncurrent liabilities 9,300 8,577
-------- --------
Total liabilities 151,552 163,624
Shareholders' Equity:
Common stock, $.10 par value, authorized 50,000,000
shares; issued 10,729,513 shares and 9,153,014
shares, respectively 1,073 915
Preferred stock, $1.00 par value, authorized
10,000,000 shares; issued 0 shares and 1,999,992
shares, respectively -- 2,000
Additional paid in capital 73,053 70,514
Retained earnings 62,036 45,232
Deferred compensation and unrecognized pension cost (117) (88)
Foreign currency translation adjustments (2,877) (4,911)
Less: Common stock held in treasury;
187,049 and 188,040 shares, respectively (1,456) (1,343)
-------- --------
Total shareholders' equity 131,712 112,319
-------- --------
Total liabilities and shareholders' equity $283,264 $275,943
======== ========
The accompanying notes to consolidated financial statements are an integral
part of this statement.
</TABLE>
<PAGE> 9
Scotsman Industries, Inc.
Consolidated Statement of Cash Flows
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Fiscal Years Ended Dec. 29, Dec.31, Jan. 1,
1996 1995 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 18,568 $ 15,408 $ 12,785
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,870 7,594 6,019
Loss (gain) on property dispositions (82) (39) 45
Change in assets and liabilities:
Trade accounts receivable (3,310) (2,607) (7,779)
Inventories 237 2,006 (3,815)
Trade accounts payable and other liabilities (1,877) (2,074) 10,290
Other, net 1,101 3,162 (1,369)
-------- -------- --------
Net cash provided by operating activities 23,507 23,450 16,176
Cash flows from investing activities:
Investment in properties and equipment (6,195) (6,513) (5,434)
Proceeds from dispositions of properties and equipment 230 215 34
Acquisition of Delfield and Whitlenge -- -- (28,689)
Investment in U.K. joint venture (2,024) -- --
Investment in China joint venture, net (399) (665) --
Acquisition of Hartek (991) (1,491) --
-------- -------- --------
Net cash used in investing activities (9,379) (8,454) (34,089)
Cash flows from financing and capital activities:
Short-term debt, net (6,524) 3,616 (74)
Issuance of long-term debt 16,074 17,806 63,000
Principal payments under long-term debt
and capitalized leases (21,128) (28,071) (42,831)
Dividends paid to shareholders (2,035) (2,118) (1,339)
-------- -------- --------
Net cash provided by (used in) financing
and capital activities (13,613) (8,767) 18,756
Effect of exchange rate changes on cash and
temporary cash investments 178 (191) 465
-------- -------- --------
Net increase in cash and temporary cash investments 693 6,038 1,308
Cash and temporary cash investments at beginning of year 15,808 9,770 8,462
-------- -------- --------
Cash and temporary cash investments at end of year $ 16,501 $15,808 $ 9,770
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 6,812 $ 7,431 $ 4,566
======== ======== ========
Income taxes $ 14,957 $ 10,992 $ 10,685
======== ======== ========
Supplemental schedule of noncash investing
and financing activities:
Investment in properties and equipment through
issuance of capitalized lease obligations $ (42) $ (96) $ (56)
======== ======== ========
Issuance of stock for acquisition of Delfield and
Whitlenge $ -- $(12,089) $(39,000)
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
<PAGE> 10
Scotsman Industries, Inc.
Consolidated Statement of Shareholders' Equity
(Amounts in thousands, except number of shares)
<TABLE>
<CAPTION>
Foreign
Treasury Common Preferred Additional Currency
Stock Stock Stock Paid in Retained Translation Treasury
Number Par Value Par Value Capital Earnings Other (a) Adjustments Stock Total
-------- --------- --------- -------- -------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 2, 1994 202,295 $ 721 $ -- $ 20,557 $ 20,855 $ (54) $(6,741) $(1,344) $ 33,994
------- ----- ------ -------- -------- ------ ------- ------- --------
Net income -- -- -- -- 12,785 -- -- -- 12,785
Foreign currency translation
adjustments -- -- -- -- -- -- 1,710 -- 1,710
Issuance of deferred
compensation (8,038) -- -- 118 -- (119) -- 1 --
Amortization of deferred
compensation -- -- -- -- -- 99 -- -- 99
Dividends declared to common
shareholders -- -- -- -- (796) -- -- -- (796)
Dividends declared to preferred
shareholders -- -- -- -- (885) -- -- -- (885)
Issuance of common and preferred
stock relating to acquisition
of Delfield and Whitlenge -- 120 2,000 36,880 -- -- -- -- 39,000
Stock options exercised -- 5 -- 530 -- -- -- -- 535
Unrecognized pension cost -- -- -- -- -- 21 -- -- 21
Other 2 -- -- -- -- -- -- -- --
------- ----- ------ -------- -------- ------ ------- ------- --------
Balance at January 1, 1995 194,259 $ 846 $2,000 $ 58,085 $31,959 $ (53) $(5,031) $(1,343) $ 86,463
======= ===== ====== ======== ======== ====== ======= ======= ========
Net income -- -- -- -- 15,408 -- -- -- 15,408
Foreign currency translation
adjustments -- -- -- -- -- -- 120 -- 120
Issuance of deferred
compensation (6,219) -- -- 120 -- (120) -- -- --
Amortization of deferred
compensation -- -- -- -- -- 129 -- -- 129
Dividends declared to common
shareholders -- -- -- -- (895) -- -- -- (895)
Dividends declared to preferred
shareholders -- -- -- -- (1,240) -- -- -- (1,240)
Issuance of common stock
relating to acquisition
of Delfield and Whitlenge -- 67 -- 12,022 -- -- -- -- 12,089
Stock options exercised -- 2 -- 287 -- -- -- -- 289
Unrecognized pension cost -- -- -- -- -- (44) -- -- (44)
------- ----- ------ -------- -------- ------ ------- ------- --------
Balance at December 31, 1995 188,040 $ 915 $2,000 $ 70,514 $ 45,232 $ (88) $(4,911) $(1,343) $112,319
Net income -- -- -- -- 18,568 -- -- -- 18,568
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION> Foreign
Treasury Common Preferred Additional Currency
Stock Stock Stock Paid in Retained Translatio Treasury
Number Par Value Par Value Capital Earnings Other (a) Adjustment Stock Total
-------- --------- --------- ---------- -------- --------- ---------- -------- -------
<S> <C> <C> <C> <C> <S> <C> <C> <C> <C>
Foreign currency translation
adjustments -- -- -- -- -- -- 2,034 -- 2,034
Issuance of deferred
compensation (5,965) -- -- 119 -- (119) -- -- --
Amortization of deferred
compensation -- -- -- -- -- 120 -- -- 120
Dividends declared to common
shareholders -- -- -- -- (951) -- -- -- (951)
Dividends declared to preferred
shareholders -- -- -- -- (813) -- -- -- (813)
Conversion of preferred stock
into common stock -- 153 (2,000) 1,847 -- -- -- -- --
Stock options exercised 4,974 5 -- 573 -- -- -- (113) 465
Unrecognized pension cost -- -- -- -- -- (30) -- -- (30)
-------- ------ ------ -------- ------- ----- ------- ------- --------
Balance at December 29, 1996 187,049 $1,073 $ -- $ 73,053 $62,036 $(117) $(2,877) $(1,456) $131,712
======== ====== ====== ======== ======= ===== ======= ======= ========
</TABLE>
(a) Other shareholders' equity includes deferred compensation and unrecognized
pension cost.
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE> 12
SCOTSMAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of Scotsman
Industries, Inc. ("Scotsman" or "the Company") and its consolidated
subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.
Certain amounts in the consolidated financial statements for previous
years have been reclassified to conform to the presentation used for
fiscal year 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Fiscal Year
The Company reports on a 52-53 week fiscal year ending on the Sunday
nearest to December 31. Fiscal years 1996, 1995 and 1994 had 52 weeks.
Cash Management
The Company considers all highly liquid investments with original
maturities of three months or less to be temporary cash investments.
Temporary cash investments, primarily Eurodollar deposits or repurchase
agreements with maturities of 90 days or less, are carried at cost, which
approximates market. Interest income (in thousands) included in interest
expense, net was $791, $633 and $277 for fiscal years 1996, 1995 and
1994, respectively.
<PAGE> 13
Trade Accounts and Notes Receivable
Trade accounts and notes receivable at December 29, 1996, and December
31, 1995, included notes of $7.5 million and $7.3 million, respectively.
Inventories
Inventories are stated at the lower of cost or market and include the
appropriate elements of material, labor and manufacturing overhead
expenses. Cost is determined using the last-in, first-out ("LIFO")
method for a portion of domestic inventories and the first-in, first-out
("FIFO") method for the balance of domestic and all foreign inventories.
Properties and Equipment
Properties and equipment, including capitalized leases, are recorded at
cost to the Company at date of acquisition and depreciated over either
their estimated useful lives, ranging from 3 to 40 years, or lease terms,
whichever is shorter, using principally the straight-line method for
financial reporting purposes and accelerated methods for tax reporting
purposes.
Goodwill
Cost of investments in excess of net assets of businesses acquired after
October 1970 is being amortized using the straight-line method over 40
years. The related amortization expense was $2.5 million, $2.4 million
and $1.5 million for the fiscal years 1996, 1995 and 1994, respectively.
At December 29, 1996, and December 31, 1995, accumulated amortization
was $8.0 million and $5.4 million, respectively. After an acquisition,
the Company continually reviews whether subsequent events and
circumstances have occurred that indicate that the remaining estimated
useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. If events and circumstances
indicate that goodwill related to a particular business should be
reviewed for possible impairment, the Company uses projections to assess
whether future operating income of the business on a non-discounted basis
is likely to exceed the goodwill amortization over the remaining life of
the goodwill, to determine whether a writedown of goodwill to recoverable
value (as determined by the same projections) is appropriate.
<PAGE> 14
Financial Instruments
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company's
participation in derivatives is limited primarily to interest rate swap
agreements and forward exchange contracts. The Company enters into
interest rate swap agreements to reduce the impact of changes in interest
rates on its floating-rate long-term debt. The difference between the
fixed and floating rates, which is to be paid or received, is accrued as
interest rates change and is recognized over the life of the swap
agreements. The cash impacts of these instruments are included with the
cash flows of the items to which they relate in the Consolidated
Statement of Cash Flows.
Interest Expense
Interest expense included in the Consolidated Statement of Income is
related to private placement debt, debt covered under a credit agreement,
industrial development revenue bonds, capitalized lease obligations, and
borrowings on domestic lines of credit and foreign lines of credit.
Research and Development Costs
Research and development costs related to both present and future
products are expensed currently. Research and development expenditures
for fiscal years 1996, 1995 and 1994 were $5.6 million, $4.8 million and
$5.1 million, respectively.
Foreign Currency Translation
The Company has foreign subsidiaries located in Italy, Germany, Austria,
China and the United Kingdom. Foreign subsidiary income and expenses are
translated into United States dollars at the average rates of exchange
prevailing during the year. The assets and liabilities are translated
into U.S. dollars at the rates of exchange on the balance sheet date, and
the related translation adjustments are accumulated as a separate
component of shareholders' equity. As the Company intends to maintain
its investments in these subsidiaries indefinitely, ultimate realization
of these translation adjustments is highly uncertain. Foreign currency
transaction gains and losses are minimal and are recorded in income as
they occur.
Taxes
Federal and state income taxes are not provided on undistributed earnings
of foreign subsidiaries that have been or are intended to be reinvested
indefinitely.
<PAGE> 15
Stock Options
In 1995 the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
("SFAS 123"). Currently, when stock options are exercised proceeds from
the sale of common stock issued under those options are credited to
common stock and additional paid in capital. Therefore, under the method
used by the Company, no charges or credits are made to income for stock
options. As permitted by SFAS 123, the Company will continue to account
for stock options as described above. The financial statement effect of
this new standard is limited to additional required footnote disclosure
in 1996 which is provided in Note 12.
Earnings Per Share
Primary earnings per share are computed based on income after preferred
stock dividends. The number of shares includes common stock and common
stock equivalents.
The calculation of fully-diluted net income per share is based on net
income before preferred stock dividends. The number of shares includes
common stock and common stock equivalents, assumes conversion of the
convertible preferred stock from the date of issue and also includes the
dilutive impact, as if issuance had occurred on the acquisition date of
Delfield and Whitlenge, of contingent shares that were issued subsequent
to January 1, 1995.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 29, 1996 Dec. 31, 1995
<S> <C> <C>
Finished goods $23,207 $21,604
Work-in-process 9,052 8,023
Raw materials 20,271 22,624
------- -------
Total inventories $52,530 $52,251
======= =======
</TABLE>
Approximately $7.0 million and $7.5 million of total Company inventories
were valued on the LIFO method in fiscal 1996 and 1995, respectively. In
1996 there were reductions in levels of inventory valued on LIFO which
reduced cost of sales by $0.1 million. If inventories valued on the LIFO
method had been valued using the FIFO method, they would have been $3.9
million and $4.1 million higher at December 29, 1996, and December 31,
1995, respectively.
<PAGE> 16
3. PROPERTIES AND EQUIPMENT
Properties and equipment consisted of assets owned and leased under
capital lease arrangements as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 29, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Owned:
Land $ 1,966 $ 1,995
Buildings and leasehold
improvements 28,521 28,046
Machinery, fixtures and
equipment 54,564 49,294
Accumulated depreciation
and amortization (43,000) (37,949)
-------- --------
Owned, net 42,051 41,386
-------- --------
Leased:
Buildings and leasehold
improvements 5,141 5,029
Machinery, fixtures and 1,121 1,540
equipment
Accumulated depreciation
and amortization (1,654) (1,582)
-------- --------
Leased, net 4,608 4,987
-------- --------
Properties and equipment,
net $ 46,659 $ 46,373
======== ========
</TABLE>
4. SHORT-TERM DEBT
Short-term debt (in thousands) at December 29, 1996, and December 31,
1995, was $6,115 and $12,767, respectively, and principally related to amounts
owed under lines of credit. The weighted average interest rate based on
short-term debt outstanding as of December 29, 1996, and December 31, 1995, was
6.1 percent and 7.3 percent, respectively. Average borrowings (in thousands)
and the related weighted average interest rates were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Bank and other borrowings $4,888 $2,463
Weighted average interest rate 6.4% 7.9%
====== ======
</TABLE>
The maximum aggregate short-term debt outstanding (in thousands) at the
end of any month during fiscal years 1996 and 1995 was $11,109 and
$12,767, respectively.
<PAGE> 17
5. LINES OF CREDIT
The Company maintains various credit agreements which are used primarily
to fund the Company's working capital needs. At December 29, 1996, these
agreements (in thousands) included foreign and domestic lines of credit
of $18,472 and $11,000, respectively. Lines of credit are reviewed
annually, with amounts borrowed under lines of credit included in
short-term debt.
At December 29, 1996, foreign and domestic lines of credit not in use
were (in thousands) $18,216 and $5,141, respectively. Borrowings under
these agreements are available at the prime rate or other prevailing
market rates. There are no fees or compensating balance requirements on
the lines of credit.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 29, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Payroll and employee benefits $ 7,818 $ 6,394
Current portion of product
warranties 6,673 5,994
Reserve for customer allowances 4,264 3,446
Other current liabilities 14,535 18,978
------- -------
Total accrued expenses $33,290 $34,812
======= =======
</TABLE>
<PAGE> 18
7. LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
Long-term debt and capitalized lease obligations consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Dec. 29, Dec. 31,
1996 1995
-------- --------
<S> <C> <C>
Credit Agreement
with floating interest rates;
due 2000 $35,473 $41,765
11.43% private placement
agreement; due 1997-1998 20,000 20,000
Allendale County Industrial
Revenue Bonds with floating
interest rate; due 2001 9,250 9,250
Town of Covington
Industrial Revenue Bonds
with floating interest rate;
due 2002 - 2006 3,150 3,150
Isabella County
Industrial Revenue Bonds
with floating interest rate;
due 1996 - 2003 450 500
Foreign borrowings
with various interest rates;
due 1997 - 2011 2,047 -
Capital lease obligations
with various interest rates;
due 1996 - 1998 121 324
------- -------
Total $70,491 $74,989
Current portion 10,202 270
------- -------
Long-term portion $60,289 $74,719
======= =======
</TABLE>
In April 1994 a $90 million reducing revolving credit agreement ("Credit
Agreement") was established to provide the financing for the cash consideration
paid in connection with the acquisitions of Delfield and Whitlenge, the
refinancing of the majority of approximately $35 million in existing
indebtedness of Delfield and Whitlenge, replacement of letters of credit of
approximately $10.1 million, working capital for the Company and its
subsidiaries following the acquisitions, and transaction costs associated with
the acquisitions. Under the terms of the Credit Agreement, the revolving
credit facility reduces by $7 million at the end of years one and two, $12
million at the end of year three and $5 million at the end of years four and
five, with the remaining balance due at the end of year six. As of December 29,
1996, of the $76.0 million of credit available under this agreement, $30.4
million was unused.
<PAGE> 19
Borrowings under the Credit Agreement will bear interest at a floating rate
based upon, at the Company's option, (a) the higher of the agent bank's
corporate base rate or the federal funds rate plus 0.5 percent per annum, or
(b) the rate offered by the agent bank for deposits in the relevant
Eurocurrency, plus an applicable margin. The applicable margin varies between
0.50 percent and 1.0 percent per annum, depending upon the Company's ratio of
earnings before interest, taxes and amortization to total interest. As of
December 29, 1996, interest rates under the Credit Agreement ranged from
approximately 6.1 percent for Eurodollar loans to approximately 6.9 percent for
borrowings denominated in pounds sterling. Commitment fees on the Credit
Agreement vary from 0.175 percent to 0.25 percent per annum on the unused
portion.
In 1989 the Company issued $20.0 million of private placement debt held
primarily by insurance companies.
The Allendale County Industrial Revenue Bonds are secured by a bank letter of
credit for $9.6 million. The current cost of the commitment fee on the letter
of credit ranges from 0.50 percent to 1.0 percent on outstanding principal and
interest depending on the Company's interest coverage ratio as defined in the
Credit Agreement as described above. The interest rate applicable to the
Allendale County Industrial Revenue Bonds was 4.21 percent and 5.23 percent at
December 29, 1996, and December 31, 1995, respectively.
Delfield had two industrial revenue bonds outstanding which the Company assumed
as of the acquisition in April 1994. One series was issued by the town of
Covington, Tennessee and the other was issued by Isabella County, Michigan. The
Town of Covington Industrial Revenue Bonds are secured by a building with a net
book value of $4.4 million as of December 29, 1996. The Isabella County
Industrial Revenue Bonds are secured by a building section with a net book
value of $0.8 million as of December 29, 1996. The interest rates for these two
industrial revenue bonds as of December 29, 1996, were 5.16 percent and 5.94
percent, respectively. The interest rates for these two industrial revenue
bonds as of December 31, 1995, were 5.31 percent and 6.12 percent,
respectively.
The Company also has various capital lease obligations which are collateralized
by properties and equipment with a net book value of approximately $0.2
million.
<PAGE> 20
The weighted average effective interest rate was 7.5 percent and 7.7 percent at
December 29, 1996, and December 31, 1995, respectively. Future required
maturities of long-term debt and capital leases assuming letters of credit are
outstanding at the same level as December 29, 1996, were as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $10,202
1998 10,710
1999 415
2000 35,888
2001 9,320
Thereafter 3,956
-------
Total $70,491
=======
</TABLE>
The Credit Agreement and private placement agreement contain various financial
covenants that, among other things, require the Company to maintain, on a
consolidated basis, specified leverage, interest expense coverage and cash flow
coverage ratios, and a minimum adjusted consolidated tangible net worth. The
Company was in compliance with these covenants as of December 29, 1996. Among
other restrictions, one of the Company's covenants has the effect of
restricting the amount of the Company's dividends to its shareholders to an
amount equal to $2.0 million plus 40 percent of the sum of cumulative net
income from May 2, 1994, forward and the net cash proceeds from the issuance of
equity securities after April 29, 1994. Under such a covenant, $45.4 million
of retained earnings was restricted as of December 29, 1996. The Company is
precluded from paying dividends to its shareholders if a default or an event
which, but for the lapse of time or giving of notice, or both, would constitute
a default under the Credit Agreement has occurred and is continuing or would
occur after giving effect to the payment of such dividends.
8. OPERATING LEASES
The Company leases certain of its offices, buildings, and machinery and
equipment for periods up to 10 years with various renewal options.
Rental expense under operating leases was $2.5 million in 1996, $2.4
million in 1995 and $2.0 million in 1994.
<PAGE> 21
Future minimum lease commitments under noncancelable operating leases
with initial lease terms greater than one year at December 29, 1996, were
as follows (in thousands):
<TABLE>
<S> <C>
1997 $1,584
1998 1,390
1999 979
2000 1,019
2001 1,000
Thereafter 1,955
Total minimum lease ------
commitments $7,927
======
</TABLE>
9. EMPLOYEE BENEFIT PLANS
The Company sponsors defined benefit pension plans for certain salaried
and hourly employees. Plans covering salaried employees provide benefits
that are based on years of service and compensation. Plans covering
hourly employees provide benefits of stated amounts for each year of
service. The pension assets are invested in institutional mutual funds
which contain both equities and fixed investments. The Company complies
with funding requirements under the Employee Retirement Income Security
Act.
As a result of the spin-off of the Company from Household International,
Inc. ("Household") in 1989, Household became responsible for all domestic
salaried pension benefits accrued prior to March 31, 1989.
The Company adopted a supplemental executive retirement plan ("SERP") for
certain employees in 1994.
Net periodic pension cost included in the Consolidated Statement of
Income was as follows (in thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended
------------------------------------
Dec. 29, Dec. 31, Jan. 1
1996 1995 1995
--------- ---------- ------------
<S> <C> <C> <C>
Service cost $1,141 $ 919 $ 815
Interest cost 790 667 475
Actual return on
plan assets (1,050) (797) (213)
Net amortization
and deferral 519 365 (60)
Net periodic ------ ------ ------
pension cost $1,400 $1,154 $1,017
====== ====== ======
</TABLE>
<PAGE> 22
The funded status of the Company's pension plans (in thousands),
excluding the Italian and German pension plans, was as follows:
<TABLE>
<CAPTION>
Dec. 29, 1996 Dec. 31, 1995
------------------------ ------------------------
Plan Accumulated Plan Accumulated
Assets Benefits Assets Benefits
Exceed Exceed Exceed Exceed
Accumulated Plan Accumulated Plan
Benefits Assets Benefits Assets
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Actuarial present
value of:
Vested benefits
obligation $(4,425) $(4,435) $(1,688) $(5,193)
Non-vested
benefits
obligation (419) (586) -- (1,542)
Accumulated ------- ------- ------- -------
benefit
obligation (4,844) (5,021) (1,688) (6,735)
Effects of
anticipated
future
compensation
levels (1,838) (612) (292) (1,607)
Projected ------- ------- ------- -------
benefit
obligation (6,682) (5,633) (1,980) (8,342)
Plan assets
at fair
value 5,115 3,771 1,772 5,393
Projected ------- ------- ------- -------
benefit
obligation
in excess
of plan
assets (1,567) (1,862) (208) (2,949)
Unrecognized
net asset -- (9) -- (12)
Unrecognized
prior
service cost 464 835 -- 1,289
Unrecognized
net (gain)
or loss (396) 74 (79) 1
Adjustment
required
to recognize
minimum
liability -- (344) -- (482)
Accrued ------- ------- ------- -------
pension
cost $(1,499) $(1,306) $ (287) $(2,153)
======= ======= ======= =======
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Assumptions used in the actuarial computations were:
Dec. 29, Dec. 31, Jan. 1,
1996 1995 1995
-------- -------- -------
<S> <C> <C> <C>
Discount rate 7.5 - 9.0% 7.5 - 9.0% 8.0 - 9.0%
Rate of increase
in compensation
levels 4.0 - 7.0% 4.0 - 7.0% 4.0 - 7.0%
Expected long-term
rate of return
on assets 8.5 - 10.0% 8.5 - 10.0% 9.0 - 10.0%
</TABLE>
The Company has pension plans covering employees in its Italian
subsidiaries. These plans combine aspects of both government mandated
and non-contributory plans. Total pension expense under these plans
included in the Consolidated Statement of Income (in thousands) was $895,
$888, and $785 in fiscal years 1996, 1995 and 1994, respectively. The
unfunded liability for these plans included in the Consolidated Balance
Sheet at December 29, 1996, and December 31, 1995, (in thousands) was
$4,578 and $4,286, respectively. The Company also has a Hartek pension
plan in Germany which covers only a former employee and his spouse.
Information for the Hartek pension plan has not been included in the
tables presented as the amounts were immaterial as of December 29, 1996.
The Company also sponsors defined contribution benefit plans.
Participation in one of these plans is available to substantially all
domestic employees. Company contributions to these plans are based on
either a percentage of employee contributions or a specified amount
depending on the provisions of the plan. Total costs incurred under the
plans were (in thousands) $742, $568, and $643 for fiscal years 1996,
1995 and 1994, respectively.
The Company maintains plans that provide certain health care benefits to
certain employees retiring from the Company on or after attaining age 55
who have rendered at least 10 years of service to the Company. These
plans are unfunded. The Company reserves the right to change or
terminate the benefits at any time.
<PAGE> 24
Net periodic post-retirement benefit cost for the fiscal years ended
December 29, 1996, December 31, 1995, and January 1, 1995, included the
following components (in thousands):
<TABLE>
<CAPTION>
Dec. 29, Dec. 31, Jan. 1,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Service cost on benefits earned $146 $132 $161
Interest cost on accumulated
post-retirement benefit obligation 148 139 142
Amortization of net loss subsequent
to transition - - 4
--- --- ----
Net periodic post-retirement
benefit cost $294 $271 $307
==== ==== ====
</TABLE>
The following table sets forth the status of the plan, reconciled to the
accrued post-retirement benefit cost recognized in the Company's balance sheet
(in thousands):
<TABLE>
<CAPTION>
Dec. 29, Dec. 31,
1996 1995
---- ----
<S> <C> <C>
Accumulated post-retirement
benefit obligation:
Retirees $ 755 $ 820
Fully-eligible active plan
participants 171 141
Other active plan
participants 1,110 1,161
------ ------
Total $2,036 $2,122
Unrecognized net (loss) gain 64 (126)
Accrued post-retirement ------ ------
benefit cost recognized
in the balance sheet $2,100 $1,996
====== ======
</TABLE>
Assumptions used in the actuarial computations were:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Discount rate 7.5% 7.5%
Projected health care cost trend rates:
Pre-65 benefits 8.5% 12.6%
Post-65 benefits 8.5% 11.3%
Ultimate health care cost trend rates:
Pre-65 benefits 5.0% 5.5%
Post-65 benefits 5.0% 5.5%
</TABLE>
<PAGE> 25
Increasing the assumed health care cost trend rate by one percentage
point in each year would increase the accumulated post-retirement benefit
obligation by approximately (in thousands) $360 for 1996 and $378 for
1995, and the aggregate of the service and interest cost components of
net periodic post-retirement benefit cost by approximately (in
thousands) $64 for 1996, $57 for 1995 and $63 for 1994.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
During 1994 the Company adopted Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial
Instruments," ("SFAS 107") and Statement of Financial Accounting
Standards No. 119, "Disclosure About Derivative Financial Instruments and
Fair Value of Financial Instruments"("SFAS 119"). These statements
require certain disclosures about the fair value of financial
instruments, including derivative financial instruments, for which it is
practicable to estimate fair value.
The following methods and assumptions were used to estimate the fair
market value of each class of financial instrument for which it is
practicable to estimate that value:
Cash and Temporary Cash Investments
Temporary cash investments consist principally of investments in
short-term, interest-bearing instruments. The carrying amount
approximates fair market value.
Trade Accounts and Notes Receivable and Payable
The carrying amount of the Company's trade accounts and notes
receivable and payable approximates market value.
Long-Term Debt
The carrying amount of most of the Company's long-term debt and the
Company's short-term debt approximates market value since rates on
those debt agreements are variable and are set periodically based
on current rates during the year. An exception would be the
private placement agreement which has a fixed interest rate of
11.43 percent. The fair value of the private placement agreement
was estimated based on the current rates quoted to the Company for
debt with the same maturities.
<PAGE> 26
Letters of Credit
As collateral for the Company's industrial revenue bonds and for
certain of its insurance programs, the Company had a total of $10.1
million of letters of credit outstanding as of December 29, 1996.
The Company pays letter of credit fees to its bank group that range
from 0.50 to 1.0 percent based upon the Company's interest coverage
ratio as defined in the Credit Agreement. It is the Company's
opinion that the replacement costs for such letters of credit would
not significantly vary from the present fee structure. No material
loss is anticipated due to nonperformance by counterparties to
these agreements.
Swap Agreements and Forward Contracts
Effective May 1994 the Company entered into two interest rate swap
agreements to reduce the impact of changes in interest rates on its
domestic floating-rate long-term debt. Both of the interest rate
swap agreements had a notional principal amount of $10 million and
interest payable was at a fixed rate of 5.64 percent and 6.33
percent, respectively. In return for both of these agreements, the
Company will receive floating rate interest payments based on
three-month London Interbank Offered Rate. These agreements will
expire in May 1997. These two swap agreements are accounted for as
hedges. The Company had a forward exchange contract outstanding as
of December 29, 1996, to hedge exposure relating to an intercompany
transaction. The Company had no forward exchange contracts
outstanding as of December 31, 1995.
The fair value of interest rate swaps and forward exchange
contracts is the estimated amount that the Company would receive or
pay to terminate the agreements as of the balance sheet date.
<PAGE> 27
The estimated fair value of the Company's financial instruments at
December 29, 1996, (in thousands) was as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------- -------
<S> <C> <C>
Assets:
Cash and temporary
cash investments $16,501 $16,501
Trade accounts
and notes receivable 58,734 58,734
Forward exchange contract -- 229
Liabilities:
Short-term debt 6,115 6,115
Trade accounts payable 22,344 22,344
Long-term debt 70,370 71,535
Interest rate
swap agreements -- 44
</TABLE>
The estimated fair value of the Company's financial instruments at
December 31, 1995, (in thousands) was as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
<S> <C> <C>
Assets:
Cash and temporary
cash investments $15,808 $15,808
Trade accounts
and notes receivable 54,500 54,500
Liabilities:
Short-term debt 12,767 12,767
Trade accounts payable 24,174 24,174
Long-term debt 74,665 76,675
Interest rate
swap agreements -- 176
</TABLE>
<PAGE> 28
11. INCOME TAXES
The components of the consolidated net deferred tax assets and
liabilities as of December 29, 1996, and December 31, 1995, were as
follows (in thousands):
<TABLE>
<CAPTION>
Dec. 29, Dec. 31,
1996 1995
<S> <C> <C>
Gross deferred tax assets:
Tax credits due to Italian
reorganization $ 530 $ 556
Warranty accruals 3,110 2,907
Reserve for Delfield and
Whitlenge 291 1,055
Hartek reserve 461 1,091
Receivable allowances 812 797
Inventory reserves 720 754
Reserve for post-retirement
medical costs 823 791
Tax benefit of German
net operating loss carry forwards 3,562 4,851
Other 3,502 2,989
-------- --------
Total gross deferred tax assets 13,811 15,791
Valuation allowance (3,681) (4,991)
-------- --------
Total deferred tax assets $ 10,130 $ 10,800
======== ========
Gross deferred tax liabilities:
Properties and equipment $ (6,102) $ (5,702)
Inventory related items (180) (909)
Simag goodwill amortization (1,611) (1,186)
Other (1,239) (1,157)
-------- --------
Total gross deferred tax
liabilities $ (9,132) $ (8,954)
======== ========
</TABLE>
Deferred taxes reflected in the accompanying balance sheets as of December 29,
1996, and December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 29, Dec. 31,
1996 1995
-------- --------
<S> <C> <C>
Current portion of deferred
tax asset $ 4,708 $ 5,690
Noncurrent portion of deferred
tax asset (included in other
noncurrent assets) - 22
Current portion of deferred
tax liability (included in
accrued expenses) - (52)
Noncurrent portion of deferred
tax liability (3,710) (3,814)
-------- --------
</TABLE>
<PAGE> 29
The valuation allowance as of December 29, 1996, includes $3.6 million to
entirely offset the tax asset established for Hartek pre-acquisition net
operating loss carry forwards which might not be realized due to the
terms of the purchase agreement of Hartek (see Note 14) which requires
substantial repayment to the seller if utilized and due to a pending
decision of the Supreme Tax Court in Germany which may result in such
carry forwards being not utilizable by the Company. The German net
operating loss carry forwards, if realized, will result in a reduction of
goodwill and the benefit of utilizing the net operating loss carry
forwards will not flow through the income statement.
The valuation allowance also includes $0.1 million to partially offset
the tax asset in Italy relating to a prior-year reorganization of one of
the Company's Italian subsidiaries. The Company established this reserve
for the Italian tax asset due to the limited carry forward life of net
operating losses in Italy.
The provision (benefit) for income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended
--------------------------------------------
Dec. 29, Dec. 31, Jan. 1,
1996 1995 1995
------------- --------- ------------
<S> <C> <C> <C>
United States:
Current $ 7,518 $ 7,431 $ 7,300
Deferred 837 855 (746)
------- ------- -------
8,355 8,286 6,554
------- ------- -------
Foreign:
Current 7,407 3,605 2,412
Deferred 687 829 1,047
------- ------- -------
8,094 4,434 3,459
Provision for ------- ------- -------
income taxes $16,449 $12,720 $10,013
======= ======= =======
</TABLE>
<PAGE> 30
The provision (benefit) for deferred income taxes included the following (in
thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended
---------------------------------
Dec. 29, Dec. 31, Jan. 1,
1996 1995 1995
------- -------- --------
<S> <C> <C> <C>
Amortization of
of Italian
reorganization
benefits $ 58 $ 122 $ 535
Depreciation 458 307 203
Reserve for
Glenco-Star
disposition -- 249 56
Reserve for swap loss -- -- 38
Warranty reserve (311) (33) (304)
Inventory adjustments (732) 913 (95)
Reserve for relocation
of Crystal Tips -- -- 167
Valuation allowance
changes (27) (51) (117)
Reserve for Delfield
and Whitlenge 727 -- --
Utilization of German net
operating loss carry
forwards 952 -- --
Other, net 399 177 (182)
------- ------ -------
Total $ 1,524 $1,684 $ 301
======= ====== =======
</TABLE>
Income before income taxes from foreign operations was $15.7 million in 1996,
$8.9 million in 1995, and $6.9 million in 1994. The differences between the
Company's effective tax rate and the statutory federal income tax rate were as
follows:
<TABLE>
<CAPTION>
For the Fiscal Years Ended
----------------------------------
Dec. 29, Dec. 31, Jan. 1,
1996 1995 1995
--------- ---------- ---------
<S> <C> <C> <C>
Statutory federal
income tax rate 35.0% 35.0% 35.0%
Increase in rate resulting from:
State and local income
taxes, net of federal
tax benefit 1.7 2.9 2.7
Foreign tax effect 7.6 4.9 4.9
Other 2.7 2.4 1.3
---- ---- ----
47.0% 45.2% 43.9%
==== ==== ====
</TABLE>
<PAGE> 31
In accordance with the Company's accounting policy, provision for U.S.
income taxes has not been made on $38.6 million of undistributed earnings
of foreign subsidiaries at December 29, 1996.
12. STOCK-BASED COMPENSATION PLANS
The Company has a long-term executive incentive program which provides
for granting key employees options to purchase the Company's common
stock. Under the program, options are exercisable at a rate set by the
Compensation Committee of the Board of Directors of the Company. To
date, options have been exercisable in cumulative annual increments of 25
percent commencing one year after the date of grant. The option price
per share is not less than the fair market value of one share on the date
of the grant. An option may not be exercisable after more than 10 years
and one day from the date of the grant.
In August 1994 the Board of Directors adopted, subject to shareholder
approval, the Non-Employee Directors Stock Option Plan. The plan was
approved by the shareholders at the 1995 Annual Meeting of Shareholders.
The plan provides for (a) an automatic award of options to purchase
shares of the Company's common stock to non-employee directors as of the
effective date of the plan, (b) automatic awards to non-employee
directors who are elected or appointed to the Board of Directors after
the effective date and (c) automatic annual awards thereafter. The
options will vest 100 percent on the date preceding the first annual
meeting of shareholders following the date of the grant of the options.
The option price per share may not be less than the fair market value of
one share on the date of the grant. An option may not be exercisable
after more than 10 years and one day from the date of the grant.
<PAGE> 32
The Company accounts for these plans under APB Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost
for these plans been determined consistent with FASB Statement No. 123
("SFAS 123"), the Company's net income and earnings per share would have
been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1995
---- -----
<S> <C> <C>
Net income:
As reported $18,568 $15,408
Pro forma 18,306 15,281
Primary net income per share:
As reported $1.85 $1.58
Pro forma $1.82 $1.56
Fully-diluted net income per share:
As reported $1.73 $1.45
Pro forma $1.71 $1.43
</TABLE>
A summary of the status of the Company's two stock option plans at December 29,
1996, December 31, 1995, and January 1, 1995, and changes during the years then
ended is presented in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding
at beginning
of year 525 $12 473 $10 472 $ 9
Granted 92 18 79 18 71 16
Exercised (51) 10 (24) 9 (52) 9
Forfeited (6) 17 (3) 16 (18) 11
---- --- ---
Outstanding
at end of
year 560 13 525 12 473 10
---- --- ---
Exercisable
at end of
year 377 10 357 10 294 9
Weighted
average
fair value
of options
granted
during
the year $9.74 $10.73 --
</TABLE>
<PAGE> 33
The following table summarizes information about stock options outstanding at
December 29, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------ -------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/29/96 Life(years) Price at 12/29/96 Price
<S> <C> <C> <C> <C> <C>
$ 7 to $ 9 224,187 3.2 $ 8 224,187 $ 8
$11 to $15 121,300 3.8 $12 104,645 $12
$16 to $20 214,675 8.2 $18 48,525 $18
------- -------
$ 7 to $20 560,162 4.3 $13 377,357 $10
======= =======
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1996 and 1995, respectively:
risk-free interest rates of 5.93 percent and 7.56 percent for the
executive options and 6.86 percent and 6.77 percent for the Non-Employee
Directors Plan options; expected dividend yields of 0.60 percent for the
executive plan options for both years and 0.50 percent for the
Non-Employee Directors plan options for both years; expected lives of
10.01 for both plans in both years; and expected volatility of 36.60
percent for both plans in both years.
The Company issued from treasury 5,965, 6,219, and 8,038 shares of common
stock in fiscal years 1996, 1995 and 1994, respectively, as annual Board
of Directors fees. Costs relating to these fees (in thousands) of $120,
$129, and $99 were recorded in fiscal years 1996, 1995 and 1994,
respectively.
13. ACQUISITION OF DELFIELD AND WHITLENGE
On April 29, 1994, the Company completed the acquisition of The
Delfield Company and Whitlenge Drink Equipment Limited for approximately
$69.3 million in a combination of cash, preferred stock and common stock.
The cash outlay was offset by cash on the books of the acquired
businesses at closing of $3.9 million. Scotsman shareholders approved
the issuance of common and preferred stock related to the acquisition at
a special shareholders meeting on April 28, 1994.
<PAGE> 34
The method of accounting used for the combination was the purchase
method. The initial amount of goodwill allocated to Delfield and
Whitlenge was $73.7 million and is being amortized over 40 years using
the straight-line method. The acquisition price included: (a) $30.4
million in cash, (b) 1.2 million shares of common stock (with a market
value of approximately $16.5 million on the acquisition date) and (c) 2.0
million shares of Series A $0.62 cumulative convertible preferred stock
with an aggregate liquidation preference of $22.5 million which were
convertible into 1,525,393 shares of common stock. (If such conversion
had taken place on January 1, 1996, primary earnings per share would have
been $1.73.) All the cumulative convertible preferred stock was
converted to common stock during 1996. Also, the acquisition price of
$69.3 million was increased by $12.1 million to include 667,000 shares of
additional common stock based upon the businesses of Delfield and
Whitlenge meeting a specified level of earnings before interest, income
taxes, depreciation and amortization in fiscal year 1994. These
additional shares were issued subsequent to January 1, 1995. In
addition, Scotsman also assumed Delfield and Whitlenge debt of
approximately $35 million which was substantially repaid on the
acquisition date. (See Note 7.) The results of Delfield and Whitlenge
are included in the income statements for the Company beginning after
April 29, 1994.
Delfield, headquartered in Mt. Pleasant, Michigan, manufactures and sells
refrigerated foodservice equipment, primarily in the United States.
Whitlenge, located near Birmingham, England, manufactures and sells drink
dispensing equipment in Western Europe.
The accompanying unaudited condensed pro forma income statement
information is presented to illustrate the effect of certain events on
the historical income statement information of the Company as if the
acquisitions of Delfield and Whitlenge had occurred as of the first day
of the period presented.
The pro forma information includes assumptions and estimates and is not
necessarily indicative of the results of operations of the Company as
they may be in the future or as they might have been had the transaction
occurred as discussed above.
The unaudited condensed pro forma income statement information should be
read in conjunction with the historical condensed financial statements
and notes thereto of the Company appearing elsewhere herein.
<PAGE> 35
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
PRO FORMA (Unaudited)
<S> <C>
Twelve Months Ended Jan. 1, 1995
Net sales $304,144
Net income 13,547
Net income per share, fully diluted $ 1.28
</TABLE>
14. ACQUISITION OF HARTEK
The Company's Scotsman Group Inc. subsidiary acquired on December 31,
1995, the stock of Hartek Beverage Handling GmbH and the stock of Hartek
Awagem Vertriebsges. m.b.H., a beverage dispensing manufacturer and a
small distributor of Hartek and other products located in Radevormwald,
Germany and Vienna, Austria, respectively (collectively, "Hartek").
Hartek had 1995 annual sales of approximately $24 million. The method of
accounting used for the combination was the purchase method. The results
of the Hartek businesses have been included in the income statements for
the Company beginning on the date of acquisition, December 31, 1995.
Hartek was acquired for an initial cost of $5.8 million, including
acquisition costs. No shares of stock were or will be issued as a result
of these acquisitions. The cash outlay was partially offset by cash on
the books of Hartek at closing of $3.3 million. Goodwill of $1.9 million
has been recorded as of December 29, 1996. The amount of goodwill from
this acquisition will be amortized for book purposes over 40 years using
the straight-line method.
Under the terms of the agreement governing the purchase of the Hartek
businesses, the Company is required to pay to the seller 75 percent of
the actual amount of any tax saving realized by Hartek in respect of each
of its financial years 1996 through 1998 through the use of the amount of
any tax loss carry forward available to Hartek as of December 31, 1995,
in reduction of taxable profits for those financial years 1996 through
1998. This additional consideration is not to exceed an amount of 2.2
million deutsche marks or, as of December 29, 1996, approximately $1.4
million. In addition, at the date of acquisition, Scotsman also assumed
Hartek debt of approximately $6.4 million.
<PAGE> 36
Pro forma unaudited 1995 net sales of the Company, as if Hartek were
acquired on the first day of the fiscal year 1995 would have been $349
million. Pro forma information relating to net income and earnings per
share has not been presented as the pro forma impact of those numbers on
the Company's results was not material. Pro forma information includes
assumptions and estimates and is not necessarily indicative of the
results of operations of the Company as they may be in the future or as
they might have been had the transaction occurred as discussed above.
15. GEOGRAPHIC INFORMATION
The Company's geographic data, based on the locations of operations, are
as follows (in thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended Dec. 29, Dec. 31, Jan. 1,
1996 1995 1995
<S> <C> <C> <C>
Sales to unaffiliated
customers:
United States $235,302 $239,110 $201,746
Europe 121,071 85,181 64,886
-------- -------- --------
Total $356,373 $324,291 $266,632
======== ======== ========
Operating profit:
United States $ 24,248 $ 25,309 $ 20,773
Europe 16,048 9,145 7,441
-------- -------- --------
Total $ 40,296 $ 34,454 $ 28,214
======== ======== ========
Identifiable assets:
United States $181,259 $181,994 $172,608
Europe 102,005 93,949 72,183
-------- -------- --------
Total $283,264 $275,943 $244,791
======== ======== ========
</TABLE>
Export sales from the United States were less than 10 percent of consolidated
net sales for all years presented.
<PAGE> 37
16. SUBSEQUENT EVENT (UNAUDITED)
In March of 1997 the Company completed the acquisition of Kysor Industrial
Corporation ("Kysor"), a major manufacturer and marketer of refrigerated
display cases, commercial refrigeration systems and insulated panels primarily
serving the supermarket industry. The Company purchased Kysor's common and
preferred stock (hereinafter referred to as the "Acquisition") for an aggregate
purchase price of $309 million. Concurrent with the purchase, the Company sold
Kysor's Transportation Products Group to a third party for an aggregate
purchase price of $86 million plus assumption of certain liabilities. The
Company retained possession of Kysor's Commercial Products Group. Goodwill
relating to the acquisition of Kysor will be finalized within 12 months of the
acquisition date and will be amortized for book purposes over 40 years using
the straight-line method.
Kysor, headquartered in Cadillac, Michigan, reported total sales in 1996
of $381 million, of which $245 million related to commercial refrigeration
products.
The acquisition of Kysor, after giving effect to the divestiture of the
Transportation Products Group and other acquisition related transactions, was
financed through a $415 million loan facility between the Company and the First
National Bank of Chicago (the "FNBC Facility"). The FNBC Facility consists of
a $150 million seven-year term loan and a $265 million seven-year revolving
loan facility, both with an initial interest rate of 1.375 percent above
Eurocurrency rates. The interest rates on both facilities adjust based on a
certain ratio tied to the strength of the Company's balance sheet.
The agreement governing the FNBC Facility includes various financial
covenants. One of those covenants has the effect of restricting the amount of
the Company's dividends to its shareholders by requiring the Company to
maintain consolidated stockholders' equity of at least $120 million (without
giving effect to the cumulative effect of future changes in accumulated
translation adjustments), plus 60 percent of (i) the cumulative net income of
the Company from December 30, 1996, forward and (ii) the net cash proceeds from
any future issuance of equity securities by the Company after the closing of
the FNBC Facility. At December 29, 1996, consolidated stockholders' equity of
the Company was $131.7 million. The Company is also precluded from paying
dividends to its shareholders (other than dividends payable in its own capital
stock) if a default or an unmatured default under the agreement has occurred
and is continuing or would occur after giving effect to the payment of such
dividends.
<PAGE> 38
The FNBC Facility requires that a notional amount of $150 million be hedged
to reduce interest rate exposure for three years. In addition to financing the
Kysor acquisition, proceeds of the FNBC Facility will be used to pay expenses
associated with this acquisition and were used to repay existing long-term
debt, including the $90.0 million reducing credit agreement and the $20.0
million private placement agreement.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Scotsman Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Scotsman
Industries, Inc. (a Delaware Corporation) and subsidiaries as of December 29,
1996, and December 31, 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 29, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Scotsman Industries, Inc. and
subsidiaries as of December 29, 1996, and December 31, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 29, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chicago, Illinois
February 4, 1997
<PAGE> 39
Scotsman Industries, Inc.
Five Year Summary
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
For the Fiscal Years Ended Dec. 29, Dec. 31, Jan. 1, Jan. 2, Jan. 3,
1996 (a) 1995 (b) 1995 (c) 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales $356,373 $324,291 $266,632 $163,952 $168,674
Income before income taxes 35,017 28,128 22,798 13,371 10,185
Net income 18,568 15,408 12,785 7,411 6,392
Net income per share,
fully diluted (d) 1.73 1.45 1.35 1.06 0.90
Total assets (e) 283,264 275,943 244,791 103,173 96,103
Long-term debt and capitalized
lease obligations, excluding
current portion (e) 60,289 74,719 85,161 29,469 29,589
Cash dividends declared per
common share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10
======== ======== ======== ======== ========
</TABLE>
(a) The information for the fiscal year ended December 29, 1996, includes
balance sheet information and the results of Hartek which was acquired
on December 31, 1995.
(b) The information for the fiscal year ended December 31, 1995, includes
balance sheet information for Hartek which was acquired on
December 31, 1995.
(c) The results for the fiscal year ended January 1, 1995, include the
results from Delfield and Whitlenge as of the date of their
acquisitions, April 29, 1994.
(d) The calculation of net income per share for the fiscal years 1996, 1995,
1994, 1993, and 1992 was based on 10,728,188, 10,649,763, 9,488,965,
7,000,651, and 7,096,976 weighted average shares of common stock,
respectively. The calculation of fully-diluted net income per share for
the fiscal years ended January 1, 1995, December 31, 1995, and December
29, 1996, is based on net income before preferred stock dividends. The
number of shares assumes conversion of convertible preferred stock from
the date of issue and also includes the dilutive impact, as if issuance
had occurred on the acquisition date, of contingent shares which were
subsequently distributed to the sellers of Delfield and Whitlenge based on
those businesses having achieved a specified combined level of earnings
during fiscal year 1994, and also includes the dilutive impact of common
stock options outstanding. The net income per-share calculation for
fiscal years ended prior to January 1, 1995, did not reflect the dilutive
effect of stock options outstanding as the dilutive effect was immaterial.
(e) At year end
<PAGE> 40
Scotsman Industries, Inc.
Selected Quarterly Financial Data
(Unaudited)
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
Fiscal year 1996 Fiscal year 1995
-------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For The Three Months Ended Dec. 29, Sept. 29, June 30, Mar. 31, Dec. 31, Oct. 1, July 2, Apr. 2,
1996 1996 1996 1996 1995 1995 1995 1995
Net sales $ 73,653 $ 92,764 $104,423 $ 85,533 $ 70,779 $ 87,075 $ 90,363 $ 76,074
Cost of sales 55,692 66,558 73,562 62,130 52,709 63,348 64,471 55,874
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit 17,961 26,206 30,861 23,403 18,070 23,727 25,892 20,200
Selling and administrative expenses 13,063 14,195 15,854 15,023 13,506 13,079 13,627 13,223
-------- -------- -------- -------- -------- -------- -------- --------
Income from operations 4,898 12,011 15,007 8,380 4,564 10,648 12,265 6,977
Interest expense, net 1,120 1,322 1,422 1,415 1,366 1,639 1,744 1,577
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes 3,778 10,689 13,585 6,965 3,198 9,009 10,521 5,400
Income taxes 1,677 4,906 6,520 3,346 1,259 4,099 4,792 2,570
-------- -------- -------- -------- -------- -------- -------- --------
Net income $ 2,101 $ 5,783 $ 7,065 $ 3,619 $ 1,939 $ 4,910 $ 5,729 $ 2,830
======== ======== ======== ======== ======== ======== ======== ========
Net income per share (a):
Primary $ 0.20 $ 0.58 $ 0.73 $ 0.36 $ 0.18 $ 0.50 $ 0.59 $ 0.29
======== ======== ======== ======== ======== ======== ======== ========
Fully diluted $ 0.20 $ 0.54 $ 0.66 $ 0.34 $ 0.18 $ 0.46 $ 0.54 $ 0.27
======== ======== ======== ======== ======== ======== ======== ========
Weighted average common shares
outstanding:
Primary 10,475,223 9,474,377 9,315,726 9,140,363 9,111,889 9,129,549 9,128,141 8,565,289
Fully diluted 10,761,585 10,730,902 10,701,692 10,669,965 10,650,140 10,654,786 10,653,582 10,640,578
</TABLE>
<PAGE> 41
(a) Net income per share on a primary basis was computed to be net income
after preferred stock dividends. Fully-diluted net income per share was based
on net income before preferred stock dividends and the number of shares assumed
the conversion of convertible preferred stock from the date of issue and also
included the dilutive impact, as if issuance had occurred on the acquisition
date, of contingent shares that were distributed to the sellers of Delfield and
Whitlenge subsequent to January 1, 1995, based on those businesses having
achieved a specified combined level of earnings during fiscal year 1994.
<PAGE> 42
Scotsman Industries, Inc.
Common Stock
Scotsman Industries, Inc. common stock is listed on the New York Stock
Exchange. The common stock ticker symbol is SCT.
<TABLE>
<CAPTION>
Dividends
1995 High Low Last Declared
<S> <C> <C> <C> <C>
1st Quarter 18 5/8 16 7/8 18 1/2 $0.025
2nd Quarter 19 3/4 17 18 1/2 $0.025
3rd Quarter 20 15 1/8 16 3/8 $0.025
4th Quarter 17 3/4 16 17 5/8 $0.025
------
Total dividends declared $0.100
Shares outstanding at December 31, 1995 8,964,974
Shareholders of record at December 31, 1995 4,800
<CAPTION>
Dividends
1996 High Low Last Declared
<S> <C> <C> <C> <C>
1st Quarter 18 17 17 7/8 $0.025
2nd Quarter 21 17 7/8 20 1/8 $0.025
3rd Quarter 24 19 1/2 22 7/8 $0.025
4th Quarter 24 7/8 22 3/4 23 3/4 $0.025
------
Total dividends declared $0.100
Shares outstanding at December 29, 1996 10,542,464
Shareholders of record at December 29, 1996 4,559
</TABLE>
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation OTHER NAMES UNDER WHICH
NAME OF SUBSIDIARY or Organization SUBSIDIARY DOES BUSINESS
------------------ --------------- ------------------------
<S> <C> <C>
Scotsman Group Inc. Delaware Scotsman
Scotsman Commercial Ice
Systems, Inc.
Scotsman Ice Systems
Scotsman of Los Angeles
Beleggingsmaatschappij
Interrub B.V. Netherlands None
Booth, Inc. Texas Crystal Tips
Castel MAC, S.p.A. Italy None
Charles Needham Industries, Inc. Michigan None
Charles Needham Industries LP Delaware Limited Partnership Kysor/Needham
DFC Holding Corporation Delaware None
The Delfield Company Delaware None
Frimont, S.p.A. Italy None
Hartek Awagem Vertriebsges m.b.H. Austria None
Hartek Beverage Handling GmbH Germany None
Kysor/Bangor, Inc. Michigan None
Kysor Business Trust Delaware Business Trust None
Kysor CNI, Inc. Michigan None
Kysor Industrial Corporation Michigan Kysor/Warren
Kysor/Kalt, Inc. Michigan None
Kysor/Warren de Mexico Mexico None
S. De R.L. De C.V.
Kysor Worldwide Corp. Barbados None
Scotsman Drink Limited England None
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation OTHER NAMES UNDER WHICH
NAME OF SUBSIDIARY or Organization SUBSIDIARY DOES BUSINESS
------------------ --------------- ------------------------
<S> <C> <C>
Scotsman Group FSC, Inc. Barbados None
Shenyang Scotsman-Xinle China None
Refrigeration Equipment
Manufacturing Co. Ltd.
(60% owned)
Whitlenge Acquisition Limited England None
Whitlenge Drink Equipment Limited England None
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in, or incorporated by reference to, this Form 10-K into
the Company's previously filed Registration Statements, File Nos. 33-35870,
33-35871, 33-53482, 33-57219, 33-56353, 33-59397, and 33-60377.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Scotsman
Industries, Inc. Consolidated Balance Sheet as of December 29, 1996 and Scotsman
Industries, Inc. Consolidated Statement of Income for the Twelve Months Ended
December 29, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 16,501
<SECURITIES> 0
<RECEIVABLES> 58,734
<ALLOWANCES> 2,778
<INVENTORY> 52,530
<CURRENT-ASSETS> 137,574
<PP&E> 46,659
<DEPRECIATION> 44,654
<TOTAL-ASSETS> 283,264
<CURRENT-LIABILITIES> 78,253
<BONDS> 60,289
0
0
<COMMON> 1,073
<OTHER-SE> 130,639
<TOTAL-LIABILITY-AND-EQUITY> 283,264
<SALES> 356,373
<TOTAL-REVENUES> 356,373
<CGS> 257,942
<TOTAL-COSTS> 257,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,279
<INCOME-PRETAX> 35,017
<INCOME-TAX> 16,449
<INCOME-CONTINUING> 18,568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,568
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.73
</TABLE>
<PAGE> 1
EXHIBIT 99
SCOTSMAN INDUSTRIES, INC.
CAUTIONARY STATEMENTS
Information provided by the Company from time to time, either orally or in
writing, may contain certain "forward looking" information, as that term is
defined in the Private Securities Litigation Reform Act of 1995 (the "Act").
Consistent with the Act, such forward-looking information may include
information relating to such matters as sales, income, earnings per share,
return on equity, capital expenditures, dividends, capital structure, cash
flow, debt to capitalization ratios, internal growth rates, future economic
performance, management's plans and objectives for future operations, or the
assumptions relating to, or underlying, any such forward-looking information.
The cautionary statements set forth below are being made pursuant to the
provisions of the Act and with the intention of obtaining the benefits of the
"safe harbor" provisions of the Act. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those expressed
in, or implied by, the forward-looking statements as a result of various
factors, including but not limited to the following:
1. The Company's performance should be expected to be affected by the
strength or weakness of the various economies in which the Company markets
its products, primarily in the United States and Western Europe, but also
in the Far East. The relative strength or weakness of these economies may
affect the rate at which new hotels, restaurants, fast food outlets,
supermarkets or other facilities with a need for the Company's products
are built, and the rate at which other potential commercial customers
replace or upgrade ice machines, beverage dispensing systems, food
preparation and storage equipment, refrigerated display cases, walk-in
cold rooms, and insulated panels already in use, thus affecting the demand
for the Company's products.
2. Sales of a significant proportion of the Company's products can be
negatively impacted by abnormal weather conditions during different
seasons and quarters of the year.
3. Underutilization of the Company's facilities may occur as a result of
failure to meet anticipated sales volumes. Such underutilization, which
results in excess capacity costs, may significantly affect the Company's
operating results.
4. The Company's ability to realize operating profits is dependent on its
ability to timely manufacture, source and deliver products which may be
sold for a profit. Labor difficulties, delays in delivery or increased
prices of raw materials and purchased components, scheduling and
transportation difficulties, management dislocations and delays in
development and manufacture of new products can negatively affect
operating profits.
5. The Company's results of operations can be negatively impacted by product
liability or other lawsuits and/or by warranty claims or other returns of
goods.
6. The Company manufactures some of its products in the United Kingdom,
Italy and Germany and sells its products throughout Western Europe and the
Middle and Far East. Currency devaluations and unfavorable changes in
foreign country monetary and tax policies and other changes in the
regulatory climate in foreign countries could materially affect the
Company's profitability and the Company's plans to grow its international
businesses.
<PAGE> 2
7. Although no single customer accounts for more than 10% of the Company's
consolidated net sales, the volume of sales of the Company's drink
dispensing equipment, food preparation and storage equipment, refrigerated
display cases, walk-in cold rooms and insulated panels may be affected,
from time to time, by changes in the buying patterns of certain large
customers as a result of internal cost-control measures adopted by such
customers, changes in the strategic plans of such customers, or other
factors.
8. The Company's products and manufacturing processes are subject to various
environmental, health and safety regulations and standards. Such
regulations and standards, from time to time, may require significant
changes in products or manufacturing methods. The Company also is, or may
be, subject from time to time to claims and litigation arising under the
Comprehensive Environmental Response, Compensation and Liability Act and
similar state statutes. The Company believes that environmental, health
and safety matters will not have a material effect on its business or
financial condition. However, legal and regulatory requirements in this
area are increasing, and there can be no assurance that significant costs
and liabilities will not be incurred as a result of currently unidentified
or future problems or new regulatory developments.
