<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934.
For the quarterly period ended July 28, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934.
For the transition period from ___________ to ___________.
Commission file number 0-25066
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OWOSSO CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2756709
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
One Tower Bridge, 100 Front Street, Suite 1400, West Conshohocken, PA 19428
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (610) 834-0222
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Former name, address and former fiscal year, if changed since last report
Indicate by check 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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OWOSSO CORPORATION
INDEX
PAGE NO.
PART I - Financial Information:
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
July 28, 1996 (unaudited) and
October 29, 1995
Consolidated Statements of Earnings 4
Nine and Three Months Ended July 28, 1996 and
July 30, 1995 (unaudited)
Consolidated Statements of Cash Flows 5
Nine Months Ended July 28, 1996 and
July 30, 1995 (unaudited)
Notes to Consolidated Financial Statements 6
(unaudited)
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operation
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 17
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<PAGE>
OWOSSO CORPORATION
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
July 28, October 29,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,219,429 $ 1,750,236
Receivables, net 19,716,836 18,190,026
Inventories, net 21,481,317 20,564,974
Prepaid expenses and other 1,317,051 1,164,617
Advances and interest receivable from affiliate 34,839 27,807
Deferred taxes 785,000 785,000
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Total current assets 44,554,472 42,482,660
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OTHER ASSETS:
Restricted cash 415,177 352,758
Prepaid pension 413,209 413,209
Other 586,130 398,038
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Total other assets 1,414,516 1,164,005
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PROPERTY, PLANT AND EQUIPMENT, net 25,678,486 25,353,517
INTANGIBLES, net 38,277,098 39,719,089
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TOTAL ASSETS $109,924,572 $108,719,271
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,654,537 $ 6,026,511
Accrued compensation and benefits 2,819,635 3,127,438
Accrued expenses 1,486,170 1,734,491
Accrued interest 605,002 363,827
Current portion of related party debt 2,275,000 8,950,000
Current portion of long-term debt 2,754,170 1,715,951
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Total current liabilities 17,594,514 21,918,218
RELATED PARTY DEBT, Less current portion 3,750,000 4,150,000
LONG-TERM DEBT, Less current portion 44,160,432 37,982,933
POSTRETIREMENT BENEFITS 1,559,480 1,412,298
DEFERRED TAXES 3,686,000 3,686,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Convertible preferred stock Class A, 5% cumulative, $.01 par value; 10,000,000 shares
authorized; 1,071,428 shares issued and outstanding
(aggregate liquidation value at January 28, 1996 - $15,000,000) 13,597,121 13,392,850
Common stock, 15,000,000 authorized; 5,865,000 shares issued and outstanding 58,650 58,650
Preferred stock, 10,000,000 shares authorized
Additional paid-in capital 21,611,701 21,611,701
Retained earnings 3,906,674 4,506,621
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Total stockholders' equity 39,174,146 39,569,822
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $109,924,572 $108,719,271
============ ============
</TABLE>
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OWOSSO CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
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July 28, July 30, July 28, July 30,
1996 1995 1996 1996
<S> <C> <C> <C> <C>
NET SALES $ 33,294,650 $ 29,549,940 $ 94,656,946 $ 77,862,032
COST OF PRODUCTS SOLD 24,768,476 21,677,702 71,133,020 55,592,331
------------ ------------ ------------ ------------
GROSS PROFIT 8,526,174 7,872,238 23,523,926 22,269,701
SELLING, GENERAL AND ADMINISTRATIVE 4,801,301 4,014,330 14,164,205 10,119,300
CORPORATE EXPENSES 1,240,029 737,003 3,291,506 2,207,623
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 2,484,844 3,120,905 6,068,215 9,942,778
INTEREST EXPENSE 951,086 793,064 3,013,434 2,111,708
OTHER INCOME 58,450 282,082 112,844 372,888
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,592,208 2,609,923 3,167,625 8,203,958
INCOME TAX PROVISION 748,028 996,990 1,416,966 3,111,535
------------ ------------ ------------ ------------
NET INCOME 844,180 1,612,933 1,750,659 5,092,423
DIVIDENDS AND ACCRETION ON PREFERRED
STOCK (256,875) -- (766,771) --
------------ ------------ ------------ ------------
NET INCOME AVAILABLE FOR COMMON
STOCKHOLDERS $ 587,305 $ 1,612,933 $ 983,888 $ 5,092,423
============ ============ ============ ============
NET INCOME PER COMMON SHARE $ 0.10 $ 0.28 $ 0.17 $ 0.87
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,865,000 5,865,000 5,865,000 5,865,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
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OWOSSO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
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July 28, July 30,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,750,659 $ 5,092,423
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss on sale of assets 118,034 6,836
Depreciation 2,923,707 2,137,079
Amortization 1,838,919 942,037
Amortization of deferred gain on sale and leaseback (57,887)
Changes in assets and liabilities which provided (used) cash:
Accounts receivable (1,526,810) (969,108)
Inventories (916,343) (2,333,101)
Prepaid expenses and other (159,466) 69,678
Deferred taxes (69,915)
Accounts payable 1,628,026 (938,355)
Accrued expenses (167,767) (491,083)
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Net cash provided by operating activities 5,488,959 3,388,604
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INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired (2,275,833)
Purchases of property, plant and equipment (3,366,995) (3,305,424)
Increase in other assets (647,439) (203,218)
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Net cash used in investing activities (4,014,434) (5,784,475)
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FINANCING ACTIVITIES:
Payments on amounts due to/from affiliates (886,503)
Proceeds from long-term debt 150,000
Borrowings from line of credit 8,250,000 9,350,000
Payments on long-term debt (8,259,282) (4,973,079)
Dividends paid (2,146,050) (1,407,600)
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Net cash (used in) provided by financing activities (2,005,332) 2,082,818
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NET DECREASE IN CASH AND CASH EQUIVALENTS (530,807) (313,053)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,750,236 1,508,037
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,219,429 $ 1,194,984
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for interest $ 2,772,259 $ 1,870,493
=========== ===========
Cash paid during the period for taxes $ 1,380,000 $ 3,408,000
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SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITY -
Accrual of preferred stock dividends $ 187,500
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</TABLE>
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OWOSSO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. THE COMPANY
Business - The consolidated financial statements represent the
consolidated financial position, results of operations and cash flows of
Owosso Corporation (the "Company") and its subsidiaries (collectively, the
subsidiaries): Motor Products - Owosso Corporation (Motor Products), Motor
Products Ohio Corporation: (MP - Ohio), Sooner Trailer Manufacturing Co.
(Sooner), Cramer Company (Cramer), DewEze Manufacturing, Inc., including
Parker (DewEze), Snowmax Incorporated (Snowmax), The Landover Company
(Dura-Bond), Ahab Investment Company (Ahab), Great Bend Manufacturing,
Inc. (Great Bend) and Stature Electric, Inc. (Stature Electric). Certain
of the Company's subsidiaries were previously affiliated with the Brynavon
Group, due to those entities being under common control and common
management.
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the financial statements do not include all of the information
and notes normally included with financial statements prepared in
accordance with generally accepted accounting principles. In the opinion
of management, all adjustments (consisting of a normal recurring nature)
considered necessary for a fair presentation of results for interim
periods have been made. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
October 29, 1995.
2. PRO FORMA INFORMATION
The following unaudited pro forma financial information shows the results
of the Company's operations for the periods presented as though the
purchase of Great Bend and Stature Electric have been made at the
beginning of the period.
Nine Months
Ended
July 30,
1995
Net Sales $98,509,000
Income From operations 12,442,000
Net income 5,738,000
Dividends and accretion on preferred stock 767,000
Net income available for common stockholders 4,971,000
Net income per common share $ 0.85
Number of shares 5,865,000
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<PAGE>
3. INVENTORIES
Inventories are summarized as follows:
July 28, October 29,
1996 1995
Raw materials and purchased parts $ 9,979,552 $10,187,479
Work in process 4,991,023 4,957,924
Finished goods 6,510,742 5,419,571
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Total $21,481,317 $20,564,974
=========== ===========
4. LONG-TERM DEBT
Long-term debt consists of the following:
July 28, October 29,
1996 1995
Banks $30,895,118 $22,746,445
Industrial revenue bonds 9,457,485 9,489,684
Former and current stockholders 12,370,311 20,213,174
Other 216,688 349,581
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Total long-term debt 52,939,602 52,798,884
Less portion due within one year 5,029,170 10,665,951
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Total $47,910,432 $42,132,933
=========== ===========
Concurrent with the Offering, the Company entered into a $40,000,000
unsecured revolving credit agreement with two banks, which expires on
March 31, 2000. In connection with the Stature Electric acquisition, the
Company increased its credit line to $55,000,000 and amended certain
financial covenants. Interest is payable, at the Company's option, at
either the bank's prime rate (8.25% at July 28, 1996) or a variable spread
(1.75% at July 28, 1996) over the London Interbank Offered Rate. The
agreement includes financial and other covenants, including leverage,
fixed charge, cash flow and net worth ratios, restrictions on certain
asset sales, mergers and other significant transactions, and a negative
pledge on fixed assets. Repayment of the Industrial Revenue Bonds of
certain of the subsidiaries has been guaranteed by the Company.
In the third quarter of 1996 the Company entered into two interest rate
swap agreements, each with a $7.5 million notional amount. Beginning in
fiscal year 1997 the Company will receive a floating interest rate payment
in exchange for a fixed interest rate payment periodically over the life
of the agreement. The Company enters into these interest rate swap
agreements to change the fixed/variable interest rate mix of the debt
portfolio to reduce the Company's aggregate risk to movements in interest
rates.
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<PAGE>
5. TAXES ON INCOME
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109. The effective income tax rate
differs from the federal statutory tax rate due to adjustments for
amortization of goodwill, officers' life insurance premiums, state income
taxes, and meals and entertainment. The increase in the effective tax rate
for the quarter ended July 28, 1996 as compared to July 30, 1995 results
from the additional amortization of goodwill and customer lists related to
the acquisitions of Great Bend and Stature Electric.
6. CONTINGENCIES
The Company is subject to federal, state and local environmental
regulation with respect to their operations. The Company believes that it
is operating in substantial compliance with applicable environmental
regulations.
In December 1990, Dura-Bond was issued a nonbinding request for certain
investigative and remediation measures by the California Regional Water
Quality Control Board relating to a facility it formerly operated. Since
the issuance of the request, the State has taken no further action against
Dura-Bond. In the event the State were to seek further remediation,
Dura-Bond may face claims from the State or claims for contribution to its
former lessor. Dura-Bond believes that it has substantial defenses to any
such claim. The cost of any such additional investigation and remediation,
if required, cannot be reasonably estimated.
Motor Products is currently engaged in negotiations with the Michigan
Department of Natural Resources regarding the applicable requirements for
closure of a belowground containment structure at Motor Products'
facility. Depending on the outcome of these negotiations, Motor Products
may incur the cost of closure and cleanup which is not expected to be
significant.
The lessor of Cramer's facility is engaged in negotiations with the State
of Connecticut regarding additional investigative or remedial measures at
this facility. Cramer may be required to bear a portion of the costs of
any such investigative or remedial measures, the amount of which cannot
currently be reasonably estimated. Cramer is also engaged in the closure
of waste handling facilities at this location in accordance with State
regulations. Closure is expected to be completed in 1996 at a cost which
is not expected to be significant.
Cramer has been named as a potentially responsible party with respect to a
hazardous substance disposal site being cleaned up by the U.S.
Environmental Protection Agency under its "Superfund" program, which they
expect to settle through the payment of minor amounts.
A portion of Sooner's manufacturing facility was used in the past to store
containers of waste oil and solvents, and an aboveground diesel fuel
storage tank is currently located at the facility. The Company intends to
establish a well at the facility for the purpose of monitoring the ground
water for any contamination, and the Company estimates such monitoring
will cost approximately $12,500 per year.
Current historic manufacturing and other operations at the Company's
various facilities may result, and may have resulted, in the discharge and
release of hazardous substances and waste from time to time. The Company
routinely responds to such incidents as deemed appropriate pursuant to
applicable federal, state and local environmental regulations.
In addition to the matters reported herein, the Company is involved in
litigation dealing with the numerous aspects of its business operations.
The Company believes that settlement of such litigation will not have a
material effect on its financial position or results of operations.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three months ended July 28, 1996 compared to three months ended July 30, 1995
Net Sales. Net sales for the Company's third quarter of 1996 totaled $33.3
million as compared to $29.5 million in the third quarter of fiscal 1995, an
increase of 13%. The inclusion of the results of Stature Electric, Inc.
("Stature"), acquired at the end of the Company's 1995 fiscal year, was
responsible for the increase. Without that acquisition, net sales for the
quarter would have decreased 4% compared to the third quarter of fiscal 1995.
Net sales in the Company's Engineered Component Products segment increased 35%
to $19.5 million from $14.4 million. The addition of Stature and increased net
sales at the Company's other motor businesses, taken as a whole, more than
offset declines in net sales at the Company's other businesses in this segment.
Dura-Bond's sales remained lower than in the prior year period despite some
sales of its replacement camshaft bearings through Federal-Mogul. Net sales at
Dura-Bond are expected to remain below last year's level through the end of
fiscal 1996, although it has received some orders from Federal-Mogul which may
translate into sales in the fourth quarter of fiscal 1996; however, Stature's
additional sales, as well as comparisons to a slow fourth quarter of fiscal
1995, are expected to cause sales in this segment to remain above prior year
levels.
In the Company's Specialized Equipment segment, net sales in the third fiscal
quarter decreased 9%, to $13.8 million from $15.1 million in the third quarter
of fiscal 1995 due to a 15% decline in sales of aluminum trailers, and a
decrease in sales at DewEze and Great Bend, which more than offset a 20%
increase in sales of grain handling equipment at Parker. Sales at DewEze and
Great Bend have been affected by a poor cattle market while sales at Parker have
benefited from favorable conditions in the corn and soybean markets. The Company
believes that it has begun to see a leveling off or slight decline in the
aluminum horse trailer market, and that this trend may continue into the near
future and that the economic factors affecting its other businesses in this
segment are likely to continue. Consequently, the Company expects that sales in
this segment will be lower in the fourth quarter of fiscal 1996 than in the
prior year period. However, the Company expects net sales in this segment for
all of fiscal 1996 to be well above prior year levels.
Gross Profit. Gross profit was $8.5 million for the third quarter, 8% above last
year's third quarter gross profit, representing a reduction to 25.6% of net
sales compared to 26.6% of net sales in the third quarter of fiscal 1995. In the
Company's Engineered Component Products segment, third quarter gross profit
increased 26% to $5.3 million in fiscal 1996 from $4.2 million in the prior
year. The increase came about due to the inclusion of Stature's results in
fiscal 1996 and increased sales in the Company's other motor businesses, which
offset lower sales at the other businesses in this segment. The gross margin in
this segment declined to 27.0% of sales in the fiscal third quarter from 29.1%
of sales in the prior year period. Increased margins at Dura-Bond due to a
change in its distribution channel and greater efficiency at the Company's Ohio
motor plant were more than offset by lower gross margins at Snowmax resulting
from absorption of fixed costs over lower sales volume and the addition of
Stature whose gross margins are lower than the remaining businesses in the
segment, taken as a whole. In the Company's Specialized Equipment segment, gross
profit declined 12% to $3.2 million (23.6% of sales) in the third quarter of
fiscal 1996 from $3.7 million (24.3% of sales) in the third quarter of fiscal
1995. The decrease in gross profit was primarily due to reduced trailer sales
and reduced margins at Sooner resulting from the lower sales level versus fixed
overhead costs and higher labor expense due to production inefficiencies. These
factors affected both the overall level of gross profit in the segment and the
gross margin.
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<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $4.8 million, or 14.4% of sales in the third
quarter of fiscal 1996, as compared to $4.0 million, or 13.6% of sales in the
third quarter of fiscal 1995. The increase was primarily attributable to the
addition of selling, general and administrative expenses of Stature, including
the amortization of intangible assets resulting from the acquisition. In the
Engineered Component Products segment, these expenses increased to $2.5 million
(12.8% of sales) from $1.9 million (12.9% of sales) as the addition of Stature's
expenses outweighed a 4% decline in selling, general and administrative expenses
in the remainder of this segment. In the Specialized Equipment segment, selling,
general and administrative expenses were $2.3 million, or 16.4% of sales, in the
third quarter of fiscal 1996, as compared to $2.1 million, or 14.2% of sales in
the prior year period. Increased selling general and administrative expenses at
Sooner, primarily related to marketing expense and internal sales salaries,
accounted for most of the increase.
Corporate Expenses. Corporate expenses were $1.2 million, or 3.7% of net sales
in the third quarter of fiscal 1996, as compared to $0.7 million, or 2.5% of net
sales in the prior year period. The increase in corporate expenses was primarily
due to recruiting and severance costs related to the resignation of the
Company's former chief operating officer as well as higher insurance costs and
higher data processing expenses incurred commensurate with the growth in the
Company's net sales.
Income from Operations. Income from operations decreased 20% to $2.5 million, or
7.5% of net sales, in the third quarter of fiscal 1996 from $3.1 million, or
10.6% of net sales, in the prior year period. Income from operations in the
Company's Engineered Component Products segment increased 19% to $2.8 million
(before allocation of corporate expenses) in the third quarter of fiscal 1996
from $2.3 million in the 1995 period. The addition of Stature's results and
improved results at the Company's other motor businesses more than offset
reduced sales at its Dura-Bond subsidiary due to reduced sales of its products
through Federal-Mogul's distribution network, and lower income at Snowmax as
described above. In the Specialized Equipment segment, income from operations
(before allocation of corporate expenses) decreased 38% to $0.9 million in the
third quarter of fiscal 1996 from $1.5 million in the third quarter of fiscal
1995. Reduced sales and margins in the aluminum trailer business more than
offset increased income from operations at Great Bend and Parker.
Interest Expense, net. Net interest expense increased to $1.0 million, or 2.9%
of sales, in the third quarter of fiscal 1996 from $0.8 million, or 2.7% of
sales in the third quarter of fiscal 1995, primarily due to increased
indebtedness incurred in connection with the acquisition of Stature, without
which interest expense would have declined due to lower effective interest
rates.
Income Tax Expense. Income tax expense was $0.7 million in the third quarter of
fiscal 1996, representing an effective rate of 47%. The effective tax rate is
higher than the statutory Federal rate due to non-deductible expenses and the
effect of state income taxes. Non-deductible expenses, primarily amortization of
intangible assets connected with acquisitions, were higher as a proportion of
pretax income in the third quarter, resulting in an increased effective tax
rate. Income tax expense in the third quarter of fiscal 1995 was $1.0 million,
representing an effective tax rate of 38%. The Company expects the higher
effective tax rate seen in the fiscal third quarter of 1996 to continue or
increase for the remainder of fiscal 1996.
Net Income. Net income was $0.8 million, or 2.5% of net sales in the third
quarter of fiscal 1996, as compared to $1.6 million, or 5.5% of net sales in the
prior year period. The decrease in net income was a result of the lower income
from operations, higher net interest expense and the increase in the effective
tax rate. As well, the Company recognized other income of $282,000 in the third
quarter of fiscal 1995 $200,000 of which related to the early retirement of
affiliate notes, as compared to other income of $58,000 in the fiscal 1996
quarter.
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Earnings Per Share. Earnings per share of $0.10 in the third quarter of 1996 are
calculated after deduction of preferred stock dividends and accretion in
preferred stock value totaling $0.3 million, whereas there was no preferred
stock outstanding in the prior year. Earnings per share in the third quarter of
1995 were $0.28. The Company's acquisition of Stature was slightly dilutive to
earnings per share in the third quarter of fiscal 1996. The effects of the
accretion on preferred stock on earnings per share will be approximately $0.05
for the full fiscal year of 1996. Because of the factors affecting Sooner listed
above and the expectation of lower income from Snowmax due to a planned
reduction of slow moving and discontinued inventory, the Company expects that
fourth quarter earnings per share will be less than in the third quarter.
Nine months ended July 28, 1996 compared to nine months ended July 30, 1995
Net Sales. Net sales for the Company's first nine months of 1996 totaled $94.7
million as compared to $77.9 million in the first nine months of fiscal 1995, an
increase of 22%, due to the inclusion of the results of Great Bend (acquired in
May 1995) in the first six months of fiscal 1996, and Stature for the entire
first nine months of fiscal 1996. Without including the results of these
recently acquired companies net sales would have increased only 4%.
Net sales in the Company's Engineered Component Products segment increased 23%
to $54.0 million in the first nine months of fiscal 1996 from $44.0 million in
the 1995 period, as the addition of Stature Electric and the beginning of
shipments from the Company's new Ohio motor manufacturing facility more than
offset declines in net sales at each of the other businesses in this segment.
This decline can be attributed primarily to a slower manufacturing economy in
the first half of fiscal 1996 than in the year earlier period, and Dura-Bond
selling a reduced volume of its replacement camshaft bearings through
Federal-Mogul.
Net sales in the Specialized Equipment segment increased 20% to $40.7 million in
the first nine months of fiscal 1996 from $33.9 million in the first nine months
of fiscal 1995. Increased demand for the Company's agricultural equipment and
the addition of the results of Great Bend led to the increase. The Company
believes that it has now begun to see a leveling off or slight decline in the
aluminum horse trailer market, and that this trend may continue into the near
future. Consequently, the Company expects that sales in this segment will be
lower in the fourth quarter of fiscal 1996 than in the prior year period.
However, the Company expects net sales in this segment for all of fiscal 1996 to
be well above prior year levels for the full fiscal year.
Gross Profit. Gross profit was $23.5 million, or 24.9% of net sales in the first
nine months of fiscal 1996 as compared to $22.3 million, or 28.6% of net sales
in the year earlier period. The increase in gross profit is attributable to the
increase in net sales. The gross profit margins in the first nine months of
fiscal 1996 were lower primarily due to the absorption of fixed manufacturing
costs over a lower sales volume in the motor businesses in the first half of
fiscal 1996, and more recently in the aluminum trailer business. The gross
profit margin in the trailer business was also affected by an adjustment in
inventory valuation, reduced productivity during a union organization attempt
and increased overhead in anticipation of higher sales than actually occurred.
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<PAGE>
In the Engineered Component Products segment, gross profit increased to $13.9
million, or 25.8% of sales for the first three quarters of fiscal 1996 from
$12.9 million, or 29.3% of sales, in the prior year period, an increase of 8%.
This increase is due to the addition of Stature, which offset year-to-date
declines at the other businesses in this segment. Gross profit margins, though
lower than in the prior year period due to the factors affecting the motor
businesses described above, have increased during the year with increasing sales
volume. While the Company anticipates that the gross margin in its motor
businesses will be higher in the fourth quarter than for the first nine months
of fiscal 1996, this development is expected to be offset, at least in part, by
anticipated lower gross margins in its heat transfer coil business, where the
Company has decided to sell off some slow moving and discontinued inventory and
returned inventory in need of rework. In the Company's Specialized Equipment
segment, gross profit rose to $9.6 million, or 23.6% of sales, in the first
three quarters of fiscal 1996 from $9.4 million, or 27.7% of sales, in the 1995
period, as the inclusion of Great Bend's results in the first six months of
fiscal 1996 and a higher gross profit in the grain handling equipment business
outweighed the decline in gross profit at Sooner discussed above. Although the
effects of the union organization attempt are expected to diminish in the last
part of the fourth quarter of fiscal 1996, the Company expects that because of
continuing slower demand for its aluminum horse trailers, the gross margin in
this segment will continue to be lower for the remainder of the year than in
fiscal 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $14.2 million, or 15.0% of net sales in the first
nine months of fiscal 1996, as compared to $10.1 million, or 13.0% of net sales
in the first nine months of fiscal 1995. The increase in selling, general and
administrative expenses can be attributed to the addition of selling, general
and administrative expenses of Great Bend for an additional two quarters in
fiscal 1996 as well as those of Stature for the full first nine months of fiscal
1996, including the amortization of intangible assets resulting from these
acquisitions. Selling, general and administrative expenses increased 7% for the
Company's other businesses. In the Engineered Component Products segment, these
expenses increased to $7.5 million in the first three quarters of fiscal 1996
from $5.3 million in the 1995 period, primarily due to Stature's expenses which
include approximately $0.8 million of non-cash amortization expenses related to
the acquisition, and for increased sales and marketing costs in the Company's
replacement camshaft bearing business. In the Specialized Equipment segment,
selling, general and administrative expenses increased to $6.7 million for the
first nine months of fiscal 1996 from $4.8 million in the 1995 period. The
increase was due to the additional Great Bend expenses, increased selling
expenses at the Company's grain handling equipment business commensurate with
its increased sales, and higher marketing and administrative expenses at Sooner.
Corporate Expenses. Corporate expenses were $3.3 million, or 3.5% of net sales
in the first nine months of fiscal 1996, as compared to $2.2 million, or 2.8% of
net sales in the prior year period. The increase in corporate expenses was
primarily due to higher personnel and data processing expenses incurred
commensurate with the growth in net sales as well as higher recruitment and
insurance expenses.
-12-
<PAGE>
Income from Operations. Income from operations decreased 39% to $6.1 million, or
6.4% of sales, in the first nine months of fiscal 1996 from $9.9 million, or
12.8% of sales, in the prior year period. Income from operations in the
Company's Engineered Component Products segment decreased 15% to $6.4 million
(before allocation of corporate expenses) in the first nine months of fiscal
1996 from $7.6 million in the 1995 period. Reduced sales volume in the Company's
historical motor businesses, reduced sales at its Dura-Bond subsidiary, and an
increase in the operating loss at its new Ohio manufacturing facility exceeded
the effect of the addition of Stature's results. In the Specialized Equipment
segment, income from operations (before allocation of corporate expenses)
decreased 36% to $2.9 million in the first nine months of fiscal 1996 from $4.6
million in the fiscal 1995 period. Reduced margins in the aluminum trailer
business and the bale handling equipment business more than offset the addition
of Great Bend's results and increased income from operations in the grain
handling equipment business.
Interest Expense, net. Net interest expense increased to $3.0 million, or 3.2%
of sales, in the first nine months of fiscal 1996 from $2.1 million, or 2.7% of
sales in the first nine months of fiscal 1995, primarily due to increased
indebtedness incurred in connection with the acquisitions of Great Bend and
Stature.
Income Tax Expense. Income tax expense was $1.4 million in the first nine months
of fiscal 1996, representing an effective rate of 45%. The effective tax rate is
higher than the statutory Federal rate due to non-deductible expenses and the
effect of state income taxes. Non-deductible expenses, primarily amortization of
intangible assets connected with acquisitions, were higher as a proportion of
pretax income in the third quarter, resulting in an increased effective tax
rate. Income tax expense in the first three quarters of fiscal 1995 was $3.1
million, representing an effective tax rate of 38%. The Company expects the
higher effective tax rate seen in the fiscal third quarter to continue or
increase for the remainder of fiscal 1996.
Net Income. Net income was $1.8 million, or 1.8% of net sales in the first nine
months of fiscal 1996, as compared to $5.1 million, or 6.5% of net sales in the
prior year period. The decrease in net income was a result of the lower income
from operations, higher net interest expense and the increase in the effective
tax rate. As well, the Company recognized other income of $373,000 in the first
three quarters of fiscal 1995 $200,000 of which related to the early retirement
of affiliate notes, as compared to other income of $113,000 in the fiscal 1996
quarter.
Earnings Per Share. Earnings per share of $0.17 for the first nine months of
1996 are calculated after deduction of preferred stock dividends and accretion
in preferred stock value totaling $0.8 million, whereas there was no preferred
stock outstanding in the prior year. Earnings per share in the first nine months
of fiscal 1995 were $0.87. The Company's acquisition of Stature was dilutive to
earnings per share in the first nine months of fiscal 1996, while the
acquisition of Great Bend had a negligible effect. The effects of the accretion
on preferred stock on earnings per share will be approximately $0.05 for the
full year of 1996. Although earnings per share have already shown a substantial
improvement over earnings per share for the first half of fiscal 1996, the
Company believes that because of its lower net income in the first nine months
of fiscal 1996 and expected lower earnings in the fourth quarter of fiscal 1996
than in the fourth quarter of fiscal 1995, combined with the effect of the
preferred stock, earnings per share for fiscal 1996 will be substantially lower
as compared to fiscal 1995.
-13-
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents decreased to $1.2 million at July 28, 1996 from $1.8
million at October 29, 1995. In addition to cash and cash equivalents at July
28, 1996 was $0.4 million in cash which is restricted under industrial revenue
bond financings. Through more efficient use of its cash, the Company expects to
be able to keep a lower level of cash and cash equivalents in relation to its
total assets than at October 29, 1995.
Net cash provided by operating activities was $5.5 million in the first nine
months of fiscal 1996 as compared to $3.4 million in the first nine months of
fiscal 1995. This increase was attained despite lower net income because of
higher non-cash expenses recorded before calculation of net income in the fiscal
1996 period and lower cash used to finance net working capital needs. Cash
provided from operating activities, along with borrowings on the Company's $55
million revolving line of credit with two banks, were used to finance increased
net working capital in the first nine months of fiscal 1996, as well as capital
expenditures, dividends and retirement of other debt, including a portion of the
debt incurred in the acquisition of Stature.
Net working capital increased to $27.0 million at July 28, 1996 from $20.6
million at October 29, 1995. Repayment of current indebtedness incurred in
connection with the acquisition of Stature using funds from the Company's bank
line of credit and a seasonal increase in accounts receivable and inventory were
the principal factors in the increase. At July 28, 1996, $29.4 million was
outstanding under the credit agreement.
Capital expenditures were $3.4 million in the first three quarters of fiscal
1996, compared to $3.3 million in the prior year period. Of the capital
expenditures, $2.3 million were in the Engineered Component Products segment,
$0.9 million were in the Specialized Equipment segment, and the remainder at the
corporate level. The Company has increased its capital spending in the second
half of fiscal 1996, and it expects capital expenditures for the full fiscal
year to be at a level similar to the $4.4 million spent in fiscal 1995.
After the end of the fiscal quarter, the Company's Dura-Bond subsidiary
purchased all of the outstanding stock of Snyder Industries, a manufacturer of
valve seats and shims with annual sales of approximately $0.7 million. Funds
from the revolving credit of approximately $1.6 million were used indirectly to
finance the acquisition. The Company regularly evaluates potential acquisitions,
and the completion of any such acquisition could involve the incurrence of
additional indebtedness by the Company, which could in turn result in a high
degree of financial leverage that might inhibit the Company's ability to obtain
additional financing on terms similar to existing credit facilities. In
addition, any such acquisition could involve issuance of securities of the
Company, including common stock or securities convertible into common stock,
which could have the effect of diluting the interests of existing stockholders.
During the third quarter of fiscal 1996 the Company entered into two interest
rate swaps to fix the interest rate on $15.0 million of its line of credit,
beginning in July 1997. (See Note 4 to Financial Statements.) Cash from
operations, along with the bank line of credit, will continue to be required to
refinance indebtedness related to the Stature acquisition of approximately $1.9
million during the next year. The Company believes that bank credit facilities
and funds from operations will be sufficient to refinance that indebtedness and
to fund the Company's normal operations for the foreseeable future.
-14-
<PAGE>
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The following information is provided pursuant to the "Safe Harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Certain statements in
Management's Discussion and Analysis of this Form 10-Q are "forward-looking
statements" made pursuant to these provisions.
The Company cautions readers that the following important factors, among others,
have in the past affected and could in the future affect the Company's actual
results of operations and cause the Company's actual results to differ
materially from the results expressed in any forward-looking statements made by
or on behalf of the Company:
The Company's results have been and can be expected to continue to be
affected by the general economic conditions in the United States and
specific economic factors influencing the manufacturing and
agricultural sectors of the economy. Lower demand for the Company's
products can lower revenues as well as cause underutilization of the
Company's plants, leading to reduced gross margins.
Commodity prices can have a material influence on the Company's
results. Grain prices and cattle prices can affect demand for certain
agricultural equipment sold by the businesses in the Company's
Specialized Equipment segment. Metal prices, particularly aluminum,
copper and steel, can affect the Company's costs as well as demand for
the Company's products and the value of inventory held at the end of a
reporting period. Lack of availability of certain commodities could
also disrupt the Company's production.
Weather can affect the success of the grain harvest in the United
States, which can directly affect demand for the Company's grain
handling equipment business.
The start-up of the Company's new Ohio plant has affected results of
operations. Acceptance of this plant's products and manufacturing
difficulties could lead to continuing losses from that operation.
Changes in demand that change product mix may reduce operating margins
by shifting demand toward less profitable products.
Loss of a substantial customer may affect results of operations. For
example, the Company's replacement camshaft bearing business sells a
substantially reduced volume of its products through Federal-Mogul
Corporation, which had been that business unit's largest customer.
The Company's results can be affected by engineering difficulties in
designing new products or applications for existing products to meet
the requirements of its customers.
Obsolescence or quality problems leading to returned goods in need of
repair can also affect the value of the Company's inventories and its
profitability.
-15-
<PAGE>
The Company's results are dependent on the hiring and retention of
qualified executive and local management. For example, the Company is
currently involved in a search for a new chief operating officer who is
expected to play a large role in the Company's strategic direction and
internal growth prospects. There can be no assurance that the Company
will be able to find a qualified candidate in the near future.
The Company has a substantial amount of floating rate debt. Increases
in short term interest rates could be expected to increase the
Company's interest expense.
Acquisitions are an important part of the Company's growth strategy.
Acquisitions may have a dilutive effect on the Company's earnings and
could affect the Company's available credit and interest costs.
Conversely, the Company may from time to time divest of product lines
or business units. Any such divestiture may involve costs of
disposition or losses on the disposition that could reduce the
Company's results.
The Company is subject to various Federal and state environmental laws
which could be costly to adhere to if changed materially.
-16-
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
- ----------- -----------
10.72 Fifth Amendment to Credit Agreement by and among Owosso
Corporation, its subsidiaries, NBD Bank, PNC Bank, N.A.,
and NBD Bank, as Agent, dated as of May 31, 1996.
10.73 Separation and Confidentiality Agreement between
Thomas L. French and Owosso Corporation.
(b) No Current Reports on Form 8-K were filed during
the quarter for which this report is filed.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
OWOSSO CORPORATION
By: /s/ George B. Lemmon Jr.
--------------------------
George B. Lemmon, Jr.
Chief Executive Officer
By: /s/ John H. Wert Jr.
--------------------------
John H. Wert, Jr.,
Senior Vice President - Finance and Chief
Financial Officer
Date: September 11, 1996
-18-
<PAGE>
Index to Exhibits
Exhibit Number Description
-------------- -----------
10.72 Fifth Amendment to Credit Agreement
by and among Owosso Corporation,
its subsidiaries, NBD Bank, PNC Bank,
N.A., and NBD Bank, as Agent, dated
as of May 31, 1996.
10.73 Separation and Confidentiality Agreement
between Thomas L. French and Owosso
Corporation, dated as of June 14, 1996.
<PAGE>
EXHIBIT No. 10.72
CREDIT AGREEMENT AMENDMENT
<PAGE>
Execution Copy
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of May 31,
1996 (this "Amendment"), is by and among OWOSSO CORPORATION, a Pennsylvania
corporation ("Owosso"), AHAB INVESTMENT COMPANY, a Delaware corporation
("Ahab"), CRAMER COMPANY, a Delaware corporation ("Cramer"), DEWEZE
MANUFACTURING, INC., a Pennsylvania corporation ("DewEze"), THE LANDOVER
COMPANY, a Pennsylvania corporation ("Landover"), MOTOR PRODUCTS-OWOSSO
CORPORATION, a Delaware corporation ("Motor Products"), SNOWMAX, INCORPORATED, a
Pennsylvania corporation ("Snowmax"), SOONER TRAILER MANUFACTURING CO., a
Delaware corporation ("Sooner"), MOTOR PRODUCTS-OHIO CORPORATION, a Delaware
corporation ("Motor Products-Ohio"), GREAT BEND MANUFACTURING COMPANY, INC., a
Kansas corporation, STATURE ELECTRIC, INC., a New York corporation ("Stature"
and, together with Owosso, Ahab, Cramer, DewEze, Landover, Motor Products,
Snowmax, Sooner, Motor Products-Ohio and Great Bend, collectively the
"Borrowers" and individually a "Borrower"), NBD BANK, a Michigan banking
corporation formerly known as NBD Bank, N.A. ("NBD"), PNC BANK, NATIONAL
ASSOCIATION, a national banking association ("PNC" and, together with NBD,
collectively the "Banks" and individually a "Bank"), and NBD BANK, as agent (in
such capacity, the "Agent") for the Banks.
INTRODUCTION
A. The Borrowers, the Banks and the Agent are parties to the
Credit Agreement, dated as of October 31, 1994, as amended by the First
Amendment to Credit Agreement, dated as of August 1, 1995, the Second Amendment
to Credit Agreement, dated as of September 1, 1995, the Third Amendment to
Credit Agreement, dated as of October 31, 1995, and the Fourth Amendment to
Credit Agreement, dated as of March 8, 1996 (the "Credit Agreement"), pursuant
to which the Banks provide to the Borrowers, on a joint and several liability
basis, a revolving credit facility in the aggregate principal amount of
$55,000,000.
B. The Borrowers now desire that certain covenants of the
Borrowers under the Credit Agreement be modified, and the Banks and the Agent
are willing to so amend the Credit Agreement on the terms and conditions herein
set forth.
NOW, THEREFORE, in consideration of the mutual agreements
herein and in the Credit Agreement contained, the parties hereto agree as
follows:
ARTICLE 1. CREDIT AGREEMENT AMENDMENTS
Effective upon the date (the "Amendment Date") that the
condition precedent set forth in Article 2 of this Amendment is satisfied, the
Credit Agreement hereby is amended as follows:
1.1 Section 5.2(a) is amended to read in full as follows:
(a) Net Worth. Permit or suffer the Consolidated Net
Worth of the Borrowers and their Subsidiaries to be less than
(i) at any time during the period prior to the start of the
first fiscal year of the Borrowers beginning after the IPO,
the greater of (A) $20,000,000 and (B) 90% of the Consolidated
Net Worth of the Borrowers and their Subsidiaries immediately
following the completion of the IPO, (ii) at any time after
the start of the first fiscal year of the Borrowers beginning
after the IPO but prior to the end of such fiscal year, 90% of
the Consolidated Net Worth of the Borrowers and their
Subsidiaries immediately prior to the start of such first
fiscal year, and (iii) at the end of the first fiscal year of
the Borrowers following the IPO or at any time thereafter, the
greater of (A) 90% of the highest previous fiscal year-end
Consolidated Net Worth of the Borrowers and their Subsidiaries
and (B) the sum of $2,000,000 plus the Consolidated Net Worth
of the Borrowers and their Subsidiaries as of the last fiscal
year-end of the Borrowers; provided that for the period
beginning immediately following the end of the Borrowers'
fiscal year ending on or about October 31, 1996 through the
end of the Borrowers' fiscal year ending on or about October
31, 1997, the Borrowers shall not permit or suffer the
Consolidated Net Worth of the Borrowers and their Subsidiaries
to be less than 90% of the highest previous fiscal year-end
Consolidated Net Worth of the Borrowers and their
Subsidiaries.
1.2 Section 5.2(c) is amended to read in full as follows:
(c) Fixed Charges Coverage. Permit or suffer the
ratio of Consolidated Fixed Charges Coverage Availability of
the Borrowers and their Subsidiaries to Consolidated Fixed
Charges of the Borrowers and their Subsidiaries to be less
than (i) 2.25 to 1.00 at any time prior to the end of the
Borrowers' fiscal quarter ending on or about January 31, 1997
(ii) 2.50 to 1.00 as of the end of the Borrowers' fiscal
quarter ending on or about January 31, 1997 or at any time
thereafter prior to the end of the Borrowers' fiscal quarter
ending on or about April 30, 1997, or (iii) 3.00 to 1.00 as of
the end of the Borrowers' fiscal quarter ending on or about
April 30, 1997 or at any time thereafter; such ratio to be
determined as of the last day of each fiscal quarter of the
Borrowers for the period of four fiscal quarters of the
Borrowers then ended. For purposes of determining from time to
time the Borrowers' compliance with this subsection, each
Person that is a Borrower or a Subsidiary of a Borrower at the
time of such determination shall be deemed to have been a
Borrower or a Subsidiary of a Borrower, as the case may be,
for the entire period relevant to such determination (i.e., in
each case, the period of four fiscal quarters of the Borrowers
then ended) and each Person that was a Borrower or Subsidiary
of a Borrower at any time during such relevant period, but is
no longer a Borrower or Subsidiary of a Borrower, as the case
may be, at the time of such determination, shall be deemed not
to have been a Borrower or a Subsidiary of a Borrower, as the
case may be, at any time during such period.
1.3 Section 5.2(d) is amended to read in full as follows:
(d) Ratio of Senior Debt to Tangible Capital Funds
with Minimum Tangible Capital Funds and Tangible Net Worth.
Permit or suffer both of either (i) and (ii) below or (i) and
(iii) below to occur at any time:
(i) the ratio of (A) Consolidated Senior
Debt of the Borrowers and their Subsidiaries to (B)
Consolidated Tangible Capital Funds of the Borrowers and their
Subsidiaries to exceed (1) at the end of each of the
Borrowers' fiscal quarters ending on or about April 30, 1996
and July 31, 1996, 5.25 to 1.00, (2) at the end of each of the
Borrowers' fiscal quarters ending on or about October 31, 1996
and January 31, 1997, 4.50 to 1.00, (3) at the end of the
Borrowers' fiscal quarter ending on or about April 30, 1997,
4.00 to 1.00, (4) at the end of the Borrowers' fiscal quarter
ending on or about July 31, 1997, 3.50 to 1.00, and (5) at the
end of the Borrowers' fiscal quarter ending on or about
October 31, 1997 or at the end of any fiscal quarter
thereafter, 3.00 to 1.00.
(ii) the Consolidated Tangible Capital Funds of the
Borrowers and their Subsidiaries to be less than the sum of
(A) $15,000,000 plus (B) 50% of the Consolidated Cumulative
Net Income of the Borrowers and their Subsidiaries for the
period from the completion of the IPO through the end of the
latest fiscal quarter of the Borrowers prior to the date of
determination.
(iii) the Consolidated Tangible Net Worth of
the Borrowers and their Subsidiaries to be less than (i) as of
the end of any fiscal year of the Borrowers commencing with
the Borrowers' fiscal year ending in 1994, the sum of (A)
$7,500,000 plus (B) an amount equal to 50% of the Consolidated
Cumulative Net Income of the Borrowers and their Subsidiaries
for each fiscal year of the Borrowers ending in 1996 and
thereafter.
ARTICLE 2. CONDITION PRECEDENT TO AMENDMENTS
As a condition precedent to the effectiveness of the
amendments to the Credit Agreement set forth in Article 1 of this Amendment, the
Borrowers shall have paid to the Banks a fee for this Amendment in the amount of
$15,000. Such fee shall be shared between the Banks as follows: $9,545.25 for
NBD and $5,454.75 for PNC.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Amendment,
each Borrower represents and warrants that:
3.1 The execution, delivery and performance by the Borrowers
of this Amendment have been duly authorized by all necessary corporate action
and do not and will not (a) require any consent or approval of the stockholders
of any Borrower, (b) violate any provisions of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to any Borrower or of the Articles of Incorporation or
By-Laws of any Borrower, or (c) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which any Borrower is a party or by which any Borrower or its
properties may be bound or affected.
3.2 No authorization, consent, approval, license, exemption of
or filing, declaration or registration with any governmental authority or any
non-governmental person or entity, including without limitation any creditor or
stockholder of any Borrower, is required on the part of any Borrower in
connection with the execution, delivery and performance of this Amendment or the
transactions contemplated hereby or as a condition to the legality, validity or
enforceability of this Amendment.
<PAGE>
3.3 This Amendment is a legal, valid and binding obligation of
the Borrowers enforceable against the Borrowers in accordance with its terms.
3.4 After giving effect to the amendments contained in Article
1 of this Amendment and to Section 4.2 of this Amendment, the representations
and warranties contained in Article IV of the Credit Agreement are true on and
as of the date hereof with the same force and effect as if made on and as of the
date hereof, provided that neither (a) Stature nor (b) either of Motor
Products-Ohio or Great Bend shall be deemed a "Borrower" with respect to, but
only with respect to, such representations and warranties regarding historical
matters involving only, respectively, (a) the Borrowers other than Stature or
(b) the Borrowers other than Stature, Motor Products-Ohio and Great Bend.
ARTICLE 4. MISCELLANEOUS
4.1 If any Borrower shall fail to perform or observe any term,
covenant or agreement in this Amendment, or any representation or warranty made
by any Borrower in this Amendment shall prove to have been incorrect in any
material respect when made, such occurrence shall be deemed to constitute an
Event of Default.
4.2 All references to the Credit Agreement in any agreement,
certificate or instrument referred to in the Credit Agreement, or delivered
pursuant thereto or in connection therewith or in any other document, hereafter
shall be deemed references to the Credit Agreement, as amended hereby.
4.3 All agreements, certificates and instruments executed
pursuant to the Credit Agreement or in connection therewith and, subject to the
amendments herein provided, the Credit Agreement, shall in all respects continue
in full force and effect and are hereby ratified and confirmed.
4.4 Capitalized terms used but not defined in this Amendment
shall have the respective meanings ascribed thereto in the Credit Agreement.
4.5 This Amendment shall be governed by and construed in
accordance with the laws of the State of Michigan.
4.6 This Amendment may be signed upon any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument.
4.7 The Borrowers jointly and severally agree to pay the
reasonable fees and expenses of Dickinson, Wright, Moon, Van Dusen & Freeman,
counsel for the Agent, in connection with the negotiation and preparation of
this Amendment and the documents referred to herein and the consummation of the
transactions contemplated hereby, and in connection with advising the Agent as
to its rights and responsibilities with respect thereto.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed and delivered as of the date first above written.
BORROWERS: OWOSSO CORPORATION
By: /s/ John H. Wert Jr.
-----------------------------
Its: SVP FINANCE & CFO
--------------------------
AHAB INVESTMENT COMPANY
By: /s/ Norman J. Shuman
-----------------------------
Its: Vice President
------------------------
CRAMER COMPANY
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
DEWEZE MANUFACTURING, INC.
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
<PAGE>
THE LANDOVER COMPANY
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
MOTOR PRODUCTS-OWOSSO CORPORATION
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
GREAT BEND MANUFACTURING
COMPANY, INC.
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
SNOWMAX, INCORPORATED
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
SOONER TRAILER MANUFACTURING CO.
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
MOTOR PRODUCTS-OHIO CORPORATION
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
STATURE ELECTRIC, INC.
By: /s/ John H. Wert Jr.
-----------------------------
Its: Treasurer
------------------------
<PAGE>
Agent and Banks: NBD BANK, as Agent and as a Bank
By: /s/ William C. Goodue
-----------------------------
Its: Vice President
------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Mark E. Bevilacqua
-----------------------------
Its: Vice President
------------------------
<PAGE>
EXHIBIT No. 10.73
SEPARATION AND CONFIDENTIALITY AGREEMENT
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SEPARATION AND CONFIDENTIALITY AGREEMENT
BETWEEN
THOMAS L. FRENCH
AND
OWOSSO CORPORATION
JUNE 14, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
SEPARATION AND CONFIDENTIALITY AGREEMENT
THIS SEPARATION AND CONFIDENTIALITY AGREEMENT is made as of the 14th
day of June, 1996 by and between THOMAS L. FRENCH, an individual residing in the
Commonwealth of Pennsylvania ("Executive"), and OWOSSO CORPORATION, a business
corporation existing under the laws of the Commonwealth of Pennsylvania,
together with each and every one of its predecessors, successors (by merger or
otherwise), parents, subsidiaries, affiliates, assigns, directors, officers,
employees, agents and other representatives of any kind (hereinafter
collectively referred to as the "Company").
W I T N E S S E T H:
WHEREAS, Executive has been employed by the Company since its
formation in March 1994 in the capacity of President and Chief Operating Officer
and has served as a member of the Board of Directors of the Company; and
WHEREAS, Executive and the Company have agreed that it is in their
mutual best interests for Executive to resign his positions as a director,
officer and employee of the Company; and
WHEREAS, Executive and the Company also desire to settle fully and
finally all differences between them, including, but in no way limited to, any
differences arising out of any aspect of Executive's employment with the Company
and/or out of his separation from that employment.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth, Executive and the Company acting of their own free will and intending
to be legally and irrevocably bound hereby, agree as follows:
1. Prior Agreements. All agreements and understandings between
Executive and the Company, whether oral or written, which were in effect at any
time prior to the execution and delivery of this Agreement ("Prior Agreements")
are hereby terminated and of no further force and effect. Neither Executive nor
the Company shall have any further rights or obligations under any such Prior
Agreements.
2. Employment Termination. Executive acknowledges and agrees that,
effective as of May 8, 1996 (the "Commencement Date"), he did not (and shall not
in the future) render any further services to the Company in the capacity of
employee, officer or director of the Company, and that, as of the Commencement
Date, he has effectively resigned from any and all positions that he heretofore
held with the Company, its subsidiaries and affiliates. Contemporaneously with
the execution and delivery of this Agreement, Executive shall execute and
deliver to the Company a formal resignation from his positions as President,
Chief Operating Officer and member of the Company's Board of Directors and
similar resignations with respect to each and every subsidiary of the
Corporation for which he served as an officer and/or director. Executive further
acknowledges and agrees that, effective as of the Commencement Date, he was no
longer (and shall no longer in the future) be authorized to represent, to incur
any expenses or liabilities or to take any other action on behalf of, the
Company. In addition, Executive acknowledges and agrees that the Company shall
not have any obligation, contractual or otherwise, to rehire, reemploy or recall
him in the future and/or to pay or to make available to him any additional
compensation or benefits after the Commencement Date except as required by law
or as specifically provided herein.
3. Consideration. In consideration for the general release described
in Section 7 hereunder and for all other agreements by Executive contained in
this Agreement, the Company shall provide Executive with the following benefits
and compensation:
a. Executive Base Salary. The Company shall continue Executive's
base salary from the Commencement Date until the first anniversary of the
Commencement Date. Such salary shall continue to be inclusive of all applicable
income, social security and other taxes and charges which are required by law to
be withheld by the Company and such salary shall be withheld and paid in
accordance with the Company's normal payroll practice for its executives from
time to time in effect.
b. Executive Bonuses. Company shall pay Executive immediately
upon the Effective Date of this Agreement, Twelve Thousand Dollars ($12,000) in
cash, which amount constitutes the pro rata portion of Executive's bonus for the
first six (6) months of the Company's 1996 fiscal year.
c. Welfare Benefit Continuation.
(i) It is the intention of the parties hereto that
Executive's status as an active participant under the Company's basic group life
insurance and long term disability programs will continue, insofar as permitted
by the contracts with the Company's group insurance providers and by applicable
law through the first anniversary of the Commencement Date; provided that, in
the event that Executive's status as an active participant under such insurance
and disability programs is not permitted by the Company's contracts with its
insurance providers or by applicable law, the Company will use its best efforts
to obtain reasonably equivalent coverage for Executive through the first
anniversary of the Commencement Date.
<PAGE>
(ii) The inclusion of Executive as an active participant in
the Company's group health plan shall terminate as of the Commencement Date.
Nevertheless, the Executive shall be eligible to continue coverage under the
Company's group health plan to the extent required by the Consolidated Omnibus
Budget Reconciliation Act of 1986, as amended ("COBRA"), 29 U.S.C. Sections
1161-1169. Furthermore, as part of the severance package made available to
Executive hereunder, the Company agrees to bear the cost of continuing
Executive's group medical benefits under COBRA (less an amount equal to the
amount that Executive would have been required to pay for such group medical
benefits were he still employed by the Company) through the first anniversary of
the Commencement Date. During the period during which the Company subsidizes the
Executive's COBRA premium, the Executive's required contribution (as provided
for above) will be deducted from Executive's monthly salary continuation
payments. The cost of COBRA coverage for any period after the first anniversary
of the Commencement Date shall be borne exclusively by the Executive.
The Company's assumption of the cost of such coverage shall be
considered an employer subsidy of the employee's right to purchase continuation
coverage under COBRA. This Agreement shall in no way extend the maximum period
of continuation coverage to which the Executive is entitled under COBRA beyond
the time described in ERISA Section 602, 29 U.S.C. Section 1162, or otherwise
expand the Executive's rights under COBRA.
(iii) Pursuant to ERISA 602(2)(D)(i), the Executive's
entitlement to COBRA continuation coverage ceases on the date that the Executive
becomes covered under another group medical plan which does not contain any
exclusion or limitation with respect to any preexisting condition of the
Executive. In the event the Executive becomes covered under such a plan, the
Executive agrees to immediately notify the Company by written notice to the
Chief Financial Officer of the Company.
c. Other Insurance. The Company shall continue for one (1) year
Executive's (i) term life insurance coverage, and in connection therewith shall
pay all premiums relating thereto scheduled on the Commencement Date to be made
from the Commencement Date until the first anniversary of the Commencement Date,
and (ii) D&O insurance coverage, and in connection therewith shall pay all
premiums relating thereto scheduled on the Commencement Date to be made from the
Commencement Date until the first anniversary of the Commencement Date.
d. Outplacement Service. The Company shall pay up to (but not
more than) Fifteen Thousand Dollars ($15,000) for outplacement services for
Executive, such payment to be made to one or more agencies selected by Executive
upon submission by Executive of valid invoices or bills for services rendered by
such agency(ies).
e. Leased Vehicle. Pursuant to a lease between the Company and
Don Rosen BMW (the "Lease"), the Company leases for the use of Executive, one
black on black 1996 BMW 328ia sedan (the "Leased Vehicle"). The Company shall
make (i) all lease payments scheduled on the Commencement Date to be made under
the Lease from the Commencement Date until the first anniversary of the
Commencement Date, (ii) all auto insurance premium payments relating to the
Leased Vehicle that are scheduled on the Commencement Date to be made from the
Commencement Date until the first anniversary of the Commencement Date, and
(iii) all payments reasonably necessary or appropriate in order to maintain the
Leased Vehicle from the Commencement Date until the first anniversary of the
Commencement Date; provided, however, that the Company shall not be responsible
to pay for gasoline for the Leased Vehicle. Executive shall use his best efforts
to obtain Don Rosen BMW's consent to the termination of the Lease effective on
the first anniversary of the Commencement Date. In the event that Executive is
unable to obtain such consent, on the first anniversary of the Commencement
Date, Executive shall return the Leased Vehicle to the Company in the same
condition as such Leased Vehicle is in on the Commencement Date, reasonable wear
and tear excepted.
4. Option Regarding Company Stock.
a. On the date hereof, Executive owns beneficially and of record
131,324 restricted shares (the "Shares") of the Company's common stock, par
value $.01 per share ("Common Stock"). Executive hereby represents and warrants
to the Company that (i) Executive owns the Shares beneficially and of record,
(ii) Executive has good, marketable and valid title to the Shares, free and
clear of all liens, security interests, pledges, negative pledges, encumbrances,
restrictions, options, charges or claims of any kind, and (iii) no person or
entity has any agreement, subscription, option, or warrant, or any other right
or commitment, entitling him or it to acquire from Executive any of the Shares.
b. For a period of two (2) business days following the expiration
of the Stock Price Computation Period (as defined below), Executive may, upon
delivery of written notice to the Company, together with the certificates
representing the Shares and stock power(s) duly executed in blank (the
"Conditions"), require the Company to purchase the Shares. Upon fulfillment of
the Conditions, the Company shall within two (2) business days thereafter
purchase the Shares from Executive for a purchase price (the "Purchase Price")
equal to the average closing price of the Common Stock as reported by the Nasdaq
Stock Market for the trading days comprising the Stock Price Computation Period.
The Purchase Price shall be payable as follows: (i) up to Two Hundred Forty Five
Thousand Dollars ($245,000) of such Purchase Price (in Executive's sole
discretion) shall be payable in cash at settlement of such purchase and sale
(the "Closing") and (ii) the balance of such Purchase Price shall be payable by
the delivery of a subordinated secured promissory note of the Company in form
reasonably acceptable to the Company and the Executive (the "Note").
c. The Note shall be payable in full on the second anniversary of
the Closing, shall bear interest at eight percent (8%) per annum, payable
quarterly in arrears, and shall be secured by the Shares. The Note shall be
subordinated only to the Company's senior lender, NBD Bank (in its capacity as a
lender or as agent), or its successors and assigns or any lender that replaces
NBD Bank, in accordance with a Subordination Agreement, the terms and conditions
of which shall be reasonably acceptable to the Company's senior lender.
d. For purposes hereof, the "Stock Price Computation Period"
shall commence on the third (3rd) business day following June 3, 1996 and shall
end on such date which, including the commencement date of the Stock Price
Computation Period, is thirty five (35) trading days later. For purposes hereof,
a "trading day" shall mean any day that securities trade on the Nasdaq Stock
Market.
5. Confidentiality.
a. Executive agrees that he will not disclose or use for his
direct or indirect benefit or the direct or indirect benefit of any third party,
any Confidential Information (as hereinafter defined) of the Company. In
general, "Confidential Information" means any and all proprietary information of
the Company, whether any information relating to computer codes or instructions
(including source and object code listings, logic algorithms, subroutines,
modules or other subparts of computer programs and related documentation,
including program notation); computer processing systems and techniques;
concepts; layouts; flowcharts; specifications; know-how; any associated user or
other manuals or other like textual materials (including any other data and
materials used in performing Executive's duties); all computer inputs and
outputs (regardless of the media on which stored or located); hardware and
software configurations; designs; interfaces; research; processes; inventions;
products; methods; marketing sales and distribution data, methods, plans and
efforts; the Company's relationship with actual and prospective customers,
contractors and suppliers; sales, business, alliance and strategic plans;
alliance agreements; license agreements; budgets; any other materials prepared
by Executive or other employees in the course of, relating to or arising out of
their employment, or prepared by any other contractor for the Company or its
customers; and any other materials that have not been made available to the
general public.
b. Executive agrees that he will, effective the Commencement
Date: (i) discontinue all use of Confidential Information; (ii) return to the
Company all material furnished by the Company that contains Confidential
Information; (iii) erase or destroy any Confidential Information contained in
computer memory or data storage apparatus under the ownership or control of
Executive; and (iv) remove Confidential Information from any software under the
ownership or control of Executive that incorporates or uses Confidential
Information in whole or in part.
c. Executive has returned to the Company, on or prior to the
Commencement Date, any documents, records, notebooks, files, correspondence,
reports, memorandum, personal property owned by the Company, or any other
documents and material whatsoever relating to the business of the Company.
Executive represents that he has returned all door and file keys, card key
passes, computer access cards, software, credit cards and other physical
property of any kind owned by the Company that Executive received in connection
with his employment. Executive further agrees that he will not make, retain,
remove or distribute any copies of any of the foregoing.
6. Confidentiality of Terms. Executive agrees that the terms of this
Agreement shall remain completely confidential, and he will not hereafter
disclose any information concerning this Agreement to anyone except: (a) his
spouse and family; (b) his personal attorney, if any; (c) his personal financial
and/or tax advisors; (d) taxing authorities and (e) as otherwise may be required
by law or court order. Executive further understands that such information may
be disclosed to the aforementioned individuals only on the condition that such
individuals in turn agree to keep such information completely confidential, and
not disclose it to others, except as may otherwise be required by law or court
order. After his resignation and in response to any inquiries by employees of
the Company or third parties concerning any of the terms of this Agreement,
Executive agrees to state only that he resigned his employment.
7. Non-Disparagement. Neither Executive nor the executive officers of
the Company will make to any person outside the employment of that party any
tortiously defamatory or disparaging statement with regard to the other party or
the other party's business.
8. Waiver and Release of Claims.
a. In consideration of the foregoing, except as set forth in
Section 8(c) hereof, Executive completely releases, relinquishes, waives and
discharges the Company, its officers, directors, employees, agents, successors
and assigns from all claims, liabilities, demands and causes of action, known or
unknown, filed or contingent, which he may have or claim to have against the
Company as of the date of the signing of this Agreement arising out of or in any
way related to his employment with the Company or the termination of that
employment. Executive agrees that he has executed this Agreement and this
release on his own behalf, and also on behalf of his heirs, agents,
representatives, successors and assigns. This release includes, but is not
limited to, a release of any rights or claims he may have:
(i) for alleged employment discrimination on the basis of
age, race, color, religion, sex, national origin,
veteran status, disability and/or handicap, in
violation of any federal, state or local statute,
ordinance, judicial precedent or executive order,
including but not limited to claims for discrimination
under the following statutes: Title VII of the Civil
Rights Act of 1964, 42 U.S.C. Section 2000e et seq.,
the Civil Rights Act of 1866, 42 U.S.C. Section 1981,
the Age Discrimination in Employment Act, as amended,
29 U.S.C. Section 621 et seq., the Older Workers
Benefit Protection Act, the Rehabilitation Act of
1972, as amended, 29 U.S.C. Section 701 et seq., the
Americans with Disabilities Act, 42 U.S.C. Section
12101 et seq., the Family and Medical Leave Act of
1993, 29 U.S.C. Section 2601 et seq., and the
Pennsylvania Human Relations Act, 43 P.S. Section 951
et seq.;
(ii) in tort (including but not limited to any claims for
misrepresentation, defamation, interference with
contract or prospective economic advantage,
intentional infliction of emotional distress and
negligence);
(iii) for wages and benefits (including without limitation
salary, stock, commissions, royalties, license fees,
health and welfare benefits, severance pay, vacation
pay, and bonuses);
(iv) for wrongful discharge and breach of contract (whether
express or implied), and implied covenants of good
faith and fair dealing;
(v) for breach of any express or implied contract claims;
(vi) for wrongful termination or any other tort claims,
including claims for attorney's fees, whether based on
common law, or otherwise;
(vii) to acquire or exercise any other rights or
entitlements of stock, warrants, options, or other
securities of the Company, and any related entity
other than pursuant to the exercise of stock options
and warrants currently held or acquired otherwise than
from the Company.
Executive understands, however, that by signing this release, he does not waive
rights to: (x) claims arising under any applicable worker's compensation laws;
(y) any claims which the law states may not be waived; and (z) his vested rights
under the regular employment benefit plans of the Company, in effect as of the
date this Agreement.
b. In consideration of the foregoing, except as set forth in
Section 8(c) hereof, the Company in turn completely releases, relinquishes,
waives and discharges Executive from all claims, liabilities, demands and causes
of action, known or unknown, filed or contingent, which it may have or claim to
have against Executive as of the date of the signing of this Agreement arising
out of or in any way related to Executive's employment with the Company or the
termination of that employment.
(c) Executive and the Company specifically acknowledge and hereby
agree that the provisions of this general release extend to all of the
aforementioned actions, whether presently matured or not matured, known or
unknown, suspected or unsuspected by Executive and by the Company, and further
agree that this constitutes an essential, material term of this Agreement.
Notwithstanding the foregoing, Executive and the Company expressly agree that
the releases set forth in this Section 8 shall not apply to any and all suits,
causes of action, claims, demands, charges, complaints, obligations or any
actions of any sort whatsoever, whether in law or equity, directly or
indirectly, relating to or in any way arising out of any aspect of this
Agreement and any other agreements and instruments related to the transactions
contemplated herein.
9. No Admission. This Agreement shall not in any way be construed as
an admission by either Executive or the Company that either has acted wrongfully
with respect to the other party or that any action taken by Executive or the
Company with respect to the other at any time prior to the execution of this
Agreement has been unwarranted, unjustified, discriminatory, or otherwise
unlawful. Rather, it is understood and agreed that this Agreement constitutes a
good faith settlement of any and all claims between the parties, and, except as
set forth in Section 8(c) hereof, Executive and the Company hereby specifically
disclaim any liability to or wrongful acts against the other party on the part
of itself, its directors, officers, employees, agents and/or other
representatives including legal counsel of any kind.
10. Indemnification. To the extent permitted by law, the Company
agrees to defend, indemnify and hold Executive harmless against any threatened
or pending actions or proceedings, whether brought by a third party or as a
derivative action, by reason of the fact that Executive was a director, an
officer and/or a representative of the Company acting within the scope of his
employment.
11. Cooperation in Defending Legal Actions. Executive understands that
he will not in the future voluntarily assist any individual or entity in
preparing, commencing or prosecuting any action or proceeding against the
Company, its directors, officers, employees, or affiliates, including but not
limited to, any administrative agency claims, charges or complaints and/or
lawsuits against the Company, its directors, officers, employees or affiliates,
or to voluntarily participate or cooperate in any such action or proceeding,
except as such waiver is prohibited by applicable law. Executive also agrees
that he will cooperate with and assist the Company in its defense of any such
action or proceeding, including without limitation, any actions or proceedings
currently pending or threatened against the Company or hereafter initiated
against the Company. This Agreement shall not preclude Executive from testifying
in such an action or proceeding if he is requested to do so by the Company or is
compelled to do so pursuant to a subpoena or other court order. However,
Executive expressly agrees that he will provide written notice addressed to the
attention of the Chief Financial Officer of the Company, if he should receive,
by service or otherwise, a notice, subpoena or other court order or any other
written request seeking or requiring him to testify or otherwise participate in
or assist in any action or proceeding against the Company, such notice to be so
provided within twenty-four (24) hours of each such receipt by Executive or
anyone acting on his behalf.
12. Entire Agreement. This Agreement constitutes the entire
understanding between Executive and the Company and supersedes all other
agreements, whether written or oral, with respect to the transactions
contemplated herein. This Agreement may not be amended or modified by either
party unless such amendment or modification is memorialized in a writing signed
by each of the parties hereto.
13. Waiver. Any waiver by either party of any breach of any term or
condition of this Agreement shall not operate as a waiver of any other breach of
such term or condition or of any other term or condition, nor shall any failure
to enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof or constitute or be deemed a waiver or release of any
other rights, in law or in equity.
14. Arbitration. Except in the case of a breach of Sections 5, 6
and/or 7 of this letter for which the non-breaching party shall be entitled to
apply to a court of competent jurisdiction for injunctive relief therefrom, in
the case of a dispute, controversy, difference or claim arising out of this
letter or for the breach hereof (either, a "Dispute"), the parties herein shall
use exclusively the procedures set forth herein to resolve the Dispute.
a. Submission to Arbitration. Any Dispute shall be settled by
arbitration before three arbitrators, at least one of whom will be a lawyer, in
accordance with the Rules of the American Arbitration Association ("AAA") then
in effect and as modified by this Section 14 or by further agreement of the
parties. Any such arbitration will be conducted in Philadelphia, Pennsylvania.
The arbitrators will be selected from a panel of persons knowledgeable in the
specific areas which may be relevant to the claim. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction.
b. Confidentiality. Neither party nor the arbitrators may
disclose the existence or results of any arbitration under this letter or any
evidence presented during the course of the arbitration without the prior
written consent of both parties.
c. Cost of Arbitration. Each party shall bear its own costs
incurred in the arbitration. If either party refuses to submit to arbitration
any Dispute required to be submitted to arbitration pursuant to this Section 14,
and instead commences any other proceeding, including, without limitation,
litigation, then the party who seeks enforcement of the obligation to arbitrate
shall be entitled to its attorneys' fees and costs incurred in any such
proceeding.
15. Governing Law. All issues concerning this Agreement will be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to any choice of law or conflict of law
provision or rule (whether of the Commonwealth of Pennsylvania or any other
jurisdiction) that would cause the application of the law of any jurisdiction
other than the Commonwealth of Pennsylvania. The parties hereto agree that,
except as otherwise set forth in Section 14 hereof, any action to enforce this
Agreement may be properly brought in any court within the Commonwealth of
Pennsylvania or in the United States District Court for the Eastern District of
Pennsylvania, and the parties hereto agree that the courts of the Commonwealth
of Pennsylvania and the United States District Court for the Eastern District of
Pennsylvania shall have jurisdiction with respect to the subject matter hereof
and the person of the parties hereto.
16. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
17. Further Assurances. From time to time after the execution of this
Agreement, each of the parties hereto hereby agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper and advisable under applicable laws, rules
and regulations to consummate and make effective the transactions contemplated
by this Agreement, including using its best efforts to obtain all necessary
waivers, consents and approvals. In case at any time after the execution of this
Agreement further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each of the parties shall
take all such necessary action.
18. Assignment. This Agreement may not be assigned by either party (by
operation of law or otherwise) without the express written consent of the other
party.
19. Enforcement. All remedies at law and equity shall be available for
the enforcement of this Agreement incorporated by reference herein. This
Agreement may be pleaded as a full bar to the enforcement of any claim in any
way related to or arising out of Executive's employment with the Company and/or
the termination of his employment.
20. Opportunity to Review; Effectiveness of Agreement; Revocation.
a. EXECUTIVE HEREBY ACKNOWLEDGES THAT HE IS ACTING OF HIS OWN
FREE WILL, THAT HE HAS BEEN AFFORDED A REASONABLE TIME TO READ AND REVIEW THE
TERMS OF THIS AGREEMENT, THAT HE HAS HAD AN OPPORTUNITY TO SEEK THE ADVICE OF
COUNSEL AND THAT HE IS VOLUNTARILY ENTERING INTO THIS AGREEMENT WITH FULL
KNOWLEDGE OF ITS RESPECTIVE PROVISIONS AND EFFECTS.
b. Executive acknowledges that he has been advised that he has
not less than twenty-one (21) days to consider this Agreement; that he has seven
(7) days after signing this Agreement within which to revoke his acceptance of
this Agreement and THAT THIS AGREEMENT WILL NOT BECOME EFFECTIVE OR ENFORCEABLE
UNTIL AFTER THAT SEVEN (7) DAY REVOCATION PERIOD EXPIRES (such date, the
"Effective Date"); and that he should consult an attorney before signing this
Agreement.
c. If Executive elects to revoke his acceptance of this
Agreement, he will do so within seven (7) days after executing it, by depositing
a letter in the U.S. Mail, postage prepaid, addressed to:
Owosso Corporation
One Tower Bridge
100 Front Street
West Conshohocken, PA 19428
Attn: Chief Financial Officer
Such a letter shall advise the Chief Financial Officer that Executive has
elected to revoke his acceptance of this Agreement. Executive shall not accept,
endorse, or deposit any check or other payment sent or made to him by the
Company pursuant to the terms of this Agreement if Executive elects to revoke
his acceptance of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
22. Contractual Effect. The parties understand and acknowledge that
the terms of this Agreement are contractual and not a mere recital.
Consequently, they expressly consent that this Agreement shall be given full
force and effect according to each and all of its express terms and provisions,
and that it shall be binding upon the respective parties as well as their heirs,
executors, successors, administrators and assigns.
IN WITNESS WHEREOF, Executive and the Company each acknowledge that
they are acting of their own free will, that they have had a sufficient
opportunity to read and review the terms of this Agreement, they have each
received the advice of their respective counsel with respect hereto, and that
they have voluntarily caused the execution of this Agreement as of the day and
year set forth below.
Witness
/s/ Bruce K. Fenton /s/ Thomas L. French
- ---------------------- -----------------------
Thomas L. French
ATTEST: OWOSSO CORPORATION
By: /s/ Brian Tidwell By: /s/ George B. Lemmon, Jr.
---------------------- -------------------------
Title: VP-Operations Title: CEO
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-END> JUL-28-1996
<EXCHANGE-RATE> 1
<CASH> 1,219,429
<SECURITIES> 0
<RECEIVABLES> 19,880,000
<ALLOWANCES> 171,164
<INVENTORY> 21,481,317
<CURRENT-ASSETS> 44,554,472
<PP&E> 48,121,620
<DEPRECIATION> 22,443,134
<TOTAL-ASSETS> 109,924,572
<CURRENT-LIABILITIES> 17,594,514
<BONDS> 52,939,602
0
13,597,121
<COMMON> 58,650
<OTHER-SE> 25,518,375
<TOTAL-LIABILITY-AND-EQUITY> 109,924,572
<SALES> 94,656,946
<TOTAL-REVENUES> 94,769,790
<CGS> 71,133,020
<TOTAL-COSTS> 71,133,020
<OTHER-EXPENSES> 17,455,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,013,434
<INCOME-PRETAX> 3,167,625
<INCOME-TAX> 1,416,966
<INCOME-CONTINUING> 1,750,659
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