<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: Commission file number: 0-25066
January 31, 1999
OWOSSO CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2756709
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
The Triad Building, 2200 Renaissance Boulevard
Suite 150, King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 275-4500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
As of March 10, 1999, 5,815,842 shares of the Registrant's Common Stock, $.01
par value, were outstanding.
================================================================================
<PAGE>
OWOSSO CORPORATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations 3
for the Fourteen Weeks Ended January 31, 1999 and
the Thirteen Weeks Ended January 25, 1998 (unaudited)
Condensed Consolidated Balance Sheets at 4
January 31, 1999 (unaudited) and October 25, 1998
Condensed Consolidated Statements of Cash Flows 5
for the Fourteen Weeks Ended January 31, 1999 and
the Thirteen Weeks Ended January 25, 1998 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
(unaudited)
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risks 17
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
OWOSSO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
January 31, January 25,
1999 1998
<S> <C> <C>
Net sales $ 38,835,000 $ 34,054,000
Cost of products sold 31,607,000 26,558,000
------------ ------------
Gross profit 7,228,000 7,496,000
Expenses:
Selling, general and administrative 4,687,000 5,006,000
Corporate 1,561,000 1,400,000
------------ ------------
Income from operations 980,000 1,090,000
Interest expense 1,296,000 1,124,000
Other income 73,000 45,000
------------ ------------
Income (loss) before income taxes (243,000) 11,000
Income tax expense (benefit) (111,000) 5,000
------------ ------------
Net income (loss) (132,000) 6,000
Dividends and accretion on preferred stock (271,000) (265,000)
------------ ------------
Net income (loss) available for common stockholders $ (403,000) $ (259,000)
============ ============
Basic and diluted earnings (loss) per common share $ (0.07) $ (0.04)
============ ============
Weighted average number of common shares outstanding 5,816,000 5,809,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
OWOSSO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 31, October 25,
1999 1998
ASSETS (Unaudited) (See Note)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 195,000 $ 191,000
Receivables, net 16,392,000 17,919,000
Inventories, net 21,591,000 21,262,000
Prepaid expenses and other 2,045,000 1,283,000
Deferred taxes 733,000 733,000
------------ ------------
Total current assets 40,956,000 41,388,000
PROPERTY, PLANT AND EQUIPMENT, NET 36,935,000 35,915,000
GOODWILL, NET 28,006,000 28,155,000
OTHER INTANGIBLE ASSETS, NET 8,486,000 8,690,000
NET ASSETS HELD FOR SALE 7,296,000 7,619,000
RESTRICTED CASH 1,923,000 1,906,000
OTHER ASSETS 1,549,000 1,533,000
------------ ------------
TOTAL ASSETS $125,151,000 $125,206,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 9,206,000 $ 9,762,000
Accrued expenses 5,607,000 7,197,000
Current portion of related party debt 1,815,000 2,843,000
Current portion of long-term debt 1,757,000 1,935,000
------------ ------------
Total current liabilities 18,385,000 21,737,000
LONG-TERM DEBT, LESS CURRENT PORTION 67,856,000 63,746,000
POSTRETIRMENT BENEFITS 2,742,000 2,713,000
DEFERRED TAXES 2,367,000 2,367,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY 33,801,000 34,643,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $125,151,000 $125,206,000
============ ============
</TABLE>
Note: the balance sheet at October 25, 1998 has been condensed from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
4
<PAGE>
OWOSSO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
January 31, January 25,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (132,000) $ 6,000
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation 1,292,000 1,085,000
Amortization 570,000 573,000
Other - 8,000
Changes in operating assets and liabilities (1,384,000) (1,731,000)
----------- -----------
Net cash provided by (used in) operating activities 346,000 (59,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (2,313,000) (2,362,000)
Contingent consideration on acquisition (223,000) -
Other 1,000 (99,000)
----------- -----------
Net cash used in investing activities (2,535,000) (2,461,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit agreement 4,400,000 4,150,000
Payments on long-term debt (468,000) (1,135,000)
Payments on related party debt (1,028,000) -
Dividends paid (711,000) (710,000)
----------- -----------
Net cash provided by financing activities 2,193,000 2,305,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,000 (215,000)
CASH AND CASH EQUIVALENTS, BEGINNING 191,000 840,000
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 195,000 $ 625,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 1,495,000 $ 1,023,000
=========== ===========
Taxes paid $ 84,000 $ 202,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
OWOSSO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company - The consolidated financial statements represent the
consolidated financial position, results of operations and cash flows
of Owosso Corporation and subsidiaries (the "Company"). The Company's
operating subsidiaries include:
o The "Motor Companies":
o Motor Products - Owosso Corporation ("Motor Products")
o Motor Products - Ohio Corporation ("MP-Ohio")
o Stature Electric, Inc. ("Stature")
o Owosso Motor Group, Inc. ("Motor Group")
o M.H. Rhodes, Inc. ("Rhodes") - acquired June 30, 1998
o Snowmax, Inc. ("Snowmax")
o Astro Air Acquisition, Inc. ("Astro Air") - acquired April 26, 1998
o The Landover Company ("Dura-Bond")
o Sooner Trailer Manufacturing Co. ("Sooner")
o Parker Industries ("Parker") - sold March 5, 1999
The Company is a diversified manufacturer of products in narrowly
defined niche markets and currently operates in two business segments,
Engineered Component Products (the Motor Companies, Snowmax, Dura-Bond,
and Astro Air), and Specialized Equipment (Sooner and Parker). In 1998,
the Specialized Equipment segment also included Great Bend
Manufacturing Company, Inc. ("Great Bend") which was sold in April 1998
and DewEze Manufacturing, Inc. ("DewEze") which was sold in July 1998.
The condensed consolidated financial statements include the results of
Parker, which was sold March 5, 1999 (see Note 7). In the Engineered
Component Products segment, the Company's products, primarily motors,
heat transfer "fin and tube" coils and replacement cam shaft bearings,
are sold primarily to original equipment manufacturers or service
providers who use them in their end products or services. The products
sold in the Specialized Equipment segment, primarily all-aluminum horse
trailers and agricultural equipment, are almost exclusively final
products sold through dealers to their users. Nearly all of the
Company's customers are located in North America.
Financial Statements - The condensed consolidated balance sheet as of
January 31, 1999 and the condensed consolidated statements of
operations and cash flows for the three months ended January 31, 1999
and January 25, 1998 have been prepared by the Company, without audit.
In the opinion of management, all adjustments (which include only
normal recurring adjustments) considered necessary to present fairly
the financial position, results of operations and cash flows as of
January 31, 1999 and for all periods presented have been made. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's October 25, 1998
Annual Report on Form 10-K.
Fiscal Year - The Company's fiscal year includes 52 or 53 weeks ending
on the last Sunday in October. Fiscal year 1999 will consist of 53
weeks. The first fiscal quarter of 1999 ended January 31, 1999 included
14 weeks, whereas the first quarter of 1998 included 13 weeks.
6
<PAGE>
Seasonality - Sales of certain of the Company's specialized equipment
tend to be seasonal with lowest sales during the first quarter and
higher sales during the fourth fiscal quarter, corresponding with the
fall harvest season for farmers. Sales of the Company's engineered
component products experience less seasonality but generally are lowest
during the first fiscal quarter.
Cyclicality - The Company's Engineered Component Products segment is
subject to changes in the overall level of domestic economic activity.
The Specialized Equipment segment is subject to changes in certain
sectors of the agricultural economy, which may be influenced by climate
changes and government policy. The segment's horse trailer sales, which
have not tended to be affected by changes in the agricultural economy,
have had a moderating effect on the results of the entire Specialized
Equipment segment, but are subject to the overall domestic business
cycle.
Earnings (loss) per share - Basic earnings per common share is computed
by dividing net earnings (the numerator) by the weighted average number
of common shares outstanding during each period (the denominator). The
computation of diluted earnings per common share is similar to that of
basic earnings per common share, except that the denominator is
increased by the dilutive effect of stock options outstanding, computed
using the treasury stock method.
Comprehensive income - Effective for the first quarter of 1999, the
Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, Reporting Comprehensive Income. SFAS No. 130 requires the
presentation of comprehensive income and its components in a full set
of general purpose financial statements. The Company's comprehensive
income for the first quarter of 1999 and 1998 consisted solely of net
earnings.
New Accounting Pronouncements - In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. This statement,
which establishes standards for reporting information about operating
segments and requires the reporting of selected information about
operating segments in interim financial statements, is effective for
fiscal years beginning after December 15, 1997, although earlier
application is permitted. Reclassification of segment information for
earlier periods presented for comparative purposes is required under
SFAS No. 131. As this statement only requires additional disclosures in
the Company's consolidated financial statements, its adoption will not
have any impact on the Company's consolidated financial position or
results of operations. The Company expects to adopt SFAS No. 131
effective October 31, 1999.
In March 1998, the FASB issued SFAS No. 132, Employers' Disclosure
About Pensions and Other Postretirement Benefits. This statement, which
revises the required disclosures for employee benefit plans, is
effective for fiscal years beginning after December 15, 1997, although
earlier adoption is permitted. Restatement of disclosures for earlier
periods, presented for comparative purposes, is required under SFAS No.
132. As this statement only revises disclosures in the Company's
consolidated financial statements, its adoption will not have any
impact on the Company's consolidated financial position or results of
operations. The Company expects to adopt SFAS No. 132 effective October
31, 1999.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement, which establishes
accounting and reporting standards for derivative instruments and
hedging activities, is effective for fiscal years beginning after June
15, 1999, although earlier adoption is permitted. The Company has not
yet completed its analysis of the effects of adopting this statement on
its consolidated financial position or results of operations. The
Company expects to adopt SFAS No. 133 in fiscal 2000.
7
<PAGE>
2. ACQUISITION
In connection with the acquisition of Astro Air in April 1998, the
Company entered into a five-year consulting agreement with Dacus
Properties, Inc. ("DPI"), the former owner of Astro Air, under which
DPI receives 3.4% of net revenues generated by certain specified
customers. For the three months ended January 31, 1999, the Company
recorded $223,000 of contingent consideration under the agreement with
DPI as goodwill based upon related first quarter 1999 revenues.
3. INVENTORIES
January 31, October 25,
1999 1998
Raw materials and purchased parts $ 9,843,000 $ 10,039,000
Work in process 3,963,000 4,161,000
Finished goods 7,785,000 7,062,000
------------ ------------
Total $ 21,591,000 $ 21,262,000
------------ ------------
4. ACCRUED RESTRUCTURING CHARGE
In connection with the merger, in June 1998, of the Company's former
subsidiary, Cramer Company ("Cramer"), into Rhodes, and the
consolidation of Cramer's manufacturing into Rhodes' manufacturing
facility, the Company recorded a restructuring charge of $909,000, of
which $827,000 has been paid through January 31, 1999. Approximately
$82,000 of restructuring costs is included in accrued expenses at
January 31, 1999. The Company anticipates that the remaining
restructuring costs will be paid by the end of the third fiscal quarter
of 1999.
5. LONG-TERM DEBT
On January 22, 1999, the Company entered into a new $55,000,000
revolving credit facility with the Company's two primary banks,
expiring in December 2002. The new agreement is secured by the non-real
estate assets of the Company. Interest is payable, at the Company's
option, at either the bank's prime rate or a variable spread (2.5% at
the inception of the agreement) over the London Interbank Offered Rate.
The agreement includes financial and other covenants, including fixed
charge, cash flow and net worth ratios and restrictions on certain
asset sales, mergers and other significant transactions. The Company
was in compliance with such covenants at January 31, 1999, and expects
to be in compliance with such covenants for the foreseeable future.
6. COMMITMENTS AND CONTINGENCIES
The Company is subject to federal, state and local environmental
regulation with respect to its operations. The Company believes that it
is operating in substantial compliance with applicable environmental
regulations. Manufacturing and other operations at the Company's
various facilities may result, and may have resulted, in the discharge
and release of hazardous substances
8
<PAGE>
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.
The Company is a party to a consent decree with the State of
Connecticut pursuant to which it has agreed to complete its
environmental investigation of the site on which its Cramer facility
was previously located and conduct any remedial measures which may be
required. The Company is also in negotiations with the former operator
of the site concerning the reimbursement by the former operator of any
costs the Company has incurred or may incur in the future in connection
with this matter. Based upon the amounts recorded as liabilities, the
Company does not believe that the ultimate resolution of this matter
will have a material adverse effect on the consolidated financial
results of the Company.
The Company has been named as a potentially responsible party with
respect to two hazardous substance disposal sites currently under
remediation by the U.S. Environmental Protection Agency (the "EPA")
under its "Superfund" program. With respect to both sites, based on the
minimal amount of waste alleged to have been contributed to the site by
the Company, the Company expects to resolve the matters through the
payment of de minimis amounts.
Rhodes has been named as a potentially responsible party with respect
to a hazardous disposal site currently under remediation by the EPA
under its "Superfund" program. Based on the minimal amount of waste
alleged to have been contributed to the site by Rhodes, the Company
expects to resolve the matter through the payment of a de minimis
amount. Rhodes is also involved in environmental remediation at its
manufacturing site, which is not subject to any Superfund law
proceeding. Based upon the amounts recorded as liabilities, the Company
does not believe that the resolution of this matter will have a
material adverse effect on the consolidated financial results of the
Company.
Sooner has arrangements with a number of financial institutions to
provide floor plan financing for its dealers, which requires it to
repurchase repossessed products from the financial institutions in the
event of a default by the financed dealer. Its obligation is typically
to repurchase the equipment at 90% of the purchase price for the first
180 days, 80% for the next 90 days and 70% for the next 90 days, after
which the obligation expires. In the event of a default by all of the
financed dealers, the Company would be required to repurchase
approximately $11,550,000 of product as of January 31, 1999. The
Company does not believe that its obligation under these repurchase
agreements will have a material adverse effect on the financial results
of the Company. Sooner has not taken possession of any significant
amount of equipment pursuant to the repurchase obligations in these
contracts.
In addition to the matters reported herein, the Company is involved in
litigation dealing with numerous aspects of its business operations.
The Company believes that settlement of such litigation will not have a
material adverse effect on its consolidated financial position or
results of operations.
7. SUBSEQUENT EVENT - SALE OF PARKER
On March 5, 1999, the Company completed the sale of the business and
substantially all of the assets of Parker to Top Air Manufacturing,
Inc., of Cedar Falls, Iowa. In connection with the sale, the Company
received cash of $3.3 million, a non-interest bearing note of $3.6
million, and the assumption of liabilities of $550,000, all subject to
adjustment to reflect the change in book value of the assets between
the valuation date and the date of the closing of the transaction. In
9
<PAGE>
addition, the local development authority in Iowa has agreed to acquire
certain Parker fixed assets for $750,000, and lease those assets to Top
Air. Based upon the proposed terms of the sale, the Company recorded,
in the fourth quarter of fiscal 1998, a pre-tax charge of $1,635,000 to
adjust the carrying value of Parker's assets to their estimated fair
market value. The carrying value of the net assets of Parker, which is
a component of the Company's Specialized Equipment segment, are
included in the consolidated balance sheet as "Net assets held for
sale." Sales attributable to Parker were $602,000 and $2,100,000 for
the first quarters of 1999 and 1998, respectively. Loss from
operations, before the allocation of corporate expenses, from Parker
was $268,000 for the first quarter of 1999, as compared to income from
operations of $16,000 for the first quarter of 1998.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion addresses the financial condition of the Company as of
January 31, 1999 and the results of operations for the three months ended
January 31, 1999 and January 25, 1998. The 1999 period included 14 weeks,
whereas the 1998 period included 13 weeks. This discussion should be read in
conjunction with the financial statements included elsewhere herein and the
Management's Discussion and Analysis and Financial Statement sections of the
Company's Annual Report on Form 10-K to which the reader is directed for
additional information.
Seasonality. Sales of certain of the Company's specialized equipment tend to be
seasonal, with lowest sales during the first fiscal quarter and higher sales
during the fourth fiscal quarter, corresponding with the fall harvest season for
farmers. Sales of the Company's engineered component products experience less
seasonality but generally are lowest during the first fiscal quarter.
Results of Operations
The following table sets forth for the periods indicated the percentage
relationship that certain items in the Company's Condensed Consolidated
Statements of Operations bear to net sales.
Three Months Ended
------------------------
January 31, January 25,
1999 1998
Net sales 100.0% 100.0%
Cost of products sold 81.4% 78.0%
------ ------
Gross profit 18.6% 22.0%
Expenses:
Selling, general and administrative 12.1% 14.7%
Corporate 4.0% 4.1%
----- ------
Income from operations 2.5% 3.2%
Interest expense 3.3% 3.3%
Other income 0.2% 0.1%
----- -----
Income (loss) before income taxes -0.6% 0.0%
Income tax expense (benefit) -0.3% 0.0%
----- -----
Net income (loss) -0.3% 0.0%
Dividends and accretion on preferred stock 0.7% 0.8%
===== =====
Net income (loss) available for common stockholders -1.0% -0.8%
===== =====
Three months ended January 31, 1998 compared to three months ended January 25,
1998
Net sales. For the first quarter of 1999, net sales increased 14.0%, to $38.8
million, as compared to net sales of $34.1 million in the first quarter of 1998.
These results include the effects of disposing of Great Bend, which was sold in
April 1998, and DewEze, which was sold in July 1998, and the acquisition, in
April 1998, of Astro Air. Sales attributable to Great Bend and DewEze were $3.7
million and $2.7 million, respectively, in 1998. Sales attributable to Astro Air
included in 1999 results were $6.8 million. Exclusive of the effects of the
acquisition of Astro Air and the dispositions of Great Bend and DewEze, net
sales increased 15.4% over the prior year quarter.
In the Company's Engineered Component Products segment, net sales increased
$12.2 million, to $30.9 million in 1999 from $18.7 million in 1998. This
increase reflects $6.8 million in sales from Astro Air.
11
<PAGE>
These results also reflect a $4.2 million, or 30.4%, increase in sales at the
Motor Companies as a result of increased sales to existing customers and the
addition of new customers, and a $1.0 million, or 31.3%, increase in sales of
heat transfer coils at Snowmax, attributable to increased volume with a
significant customer.
Net sales in the Specialized Equipment segment were $7.9 million in 1999, as
compared to $15.4 million in 1998. This decrease reflects the sale in 1998 of
Great Bend and DewEze and significantly lower sales at Parker as a result of a
weak agricultural market and the effects of its pending sale, which was
subsequently completed on March 5, 1999.
Gross profit. For the first quarter of 1999, gross profit was $7.2 million, or
18.6% of net sales, as compared to $7.5 million, or 22.0% of net sales in the
prior year quarter. The decrease in gross profit reflects principally the
dispositions of Great Bend and DewEze. Exclusive of these dispositions and the
acquisition of Astro Air, gross profit would have been $6.4 million, or 20.0% of
net sales, in 1999, as compared to $5.6 million, or 20.0% of net sales, in 1998.
Gross profit in the Engineered Component Products segment increased 31.8%, to
$5.8 million, or 18.9% of net sales, as compared to $4.4 million, or 22.0% of
net sales in the first quarter of 1998. The increase in gross profit was
principally a result of the inclusion of Astro Air and increased sales at the
Motor Companies. The decrease in gross margin percentage was primarily a result
of the inclusion of Astro Air, which has lower gross profit margins than other
companies in this segment, and a decreased margin percentage at the Motor
Companies as a result of changes in product mix.
In the Specialized Equipment segment, gross profit was $1.4 million, or 17.5% of
net sales, as compared to $3.1 million, or 19.9% of net sales, in the prior year
quarter. This decrease reflects the sales of Great Bend and DewEze and reduced
sales at Parker. Gross profit at Sooner Trailer, the only remaining business
unit in this segment, increased to $1.3 million, or 18.3% of net sales, in 1999,
from $729,000, or 10.5% of net sales, in 1998, primarily as a result of the
discontinuation of certain low-margin livestock trailers and the institution of
price increases on certain other models in the second quarter of 1998.
Selling, general and administrative expenses. As a percentage of net sales,
selling, general and administrative expenses decreased to 12.1%, or $4.7
million, in the first quarter of 1999, as compared to 14.7%, or $5.0 million, in
the prior year quarter.
Selling, general and administrative expenses in the Engineered Component
Products segment were $3.2 million in 1999, as compared to $2.4 million in 1998.
This increase reflects the inclusion of Astro Air and increased costs at the
Motor Companies, primarily as a result of the inclusion of Rhodes, acquired in
July 1998. As a percentage of net sales, selling, general and administrative
expenses decreased to 10.3%, from 12.8%, in 1998. This decrease was primarily a
result of the inclusion of Astro Air, which has lower selling, general and
administrative expenses as a percentage of net sales than other companies in
this segment.
Selling, general and administrative expenses in the Specialized Equipment
segment decreased $1.1 million, to $1.5 million in 1999 as a result of the
dispositions of Great Bend and DewEze. As a percentage of net sales, selling
general and administrative expenses in this segment increased to 19.1% in 1999,
as compared to 17.0% in the prior year quarter, primarily as a result of weak
sales at Parker.
Corporate expenses. In the first quarter of 1999, corporate expenses were $1.6
million, or 4.0% of net sales, as compared to $1.4 million, or 4.1% of net sales
in 1998. The increase in corporate expenses primarily reflects the 14-week
accounting period in 1999, as compared to the 13-week period in 1998.
12
<PAGE>
Income from operations. For the first quarter of 1999, income from operations
was $980,000, or 2.5% of net sales, as compared to $1.1 million, or 3.2% of net
sales, in 1998.
Among other measures, the Company evaluates the operating performance of its
business segments and its individual subsidiaries based on business unit income,
which is defined as income from operations before allocation of corporate
expenses. The Company believes this measurement most closely reflects the
subsidiaries' individual contributions. On this basis, business unit income for
the Engineered Component Products segment increased to $2.7 million in the first
quarter of 1999, as compared to $2.0 million in the prior year quarter. This
increase was primarily a result of Astro Air, which contributed $508,000 of
business unit income in 1999. Business unit income of the Motor Companies was
essentially flat and was adversely effected by the inclusion of Rhodes, which
has had low gross margins since its acquisition and high selling, general and
administrative expenses, in comparison to other companies in this segment. As a
percentage of net sales, business unit income for this segment was 8.6%, as
compared to 10.9% in the prior quarter. The decrease in business unit income as
a percentage of net sales was primarily a result of the inclusion of Rhodes, for
the reasons described above, and the inclusion of Astro Air, which has lower
gross margins than other companies in this segment. The results of operations of
Rhodes continue to be adversely affected by inefficiencies as a result of the
continuing process of integrating its systems and operations with the Company's
former Cramer subsidiary.
The Specialized Equipment segment experienced a loss at the business unit level
of $127,000 in 1999, as compared to business unit income of $460,000 in the
first quarter of 1998. These results reflect the dispositions of Great Bend and
DewEze and poor operating results at Parker, as a result of the weak
agricultural market and the effects of its pending sale. Business unit income at
Sooner increased from a loss of $367,000 in 1998 to income of $141,000 in 1999,
primarily as a result of increased gross margins.
Interest expense. For the first quarter of 1999, interest expense was $1.3
million, as compared to $1.1 million in 1998. This increase was primarily the
result of increased borrowings under the Company's revolving credit agreement.
Income tax expense (benefit). The Company's effective income tax rate was 45.7%
for 1999, while the benefit recorded in the prior year quarter was at an
effective rate of 45.5%.
Net income (loss) available for common stockholders. Net loss available for
common stockholders was $403,000, or $.07 per share, in the first quarter of
1999, as compared to a net loss of $259,000, or $.04 per share, in the prior
year quarter. Income (loss) available for common stockholders is calculated by
subtracting dividends on preferred stock of $188,000 for both 1999 and 1998 and
by deducting the non-cash accretion in book value of preferred stock of $83,000
and $77,000 for 1999 and 1998, respectively.
Liquidity and Capital Resources
Cash and cash equivalents were $195,000 at January 31, 1999, exclusive of $1.9
million of cash that was restricted under an industrial revenue financing.
Working capital increased to $22.6 million at January 31, 1999 from $19.7
million at October 25, 1998. This increase was primarily a result of a reduction
in the current portion of long-term debt and the payment of accrued expenses.
Net cash provided by operating activities was $346,000, as compared to net cash
used in operating activities of $59,000 in the prior year quarter. The increase
in cash from operations was principally the result of increased cash collections
on accounts receivable in comparison to the prior year, partially offset by the
payment of accounts payable and accrued expenses due to timing.
Net cash used in investing activities included $2.3 million for capital
expenditures for equipment, invested primarily in the Engineered Component
Products segment and $233,000 of contingent
13
<PAGE>
consideration paid to the former owner of Astro Air and recorded as goodwill.
The Company currently plans to invest approximately $4.0 million during the
remainder of fiscal 1999, primarily for added capacity and production
efficiencies in the Engineered Component Products segment. Management
anticipates funding capital expenditures with cash from operations and proceeds
from the Company's revolving credit facility.
The Company is currently negotiating a joint venture agreement with a subsidiary
of its largest customer, Bergstrom, Inc. The joint venture, which is anticipated
to be owned 90% by the Company, will manufacture and supply heat transfer coils
primarily to Bergstrom's facility in Birmingham, England, and will be located on
property adjacent to Bergstrom's current facility in Birmingham.
Net cash provided by financing activities included net borrowings of $4.4
million under the Company's $55.0 million revolving credit agreement, debt
repayments of $1.5 million, including the repayment of $1.0 million of related
party debt, and the payment of dividends of $711,000.
On January 22, 1999, the Company entered into a new $55.0 million revolving
credit agreement with the Company's two primary banks, expiring in December
2002. At January 31, 1999, $52.6 million was outstanding and $2.4 million was
available for additional borrowing under the agreement. Interest is payable, at
the Company's option, at either the agent bank's prime rate or at a spread over
the London Interbank Offered Rate that varies with the Company's ratio of total
debt to EBITDA. The LIBOR spread was 2.5% at January 31, 1999. The agreement
contains customary financial and other covenants, including fixed charges, cash
flow and net worth ratios, restrictions on certain asset sales, mergers and
other significant transactions. The Company was in compliance with such
covenants at January 31, 1999, and anticipates that it will remain in compliance
with these covenants for the foreseeable future.
The Company has interest rate swap agreements with its two banks with notional
amounts totaling $15.0 million. The Company entered into these agreements to
change the fixed/variable interest rate mix of its debt portfolio, in order to
reduce the Company's aggregate risk from movements in interest rates. The
agreements require the Company to make quarterly fixed payments on the notional
amount at rates of 7.0675% and 7.09% through July 2002 in exchange for receiving
payments at the three-month London Interbank Offered Rate.
The Company believes anticipated funds to be generated from future operations
and available credit facilities will be sufficient to meet anticipated operating
and capital needs.
Other
On March 5, 1999, the Company completed the sale of the business and
substantially all of the assets of Parker to Top Air Manufacturing, Inc., of
Cedar Falls, Iowa. In connection with the sale, the Company received cash of
$3.3 million, a non-interest bearing note of $3.6 million, and the assumption of
liabilities of $550,000, all subject to adjustment to reflect the change in book
value of the assets between the valuation date and the date of the closing of
the transaction. In addition, the local development authority in Iowa has agreed
to acquire certain Parker fixed assets for $750,000, and lease those assets to
Top Air. Based upon the proposed terms of the sale, the Company recorded, in the
fourth quarter of fiscal 1998, a pre-tax charge of $1,635,000 to adjust the
carrying value of Parker's assets to their estimated fair market value. The
carrying value of the net assets of Parker, which is a component of the
Company's Specialized Equipment segment, are included in the consolidated
balance sheet as "Net assets held for sale." Sales attributable to Parker were
$602,000 and $2,100,000 for the first quarters of 1999 and 1998, respectively.
Loss from operations, before the allocation of corporate expenses, from Parker
was $268,000 for the first quarter of 1999, as compared to income from
operations of $16,000 for the first quarter of 1998.
14
<PAGE>
"Year 2000" Costs
The Company's primary centralized manufacturing and accounting information
system is currently Year 2000 compliant (meaning that it can properly process
dates in the year 2000 and beyond). The Company is currently evaluating any
possible exposures related to other date-sensitive equipment and anticipates
being fully Year 2000 compliant by the end of July 1999. The cost to the Company
of bringing such equipment into Year 2000 compliance is expected to be
approximately $200,000. Historical costs related to Year 2000 issues have not
been material. In addition, the Company has initiated formal communications with
its significant suppliers and large customers to determine the extent to which
the Company is vulnerable to those third parties' failure to remediate their own
Year 2000 compliance issues. There can be no assurance that the systems of other
companies on which the Company's systems rely will be timely converted, or that
a failure to convert by another company, or a conversion that is incompatible
with the Company's systems, would not have a material adverse effect on the
Company. Management believes that the Company has taken measures to minimize the
exposure to a Year 2000 disruption. The Company does not yet have a contingency
plan but anticipates developing, by July 1999, a plan that would focus on
various types of possible business interruptions that could occur.
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, including those which
express "belief", "anticipation" or "expectation" as well as other statements
which are not historical fact, are "forward-looking statements" made pursuant to
these provisions. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. The Company undertakes no
obligation to republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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:
o No definitive agreement exists with regard to the Company's
proposed joint venture in the United Kingdom. If the Company
enters into the joint venture, it may be subjected to various
risks which may include currency risk, risk associated with
compliance with foreign regulations, and political and economic
risks.
o Anticipated cost savings in connection with the merger of Cramer
and Rhodes have not yet fully materialized as a result of the
continuing process of integrating their systems and operations.
Improvement in the operating results of Rhodes is not expected
until such integration is completed.
o 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
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.
15
<PAGE>
o Commodity prices can have a material influence on the Company's
results. 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.
o Changes in demand that change product mix may reduce operating
margins by shifting demand toward less profitable products.
o Loss of a substantial customer may affect results of operations.
o 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.
o Obsolescence or quality problems leading to returned goods in need
of repair can affect the value of the Company's inventories and
its profitability.
o 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.
o Acquisitions are an important part of the Company's growth
strategy. Acquisitions may have a dilutive effect on the Company's
earnings and could effect 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 loss on the disposition that
could reduce the Company's results. In addition, acquisitions or
dispositions could effect the Company's relative mix of operating
results from engineered component products and specialized
equipment, thereby effecting the seasonality and cyclicality of
such operating results.
o Although the Company believes that it has taken measures to
minimize the exposure of a Year 2000 disruption, there can be no
assurance that, if a disruption occurs, it would not have a
material adverse effect on the Company's operating results.
16
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses a revolving credit facility, industrial revenue bonds and term
loans to finance a significant portion of its operations. These on-balance sheet
financial instruments, to the extent they provide for variable rates of
interest, expose the Company to interest rate risk resulting from changes in
London Interbank Offered Rate or the prime rate. The Company uses off-balance
sheet interest rate swap agreements to partially hedge interest rate exposure
associated with on-balance sheet financial instruments. All of the Company's
derivative financial instrument transactions are entered into for non-trading
purposes.
The quantitative and qualitative disclosures about market risk as of January 31,
1999 did not differ materially from the information disclosed in the Company's
Form 10-K for the fiscal year ended October 25, 1998. The information set forth
in the Form 10-K under Part I, Item 7A - Quantitative and Qualitative
Disclosures About Market Risk is incorporated herein by reference in response to
this Item 3.
17
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
10.1 Amended and Restated Credit Agreement by and among Owosso
Corporation, its subsidiaries, NBD Bank, PNC Bank, N.A., and
NBD Bank, as Agent, dated as of January 22, 1999.
11 Computation of Per Share Earnings
27 Financial Data Schedule
*99.1 Part I, Item 7A - Quantitative and Qualitative Disclosures
About Market Risk of the Company's Annual Report on Form 10-K
for the year ended October 25, 1998.
(b) Form 8-K
No reports on Form 8-K were filed during the quarter ended
January 31, 1999.
- ----------------------------
* Incorporated by reference.
18
<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
Date: March 10, 1999 By: /s/ George B. Lemmon, Jr.
-------------------------
George B. Lemmon, Jr.
President, Chief Executive
Officer, and Director
By: /s/ John H. Wert, Jr.
---------------------
John H. Wert, Jr.
Senior Vice President - Finance,
Chief Financial Officer, and
Treasurer and Secretary
19
<PAGE>
Execution Copy
OWOSSO CORPORATION
AHAB INVESTMENT COMPANY
DWZM, INC.
THE LANDOVER COMPANY
MOTOR PRODUCTS-OWOSSO CORPORATION
SNOWMAX, INCORPORATED
MOTOR PRODUCTS-OHIO CORPORATION
GBMC, INC.
STATURE ELECTRIC, INC.
OWOSSO MOTOR GROUP, INC.
ASTRO AIR ACQUISITION CORPORATION
SOONER TRAILER MANUFACTURING CO.
M.H. RHODES, INC.
and
ASTRO AIR UK HOLDINGS, INC.
------------------------------------
$55,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of January 22, 1999
-----------------------------------
NBD BANK
and
PNC BANK, NATIONAL ASSOCIATION
with
NBD BANK, as Agent
Arranged by First Chicago Capital Markets, Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C> <C>
ARTICLE I DEFINITION................................................................1
1.1 Certain Definitions..................................................1
1.2 Other Definitions; Rules of Construction............................10
ARTICLE II THE COMMITMENTS AND THE LOANS...........................................10
2.1 Commitments of the Banks............................................10
2.2 Termination and Reduction of Commitments............................10
2.3 Fees................................................................11
2.4 Disbursement of Loans...............................................11
2.5 Conditions for First Disbursement...................................13
2.6 Further Conditions for Disbursement.................................14
2.7 Subsequent Elections as to Borrowings...............................15
2.8 Limitation of Requests and Elections................................15
2.9 Minimum Amounts; Limitation on Number of Borrowings.................15
2.10 Security and Collateral.............................................16
ARTICLE III PAYMENTS AND PREPAYMENTS OF LOANS......................................16
3.1 Principal Payments and Prepayments..................................16
3.2 Interest Payments...................................................16
3.3 Payment Method......................................................17
3.4 No Setoff or Deduction..............................................17
3.5 Payment on Non-Business Day; Payment Computations...................17
3.6 Additional Costs....................................................18
3.7 Illegality and Impossibility........................................19
3.8 Indemnification.....................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES..........................................19
4.1 Corporate Existence and Power.......................................19
4.2 Corporate Authority.................................................20
4.3 Binding Effect......................................................20
4.4 Subsidiaries........................................................20
4.5 Litigation..........................................................20
4.6 Financial Condition.................................................20
4.7 Use of Loans........................................................21
4.8 Consents, Etc.......................................................21
4.9 Taxes...............................................................21
4.10 Title to Properties.................................................22
4.11 ERISA...............................................................22
4.12 Environmental and Safety Matters....................................22
4.13 Disclosure..........................................................22
4.14 Common Enterprise...................................................22
4.15 Year 2000...........................................................23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C> <C>
ARTICLE V COVENANTS................................................................23
5.1 Affirmative Covenants...............................................23
5.2 Negative Covenants..................................................27
ARTICLE VI DEFAULT.................................................................31
6.1 Events of Default...................................................31
6.2 Remedies............................................................33
6.3 Allocation of Proceeds..............................................34
ARTICLE VII THE AGENT AND THE BANKS................................................35
7.1 Appointment and Authorization.......................................35
7.2 Agent and Affiliates................................................35
7.3 Scope of Agent's Duties.............................................35
7.4 Reliance by Agent...................................................35
7.5 Default.............................................................36
7.6 Liability of Agent..................................................36
7.7 Nonreliance on Agent and Other Banks................................36
7.8 Indemnification.....................................................36
7.9 Resignation of Agent................................................37
7.10 Sharing of Payments.................................................37
ARTICLE VIII MISCELLANEOUS.........................................................38
8.1 Amendments, Etc.....................................................38
8.2 Notices.............................................................39
8.3 No Waiver By Conduct; Remedies Cumulative...........................39
8.4 Reliance on and Survival of Various Provisions......................40
8.5 Expenses............................................................40
8.6 Successors and Assigns..............................................40
8.7 Counterparts........................................................43
8.7 Counterparts........................................................43
8.8 Governing Law.......................................................43
8.9 Table of Contents and Headings......................................44
8.10 Construction of Certain Provisions..................................44
8.11 Integration and Severability........................................44
8.12 Independence of Covenants...........................................44
8.13 Interest Rate Limitation............................................44
8.14 Joint and Several Obligations; Contribution Rights; Savings Clause..45
8.15 Consents to Renewals, Modifications and Other Actions and Events....46
8.16 Waivers, Etc........................................................47
8.17 WAIVER OF JURY TRIAL................................................47
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A Pledge Agreement
Exhibit B Revolving Credit Note
Exhibit C Security Agreement
Exhibit D Request for Borrowing
Exhibit E Request for Continuation or Conversion
Exhibit F Assignment and Acceptance
SCHEDULES
Schedule 4.2 (Contravened Agreements)
Schedule 4.4 (Subsidiaries)
Schedule 5.2(e) (Indebtedness)
Schedule 5.2(f) (Liens)
</TABLE>
iii
<PAGE>
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 22,
1999 (this "Agreement") is by and among OWOSSO CORPORATION, a Pennsylvania
corporation ("Owosso"), AHAB INVESTMENT COMPANY, a Delaware corporation
("Ahab"), DWZM, INC., a Pennsylvania corporation, formerly known as DewEze
Manufacturing, Inc. ("DWZM"), THE LANDOVER COMPANY, a Pennsylvania corporation,
and the survivor of the merger with Snyder Industries Group, Inc., a Washington
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"), GBMC, INC., a Kansas corporation, formerly known as
Great Bend Manufacturing Company, Inc. ("GBMC"), STATURE ELECTRIC, INC., a New
York corporation ("Stature"), OWOSSO MOTOR GROUP, INC., a Pennsylvania
corporation ("Motor Group"), ASTRO AIR ACQUISITION CORPORATION, a Delaware
corporation ("Astro Air"), M. H. RHODES, INC., a Delaware corporation, and the
survivor of the merger with Cramer Company, a Delaware corporation ("Rhodes"),
and ASTRO AIR UK HOLDINGS, INC., a Delaware corporation ("Astro Air UK") and,
together with Owosso, Ahab, DWZM, Landover, Motor Products, Snowmax, Sooner,
Motor Products-Ohio, GBMC, Stature, Motor Group, Astro Air and Rhodes
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 and any other lender or lenders from time to time entering into an
Assignment and Acceptance pursuant to Section 8.6 or otherwise becoming a party
hereto, collectively, the "Banks" and, individually, a "Bank"), and NBD BANK, as
agent (in such capacity, the "Agent") for the Banks.
INTRODUCTION
The Borrowers, NBD, PNC and the Agent have entered into the Credit
Agreement, dated as of October 31, 1994, as amended or modified from time to
time (the "Existing Credit Agreement"), pursuant to which NBD and PNC provide to
the Borrowers a revolving credit facility in the aggregate principal amount of
$55,000,000 in order to provide funds for the Borrowers' general corporate
purposes. The Borrowers, the Banks and the Agent now desire to amend and restate
the Credit Agreement in this Agreement in order to modify certain terms thereof,
all on the terms and conditions herein set forth.
In consideration of the premises and of the mutual agreements herein
contained, the parties hereby amend and restate the Existing Credit Agreement,
and further agree, as follows:
1
<PAGE>
ARTICLE I
DEFINITION
1.1 Certain Definitions As used herein and in the Schedules and
Exhibits attached hereto, the following terms shall have the following
respective meanings:
"Affiliate", when used with respect to any person shall mean any other
person which, directly or indirectly, controls or is controlled by or is under
common control with such person. For purposes of this definition "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.
"Applicable Margin" shall mean, for purposes of determining for any
period of three consecutive calendar months (any such period, an "Application
Quarter") coinciding or approximately coinciding with a fiscal quarter of the
Borrower, or any portion of any such period, the commitment fee payable under
Section 2.3(a), the Eurodollar Rate applicable to Eurodollar Rate Loans then
outstanding or the Floating Rate applicable to Floating Rate Loans then
outstanding, the applicable margin (expressed as a percentage per annum) in
accordance with the following chart based upon the ratio of (a) the Consolidated
Total Debt of the Borrowers and their Subsidiaries as of the end of the latest
fiscal quarter of the Borrowers prior to the Application Quarter for which the
compliance certificate has been furnished in accordance with Section 5.1(d)(iv)
to (b) the Consolidated EBITDA of the Borrowers and their Subsidiaries for the
period of four fiscal quarters of the Borrowers ending with such latest prior
fiscal quarter; provided that, for Loans outstanding during, and commitment fees
payable with respect to, the period from and including the Effective Date
through and including April 30, 1999, the Applicable Margin shall be fixed at
Level 5 identified below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of the Borrowers' Applicable Margin Applicable Applicable
Consolidated Total Debt to for the Margin for the Margin for the
Level the Borrowers' Commitment Fee Eurodollar Rate Floating Rate
Consolidated EBITDA (%) (%) (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Equal to or less than 2.00 to .25 1.00 0
1.00
- -------------------------------------------------------------------------------------------------------------------------------
2 Equal to or less than 2.35 to .30 1.375 0
1.00 but greater than 2.00 to
1.00
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of the Borrowers' Applicable Margin Applicable Applicable
Consolidated Total Debt to for the Margin for the Margin for the
Level the Borrowers' Commitment Fee Eurodollar Rate Floating Rate
Consolidated EBITDA (%) (%) (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3 Equal to or less than 2.75 to .35 1.625 0
1.00 but greater than 2.35 to
1.00
- -------------------------------------------------------------------------------------------------------------------------------
4 Equal to or less than 3.25 to .45 2.00 0
1.00 but greater than 2.75 to
1.00
- -------------------------------------------------------------------------------------------------------------------------------
5 Equal to or less than 3.75 to .50 2.50 0
1.00 but greater than 3.25 to
1.00
- -------------------------------------------------------------------------------------------------------------------------------
6 Greater than 3.75 to 1.00 .50 3.00 .50
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Such ratio shall be determined from the then most recent compliance certificate
delivered by the Borrowers from time to time pursuant to Section 5.1(d)(iv).
Subject to the proviso above, each change in the Applicable Margin shall be
effective on the first day of the first Application Quarter beginning after
delivery of any such compliance certificate; provided that, in the event that
the Borrower shall at any time fail to furnish to the Banks any compliance
certificate when and as required to be delivered pursuant to Section 5.1(d)(iv),
the Applicable Margin shall be set at Level 6 identified above until such time
as such compliance certificate is so delivered.
"Borrowing" shall mean the aggregation of Loans of the Banks to be made
to the Borrowers or continuations and conversions of any Loans, made pursuant to
Article II on a single date and for a single Interest Period, which Borrowings
may be classified for purposes of this Agreement by reference to the type of
Loans comprising the related Borrowing, e.g., a "Eurodollar Rate Borrowing" is a
Borrowing comprised of Eurodollar Rate Loans.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which the Agent is not open to the public for carrying on substantially
all of its banking functions.
"Capital Lease" of any person shall mean any lease which, in accordance
with generally accepted accounting principles, is or should be capitalized on
the books of such person.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations thereunder.
3
<PAGE>
"Commitment" shall mean, with respect to each Bank, the commitment of
each such Bank to make Loans pursuant to Section 2.1 in amounts not exceeding in
aggregate principal amount outstanding at any time the respective commitment
amount for such Bank set forth next to the name of such Bank in the signature
pages hereof, as such amount may be reduced from time to time pursuant to
Section 2.2.
"Consolidated" or "consolidated" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more persons
of the amounts signified by such term for all such persons determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Contingent Liabilities" of any person shall mean, as of any date, all
obligations of such person or of others for which such person is contingently
liable, as obligor, guarantor or in any other capacity, or in respect of which
obligations such person assures a creditor against loss or agrees to take any
action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including
without limitation all reimbursement obligations of such person in respect of
any letters of credit, surety bonds or similar obligations and all obligations
of such person to advance funds to, or to purchase assets, property or services
from, any other person in order to maintain the financial condition of such
other person.
"Cumulative Net Income" of any person shall mean, as of any date, the
net income (after deduction for income and other taxes of such person determined
by reference to income or profits of such person) for the period commencing on
the specified date through the end of the most recently completed fiscal year of
such person (but without reduction for any net loss incurred for any fiscal year
during such period), taken as one accounting period, all as determined in
accordance with generally accepted accounting principles; provided that, with
respect to Owosso, such net income shall be the net income available for common
stockholders.
"Default" shall mean any of the events or conditions described in
Section 6.1 which might become an Event of Default with notice or lapse of time
or both.
"Dollars" and "$" shall mean the lawful money of the United States of
America.
"Domestic Subsidiary" of any person shall mean any Subsidiary of such
person that is not a Foreign Subsidiary of such person.
"EBIT" of any person shall mean, for any period, the after-tax net
income (exclusive of any non-recurring gains or losses for such person's fiscal
year 1998, and any tax effects thereof) of such person for such period plus, to
the extent deducted in determining such after-tax net income for such period,
(a) Interest Charges of such person for such period, and (b) income and other
taxes determined by reference to profits of such person for such period.
"EBITDA" of any person shall mean, as of the last day of any fiscal
quarter of such person, the EBIT of such person for the period of four fiscal
quarters of such person then
4
<PAGE>
ended plus, to the extent deducted in determining such EBIT for such period,
depreciation and amortization charges of such person for such period.
"Effective Date" shall mean the effective date specified in the final
paragraph of this Agreement.
"Environmental Laws" at any date shall mean all provisions of law,
statute, ordinance, rules, regulations, judgments, writs, injunctions, decrees,
orders, awards and standards promulgated by the government of the United States
of America or any foreign government or by any state, province, municipality or
other political subdivision thereof or therein, or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning the protection of, or regulating the discharge of substances into,
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which, together with any Borrower or any Subsidiary of any
Borrower, would be treated as a single employer under Section 414 of the Code.
"Eurodollar Business Day" shall mean, with respect to any Eurodollar
Rate Loan, a day which is both a Business Day and a day on which dealings in
Dollar deposits are carried out in the interbank market selected by the Agent
with respect to such Eurodollar Rate Loan.
"Eurodollar Interest Period" shall mean, with respect to any Eurodollar
Rate Loan, the period commencing on the day such Eurodollar Rate Loan is made or
converted to a Eurodollar Rate Loan and ending on the date one, two, three or
six months thereafter, or such longer period of time not exceeding twelve months
acceptable to the Banks, as the Company may elect under Section 2.4 or 2.7, and
each subsequent period commencing on the last day of the immediately preceding
Eurodollar Interest Period and ending on the date one, two, three or six months
thereafter, as the Company may elect under Section 2.4 or 2.7, provided,
however, that (a) any Eurodollar Interest Period which commences on the last
Eurodollar Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Eurodollar Business Day of the appropriate subsequent
calendar month, (b) each Eurodollar Interest Period which would otherwise end on
a day which is not a Eurodollar Business Day shall end on the next succeeding
Eurodollar Business Day or, if such next succeeding Eurodollar Business Day
falls in the next succeeding calendar month, on the next preceding Eurodollar
Business Day, and (c) no Eurodollar Interest Period which would end after the
Termination Date shall be permitted.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Rate
Borrowing and the related Eurodollar Interest Period, the per annum rate that is
equal to the sum of:
(a) the Applicable Margin, plus
5
<PAGE>
(b) the rate per annum obtained by dividing (i) the per annum rate of
interest at which deposits in Dollars for such Eurodollar Interest Period and in
an aggregate amount comparable to the amount of the Eurodollar Rate Loan to be
made by the Agent in its capacity as a Bank hereunder as part of such Borrowing
are offered to the Agent or any affiliate of the Agent by other prime banks in
the London interbank market at approximately 11:00 a.m. London time on the
second Eurodollar Business Day prior to the first day of such Eurodollar
Interest Period by (ii) an amount equal to one minus the stated maximum rate
(expressed as a decimal) of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
that is specified on the first day of such Eurodollar Interest Period by the
Board of Governors of the Federal Reserve System (or any successor agency
thereto) for determining the maximum reserve requirement with respect to
eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of such Board) maintained by a member bank of such System;
all as conclusively determined by the Agent, such sum to be rounded up, if
necessary, to the nearest whole multiple of one one-hundredth of one percent
(1/100 of 1%); which Eurodollar Rate shall change simultaneously with any change
in such Applicable Margin.
"Eurodollar Rate Loan" shall mean any Loan which bears interest at the
Eurodollar Rate.
"Event of Default" shall mean any of the events or conditions described
in Section 6.1.
"Federal Funds Rate" shall mean the per annum rate established and
announced by the Agent from time to time as the opening federal funds rate paid
by the Agent in its regional federal funds market for overnight borrowings from
other banks; which Federal Funds Rate shall change simultaneously with any
change in such announced rate.
"Fixed Charges" of any person shall mean, for any period, the sum,
without duplication, of (a) Interest Charges of such person for such period,
plus (b) Operating Lease Rental Expense of such person for which period, plus
(c) all taxes paid by such person in cash during such period (exclusive of any
such taxes to the extent resulting solely from any non-recurring gains or losses
for such person's fiscal year 1998), plus (d) all dividends and other
distributions paid or payable or otherwise accumulating during such period on
any capital stock of such person, plus (e) the maximum amount of principal or
other sums required to be paid by such person during the period of four fiscal
quarters of such person immediately following such period with respect to
Indebtedness (including the current portion of any Capital Lease) of such person
having a final maturity more than one year from the date of creation of such
Indebtedness; provided that this clause (e) shall not include any Related Party
Indebtedness except to the extent such Related Party Indebtedness is scheduled
to mature within such following four fiscal quarter period or the maturity of
such Related Party Indebtedness has been accelerated as of the date of
determination of Fixed Charges.
6
<PAGE>
"Fixed Charges Coverage Availability" of any person shall mean, for any
period, the sum of EBITDA such person for such period plus, to the extent
deducted in determining such EBITDA or such period, Operating Lease Rental
Expense of such person for such period.
"Floating Rate" shall mean the per annum rate equal to the sum of (a)
the Applicable Margin, plus (b) greater of (i) the Prime Rate in effect from
time to time and (ii) the sum of one-half of one (1/2 of 1%) per annum plus the
Federal Funds Rate in effect from time to time; which Floating Rate shall change
simultaneously with any change in such Applicable Margin, Prime Rate or Federal
Funds Rate, as the case may be.
"Floating Rate Loan" shall mean any Loan which bears interest at the
Floating Rate.
"Foreign Subsidiary" of any person shall mean any Subsidiary of such
person incorporated or organized in any jurisdiction other than any State of the
United States of America.
"generally accepted accounting principles" shall mean generally
accepted accounting principles applied on a basis consistent with that reflected
in the financial statements referred to in Section 4.6.
"Indebtedness" of any person shall mean, as of any date, without
duplication, (a) all obligations of such person for borrowed money, (b) all
obligations of such person represented by any note, bond, debenture or similar
evidence of indebtedness, (c) all obligations of such person as lessee under any
Capital Lease, (d) all obligations which are secured by any Lien existing on any
asset or property of such person whether or not the obligation secured thereby
shall have been assumed by such person, (e) the unpaid purchase price for goods,
property or services acquired by such person, except for trade accounts payable
arising in the ordinary course of business that are not past due, (f) all
obligations of such person to purchase goods, property or services where payment
therefor is required regardless of whether delivery of such goods or property or
the performance of such services is ever made or tendered (generally referred to
as "take or pay contracts"), (g) all liabilities of such person in respect of
Unfunded Benefit Liabilities under any Plan or of any ERISA Affiliate, (h) all
obligations of such person in respect of any interest rate or currency swap,
rate cap or other similar transaction (valued in an amount equal to the highest
termination payment, if any, that would be payable by such person upon
termination for any reason on the date of determination), and (i) all
obligations of others similar in character to those described in clauses (a)
through (h) of this definition for which such person is contingently liable, as
obligor, guarantor, surety or in any other capacity, or in respect of which
obligations such person assures a creditor against loss or agrees to take any
action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including
without limitation all reimbursement obligations of such person in respect of
letters of credit, surety bonds or similar obligations and all obligations of
such person to advance funds to, or to purchase assets, property or services
from, any other person in order to maintain the financial condition of such
other person.
7
<PAGE>
"Interest Charges" of any person shall mean, for any period, without
duplication, all interest paid or payable by such person on Indebtedness of such
person during such period.
"Interest Payment Date" shall mean (a) with respect to any Eurodollar
Rate Loan, the last day of each Interest Period with respect to such Eurodollar
Rate Loan and, in the case of any Interest Period exceeding three months, those
days that occur during such Interest Period at intervals of three months after
the first day of such Interest Period, and (b) with respect to any Floating Rate
Loan, the 15th day of each February, May, August and November occurring after
the date hereof, commencing with the 15th day of February, 1999; provided that,
notwithstanding anything in this Agreement to the contrary, on each Interest
Payment Date with respect to Floating Rate Loans, interest shall be payable as
accrued but unpaid for the period ending at the end of the month immediately
preceding such Interest Payment Date.
"Interest Period" shall mean any Eurodollar Interest Period.
"Lien" shall mean any pledge, assignment, hypothecation, mortgage,
security interest, deposit arrangement, option, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
lessor's or lessee's interest under any lease, subordination of any claim or
right, or any other type of lien, charge, encumbrance, preferential arrangement
or other claim or right.
"Loan" shall mean any Revolving Credit Loan. Any such Loan or portion
thereof may also be denominated as a Floating Rate Loan or a Eurodollar Rate
Loan and such Floating Rate Loans and Eurodollar Rate Loans are referred to
herein as "types" of Loans.
"Multiemployer Plan" shall mean any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"Net Worth" of any person shall mean the net worth of such person
determined in accordance with generally accepted accounting principles.
"Note" shall mean any Revolving Credit Note.
"Operating Lease Rental Expense" of any person shall mean, for any
period, the maximum amount of all rents and other payments (exclusive of
property taxes, property and liability insurance premiums and maintenance costs)
paid or required to be paid by such person during such period under any lease of
real or personal property in respect of which such person is obligated as a
lessee or user, other than Capital Leases.
"Overdue Rate" shall mean (a) in respect of principal of Floating Rate
Loans, a rate per annum that is equal to the sum of three percent (3%) per annum
plus the Floating Rate, (b) in respect of principal of Eurodollar Rate Loans, a
rate per annum that is equal to the sum of three percent (3%) per annum plus the
per annum rate in effect thereon until the end of the then current Interest
Period for such Loan and, thereafter, a rate per annum that is equal to the sum
of three percent (3%) per annum plus the Floating Rate, and (c) in respect of
other amounts
8
<PAGE>
payable by the Borrowers hereunder (other than interest), a per annum rate that
is equal to the sum of three percent (3%) per annum plus the Floating Rate.
"Parker Loss" shall mean the net (after-tax) loss, if any, on the
Parker Sale.
"Parker Sale" shall mean the sale of the assets of the Parker division
of DWZM.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean Liens permitted by Section 5.2(f) hereof.
"Person" or "person" shall include an individual, a corporation, an
association, a partnership, a limited liability company, a trust or estate, a
joint stock company, an unincorporated organization, a joint venture, a trade or
business (whether or not incorporated), a government (foreign or domestic) and
any agency or political subdivision thereof, or any other entity.
"Plan" shall mean any pension plan (other than a Multiemployer Plan)
subject to Title IV of ERISA or to the minimum funding standards of Section 412
of the Code which has been established or maintained by one or more of the
Borrowers, any Subsidiary of a Borrower or any ERISA Affiliate, or by any other
person if any Borrower, any Subsidiary of any Borrower or any ERISA Affiliate
could have liability with respect to such pension plan.
"Pledge Agreement" shall mean, collectively, each pledge agreement
entered into by Owosso in favor of the Agent for the benefit of the Banks and
the Agent pursuant to this Agreement in substantially the form of Exhibit A
hereto, as amended or modified from time to time.
"Prime Rate" shall mean the per annum rate announced by the Agent from
time to time as its "prime rate" (it being acknowledged that such announced rate
may not necessarily be the lowest rate charged by the Agent to any of its
customers), which Prime Rate shall change simultaneously with any change in such
announced rate.
"Prohibited Transaction" shall mean any transaction involving any Plan
which is proscribed by Section 406 of ERISA or Section 4975 of the Code.
"Pro Rata Share" shall mean, for any Bank and with respect to any
amount, such Bank's share of such amount determined in accordance with the ratio
that the Commitment amount for such Bank bears to the aggregate Commitment
amounts for all the Banks.
"Related Party Indebtedness" shall mean all Indebtedness of the
Borrowers or any of them to any Affiliate, any former Affiliate, any owner of
any legal or beneficial interest in any of the Borrowers, or any former such
owner, including, without limitation, all Indebtedness of
9
<PAGE>
Stature to its former shareholders arising in connection with the acquisition of
Stature by Owosso.
"Reportable Event" shall mean a reportable event as described in
Section 4043(b) of ERISA including those events as to which the thirty (30) day
notice period is waived under Part 2615 of the regulations promulgated by the
PBGC under ERISA.
"Required Banks" shall mean Banks holding not less than (i) 66 2/3% of
the aggregate principal amount of Loans then outstanding or (ii) 66 2/3% of the
Commitments if no Loans are then outstanding.
"Revolving Credit Loan" shall mean any borrowing under Section 2.4
evidenced by the Revolving Credit Notes and made pursuant to Section 2.1.
"Revolving Credit Note" shall mean any promissory note of the Borrowers
evidencing the Revolving Credit Loans, in substantially the form annexed hereto
as Exhibit B, as amended or modified from time to time and together with any
promissory note or notes issued in exchange or replacement therefor.
"Security Agreement" shall mean any security agreement entered into by
the Borrowers or any of them for the benefit of the Agent and the Banks pursuant
to this Agreement in substantially the form of Exhibit C hereto, as amended or
modified from time to time.
"Security Documents" shall mean, collectively, the Security Agreements,
the Pledge Agreement and all other agreements and documents, including financing
statements, assignments separate from certificate and similar documents,
delivered pursuant to this Agreement or otherwise entered into by any person to
secure the Loans hereunder.
"Stature Bonds" shall mean the Variable Rate Demand Industrial
Development Revenue Bonds, Series 1998 (Stature Electric, Inc. Facility) in the
aggregate amount of $5,750,000 issued by the Jefferson County Industrial
Development Agency (the "Issuer") under a Trust Indenture dated as of October 1,
1998 to which PNC Bank, National Association, as the original Trustee (since
replaced by a successor trustee), and the Issuer were parties and any bonds
issued pursuant to any refunding or refinancing thereof.
"Subordinated Debt" of any person shall mean, as of any date, that
Indebtedness of such person for borrowed money which is expressly subordinate
and junior in right and priority of payment to the Loans and other Indebtedness
of such person to the Banks in manner and by agreement satisfactory in form and
substance to the Required Banks.
"Subsidiary" of any person shall mean any other person (whether now
existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law) at least a majority of the securities or
other ownership interests of each class having ordinary voting power or
analogous right (other than securities or other ownership interests which have
such power or right only by reason of the happening of a contingency), at the
time as
10
<PAGE>
of which any determination is being made, are owned, beneficially and of record,
by such person or by one or more of the other Subsidiaries of such person or by
any combination thereof.
"Termination Date" shall mean the earlier to occur of (a) December 31,
2002, and (b) the date on which the Commitments shall be terminated pursuant to
Section 2.2 or 6.2.
"Total Debt" of any person shall mean, as of any date, without
duplication, all Indebtedness of such person for borrowed money, including,
without limitation, all obligations of such person represented by any note,
bond, debenture or similar evidence of indebtedness, and all Indebtedness of
such person comprised of obligations as lessee under any Capital Lease; provided
that Total Debt of the Company and its Subsidiaries shall not include the
proceeds of the Stature Bonds that at such date remain in a fund held by the
Trustee prior to their expenditure for the financed Stature project.
"Unfunded Benefit Liabilities" shall mean, with respect to any Plan as
of any date, the amount of the unfunded benefit liabilities determined in
accordance with Section 4001(a)(18) of ERISA.
"Year 2000 Issues" shall mean the anticipated costs, problems and
uncertainties associated with the inability of certain computer applications to
effectively handle data, including dates on and after January 1, 2000, as such
inability affects the business, operations or condition, financial or otherwise,
of the Borrowers, their Subsidiaries and their respective material customers,
suppliers and vendors.
"Year 2000 Program" shall have the meaning ascribed thereto in Section
4.15.
1.2 Other Definitions; Rules of Construction. As used herein and in the
Schedules and Exhibits attached hereto, the terms "Agent", "Ahab", "Astro Air",
"Banks", "Borrowers", "DWZM", "Existing Bank", Existing Banks", "Existing Credit
Agreement", "GBMC", "Landover", "Motor Group", "Motor Products", "Motor
Products-Ohio", "NBD", "Owosso", "Rhodes", "PNC", "Snowmax", "Sooner" "Stature"
and "this Agreement" shall have the respective meanings ascribed thereto in the
initial and introductory paragraphs of this Agreement. Such terms, together with
the other terms defined in Section 1.1, shall include both the singular and the
plural forms thereof and shall be construed accordingly. All computations
required hereunder and all financial terms used herein shall be made or
construed in accordance with generally accepted accounting principles unless
such principles are inconsistent with the express requirements of this
Agreement. Use of the terms "herein", "hereof", and "hereunder" shall be deemed
references to this Agreement in its entirety and not to the Section or clause in
which such term appears. References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Agreement unless otherwise
specifically provided.
11
<PAGE>
ARTICLE II
THE COMMITMENTS AND THE LOANS
2.1 Commitments of the Banks. Each Bank agrees, for itself only, subject to
the terms and conditions of this Agreement, to make Revolving Credit Loans to
the Borrowers pursuant to Section 2.4 from time to time from and including the
Effective Date to but excluding the Termination Date, not to exceed in aggregate
principal amount at any time outstanding its respective Commitment as of the
date any such Loan is made.
2.2 Termination and Reduction of Commitments.
(a) The Borrowers shall have the right to terminate the Commitments or
reduce the commitment amounts for the Banks set forth in the signature pages
hereof at any time and from time to time, provided that (i) the Borrowers shall
give notice of such termination or reduction to the Agent (with sufficient
executed copies for each Bank) specifying the amount and effective date thereof,
(ii) each partial reduction of such commitment amounts shall be in a minimum
amount of $1,000,000 and in an integral multiple of $500,000, (iii) no such
termination or reduction shall be permitted with respect to any portion of the
Commitments as to which a request for a Borrowing pursuant to Section 2.4 is
then pending, and (iv) the Commitments may not be terminated in their entirety
if any Loans are then outstanding and the commitment amounts may not be reduced
below the principal amount of Loans then outstanding.
(b) In addition, the commitment amounts for the Banks shall reduce in
the aggregate amount of $2,500,000 on each of December 31, 1999, December 31,
2000 and December 31, 2001, in each case provided that a Bank or Banks shall
have given Owosso not less than 30 days' prior written notice thereof.
Notwithstanding anything herein to the contrary, any such reduction shall not
occur if all the Banks agree in writing with respect to such reduction in their
sole discretion.
(c) The Commitments or commitment amounts, as the case may be, or any
portion thereof, terminated or reduced, as the case may be, pursuant to this
Section 2.2 may not be reinstated. Each partial reduction of the commitment
amounts pursuant to part (a) or (b) of this Section 2.2 shall reduce the
commitment amounts of all of the Banks proportionately in accordance with the
respective commitment amount for each such Bank set forth on the signature pages
hereof next to the name of each such Bank.
12
<PAGE>
2.3 Fees.
(a) The Borrowers agree to pay to the Banks a commitment fee on the
daily average amount of the Commitments during each calendar quarter or portion
thereof from the Effective Date to but excluding the Termination Date, at a rate
equal to the Applicable Margin for such calendar quarter. Accrued commitment
fees shall be payable (i) quarterly in arrears on the 15th day of each February,
May, August and November, commencing on the 15th day of February, 1999, as
accrued but unpaid in the case of each such payment for the period ending at the
end of the immediately preceding month, and (ii) on the Termination Date, as
accrued but unpaid for the period ending on the Termination Date.
(b) The Borrowers further agree to pay to the Agent agency fees for its
services as Agent under this Agreement in such amounts and at such times as may
from time to time be agreed upon by the Borrowers and the Agent.
(c) The Borrowers further agree to pay to the Banks a closing fee in
the amount of $68,750 for this Agreement, which closing fee shall be shared
between the Banks in accordance with their Pro Rata Shares.
2.4 Disbursement of Loans.
(a) The Borrowers shall give the Agent notice of their request for each
Borrowing in substantially the form of Exhibit D hereto (with sufficient
executed copies for each Bank) not later than 11:00 a.m. Detroit time (i) three
Eurodollar Business Days prior to the date such Borrowing is requested to be
made if such Borrowing is to be made as a Eurodollar Rate Borrowing, and (ii) on
the Business Day such Borrowing is requested to be made if such Borrowing is to
be made as a Floating Rate Borrowing, which notice shall specify whether a
Eurodollar Rate Borrowing or a Floating Rate Borrowing is requested and, in the
case of each requested Eurodollar Rate Borrowing, the Interest Period to be
initially applicable to such Borrowing. The Agent shall provide notice of such
requested Borrowing to each Bank not later than 1:00 p.m. Detroit time on the
date the Agent receives such notice from the Borrowers, unless the Agent
receives such notice after 11:00 a.m. Detroit time, in which case the Agent
shall provide such notice to each Bank not later than 1:00 p.m. Detroit time on
the next Business Day. Subject to the terms and conditions of this Agreement,
the proceeds of each such requested Borrowing shall be made available to the
Borrowers on the date such Borrowing is requested to be made by depositing the
proceeds thereof, in immediately available funds, in an account maintained and
designated by the Borrowers at the principal office of the Agent.
(b) Subject to the terms and conditions of this Agreement, each Bank,
on the date any Borrowing is requested to be made, shall make its Pro Rata Share
of such Borrowing available in immediately available funds at the principal
office of the Agent for disbursement to the Borrowers. Unless the Agent shall
have received notice from any Bank prior to the time such Borrowing is requested
under this Section 2.4 that such Bank will not make available to the Agent such
Bank's Pro Rata Share of such Borrowing, the Agent may assume that such Bank has
made such Pro Rata Share available to the Agent on the date such Borrowing is
requested to
13
<PAGE>
be made in accordance with this Section 2.4. Unless the Agent shall have
received such notice from such Bank, if and to the extent such Bank shall not
have so made such Pro Rata Share available to the Agent, the Agent may (but
shall not be obligated to) make such amount available to the Borrowers, and such
Bank and the Borrowers severally agree to pay to the Agent forthwith on demand
such amount together with interest thereon, for each day from the date such
amount is made available to the Borrowers by the Agent until the date such
amount is repaid to the Agent, at a rate per annum equal to the interest rate
applicable to such Borrowing during such period. The Agent shall give the
Borrowers prompt notice of the failure of any Bank to so make its Pro Rata Share
of any requested Borrowing available to the Agent; provided that the failure of
the Agent to give such notice shall not relieve the Borrowers or any of the
Banks of any of their obligations under this Section 2.4(b). If such Bank shall
pay such amount to the Agent together with interest, such amount so paid shall
constitute a Loan by such Bank as a part of such Borrowing for purposes of this
Agreement. The failure of any Bank to make its Pro rata Share of any such
Borrowing available to the Agent shall not relieve any other Bank of its
obligations to make available its Pro Rata Share of such Borrowing on the date
such Borrowing is requested to be made, but no Bank shall be responsible for
failure of any other Bank to make such Pro Rata Share available to the Agent on
the date of any such Borrowing.
(c) All Revolving Credit Loans made under this Section 2.4 shall be
evidenced by the Revolving Credit Notes, and all such Loans shall be due and
payable and bear interest as provided in Article III. Each Bank is hereby
authorized by the Borrowers to record on the schedule attached to the Notes, or
in its books and records, the date, and amount and type of each Loan and the
duration of the related Interest Period (if applicable), the amount of each
payment or prepayment of principal thereon, and the other information provided
for on such schedule, which schedule or books and records, as the case may be,
shall, absent manifest error, constitute prima facie evidence of the information
so recorded, provided, however, that failure of any Bank to record, or any error
in recording, any such information shall not relieve the Borrowers of their
obligation to repay the outstanding principal amount of the Revolving Credit
Loans, all accrued interest thereon and other amounts payable with respect
thereto in accordance with the terms of the Notes and this Agreement. Subject to
the terms and conditions of this Agreement, the Borrowers may borrow Revolving
Credit Loans under this Section 2.4, prepay Revolving Credit Loans pursuant to
Section 3.1 and reborrow Revolving Credit Loans under this Section 2.4.
(d) Each Borrower other than Owosso hereby irrevocably appoints and
authorizes Owosso to act as its agent in requesting Advances on such Borrower's
behalf.
(e) The initial Borrowings under this Agreement shall, subject to the
terms and conditions of this Agreement, be Borrowings of Floating Rate Loans and
Eurodollar Rate Loans, respectively, in an aggregate principal amount not less
than the aggregate outstanding principal amount of the Floating Rate Loans and
Eurodollar Rate Loans (as defined in the Existing Credit Agreement),
respectively, made by NBD and PNC under the Existing Credit Agreement, and such
Borrowings shall be made immediately upon the satisfaction of all conditions set
forth in Sections 2.5 and 2.6. Thereupon all Floating Rate Loans (as defined in
the Existing Credit Agreement) shall be deemed restated and replaced by such
initial Floating
14
<PAGE>
Rate Borrowing under this Agreement and all Eurodollar Rate Loans (as defined in
the Existing Credit Agreement) shall be deemed restated and replaced by such
initial Eurodollar Rate Borrowing under this Agreement
2.5 Conditions for First Disbursement. The obligation of the Banks to
make the first Loan hereunder is subject to receipt by each Bank and the Agent
of the following documents and completion of the following matters, in form and
substance satisfactory to each Bank and the Agent:
(a) Good-Standing Certificates; Bringdowns of Charter Documents and
By-Laws. Certificates of recent date of the appropriate authority or official of
each Borrower's respective state of incorporation certifying as to the good
standing and corporate existence of each Borrower, together with a certificate
of each Borrower to the effect that the copies of the by-laws and charter
documents of each Borrower previously delivered to the Banks parties to the
Existing Credit Agreement continue in full force and effect as of the Effective
Date and continue to be true and complete copies thereof as of the Effective
Date, except as otherwise noted in such certificates;
(b) Corporate Authorizations. Copies of all authorizing resolutions and
evidence of other corporate action taken by each Borrower to authorize the
execution, delivery and performance by each Borrower of this Agreement, the
Security Documents and the Notes and the consummation by such Borrower of the
transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized officer of each Borrower;
(c) Incumbency Certificates. Certificates of incumbency of each
Borrower containing, and attesting to the genuineness of, the signatures of
those officers authorized to act on behalf of each such Borrower in connection
with this Agreement, the Security Documents and the Notes and the consummation
by such Borrower of the transactions contemplated hereby, certified as true and
correct as of the Effective Date by a duly authorized officer of each Borrower;
(d) Notes. The Revolving Credit Notes duly executed on behalf of the
Borrowers for each Bank;
(e) Legal Opinion. The favorable written opinion of Pepper Hamilton
LLP, general counsel for the Borrowers, with respect to such matters as the
Banks and the Agent may reasonably request;
(f) Consents, Approvals, Etc. Copies of all governmental and
nongovernmental consents, approvals, authorizations, declarations, registrations
or filings, if any, required on the part of any Borrower in connection with the
execution, delivery and performance of this Agreement, the Security Documents,
the Notes or the transactions contemplated hereby or as a condition to the
legality, validity or enforceability of this Agreement, the Security Documents
or the Notes, certified as true and correct and in full force
15
<PAGE>
and effect as of the Effective Date by a duly authorized officer of each
Borrower, or if none is required, a certificate of each such officer to that
effect;
(g) Payment of Closing Fee. The Borrowers shall have paid to the Agent
for the account of the Banks the closing fee under Section 2.3(c) in the amount
of $68,750 in immediately available funds;
(h) Security Documents. The Security Documents duly executed on behalf
of the Borrowers granting to the Banks and the Agent the collateral and security
intended to be provided pursuant to Section 2.10, together with:
(A) Recording, Filing, Etc. Evidence of the recordation, filing and
other action (including payment of any applicable taxes or fees) in such
jurisdictions as the Agent or any Bank may deem necessary or appropriate with
respect to the Security Documents, including the filing of financing statements
and similar documents which the Agent or any Bank may deem necessary or
appropriate to create, preserve or perfect the liens, security interests and
other rights intended to be granted to the Agent and the Banks hereunder,
together with Uniform Commercial Code and other record searches in such offices
as the Agent or any Bank may reasonably request;
(B) Pledged Stock Certificates. The original stock certificates
representing all the stock pledged under the Pledge Agreement, together with
assignments separate from certificate duly executed on behalf of the Borrowers
by Owosso in blank for all of such certificates. (The Agent hereby acknowledges
that it received such stock certificates and assignments pursuant to the
Existing Credit Agreement and that it retains possession of the same.); and
(C) Casualty and Other Insurance. Evidence that the casualty and
other insurance required pursuant to Section 5.1(c) and the Security Documents
is in full force and effect;
(i) Year 2000 Information. Information satisfactory to the Agent and
the Banks regarding each Borrower's Year 2000 Program; and
(j) Miscellaneous. Such other documents and completion of such other
matters as the Agent may reasonably request.
2.6 Further Conditions for Disbursement. The obligation of the Banks to
make any Loan (including the first Loan), or any continuation or conversion
under Section 2.7, is further subject to the satisfaction of the following
conditions precedent:
(a) The representations and warranties contained in Article IV hereof
and in the Security Documents shall be true and correct in all material respects
on and as of the date such Loan is made (both before and after such Loan is
made) as if such representations and warranties were made on and as of such
date; and
16
<PAGE>
(b) No Event of Default or Default shall exist or shall have occurred
and be continuing on the date such Loan is made (whether before or after such
Loan is made).
The Borrowers shall be deemed to have made a representation and warranty to the
Banks at the time of the making of, and the continuation or conversion of, each
Loan to the effects set forth in clauses (a) and (b) of this Section 2.6. For
purposes of this Section 2.6, the representations and warranties contained in
Section 4.6 hereof shall be deemed made with respect to both the financial
statements referred to therein and the most recent financial statements
delivered pursuant to Section 5.1(d)(ii) and (iii).
2.7 Subsequent Elections as to Borrowings. The Borrowers may elect (a) to
continue a Eurodollar Rate Borrowing, or a portion thereof, as a Eurodollar
Rate Borrowing or (b) to convert a Eurodollar Rate Borrowing, or a portion
thereof, to a Floating Rate Borrowing or (c) to convert a Floating Rate
Borrowing, or a portion thereof, to a Eurodollar Rate Borrowing, in each case by
giving notice thereof to the Agent (with sufficient executed copies for each
Bank) in substantially the form of Exhibit E hereto not later than 11:00 a.m.
Detroit time three Eurodollar Business Days prior to the date any such
continuation of or conversion to a Eurodollar Rate Borrowing is to be effective
and not later than 11:00 a.m. Detroit time one Business Day prior to the date
such continuation or conversion is to be effective in all other cases, provided
that an outstanding Eurodollar Rate Borrowing may only be converted on the last
day of the then current Interest Period with respect to such Borrowing, and
provided, further, if a continuation of a Borrowing as, or a conversion of a
Borrowing to, a Eurodollar Rate Borrowing is requested, such notice shall also
specify the Interest Period to be applicable thereto upon such continuation or
conversion. The Agent shall promptly provide notice of such election to the
Banks. If the Borrowers shall not timely deliver such a notice with respect to
any outstanding Eurodollar Rate Borrowing, the Borrowers shall be deemed to have
elected to convert such Eurodollar Rate Borrowing to a Floating Rate Borrowing
on the last day of the then current Interest Period with respect to such
Borrowing.
2.8 Limitation of Requests and Elections. Notwithstanding any other
provision of this Agreement to the contrary, if, upon receiving a request for a
Eurodollar Rate Borrowing pursuant to Section 2.4, or a request for a
continuation of a Eurodollar Rate Borrowing as a Eurodollar Rate Borrowing, or a
request for a conversion of a Floating Rate Borrowing to a Eurodollar Rate
Borrowing pursuant to Section 2.7, (a) deposits in Dollars for periods
comparable to the Interest Period elected by the Borrowers are not available to
any Bank in the relevant interbank market, or (b) the applicable interest rate
will not adequately and fairly reflect the cost to any Bank of making, funding
or maintaining the related Eurodollar Rate Borrowing or (c) by reason of
national or international financial, political or economic conditions or by
reason of any applicable law, treaty, rule or regulation (whether domestic or
foreign) now or hereafter in effect or whether or not presently applicable to
any Bank, or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by any Bank with any guideline, request or directive of such
authority (whether or not having the force of law), including without limitation
exchange controls, it is impracticable, unlawful or impossible for any Bank (i)
to make or fund the
17
<PAGE>
relevant Eurodollar Rate Borrowing or (ii) to continue such Eurodollar Rate
Borrowing as a Eurodollar Rate Borrowing or (iii) to convert a Borrowing to such
a Eurodollar Rate Borrowing, then the Borrowers shall not be entitled, so long
as such circumstances continue, to request a Eurodollar Rate Loan pursuant to
Section 2.4 with respect to any Bank or a continuation of or conversion to a
Eurodollar Rate Loan from such Bank pursuant to Section 2.4; provided that, so
long as such circumstances exist, such Bank's Loan made as part of any
Eurodollar Rate Borrowing in which the other Bank is participating shall bear
interest at the Floating Rate, but shall otherwise be considered a Eurodollar
Rate Loan made as part of such Eurodollar Rate Borrowing. In the event that such
circumstances no longer exist with respect to such Bank, such Bank shall again
consider requests for Eurodollar Rate Loans pursuant to Section 2.4, and
requests for continuations of and conversions to Eurodollar Rate Loans of the
affected type pursuant to Section 2.7.
2.9 Minimum Amounts; Limitation on Number of Borrowings. Except for (a)
Borrowings and conversions thereof which exhaust the entire remaining amount of
the Commitments and (b) payments required pursuant to Section 3.8, each
Borrowing and each continuation or conversion pursuant to Section 2.7 and each
prepayment thereof shall be (i) in a minimum amount of $3,000,000 and in an
integral multiple of $100,000, in the case of Eurodollar Rate Borrowings, and
(ii) in a minimum amount of $50,000 and in an integral multiple thereof, in the
case of Floating Rate Borrowings. The aggregate number of Eurodollar Rate
Borrowings outstanding at any one time under this Agreement may not exceed five.
No more than six Interest Periods shall be permitted to exist at any one time
with respect to all Borrowings outstanding hereunder from time to time.
2.10 Security and Collateral. To secure the payment when due of the
Notes and all other obligations of the Borrowers under this Agreement to the
Agent and the Banks, the Borrowers shall execute and deliver, or cause to be
executed and delivered, to the Agent and the Banks, Security Documents granting
the following:
(a) Security interests in all present and future accounts, inventory,
general intangibles, chattel paper, instruments, equipment, fixtures, and all
other personal property of the Borrowers; and
(b) Pledges of all the capital stock of all Domestic Subsidiaries of
Owosso and pledges of 65% of all the capital stock of all Foreign Subsidiaries
of Owosso.
18
<PAGE>
ARTICLE III
PAYMENTS AND PREPAYMENTS OF LOANS
3.1 Principal Payments and Prepayments.
(a) Unless earlier payment is required under this Agreement, the
Borrowers shall pay to the Banks on the Termination Date the entire outstanding
principal amount of the Loans.
(b) The Borrowers may at any time and from time to time prepay all or a
portion of the Borrowings, without premium or penalty, provided that prepayment
shall only be permitted if the Borrowers shall have paid to the Banks, together
the principal thereof prepaid, all accrued interest to the date of payment and
all amounts owing to the Banks under Section 3.8 in connection with such
prepayment.
(c) If at any time the aggregate outstanding principal amount of the
Loans shall exceed the aggregate Commitments of the Banks, the Borrowers shall
forthwith pay to the Banks an amount for application to the outstanding
principal amount of the Loans such that the aggregate amount of such payments is
not less than the amount of such excess.
3.2 Interest Payments. The Borrowers shall pay interest to the Banks on
the unpaid principal amount of each Loan, for the period commencing on the date
such Loan is made until such Loan is paid in full, on each Interest Payment Date
and at maturity (whether at stated maturity, by acceleration or otherwise), and
thereafter on demand, at the following rates per annum:
(a) During such periods that such Loan is a Floating Rate Loan, the
Floating Rate.
(b) During such periods that such Loan is a Eurodollar Rate Loan, the
Eurodollar Rate applicable to such Loan for each related Eurodollar Interest
Period.
Notwithstanding the foregoing paragraphs (a) and (b), the Borrowers shall pay
interest on demand at the Overdue Rate on the outstanding principal amount of
any Loan and any other amount payable by the Borrowers hereunder (other than
interest) which is not paid in full when due (whether at stated maturity, by
acceleration or otherwise) for the period commencing on the due date thereof
until the same is paid in full.
3.3 Payment Method.
(a) All payments to be made by the Borrowers hereunder will be made in
Dollars and in immediately available funds to the Agent for the account of the
Banks at its address set forth in Section 8.2 not later than 1:00 p.m. Detroit
time on the date on which such payment shall become due. Payments received after
1:00 p.m. Detroit time shall be deemed to be payments made prior to 1:00 p.m.
Detroit time on the next succeeding Business Day.
(b) At the time of making each such payment, the Borrowers shall,
subject to the other terms and conditions of this Agreement, specify to the
Agent that Loan or other obligation of the Borrowers hereunder to which such
payment is to be applied. In the event that the Borrowers fail to so specify the
relevant obligation or if an Event of Default shall have
19
<PAGE>
occurred and be continuing, the Agent may apply such payments as it may
determine in its sole discretion.
(c) On the day such payments are deemed received, the Agent shall remit
to the Banks their respective shares of such payments in immediately available
funds, (i) in the case of payments of principal on any Borrowing, determined on
a pro rata basis with respect to each such Bank by the ratio which the
outstanding principal balance of its Loan included in such Borrowing bears to
the outstanding principal balance of the Loans of all the Banks included in such
Borrowing, (ii) in the case of payments of interest on any Borrowing, determined
based upon the actual unpaid interest accrued on such Bank's Loan made as part
of such Borrowing, and (iii) in the case of fees paid pursuant to Section 2.3
and other amounts payable hereunder (other than the Agent's fees payable
pursuant to Section 2.3(c) and amounts payable to any Bank under Section 3.6,
3.8 or 8.5) determined on a pro rata basis with respect to each such Bank by the
ratio which the Commitment of such Bank bears to the Commitments of all the
Banks.
3.4 No Setoff or Deduction. All payments of principal and interest on
the Loans and other amounts payable by the Borrowers hereunder shall be made by
the Borrowers without setoff or counterclaim, and free and clear of, and without
deduction or withholding for, or on account of, any present or future taxes,
levies, imposts, duties, fees, assessments, or other charges of whatever nature,
imposed by any governmental authority, or by any department, agency or other
political subdivision or taxing authority.
3.5 Payment on Non-Business Day; Payment Computations. Except as
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan or any other amount due hereunder
becomes due and payable on a day which is not a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, in the case
of any installment of principal, interest shall be payable thereon at the rate
per annum determined in accordance with this Agreement during such extension.
Computations of interest and other amounts due under this Agreement shall be
made on the basis of (a) in the case of interest accruing at the Floating Rate,
and other amounts due under this Agreement other than interest accruing at the
Eurodollar Rate, a year of 365 or 366 days, as the case may be, and (b) in the
case of interest accruing at the Eurodollar Rate, a year of 360 days; in each
case for the actual number of days elapsed, including the first day but
excluding the last day of the relevant period.
3.6 Additional Costs.
(a) In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to any Bank or the Agent, or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank or the Agent
with any guideline, request or directive of any such authority (whether or not
having the force of law), shall (a) affect the basis of taxation of payments to
any Bank or the Agent of any amounts payable by the Borrowers under this
Agreement (other than taxes imposed on the
20
<PAGE>
overall net income of the Bank or the Agent, by the jurisdiction, or by any
political subdivision or taxing authority of any such jurisdiction, in which any
Bank or the Agent, as the case may be, has its principal office), or (b) shall
impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any Bank or the Agent, or (c) shall impose any other condition with
respect to this Agreement, the Security Documents, the Commitments, the Notes or
the Loans, and the result of any of the foregoing is to increase the cost to any
Bank or the Agent, as the case may be, of making, funding or maintaining any
Eurodollar Rate Loan or to reduce the amount of any sum receivable by any Bank
or the Agent, as the case may be, thereon, then the Borrowers shall pay to such
Bank or the Agent, as the case may be, from time to time, upon request by such
Bank (with a copy of such request to be provided to the Agent) or the Agent,
additional amounts sufficient to compensate such Bank or the Agent, as the case
may be, for such increased cost or reduced sum receivable to the extent such
Bank or the Agent is not compensated therefor in the computation of the interest
rate applicable to such Eurodollar Rate Loan. A statement as to the amount of
such increased cost or reduced sum receivable, prepared in good faith and in
reasonable detail by such Bank or the Agent, as the case may be, and submitted
by such Bank or the Agent, as the case may be, to the Borrowers, shall be
conclusive and binding for all purposes absent manifest error in computation.
(b) In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to any Bank or the Agent, or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank or the Agent
with any guideline, request or directive of any such authority (whether or not
having the force of law), including any risk-based capital guidelines, affects
or would affect the amount of capital required or expected to be maintained by
such Bank or the Agent (or any corporation controlling such Bank or the Agent)
and such Bank or the Agent, as the case may be, determines that the amount of
such capital is increased by or based upon the existence of such Bank's or the
Agent's obligations hereunder and such increase has the effect of reducing the
rate of return on such Bank's or the Agent's (or such controlling corporation's)
capital as a consequence of such obligations hereunder to a level below that
which such Bank or the Agent (or such controlling corporation) could have
achieved but for such circumstances (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Bank or the Agent to be
material, then the Borrowers shall pay to such Bank or the Agent, as the case
may be, from time to time, upon request by such Bank (with a copy of such
request to be provided to the Agent) or the Agent, additional amounts sufficient
to compensate such Bank or the Agent (or such controlling corporation) for any
increase in the amount of capital and reduced rate of return which such Bank or
the Agent reasonably determines to be allocable to the existence of such Bank's
or the Agent's obligations hereunder. A statement as to the amount of such
compensation, prepared in good faith and in reasonable detail by such Bank or
the Agent, as the case may be, and submitted by such Bank or the Agent to the
Borrowers, shall be conclusive and binding for all purposes absent manifest
error in computation.
3.7 Illegality and Impossibility. In the event that any applicable law,
treaty, rule or regulation (whether domestic or foreign) now or hereafter in
effect and whether or not presently
21
<PAGE>
applicable to any Bank, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Bank with any guideline, request or directive of
such authority (whether or not having the force of law), including without
limitation exchange controls, shall make it unlawful or impossible for any Bank
to maintain any Eurodollar Rate Loan under this Agreement, the Borrowers shall,
upon receipt of notice thereof from such Bank, repay in full the then
outstanding principal amount of each Eurodollar Rate Loan so affected, together
with all accrued interest thereon to the date of payment and all amounts owing
to such Bank under Section 3.8, (a) on the last day of the then current Interest
Period applicable to such Loan if such Bank may lawfully continue to maintain
such Loan to such day, or (b) immediately if such Bank may not continue to
maintain such Loan to such day.
3.8 Indemnification. If the Borrowers make any payment of principal with
respect to any Eurodollar Rate Loan on any other date than the last day of an
Interest Period applicable thereto (whether pursuant to Section 3.1(b), 3.7,
Section 6.2 or otherwise), or if the Borrowers fail to borrow any Eurodollar
Rate Loan after notice has been given to the Banks in accordance with Section
2.4, or if the Borrowers fail to continue as a Eurodollar Rate Loan or convert
to a Eurodollar Rate Loan any Loan for which such an election is pending
pursuant to Section 2.7, or if the Borrowers fail to make any payment of
principal or interest in respect of a Eurodollar Rate Loan when due, the
Borrowers shall reimburse each Bank on demand for any resulting loss or expense
incurred by each such Bank, including without limitation any loss incurred in
obtaining, liquidating or employing deposits from third parties, whether or not
such Bank shall have funded or committed to fund such Loan. A statement as to
the amount of such loss or expense, prepared in good faith and in reasonable
detail by such Bank and submitted by such Bank to the Borrowers, shall be
conclusive and binding for all purposes absent manifest error in computation.
Calculation of all amounts payable to such Bank under this Section 3.8 shall be
made as though such Bank shall have actually funded or committed to fund the
relevant Eurodollar Rate Loan through the purchase of an underlying deposit in
an amount equal to the amount of such Loan and having a maturity comparable to
the related Interest Period and through the transfer of such deposit from an
offshore office of such Bank to a domestic office of such Bank in the United
States of America; provided, however, that such Bank may fund any Eurodollar
Rate Loan in any manner it sees fit and the foregoing assumption shall be
utilized only for the purpose of calculation of amounts payable under this
Section 3.8.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants that:
4.1 Corporate Existence and Power. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation identified in the introductory paragraph of this Agreement, and
each is duly qualified to do business, and is in good standing, in all
additional jurisdictions where such qualification is necessary under
22
<PAGE>
applicable law. Each Borrower has all requisite corporate power to own or lease
the properties used in its business and to carry on its business as now being
conducted and as proposed to be conducted, and to execute and deliver this
Agreement, the Security Documents and the Notes and to engage in the
transactions contemplated by this Agreement.
4.2 Corporate Authority. The execution, delivery and performance by
each Borrower of this Agreement, the Security Documents and the Notes have been
duly authorized by all necessary corporate action and are not in contravention
of any law, rule or regulation, or any judgment, decree, writ, injunction, order
or award of any arbitrator, court or governmental authority, or of the terms of
any Borrower's charter or by-laws, or, except as set forth on Schedule 4.2
hereto, of any contract or undertaking to which any Borrower is a party or by
which any Borrower or its property may be bound or affected and will not result
in the imposition of any Lien except for Permitted Liens.
4.3 Binding Effect. This Agreement is, and the Security Documents and
Notes when delivered hereunder will be, legal, valid and binding obligations of
each Borrower party thereto enforceable against each such Borrower in accordance
with their respective terms.
4.4 Subsidiaries. Schedule 4.4 hereto correctly sets forth the
corporate name, jurisdiction of incorporation and ownership of each Subsidiary
of each Borrower. Each such Subsidiary and each corporation becoming a
Subsidiary of a Borrower after the date hereof is and will be a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is and will be duly qualified to do business
in each additional jurisdiction where such qualification is or may be necessary
under applicable law. Each Subsidiary of each Borrower has and will have all
requisite corporate power to own or lease the properties used in its business
and to carry on its business as now being conducted and as proposed to be
conducted. All outstanding shares of capital stock of each class of each
Subsidiary of each Borrower have been and will be validly issued and are and
will be fully paid and nonassessable and, except as otherwise indicated in
Schedule 4.4 hereto or disclosed in writing to the Bank from time to time, are
and will be owned, beneficially and of record, by a Borrower or another
Subsidiary of a Borrower free and clear of any Liens.
4.5 Litigation. There is no action, suit or proceeding pending or, to
the best of each Borrower's knowledge, threatened against or affecting any
Borrower or any Subsidiary of any Borrower before or by any court, governmental
authority or arbitrator, which if adversely decided might result, either
individually or collectively, in any material adverse change in the business,
properties, operations or condition, financial or otherwise, of any Borrower or
any Subsidiary of any Borrower or in any material adverse effect on the
legality, validity or enforceability of this Agreement, the Security Documents
or the Notes and, to the best of each Borrower's knowledge, there is no basis
for any such action, suit or proceeding.
4.6 Financial Condition.
(a) The consolidated balance sheet of Owosso and its Subsidiaries and the
consolidated statements of income, retained earnings and cash flows of Owosso
and its
23
<PAGE>
Subsidiaries for the fiscal year ended in October, 1997 and reported on by
Deloitte & Touche, independent certified public accountants, and the interim
consolidated balance sheet and interim consolidated statements of income,
retained earnings and cash flows of Owosso and its Subsidiaries, as of or for
the nine-month period ended on or about July 31, 1998, copies of which have been
furnished to the Banks, fairly present on an historical combined basis, and the
financial statements of Owosso and its Subsidiaries delivered pursuant to
Section 5.1(d) will fairly present, the consolidated financial position of
Owosso and its Subsidiaries as at the respective dates thereof, and the
consolidated results of operations of Owosso and its Subsidiaries for the
respective periods indicated, all in accordance with generally accepted
accounting principles consistently applied (subject, in the case of said interim
statements, to year-end audit adjustments). There has been no material adverse
change in the business, properties, operations or condition, financial or
otherwise, of Owosso or any of its Subsidiaries since the end of its fiscal year
ended in October, 1997. There is no material Contingent Liability of any of the
other Borrowers that is not reflected in such financial statements or in the
notes thereto.
(b) The preliminary consolidated balance sheet of Owosso and its
Subsidiaries and the preliminary consolidated statements of income, retained
earnings and cash flows of Owosso and its Subsidiaries for the fiscal year ended
in October, 1998, copies of which have been furnished to the Banks, fairly
present the consolidated financial position of Owosso and its Subsidiaries at
the date thereof, and the consolidated results of operations of Owosso and its
Subsidiaries for such fiscal year, in accordance with generally accepted
accounting principles consistently applied, and such financial position and
results of operations are not materially different from those that will be
presented in the audited financial statements of Owosso and its Subsidiaries for
such fiscal year to be delivered to the Banks pursuant to Section 5.1(d). There
has been no material adverse change in the business, properties, operations or
conditions, financial or otherwise, of Owosso or any of its Subsidiaries since
the preparation of such preliminary financial statements.
4.7 Use of Loans. The Borrowers will use the proceeds of the Loans to
refinance existing indebtedness of the Borrowers to the Banks under the Existing
Credit Agreement and for their general and other corporate purposes, including,
without limitation, acquisitions. Neither any Borrower nor any Subsidiary of any
Borrower extends or maintains, in the ordinary course of business, credit for
the purpose, whether immediate, incidental, or ultimate, of buying or carrying
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System), and no part of the proceeds of any Loan will be
used for the purpose, whether immediate, incidental, or ultimate, of buying or
carrying any such margin stock or maintaining or extending credit to others for
such purpose. After applying the proceeds of each Loan such margin stock will
not constitute more than 25% of the value of the assets (either of any Borrower
alone or of the Borrowers and their Subsidiaries on a consolidated basis) that
are subject to any provisions of this Agreement that may cause the Loan to be
deemed secured, directly or indirectly, by margin stock.
4.8 Consents, Etc. Except for (a) such consents, approvals, authorizations,
declarations, registrations or filings delivered by the Borrowers pursuant to
Section 2.5(f), if
24
<PAGE>
any, each of which is in full force and effect, and (b) any matters identified
on Schedule 4.2, no consent, approval or authorization of or declaration,
registration or filing with any governmental authority or any nongovernmental
person or entity, including without limitation any creditor, lessor or
stockholder of any Borrower or any Subsidiary of any Borrower, is required on
the part of the Borrowers in connection with the execution, delivery and
performance of this Agreement, the Notes, the Security Documents or the
transactions contemplated hereby or as a condition to the legality, validity or
enforceability of this Agreement, the Security Documents or the Notes.
4.9 Taxes. The Borrowers and their Subsidiaries have filed all tax returns
(federal, state and local) required to be filed and have paid all taxes shown
thereon to be due, including interest and penalties, or have established
adequate financial reserves on their respective books and records for payment
thereof. No Borrower nor any Subsidiary of any Borrower knows of any actual or
proposed tax assessment or any basis therefor, and no extension of time for the
assessment of deficiencies in any federal or state tax has been granted by any
Borrower or any such Subsidiary.
4.10 Title to Properties. Except as otherwise disclosed in the latest
balance sheet delivered pursuant to Section 4.6 or 5.1(d) of this Agreement, the
Borrowers or one or more of their Subsidiaries have good and marketable fee
simple title to all of the real property, and a valid and indefeasible ownership
interest in all of the other properties and assets, material to the conduct of
their business or operations reflected in said balance sheet or subsequently
acquired by a Borrower or any such Subsidiary. All of such properties and assets
are free and clear of any Lien except for Permitted Liens.
4.11 ERISA. The Borrowers, their Subsidiaries, the ERISA Affiliates and
the Plans are in compliance in all material respects with those provisions of
ERISA and of the Code which are applicable with respect to any Plan. No
Prohibited Transaction and no Reportable Event has occurred with respect to any
Plan. None of the Borrowers, any of their Subsidiaries or any of the ERISA
Affiliates is an employer with respect to any Multiemployer Plan. The Borrowers,
their Subsidiaries and the ERISA Affiliates have met the minimum funding
requirements under ERISA and the Code with respect to each of their respective
Plans, if any, and have not incurred any liability to the PBGC or any Plan. The
execution, delivery and performance of this Agreement, the Security Documents
and the Notes does not constitute a Prohibited Transaction. There is no material
Unfunded Benefit Liability, determined in accordance with Section 4001(a)(18) of
ERISA, with respect to any Plan.
4.12 Environmental and Safety Matters. Each of the Borrowers and their
Subsidiaries is in substantial compliance with all federal, state and local
laws, ordinances and regulations relating to safety and industrial hygiene or to
the environmental condition, including without limitation all Environmental Laws
in jurisdictions in which any Borrower or any such Subsidiary owns or operates,
or has owned or operated, a facility or site, or arranges or has arranged for
disposal or treatment of hazardous substances, solid waste, or other wastes,
accepts or has accepted for transport any hazardous substances, solid wastes or
other wastes or holds or has held any interest in real property or otherwise. No
demand, claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any
25
<PAGE>
governmental authority, private person or entity or otherwise, arising under,
relating to or in connection with any Environmental Laws is pending or
threatened against any Borrower or any Subsidiary of any Borrower, any real
property in which any Borrower or any such Subsidiary holds or has held an
interest or any past or present operation of any Borrower or any such
Subsidiary, which, if adversely decided, might result, either individually or
collectively, in liability of any one or more of the Borrowers in an amount
greater than $1,000,000.
4.13 Disclosure. No report or other information furnished in writing by
or on behalf of any Borrower to the Banks or the Agent in connection with the
negotiation or administration of this Agreement contains any material
misstatement of fact or omits to state any material fact or any fact necessary
to make the statements contained therein not misleading.
4.14 Common Enterprise. The Borrowers and their Subsidiaries are engaged in
business as an integrated group. The successful and economical operation of the
integrated group requires financing on such basis that credit supplied by the
Banks is available to all of the Borrowers and may be transferred among the
Borrowers after being disbursed by the Banks. The Loans made by the Banks to the
Borrowers on a joint and several basis will benefit, directly or indirectly, all
the Borrowers by strengthening and providing significant economies to the
integrated group, inasmuch as the successful operation and condition of each
Borrower is dependent upon the continued successful performance of the
integrated group as a whole.
4.15 Year 2000. The Borrowers have assessed to a reasonable extent the
Year 2000 Issues and have a realistic and achievable program for remediating the
Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such
assessment and on the Year 2000 Program the Borrowers do not reasonably
anticipate that the Year 2000 Issues will have a material adverse effect on the
business, properties, operations or condition, financial or otherwise, of any of
the Borrowers or any of their Subsidiaries.
ARTICLE V
COVENANTS
5.1 Affirmative Covenants. Each Borrower covenants and agrees that,
until the Termination Date and thereafter until the payment in full of the
principal of and accrued interest on the Notes and the performance of all other
obligations of the Borrowers under this Agreement, unless the Required Banks
shall otherwise consent in writing, it shall, and shall cause each of its
Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Do or cause to be done
all things necessary to preserve, renew and keep in full force and effect its
legal existence and its qualification as a foreign corporation in good standing
in each jurisdiction in which such qualification is necessary under applicable
law and the rights, licenses, permits (including those required under
Environmental Laws), franchises, patents, copyrights, trademarks and trade names
material to the conduct of its businesses; and defend all of the foregoing
against all
26
<PAGE>
claims, actions, demands, suits or proceedings at law or in equity or by or
before any governmental instrumentality or other agency or regulatory authority.
(b) Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority
whether federal, state, local or foreign (including without limitation ERISA,
the Code and Environmental Laws), in effect from time to time; and pay and
discharge promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income, revenues or property, before the same
shall become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise, which, if unpaid, might give rise to Liens
upon such properties or any portion thereof, except to the extent that payment
of any of the foregoing is then being contested in good faith by appropriate
legal proceedings and with respect to which adequate financial reserves have
been established on the books and records of such Borrower or such Subsidiary,
as the case may be, as determined in accordance with generally accepted
accounting principles.
(c) Maintenance of Properties; Insurance. Maintain, preserve and
protect all property that is material to the conduct of the business of the
Borrowers or any of their Subsidiaries and keep such property in good repair,
working order and condition and from time to time make, or cause to be made all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times in accordance with customary and prudent
business practices for similar businesses; and maintain in full force and effect
insurance with responsible and reputable insurance companies or associations in
such amounts, on such terms and covering such risks, including fire and other
risks insured against by extended coverage, as is usually carried by companies
engaged in similar businesses and owning similar properties similarly situated
and maintain in full force and effect public liability insurance, insurance
against claims for personal injury or death or property damage occurring in
connection with any of its activities or any of any properties owned, occupied
or controlled by it, in such amount as it shall reasonably deem necessary, and
maintain such other insurance as may be required by law or as may be reasonably
requested by the Banks for purposes of assuring compliance with this Section
5.1(c). This Section 5.1(c) shall not prohibit any transaction permitted under
Section 5.2(h).
(d) Reporting Requirements. Furnish to the Banks and the Agent the
following:
(i) Promptly and in any event within three calendar days after
becoming aware of the occurrence of (A) any Event of Default or Default, (B) the
commencement of any material litigation against, by or affecting any Borrower or
any Subsidiary of any Borrower, and any material developments therein, or (C)
entering into any material contract or undertaking that is not entered into in
the ordinary course of business or (D) any development in the business or
affairs of any Borrower or any Subsidiary of any Borrower (including, without
limitation, developments with respect to Year 2000 Issues) which has resulted in
or which is likely, in the reasonable judgment of the Borrowers, to result in a
material adverse change in the business, properties, operations or condition,
financial or otherwise, of
27
<PAGE>
any Borrower or any Subsidiary of any Borrower, a statement of the chief
financial officer of Owosso setting forth details of each such Event of Default
or Default and such litigation, material contract or undertaking or development
and the action which the Borrower or such Subsidiary, as the case may be, has
taken and proposes to take with respect thereto;
(ii) As soon as available and in any event within 50 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Borrowers, the consolidated balance sheet of the Borrowers and their
Subsidiaries as of the end of such quarter, and the related consolidated
statements of income, retained earnings and cash flows for the period commencing
at the end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding date or period of the preceding fiscal year, all in reasonable
detail and duly certified (subject to year-end audit adjustments) by the chief
financial officer of Owosso as having been prepared in accordance with generally
accepted accounting principles;
(iii) As soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, a copy of the consolidated balance
sheet of the Borrowers and their Subsidiaries as of the end of such fiscal year
and the related consolidated statements of income, retained earnings and cash
flows of the Borrowers and their Subsidiaries for such fiscal year, with a
customary audit report of Deloitte & Touche, or other independent certified
public accountants selected by the Borrowers and acceptable to the Banks,
without qualifications unacceptable to the Banks, together with a certificate of
such accountants stating (A) that they have reviewed this Agreement and stating
further whether, in the course of their review of such financial statements,
they have become aware of any Event of Default or Default, and, if such an Event
of Default or Default is continuing, a statement setting forth the nature and
status thereof, and (B) that a computation by the Borrowers (which computation
shall accompany such certificate and shall be in reasonable detail) showing
compliance with Section 5.2 (a), (b), (c) and (d) hereof is in conformity with
the terms of this Agreement;
(iv) Not later than the 50th day after the end of each of the
first three fiscal quarters of each fiscal year of the Borrowers, and the 70th
day after the end of the fourth fiscal quarter of each fiscal year of the
Borrowers, a certificate of the chief financial officer of Owosso stating (a)
that no Event of Default or Default has occurred and is continuing or, if an
Event or Default or Default has occurred and is continuing, a statement setting
forth the details thereof and the action which the Borrowers have taken and
propose to take with respect thereto, and (b) that a computation (which
computation shall accompany such certificate and shall be in reasonable detail)
showing compliance with Section 5.2(a), (b), (c) and (d) hereof is in conformity
with the terms of this Agreement, and (c) stating the ratio of the Consolidated
Total Debt of the Borrowers and their Subsidiaries as of the end of such fiscal
quarter to the Consolidated EBITDA of the Borrowers and their Subsidiaries for
the period of four fiscal quarters then ended;
(v) Promptly after the sending or filing thereof, copies of all
reports, proxy statements and financial statements which any Borrower or any
Subsidiary of any
28
<PAGE>
Borrower sends to or files with any of their respective security holders or any
securities exchange or the Securities and Exchange Commission or any successor
agency thereof;
(vi) From time to time upon, and within 10 Business Days of
request by the Agent, a report describing all insurance with respect to the
Borrowers and their Subsidiaries or any of their respective property or assets,
including, without limitation, liability, casualty, and business interruption
(including product liability), insurance, in form and detail satisfactory to the
Agent, certified as true and correct by the chief financial officer of Owosso;
(vii) Promptly and in any event within 10 Business Days after
receiving or becoming aware thereof, (A) a copy of any notice of intent to
terminate any Plan filed with the PBGC, (B) a statement of the chief financial
officer of Owosso setting forth the details of the occurrence of any Reportable
Event with respect to any Plan, (C) a copy of any notice that any Borrower, any
Subsidiary of any Borrower or any ERISA Affiliate may receive from the PBGC
relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any Plan, or (D) a copy of any notice of failure to make a
required installment or other payment within the meaning of Section 412(n) of
the Code or Section 302(f) of ERISA with respect to a Plan;
(viii) Promptly upon request by the Agent, a copy of any management
letter or comparable analysis prepared by the auditors for the Borrowers or any
of their Subsidiaries; and
(ix) Promptly, such other information respecting the business,
properties, operations or condition, financial or otherwise, of any of the
Borrowers or any of the Subsidiaries of the Borrowers as any Bank or the Agent
may from time to time reasonably request.
(e) Accounting, Access to Records, Books, Etc. Maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with
generally accepted accounting principles and to comply with the requirements of
this Agreement and, at any reasonable time and from time to time, (i) permit any
Bank or the Agent or any agents or representatives thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, the Borrowers and their Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrowers and their Subsidiaries with their
respective directors, officers, employees and independent auditors, and by this
provision the Borrowers do hereby authorize such persons to discuss such
affairs, finances and accounts with any Bank or the Agent, and (ii) permit the
Agent or any of its agents or representatives to conduct a comprehensive field
audit of its books, records, properties and assets.
(f) Further Assurances. Execute and deliver, within 30 days after
request therefor by the Banks and the Agent, all further instruments and
documents and take all further action that may be necessary or desirable, or
that the Agent may request, in order to give effect to, and to aid in the
exercise and enforcement of the rights and remedies of the Agent and the
29
<PAGE>
Banks under, this Agreement, the Notes and the Security Documents. In addition,
the Borrowers agree to deliver to the Agent from time to time upon the
acquisition or creation of any Subsidiary not listed in Schedule 4.4 hereto
supplements to Schedule 4.4 such that such Schedule, together with such
supplements, shall at all times accurately reflect the information provided for
thereon.
(g) Domestic Subsidiaries to Become Borrowers. Promptly and in any
event within 15 days of any person becoming a Domestic Subsidiary of any
Borrower or of any Subsidiary of any Borrower, execute and deliver, and cause
such person to execute and deliver, such documents and instruments, including,
without limitation, addenda to this Agreement, new Revolving Credit Notes for
the Banks and Security Documents, together with other related documents
described in Section 2.5, sufficient to grant to the Agent for the benefit of
the Banks liens and security interests in all collateral of the types described
in Section 2.10, and take such further action, and cause such person to take
such further action, including, without limitation, causing counsel for such
person to render opinions reasonably requested by the Agent and the Banks, all
in form and substance satisfactory to the Agent and the Banks, such that such
person becomes a party to this Agreement, with all the rights and obligations of
a Borrower hereunder, and provides collateral and security for the Agent and the
Banks as contemplated hereby. In addition, the relevant Borrower or Subsidiary
shall, within such time period, execute and deliver to the Banks and the Agent a
pledge agreement, or an amendment to any existing Pledge Agreement, in form and
substance satisfactory to the Agent, pursuant to which such Borrower or
Subsidiary, as the case may be, shall pledge all capital stock of such new
Subsidiary.
(h) Additional Security and Collateral. Promptly execute and deliver,
and cause the other Borrowers to execute and deliver, additional Security
Documents sufficient to grant to the Agent for the benefit of the Banks liens
and security interests in any after-acquired property of the types described in
Section 2.10, including without limitation pledges of 65% of the capital stock
of all Foreign Subsidiaries. The Borrowers shall notify the Agent, within 10
days after the occurrence thereof, of the acquisition of any property by any
Borrower that is not subject to the existing Security Documents (including
pursuant to any after-acquired property provisions thereof), any person's
becoming a Subsidiary and any other event or condition that may require
additional action of any nature in order to preserve the effectiveness and
perfected status of the liens and security interests of the Banks and the Agent
with respect to such property pursuant to the Security Documents.
(i) Year 2000. Take all actions reasonably necessary to successfully
implement the Year 2000 Program and to assure that Year 2000 Issues will not
have a material adverse effect upon the business, properties, operations or
condition, financial or otherwise, of any of the Borrowers or any of their
Subsidiaries. Upon the request of the Agent or any Bank, the Borrowers will
provide a description of the Year 2000 Program.
5.2 Negative Covenants. Until the Termination Date and thereafter until
the payment in full of the principal of and accrued interest on the Notes and
the performance of all other obligations of the Borrowers under this Agreement,
each Borrower agrees that, unless the
30
<PAGE>
Required Banks shall otherwise consent in writing, it shall not, and shall not
permit any of its Subsidiaries to:
(a) Net Worth. Permit or suffer the Consolidated Net Worth of the
Borrowers and their Subsidiaries at any time to be less than the sum of (i)
$33,000,000, minus (ii) the Parker Loss, plus (iii) 50% of Consolidated
Cumulative Net Income of the Borrowers and their Subsidiaries for the period
commencing on the first day of the Borrowers' fiscal year 1999.
(b) Total Debt to EBITDA. Permit or suffer the ratio of Consolidated
Total Debt of the Borrowers and their Subsidiaries as of the end of any fiscal
quarter of the Borrowers to Consolidated EBITDA of the Borrowers and their
Subsidiaries for the period of four fiscal quarters of the Borrowers then ending
to be greater than (i) 4.25 to 1.00 from and including the Effective Date to and
including the day immediately preceding the day a change in the requirement of
this Section 5.2(b) is effected pursuant to the following clause (ii), (ii) 4.00
to 1.00 from and including the earlier to occur of (A) the last day of the
Borrowers' fiscal quarter ending on or about April 30, 1999 and (B) the
effective date of the sale of the Parker division of DWZM, to and including the
day immediately preceding the last day of the Borrowers' fiscal year ending on
or about October 31, 1999, (iii) 3.50 to 1.00 from and including the last day of
the Borrowers' fiscal year ending on or about October 31, 1999 to and including
the day immediately preceding the last day of the Borrowers' fiscal year ending
on or about October 31, 2000, (iv) 3.25 to 1.00 from and including the last day
of the Borrowers' fiscal year ending on or about October 31, 2000 to and
including the day immediately preceding the last day of the Borrowers' fiscal
year ending on or about October 31, 2001, and (v) 3.00 to 1.00 from and
including the last day of the Borrowers' fiscal year ending on or about October
31, 2001 and thereafter.
(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) 1.25 to 1.00 from and including the last day of the Borrowers' fiscal
year ending on or about October 31, 1998 to and including the day immediately
preceding the last day of the Borrowers' fiscal year ending on or about October
31, 2001 and (ii) 1.50 to 1.00 from and including the last day of the Borrowers'
fiscal year ending on or about October 31, 2001 and 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 ending.
(d) Capital Expenditures. Permit or suffer the aggregate consolidated
capital expenditures of the Borrowers and their Subsidiaries during any fiscal
year of the Borrowers, commencing with the Borrowers' fiscal year 1999, to
exceed the greater of (i) $7,000,000 or (ii) the sum of (A) the consolidated
depreciation expense of the Borrowers and their Subsidiaries for such fiscal
year plus 50% of consolidated net income of the Borrowers and their Subsidiaries
for such fiscal year, all as determined in accordance with generally accepted
accounting principles; provided that the portion of any capital expenditures
made with proceeds of the Stature Bonds shall not be counted for purposes of
this Section 5.2(d).
31
<PAGE>
(e) Indebtedness. Create, incur, assume or in any manner become liable
in respect of, or suffer to exist, any Indebtedness other than:
(i) The Loans;
(ii) The Indebtedness described in Schedule 5.2(e) hereto, having
the same terms as those existing on the date of this Agreement, but no extension
or renewal thereof shall be permitted;
(iii) Indebtedness in aggregate outstanding principal amount not
exceeding $1,000,000 which is secured by one or more liens permitted by Section
5.2(f)(vii) hereof;
(iv) Indebtedness of any Borrower or Domestic Subsidiary of any
Borrower owing to any Borrower or to any other Domestic Subsidiary of any
Borrower;
(v) Unsecured current Indebtedness constituting obligations for the
unpaid purchase price of goods, property or services incurred in the ordinary
course of business (A) to a seller of inventory purchased for sale in the
ordinary course of business of the Borrowers or any of their Subsidiaries, (B)
to a seller of other property used in the business of the Borrowers or any of
their Subsidiaries or (C) to a provider of services to the Borrowers or any of
their Subsidiaries;
(vi) Subordinated Debt of the Borrowers or any of their
Subsidiaries;
(vii) Interest rate or currency swaps, rate caps or other similar
transactions with the Banks (valued in an amount equal to the highest
termination payment, if any, that would be payable by such person upon
termination for any reason on the date of determination) not exceeding
$2,000,000;
(viii) Indebtedness to the Banks or any of them in respect of
letters of credit the aggregate maximum amount available to be drawn under which
at any time does not exceed $500,000 (excluding from such aggregate amount any
letters of credit identified on Schedule 5.2(e));
(ix) Other Indebtedness of the Borrowers and their Domestic
Subsidiaries not exceeding $3,000,000 in aggregate principal amount outstanding
at any time; and (x) Indebtedness of Foreign Subsidiaries of the Borrowers not
exceeding $2,500,000 in aggregate principal amount outstanding at any time.
(f) Liens. Create, incur or suffer to exist any Lien on any of the
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, whether now owned or hereafter acquired, of any Borrower or any
Subsidiary of any Borrower, other than:
32
<PAGE>
(i) Liens for taxes not delinquent or for taxes being contested
in good faith by appropriate proceedings and as to which adequate financial
reserves have been established on its books and records;
(ii) Liens (other than any Lien imposed by ERISA) created and
maintained in the ordinary course of business which are not material in the
aggregate, and which would not have a material adverse effect on the business or
operations of the Borrowers or any of their Subsidiaries and which constitute
(A) pledges or deposits under worker's compensation laws, unemployment insurance
laws or similar legislation, (B) good faith deposits in connection with bids,
tenders, contracts or leases to which a Borrower or any Subsidiary of any
Borrower is a party for a purpose other than borrowing money or obtaining
credit, including rent security deposits, (C) liens imposed by law, such as
those of carriers, warehousemen and mechanics, if payment of the obligation
secured thereby is not yet due, (D) Liens securing taxes, assessments or other
governmental charges or levies not yet subject to penalties for nonpayment, and
(E) pledges or deposits to secure public or statutory obligations of any
Borrower or any Subsidiary of any Borrower, or surety, customs or appeal bonds
to which any Borrower or any such Subsidiary is a party;
(iii) Liens affecting real property which constitute minor survey
exceptions or defects or irregularities in title, minor encumbrances, easements
or reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to the use of such real property, provided that all of the
foregoing, in the aggregate, do not at any time materially detract from the
value of said properties or materially impair their use in the operation of the
businesses of the Borrowers or any of their Subsidiaries;
(iv) Liens in favor of the Agent for the benefit of the Agent and
the Banks;
(v) Each Lien described in Schedule 5.2(f) hereto may be suffered
to exist upon the same terms as those existing on the date hereof;
(vi) Other Liens the aggregate principal amount of all Indebtedness
secured by which, together with the Indebtedness secured by the Liens permitted
under subparagraph (vii) below, does not exceed $2,000,000 at any time;
(vii) Any Lien created to secure payment of a portion of the
purchase price of or existing at the time of acquisition of, any tangible fixed
asset acquired by the Borrowers or any of their Subsidiaries may be created or
suffered to exist upon such fixed asset if the outstanding principal amount of
the Indebtedness secured by such Lien does not at any time exceed 100% of the
purchase price paid by the Borrowers or such Subsidiary for such fixed asset,
and the aggregate principal amount of all Indebtedness secured by such Liens
does not exceed $1,000,000, provided that such Lien does not encumber any other
asset at any time owned by the Borrowers or such Subsidiary, and provided,
further, that not more than one such Lien shall encumber such fixed asset at any
one time; and
33
<PAGE>
(viii) Liens encumbering assets of Foreign Subsidiaries of Owosso
created to secure Indebtedness permitted under Section 5.2(e)(x), provided that
the aggregate principal amount of all Indebtedness secured by such Liens does
not exceed $2,500,000.
(g) Merger; Acquisitions; Etc. Purchase or otherwise acquire, whether
in one or a series of transactions, all or a substantial portion of the business
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, of any person, or all or a substantial portion of the capital stock
of or other ownership interest in any other person; nor merge or consolidate or
amalgamate with any other person or take any other action having a similar
effect, nor enter into any joint venture or similar arrangement with any other
person, provided, however, that this Section 5.2(g) shall not prohibit the
creation of Foreign Subsidiaries of the Borrowers (subject to Section 5.2(n)),
or any merger or acquisition if (i) such Borrower or Subsidiary, as the case may
be, shall be the surviving or continuing corporation thereof, except in the case
of a merger of such Borrower or Subsidiary into a Delaware corporation
wholly-owned, directly or indirectly, by Owosso solely for the purpose of
changing to Delaware the state in which such Borrower or Subsidiary, as the case
may be, is incorporated, (ii) and after such merger or acquisition, no Default
or Event of Default shall exist or shall have occurred and be continuing and the
representations and warranties contained in Article IV and in the Security
Documents shall be true and correct on and as of the date thereof (both before
and after such merger or acquisition is consummated) as if made on the date such
merger or acquisition is consummated, (iii) prior to the consummation of such
merger or acquisition, the Borrowers shall have provided to the Banks an opinion
of counsel as to the satisfaction of the requirement of clause (i) above and a
certificate of the chief financial officer of Owosso stating that such merger or
acquisition complies with this Section 5.2(g) and that any other conditions
under this Agreement relating to such transaction have been satisfied, and (iv)
the aggregate amount of the costs of all such transactions after the Effective
Date does not exceed $5,000,000.
(h) Disposition of Assets; Etc. Sell, lease, license, transfer,
assign or otherwise dispose of all or a substantial portion of its business,
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, whether in one or a series of transactions, other than (i) inventory
sold in the ordinary course of business upon customary credit terms, (ii) sales
of scrap or obsolete material or equipment and (iii) the Parker Sale.
(i) Negative Pledge Limitation. Enter into any agreement with any
person other than the Banks and the Agent pursuant hereto that prohibits or
limits the ability of any of the Borrowers or any of their respective
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
their respective assets, rights, revenues or property, real, personal or mixed,
tangible or intangible, whether now owned or hereafter acquired, provided,
however, that this Section 5.2(i) shall not prohibit any such agreements entered
into in connection with the Stature Bonds to the extent, and only to the extent,
such agreements prohibit any Lien upon the property and assets of Stature
comprising the collateral for Stature's obligations relating to the Stature
Bonds.
34
<PAGE>
(j) Inconsistent Agreements. Enter into any material agreement
containing any provision which would be violated or breached by this Agreement
or any of the transactions contemplated hereby or by performance by the
Borrowers or any of their Subsidiaries of their obligations in connection
therewith.
(k) Nature of Business. Make any substantial change in the nature of
its business from that engaged in on the date of this Agreement or engage in any
other businesses other than those in which it is engaged on the date of this
Agreement; provided that acquisitions permitted under Section 5.2(g) of new
businesses that are different from those then engaged in by the Borrowers but
that are consistent with the acquisition goals of the Borrowers as previously
described to the Banks shall not be in violation of this Section 5.2(k).
(l) Payments and Modification of Subordinated Debt. Make any optional
payment, prepayment or redemption of any Subordinated Debt, nor amend or modify,
or consent or agree to any amendment or modification, which would shorten any
maturity or increase the amount of any payment of principal or increase the rate
(or require earlier payment) of interest on any such Subordinated Debt, nor
amend any agreement under which any Subordinated Debt is issued or created or
otherwise related thereto, nor enter into any agreement or arrangement providing
for the defeasance of any Subordinated Debt.
(m) Fiscal Year. Change its fiscal year from commencing on the
first Monday following the last Sunday in October of each calendar year and
ending on the last Sunday in October of the next following calendar year.
(n) Investments, Loans and Advances. Purchase or otherwise acquire
any capital stock of or other ownership interest in, or debt securities of or
other evidences of Indebtedness of, any Foreign Subsidiary of Owosso or any of
its Subsidiaries; nor make any loan or advance of any of its funds or property
or make any other extension of credit to, or make any investment or acquire any
interest whatsoever in, any such Foreign Subsidiary; nor incur any Contingent
Liability for the benefit of any such Foreign Subsidiary; provided that this
Section 5.2(n) shall not prohibit such acquisitions, loans, advances, contingent
liabilities and other investments not exceeding, without duplication, $3,000,000
in the aggregate.
ARTICLE VI
DEFAULT
6.1 Events of Default. The occurrence of any one of the following events or
conditions shall be deemed an "Event of Default" hereunder unless waived by the
Banks pursuant to Section 8.1:
(a) Nonpayment. The Borrowers shall fail to pay when due any principal
of or interest on the Notes, or any fees or any other amount payable hereunder;
35
<PAGE>
(b) Misrepresentation. Any representation or warranty made by the
Borrowers or any Subsidiary of any Borrower in Article IV hereof or in any of
the Security Documents or in any other certificate, report, financial statement
or other document furnished by or on behalf of the Borrowers or any such
Subsidiary in connection with this Agreement, shall prove to have been incorrect
in any material respect when made or deemed made;
(c) Certain Covenants. The Borrowers shall fail to perform or observe
any term, covenant or agreement contained in any Section in Article V hereof,
other than Sections 5.1(a), 5.1(b), 5.1(c), 5.2(f) and 5.2(i);
(d) Certain Other Covenants. The Borrowers shall fail to perform or
observe any term, covenant or agreement contained in Section 5.1(a), 5.1(b),
5.1(c), 5.2(f) or 5.2(i), and any such failure shall remain unremedied for 15
Business Days after notice thereof shall have been given to the Borrowers by the
Agent;
(e) Other Defaults. The Borrowers or any Subsidiary of any Borrower
shall fail to perform or observe any other term, covenant or agreement contained
in this Agreement (other than those identified in subparagraphs (a), (b), (c)
and (d) above) or in any Security Document, and any such failure shall remain
unremedied for 30 calendar days after notice thereof shall have been given to
the Borrowers by the Agent (or such longer or shorter period of time as may be
specified in such Security Document);
(f) Other Indebtedness. Any Borrower or any Subsidiary of any Borrower
shall fail to pay any part of the principal of, the premium, if any, or the
interest on, or any other payment of money due under any of its Indebtedness at
any time owing to any of the Banks (other than Indebtedness hereunder), beyond
any period of grace provided with respect thereto, or if any Borrower or any
Subsidiary of any Borrower fails to perform or observe any other term, covenant
or agreement contained in any agreement, document or instrument evidencing or
securing any such Indebtedness owing to any of the Banks, or under which any
such Indebtedness was issued or created, beyond a period of grace, if any,
provided with respect thereto; or any Borrower or any Subsidiary of any Borrower
shall fail to pay any part of the principal of, the premium, if any, or the
interest on, or any other payment of money due under any of its Indebtedness at
any time owing to any other Person, beyond any period of grace provided with
respect thereto, which individually or together with other such Indebtedness as
to which any such failure exists has an aggregate outstanding principal amount
in excess of $1,000,000; or if any Borrower or any Subsidiary of any Borrower
fails to perform or observe any other term, covenant or agreement contained in
any agreement, document or instrument evidencing or securing any such
Indebtedness owing to any other Person having such aggregate outstanding
principal amount, or under which any such Indebtedness was issued or created,
beyond any period of grace, if any, provided with respect thereto.
Notwithstanding anything in this Section 6.1(f) to the contrary, no matter
identified on Schedule 4.2 shall be deemed an Event of Default under this
Agreement; or
(g) Judgments. One or more judgments or orders for the payment of money
in an aggregate amount of $500,000 shall be rendered against any of the
Borrowers or their
36
<PAGE>
Subsidiaries, or any other judgment or order (whether or not for the payment of
money) shall be rendered against or shall affect any of the Borrowers or their
Subsidiaries which causes or could cause a material adverse change in the
business, properties, operations or condition, financial or otherwise, of any of
the Borrowers or their Subsidiaries or which does or could have a material
adverse effect on the legality, validity or enforceability of this Agreement,
the Notes or any of the Security Documents, and either (i) such judgment or
order shall have remained unsatisfied and the Borrowers or such Subsidiary shall
not have taken action necessary to stay enforcement thereof by reason of pending
appeal or otherwise, prior to the expiration of the applicable period of
limitations for taking such action or, if such action shall have been taken, a
final order denying such stay shall have been rendered, or (ii) enforcement
proceedings shall have been commenced by any creditor upon any such judgment or
order;
(h) ERISA. The occurrence of a Reportable Event that results in or
could result in any material liability of any Borrower, any Subsidiary of any
Borrower or any ERISA Affiliate to the PBGC or to any Plan and such Reportable
Event is not corrected within thirty (30) days after the occurrence thereof; or
the occurrence of any Reportable Event which could constitute grounds for
termination of any Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer any Plan and such
Reportable Event is not corrected within thirty (30) days after the occurrence
thereof; or the filing by any Borrower, any Subsidiary of any Borrower or any
ERISA Affiliate of a notice of intent to terminate a Plan or the institution of
other proceedings to terminate a Plan which could result in any material
liability of any Borrower, any Subsidiary of any Borrower or any ERISA Affiliate
to the PBGC or to any Plan; or any Borrower, any Subsidiary of any Borrower or
any ERISA Affiliate shall fail to pay when due any liability to the PBGC or to a
Plan; or the PBGC shall have instituted proceedings to terminate, or to cause a
trustee to be appointed to administer, any Plan; or any person engages in a
Prohibited Transaction with respect to any Plan which results in or could result
in material liability of any Borrower, any Subsidiary of any Borrower, any ERISA
Affiliate, any Plan of the Borrowers, their Subsidiaries or their ERISA
Affiliates or any fiduciary of any such Plan; or failure by any Borrower, any
Subsidiary of any Borrower or any of their ERISA Affiliates to make a required
installment or other payment to any Plan within the meaning of Section 302(f) of
ERISA or Section 412(n) of the Code that results in or could result in material
liability of any Borrower, any Subsidiary of any Borrower or any ERISA Affiliate
to the PBGC or any Plan; or the withdrawal of any Borrower, any Subsidiary of
any Borrower or any ERISA Affiliate from a Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(9a)(2) of ERISA; or any
Borrower, any Subsidiary of any Borrower or any ERISA Affiliate becomes an
employer with respect to any Multiemployer Plan without the prior written
consent of the Required Banks; or
(i) Insolvency, Etc. Any Borrower or any Subsidiary of any Borrower
shall be dissolved or liquidated (or any judgment, order or decree therefor
shall be entered), or shall generally not pay its debts as they become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or shall institute, or there
shall be instituted against any Borrower or any Subsidiary of any Borrower, any
proceeding or case seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or
37
<PAGE>
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief or protection of debtors or seeking the entry of an order for relief, or
the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its assets, rights, revenues or property, and,
if such proceeding is instituted against any Borrower or such Subsidiary and is
being contested by such Borrower or such Subsidiary, as the case may be, in good
faith by appropriate proceedings, such proceeding shall remain undismissed or
unstayed for a period of 60 days; or any Borrower or any Subsidiary of any
Borrower shall take any action (corporate or other) to authorize or further any
of the actions described above in this subsection; or
(j) Security Documents. Any event of default described in any Security
Document shall have occurred and be continuing, or any material provision of any
Security Document shall at any time for any reason cease to be valid, binding
and enforceable against any obligor thereunder, or the validity, binding effect
or enforceability thereof shall be contested by any person, or any obligor shall
deny that it has any or further liability or obligation thereunder, or any
Security Document shall be terminated, invalidated or set aside, or be declared
ineffective or inoperative or in any way cease to give or provide to the Agent
and the Banks the benefits purported to be created thereby; or
(k) Subordinated Debt Defaults. Any default under any subordination
agreement in favor of the Agent or the Banks with respect to any Subordinated
Debt having an aggregate outstanding principal amount in excess of $1,000,000
shall have occurred and be continuing beyond any applicable grace period; or any
material provisions of any such subordination agreement or any other
subordination terms of any Subordinated Debt having such aggregate outstanding
principal amount shall at any time for any reason cease to be valid and binding
and enforceable against the Borrowers or any holder of any Subordinated Debt, or
the validity, binding effect or enforceability thereof shall be contested by any
Borrower; or any Borrower shall deny that it has any further obligation under
any such subordination terms or any such subordination agreement, or any such
subordination terms or subordination agreement shall be terminated, invalidated
or set aside, or be declared ineffective or inoperative or in any way ceases to
give or provide to the Banks and the Agent the benefits purported to be created
thereby.
6.2 Remedies.
(a) Upon the occurrence and during the continuance of any Event of
Default, the Agent may and, upon being directed to do so by the Required Banks
shall, by notice to the Borrowers (i) terminate the Commitments or (ii) declare
the outstanding principal of, and accrued interest on, the Notes and all other
amounts owing under this Agreement, the Security Documents and the Notes to be
immediately due and payable, or either one or both of the foregoing, whereupon
the Commitments shall terminate forthwith and all such amounts shall become
immediately due and payable, as the case may be, provided that in the case of
any event or condition described in Section 6.1(i) with respect to any Borrower,
the Commitments shall automatically terminate forthwith and all such amounts
shall automatically become immediately
39
<PAGE>
due and payable without notice; in all cases without demand, presentment,
protest, diligence, notice of dishonor or other formality, all of which are
hereby expressly waived.
(b) The Agent may and, upon being directed to do so by the Required
Banks, shall, in addition to the remedies provided in Section 6.2(a), exercise
and enforce any and all other rights and remedies available to it or the Banks,
whether arising under this Agreement, the Security Documents or the Notes or
under applicable law, in any manner deemed appropriate by the Agent, including
suit in equity, action at law, or other appropriate proceedings, whether for the
specific performance (to the extent permitted by law) of any covenant or
agreement contained in this Agreement, any Security Document or in the Notes or
in aid of the exercise of any power granted in this Agreement, any Security
Document or the Notes.
(c) Upon the occurrence and during the continuance of any Event of
Default, each Bank may at any time and from time to time, without notice to any
Borrower (any requirement for such notice being expressly waived by the
Borrowers) set off and apply against any and all of the obligations of the
Borrowers now or hereafter existing under this Agreement, whether owing to such
Bank or any other Bank or the Agent, any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Bank to or for the credit or the account of any Borrower
and any property of any Borrower from time to time in possession of such Bank,
irrespective of whether or not such Bank shall have made any demand hereunder
and although such obligations may be contingent and unmatured. The Borrowers
hereby grant to the Banks and the Agent a lien on and security interest in all
such deposits, indebtedness and property as collateral security for the payment
and performance of the obligations of the Borrowers under this Agreement. The
rights of such Bank under this Section 6.2(c) are in addition to other rights
and remedies (including, without limitation, other rights of setoff) which such
Bank may have.
6.3 Allocation of Proceeds. All proceeds received by the Agent pursuant
to the Security Documents for application to the obligations secured thereby
(the "Obligations") or any payments on any of the Obligations received by the
Agent or any Bank upon and during the continuance of any Event of Default,
including, without limitation, pursuant to the exercise of rights of setoff,
shall be allocated and distributed as follows:
(a) First, to the payment of all costs, expenses and fees, including
without limitation all attorneys' fees, of the Agent in connection with the
enforcement of the Security Documents and otherwise administering this
Agreement;
(b) Second, to the payment of all costs, expenses and fees, including
without limitation, commitment fees and attorneys' fees, owing to the Banks
pursuant to the Obligations on a pro rata basis in accordance with the
Obligations consisting of fees, costs and expenses owing to the Banks under the
Obligations, for application to payment of such liabilities;
(c) Third, to the Banks on a pro rata basis in accordance with the
Obligations consisting of interest under this Agreement and the Notes, for
application to payment of such liabilities;
39
<PAGE>
(d) Fourth, to the Banks on a pro rata basis in accordance with the
Obligations consisting of principal owing to the Banks under the Obligations,
for application to payment of such liabilities;
(e) Fifth, to the payment of any and all other amounts owing to the
Banks and the Agents on a pro rata basis in accordance with the total amount of
such Obligations owing to each of the Banks and the Agents, for application to
payment of such liabilities; and
(f) Sixth, to the Borrowers or such other persons as may be legally
entitled thereto.
ARTICLE VII
THE AGENT AND THE BANKS
7.1 Appointment and Authorization. Each Bank hereby irrevocably appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement, the Security Documents and the Notes as are
delegated to the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto. The provisions of this Article VII
are solely for the benefit of the Agent and the Banks, and the Borrowers shall
not have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for the Borrowers.
7.2 Agent and Affiliates. NBD Bank in its capacity as a Bank hereunder
shall have the same rights and powers hereunder as any other Bank and may
exercise or refrain from exercising the same as though it were not the Agent.
NBD Bank and its affiliates may (without having to account therefor to any Bank)
accept deposits from, lend money to, and generally engage in any kind of
banking, trust, financial advisory or other business with any Borrower or any
Subsidiary of any Borrower as if it were not acting as Agent hereunder, and may
accept fees and other consideration therefor without having to account for the
same to the Banks.
7.3 Scope of Agent's Duties. The Agent shall have no duties or
responsibilities except those expressly set forth herein, and shall not, by
reason of this Agreement, have a fiduciary relationship with any Bank, and no
implied covenants, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or shall otherwise exist against the Agent. As to any
matters not expressly provided for by this Agreement (including, without
limitation, collection and enforcement actions under the Security Documents and
the Notes), the Agent shall not be required to exercise any discretion or take
any action, but may request instructions from the Banks. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, pursuant to
the written instructions of the Required Banks or all Banks, if applicable,
which instructions and any action or omission pursuant thereto shall be binding
40
<PAGE>
upon all of the Banks; provided, however, that the Agent shall not be required
to act or omit to act if, in the judgment of the Agent, such action or omission
may expose the Agent to personal liability or is contrary to this Agreement, any
Security Document or the Notes or applicable law.
7.4 Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice, document or other communication (including any cable,
telegram, telex, facsimile transmission or oral communication) believed by it to
be genuine and correct and to have been sent or given by or on behalf of a
proper person. The Agent may treat the payee of any Note as the holder thereof.
The Agent may employ agents (including, without limitation, collateral agents)
and may consult with legal counsel (who may be counsel for the Borrowers),
independent public accounts and other experts selected by it and shall not be
liable to the Banks, except as to money or property received by it or its
authorized agents, for the negligence or misconduct of any such agent selected
by it with reasonable care or for any action taken or omitted to be taken by it
in good faith in accordance with the advice of such counsel, accountants or
experts.
7.5 Default. The Agent shall not be deemed to have knowledge of the
occurrence of any Default or Event of Default, unless the Agent has received
written notice from a Bank or any Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice, the Agent shall give written notice thereof to
the Banks.
7.6 Liability of Agent. Neither the Agent nor any of its directors,
officers, agents, or employees shall be liable to the Banks for any action taken
or not taken by it or them in connection herewith with the consent or at the
request of the Required Banks or all Banks, if applicable, or in the absence of
its or their own gross negligence or willful misconduct. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any recital, statement,
warranty or representation contained in this Agreement, any Security Document or
any Note, or in any certificate, report, financial statement or other document
furnished in connection with this Agreement, (ii) the performance or observance
of any of the covenants or agreements of the Borrowers or any Subsidiary of the
Borrowers, (iii) the satisfaction of any condition specified in Article II
hereof, or (iv) the validity, effectiveness, legal enforceability, value or
genuineness of this Agreement, the Security Documents or the Notes or any other
instrument or document furnished in connection herewith.
7.7 Nonreliance on Agent and Other Banks. Each Bank acknowledges and agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrowers and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decision in
taking or not taking action under this Agreement. The Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrowers or any Subsidiary of the Borrowers of this Agreement, the Security
Documents or the Notes or any other documents
41
<PAGE>
referred to or provided for herein or to inspect the properties or books of the
Borrowers or any Subsidiary of the Borrowers and, except for notices, reports
and other documents and information expressly required to be furnished to the
Banks by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Bank with any information concerning the affairs,
financial condition or business of the Borrowers or any Subsidiary of the
Borrowers which may come into the possession of the Agent or any of its
affiliates.
7.8 Indemnification. The Banks agree to indemnify the Agent (to the extent
not reimbursed by the Borrowers, but without limiting any obligation of the
Borrowers to make such reimbursement), ratably according to the respective
principal amounts of the Loans then outstanding made by each of them (or if no
Loans are at the time outstanding, ratably according to the respective amounts
of their Commitments), from and against any and all claims, damages, losses,
liabilities, costs or expenses of any kind or nature whatsoever (including,
without limitation, fees and disbursements of counsel) which may be imposed on,
incurred by, or asserted against the Agent in any way relating to or arising out
of this Agreement, the Notes or the Security Documents or the transactions
contemplated hereby or any action taken or omitted by the Agent under this
Agreement, provided, however, that no Bank shall be liable for any portion of
such claims, damages, losses, liabilities, costs or expenses resulting from the
Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including, without limitation, fees
and expenses of counsel) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by the
Borrowers, but without limiting the obligation of the Borrowers to make such
reimbursement. Each Bank agrees to reimburse the Agent promptly upon demand for
its ratable share of any amounts owing to the Agent by the Banks pursuant to
this Section. If the indemnity furnished to the Agent under this Section shall,
in the judgment of the Agent, be insufficient or become impaired, the Agent may
call for additional indemnity from the Banks and cease, or not commence, to take
any action until such additional indemnity if furnished.
7.9 Resignation of Agent. The Agent may resign as such at any time upon
thirty days' prior written notice to the Borrowers and the Banks. In the event
of any such resignation, the Banks shall, by an instrument in writing delivered
to the Borrowers and the Agent, appoint a successor, which shall be a commercial
bank organized under the laws of the United States or any State thereof and
having a combined capital and surplus of at least $500,000,000. If a successor
is not so appointed or does not accept such appointment before the Agent's
resignation becomes effective, the resigning Agent may appoint a temporary
successor to act until such appointment by the Banks is made and accepted or if
no such temporary successor is appointed as provided above by the resigning
Agent, the Banks shall thereafter perform all the duties of the Agent hereunder
until such appointment by the Banks is made and accepted. Notwithstanding
anything herein to the contrary, the Agent shall not be discharged of its duties
and obligations relating to its function as collateral agent for the Banks under
the Security Documents until the acceptance by a successor agent of such duties
and obligations. Any successor to the Agent
42
<PAGE>
shall execute and deliver to the Borrowers and the Banks an instrument accepting
such appointment and thereupon such successor Agent, without further act, deed,
conveyance or transfer shall become vested with all of the properties, rights,
interests, powers, authorities and obligations of its predecessor hereunder with
like effect as if originally named as Agent hereunder. Upon request of such
successor Agent, the Borrowers and the resigning Agent shall execute and deliver
such instruments of conveyance, assignment and further assurance and do such
other things as may reasonably be required for more fully and certainly vesting
and confirming in such successor Agent all such properties, rights, interests,
powers, authorities and obligations. The provisions of this Article VII shall
thereafter remain effective for such resigning Agent with respect to any actions
taken or omitted to be taken by such Agent while acting as the Agent hereunder.
7.10 Sharing of Payments. The Banks agree among themselves that, in the
event that any Bank shall obtain payment in respect of any Loan or any other
obligation owing to the Banks under this Agreement through the exercise of a
right of set-off, banker's lien, counterclaim or otherwise in excess of its
ratable share of payments received by all of the Banks on account of the Loans
and other obligations (or if no Loans are outstanding, ratably according to the
respective amounts of the Commitments), such Bank shall promptly purchase from
the other Banks participations in such Loans and other obligations in such
amounts, and make such other adjustments from time to time, as shall be
equitable to the end that all of the Banks share such payment in accordance with
such ratable shares. The Banks further agree among themselves that if payment to
a Bank obtained by such Bank through the exercise of a right of set-off,
banker's lien, counterclaim or otherwise as aforesaid shall be rescinded or must
otherwise be restored, each Bank which shall have shared the benefit of such
payment shall, by repurchase of participations theretofore sold, return its
share of that benefit to each Bank whose payment shall have been rescinded or
otherwise restored. The Borrowers agree that any Bank so purchasing such a
participation may, to the fullest extent permitted by law, exercise all rights
of payment, including set-off, banker's lien or counterclaim, with respect to
such participation as fully as if such Bank were a holder of such Loan or other
obligation in the amount of such participation. The Banks further agree among
themselves that, in the event that amounts received by the Banks and the Agent
hereunder are insufficient to pay all such obligations or insufficient to pay
all such obligations when due, the fees and other amounts owing to the Agent in
such capacity shall be paid therefrom before payment of obligations owing to the
Banks under this Agreement. Except as otherwise expressly provided in this
Agreement, if any Bank or the Agent shall fail to remit to the Agent or any
other Bank an amount payable by such Bank or the Agent to the Agent or such
other Bank pursuant to this Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Bank at a rate per annum equal to the rate at which borrowings are
available to the payee in its overnight federal funds market. It is further
understood and agreed among the Banks and the Agent that if the Agent shall
engage in any other transactions with the Borrowers and shall have the benefit
of any collateral or security therefor which does not expressly secure the
obligations arising under this Agreement except by virtue of a so-called dragnet
clause or comparable provision, the Agent shall be entitled to apply any
proceeds of such collateral or security first in
43
<PAGE>
respect of the obligations arising in connection with such other transaction
before application to the obligations arising under this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments, Etc.
(a) No amendment, modification, termination or waiver of any provision
of this Agreement nor any consent to any departure therefrom shall be effective
unless the same shall be in writing and signed by the Required Banks and, except
in the case of any such waiver or consent, the Borrowers and, to the extent any
rights or duties of the Agent may be affected thereby, the Agent, provided,
however, that no such amendment, modification, termination, waiver or consent
shall, without the consent of the Agent and all of the Banks, (i) authorize or
permit the extension of time for, or any reduction of the amount of, any payment
of the principal of, or interest on, the Notes or any fees or other amount
payable hereunder, (ii) amend, extend or terminate the respective Commitments of
any of the Banks set forth on the signature pages hereof or modify the
provisions of this Section regarding the taking of any action under this Section
or the definition of Required Banks, (iii) provide for the discharge of any
Borrower or the release of any collateral subject to any Security Document, or
(iv) amend, modify or waive any other provision of this Agreement or the
Security Documents which by its terms requires the consent of all of the Banks.
(b) Any such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(c) Notwithstanding anything herein to the contrary, no Bank that is in
default of any of its obligations, covenants or agreements under this Agreement
shall be entitled to vote (whether to consent or to withhold its consent) with
respect to any amendment, modification, termination or waiver of any provision
of this Agreement or any departure therefrom or any direction from the Banks to
the Agent, and, for purposes of determining the Required Banks at any time when
any Bank is in default under this Agreement, the Commitment and Loans of such
defaulting Banks shall be disregarded.
8.2 Notices.
(a) Except as otherwise provided in Section 8.2(c) hereof, all notices
and other communications hereunder shall be in writing and shall be delivered or
sent to the Borrowers at the Triad Building, 2200 Renaissance Boulevard, Suite
150, King of Prussia, PA 19406, Attention: John H. Wert, Jr., Senior Vice
President of Finance and Chief Financial Officer, Facsimile No. (610) 275-5122,
and to the Agent and the Banks at the respective addresses and numbers for
notices set forth on the signature pages hereof, or to such other address as may
be designated by the Borrowers, the Agent or any Bank by notice to the other
44
<PAGE>
parties hereto. All notices and other communications shall be deemed to have
been given at the time of actual delivery thereof to such address, or if sent by
certified or registered mail, postage prepaid, to such address, on the third day
after the date of mailing, or in the case of telex notice, upon receipt of the
appropriate answer back, provided, however, that notices to the Agent shall not
be effective until received.
(b) Notices by the Borrowers to the Agent with respect to terminations
or reductions of the Commitments pursuant to Section 2.2, requests for Loans
pursuant to Section 2.4, requests for continuations or conversions of Loans
pursuant to Section 2.7 and notices of prepayment pursuant to Section 3.1 shall
be irrevocable and binding on the Borrowers.
(c) Any notice to be given by the Borrowers to the Agent pursuant to
Sections 2.4, 2.7 or 3.1 and any notice to be given by the Agent or any Bank
hereunder, may be given by telephone, and all such notices given by the
Borrowers may be confirmed in writing in the manner provided in Section 8.2(a)
and shall promptly be so confirmed if requested by the Agent or any Bank;
provided that neither the Agent nor any Bank shall be liable for any act, error
or omission due to the failure of the Borrowers to provide any such written
confirmation, whether requested by the Agent or any Bank or not. Any such notice
given by telephone shall be deemed effective upon receipt thereof by the party
to whom such notice is to be given.
8.3 No Waiver By Conduct; Remedies Cumulative. No course of dealing on the
part of the Agent or any Bank, nor any delay or failure on the part of the Agent
or any Bank in exercising any right, power or privilege hereunder shall operate
as a waiver of such right, power or privilege or otherwise prejudice the Agent's
or any Bank's rights and remedies hereunder; nor shall any single or partial
exercise thereof preclude any further exercise thereof or the exercise of any
other right, power or privilege. No right or remedy conferred upon or reserved
to the Agent or any Bank under this Agreement, any Security Document or the
Notes is intended to be exclusive of any other right or remedy, and every right
and remedy shall be cumulative and in addition to every other right or remedy
granted thereunder or now or hereafter existing under any applicable law. Every
right and remedy granted by this Agreement, any Security Document or the Notes
or by applicable law to the Agent or any Bank may be exercised from time to time
and as often as may be deemed expedient by the Agent or any Bank and, unless
contrary to the express provisions of this Agreement, or any Security Document
or the Notes, irrespective of the occurrence or continuance of any Default or
Event of Default.
8.4 Reliance on and Survival of Various Provisions. All terms, covenants,
agreements, representations and warranties of the Borrowers herein or in any
certificate, report, financial statement or other document furnished by or on
behalf of the Borrowers in connection with this Agreement shall be deemed to be
material and to have been relied upon by the Banks, notwithstanding any
investigation heretofore or hereafter made by any Bank or on such Bank's behalf,
and those covenants and agreements of the Borrowers set forth in Section 3.6,
3.8 and 8.5 hereof shall survive the repayment in full of the Loans and the
termination of the Commitments.
45
<PAGE>
8.5 Expenses. (a) The Borrowers agree to pay, or reimburse the Agent for the
payment of, on demand, (i) the reasonable fees and expenses of counsel to the
Agent, including without limitation the fees and expenses of Dickinson Wright
PLLC, in connection with the preparation, execution, delivery and administration
of this Agreement, the Security Documents and the Notes and the consummation of
the transactions contemplated hereby, and in connection with advising the Agent
as to its rights and responsibilities with respect thereto, and in connection
with any amendments, waivers or consents in connection therewith, and (ii) all
stamp and other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing or recording of this Agreement, any
Security Document and the Notes, and the consummation of the transactions
contemplated hereby, and any and all liabilities with respect to or resulting
from any delay in paying or omitting to pay such taxes or fees, and (iii) all
reasonable costs and expenses of the Agent and the Banks (including reasonable
fees and expenses of counsel and whether incurred through negotiations, legal
proceedings or otherwise) in connection with any Default or Event of Default or
the enforcement of, or the exercise or preservation of any rights under, this
Agreement, any Security Document or the Notes or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement.
(b) The Borrowers hereby indemnify and agree to hold harmless the Banks
and the Agent, and their respective officers, directors, employees and agents,
from and against any and all claims, damages, losses, liabilities, costs or
expenses of any kind or nature whatsoever (including reasonable attorneys' fees
and disbursements incurred in connection with any investigative, administrative
or judicial proceeding whether or not such person shall be designated as a party
thereto) which the Banks or the Agent or any such person may incur or which may
be claimed against any of them by reason of or in connection with entering into
this Agreement or the transactions contemplated hereby, including without
limitation those arising under Environmental Laws; provided, however, that the
Borrowers shall not be required to indemnify any such Bank and the Agent or such
other person, to the extent, but only to the extent, that such claim, damage,
loss, liability, cost or expense is attributable to the gross negligence or
willful misconduct of such Bank or the Agent, as the case may be.
8.6 Successors and Assigns. (a) This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided that the Borrowers may not, without the prior consent of the
Agent and the Banks, assign its rights or obligations hereunder or under the
Notes or any Security Document and the Banks shall not be obligated to make any
Loan hereunder to any entities other than the Borrowers.
(b) Any Bank may sell to any financial institution or institutions, and
such financial institution or institutions may further sell, a participation
interest (undivided or divided) in, the Loans and such Bank's rights and
benefits under this Agreement, the Notes and the Security Documents, and to the
extent of that participation interest such participant or participants shall
have the same rights and benefits against the Borrowers under Sections 3.7, 3.9
and 6.2(c) as it or they would have had if such participant or participants were
the Bank making the Loans to the Borrowers hereunder; provided, however, that
(i) such Bank's obligations under this Agreement shall remain unmodified and
fully effective and enforceable
46
<PAGE>
against such Bank, (ii) such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Bank shall
remain the holder of its Notes for all purposes of this Agreement, (iv) the
Borrowers, the Agent and the other Banks shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement, and (v) such Bank shall not grant to its participant any
rights to consent or withhold consent to any action taken by such Bank or the
Agent under this Agreement other than action requiring the consent of all of the
Banks hereunder. Notwithstanding anything herein to the contrary, no Bank shall
grant to its participant any rights to determine whether or not such Bank shall
give any notice contemplated by Section 2.2(b) or to determine whether or not
such Bank shall agree that any reduction of the commitment amounts contemplated
by Section 2.2(b) shall or shall not occur.
(c) The Agent from time to time in its sole discretion may appoint
agents for the purpose of servicing and administering this Agreement and the
transactions contemplated hereby and enforcing or exercising any rights or
remedies of the Agent provided under this Agreement, the Notes, any Security
Documents or otherwise. In furtherance of such agency, the Agent may from time
to time direct that the Borrowers provide notices, reports and other documents
contemplated by this Agreement (or duplicates thereof) to such agent. The
Borrowers hereby consent to the appointment of such agent and agrees to provide
all such notices, reports and other documents and to otherwise deal with such
agent acting on behalf of the Agent in the same manner as would be required if
dealing with the Agent itself.
(d) Each Bank may, with the prior consent of the Agent and Owosso
(which shall not be unreasonably withheld or delayed), assign to one or more
banks or other entities all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment, the Loans owing to it and the Note held by it); provided, however,
that (i) each such assignment shall be of a uniform, and not a varying,
percentage of all rights and obligations, (ii) except in the case of an
assignment of all of a Bank's rights and obligations under this Agreement, (A)
the amount of the Commitment of the assigning Bank being assigned pursuant to
each such assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than $5,000,000, and
in integral multiples of $1,000,000 thereafter, or such lesser amount as the
Borrowers and the Agent may consent to and (B) after giving effect to each such
assignment, the amount of the Commitment of the assigning Bank shall in no event
be less than $5,000,000, (iii) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance in the form of Exhibit F hereto (an "Assignment and
Acceptance"), together with any Note subject to such assignment and a processing
and recordation fee of $3,500, and (iv) any Bank may, without the consent of
Owosso or the Agent, and without paying any fee, assign to any affiliate of such
Bank that is a bank or financial institution all of its rights and obligations
under this Agreement. Notwithstanding anything to the contrary, upon the
occurrence and during the continuation of any Event of Default, no consent of
Owosso shall be required for any such assignment. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in such
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance,
47
<PAGE>
have the rights and obligations of a Bank hereunder and (y) the Bank assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all of the remaining portion of an
assigning Bank's rights and obligations under this Agreement, such Bank shall
cease to be a party hereto).
(e) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of any Borrower or the
performance or observance by the Borrowers of any of their obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.6(a)
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Agent, such assigning Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Bank.
(f) The Agent shall maintain at its address designated on the signature
pages hereof a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the Banks
and the Commitment of, and principal amount of the Loans owing to, each Bank
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Agent and the Banks may treat each person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrowers or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(g) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee, together with any Note or Notes subject to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrowers. Within five (5) Business Days after its receipt
48
<PAGE>
of such notice, the Borrowers, at their own expense, shall execute and deliver
to the Agent in exchange for the surrendered Note a new Note to the order of
such assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Bank has retained a
Commitment hereunder, a new Note to the order of the assigning Bank in an amount
equal to the Commitment retained by it hereunder. Such new Note or Notes shall
be in an aggregate principal amount equal to the principal amount of such
surrendered Note, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit B hereto.
(h) The Borrowers shall not be liable for any costs or expenses of any
Bank in effectuating any participation or assignment under this Section 8.6.
(i) The Banks may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 8.6, disclose
to the assignee or participant or proposed assignee or participant any
information relating to the Borrowers.
(j) Notwithstanding any other provision set forth in this
Agreement, any Bank may at any time create a security interest in, or assign,
all or any portion of its rights under this Agreement (including, without
limitation, the Loans owing to it and the Note held by it) in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System; provided that such creation of a security
interest or assignment shall not release such Bank from its obligations under
this Agreement.
(k) Each Borrower authorizes each Bank to disclose to any participant
or assignee or any other person acquiring an interest in this Agreement and the
Notes by operation of law (each a "Transferee") and any prospective Transferee
all documentation and other information made available by the Borrowers or any
of their Subsidiaries to the Agent or any Bank under the terms of this
Agreement, and all other information that has been delivered to the Agent or any
Bank by or on behalf of the Borrowers or any of their Subsidiaries prior to the
Effective Date in connection with the Banks' credit evaluation of the Borrowers
and their Subsidiaries, if such Transferee, prior to such disclosure, agrees for
the benefit of the Borrowers to hold such documentation and other information in
confidence pursuant to an agreement reasonably satisfactory to the Borrowers;
provided that any Bank and any Transferee may disclose any such documentation
and other information (i) to the extent required by legal or governmental
process or otherwise by law, or (ii) if such documentation and other information
is publicly available or thereafter becomes publicly available other than by
action of such Bank or Transferee, respectively, or was theretofore known to
such Bank or Transferee independent of any disclosure thereto by any Bank or by
any of the Borrowers or any of their Subsidiaries, or (iii) to the extent of
necessary disclosure to such Bank or Transferee's accountants, attorneys or
regulators, or (iv) in any litigation or similar proceedings related to this
Agreement, the Notes or any of the Security Documents, or (v) to any Federal
Reserve Bank.
(l) NBD Bank agrees that, so long as no Default or Event of Default has
occurred and is continuing, it shall not make any assignment under Section
8.6(d) that would
49
<PAGE>
result in NBD Bank having a Commitment in an amount that is not equal to or
greater than the amount of each other Bank's Commitment.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.8 Governing Law. This Agreement is a contract made under, and shall be
governed by and construed in accordance with, the law of the State of Michigan
applicable to contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State. The Borrowers
further agree that any legal action or proceeding with respect to this
Agreement, any Security Document or the Notes or the transactions contemplated
hereby may be brought in any court of the State of Michigan, or in any court of
the United States of America sitting in Michigan, and the Borrowers hereby
submit to and accept generally and unconditionally the jurisdiction of those
courts with respect to its person and property, and irrevocably appoint Pepper
Hamilton LLP, whose address in Michigan is 100 Renaissance Center, Suite 3600,
Detroit, Michigan 48243-1157, as their agent for service of process and
irrevocably consent to the service of process in connection with any such action
or proceeding by personal delivery to such agent or to the Borrowers or by the
mailing thereof by registered or certified mail, postage prepaid, to the
Borrowers at their address set forth in Section 8.2. Nothing in this paragraph
shall affect the right of the Banks and the Agent to serve process in any other
manner permitted by law or limit the right of the Banks or the Agent to bring
any such action or proceeding against the Borrowers or their property in the
courts of any other jurisdiction. The Borrowers hereby irrevocably waive any
objection to the laying of venue of any such suit or proceeding in the above
described courts.
8.9 Table of Contents and Headings. The table of contents and the headings
of the various subdivisions hereof are for the convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
8.10 Construction of Certain Provisions. If any provision of this Agreement
refers to any action to be taken by any person, or which such person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such person, whether or not expressly
specified in such provision.
8.11 Integration and Severability. This Agreement embodies the entire
agreement and understanding among the Borrowers and the Agent and the Banks, and
supersedes all prior agreements and understandings, relating to the subject
matter hereof. In case any one or more of the obligations of the Borrowers under
this Agreement or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Borrowers shall not in any way be affected or impaired
thereby, and such invalidity, illegality or unenforceability in one jurisdiction
shall not affect the validity, legality or enforceability of the obligations of
the Borrowers under this Agreement, any Security Document or the Notes in any
other jurisdiction.
50
<PAGE>
8.12 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenant, the fact that it would be permitted by an exception to, or
would be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default or any event or condition
which with notice or lapse of time, or both, could become such a Default or an
Event of Default if such action is taken or such condition exists.
8.13 Interest Rate Limitation. Notwithstanding any provision of this
Agreement, the Security Documents or the Notes, in no event shall the amount of
interest paid or agreed to be paid by the Borrowers exceed an amount computed at
the highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement, any
Security Document or the Notes at the time performance of such provision shall
be due, shall involve exceeding the interest rate limitation validly prescribed
by law which a court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under applicable law, and
if for any reason whatsoever any Bank shall ever receive as interest an amount
which would be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of the Advances outstanding
hereunder (whether or not then due and payable) and not to the payment of
interest, or shall be refunded to the Borrowers if such principal and all other
obligations of the Borrowers to the Banks and the Agent have been paid in full.
8.14 Joint and Several Obligations; Contribution Rights; Savings Clause.
(a) Notwithstanding anything to the contrary set forth herein or in any
Note, the obligations of the Borrowers hereunder and under the Notes are joint
and several.
(b) If any Borrower makes a payment in respect of the indebtedness,
obligations and liabilities of the Borrowers to the Agent or any Bank under this
Agreement and the Notes (collectively, the "Bank Obligations"), it shall have
the rights of contribution set forth below against the other Borrowers; provided
that such Borrower shall not exercise its right of contribution until all the
Bank Obligations have been paid in full. If any Borrower makes a payment in
respect of the Bank Obligations that is smaller in proportion to its Payment
Share (as hereinafter defined) than such payments made by the other Borrowers
are in proportion to the amounts of their respective Payment Shares, the
Borrower making such proportionately smaller payment shall, when permitted by
the preceding sentence, pay to the other Borrowers an amount such that the net
payments made by the Borrowers in respect of the Bank Obligations shall be
shared among the Borrowers pro rata in proportion to their respective Payment
Shares. If any Borrower receives any payment that is greater in proportion to
the amount of its Payment Share than the payments received by the other
Borrowers are in proportion to the amounts of their respective Payment Shares,
the Borrower receiving such proportionately greater payment shall, when
permitted by the second preceding sentence, pay to the other Borrowers an amount
such that the payments received by the Borrowers shall be shared among the
Borrowers pro rata in proportion to their respective Payment Shares.
Notwithstanding anything to the contrary contained in this paragraph or in this
Agreement, no liability or obligation of any Borrower that
51
<PAGE>
shall accrue pursuant to this paragraph shall be paid nor shall it be deemed
owed pursuant to this paragraph until all of the Bank Obligations shall be paid
in full.
For purposes hereof, the "Payment Share" of each Borrower shall be the
sum of (i) the aggregate proceeds of the Bank Obligations received by such
Borrower (and, if received subject to a repayment obligation, remaining unpaid
on the Determination Date (as hereinafter defined)), plus (ii) the product of
(A) the aggregate Bank Obligations remaining unpaid on the date such Bank
Obligations become due and payable in full, whether by stated maturity,
acceleration, or otherwise (the "Determination Date"), reduced by the amount of
such Bank Obligations attributed to Borrowers pursuant to clause (i) above,
times (B) a fraction, the numerator of which is such Borrower's net worth on the
effective date of this Agreement, and the denominator of which is the aggregate
net worth of all Borrowers on such date.
(c) It is the intent of each Borrower, the Agent and the Banks that
each Borrower's maximum Bank Obligations shall be in, but not in excess of:
(i) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code on or within one year from the date on which
any of the Bank Obligations are incurred, the maximum amount that would not
otherwise cause the Bank Obligations (or any other obligations of such Borrower
to the Agent and the Banks) to be avoidable or unenforceable against such
Borrower under (A) Section 548 of the Bankruptcy Code or (B) any state
fraudulent transfer or fraudulent conveyance act or statute applied in such case
or proceeding by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code subsequent to one year from the date on which
any of the Bank Obligations are incurred, the maximum amount that would not
otherwise cause the Bank Obligations (or any other obligations of such Borrower
to the Agent and the Banks) to be avoidable or unenforceable against such
Borrower under any state fraudulent transfer or fraudulent conveyance act or
statute applied in any such case or proceeding by virtue of Section 544 of the
Bankruptcy Code; or
(iii) in a case or proceeding commenced by or against such Borrower
under any law, statute or regulation other than the Bankruptcy Code (including,
without limitation, any other bankruptcy, reorganization, arrangement,
moratorium, readjustment of debt, dissolution, liquidation or similar debtor
relief laws), the maximum amount that would not otherwise cause the Bank
Obligations (or any other obligations of such Borrower to the Agent and the
Banks) to be avoidable or unenforceable against such Borrower under such law,
statute or regulation including, without limitation, any state fraudulent
transfer or fraudulent conveyance act or statute applied in any such case or
proceeding.
8.15 Consents to Renewals, Modifications and Other Actions and Events. This
Agreement and all of the obligations of the Borrowers hereunder shall remain in
full force and effect without regard to and shall not be released, affected or
impaired by: (a) any amendment, assignment, transfer, modification of or
addition or supplement to the Bank Obligations, this
52
<PAGE>
Agreement or any Note; (b) any extension, indulgence, increase in the Bank
Obligations or other action or inaction in respect of this Agreement, the
Security Documents or the Notes or otherwise with respect to the Bank
Obligations, or any acceptance of security for, or guaranties of, any of the
Bank Obligations, or any surrender, release, exchange, impairment or alteration
of any such security of guaranties, including, without limitation, the failing
to perfect a security interest in any such security or abstaining from taking
advantage or of realizing upon any guaranties or upon any security interest in
any such security; (c) any default by any Borrower under, or any lack of due
execution, invalidity or unenforceability of, or any irregularity or other
defect in, this Agreement, the Security Documents or the Notes; (d) any waiver
by the Banks or any other person of any required performance or otherwise of any
condition precedent or waiver of any requirement imposed by this Agreement, the
Security Documents or the Notes, any guaranties or otherwise with respect to the
Bank Obligations; (e) any exercise or non-exercise of any right, remedy, power
or privilege in respect of this Agreement, the Security Documents or the Notes;
(f) any sale, lease, transfer or other disposition of the assets of any Borrower
or any consolidation or merger of any Borrower with or into any other person,
corporation, or entity, or any transfer or the disposition by any Borrower or
any other holder of any shares of capital stock of any Borrower; (g) any
bankruptcy, insolvency, reorganization or similar proceedings involving or
affecting any Borrower; (h) the release or discharge of any Borrower from the
performance or observance of any agreement, covenant, term or condition under
any of the Bank Obligations or contained in this Agreement, the Security
Documents or the Notes by operation of law, or (i) any other cause whether
similar or dissimilar to the foregoing which, in the absence of this provision,
would release, affect or impair the obligations, covenants, agreements and
duties of any Borrower hereunder, including without limitation any act or
omission by the Agent or any Bank or any other person which increases the scope
of such Borrower's risk; and in each case described in this paragraph whether or
not any Borrower shall have notice or knowledge of any of the foregoing, each of
which is specifically waived by each Borrower. Each Borrower warrants to the
Banks that it has adequate means to obtain from each other Borrower on a
continuing basis information concerning the financial condition and other
matters with respect to the Borrowers and that it is not relying on the Agent or
the Banks to provide such information either now or in the future.
8.16 Waivers, Etc. Each Borrower unconditionally waives: (a) notice of
any of the matters referred to in Section 8.15 above; (b) all notices which may
be required by statute, rule or law or otherwise to preserve any rights of the
Agent or any Bank, including, without limitation, presentment to and demand of
payment or performance from the other Borrowers and protest for non-payment or
dishonor; (c) any right to the exercise by the Agent or any Bank of any right,
remedy, power or privilege in connection with this Agreement, the Security
Documents or the Notes; (d) any requirement that the Agent or any Bank, in the
event of any default by any Borrower, first make demand upon or seek to enforce
remedies against, such Borrower or any other Borrower before demanding payment
under or seeking to enforce this Agreement, the Security Documents or the Notes
against any other Borrower; (e) any right to notice of the disposition of any
security which the Agent or any Bank may hold from any Borrower or otherwise and
any right to object to the commercial reasonableness of the disposition of any
such security; and (f) all errors and omissions in connection with the Agent or
any Bank's administration of any of the Bank Obligations, this Agreement or the
Notes, or any
53
<PAGE>
other act or omission of the Agent or any Bank which changes the scope of the
Borrower's risk. The obligations of each Borrower hereunder shall be complete
and binding forthwith upon the execution of this Agreement and subject to no
condition whatsoever, precedent or otherwise, and notice of acceptance hereof or
action in reliance hereon shall not be required.
8.17 WAIVER OF JURY TRIAL. EACH OF THE AGENT, THE BANKS AND THE
BORROWERS, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM. NONE OF THE AGENT, THE
BANKS OR THE BORROWERS SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE AGENT, ANY
BANK OR ANY BORROWER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
[THIS REST OF THIS PAGE INTENTIONALLY LEFT BLANK.]
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
OWOSSO CORPORATION, DWZM, INC.,
THE LANDOVER COMPANY, MOTOR
PRODUCTS-OWOSSO CORPORATION,
SNOWMAX, INCORPORATED, MOTOR
PRODUCTS-OHIO CORPORATION,
GBMC, INC., STATURE ELECTRIC, INC.,
OWOSSO MOTOR GROUP, INC.,
ASTRO AIR ACQUISITION CORPORATION,
SOONER TRAILER MANUFACTURING CO.,
M.H. RHODES, INC. and ASTRO AIR
UK HOLDINGS, INC.
By: \s\ John H. Wert, Jr.
-----------------------------------
John H. Wert, Jr.
Senior Vice President - Finance & Chief
Financial Officer of Owosso Corporation,
Assistant Secretary & Treasurer of Astro
Air Acquisition Corporation, and
Secretary & Treasurer of all such other
Borrowers
AHAB INVESTMENT COMPANY
By: \s\ Norman J. Shuman
-----------------------------------
Its: Vice-President
-----------------------------------
55
<PAGE>
Address for Notices: NBD BANK, individually and as Agent
611 Woodward Avenue
Detroit, Michigan 48226
Attention: William C. Goodhue By: \s\ William C. Goodhue
-----------------------------------
Facsimile No.: (313) 225-2290 Its: First Vice-President
-----------------------------------
Commitment Amount: $35,000,000
Percentage of
Total Commitments: 63.6363636%
Address for Notices: PNC BANK, NATIONAL ASSOCIATION
Suite 200
1000 Westlakes Drive By: \s\ Charlene C. Massih
-----------------------------------
Berwyn, Pennsylvania 19312 Its: Vice-President
Attention: Charlene Massih -----------------------------------
Facsimile No.: (610) 640-4914
Commitment Amount: $20,000,000
Percentage of
Total Commitments: 36.3636364%
Total Commitment Amount
of all Banks: $55,000,000
56
<PAGE>
OWOSSO CORPORATION
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
January 31, January 25,
1999 1998
<S> <C> <C>
BASIC:
Net income (loss) available for common stockholders $ (403,000) $ (259,000)
========== ==========
Weighted average number of common shares outstanding 5,816,000 5,809,000
========== ==========
Basic earnings (loss) per common share $ (0.07) $ (0.04)
========== ==========
DILUTED:
Net income (loss) available for common stockholders $ (403,000) $ (259,000)
========== ==========
Weighted average number of common shares outstanding 5,816,000 5,809,000
Dilutive effect of stock options - -
---------- ----------
Weighted average number of shares outstanding 5,816,000 5,809,000
========== ==========
Diluted earnings (loss) per common share $ (0.07) $ (0.04)
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 195
<SECURITIES> 0
<RECEIVABLES> 16,832
<ALLOWANCES> 440
<INVENTORY> 21,591
<CURRENT-ASSETS> 40,956
<PP&E> 66,584
<DEPRECIATION> 29,649
<TOTAL-ASSETS> 125,151
<CURRENT-LIABILITIES> 18,385
<BONDS> 67,856
0
14,368
<COMMON> 59
<OTHER-SE> 19,374
<TOTAL-LIABILITY-AND-EQUITY> 125,151
<SALES> 38,835
<TOTAL-REVENUES> 38,835
<CGS> 31,607
<TOTAL-COSTS> 31,607
<OTHER-EXPENSES> 6,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,296
<INCOME-PRETAX> (243)
<INCOME-TAX> (111)
<INCOME-CONTINUING> (132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (132)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
