-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SXa2q9wZdfNFw9WIKuU4MXa0d6ISgZpgU+GpujlHV23Vvfoww1oSFt2xlPkZciJO WrJIBWK5Nr39RSO9sAD0MA== 0000950148-96-000515.txt : 19960402 0000950148-96-000515.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950148-96-000515 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR GROUP INC CENTRAL INDEX KEY: 0000055454 STANDARD INDUSTRIAL CLASSIFICATION: GLASS CONTAINERS [3221] IRS NUMBER: 950898810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07272 FILM NUMBER: 96542406 BUSINESS ADDRESS: STREET 1: 1840 CENTURY PARK E CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3105562200 MAIL ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: KERR GLASS MANUFACTURING CORP DATE OF NAME CHANGE: 19920518 10-K 1 FORM 10-K FOR THE FISCAL YEAR ENDED 12/31/95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission file number 1-7272 KERR GROUP, INC. ---------------- (Exact name of Registrant as specified in its charter) Delaware 95-0898810 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identi- incorporation or organization) fication Number) 1840 Century Park East, Los Angeles, California 90067 - ----------------------------------------------- ----- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (310) 556-2200 -------------- Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered - ------------------- ------------------- Common Stock New York Stock Exchange $1.70 Class B Cumulative Convertible Preferred Stock, Series D New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None -Continued- -1- 2 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No. . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /. The aggregate market value of the voting stock held by non-affiliates of the Registrant, as of March 15, 1996, was $25,927,179. The number of shares of the Registrant's Common Stock, $.50 par value, outstanding as of March 15, 1996, was 3,933,095. DOCUMENTS INCORPORATED BY REFERENCE
Part(s) Into Document Which Incorporated -------- ------------------ (1) Proxy Statement to be used in Part III connection with the Annual Meeting of Stockholders to be held on April 30, 1996. With the exception of the pages of the Proxy Statement specifically incorporated by reference herein, the Proxy Statement is not deemed to be filed as a part of this Form 10-K.
(ii) -2- 3 KERR GROUP, INC. Form 10-K Annual Report For The Fiscal Year Ended December 31, 1995 PART I ITEM 1. BUSINESS 1. General Kerr Group, Inc. (the "Registrant"), a Delaware corporation which was founded in 1903, operates the Plastic Products Business and, until March 15, 1996, also operated the Consumer Products Business. Operations in the Plastic Products Business include the manufacture and sale of a variety of plastic products, including child-resistant closures, tamper-evident closures, prescription packaging products, jars, other closures and containers and the sale of glass prescription products (the "Plastic Products Business"). Operations in the Consumer Products Business included the manufacture and sale of caps and lids and the sale of glass jars and a line of pickling spice and pectin products for home canning which together with the sale of other related products, including iced tea tumblers and beverage mugs, constituted the "Consumer Products Business". On March 15, 1996, the Registrant sold to Alltrista Corporation (the "Buyer") for approximately $14,500,000 the manufacturing assets, supplies, work in process inventory and certain trademarks and a perpetual and exclusive license to use the name "Kerr" in the sale of home canning supplies. The Registrant also assigned to Buyer the lease on the Jackson, Tennessee plant where the Registrant manufactured metal caps and lids for the Consumer Products Business. The Registrant also appointed the Buyer as sales agent to sell the inventory of home canning supplies produced by the Registrant before March 15, 1996. The Registrant expects to receive approximately $16,500,000, primarily during the remainder of 1996, from the sale to its customers of Consumer Products Business inventory and the collection of accounts receivable of the Consumer Products Business. The Registrant used a portion of the proceeds to reduce debt, including $3,500,000 of debt which was secured by liens on certain equipment, and will use the balance for working capital and for further reduction of debt. -3- 4 On March 15, 1996, the Registrant, in addition to reducing its indebtedness for borrowed money by $7,500,000, obtained the consent of the lenders of such indebtedness and the lender under an Accounts Receivable Agreement to extend, until May 15, 1996, waivers with respect to defaults under certain financial covenants in loan agreements with the Registrant and to extend the maturity of a $6,040,000 note, due April 15, 1996, until May 15, 1996. The Registrant is currently in discussions with the lenders regarding such defaults and the maturity of such note. After the payment of the $3,500,000 of secured debt, the indebtedness of the Company was unsecured. On March 15, 1996, the Registrant also announced a restructuring which will consolidate certain manufacturing facilities and which will move the Registrant's principal executive office from Los Angeles, California to Lancaster, Pennsylvania where the Plastic Products Business is headquartered. The Registrant expects to realize annualized cost savings from the restructuring of approximately $6,500,000, which will be substantially realized in 1997. In connection with the restructuring, the Registrant said that Roger W. Norian, who had been President and Chief Executive Officer of the Registrant since 1980, had elected not to move to Lancaster and that, at the recommendation of Mr. Norian, he had been replaced as President and Chief Executive Officer by D. Gordon Strickland, who had been Senior Vice President, Chief Financial Officer, and General Manager, Consumer Products Business. Mr. Strickland was also elected as a Director. Mr. Norian has remained as a Director but has resigned as Chairman. In connection with the sale of assets of the Consumer Products Business and the restructuring, the Registrant will report in the first quarter of 1996 a one-time pretax gain of approximately $2,900,000 on the sale of certain assets of the Consumer Products Business and a one-time loss on the restructuring of $7,700,000. In addition to the one-time charge on the restructuring, the Registrant will incur additional non-recurring pretax charges of $2,400,000 during 1996 and early 1997 for restructuring related costs that accounting rules require to be expensed as incurred. a. Principal Products and Markets; Sales and Customers The Plastic Products Business accounted for approximately 79% of the Registrant's total net sales in 1995. The Consumer Products Business accounted for approximately 21% of the Registrant's total net sales in 1995. Plastic closures are sold to customers in the pharmaceutical, food, distilled spirits, toiletries and cosmetics and household chemical industries. Plastic and glass prescription products are sold to drug wholesalers, drug chains and independent pharmacists. Plastic bottles and jars are sold to customers in the pharmaceutical and toiletries and cosmetics industries. Plastic products are sold nationally, principally by the Registrant's sales force. -4- 5 No customer accounted for more than 10% of the Registrant's net sales in 1995, 1994 or 1993. b. Competition Competition in the markets in which the Plastic Products Business operates is highly fragmented and the Registrant has a number of large competitors with respect to its Plastic Products Business that compete for sales on the basis of price, service and quality of product. The Registrant believes that it is one of the three largest manufacturers of child-resistant plastic closures. The Registrant has one major competitor in the prescription products business, who has substantially larger market share than the Registrant. The Registrant also believes it is the largest domestic manufacturer of plastic closures incorporating a tamper-evident feature for the liquor market and that it is one of the leading suppliers of single and double walled jars to the personal care and cosmetic markets. c. Backlog The Registrant does not believe that recorded sales backlog is a significant factor in its business. d. Raw Materials and Supplies; Fuel and Energy Matters The primary raw materials used by the Registrant's Plastic Products Business are resins. The Registrant has historically been able to obtain adequate supplies of these items from a number of sources. However, since resins are derived from petroleum or fossil fuel, shortages of petroleum or fossil fuel could affect the supply of resins. From time to time, the Registrant has experienced substantial increases in the cost of resin. To the extent that the Registrant is unable to pass on resin cost increases, the cost increases could have a significant impact on the results of operations of the Registrant. The Plastic Products Business, consistent with industry practice, is generally able to pass through resin cost increases for all product lines except the prescription packaging product line. However, in times of rapidly increasing resin prices, such as experienced in late 1994 and during the first half of 1995, the Registrant's ability to pass through the full impact of resin price increases on a timely basis is limited. -5- 6 e. Product Development, Engineering, Patents and Licensing The Registrant carries on a product development and engineering program with respect to its Plastic Products Business. Expenditures for such programs during the years ended December 31, 1995, 1994 and 1993 were approximately $3,300,000, $3,600,000 and $2,000,000, respectively. Although the Registrant owns a number of United States patents, including patents for its tamper-evident closures and certain of its child-resistant closures, it is of the opinion that no one or combination of these patents is of material importance to its business. The Registrant has granted licenses on some of its patents, although the income from these sources is not material. f. Environmental Matters; Legislation Several states have enacted recycling laws which require consumers to recycle certain items including containers, and which require product, container and resin manufacturers to promote recycling efforts. These mandatory recycling laws are not expected to have an adverse effect on the Registrant's business. The Registrant is subject to laws and regulations governing the protection of the environment, including, among others, laws and regulations governing disposal of waste, discharges into water and emissions into the atmosphere. The Registrant's expenditures for environmental control equipment in each of the last three years have not been material and the standards required by such regulations have not significantly affected the Registrant's operations. Registrant is a party or a potentially responsible party in several administrative proceedings and lawsuits involving liability for cleanup of certain offsite disposal facilities under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") and similar state laws. See "Legal Proceedings". g. Employees As of December 31, 1995, the Registrant had approximately 1,000 employees, of which approximately 286 were office, supervisory and sales personnel. h. Seasonality Since the sale of assets of the Consumer Products Business, seasonality is not material to the operations of the Registrant. -6- 7 Prior to 1996, when the Registrant operated the Consumer Products Business, its sales and earnings were usually higher in the second and third calendar quarters and lower in the first and fourth calendar quarters, since most of the sales by the Consumer Products Business occured in the second and third calendar quarters. In addition, substantially all returns of home canning supplies occured in the fourth calendar quarter of each year. i. Working Capital In general, the working capital practices followed by the Registrant are typical of the businesses in which it operates. The seasonal nature of the Registrant's Consumer Products Business required periodic short-term borrowing by the Registrant. As of December 31, 1995, the Registrant had an Accounts Receivable Agreement to meet the seasonal working capital needs of the Registrant. The agreement permits the Registrant to sell its trade accounts receivable on a nonrecourse basis. Under the agreement, the maximum amount that can be advanced to the Registrant pursuant to the sale of trade accounts receivable at any time is $13,500,000, which amount is reduced on April 15, 1996 to $10,000,000. The reduction occurred because the sale of assets of the Consumer Products Business reduced the working capital needs of the Registrant. The Registrant retains collection and service responsibility, as agent for the purchaser, over any receivables sold. The proceeds from the sale of assets of the Consumer Products Business, together with the Accounts Receivable Agreement and internally generated funds, provide the Registrant with the working capital which the Registrant believes will be sufficient to meet its anticipated needs subject to the satisfactory resolution of current discussions with the Registrant's lenders regarding defaults under its loan agreements and the maturity of a $6,040,000 note. -7- 8 ITEM 2. PROPERTIES The Registrant's manufacturing activities are conducted at the five facilities described in the following table.
Building Area Location Purpose of Facility (square feet) - -------- ------------------- ------------- Lancaster, Pennsylvania Plastic Closure and 490,000 Container Plant; Warehouses Jackson, Tennessee Plastic Closure, Vial and 198,000 Bottle Plant; Warehouse Santa Fe Springs, Plastic Jar and Closure 170,000 California Plant; Warehouse Ahoskie, North Carolina Plastic Closure Plant; 153,000 Warehouse Bowling Green, Kentucky Plastic Closure Plant; 168,000 Warehouse
The Lancaster, Pennsylvania and Ahoskie, North Carolina facilities are owned by the Registrant. The Jackson, Tennessee, Santa Fe Springs, California and Bowling Green, Kentucky facilities are leased by the Registrant. The Registrant's principal executive offices are located at 1840 Century Park East, Los Angeles, California 90067, in approximately 23,000 square feet of leased space. In addition, the Registrant rents three area sales offices. In the opinion of the Registrant's management, its manufacturing facilities are suitable and adequate for the purposes for which they are being used. The Registrant owns land and buildings in Santa Ana, California used in connection with a former glass container manufacturing plant that are being held for sale. In 1995, the Registrant's plastic products manufacturing facilities operated at approximately 64% of capacity. -8- 9 ITEM 3. LEGAL PROCEEDINGS As the Registrant reported in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, in February 1986, the Registrant was advised by the United States Environmental Protection Agency ("EPA") that Phoenix Closures, Inc. ("Phoenix") was one of several companies which disposed of wastes at the American Chemical Services ("ACS") site located near Griffith, Indiana. The EPA indicated that the wastes were disposed of by Phoenix's Chicago plant between 1955 and 1975. The Registrant has advised the EPA that it did not lease the Chicago plant during the period from 1955 to 1975. The Registrant has also advised Phoenix of its responsibilities with respect to environmental matters, including the environmental matters at the ACS site, under the lease relating to the Chicago plant. As the Registrant reported in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, in March 1986, the Registrant and other parties were designated by the EPA as potentially responsible parties ("PRPs") responsible for the cleanup of certain hazardous wastes that have been disposed of at the Wayne Waste Oil ("WWO") site located near Columbia City, Indiana. In October 1986, the Registrant and other PRPs entered into a Consent Order with the EPA which allowed the PRPs to complete a Remedial Investigation and Feasibility Study for the WWO site. In March 1990, the EPA issued a Record of Decision ("ROD") for the site. The ROD documents the EPA's cleanup plan for the site, which includes capping the former municipal landfill, groundwater extraction and treatment, and soil vapor extraction. On July 20, 1992, a Consent Decree between the EPA and the PRPs at the site was entered in the United States District Court for the Northern District of Indiana, captioned United States v. Active Products Corp., No. F91-00247. Based upon the Registrant's percentage share of the total amount of wastes disposed of at the WWO site, the Registrant estimates its share of the costs under the Consent Decree will be approximately $109,000. A reserve has been established for such costs. As the Registrant reported in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, on April 12, 1990, the State of New Jersey, Department of Environmental Protection and Energy ("NJDEPE"), filed a lawsuit in the United States District Court for the District of New Jersey against the Registrant, among others, entitled State of New Jersey, Department of Environmental Protection v. Gloucester Environmental Management Services, Inc., et al., No. 84-0152 (D.N.J.). The suit alleges that the Registrant was a "generator" of hazardous wastes and other hazardous substances which were disposed of at the Gloucester Environmental Management Services, Inc. ("GEMS") facility in the Township of Gloucester. The suit seeks cleanup costs, compensatory and treble damages, and a declaration that the Registrant and others are responsible for NJDEPE's past and future response costs at the GEMS site. On March 27, 1990, NJDEPE issued a Directive to the Registrant and other parties pursuant -9- 10 to the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. Pursuant to the Directive, the Registrant and other parties have been ordered to undertake the second phase of remedial action at the site, including the construction and operation of a groundwater treatment system and operation of the remedial action performed in the first phase, and to reimburse NJDEPE's alleged past and future response costs. The estimated cost of second phase remedial action related to the GEMS site is approximately $20 million. The amount that the NJDEPE is seeking as reimbursement for past costs and damages is approximately $10 million. In October, 1995 the Registrant entered into a de minims settlement agreement with the State of New Jersey and the United States to resolve all outstanding claims. In exchange for a payment of approximately $205,000, the Registrant will be dismissed from the lawsuit in accordance with the terms of a Consent Decree which is expected to be entered by the Court later this year. The Registrant has not admitted any liability for disposal of wastes at the GEMS site. The Registrant is one of approximately ninety companies participating in the de minimis settlement. Two of the Registrant's insurance carriers have agreed to pay the cost of settlement and defense of this matter, subject to an agreement to arbitrate whether coverage is available for approximately $75,000 in settlement funds. Thus, the Registrant's maximum exposure in connection with this site is $75,000. -10- 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names, ages, positions and offices held, and a brief account of the business experience during the past five years of each executive officer of the Registrant.
Positions Held With Registrant and Periods Name and Age During Which Held ------------ ----------------- D. Gordon Strickland (49) President and Chief Executive Officer, effective March 15, 1996; Senior Vice President, Finance and Chief Financial Officer, since 1986; Robert S. Reeves (66) Senior Vice President, Sales and Marketing, Plastic Products Division, since 1992; Senior Vice President, General Manager, Commercial Glass Container Division, since 1985 J. Stephen Grassbaugh (42) Vice President, Controller, since 1988 Geoffrey A. Whynot (37) Chief Financial Officer, effective March 15, 1996; Vice President, Treasurer since 1991; Assistant Vice President, Controller, External Reporting from 1989 through 1991 Roger W. Norian (52) Chairman, President and Chief Executive Officer, from 1980 through March 15, 1996
-11- 12 Business Experience D. Gordon Strickland has served in an executive capacity with the Registrant for more than the past five years. Robert S. Reeves has served in an executive capacity with the Registrant for more than the past five years. J. Stephen Grassbaugh has served in an executive capacity with the Registrant for more than the past five years. Geoffrey A. Whynot has served as Vice President, Treasurer of Registrant since 1991 and Assistant Vice President, Controller, External Reporting of Registrant from 1989 through 1991. Roger W. Norian served in an executive capacity with the Registrant for more than the past five years -12- 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock and Preferred Stock are both listed on the New York Stock Exchange. As of March 13, 1996, there were approximately 1,214 and 130 holders of record of the Company's Common Stock and Preferred Stock, respectively. The following table summarizes the prices of the Common Stock and Preferred Stock on the New York Stock Exchange Composite Tape and quarterly cash dividends:
- --------------------------------------------------------------------------------------------- Common Stock Preferred Stock - --------------------------------------------------------------------------------------------- Cash Cash Calendar Year High Low Dividends High Low Dividends - --------------------------------------------------------------------------------------------- 1995 First Quarter $ 9 3/8 $6 7/8 $-- $20 5/8 $19 1/8 $.425 Second Quarter 8 3/8 7 1/8 -- 20 1/8 19 1/4 .425 Third Quarter 8 1/2 7 -- 20 1/4 19 .425 Fourth Quarter 10 3/8 6 1/2 -- 20 16 3/8 .425 1994 First Quarter $10 $8 1/8 $-- $21 $19 1/4 $.425 Second Quarter 10 5/8 8 -- 22 19 3/4 .425 Third Quarter 9 1/2 8 1/8 -- 20 3/4 19 7/8 .425 Fourth Quarter 9 1/2 8 1/8 -- 20 1/2 19 1/8 .425
The cummulative Preferred Stock dividend requirement as of December 31, 1995, was $829,000. The payment of Common Stock dividends is restricted by the Company's Senior Note agreement. Under the most restrictive covenant, the payment of Common Stock dividends is not permitted at December 31, 1995. -13- 14 ITEM 6. SELECTED FINANCIAL DATA (h)
Years Ended December 31, 1995 1994 1993 1992 1991 (in thousands, except per share amounts) Net sales $ 138,995 $ 139,156 $ 127,372 $ 126,610 $ 125,598 Segment earnings (loss): Plastic Products $ 4,842 $ 12,055 $ 11,428 $ 9,165 $ 9,077 Consumer Products (a) (1,590) 3,213 (2,707) 4,982 1,804 --------- --------- --------- --------- --------- Total 3,252 15,268 8,721 14,147 10,881 General corporate expenses 5,258 4,903 4,866 5,212 5,568 Loss on revaluation of land 1,000 -- -- -- -- --------- --------- --------- --------- --------- Earnings (loss) from continuing operations before interest and income taxes $ (3,006) $ 10,365 $ 3,855 $ 8,935 $ 5,313 ========= ========= ========= ========= ========= Earnings (loss) from continuing operations before income taxes (b) $ (8,825) $ 5,749 $ (967) $ 4,413 $ 1,094 Provision (benefit) for income taxes (c) (3,518) 2,345 (634) 1,826 700 --------- --------- --------- --------- --------- Earnings (loss) from continuing operations (5,307) 3,404 (333) 2,587 394 Earnings (loss) from discontinued operations (d) -- -- -- (5,284) (2,973) Extraordinary loss on retirement of debt (e) -- -- (1,300) -- -- --------- --------- --------- --------- --------- Net earnings (loss) (5,307) 3,404 (1,633) (2,697) (2,579) Preferred stock dividends 829 829 829 829 829 --------- --------- --------- --------- --------- Net earnings (loss) applicable to common stockholders $ (6,136) $ 2,575 $ (2,462) $ (3,526) $ (3,408) ========= ========= ========= ========= ========= Earnings (loss) per common share: Earnings (loss) per common share from continuing operations (a) (b) (c) $ (1.60) $ 0.70 $ (0.32) $ 0.48 $ (0.12) Earnings (loss) per common share from discontinued operations (d) -- -- -- (1.44) (0.81) Extraordinary loss per common share on retirement of debt (e) -- -- (0.35) -- -- --------- --------- --------- --------- --------- Net earnings (loss) per common share $ (1.60) $ 0.70 $ (0.67) $ (0.96) $ (0.93) ========= ========= ========= ========= ========= Cash dividends per common share $ -- $ -- $ -- $ -- $ --
-14- 15 ITEM 6. SELECTED FINANCIAL DATA (Continued)(h)
Years Ended December 31, 1995 1994 1993 1992 1991 (in thousands) Net property, plant and equipment $ 51,515 $ 48,341 $ 40,424 $ 36,383 $ 34,395 Depreciation and amortization 9,016 7,731 7,364 6,651 6,209 Capital expenditures (f) 11,840 15,648 11,256 8,359 4,391 Total assets 120,221 123,700 117,349 105,232 165,883 Senior debt (g) 50,000 50,000 50,000 -- 55,647 Subordinated long-term debt -- -- -- 40,000 40,000 Stockholders' equity before pension adjustment $ 34,047 $ 38,260 $ 34,899 $ 36,464 $ 38,338 Excess of additional pension liability over unrecognized prior service cost, net of tax benefits (10,140) (5,207) (6,835) -- -- -------- -------- -------- -------- -------- Stockholders' equity $ 23,907 $ 33,053 $ 28,064 $ 36,464 $ 38,338 ======== ======== ======== ======== ======== Weighted average number of common shares outstanding 3,842 3,674 3,669 3,675 3,675
(a) The 1993 segment loss for Consumer Products includes a $4,500,000 pre-tax loss ($2,754,000 after-tax or $0.75 per common share) associated with the relocation of the Company's home canning cap and lid manufacturing operations. See Note 11 of notes to consolidated financial statements for further information. (b) The loss from continuing operations before income taxes for 1995 includes a pre-tax loss of $1,000,000 ($0.16 per common share) related to the write-down in the book value of land formerly used by the Company as a glass container manufacturing plant. (c) The benefit for income taxes for 1993 includes a tax benefit of $369,000 ($0.10 per common share) related to a reduction in the income tax valuation reserve. See Note 4 of notes to consolidated financial statements for further information. (d) Losses related to discontinued operations for 1992 and 1991 relate to results of operations and losses on disposal of the Company's former glass container manufacturing operations and metal crown manufacturing operations. (e) See Note 7 of notes to consolidated financial statements for information regarding the extraordinary loss on retirement of debt. (f) During 1991, in addition to the capital expenditures shown above, the Company entered into long-term operating leases for manufacturing equipment costing $1,623,000. (g) As of December 31, 1995, the Company's $50,000,000 of outstanding senior debt was classified as a current liability because the Company was in default of certain financial covenants for which the Company had received waivers only through May 15, 1996. (h) The selected financial data does not reflect the discontinuance of the Consumer Products segment. -15- 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS -- 1995 COMPARED TO 1994 Net sales of the Registrant decreased to $138,995,000 in 1995 from $139,156,000 in 1994. Net sales of the Plastic Products Business increased 2.2% to $109,187,000 in 1995 from 1994 due primarily to the pass through of resin price increases. The Registrant's plastic products manufacturing facilities operated at approximately 64% of capacity during 1995. The Plastic Products Business manufactures a variety of plastic closures, prescription packaging products, bottles and jars. Although unit sales of these products have generally increased in recent years, sales and profitability of these products are affected by the availability and pricing of resin. During the first half of 1995 and the full year 1994, the average cost per pound of polypropylene, the primary resin used by the Plastic Products Business, increased 28% and 31%, respectively. Under industry practice, the Plastic Products Business is generally able to pass on resin cost increases for all products except for prescription packaging products. However, since resin costs increased substantially, the results of the Plastic Products Business were adversely affected because the Plastic Products Business was not able to obtain general price increases from customers due to the resin price increases. In addition, not all resin increases were passed on because of competitive pricing. Resin prices have declined in the second half of 1995 and early 1996. Net sales of the Consumer Products Business decreased 7.9% to $29,808,000 in 1995 compared to 1994 due primarily to lower unit sales as a result of adverse growing conditions in 1995. During August 1994, the Registrant completed the relocation of its home canning cap and lid manufacturing operations to Jackson, Tennessee from Chicago, Illinois. The new facility was expected to generate improved efficiencies and cost reductions of approximately $3,000,000 pre-tax per year ($1,836,000 after-tax, or 50 cents per common share per year). In anticipation of the relocation, the Registrant produced home canning caps and lids in excess of normal requirements. As a result, the Registrant did not expect to realize significant earnings improvement from the relocation until 1996, when inventories and production volume would approach normal levels. During 1995, the Consumer Products Business cap and lid manufacturing facility operated at approximately 33% of capacity, partially as a result of the Registrant reducing its cap and lid inventory. Cost of sales of the Registrant increased to $108,964,000 in 1995 compared to $96,356,000 in 1994 primarily due to higher resin costs in the Plastic Products Business and the sale of higher cost inventory in the Consumer Products Business. Gross profit as a percent of net sales decreased to 21.6% for 1995 as compared to 30.8% for 1994 due to substantially higher resin costs and competitive pricing in the Plastic Products Business, and the sale of higher cost inventory produced during 1994 and higher customer rebates in the Consumer Products Business. Selling, warehouse, general and administrative expenses decreased $398,000 or 1.2% during 1995, as compared to 1994. -16- 17 Segment earnings of the Plastic Products Business decreased $7,213,000 to $4,842,000 in 1995 compared to $12,055,000 in 1994 primarily due to substantially higher resin costs and competitive pricing. Segment earnings of the Consumer Products Business decreased to a loss of $1,590,000 in 1995 compared to earnings of $3,213,000 in 1994 primarily due to the sale of higher cost inventory produced during 1994, higher customer rebates and lower sales volume due to adverse weather conditions. In 1995, the Registrant incurred a $1,000,000 unusual loss related to the write-down in the book value of land formerly used by the Registrant as a glass container manufacturing plant. Earnings before interest and income taxes decreased $13,371,000 to a loss of $3,006,000 in 1995 compared to earnings of $10,365,000 in 1994 due primarily to lower earnings in both the Consumer Products and Plastic Products Businesses. Net interest expense increased $1,203,000 during 1995 compared to 1994 due to higher levels of debt and interest charged on advances under the Accounts Receivable Agreement. The decrease in the income tax provision in 1995 compared to 1994 is due to lower pre-tax earnings. Due to competitive pressures, there are occasions when the Registrant is unable to pass on to customers cost increases. Other than the inability on all occasions to pass on cost increases, inflation and changes in prices did not have a material effect on the Registrant's results of operations. SUBSEQUENT EVENT On March 15, 1996, the Registrant sold certain assets of the Consumer Products Business for a purchase price of approximately $14,500,000 and announced a restructuring which will include the relocation of the Registrant's principal executive office and the consolidation of certain manufacturing facilities. The Registrant also expects to receive approximately $16,500,000, primarily during the remainder of 1996, from the Registrant's sale to consumer products customers of the inventory of the Consumer Products Business and from the collection of the accounts receivable of the Consumer Products Business. These proceeds will be utilized for working capital, to reduce debt, including $3,500,000 of debt secured by liens on certain machinery and equipment of the Registrant, and to fund costs of the restructuring. In connection with the sale of Consumer Products Business assets, the Registrant will report in the first quarter of 1996 a one-time pretax gain of approximately $2,900,000 ($1,740,000 after-tax or $0.44 per common share). Also during the first quarter of 1996, the Registrant will report a one-time pretax loss of approximately $7,700,000 ($4,620,000 after-tax or $1.17 per common share) associated with the restructuring. The loss on the restructuring includes provisions for severance costs and related benefits, net loss on subleases, write-off of fixed assets and certain intangible assets, and legal and professional fees. In addition to the loss recorded on the restructuring, the Registrant will incur additional non-recurring pretax losses during 1996 and early 1997 associated with the restructuring of $2,400,000 ($1,440,000 after-tax or $0.37 per common share) primarily related to equipment and personnel relocation costs, inefficiences related to the relocation of operations and start-up costs which accounting rules require to be expensed as incurred. The restructuring is expected to result in annualized cost savings of approximately $6,500,000 primarily from reduced employment costs, lease costs, offices expenses, manufacturing overhead and freight. These cost savings will be substantially realized in 1997. -17- 18 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS During 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets (FASB No. 121), and Statement No. 123, Accounting for Stock-Based Compensation (FASB No.123). FASB No.121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill. FASB No. 121 will be adopted during 1996 and is not expected to have a material effect on the Registrant's financial position or results of operations. FASB No.123 establishes a "fair value" method of accounting for the value of grants under stock-based compensation plans. As permitted under FASB No. 123, the Registrant will elect to continue to measure compensation expense related to employee stock option plans utilizing the intrinsic value method as prescribed by APB Opinion No. 25. However, beginning in 1996, the Registrant will disclose in the footnotes to its financial statements the proforma effect on net income and earnings per common share as if the fair value method of measuring compensation expense related to employee stock option plans was utilized as described in FASB No.123. RESULTS OF OPERATIONS -- 1994 COMPARED TO 1993 Net sales of the Registrant increased to $139,156,000 in 1994 from $127,372,000 in 1993. Net sales of the Plastic Products Business increased 8.4% to $106,792,000 in 1994 from 1993. The Registrant's plastic products manufacturing facilities operated at approximately 74% of capacity during 1994. Net sales of the Consumer Products Business increased 12.2% to $32,364,000 in 1994 compared to 1993 due primarily to higher unit sales as a result of favorable growing conditions in 1994. During August 1994, the Registrant completed the relocation of its home canning cap and lid manufacturing operations to Jackson, Tennessee from Chicago, Illinois. During August through December of 1994, the Registrant's cap and lid manufacturing facility operated at approximately 26% of capacity. This level of operations primarily resulted because the new plant was in its start-up phase. Cost of sales of the Registrant increased to $96,356,000 in 1994 compared to $88,922,000 in 1993 primarily due to higher unit sales and higher resin costs. Gross profit as a percent of net sales increased to 30.8% for 1994 as compared to 30.2% for 1993. Selling, warehouse, general and administrative expenses increased $2,340,000 or 7.8% during 1994, as compared to 1993, primarily due to higher selling expenses, additional employees and salary and wage increases. -18- 19 The Registrant recorded a pre-tax reserve of $4,500,000 in 1993 for the expected costs associated with the relocation of the home canning cap and lid manufacturing operations. The pre-tax loss consisted primarily of accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $2,500,000, ii) asset retirement and related facility closing costs of approximately $1,000,000 and iii) moving and relocation costs of approximately $700,000. In 1994, the Registrant made cash payments related to such accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $1,500,000, ii) asset retirement and related facility closing costs of approximately $600,000, iii) moving and relocation costs of approximately $600,000 and iv) other costs of approximately $300,000. In addition, during 1994, approximately $300,000 was charged against such accruals related to the book value of fixed assets retired. The remaining accruals primarily relate to retiree health costs and pensions which will be paid over a number of years. Segment earnings of the Plastic Products Business, increased $627,000 to $12,055,000 in 1994 compared to $11,428,000 in 1993 primarily due to higher sales. Segment earnings of the Consumer Products Business increased to $3,213,000 in 1994 compared to $1,793,000 in 1993, excluding the loss on plant relocation in 1993, due primarily to higher sales as a result of favorable growing conditions. Earnings before interest and income taxes increased $2,010,000 to $10,365,000 in 1994 compared to $8,355,000 in 1993, excluding the loss on plant relocation in 1993, due primarily to higher earnings in both the Consumer Products and Plastic Products Businesses. Net interest expense decreased $206,000 during 1994, as compared to 1993, as a result of a refinancing in 1993. The increase in the income tax provision in 1994 compared to 1993 is due to higher pre-tax earnings and the recognition in 1993 of an income tax benefit of $369,000 related to a reduction in the income tax valuation reserve. During 1993, the Registrant incurred an after-tax loss of $1,300,000 in connection with the refinancing on September 21, 1993 of its 13% Subordinated Notes and the termination of its revolving credit facility. The extraordinary loss included interest expense on the 13% Subordinated Notes from September 21, 1993 through December 15, 1993 (the date on which the Subordinated Notes were redeemed at par) and the write-off of unamortized debt fees and related costs. LIQUIDITY AND CAPITAL RESOURCES During 1995, the principal use of cash flow was to fund investing activities, primarily capital expenditures of $11,840,000. Cash flow was provided primarily through net advances on accounts receivable sold under the Registrant's Accounts Receivable Agreement of $7,700,000 and a $3,249,000 reduction in inventory. -19- 20 During 1994, the principal use of cash flow was to fund investing activities, primarily capital expenditures of $15,648,000, payments associated with the relocation of the home canning operations of $3,005,000 and other payments related to discontinued operations of $2,598,000. Cash flow was provided through the reduction of the Registrant's cash balances of $9,068,000, cash from operations of $6,425,000 and cash from financing activities of $5,457,000. During 1994 and 1993, inventories increased by $6,258,000 and $5,712,000, respectively, due primarily to a) increases in inventories of home canning caps and lids in anticipation of the relocation of the home canning cap and lid plant and as a result of low sales levels in 1993, and b) increases in inventories of the Plastic Products Business due to higher quantities and costs of resin, and higher quantities of finished goods. During 1995, the Registrant contributed 250,000 shares of its Common Stock, at a price of $7.56 per share, to the Kerr Group, Inc. Retirement Income Plan. The contribution reduced the Registrant's recorded pension liability by $1,891,000. Capital expenditures of approximately $6,000,000 are planned for 1996. Since the third quarter of 1990, the Registrant has not declared any dividends on its Common Stock. The Registrant's Senior Note Agreement limits the payment of dividends on Common Stock. Under the most restrictive covenant, the payment of Common Stock dividends is not permitted at December 31, 1995. The ratio of current assets to current liabilities at December 31, 1995 and 1994 was 0.6 and 2.5, respectively. The decline in the ratio of current assets to current liabilities at December 31, 1995, compared to December 31, 1994, is due primarily to i) the classification of the Registrant's $50,000,000 of outstanding senior debt as short-term because the Registrant was in default of certain financial covenants and was currently unable to obtain waivers beyond May 15, 1996 and ii) advances on accounts receivable sold under the Accounts Receivable Agreement. At December 31, 1995 and 1994, the ratio of total debt to total capitalization was 70.3% and 62.7%, respectively. The increase in the ratio of total debt to total capitalization is primarily due to lower stockholders' equity. The Registrant has recorded deferred income tax assets of $9,808,000 on its Consolidated Balance Sheet as of December 31, 1995. In order to fully realize this deferred income tax asset, the Registrant will need to generate future taxable income of at least $35,000,000 prior to expiration of net operating loss carryforwards which will begin to expire in 2006. Based upon the Registrant's recent pre-tax earnings adjusted for significant nonrecurring items, the sale of certain assets of the Consumer Products Business and cost savings related to the restructuring announced March 15, 1996 and projections of future taxable income over the period in which the deferred income tax assets are deductible, management believes it is more likely than not that the Registrant will realize the benefit of the deferred income tax asset. There can be no assurance, however, that the Registrant will generate any specific level of continuing earnings. As of December 31, 1995, the Registrant had an Accounts Receivable Agreement (Receivable Agreement) maturing on January 18, 1997 to meet the seasonal working capital needs of the Registrant. The Receivable Agreement permits the Registrant to sell its trade accounts receivable on a nonrecourse basis. Under the Receivable Agreement, the maximum amount that can be advanced to the Registrant pursuant to the sale of trade accounts receivable at any time is $13,500,000, which amount is reduced on April 15, 1996 to $10,000,000. The reduction occurred because the sale of assets of the Consumer Products Business reduced the working capital needs of the Registrant. The Registrant retains collection and service responsibility, as agent for the purchaser, over any receivables sold. Advances under such Receivable Agreement -20- 21 are subject to certain limitations. As of December 31, 1995, receivables as shown on the accompanying Consolidated Balance Sheet have been reduced by net proceeds of $7,700,000 from advances pursuant to the sale of receivables under the Registrant's Receivable Agreement. The Receivable Agreement contains covenants identical to the Senior Notes. In addition, at December 31, 1995, the Registrant owed $6,500,000 under a note payable to a bank due April 15, 1996 with interest accrued at the prime rate (Unsecured Note Payable). The Unsecured Note Payable was originally related to a $10,000,000 bank line of credit, which effective October 24, 1995 was reduced by the lender to the then outstanding balance of $6,500,000 due to a decline in the Registrant's financial performance. The line of credit contains covenants identical to the Senior Notes. On January 5, 1996, the Registrant borrowed $3,500,000 from the same bank under a note payable secured by certain machinery and equipment (Secured Note Payable). On March 15, 1996, the Registrant used a portion of the proceeds from the sale of certain assets of the Consumer Products Business to pay the $3,500,000 Secured Note Payable, and to prepay $3,540,000 of Senior Notes and $460,000 of the Unsecured Note Payable. After the payment of the Secured Note Payable, the indebtedness of the Registrant was unsecured. In connection with the sale of certain assets of the Consumer Products Business, the Registrant obtained waivers of certain financial covenants through May 15, 1996 from the lenders under the Senior Notes, the lender under the Unsecured Note Payable and the purchaser under the Receivable Agreement (collectively referred to as "Lenders") and an extension of the maturity date of the Unsecured Note Payable to May 15, 1996. Discussions between the Lenders and the Registrant are continuing with respect to the further extension of the maturity of the Unsecured Note Payable, additional waiver of financial covenants and additional reduction of indebtedness. Although the Registrant has obtained waivers or amendments from the Lenders on three previous occasions, there can be no assurance that the Lenders will agree to further waivers. If additional waivers of financial covenants or the extension of the maturity date of the Unsecured Note Payable are not obtained, the Lenders would be entitled to exercise certain remedies, including the acceleration of the due date for payment of the Senior Notes or the Unsecured Note Payable, and the terminination of the Receivable Agreement. Based upon the past experience of the Registrant in obtaining waivers or amendments from its Lenders and because the Registrant expects to use a portion of the proceeds from the sale of inventory and collection of accounts receivables of the Consumer Products Business to further reduce debt, the Registrant believes that the Lenders will extend the due date of the Unsecured Note Payable, will not accelerate the due date for payment of the Senior Notes and will not terminate the Receivable Agreement. The accompanying consolidated financial statements have been prepared on the basis of such belief of the Registrant. At December 31, 1995, the Registrant had unused sources of liquidity consisting of cash and cash equivalents of $3,904,000, additional advances under the Receivable Agreement of $300,000, a tax net operating loss carryforward of $17,209,000, a minimum tax credit carryforward of $1,083,000 and other tax credit carryforwards of $75,000. The Registrant believes that its financial resources, including proceeds from the sale of certain assets of the Consumer Products Business and other internally generated funds, are adequate to meet its foreseeable needs, subject to the satisfactory resolution of current discussions with the Lenders. -21- 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page(s) ------- Independent Auditors' Report 23 Consolidated Balance Sheets - December 31, 1995 and 1994 24-25 Consolidated Statements of Earnings (Loss) - Three Years Ended December 31, 1995 26 Consolidated Statements of Cash Flows - Three Years Ended December 31, 1995 27 Consolidated Statements of Common Stockholders' Equity - Three Years Ended December 31, 1995 28 Notes to Consolidated Financial Statements 29-50
-22- 23 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Kerr Group, Inc. We have audited the consolidated financial statements of Kerr Group, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kerr Group, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basis consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Los Angeles, California March 15, 1996 -23- 24 CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 - ---------------------------------------------------------------------------------------------------- (in thousands) ASSETS Current assets Cash and cash equivalents $ 3,904 $ 2,261 Receivables - primarily trade accounts, less allowance for doubtful accounts of $421 in 1995 and $170 in 1994 7,430 16,312 Inventories Raw materials and work in process 11,245 11,156 Finished goods 19,796 23,134 -------- -------- Total inventories 31,041 34,290 Prepaid expenses and other current assets 3,108 4,526 -------- -------- Total current assets 45,483 57,389 Property, plant and equipment, at cost Land 427 427 Buildings and improvements 13,589 12,577 Machinery and equipment 93,401 84,462 Furniture and office equipment 6,035 5,381 -------- -------- 113,452 102,847 Accumulated depreciation and amortization (61,937) (54,506) -------- -------- Net property, plant and equipment 51,515 48,341 Deferred income taxes 8,057 2,192 Goodwill and other intangibles, net of amortization of $2,291 in 1995 and $1,812 in 1994 7,140 6,622 Other assets 8,026 9,156 -------- -------- $120,221 $123,700 ======== ========
See accompanying notes to consolidated financial statements. -24- 25 CONSOLIDATED BALANCE SHEETS (continued)
- ------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 - ------------------------------------------------------------------------------------------- (in thousands, except per share amounts) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term debt $ 6,500 $ 5,500 Senior debt due 1997 through 2003 classified as current 50,000 0 Accounts payable 10,488 13,445 Accrued pension liability 3,777 70 Other current liabilities 5,056 3,792 -------- -------- Total current liabilities 75,821 22,807 Pension liability 18,318 15,230 Other long-term liabilities 2,175 2,610 Senior debt due 1997 through 2003 0 50,000 Stockholders' equity Preferred Stock, 487 shares authorized and issued, at liquidation value of $20 per share 9,748 9,748 Common Stock, $.50 par value per share, 20,000 shares authorized, 4,226 shares issued in 1995 and 4,220 shares issued in 1994 2,113 2,110 Additional paid-in capital 27,239 27,210 Retained earnings 1,860 11,995 Treasury Stock, at cost, 293 shares in 1995 and 543 shares in 1994 (6,913) (12,803) Excess of additional pension liability over unrecognized prior service cost, net of tax benefits (10,140) (5,207) -------- -------- Total stockholders' equity 23,907 33,053 -------- -------- $120,221 $123,700 ======== ========
See accompanying notes to consolidated financial statements. -25- 26 CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
- ----------------------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - ----------------------------------------------------------------------------------------------- (in thousands, except per share amounts) Net sales $138,995 $139,156 $127,372 Cost of sales 108,964 96,356 88,922 -------- -------- -------- Gross profit 30,031 42,800 38,450 Selling, warehouse, general and administrative expenses 32,037 32,435 30,095 Loss on plant relocation -- -- 4,500 Loss on revaluation of land 1,000 -- -- Interest expense 6,047 4,985 5,680 Interest and other income (228) (369) (858) -------- -------- -------- Earnings (loss) before income taxes (8,825) 5,749 (967) Provision (benefit) for income taxes (3,518) 2,345 (634) -------- -------- -------- Earnings (loss) before extraordinary loss (5,307) 3,404 (333) Extraordinary loss on retirement of debt, after applicable income tax benefit of $632 -- -- (1,300) -------- -------- -------- Net earnings (loss) (5,307) 3,404 (1,633) Preferred stock dividends 829 829 829 -------- -------- -------- Net earnings (loss) applicable to common stockholders $ (6,136) $ 2,575 $ (2,462) ======== ======== ======== Earnings (loss) per common share: Earnings (loss) per common share before extraordinary loss $ (1.60) $ 0.70 $ (0.32) Extraordinary loss per common share on retirement of debt -- -- (0.35) -------- -------- -------- Net earnings (loss) per common share $ (1.60) $ 0.70 $ (0.67) ======== ======== ========
See accompanying notes to consolidated financial statements. -26- 27 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 1994 1993 (in thousands) CASH FLOW PROVIDED (USED) BY OPERATIONS Earnings (loss) $ (5,307) $ 3,404 $ (333) Add (deduct) noncash items included in earnings (loss) Depreciation and amortization 9,016 7,731 7,364 Reserve for loss on plant relocation, net of tax -- -- 2,754 Change in deferred income taxes (2,482) 1,705 159 Reduction in total pension liability, net (1,597) (266) (1,116) Other, net 1,420 62 (624) Changes in other operating working capital Receivables 8,882 (2,779) (2,186) Inventories 3,249 (6,258) (5,712) Other current assets 1,304 (133) (885) Accounts payable (2,957) 3,872 729 Accrued expenses 1,379 (913) (541) -------- -------- -------- Cash flow provided (used) by operations 12,907 6,425 (391) CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES Capital expenditures (11,840) (15,648) (11,256) Payments associated with relocation of home canning cap and lid operations (205) (3,005) -- Proceeds from liquidation of long-term certificates of deposit 375 1,000 -- Other, net (982) (699) (1,338) Collection of accounts receivable, and payment of accounts payable and accrued and other expenses related to discontinued operations (297) (2,598) (2,500) -------- -------- -------- Cash flow provided (used) by investing activities (12,949) (20,950) (15,094) CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES Net borrowings under lines of credit 1,000 5,500 -- Issuance of senior debt -- -- 50,000 Extinguishment of subordinated debt -- -- (41,131) Contribution of Common Stock to pension plan 1,891 -- -- Dividends paid (829) (829) (829) Other, net (377) 786 (477) -------- -------- -------- Cash flow provided (used) by financing activities 1,685 5,457 7,563 CASH AND CASH EQUIVALENTS Increase (decrease) during the year 1,643 (9,068) (7,922) Balance at beginning of the year 2,261 11,329 19,251 -------- -------- -------- Balance at end of the year $ 3,904 $ 2,261 $ 11,329 ======== ======== ========
See accompanying notes to consolidated financial statements. -27- 28 CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------- Years Ended December 31, 1995, 1994 and 1993 - ----------------------------------------------------------------------------------------------------------------------- Number Of Excess Of Shares Of Additional Pension Notes Common Additional Liability Over Receivable Stock Common Paid-In Retained Treasury Unrecognized From ESOP Outstanding Stock Capital Earnings Stock Prior Service Cost Trusts - ----------------------------------------------------------------------------------------------------------------------- (in thousands) Balance, December 31, 1992 3,675 $2,105 $27,113 $11,882 $(12,737) $ -- $(1,647) Net loss -- -- -- (1,633) -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Pension adjustment -- -- -- -- -- (6,835) -- Repayments on ESOP Trusts notes receivable -- -- -- -- -- -- 931 Purchase of common stock (8) -- -- -- (66) -- -- Restricted Stock Plan -- -- 32 -- -- -- -- ----- ------ ------- ------- -------- -------- ------- Balance, December 31, 1993 3,667 2,105 27,145 9,420 (12,803) (6,835) (716) Net earnings -- -- -- 3,404 -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Pension adjustment -- -- -- -- -- 1,628 -- Repayments on ESOP Trusts notes receivable -- -- -- -- -- -- 716 Issuance of Common Stock under stock option plans 10 5 65 -- -- -- -- ----- ------ ------- ------- -------- -------- ------- Balance, December 31, 1994 3,677 2,110 27,210 11,995 (12,803) (5,207) -- Net loss -- -- -- (5,307) -- -- -- Dividends on Preferred Stock -- -- -- (829) -- -- -- Pension adjustment -- -- -- -- -- (4,933) -- Contribution of Treasury Stock to pension fund 250 -- -- (3,999) 5,890 -- -- Issuance of Common Stock under stock option plans 6 3 29 -- -- -- -- ----- ------ ------- ------- -------- -------- ------- Balance, December 31, 1995 3,933 $2,113 $27,239 $ 1,860 $ (6,913) $(10,140) $ -- ===== ====== ======= ======= ======== ======== =======
See accompanying notes to consolidated financial statements. -28- 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Kerr Group, Inc., and its wholly owned subsidiary, collectively referred to as the Company. All material intercompany balances and transactions are eliminated in consolidation. CASH EQUIVALENTS Cash equivalents consist only of investments that have an original maturity of three months or less, are readily convertible to known amounts of cash and have insignificant risk of changes in value because of changes in interest rates. INVENTORIES Inventories are valued at the lower of cost or market, determined by the use of the first-in, first-out method. DEPRECIATION, MAINTENANCE AND REPAIRS Depreciation of property, plant and equipment is provided by the use of the straight-line method over the estimated useful lives of the assets. The principal estimated useful lives used in computing the depreciation provisions are as follows: Buildings and improvements 5 to 30 years Machinery and equipment 3 to 15 years Furniture and equipment 5 to 10 years
The policy of the Company is to charge amounts expended for maintenance and repairs to expense and to capitalize expenditures for major replacements and betterments. GOODWILL AND OTHER INTANGIBLES The excess of cost over net tangible assets of the business acquired during 1987 is amortized on a straight-line basis over 40 years. Other intangible assets are being amortized by the use of the straight-line method over their respective initial estimated lives ranging from 2 to 17 years. The Company periodically evaluates goodwill to assess recoverability based upon expectations of future nondiscounted operating earnings related to the acquired business. Based upon the most recent analysis, the Company believes that no impairment of goodwill exists at December 31, 1995. REVENUE RECOGNITION The Company recognizes revenue as product is shipped. A reserve is provided for estimated end-of-season returns of home canning supplies as sales are recorded. PENSIONS AND OTHER POSTRETIREMENT BENEFITS Financial Accounting Standards Board Statement No. 87 (FASB No. 87) requires that a company record an additional minimum pension liability to the extent that a company's accumulated pension benefit obligation exceeds the fair value of pension plan assets and accrued pension liabilities. This additional minimum pension liability is offset by an intangible asset, not to exceed prior service costs of the pension plan. Amounts in excess of prior service costs are reflected as a reduction in stockholders' equity, net of related tax benefits. -29- 30 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Effective January 1, 1993, the Company adopted Financial Accounting Standards Board Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions (FASB No. 106). As more fully described in Note 6, the Company has elected to amortize the impact of FASB No. 106 ratably over 20 years. INCOME TAXES In February 1992, the Financial Accounting Standards Board issued Statement No. 109, Accounting for Income Taxes (FASB No. 109). Under the asset and liability method of FASB No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective January 1, 1993, the Company adopted FASB No. 109. The cumulative and pro forma effect of the change in accounting was not material. EARNINGS (LOSS) PER COMMON SHARE Primary net earnings (loss) per common share are based on the weighted average number of common shares outstanding and are after Preferred Stock dividends. Fully diluted net earnings (loss) per common share reflect when dilutive 1) the incremental common shares issuable upon the assumed exercise of outstanding stock options and 2) the assumed conversion of the Preferred Stock and the elimination of the related Preferred Stock dividends. Antidilution occurred in 1995, 1994 and 1993. NATURE OF OPERATIONS - SIGNIFICANT USE OF RESIN The Company's Plastic Products Business uses a significant amount of resin in its manufacturing process. From time to time, the Company has experienced substantial increases in the cost of resin. To the extent that the Company is unable to pass on resin cost increases, the cost increases could have a significant impact on the results of operations of the Company. FINANCIAL STATEMENT PREPARATION AND PRESENTATION The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of December 31, 1995 and 1994, and the reported amounts of income and expenses for each of the three years ended December 31, 1995. Actual results could differ from those estimates. Included in other assets are certain assets held for sale consisting of real property and buildings. Management has obtained a recent appraisal to support the carrying value of such assets, however, the ultimate sales proceeds received by the Company could differ from the appraisal amount depending on changes in market conditions. Certain reclassifications have been made to prior years' financial statements to conform to the 1995 presentation. -30- 31 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS During 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets (FASB No. 121), and Statement No. 123, Accounting for Stock-Based Compensation (FASB No. 123). FASB No.121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill. FASB No. 121 will be adopted during 1996 and is not expected to have a material effect on the Company's financial position or results of operations. FASB No.123 establishes a "fair value" method of accounting for the value of grants under stock-based compensation plans. As permitted under FASB No. 123, the Company will elect to continue to measure compensation expense related to employee stock option plans utilizing the intrinsic value method as prescribed by APB Opinion No. 25. However, beginning in 1996, the Company will disclose in the footnotes to its financial statements the proforma effect on net income and earnings per common share as if the fair value method of measuring compensation expense related to employee stock option plans was utilized as described in FASB No. 123. NOTE 2 - SUBSEQUENT EVENT - SALE OF ASSETS AND RESTRUCTURING On March 15, 1996, the Company sold certain assets of the Consumer Products Business for a purchase price of approximately $14,500,000 and announced a restructuring program which will include the relocation of the Company's principal executive office and the consolidation of certain manufacturing facilities. The Company also expects to receive approximately $16,500,000, primarily during the remainder of 1996, from the Company's sale to its customers of the inventory of the Consumer Products Business and from the collection of the accounts receivable of the Consumer Products Business. These proceeds will be utilized for working capital, to reduce debt, including $3,500,000 of debt secured by liens on certain machinery and equipment of the Company, and to fund costs of the restructuring. In connection with the sale of Consumer Products Business assets, the Company will report in the first quarter of 1996 a one-time pretax gain of approximately $2,900,000 ($1,740,000 after-tax or $0.44 per common share). Also during the first quarter of 1996, the Company will report a pretax loss of approximately $7,700,000 ($4,620,000 after-tax or $1.17 per common share) associated with the restructuring. The loss on the restructuring includes provisions for severance costs and related benefits, net loss on subleases, write-off of fixed assets and certain intangible assets, and legal and professional fees. In addition to the loss recorded on the restructuring, the Company will incur additional non-recurring pretax losses during 1996 and early 1997 associated with the restructuring of $2,400,000 ($1,440,000 after-tax or $0.37 per common share) primarily related to equipment and personnel relocation costs, inefficiencies related to the relocation of operations and start-up costs which accounting rules require to be expensed as incurred. The accompanying financial statements do not reflect the discontinuance of the Consumer Products segment. -31- 32 NOTE 3 - ISSUES AFFECTING LIQUIDITY On March 15, 1996, the Company used a portion of the proceeds from the sale of certain assets of the Consumer Products Business to pay the $3,500,000 Secured Note Payable (which was borrowed on January 5, 1996), and to prepay $3,540,000 of Senior Notes and $460,000 of the Unsecured Note Payable. After the payment of the Secured Note Payable, the indebtedness of the Company was unsecured. In connection with the sale of certain assets of the Consumer Products Business, the Company obtained waivers of certain financial covenants through May 15, 1996 from the lenders under the Senior Notes, the lender under the Unsecured Note Payable and the purchaser under the Receivable Agreement (collectively referred to as "Lenders") and an extension of the maturity date of the Unsecured Note Payable to May 15, 1996. Discussions between the Lenders and the Company are continuing with respect to the further extension of the maturity of the Unsecured Note Payable, additional waiver of financial covenants and additional reduction of indebtedness. Although the Company has obtained waivers or amendments from the Lenders on three previous occasions, there can be no assurance that the Lenders will agree to further waivers. If additional waivers of financial covenants or the extension of the maturity date of the Unsecured Note Payable are not obtained, the Lenders would be entitled to exercise certain remedies, including the acceleration of the due date for payment of the Senior Notes or the Unsecured Note Payable, and the terminination of the Receivable Agreement. Based upon the past experience of the Company in obtaining waivers or amendments from its Lenders and because the Company expects to use a portion of the proceeds from the sale of inventory and collection of accounts receivables of the Consumer Products Business to further reduce debt, the Company believes that the Lenders will extend the due date of the Unsecured Note Payable, will not accelerate the due date for payment of the Senior Notes and will not terminate the Receivable Agreement. The accompanying consolidated financial statements have been prepared on the basis of such belief of the Company. NOTE 4 - INCOME TAXES Total income tax provision (benefit) for the years ended December 31, 1995 and 1994 was allocated as follows:
- -------------------------------------------------------------------------------- 1995 1994 - -------------------------------------------------------------------------------- (in thousands) Earnings (loss) $(3,518) $2,345 Stockholders' equity, related to excess of pension liability over unrecognized prior service costs (3,281) 878 ------- ------ $(6,799) $3,223 ======= ======
-32- 33 NOTE 4 - INCOME TAXES (continued) The provision (benefit) for income taxes for the years ended December 31, 1995, 1994 and 1993 consists of the following:
- -------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------- (in thousands) Current U.S. Federal $ -- $ 81 $ 119 State -- -- -- ------- ------ ----- Total current -- 81 119 Deferred U.S. Federal (2,755) 1,814 (637) State (763) 450 (116) ------- ------ ----- Total deferred (3,518) 2,264 (753) ------- ------ ----- Total provision (benefit) for income taxes $(3,518) $2,345 $(634) ======= ====== =====
The significant components of deferred income taxes (benefits) for the years ended December 31, 1995, 1994 and 1993 are as follows:
- ----------------------------------------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------------------------------------- (in thousands) Reinstatement (reduction) of deferred income taxes attributable to recognition of alternative minimum tax credits and tax net operating loss carryforwards $(5,056) $ (541) $ 52 Temporary differences associated with the sales of discontinued operations (466) 1,531 1,051 Temporary differences associated with the loss on plant relocation 157 1,429 (1,368) Additional costs inventoried for tax purposes (44) 64 (245) Excess (deficit) of pension contributions paid over pension expense 1,513 46 448 Excess (deficit) of tax over book depreciation, including assets retired or sold 668 (19) (327) Other, net (290) (246) (364) ------- ------ ------- Total $(3,518) $2,264 $ (753) ======= ====== =======
-33- 34 NOTE 4 - INCOME TAXES (continued) Total provision (benefit) for income taxes for the years ended December 31, 1995, 1994 and 1993 differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to earnings (loss) before income taxes as a result of the following:
- -------------------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------------------- (in thousands) Computed "expected" tax provision (benefit) $(3,002) $1,954 $(329) Increase (reduction) in provision resulting from: State income tax provision (benefit), net of Federal tax effect (524) 231 (47) Change in the valuation allowance for deferred tax assets -- -- (369) Other, net 8 160 111 ------- ------ ----- Actual tax provision (benefit) $(3,518) $2,345 $(634) ======= ====== =====
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities at December 31, 1995 and 1994 are as follows:
- ---------------------------------------------------------------------------------------------------- 1995 1994 - ---------------------------------------------------------------------------------------------------- (in thousands) Deferred income tax assets: Pension liabilities-- Excess of additional pension liability over unrecognized prior service cost $ 6,743 $ 3,462 Accrued pension liability -- 1,490 Accrued retiree health liability 551 630 Accrued reserves associated with discontinued operations 274 350 Inventory 675 722 Accrued vacation pay 461 383 Tax credit carryforwards 1,158 1,830 Net operating loss carryforwards 6,882 1,962 Other 670 1,120 ------- ------- Total gross deferred income tax assets 17,414 11,949 Less valuation allowance -- -- ------- ------- Deferred income tax assets, net of valuation allowance 17,414 11,949 Deferred income tax liabilities: Property, plant and equipment, principally due to differences in depreciation (5,744) (5,146) Excess of book basis over tax basis of land and buildings formerly used as a glass container manufacturing plant (1,252) (1,795) Other (610) (962) ------- ------- Total gross deferred income tax liabilities (7,606) (7,903) ------- ------- Net deferred income tax assets $ 9,808 $ 4,046 ======= =======
-34- 35 NOTE 4 - INCOME TAXES (continued) In order to fully realize the deferred income tax asset, the Company will need to generate future taxable income of at least $35,000,000 prior to expiration of net operating loss carryforwards which will begin to expire in 2006. Based upon the Company's recent pre-tax earnings adjusted for significant nonrecurring items, the sale of certain assets of the Consumer Products Business and cost savings related to the restructuring announced March 15, 1996 and projections of future taxable income over the period in which the deferred income tax assets are deductible, management believes it is more likely than not that the Company will realize the benefit of the deferred income tax asset. There can be no assurance, however, that the Company will generate any specific level of continuing earnings. At December 31, 1995, the Company had net operating loss carryforwards for Federal income tax purposes of $17,209,000 which are available to offset future Federal taxable income, expiring in the years 2006 through 2010. The Company also has an alternative minimum tax credit carryforward of $1,083,000 and other tax credit carryforwards (primarily investment tax credits) of $75,000, expiring in the years 1999 through 2009, which are available to reduce future Federal income taxes, if any. The total net cash payments related to income taxes, which primarily represent Federal alternative minimum taxes and state taxes, were $24,000, $761,000 and $470,000 for 1995, 1994 and 1993, respectively. NOTE 5 - OTHER CURRENT LIABILITIES At December 31, 1995 and 1994, other current liabilities were as follows:
- -------------------------------------------------------------------------------- 1995 1994 - -------------------------------------------------------------------------------- (in thousands) Accrued wages and vacation pay $2,143 $1,879 Accrued interest 2,617 240 Other accrued expenses 296 1,673 ------ ------ Total accrued expenses $5,056 $3,792 ====== ======
NOTE 6 - RETIREMENT BENEFITS PENSIONS The Company has a defined benefit pension plan (the "Retirement Income Plan") and a defined contribution pension plan, which cover substantially all employees. The Retirement Income Plan generally provides benefits based on years of service and average final pay. The defined contribution plan provides benefits based on a fixed percent of pay for each year of service. The Company's policy is to fund amounts sufficient to satisfy the funding requirements of the Employee Retirement Income Security Act of 1974. During 1995 and 1994, the Company funded the Retirement Income Plan by $1,983,000 more than the accrued pension expense for the 1994 plan year. During 1994 and 1993, the Company funded the Retirement Income Plan by $800,000 more than the accrued pension expense for the 1993 plan year. -35- 36 NOTE 6 - RETIREMENT BENEFITS (continued) During 1995, the Company contributed 250,000 shares of its Common Stock, at a price of $7.56 per share, to the Retirement Income Plan. The contribution reduced the Company's recorded pension liability by $1,891,000. During 1995, the Company adopted a Pension Restoration Plan which is an unfunded plan providing benefits to participants not payable by the Company's Retirement Income Plan because of the limitations on benefits imposed by the Internal Revenue Code of 1986, as amended. The aggregate annual accrued benefit for each participant under the combination of the Retirement Income Plan and the Pension Restoration Plan when expressed as a single-life annuity is limited to $200,000. Net pension expense for the years ended December 31, 1995, 1994 and 1993 included the following components:
1995 1994 1993 (in thousands) Defined Benefit Plan: Service cost (benefit earned during period) $ 498 $ 564 $ 472 Interest cost on projected benefit obligation 7,364 7,018 6,941 Actual loss (return) on assets (16,080) 597 (7,843) Net amortization and deferral 9,460 (6,552) 1,619 -------- ------- ------- Defined Benefit Plan expense $ 1,242 $ 1,627 $ 1,189 ======== ======= ======= Defined Contribution Plan expense $ 15 $ 17 $ 21 ======== ======= =======
-36- 37 NOTE 6 - RETIREMENT BENEFITS (continued) The funded status of the defined benefit plans at December 31, 1995 and 1994 was as follows:
- ------------------------------------------------------------------------------------------ 1995 1994 - ------------------------------------------------------------------------------------------ (in thousands) Actuarial present value Vested benefit obligation $ 99,237 $ 81,605 Nonvested benefit obligation 1,942 2,445 -------- -------- Accumulated benefit obligation 101,179 84,050 Effect of future salary increases 2,812 1,842 -------- -------- Projected benefit obligation 103,991 85,892 Plan assets at fair value (a) 79,084 68,750 -------- -------- Projected benefit obligation in excess of plan assets 24,907 17,142 Unrecognized net transition obligation (474) (553) Unrecognized prior service costs (936) (663) Unrecognized net loss (19,660) (10,511) -------- -------- Accrued pension liability before adjustment 3,837 5,415 Adjustment required to recognize additional minimum pension liability 18,258 9,885 -------- -------- Accrued pension liability related to the defined benefit plan $ 22,095 $ 15,300 ======== ======== Accrued pension liability related to the defined contribution plan $ 8 $ 17 ======== ========
(a) Plan assets include 368,200 shares of Company Common Stock at a value of $3,682,000 at December 31, 1995 and 118,200 shares of Company Common Stock at a value of $990,000 at December 31, 1994. In connection with recording the additional minimum pension liability pursuant to the provisions of FASB No. 87, the Company recorded a reduction in stockholders' equity of $10,140,000 at December 31, 1995, and $5,207,000 at December 31, 1994, and an intangible pension asset of $1,376,000 at December 31, 1995, and $1,216,000 at December 31, 1994. The majority of all pension plan assets are held by a master trust created for the collective investment of the plan's funds, as well as in private placement insurance contracts. At December 31, 1995, assets held by the master trust consisted primarily of cash, U.S. government obligations, corporate bonds and common stocks. The defined benefit plan assumptions as of December 31, 1995, 1994 and 1993 were as follows:
- -------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------- Discount rate 7.25% 8.75% 7.5% Increase in compensation rate 5% 5% 5% Long-term rate of return on assets 9.5% 9.5% 9.5%
-37- 38 NOTE 6 - RETIREMENT BENEFITS (continued) The Company retained the pension benefit obligations for service prior to the date of the sale and the pension assets related to the Company's discontinued Commercial Glass Container and Metal Crown Businesses. In connection with the sale of the two businesses, the Company's pension plans had a combined curtailment loss of $4,664,000 pursuant to FASB Statement No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. During 1993, the Company recorded a curtailment loss of $232,000 related to the relocation of the Company's home canning cap and lid manufacturing operations. Such curtailment losses were included as components of the respective losses on the sale of the businesses and plant relocation. RETIREE HEALTH CARE AND LIFE INSURANCE The Company provides certain health care and life insurance benefits for retired employees and their spouses. The costs of such benefits are shared by retirees through one or more of the following: a) deductibles, b) copayments and c) retiree contributions. Salaried employees hired prior to September 1, 1992, and certain hourly employees may become eligible for those benefits if they reach retirement age while working for the Company. The Company will not provide retiree health care and life insurance benefits for salaried employees hired after September 1, 1992. Health care and life insurance benefits provided by the Company are not funded in advance, but rather are paid by the Company as the costs are actually incurred by the retirees. As discussed in Note 1, effective January 1, 1993, the Company adopted FASB No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. FASB No. 106 requires a company to use an accrual method for recording retiree health care and life insurance benefits instead of the previously used pay-as-you-go method. The effect of this accounting change on 1993 results of operations was to increase retiree health care and life insurance expense by $640,000 from the amount that would have been recorded in 1993 under the previously used pay-as-you-go method. The adoption of FASB No. 106 at January 1, 1993, created a previously unrecognized accumulated postretirement benefit obligation of $13,195,000. As permitted under FASB No. 106, the Company has elected to amortize the $13,195,000 accumulated postretirement benefit obligation ratably over 20 years. Retiree health care and life insurance expense for the years ended December 31, 1995, 1994 and 1993 included the following components:
- ----------------------------------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------------------------------- (in thousands) Retiree health care and life insurance expense: Service cost (benefit earned during period) $ 41 $ 54 $ 83 Interest cost on accumulated benefit obligation 855 1,082 1,187 Actual return on assets -- -- -- Net amortization and deferral 544 624 660 ------ ------ ------ $1,440 $1,760 $1,930 ====== ====== ======
-38- 39 NOTE 6 - RETIREMENT BENEFITS (continued) The funded status of the retiree health care and life insurance plans at December 31, 1995 and 1994 was as follows:
- ---------------------------------------------------------------------------------------------- 1995 1994 - ---------------------------------------------------------------------------------------------- (in thousands) Actuarial present value of accumulated postretirement benefit obligation: Retirees $ 9,210 $ 9,083 Fully eligible active participants 735 1,428 Other active participants 1,055 739 -------- -------- Accumulated benefit obligation 11,000 11,250 Plan assets at fair value -- -- -------- -------- Accumulated benefit obligation in excess of plan assets 11,000 11,250 Unrecognized net transition obligation (10,612) (11,237) Unrecognized prior service costs -- -- Unrecognized net gain (loss) 992 1,563 -------- -------- Accrued postretirement benefit liability $ 1,380 $ 1,576 ======== ========
The retiree health care and life insurance plans assumptions are as follows:
- ----------------------------------------------------------------------------------------------------------- December 31, December 31, December 31, 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------- Discount rate 7.25% 8.75% 7.5% Health care cost trend rates-- Indemnity plans 8.75% trending down 8.75% trending down 9% trending down to 6% to 6% to 6% Managed care plans 6.75% trending down 6.75% trending down 7% trending down to 4% to 4% to 4% - -----------------------------------------------------------------------------------------------------------
The effect of a one percentage point annual increase in these assumed cost trend rates at December 31, 1995, would increase the postretirement benefit obligation by approximately $420,000 and would increase the service and interest cost components of the annual expense by approximately $40,000. -39- 40 NOTE 7 - FINANCING At December 31, 1995 and 1994, the Company's debt consisted of $50,000,000 principal amount of Senior Notes payable to a group of insurance companies consisting of John Hancock Mutual Life Insurance Company, New York Life Insurance Company and Massachusetts Mutual Life Insurance Company and lines of credit with banks. The Senior Notes were issued on September 21, 1993, and consist of $41,000,000 of 10-year notes with an interest rate of 9.45% and $9,000,000 of 6-year notes with an interest rate of 8.99%. Sinking fund payments begin under the 10-year notes in 1998 and under the 6-year notes in 1997. The Senior Notes are unsecured. The Senior Notes contain various covenants including covenants relating to coverage of fixed charges, minimum level of tangible net worth, limitation on leverage and limitation on restricted payments, for which payments are defined to include Common Stock dividends. Under the most restrictive covenant related to the payment of dividends, the payment of Common Stock dividends is not permitted at December 31, 1995. As of December 31, 1995, the Company is not in compliance with certain of the financial covenants and has obtained waivers of such covenants through May 15, 1996. As of December 31, 1995, the Company's $50,000,000 of outstanding Senior Notes is classified as a current liability because the Company was in default of certain financial covenants for which the Company had received waivers only through May 15, 1996. See further discussion at Note 3 of notes to consolidated financial statements. The mandatory scheduled principal payments, as specified in the loan agreement, for the next five years on the Senior Notes outstanding at December 31, 1995, are as follows:
- -------------------------------------------------------------------------------- Years Ended December 31, - -------------------------------------------------------------------------------- (in thousands) 1996 $ -- 1997 3,000 1998 9,833 1999 9,833 2000 6,833 2001 and thereafter 20,501
A portion of the proceeds from the sale of the Senior Notes was used to redeem all of the $40,000,000 principal amount of 13% Subordinated Notes on December 15, 1993, at par. During the third quarter of 1993, the Company incurred an after-tax loss of $1,300,000, or $0.35 per common share, in connection with the refinancing on September 21, 1993, of its 13% Subordinated Notes and the termination of its revolving credit facility. The extraordinary loss included interest expense on the 13% Subordinated Notes from September 21, 1993 through December 15, 1993 (the date on which the Subordinated Notes were redeemed at par) and the write-off of unamortized debt fees and related costs. -40- 41 NOTE 7 - FINANCING (continued) As of December 31, 1995, the Company had an Accounts Receivable Agreement (Receivable Agreement) maturing on January 18, 1997 to meet the seasonal working capital needs of the Company. The Receivable Agreement permits the Company to sell its trade accounts receivable on a nonrecourse basis. Under the Receivable Agreement, the maximum amount that can be advanced to the Company pursuant to the sale of trade accounts receivable at any time is $13,500,000, which amount is reduced on April 15, 1996 to $10,000,000. The reduction occurred because the sale of assets of the Consumer Products Business reduced the working capital needs of the Company. The Company retains collection and service responsibility, as agent for the purchaser, over any receivables sold. Advances under such Receivable Agreement are subject to certain limitations. As of December 31, 1995, receivables as shown on the accompanying Consolidated Balance Sheet have been reduced by net proceeds of $7,700,000 from advances pursuant to the sale of receivables under the Company's Receivable Agreement. The Receivable Agreement contains covenants identical to the Senior Notes. In addition, at December 31, 1995, the Company owed $6,500,000 under a note payable to a bank due April 15, 1996 (which maturity date was extended to May 15, 1996) with interest accrued at the prime rate (Unsecured Note Payable). The Unsecured Note Payable was originally related to a $10,000,000 bank line of credit, which effective October 24, 1996 was reduced by the lender to the then outstanding balance of $6,500,000 due to a decline in the Company's financial performance. During 1994 and early 1995, the Company had an additional bank line of credit which was replaced by the Receivable Agreement. The line of credit contains covenants identical to the Senior Notes. During 1995 and 1994, the Company had maximum borrowings outstanding under its lines of credit of $12,000,000 and $5,500,000, respectively. During 1995 and 1994, the weighted average interest rate under its lines of credit was 8.7% and 7.3% and the weighted average borrowings outstanding under its lines of credit was $7,528,000 and $1,544,000, respectively. Total cash payments of interest during 1995, 1994 and 1993 were $3,440,000, $4,743,000 and $6,501,000, respectively. See discussion of issues affecting liquidity at Note 3 of notes to consolidated financial statements. NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS During 1994, the Financial Accounting Standards Board issued Statement No. 107, Disclosure about Fair Value of Financial Instruments (FASB No. 107). FASB No. 107 requires the disclosure of the estimated fair values for all financial instruments for which it is practicable to estimate fair value. The fair value of cash, accounts receivable and payable, and advances pursuant to the sale of receivables under the Company's Receivable Agreement approximate their carrying amount because of their short maturity. The fair value of the line of credit approximates its carrying amount because such debt has a floating rate tied to the Prime rate. -41- 42 NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) The fair value of the Company's $50,000,000 principal amount of Senior Notes would be expected to be higher than the carrying amount because market interest rates have declined since such debt was incurred. However, since it is unlikely the Company could obtain similar unsecured financing at comparable rates today, determining a fair value of such debt is not appropriate. NOTE 9 - PREFERRED STOCK CLASS B PREFERRED STOCK At December 31, 1995 and 1994, the Company was authorized to issue 1,302,300 shares of Class B Preferred Stock, par value $.50 per share, which may be issued in series from time to time at the discretion of the Board of Directors. Holders of all series of Class B Preferred Stock share ratably as to rights to payment of dividends and to amounts payable in event of liquidation, dissolution or winding up of the Company. No dividends or payments in liquidation may be made with respect to Common Stock or any other stock ranking junior as to dividends or assets to the Class B Preferred Stock unless all accumulated dividends and sinking fund payments on the Class B Preferred Stock have been paid in full and, in the event of liquidation, unless the accumulated dividends and the liquidation preference of the Class B Preferred Stock have been paid. SERIES D At December 31, 1995 and 1994, the Company had 487,400 shares of Class B Cumulative Convertible Preferred Stock, Series D (Preferred Stock), issued and outstanding. Holders of the Preferred Stock are entitled to a cumulative dividend, payable quarterly, at the annual rate of 8.5% ($1.70 per share). The Preferred Stock is redeemable at the option of the Company at any time, in whole or in part, at a price of $20.00 per share. No purchases or redemptions of or dividends on Common Stock may occur unless all accumulated dividends have been paid on the Preferred Stock. Each share of Preferred Stock has a liquidating value of $20.00 per share and is convertible into Common Stock at the rate of 1.4545 shares of Common Stock for each share of Preferred Stock (equivalent to a conversion price of $13.75 per common share), subject to adjustment under certain conditions. At December 31, 1995, a total of 708,923 shares of Common Stock was reserved for issuance upon conversion of the Preferred Stock. If six quarterly dividends on the Preferred Stock are unpaid, the holders of Preferred Stock shall have the right, voting as a class, to elect two additional persons to the Board of Directors of the Company until all such dividends have been paid. -42- 43 NOTE 10 - COMMON STOCK EMPLOYEE STOCK OWNERSHIP PLANS The Company has two employee stock ownership plans, the Kerr Group, Inc. Employee Incentive Stock Ownership Plan Trust formed in 1985 (ESOP I) and the Kerr Group, Inc. 1987 Employee Incentive Stock Ownership Plan Trust formed in 1987 (ESOP II). Both plans are for the benefit of employees of the Company. The Company borrowed funds from a group of banks, which in turn were loaned to the plans for the purpose of purchasing shares of the Company's Common Stock. The bank loans were repaid on February 28, 1992. The related Company loan to ESOP I was repaid during 1993 and the loan to ESOP II was repaid during 1994. ESOP I and ESOP II obtained the funds to repay loans primarily through the receipt of tax deductible contributions made by the Company. The Company funded such contributions primarily through the reduction of compensation and benefits, and deferral of salary increases which it would otherwise have provided to its employees. Total contribution expense for these plans was $472,000 and $633,000 in 1994 and 1993, respectively. For financial statement purposes, the bank loans were reflected as a liability and the Company's loans to ESOP I and ESOP II were reflected as a reduction in stockholders' equity. STOCK OPTIONS Under the Company's Stock Option Plans for employees, options may be granted at a price determined by the Stock Option Committee of the Board of Directors, which may be less than market value. Options may be exercised during periods established by such Committee; however, in no event may any option be exercised more than ten years after the date of grant. All of the Company's currently outstanding options generally vest in cumulative installments of 20% per year commencing on the date of grant. Such options become exercisable in full upon the occurrence of certain enumerated events, including certain changes in control of the Company. The options granted beginning in 1992 provide that the Company's stock price must equal or exceed a triggering price per Common Share, which is higher than the exercise price of the option, for ten consecutive trading days for the options to be exercisable. The options granted during 1995, 1994 and 1993 had triggering prices of $12.50 per Common Share. The options granted during 1992 had triggering prices of $10 per Common Share, which requirement was met during 1994, and the options issued during 1992 are now exercisable. -43- 44 NOTE 10 - COMMON STOCK (continued) The following tabulation summarizes changes under the Company's Stock Option Plans for employees during the years ended December 31, 1995, 1994 and 1993.
- ----------------------------------------------------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------- Number Of Number Of Number Of Options Price Range Options Price Range Options Price Range - ----------------------------------------------------------------------------------------------------------- Options Outstanding: Beginning of year 252,100 $5 3/8-10 3/8 274,000 $5 3/8-8 5/16 198,850 $5 3/8-11 7/16 Granted 204,000 7 9/16 6,500 9 7/16-10 3/8 157,500 8-8 5/16 Exercised (6,000) 5 3/8 (10,400) 5 3/8-7 1/8 -- Cancelled (23,000) 5 3/8-8 5/16 (18,000) 5 3/8-8 5/16 (36,000) 5 3/8-10 3/4 Expired -- -- (46,350) 5 3/8-11 7/16 ------- ------------- ------- ------------- ------- -------------- End of year 427,100 5 3/8-10 3/8 252,100 5 3/8-10 3/8 274,000 5 3/8-8 5/16 Exercisable at end of year: Currently exercisable 83,200 70,900 56,200 Exercisable if Common Stock trades at triggering price of $ 12.50 277,300 57,501 31,500 ------- ------ ------ Total 360,500 128,401 87,700 Available for grant at end of year 21,497 22,497 20,100
In addition, the 1988 Stock Option Plan for Non-Employee Directors (the 1988 Plan), consisting of 80,000 shares, and 1993 Stock Option Plan for Non-Employee Directors (the 1993 Plan), consisting of 60,000 shares, provide for the grant of options to purchase Common Stock to members of the Board of Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates. The option price of each option granted under these plans is the fair market value of Common Stock on the date of grant. Options under the 1988 Plan are immediately exercisable upon grant and will expire five years from the date of grant. Future grants of options under the 1988 Plan can only be made to Directors other than the Company's current Directors. Options under the 1993 Plan are exercisable six months after date of grant, provided that the Company's stock price equals or exceeds $12.50 per Common Share for ten consecutive trading days. Options under the 1993 Plan expire ten years from the date of grant. -44- 45 NOTE 10 - COMMON STOCK (continued) The following tabulation summarizes changes under the Company's Stock Option Plans for Non-Employee Directors during the years ended December 31, 1995, 1994 and 1993.
- ------------------------------------------------------------------------------------------------------ 1995 1994 1993 - ------------------------------------------------------------------------------------------------------ Number Of Number Of Number Of Options Price Range Options Price Range Options Price Range - ------------------------------------------------------------------------------------------------------ Options Outstanding: Beginning of year 60,000 $8 3/16 60,000 $8 3/16 60,000 $11 5/16 Granted -- -- 60,000 8 3/16 Exercised -- -- -- Expired -- -- (60,000) 11 5/16 ------ ------ ------ End of year 60,000 8 3/16 60,000 8 3/16 60,000 8 3/16 Exercisable at end of year: Currently exercisable -- -- -- Exercisable if Common Stock trades at $12.50 per share or above 60,000 60,000 60,000 ------ ------ ------ Total 60,000 60,000 60,000 Available for grant at end of year 80,000 80,000 80,000
The aggregate option price for all outstanding options at December 31, 1995, 1994 and 1993 was $3,698,000, $2,359,000 and $2,508,000, respectively. At the time options are exercised, the common stock account is credited with the par value of the shares issued and additional paid-in capital is credited with the cash proceeds in excess of par value. The Company's Stock Option Plans permit the grant of both incentive stock options and nonstatutory stock options. RESTRICTED STOCK PLAN In 1985 and 1984, the Company sold 65,000 shares and 75,000 shares, respectively, of Treasury Stock to an officer of the Company at a price of $1.00 per share. The shares were sold subject to forfeiture and restrictions on disposition under conditions as defined in the Restricted Stock Purchase Agreements between the Company and the officer. As of December 31, 1994, the restrictions on all 140,000 shares have been released. Compensation expense was recorded in the periods benefitted as the difference between the fair market value on the date of sale and the sale price. During 1993, total shares of 15,000 were released from restriction. -45- 46 NOTE 11 - LOSS ON PLANT RELOCATION During the fourth quarter of 1993, the Company recorded a pre-tax loss of approximately $4,500,000 ($2,754,000 after-tax or $0.75 per common share) associated with the relocation of its home canning cap and lid manufacturing operations from Chicago, Illinois to a new manufacturing facility in Jackson, Tennessee. The pre-tax loss consisted primarily of accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $2,500,000, ii) asset retirement and related facility closing costs of approximately $1,000,000, and iii) moving and relocation costs of approximately $700,000. In 1995, the Company made cash payments related to relocation costs of approximately $200,000. In 1994, the Company made cash payments related to such accruals for i) the early recognition of retiree health care and pension expense, severance, workers' compensation costs and insurance continuation costs of approximately $1,500,000, ii) asset retirement and related facility closing costs of approximately $600,000, iii) moving and relocation costs of approximately $600,000 and iv) other costs of approximately $300,000. In addition, during 1994, approximately $300,000 was charged against such accruals related to the book value of fixed assets retired. The remaining accruals primarily relate to retiree health costs and pensions which will be paid over a number of years. NOTE 12 - RENTAL EXPENSE AND LEASE COMMITMENTS The Company occupies certain manufacturing facilities, warehouse facilities and office space and uses certain automobiles, machinery and equipment under noncancelable lease arrangements. Rent expense under these agreements was $3,714,000, $3,085,000 and $3,008,000 in 1995, 1994 and 1993, respectively. At December 31, 1995, the Company was obligated under various noncancelable leases. Calendar year minimum rental commitments under the Company's leases are as follows:
- -------------------------------------------------------------------------------- Total Real Personal Years Ended December 31, Commitment Property Property - -------------------------------------------------------------------------------- (in thousands) 1996 $3,644 $3,256 $388 1997 3,517 3,253 264 1998 3,395 3,220 175 1999 3,311 3,200 111 2000 2,607 2,590 17 2001 through 2014 20,276 20,276 --
Real estate taxes, insurance and maintenance expenses are obligations of the Company. Generally, in the normal course of business, leases that expire will be renewed or replaced by leases on other properties. -46- 47 NOTE 13 - COMMITMENTS AND CONTINGENCIES In connection with the Company's Workers' Compensation insurance programs, the Company has pledged a certificate of deposit in the amount of $500,000 to secure surety bonds. The Company's estimate of its ultimate liability relating to these programs has been reflected on the Company's consolidated balance sheet as a liability. The Company has been designated by the Environmental Protection Agency as a potentially responsible party to share in the remediation costs of several waste disposal sites. Pursuant to the sale of the Metal Crown Business, the Company has indemnified the buyer for certain environmental remediation costs. In addition, pursuant to the sale of the Commercial Glass Container Business, the Company has indemnified the buyer for certain environmental remediation costs and has retained ownership of certain real property used in the Commercial Glass Container Business which may require environmental remediation. During 1995, the Company made cash payments related to environmental remediation of $327,000. As of December 31, 1995, the Company has accrued a reserve of approximately $312,000 for the expected remaining costs associated with environmental remediation described above and in connection with its current manufacturing plants. The amount of the reserve was based in part on an environmental study performed by an independent environmental engineering firm. The Company believes that this reserve is adequate. NOTE 14 - INDUSTRY SEGMENT INFORMATION During 1995, the Company operated in two industry segments, Plastic Products and Consumer Products. The manufacturing assets of the Consumer Products segment were subsequently sold in 1996. Operations in the Plastic Products segment involve: 1) the manufacture and sale of a variety of plastic products including child-resistant closures, tamper-evident closures, prescription packaging products, jars and other plastic closures and containers; and 2) the sale of glass prescription products. Operations in the Consumer Products segment involve: 1) the manufacture and sale of caps and lids for home canning, and 2) the sale of glass jars and a line of pickling spice and pectin products for home canning, iced tea tumblers and beverage mugs. Intersegment sales are not material. No customer accounted for more than 10% of net sales in 1995, 1994 or 1993. The Company carries on a product development and engineering program with respect to its Plastic Products Business. Expenditures for such programs during the years ended December 31, 1995, 1994 and 1993 were approximately $3,300,000, $3,600,000 and $2,000,000, respectively. Although the Company owns a number of United States patents, including patents for its tamper-evident closures and certain of its child-resistant closures, it is of the opinion that no one or combination of these patents is of material importance to its business. The Company has granted licenses on some of its patents, although the income from these sources is not material. Segment earnings is income before unusual items not attributable to one of the segments, general corporate expenses, interest expense, interest and other income and provision (benefit) for income taxes. -47- 48 NOTE 14 - INDUSTRY SEGMENT INFORMATION (continued) Identifiable assets by industry segment are those assets that are used in the Company's operations in each industry segment. Corporate assets are principally cash and cash equivalents, the deferred income tax asset, land and buildings formerly used as a glass container manufacturing plant that is being held for sale, certificates of deposit and certain intangible assets. A summary of the Company's operations by industry segment follows:
- -------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------- (in thousands) Net sales: Plastic Products $109,187 $106,792 $ 98,533 Consumer Products (b) 29,808 32,364 28,839 -------- -------- -------- Total $138,995 $139,156 $127,372 ======== ======== ======== Segment earnings (loss): Plastic Products $ 4,842 $ 12,055 $ 11,428 Consumer Products (a)(b) (1,590) 3,213 (2,707) -------- -------- -------- Total 3,252 15,268 8,721 Loss on revaluation of land 1,000 -- -- General corporate expenses 5,258 4,903 4,866 -------- -------- -------- Earnings (loss) before interest and income taxes (3,006) 10,365 3,855 Interest expense 6,047 4,985 5,680 Interest and other income (228) (369) (858) -------- -------- -------- Earnings (loss) before income taxes $ (8,825) $ 5,749 $ (967) ======== ======== ========
(a) The 1993 segment loss for Consumer Products includes a $4,500,000 pre-tax loss associated with the relocation of the Company's home canning cap and lid manufacturing operations. See Note 11 of notes to consolidated financial statements for further information. (b) The manufacturing assets of the Consumer Products segment were sold on March 15, 1996. -48- 49 NOTE 14 - INDUSTRY SEGMENT INFORMATION (continued) Identifiable assets, depreciation and amortization and capital expenditures for each segment are as follows:
- -------------------------------------------------------------------------------- Years Ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------- (in thousands) Identifiable Assets: Plastic Products $ 79,367 $ 84,283 $ 69,834 Consumer Products(a) 18,981 22,782 20,403 Corporate 21,873 16,635 27,112 -------- -------- -------- Total $120,221 $123,700 $117,349 ======== ======== ======== Depreciation and amortization: Plastic Products $ 7,961 $ 6,946 $ 6,600 Consumer Products(a) 343 236 197 Corporate 712 549 567 -------- -------- -------- Total $ 9,016 $ 7,731 $ 7,364 ======== ======== ======== Capital expenditures: Plastic Products $ 10,604 $ 13,906 $ 8,587 Consumer Products(a) 976 1,472 1,920 Corporate 260 270 749 -------- -------- -------- Total $ 11,840 $ 15,648 $ 11,256 ======== ======== ========
- ------------- (a) The manufacturing assets of the Consumer Products segment were sold on March 15, 1996. -49- 50 NOTE 15 - CONDENSED QUARTERLY DATA FOR 1995 AND 1994 (UNAUDITED)
- -------------------------------------------------------------------------------- Three Months Ended March 31 June 30 Sept. 30 Dec. 31 - -------------------------------------------------------------------------------- (in thousands, except per share amounts) 1995 Net sales $30,390 $41,892 $39,021 $27,692 Gross profit 8,577 9,783 8,080 3,591 Net loss (a) (387) (285) (1,099) (3,536) Preferred stock dividends 207 207 207 208 ------- ------- ------- ------- Net loss applicable to common stockholders (a) $ (594) $ (492) $(1,306) $(3,744) ======= ======= ======= ======= Net loss per common share (primary and fully diluted) $ (0.16) $ (0.13) $ (0.33) $ (0.95)
(a) Net for the quarter ended December 31, 1995 includes a pre-tax loss of $1,000,000 ($0.15 per common share) related to the write-down in the book value of land formerly used by the Company as a glass container manufacturing plant.
- -------------------------------------------------------------------------------- Three Months Ended March 31 June 30 Sept. 30 Dec. 31 - -------------------------------------------------------------------------------- (in thousands, except per share amounts) 1994 Net sales $29,380 $41,004 $40,624 $28,148 Gross profit 9,961 12,291 12,007 8,541 Net earnings 263 1,599 1,310 232 Preferred stock dividends 207 207 207 208 ------- ------- ------- ------- Net earnings applicable to common stockholders $ 56 $ 1,392 $ 1,103 $ 24 ======= ======= ======= ======= Net earnings per common share: Primary $ 0.02 $ 0.38 $ 0.30 $ 0.01 Fully diluted $ 0.02 $ 0.36 $ 0.30 $ 0.01
-50- 51 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Certain of the information required by Item 10 of Form 10-K is included in a separate item captioned "Executive Officers of the Registrant" in Part I of this Form 10-K. The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 30, 1996 contains on pages 2 through 6 the remaining information required by Item 10 of Form 10-K and such information is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 30, 1996 contains on pages 7 through 12 the information required by Item 11 of Form 10-K, and such information is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 30, 1996 contains on pages 2 through 3 the information required by Item 12 of Form 10-K, and such information is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Registrant's Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 30, 1996 contains on page 13 the information required by Item 13 of Form 10-K, and such information is incorporated herein by this reference. -51- 52 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a. (i) Financial Statements In addition to the Consolidated Financial Statements and Independent Auditors' Report included at Item 8, the following are included herein: Schedules for the three years ended December 31, 1995: VIII - Valuation and Qualifying Accounts, page 61. All other Schedules have been omitted as inapplicable, or not required, or because the required information is included in the Consolidated Financial Statements or the notes thereto. -52- 53 (ii) Exhibits 3.1 Restated Certificate of Incorporation of the Registrant is incorporated by reference to Exhibit 3.1 to Form 10-K for the fiscal year ended December 31, 1980. 3.2 Certificate of Retirement of Capital Stock of the Registrant is incorporated by reference to Exhibit 3.2 to Form 10-K for the fiscal year ended December 31, 1989. 3.3 Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant is incorporated by reference to Exhibit 3.3 to Form 10-K for the fiscal year ended December 31, 1989. 3.4 By-laws of the Registrant, as amended effective June 15, 1993, is incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended June 30, 1993. 10.1 Amended and Restated Employment Agreement between the Registrant and Roger W. Norian dated as of December 1, 1994 incorporated by reference to Exhibit 10.4 to Form 10-K for the fiscal year ended December 31, 1994. 10.2 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and Roger W. Norian. 10.3 Employment Agreement between the Registrant and D. Gordon Strickland dated as of June 16, 1986 is incorporated by reference to Exhibit 10.5 to Form 10-K for the fiscal year ended December 31, 1986. 10.4 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and D. Gordon Strickland. 10.5 Employment Agreement between the Registrant and Robert S. Reeves dated as of February 17, 1983 is incorporated by reference to Exhibit 10.6 to Form 10-K for the fiscal year ended December 31, 1983. -53- 54 10.6 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and Robert S. Reeves. 10.7 Employment Agreement, as amended, between Registrant and Geoffrey A. Whynot dated as of November 1, 1989. 10.8 Employment Agreement between the Registrant and Norman N. Broadhurst dated as of December 8, 1988 is incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended December 31, 1988. 10.9 Employment Agreement between the Registrant and J. Stephen Grassbaugh dated as of February 24, 1989 is incorporated by reference to Exhibit 10.10 to Form 10-K for the fiscal year ended December 31, 1988. 10.10 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and J. Stephen Grassbaugh. 10.11 1984 Stock Option Plan is incorporated by reference to Exhibit 4.7 to Registration Statement No. 2-92722. 10.12 1987 Stock Option Plan is incorporated by reference to Exhibit 10.12 to Form 10-K for the fiscal year ended December 31, 1986. 10.13 Amended and Restated 1993 Employee Stock Option Plan incorporated by reference to Exhibit 10.8 to Form 10-K for the fiscal year ended December 31, 1994. 10.14 1987 Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 31, 1987. 10.15 1993 Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.4 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.16 Form of Stock Option Agreement used in connection with the 1984 Stock Option Plan is incorporated by reference to Exhibit 4.11 to Registration Statement No. 2-92722. -54- 55 10.17 Form of Stock Option Agreement used in connection with the 1987 Stock Option Plan is incorporated by reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 31, 1986. 10.18 Form of Stock Option Agreement used in connection with the 1993 Employee Stock Option Plan is incorporated by reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 31, 1993. 10.19 Form of Stock Option Agreement used in connection with the 1987 Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.23 to Form 10-K for the fiscal year ended December 31, 1987. 10.20 Form of Stock Option Agreement used in connection with the 1993 Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.19 to Form 10-K for the fiscal year ended December 31, 1993. 10.21 1993 Common Stock Purchase Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.22 Directors' Retirement Consulting Plan is incorporated by reference to Exhibit 10.22 to Form 10-K for the fiscal year ended December 31, 1984. 10.23 Key Executive Bonus Plan is incorporated by reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter ended June 30, 1993. 10.24 Pension Restoration Plan is incorporated by reference to Exhibit 10.19 to Form 10-K for the fiscal year ended December 31, 1994. 10.25 Asset Purchase Agreement dated as of November 25, 1991 by and between the Registrant and Ball Corporation is incorporated by reference to Exhibit 1 to Form 8-K dated November 24, 1991. -55- 56 10.26 Asset Purchase Agreement, dated as of December 11, 1992, by and between Crown Cork & Seal Company, Inc. and Kerr Group, Inc. is incorporated by reference to Exhibit 1 to Form 8- K dated December 11, 1992. 10.27 Asset Purchase Agreement, dated as of March 15, 1996 between Registrant and Alltrista Corporation is incorporated by reference to Exhibit 2.1 to Form 8-K dated March 29, 1996. 10.28 Sales Agent Agreement, dated as of March 15, 1996 between Registrant and Alltrista Corporation is incorporated by reference to Exhibit 99.1 to Form 8-K dated March 29, 1996. 10.29 Lease dated as of March 11, 1986 between Northrop Corporation and Registrant with respect to Registrant's principal executive offices, including related amendment to the Lease dated as of September 30, 1986 is incorporated by reference to Exhibit 10.24 to Registration Statement No. 33-08212. 10.30 Third amendment of lease dated March 11, 1986 between Northrop Corporation, predecessor in interest to State Teachers Retirement System, and Registrant is incorporated by reference to Exhibit 10.4 to Form 10-Q for the fiscal quarter ended March 31, 1995. 10.31 Lease dated August 1, 1988 between KCB Development, as lessor, and SCP Corporation, as lessee is incorporated by reference to Exhibit 10.23 to Form 10-K for the fiscal year ended December 31, 1994.. 10.32 Lease dated October 5, 1989 between Century 21 Associates, as lessor, and Santa Fe Plastic Corporation, as lessee, is incorporated by reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended September 30, 1994. 10.33 Lease between the Industrial Development Board of the City of Jackson and Kerr Group, Inc., Dated as of May 14, 1993 is incorporated by reference to Exhibit 10.5 to Form 10-Q for the fiscal quarter ended June 30, 1993. -56- 57 10.34 Amended and restated lease dated as of May 16, 1994 between Phoenician Properties, as lessor, and Kerr Group, Inc., as lessee,is incorporated by reference to Exhibit 10.4 to Form 10-Q for the fiscal quarter ended September 30, 1994. 10.35 Amendment dated May 18, 1994 between Century 21 Associates and Kerr Group, Inc. related to lease dated October 5, 1989 is incorporated by reference to Exhibit 10.5 to Form 10-Q for the fiscal quarter ended September 30, 1994. 10.36 Lease agreement dated June 30, 1994 between Bowling Green- Warren County Industrial Authority IV, Inc. and Kerr Group, Inc. is incorporated by reference to Exhibit 10.6 to Form 10-Q for the fiscal quarter ended September 30, 1994. 10.37 Note Agreement dated as of September 15, 1993 between Kerr Group, Inc. and the Purchasers identified therein is incorporated by reference to Exhibit 2 to Form 8-K dated September 21, 1993. 10.38 Line of Credit between PNC Bank and Kerr Group, Inc. dated May 2, 1994 is incorporated by reference to Exhibit 10.1 to Form 10-Q for the fiscal quarter ended June 30, 1994. 10.39 Receivables Purchase Agreement dated as of January 19, 1995 between Kerr Group, Inc., as the seller, and PNC Bank, N.A., as the purchaser is incorporated by reference to Exhibit 10.31 to Form 10-K for the fiscal year ended December 31, 1994.. 10.40 Line of Credit between the Bank of Boston and Kerr Group, Inc. dated February 9, 1995 is incorporated by reference to Exhibit 10.32 to Form 10-K for the fiscal year ended December 31, 1994. 10.41 Amendment dated February 24, 1995 of the Receivables Purchase Agreement dated as of January 19, 1995 between Kerr Group, Inc., as the seller, and PNC Bank, N.A., as the purchaser is incorporated by reference to Exhibit 10.33 to Form 10-K for the fiscal year ended December 31, 1994. -57- 58 10.42 Amendment dated March 24, 1995 of the Note Agreement dated as of September 15, 1993 between Registrant and the Purchasers identified therein is incorporated by reference to Exhibit 10.1 to Form 10-Q for the fiscal quarter ended March 31, 1995. 10.43 Amendment dated April 18, 1995 of the Receivables Purchase Agreement dated as of January 19, 1995 between Registrant, as the seller, and PNC Bank, N.A., as the purchaser is incorporated by reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended March 31, 1995. 10.44 Amendment dated September 25, 1995 of the Note Agreement dated as of September 15, 1993 between Registrant and the Purchasers identified therein is incorporated by reference to Exhibit 10.5 to Form 10-Q for the fiscal quarter ended September 30, 1995. 10.45 Consent to amendment dated September 25, 1995 pursuant to the Receivables Purchase Agreement dated as of January 19, 1995 between Registrant, as the seller, and PNC Bank, N.A., as the purchaser identified therein is incorporated by reference to Exhibit 10.6 to Form 10-Q for the fiscal quarter ended September 30, 1995. 10.46 Consent to amendment dated September 29, 1995 pursuant to Line of Credit between Bank of Boston and Registrant identified therein is incorporated by reference to Exhibit 10.7 to Form 10-Q for the fiscal quarter ended September 30, 1995. 10.47 Amendment Agreement dated November 30, 1995 of the Receivables Purchase Agreement dated as of January 19, 1995 between Registrant, as the seller, and PNC Bank, N.A., as the purchaser. 10.48 Amended and Restated Loan and Security Agreement dated January 5, 1996 between The First National Bank of Boston and Registrant -58- 59 10.49 Amendment Agreement dated January 5, 1996 of the Note Agreement dated as of September 15, 1993 between Registrant and the Purchasers identified therein. 10.50 Intercreditor Agreement dated January 5, 1996 between The First National Bank of Boston and the Purchasers identified in the Note Agreement dated as of September 15, 1993. 10.51 Consent, Waiver and Amendment Agreement dated March 15, 1996 between PNC Bank, N.A, the Purchasers identified in the Note Agreement dated as of September 15, 1993, The First National Bank of Boston and Registrant. 11.1 Statement re: Computation of Per Common Share Earnings (Loss). 21.1 Subsidiaries. 23.1 Consent of Independent Certified Public Accountants. 99.1 Undertaking is incorporated by reference to Exhibit 28.1 to Form 10-K for the year ended December 31, 1982. The Registrant has no additional long-term debt instruments in which the total amount of securities authorized under any instrument exceeds 10% of total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such long-term debt instrument upon the request of the Securities and Exchange Commission. b. Reports on Form 8-K None filed in the three months ended December 31, 1995 -59- 60 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant as duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KERR GROUP, INC. BY:/s/ D. Gordon Strickland ------------------------ D. Gordon Strickland, President and Chief Executive Officer Dated: March 29, 1996 Los Angeles, California Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Gordon C. Hurlbert March 29, 1996 - --------------------------------------- Gordon C. Hurlbert, Director /s/ Michael C. Jackson March 29, 1996 - --------------------------------------- Michael C. Jackson, Director /s/ John D. Kyle March 29, 1996 - --------------------------------------- John D. Kyle, Director /s/ James R. Mellor March 29, 1996 - --------------------------------------- James R. Mellor, Director /s/ D. Gordon Strickland March 29, 1996 - --------------------------------------- D. Gordon Strickland, Principal Executive Officer; Director /s/ Robert M. O'Hara March 29, 1996 - --------------------------------------- Robert M. O'Hara, Director /s/ Harvey L. Sperry March 29, 1996 - --------------------------------------- Harvey L. Sperry, Director /s/ Geoffrey A. Whynot March 29, 1996 - --------------------------------------- Geoffrey A. Whynot Principal Financial Officer /s/ J. Stephen Grassbaugh March 29, 1996 - --------------------------------------- J. Stephen Grassbaugh Principal Accounting Officer
-60- 61 SCHEDULE VIII KERR GROUP, INC. Valuation and Qualifying Accounts Three years ended December 31, 1995 (in thousands)
Column A Column B Column C Column D Column E - -------------------------------- ------------ ---------------------- ----------- --------- Additions ---------------------- (1) (2) Balance Charged Charged Deductions Balance at Beginning (Credited) to Other From at End Description of Period to Earnings Account Reserves(a) of Period - -------------------------------- ------------ ----------- -------- ----------- --------- Allowance for doubtful accounts, year ended: December 31, 1993 $645 ($ 42) $ -- $ 25 $578 ==== ==== ====== ==== ==== December 31, 1994 $578 $ 39 $ -- $447 $170 ==== ==== ====== ==== ==== December 31, 1995 $170 $272 $ -- $ 21 $421 ==== ==== ====== ==== ====
(a) These deductions represent uncollectible amounts charged against the reserve. -61- 62 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 KERR GROUP, INC. FORM 10-K for year ended December 31, 1995 INDEX TO EXHIBITS FILED SEPARATELY WITH FORM 10-K
Exhibit No. Document - ----------- -------- 10.2 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and Roger W. Norian. 10.4 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and D. Gordon Strickland. 10.6 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and Robert S. Reeves. 10.7 Employment Agreement, as amended, between Registrant and Geoffrey A. Whynot dated as of November 1, 1989. 10.10 Amendment dated as of January 2, 1996 of the Employment Agreement between Registrant and J. Stephen Grassbaugh. 10.47 Amendment Agreement dated November 30, 1995 of the Receivables Purchase Agreement dated as of January 19, 1995 between Registrant, as the seller, and PNC Bank, N.A., as the purchaser. 10.48 Amended and Restated Loan and Security Agreement dated January 5, 1996 between The First National Bank of Boston and Registrant
63
Exhibit No. Document - ----------- -------- 10.49 Amendment Agreement dated January 5, 1996 of the Note Agreement dated as of September 15, 1993 between Registrant and the Purchasers identified therein. 10.50 Intercreditor Agreement dated January 5, 1996 between The First National Bank of Boston and the Purchasers identified in the Note Agreement dated as of September 15, 1993. 10.51 Consent, Waiver and Amendment Agreement dated March 15, 1996 between PNC Bank, N.A, the Purchasers identified in the Note Agreement dated as of September 15, 1993, The First National Bank of Boston and Registrant 11.1 Statement re: Computation of Per Common Share Earnings (Loss). 21.1 Subsidiaries 23.1 Consent of Independent Certified Public Accountants.
EX-10.2 2 AMENDED EMPLOYMENT AGRMNT-REGISTRANT & MR. NORIAN 1 EXHIBIT 10.2 AMENDMENT TO EMPLOYMENT AGREEMENT WHEREAS, Kerr Group, Inc. (the "Company") and Roger W. Norian (the "Employee") have entered into an Employment Agreement, dated as of October 10, 1985, amended as of December 12, 1989 and further amended and restated as of December 1, 1994 (the "Employment Agreement"); and WHEREAS, the Company and the Employee have agreed to amend the Employment Agreement. NOW, THEREFORE, effective as of the date written below, the Employment Agreement is amended as follows: 1. Section 2(d) shall be amended by adding the following language after the words "$1,140,000 by certified or bank check" and prior to the colon: "and, for a period of 24 months after such termination, the Company shall provide for the Employee the same medical and dental benefits which were provided to the Employee at the date of such termination, provided, however, that the Company shall not be obligated to provide any such fringe benefit after the Employee shall receive such fringe benefit at least as favorable to the Employee from another employer" IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of January, 1996. KERR GROUP, INC. By: /s/ D. Gordon Strickland ------------------------ /s/ Roger W. Norian ------------------------ EX-10.4 3 AMENDED EMPLOYMENT AGRMNT-REGISTRANT & STRICKLAND 1 EXHIBIT 10.4 AMENDMENT TO EMPLOYMENT AGREEMENT WHEREAS, Kerr Group, Inc. (the "Company") and D. Gordon Strickland (the "Employee") have entered into an Employment Agreement, dated as of June 16, 1986 (the "Employment Agreement"); and WHEREAS, pursuant to Paragraph 13 of the Employment Agreement, the Company and the Employee have agreed to amend the Employment Agreement. NOW, THEREFORE, effective as of the date written below, the Employment Agreement is amended as follows: 1. The third sentence of Paragraph 2(b)(3) shall be deleted and replaced with: Notwithstanding anything in this Paragraph 2(b)(3) to the contrary, the Salary to be paid to Employee upon termination of employment pursuant hereto shall not be reduced by any amounts paid to Employee on account of any compensation received by Employee from other employment. Furthermore, the Company shall not be obligated to provide any such fringe benefit after Employee shall receive such fringe benefit at least as favorable to Employee from another employer. IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of January, 1996. KERR GROUP, INC. By: /s/ Roger W. Norian --------------------------- President /s/ D. Gordon Strickland --------------------------- EX-10.6 4 AMENDED EMPLOYMENT AGRMNT-REISTRANT & REEVES 1 EXHIBIT 10.6 AMENDMENT TO EMPLOYMENT AGREEMENT WHEREAS, Kerr Group, Inc. (the "Company") and Robert S. Reeves, II (the "Employee") have entered into an Employment Agreement, dated as of February 17, 1983 (the "Employment Agreement"); and WHEREAS, pursuant to Paragraph 14 of the Employment Agreement, the Company and the Employee have agreed to amend the Employment Agreement. NOW, THEREFORE, effective as of the date written below, the Employment Agreement is amended as follows: 1. The second sentence of Paragraph 2(b)(3) shall be deleted and replaced with: Notwithstanding anything in this Paragraph 2(b)(3) to the contrary, the Salary to be paid to Employee upon termination of employment pursuant hereto shall not be reduced by any amounts paid to Employee on account of any compensation received by Employee from other employment. Furthermore, the Company shall not be obligated to provide any such fringe benefit after Employee shall receive such fringe benefit at least as favorable to Employee from another employer. IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of January, 1996. KERR GROUP, INC. By: /s/ Roger W. Norian ---------------------------------- President /s/ Robert S. Reeves, II --------------------------------- EX-10.7 5 AMENDED EMPLOYMENT AGRMNT-REGISTRANT & WHYNOT 1 EXHIBIT 10.7 EMPLOYMENT AGREEMENT AGREEMENT, dated as of November 1, 1989, between Kerr Glass Manufacturing Corporation, a Delaware corporation (the "Company") and Geoffrey A. Whynot (the "Employee"). 1. Employment. The Company hereby employs the Employee and the Employee hereby accepts employment upon the terms and conditions hereinafter set forth. 2. Term. (a) The Agreement shall commence and take effect on the date hereof, and end on the date this Agreement is terminated by either the Company or the Employee as hereinafter provided in this Paragraph 2. (b) The Company may at its election terminate the obligations of the Company under this Agreement as follows: (1) If the Employer becomes ill or is injured so that he is unable to perform the services required of him hereunder and such inability to perform continues for a period in excess of 180 consecutive days and such inability is continuing at the time of such notice, then the Company may terminate its obligations hereunder on 30 days' notice provided that the Employee shall receive disability payments to which such Employee is then entitled under the Company's group disability benefits then in effect during the period commencing on the date of such termination and ending on the date such disability ends or age 65, whichever first occurs. 2 (2) For just cause upon notice of such termination to the Employee. Termination of the Employee's employment by the Company shall constitute a termination "for just cause" only if such termination is for one or more of the following reasons: (i) the failure of the Employee to render services to the Company in accordance with his obligations under this Agreement, which failure amounts to an extended and gross neglect of his duties to the Company; (ii) the continued use of drugs by the Employee to an extent that he is unable to fulfill his duties under this Agreement; and (iii) the commission by the Employee of an act of fraud or embezzlement against the Company or the Employee's having been convicted of a felony involving moral turpitude. (3) Without cause upon notice to the Employee provided that for a period of six months after such termination the Company shall (i) pay to Employee an amount each month equal to the Salary which Employee is being paid each month at the date of the notice of termination and (ii) provide for Employee the same fringe benefits, consisting of medical, dental, life and disability insurance, which were provided to Employee at the date of the notice of termination. Notwithstanding anything in this Paragraph 2(b)(3) to the contrary, the Salary to be paid to Employee shall be reduced by any amounts paid to Employee for the performance of services for anyone other than the Company during the period after - 2 - 3 termination by the Company and while the Company is required to continue to pay the Employee as herein provided, but the Employee shall not be obligated to seek the opportunity to perform such services, and the Company shall not be obligated to provide any such fringe benefit after Employee shall receive such fringe benefit at least as favorable to Employee from another employer. If the Company may elect, in accordance with Paragraph 2(b)(1) hereof, to terminate this Agreement then such election shall be deemed to have been made under Paragraph 2(b)(1) and not in accordance with this Paragraph 2(b)(3). (c) Employee may terminate his obligations under Paragraphs 4 and 5 hereof upon 90 days' prior notice thereof to the Company and, from and after the delivery of such notice, the Company shall have no further obligations under this Agreement unless it shall elect, by notice to the Employee, to continue to pay the Employee as herein provided for the 90-day period commencing with the date of delivery of the notice and in such event the Employee shall continue to perform his obligations under Paragraphs 4 and 5 during such period. 3. Compensation. The Company shall pay the Employee a salary ("Salary") at the rate of $7,000.00 per month during each month of the term hereof, payable in equal semi-monthly installments. In addition to the foregoing, the Employee shall be eligible for and participate in such fringe benefits as are - 3 - 4 generally available to executives of the Company and shall be entitled to receive such increases in Salary as the Company may from time to time deem appropriate. 4. Duties. The Employee shall be an executive of the Company, and initially shall be Assistant Vice President and Controller, General Accounting and External Reporting of the Company, and hereby promises to perform and discharge well and faithfully the duties which may be assigned to him from time to time by the Company in connection with the conduct of its business. Election or appointment as a director or officer of the Company or any subsidiary thereof during the term of this Agreement will not be a basis for the Employee to receive additional compensation. 5. Extent of Services. The Employer shall devote his entire time, attention and energies to the business of the Company and shall not during the term of this Agreement be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing the Employee from investing his personal assets in businesses which do not compete with the Company in such form or manner as will not require any services on the part of the Employee in the operation of the affairs of the companies in which such investments are made and in which his participation is solely that of an investor, and except that the Employee may - 4 - 5 purchase securities in any corporation whose securities are regularly traded provided that such purchase shall not result in his owning beneficially at any time one percent (1%) or more of the equity securities of any corporation engaged in a business competitive with that of the Company. 6. Disclosure of Information. The Employee recognizes and acknowledges that the Company's trade secrets, know-how and proprietary processes as they may exist from time to time are valuable, special and unique assets of the Company's business, access to and knowledge of which are essential to the performance of the Employee's duties hereunder. The Employee will not, during or after the term of his employment by the Company, in whole or in part, disclose such secrets, know-how or processes to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, nor shall the Employee make use of any such property for his own purposes or for the benefit of any person, firm, corporation or other entity (except the Company) under any circumstances during or after the term of his employment, provided that after the term of his employment these restrictions shall not apply to such secrets, know-how and processes which are then in the public domain (provided that the Employee was not responsible, directly or indirectly, for such secrets, know-how or processes entering the public domain without the Company's consent). - 5 - 6 7. Inventions. The Employee hereby sells, transfers and assigns to the Company or to any person or entity designated by the Company all of the entire right, title and interest of the Employee in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by the Employee, solely or jointly, during the term hereof which relate to methods, apparatus, designs, products, processes or devices, sold, leased, used or under construction or development by the Company or any subsidiary, or which otherwise relate to or pertain to the business, functions or operations of the Company or any subsidiary, or which arise from the efforts of the Employee during the course of his employment for the Company. The Employee shall communicate promptly and disclose to the Company, in such form as the Company requests, all information, details and data pertaining to the aforementioned inventions, ideas, disclosures and improvements; and the Employee shall execute and deliver to the Company such formal transfers and assignments and such other papers and documents as may be required of the Employee to permit the Company or any person or entity designated by the Company to file and prosecute the patent applications and, as to copyrightable material, to obtain copyright thereof. Any invention relating to the business of the Company or any subsidiary and disclosed by the Employee within one (1) year following the termination of this - 6 - 7 Agreement shall be deemed to fall within the provisions of this paragraph unless proved to have been first conceived and made following such termination. 8. Injunctive Relief. If there is a breach or threatened breach of the provisions of Paragraphs 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining the Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach. 9. Insurance. The Company may, at its election and for its benefit, insure the Employee against accidental loss or death and the Employee shall submit to such physical examinations and supply such information as may be required in connection therewith. 10. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by registered mail to his residence in the case of the Employee or to the Company at 1840 Century Park East, Los Angeles, California 90067, Attention: President, or to such officer or address as the Company shall notify Employee. 11. Waiver of Breach. A waiver by the Company or Employee of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by the other party. - 7 - 8 12. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware. 13. Entire Agreement. This instrument contains the entire agreement of the parties. It may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first hereinabove written. KERR GLASS MANUFACTURING CORPORATION By: /s/ D. GORDON STRICKLAND ---------------------------------- President /s/ GEOFFREY A. WHYNOT ---------------------------------- Geoffrey A. Whynot - 8 - 9 AMENDMENT TO EMPLOYMENT AGREEMENT WHEREAS, Kerr Group, Inc. (the "Company") and Geoffrey A. Whynot (the "Employee") have entered into an Employment Agreement, dated as of November 1, 1989 and amended as of November 17, 1995 (the "Employment Agreement"); and WHEREAS, pursuant to Paragraph 13 of the Employment Agreement, the Company and the Employee have agreed to amend the Employment Agreement. NOW, THEREFORE, effective as of the date written below, the Employment Agreement is amended as follows: 1. The second sentence of Paragraph 2(b)(3) shall be deleted and replaced with: Notwithstanding anything in this Paragraph 2(b)(3) to the contrary, the Salary to be paid to Employee upon termination of employment pursuant hereto shall not be reduced by any amounts paid to Employee on account of any compensation received by Employee from other employment. Furthermore, the Company shall not be obligated to provide any such fringe benefit after Employee shall receive such fringe benefit at least as favorable to Employee from another employer. IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of January, 1996. KERR GROUP, INC. By: /s/ D. GORDON STRICKLAND ------------------------------ President /s/ GEOFFREY A. WHYNOT ------------------------------ Geoffrey A. Whynot EX-10.10 6 AMENDED EMPLOYMENT AGRMNT-REGISTRANT & GRASSBAUGH 1 EXHIBIT 10.10 AMENDMENT TO EMPLOYMENT AGREEMENT WHEREAS, Kerr Group, Inc. (the "Company") and J. Stephen Grassbaugh (the "Employee") have entered into an Employment Agreement, dated as of February 24, 1989 (the "Employment Agreement"); and WHEREAS, pursuant to Paragraph 13 of the Employment Agreement, the Company and the Employee have agreed to amend the Employment Agreement. NOW, THEREFORE, effective as of the date written below, the Employment Agreement is amended as follows: 1. The second sentence of Paragraph 2(b)(3) shall be deleted and replaced with: Notwithstanding anything in this Paragraph 2(b)(3) to the contrary, the Salary to be paid to Employee upon termination of employment pursuant hereto shall not be reduced by any amounts paid to Employee on account of any compensation received by Employee from other employment. Furthermore, the Company shall not be obligated to provide any such fringe benefit after Employee shall receive such fringe benefit at least as favorable to Employee from another employer. IN WITNESS WHEREOF, the parties have executed this Amendment on the 2nd day of January, 1996. KERR GROUP, INC. By: /s/ Roger W. Norian ------------------------------- President /s/ J. Stephen Grassbaugh ------------------------------- EX-10.47 7 AMENDED RECEIVABLES PURCHASE AGREEMENT - 11/30/95 1 EXHIBIT 10.47 FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMEN THIS FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT dated as of November 30, 1995 (this "First Amendment") is made and entered into by and between KERR GROUP, INC., a Delaware corporation, as seller and initial servicer (the "Seller"), and PNC BANK, NATIONAL ASSOCIATION, a national banking association, as purchaser (the "Purchaser"), with respect to that certain Receivables Purchase Agreement dated as of January 19, 1995, as amended by those certain letter amendments dated February 24, 1995 and April 18, 1995 (the "Existing Agreement"), each by and between the Seller and the Purchaser. As used herein, the term "Agreement" means the Existing Agreement as amended by this First Amendment; and all other capitalized terms used herein shall have the respective meanings specified in accordance with Section 4.04 of this First Amendment. WITNESSETH: WHEREAS, the Seller has requested that the Purchaser amend the Existing Agreement as set forth herein; WHEREAS, the Purchaser is willing to agree to the Seller's request to amend the Existing Agreement upon the terms and conditions set forth in this First Amendment. NOW THEREFORE, in consideration of the premises (each of which is incorporated herein by reference), the Seller and the Purchaser, intending to be legally bound hereby, hereby agree as follows: ARTICLE I AMENDMENTS TO EXISTING AGREEMENT Section 1.01 Amendments to Section 1.1 of the Existing Agreement. (a) The defined term "Affiliated Obligor" set forth in Section 1.1 of the Existing Agreement is hereby amended and restated to read as follows: "Affiliated Obligor" in relation to any Obligor means an Obligor which Seller knows, or has reason to believe, to be an Affiliate of such Obligor. (b) The defined term "Allocation Minimum" set forth in Section 1.1 of the Existing Agreement is hereby amended and restated to read as follows: 2 "Allocation Minimum" means the greater of (i) 30%, or (ii) the Minimum Deferred Purchase Price Percentage. (c) The defined term "Amendment Fee" set forth below is hereby added to Section 1.1 of the Agreement and shall read as follows: "Amendment Fee" shall have the meaning ascribed to it in Section 5.1(d). (d) The defined term "Designated Purchase Date" set forth in Section 1.1 of the Existing Agreement is hereby amended and restated to read as follows: "Designated Purchase Date" means any Business day during a Monthly Accounting Period, which is not a Semi-Monthly Reporting Date, a Semi-Monthly Settlement Date, a Monthly Report Date, a Monthly Settlement Date or the Business Day following a Semi-Monthly Reporting Date or a Monthly Reporting Date, and which is designated by Seller on at least two (2) Business Days prior written notice to Purchaser as a date on which Seller desires to sell Eligible Receivables to Purchaser; provided that Seller may designate no more than six (6) such dates during a Monthly Accounting Period. (e) The defined term "Fees" set forth in Section 1.1 of the Existing Agreement is hereby amended and restated to read as follows: "Fees" shall mean collectively the Structuring Fee, the Commitment Fee, the Administrative Fee and the Amendment Fee; and the term "Fee" shall mean any of the Fees. (f) The defined term "First Amendment" set forth below is hereby added to Section 1.1 of the Agreement and shall read as follows: "First Amendment" means that certain First Amendment to Receivables Purchase Agreement dated as of November 30, 1995 by and between the Seller and the Purchaser. (g) The defined term "First Amendment Effective Date" set forth below is hereby added to Section 1.1 of the Agreement and shall read as follows: "First Amendment Effective Date" shall have the meaning ascribed to it in Section 3.02 of the First Amendment. -2- 3 (h) The defined term "Letter Amendment" set forth below is hereby added to Section 1.1 of the Agreement and shall read as follows: "Letter Amendment" means that certain letter amendment dated February 24, 1995 by and between the Seller and the Purchaser. (i) Clause (ii) of the defined term "Material Adverse Effect" set forth in Section 1.1 of the Existing Agreement is hereby amended and restated to read as follows: (ii) the ability of Seller or, if Seller or an Affiliate of Seller is acting as Servicer or Sub-Servicer, Servicer or Sub- Servicer to perform its respective obligations under this Agreement or an Assignment; (j) The defined term "Maximum Purchaser's Net Investment" set forth in Section 1.1 of the Existing Agreement is hereby amended and restated to read as follows: "Maximum Purchaser's Net Investment" means Thirteen Million Five Hundred Thousand Dollars ($13,500,000). (k) The defined term "Sub-Servicer" set forth below is hereby added to Section 1.1 of the Agreement and shall read as follows: "Sub-Servicer" means one or more Persons that are appointed by Purchaser in accordance with Section 7.1(c) or Section 7.2(j) of this Agreement, to act on the behalf of the Purchaser in its capacity as Servicer in the administration, servicing and collection of the Sold Receivables. Section 1.02 Amendments to Section 2.5(b) of the Existing Agreement. The defined term "Current Purchase Price Percentage" set forth in Section 2.5(b) of the Existing Agreement is hereby amended and restated to read as follows: "Current Purchase Price Percentage" equals the lesser of (i) 70%, or (ii) 1.00 - (15 x NCR) Section 1.03 Deletion of Existing Section 4.21 of the Existing Agreement and Addition of New Section 4.21. Section 4.21 of the Existing Agreement is hereby deleted from the Agreement, and the Existing Agreement is hereby amended to add to the Agreement a new Section 4.21 which shall read as follows: -3- 4 4.21 Use of Proceeds. The Seller shall use the proceeds of any Current Purchase Price Payment exclusively (i) to pay Earned Discount, Seller Adjustments, Fees and other costs, and expenses hereunder and under the other Receivables Documents, and (ii) to fund working capital purposes of the Seller; but in no event shall the proceeds of any Current Purchase Price Payment be used to prepay any indebtedness of Seller for borrowed money except indebtedness for borrowed money owed to Purchaser. Section 1.04 Amendments to Section 5.1 of the Existing Agreement. Subsection 5.1 of the Existing Agreement is hereby amended (i) to delete from Subsection (c) thereof the reference therein to "$10,000" and to substitute therefor the amount of $20,000, and (ii) to add thereto a new Subsection (d) which shall read as follows: (d) Amendment Fee. In consideration for the amendment of the receivables purchase facility as set forth in the First Amendment, Seller shall pay to Purchaser an amendment and restructuring fee (the Amendment Fee") on the First Amendment Effective Date equal to $135,000. Section 1.05 Amendments to Section 6.14 of the Existing Agreement. Section 6.14 of the Existing Agreement is hereby amended to add new Subsections (d) and (e) thereto which shall read as follows: (d) Effective on and as of the First Amendment Effective Date, Seller hereby agrees that Seller shall maintain Lockboxes and Lockbox Accounts for the collection of Pool Receivables only with the Purchaser. To such end Seller agrees (i) to comply with the provisions of Subsection (e) below, and (ii) to immediately direct all Obligors to direct the payment of Pool Receivables to one or more Lockboxes maintained at Purchaser. Notwithstanding any other provision herein to the contrary, any Lockboxes and related Lockbox Accounts currently maintained with the Purchaser, and any additional Lockboxes and related Lockbox Accounts newly established with the Purchaser in accordance with the directives of this Subsection 6.14(d), shall be titled or retitled, as the case may be, substantially as "PNC Bank, National Association, Collection Account re: Kerr Group, Inc., - Sold Receivables", with such additional identifying information as the Purchaser may deem appropriate. The Seller hereby agrees that the Purchaser shall have exclusive dominion and control over, and ownership of, all such Lockboxes and related Lockbox Accounts and all Collections of Sold Receivables, whether in the form of checks, monies, instruments and other property -4- 5 from time to time in it; without limitation, the Purchaser shall have the sole right to make withdrawals from all such Lockboxes and related Lockbox Accounts. Purchaser acknowledges that Collections with respect to Pool Receivables which are not Sold Receivables may be delivered to a Lockbox, and that Collections in the form of wire transfers with respect to Pool Receivables which are not Sold Receivables may be directed to a Lockbox Account maintained at the Purchaser. Any such Collections of Pool Receivables which are not Sold Receivables shall be processed in accordance with the terms of the applicable Lockbox Agreement, but any such processing shall not be deemed to diminish or impair the exclusive dominion and control over, and ownership of, all such Lockboxes and related Lockbox Accounts by the Purchaser. (e) Within ten (10) days after the First Amendment Effective Date, the Seller will obtain an agreement duly executed and delivered by Harris Trust and Savings Bank ("Harris"), in form and substance satisfactory to Purchaser, containing the following terms and conditions: (i) complete dominion and control of Lockboxes No. 71861 and 95321, and a related Lockbox Account No. 3133766 maintained at Harris, shall be transferred to Purchaser; (ii) Harris shall establish and maintain a separate demand deposit account (the "Seller Account") in the name of Seller to receive collections with respect to Pool Receivables which are not Sold Receivables; (iii) Harris will identify items for deposit into the Seller Account or into the Lockbox Account as follows: (x) items which are accompanied by a reference to invoices which have been identified on an Assignment executed by the Seller will be segregated for deposit into the Lockbox Account; (y) items which are accompanied by a reference to invoices which have not been identified on an Assignment executed by the Seller will be segregated for deposit into the Seller Account; and (z) items lacking a reference to an invoice will be held by Harris for further identification, and the Seller -5- 6 shall covenant and agree to assist Harris in any identification process; (iv) Harris shall process electronic funds transfers received by Harris with respect to Pool Receivables as follows: (x) electronic funds transfers which are accompanied by a reference to invoices which have been identified on an Assignment executed by the Seller will be re-directed for deposit into the Lockbox Account; (y) electronic funds transfers which are accompanied by a reference to invoices which have not been identified on an Assignment executed by the Seller will be deposited into the Seller Account; and (z) electronic funds transfers lacking a reference to an invoice will be held by Harris for further identification, and the Seller shall covenant and agree to assist Harris in any identification process; (v) Harris and Seller shall provide to Purchaser such information concerning Collections and applications as Purchaser may reasonably request; (vi) Seller shall be solely responsible for any increased costs and expenses resulting from such agreement; and (vii) Purchaser may deliver to Harris a directive in the form of Annex A to the Lockbox Letter Agreement among Seller, Purchaser and Harris, dated January 19, 1995, at any time hereafter when Purchaser, in the exercise of its sole discretion, determines that such an action is necessary for the protection of its rights and interest hereunder. In the event an agreement meeting the foregoing requirements is not executed and delivered to Purchaser on or before the tenth (10th) day after the First Amendment Effective Date, Purchaser shall have the right to deliver to Harris a directive in the form of Annex A to the Lockbox Letter Agreement. Section 1.06 Amendment of the Existing Agreement to Add a New Section 6.19. The Existing Agreement is hereby amended to add to the Agreement a new Section 6.19 which shall read as follows: 6.19. Use of Proceeds. The Seller will use the proceeds of a Current Purchase Price Payment only for lawful purposes in accordance with Section 4.13 and Section 4.21 hereof as applicable and such uses shall not contravene any applicable Law or any other provision hereof. The Seller hereby specifically covenants and agrees that in no event shall the proceeds of any Current Purchase Price Payment be used to prepay any indebtedness of Seller for borrowed money except indebtedness for borrowed money owed to Purchaser. Section 1.07 Amendment of the Existing Agreement to Add a New Section 6.20. The Existing Agreement is hereby amended to add to the Agreement a new Section 6.20 which shall read as follows: 6.20. Liens. The Seller shall not at any time create, incur, assume or suffer to exist any Lien on any of property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, except Liens permitted under Section 10.2 of the Note Agreement or otherwise consented to in writing by Purchaser. Section 1.08 Amendments to Section 7.1 of the Existing Agreement. Section 7.1 of the Existing Agreement is hereby amended and restated to read as follows: -6- 7 7.1. Designation of Seller as Initial Servicer; Designation of Purchaser as Successor Servicer (a) Designation of Seller as Initial Servicer. Seller hereby grants to Purchaser an irrevocable power of attorney (coupled with an interest) to designate a Person for the purpose of servicing, administering and collecting the Sold Receivables. Purchaser hereby designates and appoints Seller as the agent of Purchaser and Seller (Seller in such capacity herein, together with any successor servicer of the Sold Receivables, referred to as the "Servicer") as the initial Servicer for the purpose of servicing, administering and collecting the Sold Receivables. (b) Designation of Purchaser as a Successor Servicer. Effective on and as of the First Amendment Effective Date, Purchaser and Seller hereby agree that Seller is discharged from its duties under this Article VII as Servicer. Purchaser hereby assumes the role as Servicer for the purpose of servicing, administering and collecting the Sold Receivables, and the Seller hereby expressly agrees and consents to such assumption by the Purchaser of the role of Servicer for the Sold Receivables. (c) Designation of Seller as a Sub-Servicer. Effective on and as of the First Amendment Effective Date, Purchaser hereby appoints Seller to act as an agent of Purchaser in its capacity as Servicer to perform such duties with respect to the servicing, administering and collecting the Sold Receivables as the Purchaser may direct from time to time (the Seller in such Capacity is herein referred to as the "Sub-Servicer"). So long as Seller shall act as Sub-Servicer under this Agreement, Seller shall pay and be responsible for all costs, expenses and attorneys' fees incurred by Servicer and the Sub-Servicer in connection with the performance of their respective obligations under this Article VII. So long as Seller is Sub-Servicer, Seller hereby acknowledges that the purchase of the Sold Receivables, the incurrence by Purchaser of the risk of collection with respect to the Sold Receivables and the payment to Sub-Servicer of income (if any) on investments from the Servicer Deposit Account constitutes adequate consideration for the services of Sub-Servicer hereunder. Section 1.09 Amendments to Section 7.2 of the Existing Agreement. Section 7.2 of the Existing Agreement is hereby amended to add a new Subsection 7.2(j) and such new Subsection shall read as follows: -7- 8 (j) Authority to Appoint Sub-Servicer. At any time that the Purchaser is the Servicer, the Purchaser is hereby authorized to appoint one or more Persons, one of which may be the Seller, as the agent of the Purchaser to perform one or more duties of the Purchaser as Servicer hereunder. The duties of the Sub-Servicer shall be set forth from time to time by the Purchaser pursuant to one or more separate written directives. Section 1.10 Amendments to Section 7.9 of the Existing Agreement. Section 7.9 of the Existing Agreement is hereby amended and restated to read as follows: 7.9. Servicer Deposit Account. On the date hereof Servicer shall cause to be established, and at all times prior to the Final Payout Date, Servicer shall cause to be maintained, one or more segregated trust accounts at Purchaser in the name of Servicer, as trustee for Purchaser (collectively, the "Servicer Deposit Account"). The Servicer Deposit Account shall be used for the deposit of funds set aside pursuant to clauses (ii), (iii) and (iv) of Section 2.6(a) and no other funds. No deposit of funds in the Servicer Deposit Account shall be deemed to reduce the Purchaser's Net Investment, unless and until such funds are actually paid to Purchaser in accordance with Section 2.6 or 2.7. Except during any Liquidation Period, funds on deposit in the Servicer Deposit Account shall be invested in overnight deposits, selected by Seller but acceptable to Purchaser, and the income from such investments shall be added to the balance in such account. During any Liquidation Period, any moneys credited to the Servicer Deposit Account will remain uninvested. Except upon the commencement of, and during the continuance of, any Liquidation Period, all income on the overnight investments of the funds on deposit in the Servicer Deposit Account shall be paid to Servicer, if Seller or an Affiliate of Seller is the Servicer, or to Sub-Servicer, if Seller or an Affiliate of Seller is the Sub-Servicer, on the Semi-Monthly Settlement Date following any credit of such income to the Servicer Deposit Account as consideration for servicing the Sold Receivables. Upon the commencement of any Liquidation Period, all accrued and unpaid income on the overnight investments of the funds on deposit in the Servicer Deposit Account shall be paid to Purchaser on the Semi-Monthly Settlement Date following any credit of such accrued income to the Servicer Deposit Account and shall be applied to reduce the Purchaser's Net Investment. Any losses on the investment of sums deposited in the Servicer Deposit Account shall be for the account of Seller. On the Final Payout Date, after payment of all sums due and owing to Purchaser -8- 9 any remaining balance in the Servicer Deposit Account shall be released to Seller. Notwithstanding any other provision herein to the contrary, on and as of the First Amendment Effective Date, the Servicer Deposit Account shall be retitled substantially as "PNC Bank, National Association, Servicer Deposit Account re: Kerr Group, Inc., - Sold Receivables", with such additional identifying information as the Purchaser may deem appropriate. The Seller hereby agrees that the Purchaser shall have exclusive dominion and control over, and ownership of, the Servicer Deposit Account and all monies, instruments and other property from time to time in it; without limitation, the Purchaser shall have the sole right to make withdrawals from the Servicer Deposit Account. Section 1.11 Amendments to Section 8.1 of the Existing Agreement. (a) Subsection 8.1(h) of the Existing Agreement is hereby amended and restated to read as follows: 8.1(h) Current Default Ratio and Net Charge-Off Ratio. The Current Default Ratio as of any Relevant Month End Date exceeds [3.00%]; (ii) the average of the Current Default Ratios as of any three consecutive Month End Dates exceeds [1.75%]; or (iii) the Net Charge-Off Ratio exceeds [1.20%]; or (b) Subsection 8.1(k) of the Existing Agreement is hereby amended and restated to read as follows: 8.1(k) Delinquency Ratio. Either (A) the Delinquency Ratio at any Relevant Month End Date is greater than [2.60%]; or (B) the average of the Delinquency Ratios at any three consecutive Month End Dates is greater than [2.00%]; (c) Subsection 8.1(m) of the Existing Agreement is hereby amended and restated to read as follows: 8.1(m) Cumulative Dilution. As of any Month End Date, the aggregate dollar amount of Dilutions accruing in the twelve-month period ending on such Month End Date equals or exceeds [$20,000,000]. Section 1.12 Amendment to Section 9.1 of the Existing Agreement. Section 9.1 of the Existing Agreement is hereby amended to insert the phrase "or Sub-Servicer" immediately after the reference to "Servicer" set forth in the twelfth line thereof. -9- 10 Section 1.13 Amendment to Section 10.1(b)(vii) of the Existing Agreement. Clause (vii) of Section 10.1(b) of the Existing Agreement is hereby amended and restated to read as follows: (vii) any failure of Seller, as Servicer, Sub-Servicer or otherwise, to perform any of its duties or obligations in accordance with the provisions of Article VI or VII hereof, or in accordance with the provisions of any written direction delivered to Seller in its capacity as Sub-Servicer pursuant to Sections 7.1(c) and 7.2(j) hereof. Section 1.14 Addition of Exhibit "I-1" to the Agreement. The Existing Agreement is hereby amended to add as an exhibit thereto Exhibit "I-1" attached hereto and made a part hereof. Section 1.15 No Other Amendments. (a) Except as expressly provided in this First Amendment, this First Amendment is not intended to, shall not, and shall not be deemed or construed to, at any time, either explicitly or implicitly: (i) alter, waive or amend any of the provisions of the Existing Agreement or any other Receivables Document; (ii) waive, retroactively, now or in the future, due, timely or full performance of, compliance with, or satisfaction of any covenant, agreement, term, condition or other provision to be performed, complied with, or satisfied by the Seller at any time before, on or after the date hereof under or pursuant to the Agreement or any other Receivables Document as in effect at the time in question; or (iii) impair any right or remedy of (or available to) the Purchaser before, on or after the date hereof under the Existing Agreement, any other Receivables Document or otherwise (including, without limitation, any such right or remedy which may at any time exist or arise with respect to the occurrence, existence or continuance at any time of (x) any Termination Event or Potential Termination Event, (y) any default under any of the other Receivables Documents, or (z) any breach or violation of any covenant, agreement, term, condition or other provision referred to in clause (ii) of this Subsection 1.15(a)). (b) This First Amendment is not intended to, shall not, and shall not be deemed or construed to, establish (either explicitly or implicitly): (i) any course of dealing, course of performance or course of conduct between the Purchaser; or (ii) any obligation or agreement of any nature whatsoever on the part of the Purchaser with respect to (A) any other or further amendment, waiver or consent regarding the Agreement or any other Receivables Document, or (B) any forbearance from the exercise of -10- 11 any right or remedy of (or available to) the Purchaser under the Agreement, any other Receivables Document or otherwise. ARTICLE II SELLER'S SUPPLEMENTAL REPRESENTATIONS As an inducement to the Purchaser to enter into this First Amendment, the Seller hereby represents and warrants to the Purchaser that: Section 2.01 Incorporation by Reference. The Seller hereby repeats herein, for the benefit of the Purchaser, each of the representations and warranties made by the Seller in Article IV of the Existing Agreement, except that, for the purposes hereof, such representations and warranties (i) shall be deemed to be made by the Seller on and as of the First Amendment Effective Date and (ii) shall also extend to and cover (A) this First Amendment and (B) the Existing Agreement, as amended by this First Amendment. ARTICLE III CONDITIONS PRECEDENT Section 3.01 Conditions Precedent. The execution and delivery by the Purchaser of this First Amendment, and the effectiveness of this First Amendment, is subject to the satisfaction by the Seller, on or before November 30, 1995, of each of the following conditions: (i) The Purchaser shall have received, on or before the First Amendment Effective Date (as hereinafter defined) the following items, each, unless otherwise indicated, dated the First Amendment Effective Date, and each in form and substance satisfactory in all respects to the Purchaser and the Purchaser's special counsel, Tucker Arensberg, P.C. ("Purchaser's Counsel"): (A) A duly executed counterpart original of this First Amendment, duly executed and delivered by the Seller; (B) A duly executed, counterpart original of the First Amendment to Servicer Deposit Account Agreement substantially in the form of Exhibit "I-1" hereto; (C) A duly executed, counterpart original of direction to Harris Trust and Savings Bank transferring control of any Lockbox and Lockbox Account maintained at Harris Trust and Saving Bank to Purchaser; -11- 12 (D) A certified copy of the corporate action of the Seller authorizing the Seller's execution, delivery and performance of this First Amendment; (E) A certificate of the secretary (or an assistant secretary) of the Seller certifying the names and incumbency of the officers of the Seller who are authorized to sign this First Amendment and all other documents and certificates delivered hereunder, together with the true signatures of such officers; (F) A certificate signed by a responsible officer of Seller and dated the First Amendment Effective Date, stating that the representations and warranties contained in Article IV and in any instrument, agreement or certificate executed and delivered in connection herewith are then true and accurate in all material respects as though made on and as of the First Amendment Effective Date; (G) Evidence satisfactory to Purchaser that Seller is duly organized and validly existing and in good standing under the laws of the State of Delaware, is duly qualified as a foreign corporation and in good standing in the State of California and the Commonwealth of Pennsylvania, and has paid all California corporate taxes which are due and payable; (H) A certified copy of each search report, certified by the appropriate filing officer (or a similar certificate of counsel admitted to practice in the appropriate jurisdiction), showing that no financing statements or similar statements or notices of tax levies, assessments or liens have been filed with respect to, and then presently cover, any Receivables (except those financing statements filed pursuant to this Agreement in favor of Purchaser and those financing statements or notices (if any) as may be otherwise approved by Purchaser, in writing); (I) The payment in full of the Amendment Fee; (J) The payment of the reasonable fees and expenses of counsel to the Purchaser, including without limitation the cost of any UCC lien and tax lien searches concerning the Seller; (K) Such other evidence as Purchaser may reasonably request to establish the consummation of the transactions contemplated hereby, the taking of all proceedings in connection herewith and compliance with the conditions set forth in this First Amendment; -12- 13 (L) All material consents of all applicable Governmental Persons and third parties, including without limitation such sublicenses and consents as the Purchaser shall require with regard to all programs owned or leased by Seller and used in the servicing of any Pool Receivables, required to effectuate the transactions contemplated hereby shall have been obtained; (M) A duly executed counterpart original of the direction letter from Servicer to Sub-Servicer, duly executed and delivered by the Seller, in its capacity as Sub-Servicer; and (N) Such other instruments, documents and opinions of counsel as the Purchaser shall reasonably require, each of which shall be satisfactory in form and substance in all respects to the Purchaser and Purchaser's Counsel. (ii) The following statements shall be true and correct on the First Amendment Effective Date, and the Purchaser shall have received a certificate signed by an authorized officer of the Seller, dated the First Amendment Effective Date, and in form and substance satisfactory in all respects to the Purchaser and Purchaser's Counsel, certifying, on and as of the First Amendment Effective Date, that: (A) the representations and warranties of the Seller contained in Section 2.01 of this First Amendment, and in each of the other Receivables Documents to which the Seller is a party, are true and correct on and as of the First Amendment Effective Date as though made on and as of such date; (B) no petition by or against the Seller has at any time been filed under the United States Bankruptcy Code or under any similar act; (C) no Termination Event under the Existing Agreement, nor any default under any of the other Receivables Documents, has occurred and is continuing, and no Termination Event or Potential Termination Event under the Existing Agreement, nor any default under any of the other Receivables Documents, would result from the execution and delivery of this First Amendment; and (D) the Seller has in all material respects performed all agreements, covenants and conditions required to be performed by it on or prior to the First Amendment Effective Date under the Existing Agreement and the other Receivables Documents. Section 3.02 First Amendment Effective Date. For the purposes of this First Amendment, the term "First Amendment -13- 14 Effective Date" shall mean the first Business Day on which the Purchaser and Purchaser's counsel determine that each of the conditions set forth in Section 3.01 hereof has been either (i) satisfied by the Seller, to the satisfaction of the Purchaser and Purchaser's counsel, or (ii) expressly waived by the Purchaser; provided, however, that the amendment set forth in Section 1.01(b) of this First Amendment shall not become effective until immediately after the first Purchase to occur after the First Amendment Effective Date. If the First Amendment Effective Date does not occur on or before November 30, 1995, then, at the option of the Purchaser, this First Amendment shall be null and void and of no legal effect, and the Purchaser shall have no duty or obligation with respect to any amendment or waiver contemplated hereby. ARTICLE IV MISCELLANEOUS PROVISIONS Section 4.01 Ratification of Terms. Except as and to the extent expressly amended by this First Amendment, the Existing Agreement and the other Receivables Documents, and each and all of the representations, warranties, covenants, agreements, terms, conditions and other provisions respectively contained therein, are hereby specifically ratified and confirmed. Section 4.02 References. All notices, communications, agreements, certificates, documents or other instruments executed and delivered after the execution and delivery of this First Amendment may refer to the Existing Agreement without making specific reference to this First Amendment, but nevertheless all such references shall be deemed to refer to and include this First Amendment unless expressly stated, or the context requires, otherwise. Section 4.03 Counterparts. This First Amendment may be executed in as many different counterparts as may be convenient, each of which when executed by the Seller and the Purchaser shall be regarded as an original and all such counterparts shall constitute one First Amendment. The delivery of an executed counterpart signature page to this First Amendment by telecopier shall be effective as a delivery of an executed original counterpart hereto. Section 4.04 Capitalized Terms and Definitions. Except for proper nouns and except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings specified in the Existing Agreement, as amended by this First Amendment. -14- 15 Section 4.05 First Amendment Effective Date; References, Capitalized Terms and Definitions. From and after the First Amendment Effective Date: (a) each reference in the Existing Agreement and the other Receivables Documents to the Agreement shall be deemed to be a reference to the Existing Agreement, as amended by this First Amendment; and (b) all capitalized terms which are used in the Receivables Documents, and which (as stated therein) are used therein with the respective meanings specified in the Agreement, shall be deemed to have the respective meanings specified in the Existing Agreement, as amended by this First Amendment. Section 4.06 Taxes. The Seller shall pay any and all stamp and other taxes and fees (if any) payable or determined to be payable in connection with the execution, delivery, filing and recording of this First Amendment and any other documents related hereto, and the Seller agrees to indemnify and save the Purchaser harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any of such taxes or fees. Section 4.07 Indemnification and Contribution. (a) Indemnification. The Seller shall (to the fullest extent permitted by applicable law) indemnify, upon demand, the Purchaser and any subsequent holder of the rights of the Purchaser under the Agreement and their respective shareholders, controlling persons, directors, officers, employees and agents (each of the foregoing an "Indemnified Party"), from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses to which any of them may become subject, insofar as such losses, liabilities, claims, damages or expenses are awarded against or incurred by any of them arising out of or relating to or resulting from (a) any actual or proposed use by the Seller of any of the proceeds of any Current Purchase Price Payment, or (b) the execution, delivery or performance of this First Amendment or any other Receivables Document by the Seller or the Purchaser, or (c) the inability or failure of the Seller to perform its obligations under the Agreement and any other Receivables Documents, as amended, or any other agreement between the Seller and a third party, or (d) any other transaction arising out of or related to this First Amendment or any other Receivables Document, or (e) any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to any of the foregoing whether commenced by the Seller or any other Person; and the Seller shall reimburse any Indemnified Party, upon demand, for any reasonable expenses (including legal fees) incurred in connection with any such loss, liability, claim, damage, expense, investigation, litigation or proceeding; but -15- 16 excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Indemnified Person to be indemnified. The indemnification obligations of the Seller in this Section 4.07 shall survive the payment in full of the Purchaser's Net Investment. (b) Contribution. If for any reason the indemnification provided above in this Section 4.07 (and subject to the exceptions set forth therein) is unavailable to an Indemnified Party (other than by a final adjudication by a court of competent jurisdiction that a claim is not within the scope of such indemnification) or is insufficient to hold an Indemnified Party harmless, then Seller shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnified Party on the one hand and Seller on the other hand but also the relative fault of such Indemnified Party as well as any other relevant equitable considerations. Section 4.08 Costs and Expenses. The Seller will pay all costs and expenses of the Purchaser (including, without limitation, the reasonable fees and the disbursements of Purchaser's counsel and all fees and expenses incurred by Purchaser or its independent accountants in connection with the audit of the books and records of Seller pertaining to the Pool Receivables) in connection with the preparation, execution and delivery of this First Amendment. Section 4.09 Governing Law. THIS FIRST AMENDMENT AND ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO, OR GIVING EFFECT TO, THE PRINCIPLES OF SAID JURISDICTION REGARDING CONFLICTS OF LAW. Section 4.10 Headings. The headings used in this First Amendment are used herein for convenience and for purposes of reference only, and are not intended to, and shall not, limit or otherwise affect the meaning of this First Amendment or any provision or part hereof. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -16- 17 IN WITNESS WHEREOF, the parties hereto, with the intent to be legally bound hereby, have caused this First Amendment to Receivables Purchase Agreement to be duly executed by their respective proper and duly authorized officers as of the day and year first above written. ATTEST (Seal) KERR GROUP, INC., a Delaware corporation, as Seller, initial Servicer and Sub-Servicer By /s/ L.R. Knipple By: /s/ Geoffrey A. Whynot ----------------------------------------- --------------------------------------------------------- Name: Larry R. Knipple Name: Geoffrey A. Whynot -------------------------------------- -------------------------------------------------------- Title: Secretary Title: Treasurer ------------------------------------ ------------------------------------------------------ PNC BANK, NATIONAL ASSOCIATION, as Purchaser and successor Servicer By: /s/ Anthony L. Trunzo --------------------------------------------------------- Name: Anthony L. Trunzo ------------------------------------------------------- Title: Vice President and Manager ------------------------------------------------------
-17- 18 FIRST AMENDMENT TO SERVICER DEPOSIT ACCOUNT AGREEMENT THIS FIRST AMENDMENT TO SERVICER DEPOSIT ACCOUNT AGREEMENT dated as of November 30, 1995 (this "First Amendment") is made and entered into by and between KERR GROUP, INC., a Delaware corporation, as the seller of Tendered Receivables (the "Seller"), and PNC BANK, NATIONAL ASSOCIATION (the "Bank"), a banking association organized and existing under the laws of the United States of America, for the benefit of PNC BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as purchaser (the "Purchaser") under the Purchase Agreement referred to below and as the new servicer of the Sold Receivables (in such capacity, the "Servicer"), with respect to that certain Servicer Deposit Account Agreement dated as of January 19, 1995 (the "Existing Agreement"), by and between the Seller, the Bank, the Purchaser and Seller in the capacity of Servicer. As used herein, the term "Agreement" means the Existing Agreement as amended by this First Amendment; and all other capitalized terms used herein shall have the respective meanings specified in accordance with Section 2.04 of this First Amendment. WITNESSETH: WHEREAS, the Seller and Purchaser have entered into a Receivables Purchase Agreement (the "Original Purchase Agreement") dated as of January 19, 1995, whereby Seller agreed to sell, and Purchaser agreed to buy Tendered Receivables and Related Assets of Seller; WHEREAS, upon the assignment and transfer of the Tendered Receivables and the Related Assets to Purchaser, such Tendered Receivables and the Related Assets are referred to as the Sold Receivables; WHEREAS, Seller was appointed as the initial servicer of the Sold Receivables under the Original Purchase Agreement; and WHEREAS, contemporaneously with the execution hereof, the Original Purchase Agreement is being amended by a First Amendment to Receivables Purchase Agreement dated November __, 1995 (the "First Amendment to Purchase Agreement"); the Original Purchase Agreement, as amended by the First Amendment to Purchase Agreement and as further amended from time to time hereafter, the "Purchase Agreement"); EXHIBIT "I-1" 19 WHEREAS, pursuant to the terms of the First Amendment to Purchase Agreement, the Seller is being removed as the servicer of the Sold Receivables, and the Purchaser is to serve in the capacity of Servicer under the Purchase Agreement; WHEREAS, the Seller has requested that the Bank, the Purchaser, and the Purchaser as the new Servicer, amend the Existing Agreement as set forth herein; WHEREAS, the Bank, Purchaser and Servicer are willing to agree to the Seller's request to amend the Existing Agreement upon the terms and conditions set forth in this First Amendment. NOW THEREFORE, in consideration of the premises (each of which is incorporated herein by reference), the Bank, Servicer, Seller and the Purchaser, intending to be legally bound hereby, hereby agree as follows: ARTICLE I AMENDMENTS TO EXISTING AGREEMENT Section 1.01 Purchaser to Replace Seller as Servicer. From and after the date hereof, the term "Servicer", as used in the Agreement, shall mean and refer to Purchaser, or a successor servicer appointed by Purchaser pursuant to the Purchase Agreement. Section 1.02 Retitling of the Servicer Deposit Account. Notwithstanding the provisions of paragraph A. of the Existing Agreement, on and as of the date hereof, the Servicer Deposit Account shall be retitled substantially as "PNC Bank, National Association, Servicer Deposit Account re: Kerr Group, Inc. - Sold Receivables", with such additional identifying information as the Purchaser may deem appropriate. Section 1.03 Amendment to Subparagraph B.(2) of the Existing Agreement. The following clause is hereby deleted from Subparagraph B.(2) of the Existing Agreement: ", including any obligations of Seller in its capacity as Servicer,", and the following clause is hereby substituted therefor:", including any obligations of Seller in its capacity as Sub-Servicer (as such term is defined in the Purchase Agreement),". Section 1.04 Amendment to Paragraph H. of the Existing Agreement. The following parenthetical is hereby inserted into Paragraph H. of the Existing Agreement immediately after the reference to the "Servicer" in the first line thereof: "(if Servicer is a person other than Purchaser)". -2- 20 Section 1.05 Amendment to Subparagraph K.(1) of the Existing Agreement. The address shown for Servicer in Subparagraph K.(1) of the Existing Agreement is hereby deleted and the addresses shown for Purchaser in Subparagraph K.(4) are substituted therefor. Section 1.06 Amendment to Paragraph M. of the Existing Agreement. The proviso in Paragraph M. of the Existing Agreement is hereby deleted and the following language is substituted therefor: "provided, however, that neither Servicer (if Servicer is someone other than Purchaser) nor Seller may assign its rights or duties hereunder without the prior written consent of Purchaser." Section 1.07 No Other Amendments. (a) Except as expressly provided in this First Amendment, this First Amendment is not intended to, shall not, and shall not be deemed or construed to, at any time, either explicitly or implicitly: (i) alter, waive or amend any of the provisions of the Existing Agreement or any other Receivables Document; (ii) waive, retroactively, now or in the future, due, timely or full performance of, compliance with, or satisfaction of any covenant, agreement, term, condition or other provision to be performed, complied with, or satisfied by the Seller at any time before, on or after the date hereof under or pursuant to the Agreement or any other Receivables Document as in effect at the time in question; or (iii) impair any right or remedy of (or available to) the Purchaser before, on or after the date hereof under the Existing Agreement, any other Receivables Document or otherwise (including, without limitation, any such right or remedy which may at any time exist or arise with respect to the occurrence, existence or continuance at any time of (x) any Termination Event or Potential Termination Event, (y) any default under any of the other Receivables Documents, or (z) any breach or violation of any covenant, agreement, term, condition or other provision referred to in clause (ii) of this Subsection 1.07(a)). (b) This First Amendment is not intended to, shall not, and shall not be deemed or construed to, establish (either explicitly or implicitly): (i) any course of dealing, course of performance or course of conduct between the Purchaser; or (ii) any obligation or agreement of any nature whatsoever on the part of the Purchaser with respect to (A) any other or further amendment, waiver or consent regarding the Agreement or any other Receivables Document, or (B) any forbearance from the exercise of any right or remedy of (or available to) the Purchaser under the Agreement, any other Receivables Document or otherwise. -3- 21 ARTICLE II MISCELLANEOUS PROVISIONS Section 2.01 Ratification of Terms. Except as and to the extent expressly amended by this First Amendment, the Existing Agreement, and each and all of the representations, warranties, covenants, agreements, terms, conditions and other provisions contained therein, are hereby specifically ratified and confirmed. Section 2.02 References. All notices, communications, agreements, certificates, documents or other instruments executed and delivered after the execution and delivery of this First Amendment may refer to the Existing Agreement without making specific reference to this First Amendment, but nevertheless all such references shall be deemed to refer to and include this First Amendment unless expressly stated, or the context requires, otherwise. Section 2.03 Counterparts. This First Amendment may be executed in as many different counterparts as may be convenient, each of which when executed by the Seller and the Purchaser shall be regarded as an original and all such counterparts shall constitute one First Amendment. The delivery of an executed counterpart signature page to this First Amendment by telecopier shall be effective as a delivery of an executed original counterpart hereto. Section 2.04 Capitalized Terms and Definitions. Except for proper nouns and except as otherwise defined herein, all capitalized terms used herein shall have the respective meanings specified in the Existing Agreement, as amended by this First Amendment or in the Purchase Agreement, as appropriate. Section 2.05 Costs and Expenses. The Seller will pay all costs and expenses of the Purchaser and Bank (including, without limitation, the reasonable fees and the disbursements of Purchaser's counsel) in connection with the preparation, execution and delivery of this First Amendment. Section 2.06 Governing Law. THIS FIRST AMENDMENT AND ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO, OR GIVING EFFECT TO, THE PRINCIPLES OF SAID JURISDICTION REGARDING CONFLICTS OF LAW. Section 2.07 Headings. The headings used in this First Amendment are used herein for convenience and for purposes -4- 22 of reference only, and are not intended to, and shall not, limit or otherwise affect the meaning of this First Amendment or any provision or part hereof. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -5- 23 IN WITNESS WHEREOF, the parties hereto, with the intent to be legally bound hereby, have caused this First Amendment to Servicer Deposit Account Agreement to be duly executed by their respective proper and duly authorized officers as of the day and year first above written. ATTEST (Seal) KERR GROUP, INC., a Delaware corporation, as Seller By: By: ---------------------------- ------------------------------------- Name: Name: -------------------------- ----------------------------------- Title: Title: ------------------------- ---------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Purchaser and Service By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- PNC BANK, NATIONAL ASSOCIATION, as Bank By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- -6- EX-10.48 8 AMENDED LOAN AND SECURITY AGREEMENT - 1/5/96 1 EXHIBIT 10.48 AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT among KERR GROUP, INC. as Borrower and THE FIRST NATIONAL BANK OF BOSTON as Bank January 5, 1996 2 INDEX OF SCHEDULES Schedule A Borrower's Budget Schedule 4(e) Schedule of Documents Schedule 6(e) Permitted Indebtedness
2 3 AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Agreement") is made as of January 5, 1996, between KERR GROUP, INC., a Delaware corporation, having its principal place of business at 1840 Century Park East, Los Angeles, California 90067 ("Borrower"), and THE FIRST NATIONAL BANK OF BOSTON, a national banking association with its head office at 100 Federal Street, Boston, Massachusetts 02110 ("Bank"). RECITALS A. On or about February 9, 1995, Borrower and Bank executed a letter agreement (the "Original Loan Agreement") pursuant to which Bank extended to Borrower a line of credit originally evidenced by a Commercial Promissory Note dated February 1, 1995 in the principal amount of $10,000,000 executed by Borrower to the order of Bank (the "Original Note"; the Original Loan Agreement, Original Note and all documents executed in connection therewith or pursuant thereto are referred to collectively as the "Original Loan Documents"). B. On or about October 24, 1995, Bank notified Borrower that Bank was terminating Borrower's availability under its line of credit with Bank due to the deterioration in Borrower's financial performance and Borrower's anticipated failure to comply with the financial performance covenants set forth in the Noteholder Agreements (as defined in Section 1 of this Agreement). C. Borrower has requested that Bank provide additional financing and amend and restate the Original Loan Agreement, and Bank is willing to do so subject to the terms and conditions set forth in this Agreement and the related documents to be executed concurrently herewith or pursuant hereto (collectively, the "Restated Loan Documents"). This Agreement shall replace and supersede the Original Loan Agreement. AGREEMENT NOW THEREFORE, in consideration of the mutual promises, covenants and other agreements hereinafter set forth, the parties hereto agree as follows: SECTION 1. DEFINITIONS AND CERTAIN MATTERS OF CONSTRUCTION. Additional Obligations: Any Obligations other than the Original Obligations. Agreement: See preamble. 1 4 Bank: See preamble. Bankruptcy Case: Any proceeding commenced by or against Borrower, under any provision of the Bankruptcy Code or any other federal or state bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other similar relief, and all converted or succeeding cases in respect thereof. Bankruptcy Code: The United States Bankruptcy Code (11 U.S.C. Section 101, et seq.). Base Rate: The higher of (a) the annual rate of interest announced from time to time by Bank at its head office as Bank's "base rate" and (b) one-half of one percent (1/2%) above the Federal Funds Effective Rate. Borrower: See preamble. Budget: Borrower's projected weekly cash flows and other financial statements for the period through April 30, 1996, a copy of which is attached hereto as SCHEDULE A. Business Day: Any day on which banks in Boston, Massachusetts, are open for business generally. Change of Control: The merger or consolidation of Borrower with or into another corporation and, after such merger or consolidation is consummated, either (a) Borrower is not the surviving corporation, or (b) if Borrower is the surviving corporation, then Borrower is a wholly-owned subsidiary of another corporation and the stockholders of Borrower, immediately before such merger or consolidation is consummated, do not own at least 80% of the voting capital stock of Borrower's parent corporation, immediately after such merger or consolidation is consummated. Claims: See Section 2(b). Closing Date: The Business Day on which the conditions precedent set forth in Section 4 have been satisfied. Collateral: All of the following described real and personal property, whether now or hereafter owned by, owing to, or acquired by or arising in favor of Borrower, and whether consigned by Borrower as consignor or leased by Borrower as lessor, and located on the real property identified as 500 New Holland Avenue, Lancaster Pennsylvania or Johnny Mitchell Road, Ahoskie, North Carolina: 2 5 (a) all Equipment, now or hereafter owned or acquired by Borrower, in the form of injection molding machines and related mold frames, lining machines and cut-and-fold machines, and any and all appurtenances and additions thereto and substitutions or replacements of any of the foregoing, together with all attachments, components, parts, equipment, and accessories installed on or affixed to any of the foregoing; (b) all Fixtures, now or hereafter owned or acquired by Borrower, in the form of injection molding machines and related mold frames, lining machines and cut-and-fold machines, and any and all appurtenances and additions thereto and substitutions or replacements of any of the foregoing, now or hereafter attached or affixed to or constituting a part of, or located in or upon, any of said real property; (c) all books and records (including computer programs, printouts and other computer materials and records) pertaining to any of the foregoing; and (d) to the extent not otherwise included, all proceeds, as such term is defined in the UCC, of the foregoing in any form, and, in any event, including: (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrower from time to time with respect to any of the foregoing; (ii) any and all payments (in any form whatsoever) made or due and payable to Borrower from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the foregoing by any governmental authority (or any person acting under color of any governmental authority); (iii) any claims of Borrower against third parties for loss or damage to, or destruction of, or otherwise relating to any of the foregoing; (iv) any recoveries by Borrower against third parties with respect to any litigation or dispute concerning any of the foregoing; (v) all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing; and (vi) any and all other amounts from time to time paid or payable under or in connection with any of the foregoing, upon disposition or otherwise. Collateral to Loan Ratio: The ratio of (a) the value of Collateral to (b) the outstanding amount of the Additional Obligations. Consent: In respect of any person or entity, any permit, license or exemption from, approval or consent of, or registration or filing with any local, state or federal 3 6 governmental or regulatory agency or authority required under applicable law. Default: An event or act that, with the lapse of time, would become an Event of Default. Default Rate: See Section 3(d). Environmental Laws: All laws pertaining to environmental matters, including the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Oil Pollution Act, the Toxic Substances Control Act, and all rules, regulations, judgments, decrees, orders and licenses arising under all such laws. ERISA: The Employee Retirement Income Security Act of 1974, and all rules, regulations, judgments, decrees and orders arising thereunder. Event of Default: See Section 7. Federal Funds Effective Rate: For any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Bank from three funds brokers of recognized standing selected by Bank. Financial Covenants: The financial performance covenants set forth in the Noteholder Agreements. Financials: In respect of any period, the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such period and the related consolidated statement of income and consolidated statement of cash flow for such period, each setting forth in comparative form the figures for the previous comparable fiscal period, all in reasonable detail and prepared in accordance with GAAP. GAAP: Generally accepted accounting principles consistent with those adopted by the Financial Accounting Standards Board and its predecessor, as in effect from time to time. Guarantor: Santa Fe Plastics Corporation, a California corporation. 4 7 Indebtedness: In respect of any entity, all obligations, contingent and otherwise, that in accordance with GAAP should be classified as liabilities, including (a) all debt obligations, (b) all liabilities secured by Liens, (c) all guaranties, and (d) all liabilities in respect of bankers' acceptances or letters of credit. Interest Reserve: The special reserve for interest payments to be made by Borrower on or before April 15, 1996 in respect of the Loan, which shall be calculated based on the Base Rate as of the Closing Date. Lien: Any lien, encumbrance, mortgage, pledge, hypothecation, charge, restriction or other security interest of any kind securing any obligation of any entity or person. Loan: Any loan made or to be made to Borrower pursuant to Section 3. Loan Documents: The Original Loan Documents and the Restated Loan Documents. Material Adverse Effect: Any (i) adverse change in, or a material adverse effect upon, the operations, business, Collateral, condition (financial or otherwise) or prospects of Borrower, or (ii) impairment of the ability of Borrower to perform under any material provision of any of the Loan Documents. Maturity Date: The earlier of (a) April 15, 1996, and (b) the date on which all or substantially all of Borrower's assets are sold or a Change of Control has occurred. Noteholders: The holders of Borrower's 9.45% Series A Senior Notes due September 15, 2003 and the 8.99% Series B Senior Notes due September 15, 1999. Noteholder Agreements: The Note Agreement dated as of September 15, 1993 between each of the Noteholders and Borrower and the related documents executed concurrently therewith or pursuant thereto, each as in effect on the Closing Date or as subsequently amended with the prior written consent of Bank. Obligations: Any and all presently existing or hereafter arising indebtedness, claims, debts, attorneys' fees and other professional fees, costs of enforcement, liabilities, and obligations of Borrower owing to Bank under any Bank Loan Documents, whether direct or indirect, whether contingent or of any other nature, character, or description (including all interest and other amounts accruing after commencement of any Bankruptcy Case, and all interest and other amounts that, but for the provisions of the Bankruptcy Code, would have accrued and 5 8 become due or otherwise would have been allowed), and any refinancings, renewals, refundings, or extensions of any such amounts. Original Obligations: The Original Principal Obligations and interest thereon (including interest at the Default Rate). Original Principal Obligations: See Section 2(a). Permitted Liens: See Section 6(d). PNC: PNC Bank, N.A. PNC Agreements: The Receivables Purchase Agreement between Borrower and PNC dated January 19, 1995, as amended by amendments dated February 24, 1995, April 18, 1995, and November 30, 1995, and the related documents executed concurrently therewith or pursuant thereto, each as in effect on the Closing Date or as subsequently amended with the prior written consent of Bank. Requirement of Law: Any law, treaty, rule, regulation or determination of an arbitrator, court, or other governmental authority, in each case applicable to or binding upon Borrower or affecting any of its property. Restated Loan Documents: See Recital C. Restated Note: See Section 3(b). Subsidiary: In respect of Borrower, any business entity of which Borrower at any time owns or controls directly or indirectly more than fifty percent (50%) of the outstanding shares of stock having voting power, regardless of whether such right to vote depends upon the occurrence of a contingency. Any accounting term used in the Agreement or the other Restated Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. All other undefined terms contained in the Agreement or the other Restated Loan Documents shall, unless the context indicates otherwise, have the meanings provided for them by the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts to the extent the same are used or defined therein. When used in this Agreement, the words "herein," "hereof" and "hereunder" or other words of similar import refer to this Agreement as a whole, including the exhibits and schedules thereto, as the same may from time to time be amended, 6 9 modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement. For purposes of this Agreement and the other Loan Documents, the following additional rules of construction shall apply, unless specifically indicated to the contrary: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter; (b) the term "or" is not exclusive; (c) the term "including" (or any form thereof) shall not be limiting or exclusive; (d) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; and (e) all references to any instruments or agreements, including references to any of the Loan Documents, Noteholder Agreements and PNC Agreements, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. SECTION 2. ACKNOWLEDGMENT OF DEBT. (a) Borrower acknowledges and agrees that, as of the Closing Date, Borrower was indebted to Bank under the Original Loan Agreement in an aggregate outstanding principal amount of $6,500,000 (the "Original Principal Obligations"). (b) Borrower acknowledges and agrees that it has no offset, defense, counterclaim, dispute or disagreement of any kind or nature whatsoever (collectively, "Claims") with respect to the amount of the Original Principal Obligations. To the extent any such Claims exist, it is fully, forever and irrevocably released as provided in Section 8. SECTION 3. RESTATED LOAN. (a) Bank shall make an amended and restated term loan (the "Loan") on the Closing Date to Borrower in a maximum aggregate principal amount of TEN MILLION DOLLARS ($10,000,000), the proceeds of which shall be used for working capital purposes. Subject to the other terms and conditions hereof, (i) the amount of the Loan equal to the Original Principal Obligations shall remain outstanding and in full force and effect and (ii) the amount of the Loan that is in excess of the Original Principal Obligations, less the Interest Reserve, will be funded to Borrower by wire transfer to a bank account designated by Borrower. Bank shall establish the Interest Reserve against the amount of the Additional Obligations, that Borrower may otherwise borrow under this Section 2.1(a). 7 10 (b) The obligation of Borrower to repay to Bank the principal of the Loan, interest accrued thereon and costs and expenses related thereto shall be evidenced by an amended and restated commercial promissory note (the "Restated Note") in the maximum aggregate principal amount of $10,000,000 executed and delivered by Borrower and payable to the order of Bank, in form and substance satisfactory to Bank. (c) If Borrower sells any of the Collateral, or if any of the Collateral is taken by condemnation, Borrower shall pay to Bank, unless otherwise agreed by Bank, as a mandatory prepayment of the Loan, a sum (not to exceed the amount of the Additional Obligations) equal to the cash proceeds received by Borrower from such sale or condemnation and shall assign to Bank all of its right, title and interest in and to all non-cash proceeds from such sale or condemnation. (d) So long as no Default or Event of Default has occurred and is continuing, Borrower shall pay interest (i) on the Original Principal Obligations at a rate per annum which is equal to the Base Rate, such interest to be payable quarterly in arrears on March 31, 1996 and on the last Business Day of each subsequent fiscal quarter, and (ii) on the remainder of the Loan at a rate per annum which is equal to the sum of (x) the Base Rate and (y) two percent (2%), such interest to be payable monthly in arrears on January 31, 1996 and on the last Business Day of each subsequent calendar month. Interest payments on the Loan (other than payments of the Default Rate of interest) shall be made by applying amounts held in the Interest Reserve (to the extent such amounts are available in the Interest Reserve) to the amount then due and payable. So long as a Default or Event of Default has occurred and is continuing, amounts payable under any of the Loan Documents shall bear interest (compounded monthly and payable on demand in respect of overdue amounts) at a rate per annum which is two percent (2%) per annum above the rates otherwise applicable (the "Default Rate"). All computations of interest payable hereunder shall be made by Bank on the basis of actual days elapsed and on a 360-day year. In no contingency or event whatsoever, whether by reason of advancement of the Loan or otherwise, shall the amount paid or agreed to be paid to Bank for the use, forbearance or detention of money advanced hereunder exceed the highest lawful rate permissible under any law which a court of competent jurisdiction may deem applicable hereto. In the event that such a court determines that Bank has charged or received interest hereunder in excess of the highest applicable rate, such rate shall automatically be reduced to the maximum rate permitted by law, and Bank shall promptly refund to Borrower any interest received by it in excess of the maximum lawful rate. It is the intent hereof that Borrower not pay or contract to pay, and that Bank not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by Borrower under applicable law. 8 11 (e) If, after the date hereof, Bank determines that (i) the adoption of or any change in any banking law, rule, regulation or guideline or the administration thereof (whether or not having the force of law), or (ii) compliance by Bank or its parent bank holding company with any guideline, request or directive (whether or not having the force of law), has the effect of reducing the return on Bank's or such holding company's capital as a consequence of the Loans to a level below that which Bank or such holding company could have achieved but for such adoption, change or compliance by any amount deemed by Bank to be material, Bank may notify Borrower thereof. Borrower agrees to pay Bank the amount of Borrower's allocable share of the amount of such reduction in the return on capital as and when such allocable share of the amount of such reduction is determined, upon presentation by Bank of a statement in the amount and setting forth Bank's calculation thereof, which statement shall be deemed true and correct absent manifest error. Bank agrees to allocate shares of such reduction among Borrower and Bank's other customers similarly situated on a fair and non-discriminatory basis. SECTION 4. CONDITIONS PRECEDENT. Bank's obligations hereunder shall be conditioned upon the fulfillment of each of the following conditions precedent (which are for Bank's sole benefit): (a) this Agreement or counterparts thereof shall have been duly executed by Bank and Borrower and delivered to Bank; (b) Borrower shall be in good standing in its state of incorporation and in any other state where such qualification is necessary or desirable; (c) Bank shall have received corporate resolutions of Borrower authorizing Borrower's execution, delivery and performance of all of its obligations under this Agreement and all of the other Restated Loan Documents; (d) Borrower's counsel shall have delivered to Bank its written opinion in form and substance acceptable to Bank; (e) Bank shall have received the Restated Note, duly executed and delivered by Borrower, and such other documents, certificates and agreements as Bank may reasonably request in connection with the transaction contemplated by this Agreement, including all documents, certificates, agreements and other items listed in the Schedule of Documents attached hereto 9 12 as SCHEDULE 4(E), each in form and substance reasonably satisfactory to Bank; and (f) Borrower shall have paid to Bank (i) an arrangement fee in an amount equal to one-half of one percent (0.5%) of the maximum aggregate amount of the Additional Obligations (i.e., $17,500), (ii) any accrued and unpaid interest, and (iii) all other fees, costs and expenses of the consummation of the transactions contemplated by this Agreement (including reasonable fees and expenses of appraisers and counsel to Bank presented as of the Closing Date). SECTION 5. GRANT OF SECURITY INTEREST. (a) To secure the payment and performance in full of all Additional Obligations, Borrower hereby grants to Bank a continuing Lien upon, and a right of setoff against, and Borrower hereby assigns and pledges to Bank, all of the now owned and hereafter acquired right, title and interest in the Collateral. (b) If Bank determines that the Collateral to Loan Ratio is not in excess of 1.7 to 1.0 at any time, then Borrower shall pledge additional assets, as reasonably requested by Bank, as collateral for the Additional Obligations as necessary to increase the Collateral to Loan Ratio, in the reasonable determination of Bank, to 1.7 to 1.0. (c) Upon the reduction of the aggregate outstanding principal amount of the Loan to $6,500,000 and payment by Borrower to Bank of any other amounts then due and payable in respect of the Additional Obligations, Bank shall be deemed to have released its Lien on the Collateral. At such time, upon the written request of Borrower and at the sole expense of Borrower, Bank shall execute any and all instruments and documents prepared by Borrower to evidence the release of its Lien. (d) All amounts chargeable to Borrower (other than the Original Obligations) under this Agreement hereof shall be Obligations secured by all of the Collateral, shall be payable on demand and, with respect to any advances made by Bank, shall bear interest from the date made until paid in full at the rate applicable to the Loan from time to time. SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower hereby represents, warrants and covenants to Bank the following, the truth and accuracy of which, and compliance with which, shall be continuing conditions of the funding of the Loan by Bank to Borrower: 10 13 (a) Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Borrower is duly qualified and is authorized to do business and is in good standing as a foreign corporation in each state or jurisdiction where the character of its properties or the nature of its activities make such qualification necessary, except where the failure of Borrower to be so qualified would not have a material adverse effect on its financial condition, business or properties. (b) Borrower has the right and power and is duly authorized and empowered to enter into, execute, deliver and perform this Agreement and each of the other Loan Documents. The execution, delivery and performance of this Agreement and each of the other Loan Documents have been duly authorized by all necessary corporate action and do not and will not (i) require any Consent or any consent or approval of the shareholders of Borrower; (ii) contravene Borrower's charter, certificate of incorporation or by-laws; (iii) violate, or cause Borrower to be in default under, any Requirement of Law having applicability to Borrower; (iv) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which Borrower is a party or by which it or its properties may be bound or affected, including the Note Agreements or the PNC Agreements; or (v) result in, or require, the creation or imposition of any Lien upon or with respect to any of the properties now owned or hereafter acquired by Borrower. (c) This Agreement is, and each of the other Loan Documents when delivered under this Agreement will be, a legal, valid and binding obligation of Borrower enforceable against it in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally or by principles of equity pertaining to the availability of equitable remedies. (d) Borrower shall not mortgage, pledge, grant or permit to exist a Lien upon, any of its assets of any kind, now owned or hereafter acquired, except (i) any Lien in favor of Bank, (ii) any Lien existing on the Closing Date created under or pursuant to the PNC Agreements, or (iii) any Lien permitted under Section 10.2 of the Noteholders Agreement (collectively, "Permitted Liens"). (e) Borrower shall not create, incur, assume or permit to exist any Indebtedness resulting from borrowings, loans or advances, whether secured on unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (i) the Indebtedness of Borrower to Bank, (ii) the Indebtedness of Borrower to the Noteholders, (iii) the Indebtedness, if any, of 11 14 Borrower to PNC, and (iv) any other Indebtedness of Borrower disclosed on SCHEDULE 6(E). (f) Borrower shall not sell, discount or otherwise transfer its accounts receivable against current or deferred payment of the purchase price thereof except pursuant to the PNC Agreements. (g) Borrower shall not, without the prior written consent of Bank, which consent shall not be unreasonably withheld, (i) merge, or permit any Subsidiary to merge into or consolidate with any corporation or other entity, (ii) make, or permit any Subsidiary to make any substantial change in the nature of Borrower's or any such Subsidiary's business, (iii) acquire all or substantially all of the assets of any corporation or other entity, or (iv) sell, lease, transfer or otherwise dispose of all or a substantial or material part of its assets. (h) Borrower shall not guarantee, or permit any of the Subsidiaries to guarantee or become liable, or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate, or permit any of its Subsidiaries to pledge or hypothecate, any assets of Borrower or such Subsidiary as security for, any liabilities or obligations of any other person or entity other than the guaranty of the Additional Obligations by Guarantor. (i) Borrower shall not (i) declare or pay any dividend or distribution either in cash, stock or any other property on Borrower's common stock now or hereafter outstanding, or (ii) redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower's stock now or hereafter outstanding. (j) Borrower shall maintain adequate books and records in accordance with GAAP consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower. (k) Borrower shall provide to Bank all of the following, in form and detail satisfactory to Bank: (i) not later than 90 days after and as of the end of each fiscal year, audited Financials, prepared by KPMG Peat Marwick or another certified public accounting firm acceptable to Bank, which acceptance shall not be unreasonably withheld; 12 15 (ii) not later than 18 days after and as of the end of each month, Financials prepared by Borrower; (iii) On or before Wednesday of each week, (A) a report from the previous week comparing the amounts expended during the most recent reporting period and the amounts projected to be expended in the Budget, and (B) a report, in form reasonably acceptable to Bank, detailing and updating the status (through Friday of the previous week) of the investment bankers' efforts to sell Borrower; and (iv) from time to time, such other information as Bank may reasonably request. (l) Borrower shall pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal and including federal and state income taxes, except such as Borrower may in good faith contest or as to which a bona fide dispute may arise; provided, that reasonable provision is made to the satisfaction of Bank for eventual payment thereof in the event that it is found that the same is an obligation of Borrower. (m) Borrower possesses, and will hereafter possess, all franchises and Consents required and all trademark rights, trade names, trade name rights, patents, patent rights and fictitious name rights necessary to enable it to conduct the business in which it is now engaged without conflict with the rights of others. (n) Borrower is and shall remain in compliance with all Requirements of Law, including the Environmental Laws, having applicability to Borrower except where such noncompliance is not reasonably likely to have a Material Adverse Effect. (o) Borrower is and shall remain in compliance in all material respects with all applicable provisions of ERISA; Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles. (p) After giving effect to the transactions contemplated herein, Borrower (i) owns assets whose fair saleable value is greater than the amount required to pay all of Borrower's Indebtedness (including contingent debts), (ii) is 13 16 able to pay all its debts as they become due, and (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage. (q) The Equipment is in good operating condition and repair, and all necessary replacements of and repairs thereto shall be made so that the value and operating efficiency of the Equipment shall be maintained and preserved, reasonable wear and tear excepted. Borrower maintains and shall keep in force insurance with respect to the Equipment in customary amounts and with companies reasonably satisfactory to Bank, and Borrower will deliver from time to time at Bank's request schedules setting forth such insurance as then in effect. Borrower will not permit any of the Equipment to become an accession to any personal Property other than Equipment that is subject to first priority (except for Permitted Liens) Liens in favor of Bank. (r) Borrower shall keep accurate records itemizing and describing the kind, type, quality, quantity and value of its Equipment and any dispositions made in accordance with this Agreement. Promptly on request therefor by Bank, Borrower shall deliver to Bank any and all evidence of ownership, if any, of any of the Equipment. SECTION 7. EVENTS OF DEFAULT AND REMEDIES. (a) All Obligations shall be immediately due and payable, without notice or demand, and any provisions of this Agreement as to the funding of any portion of the Loan by Bank shall terminate automatically, upon the termination or non-renewal of this Agreement or upon the occurrence or existence of any one or more of the following "Events of Default": (i) (a) Borrower fails to pay when due any of the Obligations; or (b) Borrower fails to perform, keep or observe any other term or provision of this Agreement or any of the other Loan Documents and any such default shall remain unremedied for a period ending on the first day to occur of (x) five days after the chief executive officer, chief financial officer, treasurer, president, or any executive vice president of Borrower shall receive written notice of any such failure from Bank or (y) five days after any chief executive officer, chief financial officer, treasurer, president or executive vice president of Borrower shall or should have become aware thereof; (ii) Any representation, warranty or statement of fact made by Borrower to Bank in this Agreement or any other Loan Document shall prove to be false, inaccurate or misleading in any material respect; 14 17 (iii) Any voluntary petition or application for any relief under the bankruptcy laws of the United States now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, assignment for the benefit of creditors, dissolution or liquidation law or similar statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed by or against Borrower; (iv) The aggregate amount of actual total cash outflows of Borrower exceeds by more than fifteen percent (15%) the amounts projected for total cash outflows for any rolling four-week period in the Budget; (v) Any event shall occur or condition shall exist that shall be or cause a Material Adverse Effect; (vi) Any involuntary petition or application for any relief under the bankruptcy laws of the United States now or hereafter in effect is filed against Borrower, and the same shall not have been dismissed within fifteen (15) days thereafter; provided, that notwithstanding any provision of this Agreement to the contrary, Bank shall have no obligation to fund any portion of the Loan during the pendency of any such involuntary bankruptcy case; and (vii) The occurrence of an "Event of Default" under the Note Agreements or the PNC Agreements. (b) Upon the occurrence of an Event of Default and at any time thereafter, Bank shall have all rights and remedies provided in (i) this Agreement, (ii) any of the other Loan Documents, including the Restated Note, and (iii) the Uniform Commercial Code of the Commonwealth of Massachusetts or other applicable law, all of which rights and remedies may be exercised without notice to Borrower, all such notices being hereby waived, except such notice as is expressly provided for hereunder or is not waivable under applicable law. All rights and remedies of Bank are cumulative and not exclusive and are enforceable, in Bank's discretion, alternatively, successively or concurrently on any one or more occasions and in any order Bank may determine. SECTION 8. RELEASE OF ALL CLAIMS. (a) To the extent any Claims may exist as of the date hereof, Borrower, on behalf of itself and its successors and assigns, hereby forever and irrevocably release Bank and its respective officers, representatives, agents, attorneys, employees, predecessors, successors and assigns, from any and all Claims. 15 18 (b) Borrower hereby acknowledges that it is familiar with the provisions of Section 1542 of the California Civil Code or any similar law of any other jurisdiction, which provides as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. (c) Borrower has been advised by counsel with respect to the release contained herein. Upon advice of such counsel, Borrower hereby waives and relinquishes all of the rights and benefits which it has, or may have, under Section 1542 of the Civil Code of the State of California or any similar law of any other jurisdiction. SECTION 9. WAIVERS AND CONSENTS. (a) Borrower waives all rights to interpose any claims, deductions, setoffs or counterclaims of any kind, nature or description in any action or proceeding instituted by Bank with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating thereto, except compulsory counterclaims. (b) Bank shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights or remedies unless such waiver shall be in writing and signed by an authorized officer of Bank. A waiver by Bank of any right or remedy on any one occasion shall not be construed as a bar to or waiver of any such right or remedy which Bank would otherwise have on any future occasion, whether similar in kind or otherwise. SECTION 10. MISCELLANEOUS. (a) This Agreement shall continue in full force and effect through the Maturity Date. (b) Except as otherwise provided, any communications to be made under this Agreement shall be made in writing to the address or facsimile number of the party receiving notice which is identified with its signature below, or to such other address as either party may designate by five (5) days' prior written notice to the other and shall be deemed to have been given or made: (i) if by hand, immediately upon delivery; 16 19 (ii) if by telex, telegram or telecopy (fax), immediately upon receipt; (iii) if by overnight delivery service, one business day after dispatch; and (iv) if by first class or certified mail, three (3) days after mailing; provided, that, in all cases, if pursuant to the foregoing provisions the deemed date of any such notice, request or demand is not a Business Day, then such notice, request or demand shall be deemed to have been given or made on the first Business Day thereafter. (c) If any provision of this Agreement is held to be invalid or unenforceable, such provision shall not affect this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable. (d) This Agreement contains the entire agreement of the parties as to the subject matter hereof, all prior commitments, proposals and negotiations concerning the subject matter hereof being merged herein. Neither this Agreement nor any provision hereof shall be amended, modified or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of each of Bank, Borrower and Noteholders. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns, except that any obligation of Bank under this Agreement shall not be assignable or inure to the successors and assigns of Borrower. (e) Borrower shall pay on demand all reasonable costs and expenses (including fees of counsel) incurred by Bank in connection with the preparation, negotiation, execution, delivery, administration, modification, amendment, waiver and enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the other Restated Loan Documents and the other documents to be delivered hereunder or thereunder and the transactions contemplated hereby and thereby and the fulfillment or attempted fulfillment of conditions precedent hereunder, and all reasonable costs and expenses related to the following: (i) any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents or advice in connection with the administration of the Loan or Bank's rights hereunder or thereunder; (iii) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Bank or any other Person) in any way relating to the Collateral, any of the Loan Documents or any other agreements to be executed or delivered in connection herewith or therewith, whether as a party, witness, or otherwise, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against Borrower or any other person or entity that may be obligated to Bank by virtue of the Loan Documents, including any litigation, contest, dispute, suit, case, proceeding or action (and any 17 20 appeal or review) in connection with a case under the Bankruptcy Code, or any other applicable Federal, state or foreign bankruptcy or other similar insolvency law; (iv) any attempt to enforce any rights of Bank against Borrower or any other person or entity that may be obligated to Bank by virtue of any of the Loan Documents; or (v) any effort (A) to monitor the Loan, (B) to evaluate, observe, assess Borrower or its affairs, or (C) to verify, protect, assemble, complete, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the Collateral, including the attorneys' and other professional and service providers' fees arising from such services (including those in connection with any appellate proceedings). Borrower shall pay on demand all costs and expenses (including fees of counsel) of Bank in connection with any Default or Event of Default and any enforcement or collection proceedings resulting therefrom or any amendment, modification or waiver of, or consent with respect to any of the Loan Documents. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, workout advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; facsimile charges; secretarial overtime charges; and expenses for travel, lodging and food, and all other out-of-pocket costs and expenses of every type and nature paid or incurred in connection with the performance of such legal or other advisory services. (f) Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (g) Except as otherwise provided in this Agreement or any other Loan Document by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any other Loan Document, the provision contained in this Agreement shall govern and control. (h) No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party's having or being deemed to have structured, drafted or dictated such provision. 18 21 (i) No termination of this Agreement shall relieve or discharge Borrower of its obligations, grants of Collateral, duties and covenants hereunder or otherwise until such time as all Obligations to Bank have been indefeasibly paid and satisfied in full in cash, including the continuation and survival in full force and effect of all security interests and liens of Bank in and upon all then existing and thereafter-arising or acquired Collateral, all warranties and waivers of Borrower, and all proxies and consents executed by Borrower. (j) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to its conflicts of law rules. (k) BORROWER HEREBY IRREVOCABLY CONSENTS TO NON-EXCLUSIVE PERSONAL JURISDICTION IN THE STATE AND FEDERAL COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION OR PROCEEDING ARISING FROM OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, THE COLLATERAL OR THE OBLIGATIONS, AND WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE IN ANY SUCH COURTS, AND AGREES NOT TO ASSERT AND HEREBY WAIVES ANY DEFENSE OR OBJECTION BASED ON LACK OF JURISDICTION, IMPROPER VENUE, OR THE DOCTRINE OF FORUM NON CONVENIENS IN ANY SUCH COURTS. IN ANY SUCH ACTION OR PROCEEDING, BORROWER WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR OTHER PROCESS AND PAPERS THEREIN AND AGREES THAT THE SERVICE THEREOF MAY BE MADE BY MAIL DIRECTED TO BORROWER AT THE BUSINESS ADDRESS SET FORTH HEREIN OR OTHER ADDRESS THEREOF OF WHICH BANK HAS RECEIVED NOTICE AS PROVIDED HEREIN, SERVICE TO BE DEEMED COMPLETE FIVE (5) DAYS AFTER MAILING, OR AS PERMITTED UNDER THE RULES OF EITHER OF SUCH COURTS. (l) BORROWER AND BANK EACH WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE ORIGINAL LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT, THE OBLIGATIONS, THE COLLATERAL, OR ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR BANK IN CONNECTION THEREWITH, OR WHICH IN ANY WAY DIRECTLY OR INDIRECTLY ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND BANK IN CONNECTION WITH ANY OF THE FOREGOING. IN NO EVENT WILL BANK BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES. 19 22 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first above written. KERR GROUP, INC. a Delaware corporation By: /s/ Geoffrey A. Whynot ------------------------------------- Geoffrey A. Whynot Treasurer Address: 1840 Century Park East Los Angeles, CA 90067 Attn: Geoffrey A. Whynot Fax No.: (310) 201-5934 With a copy to: WILLKIE FARR & GALLAGHER One Citicorp Center 153 E. 53rd Street New York, New York 10022 Attn: Harvey Sperry, Esq. Fax No.: (212) 821-8111 THE FIRST NATIONAL BANK OF BOSTON By: ------------------------------------- W. Douglass Vannah Vice President Address: 100 Federal Street Boston, Massachusetts 02110 Attn: W. Douglass Vannah Fax No.: (617) 434-1508 With a copy to: MURPHY, WEIR & BUTLER 2049 Century Park East, 21st Floor Los Angeles, California 90067 Attn: Gregory A. Bray, Esq. Fax No.: (310) 788-3777 20 23 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first above written. KERR GROUP, INC. a Delaware corporation By: ---------------------------------- Geoffrey A. Whynot Treasurer Address: 1840 Century Park East Los Angeles, CA 90067 Attn: Geoffrey A. Whynot Fax No.: (310) 201-5934 With a copy to: WILLKIE FARR & GALLAGHER One Citicorp Center 153 E. 53rd Street New York, New York 10022 Attn: Harvey Sperry, Esq. Fax No.: (212) 821-8111 THE FIRST NATIONAL BANK OF BOSTON By: /s/ W. Douglass Vannah ---------------------------------- W. Douglass Vannah Vice President Address: 100 Federal Street Boston, Massachusetts 02110 Attn: W. Douglass Vannah Fax No.: (617) 434-1508 With a copy to: MURPHY, WEIR & BUTLER 2049 Century Park East, 21st Floor Los Angeles, California 90067 Attn: Gregory A. Bray, Esq. Fax No.: (310) 788-3777 20 EX-10.49 9 AMENDED AGREEMENT-REGISTRANT & THE PURCHASERS 1 EXHIBIT 10.49 AMENDMENT AGREEMENT Amendment Agreement, dated as of January 5, 1996, by and among Kerr Group, Inc., a Delaware corporation (the "Company"), John Hancock Mutual Life Insurance Company ("John Hancock"), Barnett & Co. ("Barnett"), New York Life Insurance Company ("New York Life"), Massachusetts Mutual Life Insurance Company ("Massachusetts Mutual"), and Massmutual/Carlson CBO, N.V. ("Massmutual" and, together with John Hancock, Barnett, New York Life and Massachusetts Mutual, the "Note Purchasers"). R E C I T A L S: WHEREAS, the Note Purchasers (or their predecessors in interest) and the Company entered into certain Note Agreements, each dated as of September 15, 1993 (collectively, the "Note Agreements"), providing for the issuance and sale of $41,000,000 aggregate principal amount of the Company's 9.45% Series A Senior Notes due September 15, 2003 (the "Series A Senior Notes")and $9,000,000 aggregate principal amount of the Company's 8.99% Series B Senior Notes due September 15, 1999 (collectively with the Series A Senior Notes, the "Senior Notes")(as amended, the "Note Agreements"); and WHEREAS, The First National Bank of Boston ("Bank of Boston") and the Company entered into that certain Letter Agreement, dated February 9, 1995 pursuant to which Bank of Boston extended certain financial accommodations to the Company, including a loan in the maximum principal amount of $10,000,000 evidenced by a promissory note dated February 1, 1995 to Bank of Boston in the principal amount of $10,000,000 (collectively, the "Letter Agreement"); and WHEREAS, Bank of Boston has agreed with the Company to enter into an Amended and Restated Loan and Security Agreement of even date herewith and other documents and agreements (collectively, the "Restated Loan Agreement") amending and restating the terms of the Letter Agreement pursuant to the Amended and Restated Loan and Security Agreement to be entered into concurrently herewith; and WHEREAS, the Note Purchasers have agreed to waive certain provisions of the Note Agreements; and WHEREAS, in consideration of the foregoing waivers, the Company has agreed to amend the Note Agreements in accordance with the terms hereof. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the 2 receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1. Defined Terms. Terms defined in the Note Agreements and used herein shall have the meanings given to them in the Note Agreements. SECTION 2. Amendments and Agreements. (a) Amendments to Subsection 9.1 (Required Prepayments) of Note Agreements. Subsection 9.1 of each of the Note Agreements is hereby amended (1) by retitling paragraph (c) thereof as paragraph (d) and (2) by adding after paragraph (b) thereof the following new paragraph (c): "(c) On the date of the occurrence of a "Change in Control" (as such term is defined in that certain Amended and Restated Loan and Security Agreement, dated as of January 5, 1996, between the Company and The First National Bank of Boston, as in effect on January 5, 1996 and as it may be amended thereafter with your consent (the "Bank Loan Agreement")), the Company will prepay, or cause to be prepaid, the entire outstanding principal amount of the Notes, together with interest thereon to the date of prepayment plus the Make-Whole Premium (based on such principal amount)." (b) Amendments to Subsection 10.5 (Consolidation or Merger; Sale of Assets) of Note Agreements. Subsection 10.5 of each of the Note Agreements is hereby amended by adding at the end thereof the following sentence: "Notwithstanding anything in this Section 10.5 to the contrary, the Company may engage in any transaction resulting in a "Change in Control" (as defined in the Bank Loan Agreement) if the Company complies with the provisions of Section 9.1(c)." (c) Agreements with Respect to Payments of Interest. Notwithstanding anything in the Note Agreements or the Notes to the contrary, interest shall be payable on the unpaid principal balance of the Notes quarterly on each December 31, March 31, June 30 and September 30. At the request of any holder of a Note, the Company shall exchange any currently outstanding Note for one or more new Notes reflecting the payment of interest on a quarterly basis and otherwise containing terms identical to the currently outstanding Notes. (d) Further Amendments. The parties hereto shall not amend or modify the terms and provisions of the Note Agreements, as in effect on the Closing Date, without the prior written consent of The First National Bank of Boston. SECTION 3. Representations, Warranties and Covenants. -2- 3 The Company represents and warrants that: (a) Corporate Power and Authority. The Company has all requisite corporate power and authority to enter into and perform its obligations under this Amendment Agreement. The execution, delivery and performance of this Amendment Agreement have been duly authorized by all necessary corporate action on the part of the Company and, upon execution and delivery of this Amendment Agreement by each of the Note Purchasers, this Amendment Agreement will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditors' rights generally and by general equitable principles. (b) Compliance with Other Instruments, etc. The consummation of the transactions contemplated by this Amendment Agreement will not result in any breach of, or constitute a default under, or (except as expressly contemplated hereby) result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance in respect of any property of the Company under, any indenture, mortgage, deed of trust, bank loan or credit agreement, corporate charter, by-law, or other agreement or instrument to which the Company is a party or by which the Company or any of its properties may be bound or affected, or violate any existing law, governmental rule or regulations, or any order of any court, arbitrator or governmental body, applicable to the Company or any of its properties. (c) Governmental Consent. No consent, approval or authorization of, or registration, filing or declaration with, any governmental authority is required for the validity of the execution and delivery by the Company of this Amendment Agreement or the consummation by the Company of the transactions contemplated hereby. SECTION 4. Effectiveness. This Amendment Agreement shall become effective upon the occurrence of the following events: (a) The Note Purchasers shall have received counterparts of this Amendment Agreement executed by the Company and each of the Note Purchasers; and (b) The transactions contemplated by the Restated Loan Agreement shall have been consummated. SECTION 5. Counterparts; Separate Agreements. This Amendment Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. -3- 4 SECTION 6. Governing Law. This Amendment Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles. SECTION 7. Headings. The headings of the several sections of this Amendment Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of this Amendment Agreement. SECTION 8. No Other Changes. Except as expressly stated herein, the Note Agreements are unaffected hereby and shall remain in full force and effect in accordance with the respective terms thereof. SECTION 9. Successors and Assigns. This Amendment Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, whether so expressed or not, and, in particular, shall inure to the benefit of and be enforceable by any holder or holders at any time of any Notes or any part thereof. [The rest of this page left blank intentionally] -4- 5 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: /s/ Geoffrey A. Whynot ------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------ NEW YORK LIFE INSURANCE COMPANY By: ------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------- MASSMUTUAL/CARLSON CBO, N.V. LIFE By: ------------------------- BARNETT & CO. By: ------------------------- 6 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: --------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ STEPHEN J. BLEWITT --------------------------- NEW YORK LIFE INSURANCE COMPANY By: --------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: --------------------------- MASSMUTUAL/CARLSON CBO, N.V. By: --------------------------- BARNETT & CO. By: --------------------------- 7 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: --------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: --------------------- NEW YORK LIFE INSURANCE COMPANY By: /s/ LYDIA S. SANGREE --------------------- Lydia S. Sangree Assistant Vice President MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: -------------------- MASSMUTUAL/CARLSON CBO, N.V. By: --------------------- BARNETT & CO. By: --------------------- 8 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ---------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ---------------------- NEW YORK LIFE INSURANCE COMPANY By: ---------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ BRUCE E. GAUDETTE ---------------------- Vice President MASSMUTUAL/CARLSON CBO, N.V. By: ---------------------- BARNETT & CO. By: --------------------- 9 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ---------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ---------------------- NEW YORK LIFE INSURANCE COMPANY By: ---------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ---------------------- MASSMUTUAL/CARLSON CBO, N.V. By: MEESPIERSON TRUST (CURACAO) N.V. ---------------------- Managing Director BARNETT & CO. By: ---------------------- 10 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ----------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ----------------------- NEW YORK LIFE INSURANCE COMPANY By: ----------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ----------------------- MASSMUTUAL/CARLSON CBO, N.V. By: ----------------------- BARNETT & CO. By: /s/ RICHARD McCORMICK ----------------------- -5- EX-10.50 10 INTERCREDITOR AGREEMENT 1 EXHIBIT 10.50 INTERCREDITOR AGREEMENT This Intercreditor Agreement ("Agreement") is entered into as of January 5, 1996, by and among The First National Bank of Boston ("Bank") and each of the following noteholders: John Hancock Mutual Life Insurance Company; Barnett & Co.; Massachusetts Mutual Life Insurance Company, Mass Mutual/Carlson CBO, N.V.; and New York Life Insurance Company (collectively, "Noteholders"), and is made with reference to the following facts: RECITALS A. Kerr Group, Inc., a Delaware corporation ("Borrower"), and Bank entered into a letter agreement dated as of February 9, 1995 (the "Original Loan Agreement"), pursuant to which Bank agreed to extend certain financial accommodations to Borrower, including a line of credit and letter of credit subfacility. Pursuant to the Original Loan Agreement, Borrower executed a Commercial Promissory Note dated as of February 1, 1995 (the "Original Note") in favor of Bank in the maximum principal amount of $10,000,000. As of the date hereof, the principal amount outstanding under the Original Note is $6,500,000. B. Bank, at Borrower's request, has agreed on the terms and conditions set forth in the Amended and Restated Loan and Security Agreement of even date herewith (the "Restated Loan Agreement") to amend and restate the Original Loan Agreement and to provide an amended and restated $10,000,000 loan to Borrower. C. Pursuant to the terms of the Restated Loan Agreement, Borrower is granting a security interest to Bank in certain of Borrower's property to secure the prompt payment and performance of certain obligations of Borrower. D. Borrower has entered into a Note Agreement dated as of September 15, 1993, as amended by the Amendment Agreement of even date herewith (as amended, the "Note Agreement") with each of the Noteholders (or its predecessors in interest) pursuant to which Borrower issued to the Noteholders 9.45% Series A Senior Notes due September 15, 2003 in the principal amount of $41,000,000 (the "Series A Notes") and 8.99% Series B Senior Notes due September 15, 1999 in the principal amount of $9,000,000 (the "Series B Notes"; Series A Notes and Series B Notes being referred to collectively as "Noteholder Notes"). E. Bank requires, as a condition precedent to Bank's extension of financial accommodations to Borrower under the Restated Loan Documents, that each of the Noteholders shall have entered into this Agreement with Bank. 2 AGREEMENT NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which Bank and each of the Noteholders hereby acknowledge, the parties hereby agree as follows: 1. Definitions and Rules of Construction. (a) Definitions. The following terms, as used in this Agreement, shall have the following meanings: "Additional Bank Obligations" means any and all Bank Obligations other than Original Bank Obligations. "Agreement" is as defined in the preamble to this agreement. "Bank" is as defined in the preamble to this Agreement. "Bank Loan" means any loan made or to be made to Borrower pursuant to section 3 of the Restated Loan Agreement. "Bank Loan Documents" means, collectively, all Original Loan Documents and all Restated Loan Documents. "Bank Obligations" means any and all presently existing or hereafter arising indebtedness, claims, debts, attorneys' fees and other professional fees, costs of enforcement, liabilities, and obligations of Borrower owing to Bank under any Bank Loan Documents, whether direct or indirect, whether contingent or of any other nature, character, or description (including all interest and other amounts accruing after the commencement of any Bankruptcy Case, and all interest and other amounts that, but for the provisions of the Bankruptcy Code, would have accrued and become due or otherwise would have been allowed), and any refinancings, renewals, refundings, or extensions of any such amounts. "Bankruptcy Case" means any proceeding commenced by or against Borrower, under any provision of the Bankruptcy Code or any other federal or state bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other similar relief, and all converted or succeeding cases in respect thereof. 2 3 "Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. Section 101, et seq.). "Borrower" is as defined in the preamble to this Agreement. "Change of Control" means the merger or consolidation of Borrower with or into another corporation and, after such merger or consolidation is consummated, either (a) Borrower is not the surviving corporation, or (b) if Borrower is the surviving corporation, then Borrower is a wholly-owned subsidiary of another corporation and the stockholders of Borrower, immediately before such merger or consolidation is consummated, do not own at least 80% of the voting capital stock of Borrower's parent corporation, immediately after such merger or consolidation is consummated. "Collateral" means all of the real and personal property of Borrower in which Bank has been granted a security interest pursuant to the Bank Loan Documents, including the following real and personal property located at 500 New Holland Avenue, Lancaster, Pennsylvania or Johnny Mitchell Road, Ahoskie, North Carolina: (a) all equipment, as such term is defined in the UCC, now or hereafter owned or acquired by Borrower, in the form of injection molding machines and related mold frames, lining machines and cut-and-fold machines, and any and all appurtenances and additions thereto and substitutions or replacements of any of the foregoing, together with all attachments, components, parts, equipment, and accessories installed on or affixed to any of the foregoing; (b) all fixtures, as such term is defined in the UCC, now or hereafter owned or acquired by Borrower, in the form of injection molding machines and related mold frames, lining machines and cut-and-fold machines, and any and all appurtenances and additions thereto and substitutions or replacements of any of the foregoing, now or hereafter attached or affixed to or constituting a part of, or located in or upon, any of said real property; (c) all books and records (including computer programs, printouts, and other computer materials and records) pertaining to any of the foregoing; and (d) to the extent not otherwise included, all proceeds, as such term is defined in the UCC, of the foregoing in any form, and, in any event, including, 3 4 without limitation: (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrower from time to time with respect to any of the foregoing; (ii) any and all payments (in any form whatsoever) made or due and payable to Borrower from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the foregoing by any governmental authority (or any person acting under color of any governmental authority); (iii) any claims of Borrower against third parties for loss or damage to, or destruction of, or otherwise relating to any of the foregoing; (iv) any recoveries by Borrower against third parties with respect to any litigation or dispute concerning any of the foregoing; (v) all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing; and (vi) any and all other amounts from time to time paid or payable under or in connection with any of the foregoing, upon disposition or otherwise. "Creditors' Documents" means, collectively, all Bank Loan Documents and Noteholder Agreements. "Creditors' Obligations" means, collectively, all Bank Obligations and all Noteholder Obligations. "Maturity Date" means the earlier of: (a) April 15, 1996, and (b) the date on which a sale of all or substantially all of the assets of Borrower or a Change of Control has occurred. "Note Agreement" is as defined in Recital D to this Agreement. "Noteholder Agreements" means, collectively, the Note Agreement, all Noteholder Notes and all related documents executed concurrently therewith or pursuant thereto. "Noteholder Notes" is as defined in Recital D to this Agreement. "Noteholder Obligations" means any and all presently existing or hereafter arising indebtedness, claims, debts, liabilities, and obligations of Borrower owing to any of the Noteholders under the Noteholder Agreements (including amounts arising under sections 9.1 and 9.2 of the Note Agreement), whether direct or indirect, whether contingent or of any other nature, character, or description (including all interest and other amounts accruing after commencement of any Bankruptcy Case, and all 4 5 interest and other amounts that, but for the provisions of the Bankruptcy Code, would have accrued and become due or otherwise would have been allowed), and any refinancings, renewals, refundings, or extensions of any such amounts. "Noteholders" is as defined in the preamble to this Agreement. "Original Bank Obligations" means Borrower's indebtedness to Bank in the principal amount of $6,500,000, as originally evidenced by the Original Note and the other Original Loan Documents, and interest thereon (including interest at the Default Rate (as defined in section 1 of the Restated Loan Agreement)). "Original Loan Agreement" is as defined in Recital A of this Agreement. "Original Loan Documents" means, collectively, the Original Loan Agreement, Original Note and all related documents executed concurrently therewith or pursuant thereto. "Original Note" is as defined in Recital A to this Agreement. "Restated Loan Agreement" is as defined in Recital B to this Agreement. "Restated Loan Documents" means, collectively, the Restated Loan Agreement, the Restated Note and all related documents to be executed concurrently therewith or pursuant thereto. "Restated Note" means that certain Amended and Restated Commercial Promissory Note of even date herewith, executed by Borrower in favor of Bank pursuant to the Restated Loan Agreement and in the principal amount of $10,000,000. "Series A Notes" is as defined in Recital D of this Agreement. "Series B Notes" is as defined in Recital D of this Agreement. "UCC" means the Uniform Commercial Code as adopted in the Commonwealth of Massachusetts, or in such other jurisdiction as governs the perfection of the liens and security interests in the Collateral for the purposes of the provisions hereof relating to such perfection or effect of perfection. 5 6 (b) Rules of Construction. For purposes of this Agreement, the following rules of construction shall apply, unless specifically indicated to the contrary: (i) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter; (ii) the term "or" is not exclusive; (iii) the term "including" (or any form thereof) shall not be limiting or exclusive; (iv) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; (v) all references to any instruments or agreements, including references to any of the Creditors' Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof; (vi) the words "herein," "hereof" and "hereunder" or other words of similar import refer to this Agreement, including the exhibits and schedules thereto, as the same may from time to time be amended, modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement; and (vii) the words "section" and "paragraph" refer to sections and paragraphs of this Agreement. 2. Consent to Collateralization of Additional Bank Obligations. Each of the Noteholders (a) consents to Borrower's pledge of the Collateral to Bank to secure Borrower's performance of the Additional Bank Obligations notwithstanding Section 10.2 of the Note Agreement or any other provision of the Noteholder Agreements prohibiting or otherwise limiting any such pledge of the Collateral by Borrower, and (b) waives any default or event of default under the Noteholder Agreements solely arising out of or related to such pledge of the Collateral to Bank. 3. Nonavoidability and Perfection. Each of the Noteholders agrees that it will not directly or indirectly take any action to contest or challenge the validity, legality, perfection, priority, avoidability, or enforceability of the Bank's Lien on and security interests in the Collateral granted pursuant to Restated Loan Documents or seek to have the same avoided, disallowed, set aside, or otherwise invalidated in any judicial proceeding or otherwise. In the event that any of the Noteholders (either individually or together with others) breaches or causes to be breached the terms of the preceding sentence, resulting (directly or indirectly) in the avoidance or imperfection of Bank's security interest in some or all of the Collateral, then the security interest of Bank in any such affected Collateral shall, with respect to such breaching Noteholders, continue in full force and effect irrespective of the avoidance or imperfection of Bank's security interest. 4. Management of Collateral. Until the aggregate outstanding principal amount of the Bank Loan has been reduced to 6 7 $6,500,000 and Borrower has paid Bank any other amounts then due and payable in respect of the Additional Bank Obligations: (a) none of the Noteholders shall have or exercise any rights or remedies of a creditor with respect to the Collateral; and (b) any and all proceeds of the Collateral which come into the possession, control, or custody of any of the Noteholders and to which Bank shall be entitled under the Restated Loan Agreement will be deemed to have been received for the account of Bank and shall immediately be paid over to Bank. 5. Sale of Collateral. Subject to Section 10.5 of the Note Agreement, until the aggregate outstanding principal amount of the Bank Loan has been reduced to $6,500,000 and Borrower has paid Bank any other amounts then due and payable in respect of the Additional Bank Obligations, Bank shall have the sole right as the sole secured creditor in respect of the Collateral to restrict or permit, or approve or disapprove, the sale, transfer, release or other disposition of the Collateral. Upon payment in full of all Additional Bank Obligations, payments on account of, or proceeds in respect of, the Collateral shall be distributed in accordance with paragraph 6 of this Agreement. 6. Sharing. Upon the occurrence of any of the following: (a) an event of default under the Bank Loan Documents and the Noteholder Agreements; or (b) the Maturity Date, any and all cash or property thereafter received by either (x) Bank pursuant to the Restated Loan Documents or (y) any of the Noteholders pursuant to the Noteholder Agreements, shall be applied, first, to the Additional Bank Obligations until paid in full, and second, on a pari passu basis to the Original Bank Obligations and the Noteholder Obligations. In addition, any prepayment of any principal amount of the Noteholder Notes to any of the Noteholders or any prepayment of the Original Obligations to the Bank shall be applied, first, to the Bank Obligations until the aggregate outstanding principal amount of the Bank Loan has been reduced to $6,500,000 and Borrower has paid Bank any other amounts then due and payable in respect of the Additional Bank Obligations, and second, on a pari passu basis to the remainder of the Bank Obligations and the Noteholder Obligations. Any and all cash or other property that should come into the possession, control, or custody of Bank or any of the Noteholders that is not in conformity with the terms of this paragraph will be deemed to have been received for the account of the party entitled to such cash or property pursuant to the terms of this Agreement and shall be immediately paid over to such party. 7. Bankruptcy Issues. This Agreement shall continue in full force and effect after the commencement of a Bankruptcy Case (all references herein to Borrower being deemed to apply equally to Borrower as a debtor in possession and to a trustee for Borrower's estate in a Bankruptcy Case), and shall apply with full force and effect with respect to all Collateral acquired by 7 8 Borrower, and to all of the Creditors' Obligations incurred by Borrower, subsequent to such commencement. The rights and priorities set forth in this Agreement shall remain binding irrespective of the terms of any plan of reorganization in any Bankruptcy Case or other provisions of the Bankruptcy Code or any similar federal or state statute. 8. Notice of Default and Certain Events. Bank, on the one hand, and each of the Noteholders, on the other hand, shall send written notice to the other upon the occurrence of any of the following, as applicable: (a) the declaration of any default or event of default under any applicable Creditors' Documents, or the acceleration of any Creditors' Obligations; or (b) the commencement of any sale or liquidation of, or realization upon, any of the Collateral; or (c) the receipt of any payment on account of any Creditors' Obligations. Each such notice shall be sent to the appropriate party contemporaneously with the sending of such notice to Borrower if and when sent under the applicable Creditors' Documents. The failure of any party hereto to give such notice shall not affect the relative security interests or other rights or privileges of such party as provided in this Agreement or give rise to any liability. 9. Assignment. Bank and each of the Noteholders agrees that any assignment or transfer of an interest in any of the Bank Obligations or Noteholder Obligations, respectively, shall be made expressly subject to the terms of this Agreement and each assignee or transferee shall be required to acknowledge that fact in writing prior to any such assignment or transfer. 10. Binding Effect. This Agreement shall be a continuing agreement, shall be binding upon and shall inure to the benefit of the parties hereto from time to time and their respective successors and assigns, shall be irrevocable, and shall remain in full force and effect until all of the Creditors' Obligations shall have been paid in full in cash, and the Creditors' Documents shall have been irrevocably terminated; provided, this Agreement shall continue to be effective, or be reinstated, as the case may be, if any payment, or any part thereof, of any amount paid by or on behalf of Borrower with regard to any Creditors' Obligations is rescinded or must otherwise be restored or returned upon or as a result of any Bankruptcy Case, or for any other reason, all as though such payments had not been made. 8 9 11. Amendments and Waivers. Any amendment or waiver hereunder must be evidenced by a signed writing of the party to be bound thereby and shall only be effective in the specific instance. 12. Governing Law; Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. The parties agree that actions may be tried and litigated in the state and federal courts located in any county located within the Commonwealth of Massachusetts. 13. Headings. The headings in this Agreement are for convenience of reference only, shall have no substantive meaning, and shall not alter or otherwise affect the meaning of this Agreement. 14. No Third Party Beneficiaries. All of the understandings, covenants, and agreements contained herein are solely for the benefit of Bank, each of the Noteholders, their successors and assigns, and future holders of the Noteholder Obligations and Bank Obligations, respectively, and there are no other parties, including Borrower or any of its creditors, successors, or assigns, which are intended to be benefitted, in any way, by this Agreement. 15. No Limitations on Rights Against Third Parties. Nothing contained in this Agreement is intended to or shall affect or limit, in any way, the rights that Bank or any of the Noteholders have with respect to any third parties. Bank and each of the Noteholders hereby specifically reserve all of their respective rights against Borrower and all other third parties. 16. Notice. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication shall or may be given to or served upon any of the parties hereto, or whenever any of the parties desires to give or serve upon the other communications with respect to this Agreement, each such notice, demand, request, consent, approval, declaration, or other communication shall be in writing and shall be delivered either in person, with receipt acknowledged, or by regular, registered, or certified United States mail, postage prepaid, or by facsimile, or by recognized overnight courier service, addressed as follows: 9 10 (a) If to Bank: The First National Bank Of Boston W. Douglass Vannah Vice President 100 Federal Street Boston, Massachusetts 02106 Facsimile Number: (617) 434-1508 with a copy to: Gregory A. Bray, Esq. Murphy, Weir & Butler 2049 Century Park East Suite 2100 Los Angeles, California 90067 Facsimile Number: (310) 788-3777 (b) If to John Hancock Mutual Life Insurance Company or Barnett & Co.: John Hancock Mutual Life Insurance Company John Hancock Place 200 Clarendon Street Boston, Massachusetts 02117 Attn: Bond and Corporate Finance Department T-57 Facsimile Number: (617) 572-1606 (c) If to Massachusetts Mutual Life Insurance Company: Massachusetts Mutual Life Insurance Company Securities Investment Division 1295 State Street Springfield, Massachusetts 01111-0001 Attn: Richard C. Morrison, Vice President Facsimile Number: (413) 744-6127 with a copy to: Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, Massachusetts 01111-0001 Attn: Jaqueline M. Hummel, Esq. Facsimile Number: (413) 744-6210 10 11 (d) If to MassMutual/Carlson CBO, N.V., c/o State Street Bank And Trust Company: 225 Franklin Street Boston, Massachusetts 02110 Attn: Corporate Trust Department Facsimile Number: (617) 664-5367 with a copy to: Massachusetts Mutual Life Insurance Company Securities Investment Division 1295 State Street Springfield, Massachusetts 01111-0001 Attn: Richard C. Morrison, Vice President Facsimile Number: (413) 744-6127 (e) If to New York Life Insurance Company: New York Life Insurance Company 51 Madison Avenue New York, New York 10010 Attn: Investment Department, Room 203 Facsimile Number: (212) 447-4122 with a copy to: New York Life Insurance Company Office of the General Counsel 51 Madison Avenue New York, New York 10010 Attn: Investment Section, Room 10SB Facsimile Number: (212) 576-8340 11 12 (f) And if a notice is sent to any of the Noteholders, then a copy shall be sent to: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attn: Cecil Wray, Esq. Facsimile Number: (212) 909-6836 or at such other address as may be substituted by notice given as herein provided. Giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given when received. 17. Interpretation. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party's having or being deemed to have structured, drafted or dictated such provision. 18. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 19. Complete Agreement. This Agreement constitutes the complete agreement and understanding of each of the parties hereto, and supersedes all prior or contemporaneous oral and written negotiations, agreements and understandings, express or implied, with respect to the subject matter hereof. 20. No Joint Venture. Bank and each of the Noteholders acknowledge and confirm that this Agreement shall not create a joint venture, agency or fiduciary relationship. 21. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to be one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Agreement. 12 13 22. WAIVER OF JURY TRIAL. BANK AND EACH OF THE NOTEHOLDERS HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BANK AND EACH OF THE NOTEHOLDERS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. BANK AND EACH OF THE NOTEHOLDERS HEREBY AGREE AND CONSENT THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT JURY, AND THAT ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT BY AN PARTY HERETO TO THE WAIVER OF RIGHT TO TRIAL BY JURY. 13 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. BANK: THE FIRST NATIONAL BANK OF BOSTON By: /s/ W. Douglass Vannah ------------------------------------- W. Douglass Vannah Vice-President NOTEHOLDERS: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- BARNETT & CO. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSMUTUAL/CARLSON CBO, N.V. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- 14 15 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. BANK: THE FIRST NATIONAL BANK OF BOSTON By: ------------------------------------- W. Douglass Vannah Vice-President NOTEHOLDERS: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Stephen J. Blewett ------------------------------------- Name: Stephen J. Blewett -------------------------------- Title: Investment Officer ------------------------------- BARNETT & CO. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSMUTUAL/CARLSON CBO, N.V. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- 14 16 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. BANK: THE FIRST NATIONAL BANK OF BOSTON By: ------------------------------------- W. Douglass Vannah Vice-President NOTEHOLDERS: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- BARNETT & CO. By: /s/ Richard McCormick ------------------------------------ Name: Richard McCormick -------------------------------- Title: Assistant Treasurer ------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSMUTUAL/CARLSON CBO, N.V. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------ 14 17 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. BANK: THE FIRST NATIONAL BANK OF BOSTON By: ------------------------------------- W. Douglass Vannah Vice-President NOTEHOLDERS: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- BARNETT & CO. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ Richard C. Morrison ------------------------------------ Name: Richard C. Morrison ------------------------------- Title: Vice President ------------------------------- MASSMUTUAL/CARLSON CBO, N.V. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- 14 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. BANK: THE FIRST NATIONAL BANK OF BOSTON By: -------------------------------------- W. Douglass Vannah Vice-President NOTEHOLDERS: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- BARNETT & CO. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSMUTUAL/CARLSON CBO, N.V. By: /s/ Meespierson Trust ------------------------------------- Name: Meespierson Trust (Curacao) N.V --------------------------------- Title: Managing Director -------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- 14 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. BANK: THE FIRST NATIONAL BANK OF BOSTON By: -------------------------------------- W. Douglass Vannah Vice-President NOTEHOLDERS: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- BARNETT & CO. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- MASSMUTUAL/CARLSON CBO, N.V. By: ------------------------------------- Name: ------------------------------- Title: ------------------------------- NEW YORK LIFE INSURANCE COMPANY By: /s/ Lydia S. Sangree ------------------------------------ Name: Lydia S. Sangree ------------------------------- Title: Assistant Vice President ------------------------------ 14 20 ACKNOWLEDGMENT The undersigned, KERR GROUP, INC., a Delaware corporation ("Borrower"), hereby acknowledges that it has received a copy of the foregoing Intercreditor Agreement and consents thereto, and agrees to recognize all rights granted thereby to the parties thereto, and will not do any act or perform any obligation which is not in accordance with the agreements set forth in such Intercreditor Agreement. Without limiting the generality of the foregoing, Borrower further acknowledges that Borrower is not an intended beneficiary or third party beneficiary under the Intercreditor Agreement. Dated as of January 5, 1996. KERR GROUP, INC. By: /s/ Geoffrey A. Whynot -------------------------------- Name: Geoffrey A. Whynot --------------------------------- Title: Treasurer -------------------------------- 16 EX-10.51 11 CONSENT, WAIVER AND AMENDMENT AGREEMENT 1 EXHIBIT 10.51 EXECUTION COPY CONSENT, WAIVER AND AMENDMENT AGREEMENT Consent, Waiver and Amendment Agreement (this "Agreement"), dated as of March 15, 1996, by and among Kerr Group, Inc., a Delaware corporation (the "Company"), PNC Bank, National Association ("PNC"), John Hancock Mutual Life Insurance Company ("John Hancock"), Barnett & Co. ("Barnett"), New York Life Insurance Company ("New York Life"), Massachusetts Mutual Life Insurance Company ("Massachusetts Mutual"), Massmutual/Carlson CBO, N.V. ("Massmutual" and, together with John Hancock, Barnett, New York Life and Massachusetts Mutual, the "Note Purchasers"), and The First National Bank of Boston ("Bank of Boston" and, together with PNC and the Note Purchasers, the "Lenders"). R E C I T A L S: WHEREAS, PNC and the Company entered into that certain Receivables Purchase Agreement, dated as of January 1, 1995 (as amended, the "Receivables Purchase Agreement"); and WHEREAS, the Note Purchasers (or their predecessors in interest) and the Company entered into certain Note Agreements, each dated as of September 15, 1993, providing for the issuance and sale of $41,000,000 aggregate principal amount of the Company's 9.45% Series A Senior Notes due September 15, 2003 (the "Series A Senior Notes")and $9,000,000 aggregate principal amount of the Company's 8.99% Series B Senior Notes due September 15, 1999 (collectively with the Series A Senior Notes, the "Senior Notes")(as amended, the "Note Agreements"); and WHEREAS, Bank of Boston and the Company entered into that certain Letter Agreement, dated February 9, 1995 pursuant to which Bank of Boston extended certain financial accommodations to the Company, including a loan in the maximum principal amount of $10,000,000 evidenced by a promissory note dated February 1, 1995 to Bank of Boston in the principal amount of $10,000,000 (collectively, the "Letter Agreement"); and WHEREAS, Bank of Boston and the Company further entered into that certain Amended and Restated Loan and Security Agreement, dated as of January 5, 1996, pursuant to which Bank of Boston amended and restated the financial accommodations extended to the Company under the Letter Agreement, which are presently evidenced by an amended and restated commercial promissory note dated January 5, 1996 to Bank of Boston in the principal amount of $10,000,000 (collectively, the "Restated Loan Agreement"); and WHEREAS, pursuant to a certain Agreement, dated as of January 5, 1996 (the "January Consent"), PNC waived certain provisions of the Receivables Purchase Agreement, the Note 2 Purchasers waived certain provisions of the Note Agreements and Bank of Boston waived certain provisions of the Letter Agreement; and WHEREAS, pursuant to a certain Amendment Agreement, dated as of January 5, 1996 (the "Amendment Agreement"), the Note Purchasers and the Company amended certain provisions of the Note Agreements; and WHEREAS, in consideration of Bank of Boston entering into the Restated Loan Agreement, the Company granted to Bank of Boston liens on and security interests in certain of its assets, which liens and security interests were consented to by PNC and the Note Purchasers in accordance with the terms of the January Consent; and WHEREAS, in further consideration of Bank of Boston entering into the Restated Loan Agreement, Santa Fe Plastics Corporation, a California corporation ("Santa Fe"), executed and delivered to Bank of Boston a Continuing Guaranty, dated as of January 5, 1996 (the "Santa Fe Guaranty"), pursuant to which Santa Fe guaranteed the payment of the Additional Obligations (as such term is defined in the Restated Loan Agreement) to Bank of Boston; and WHEREAS, the Company proposes (i) to sell to Alltrista Corporation, an Indiana corporation ("Alltrista"), substantially all of its equipment, contract rights (other than those relating to the sale of finished home canning inventory), trademarks, and licenses used by Kerr in its consumer products/home canning business, pursuant to an Asset Purchase Agreement between Kerr and Alltrista substantially in the form attached hereto as Exhibit A (the "Asset Purchase Agreement"), and (ii) to retain Alltrista as its sales agent for its finished home canning inventory, pursuant to a Sales Agent Agreement between Kerr and Alltrista substantially in the form attached hereto as Exhibit B (the "Sales Agent Agreement"); and WHEREAS, the Company has requested that each of the Note Purchasers, PNC and Bank of Boston consent to the transactions contemplated by, and the performance by the Company of its obligations under, the Asset Purchase Agreement and the Sales Agent Agreement, and each of the Note Purchasers, PNC and Bank of Boston are willing to do so subject to the terms and conditions set forth in this Agreement; and WHEREAS, PNC has agreed to waive certain provisions, and to amend certain other provisions, of the Receivables Purchase Agreement, the Note Purchasers have agreed to waive certain provisions of the Note Agreements, and Bank of Boston has agreed to waive certain provisions, and to amend certain other provisions, of the Restated Loan Agreement. -2- 3 NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1. Waiver. Subject to the further provisions of this Agreement: (a) the Note Purchasers (i) waive from and including March 30, 1996 through and including May 15, 1996 any Default or Event of Default (each as defined in the Note Agreements) solely arising out of the Company's failure to comply with the provisions of Section 10.1 or 10.9 of the Note Agreements, and (ii) waive from and including March 1, 1996 through and including May 15, 1996 any Default or Event of Default solely arising out of the Company's failure to comply with the provisions of Section 10.8 or 10.16 of the Note Agreements; (b) PNC (i) waives from and including March 30, 1996 through and including May 15, 1996 any default or Termination Event (each as defined in the Receivables Purchase Agreement) solely arising out of the Company's failure to comply with Section 10.1 or 10.9 of the Note Agreements, including without limitation any default or Termination Event arising under Section 6.17 of the Receivables Purchase Agreement to the extent such default or Termination Event solely relates to Section 10.1 or 10.9 of the Note Agreements, and (ii) waives from and including March 1, 1996 through and including May 15, 1996 any default or Termination Event solely arising out of the Company's failure to comply with Section 10.8 or 10.16 of the Note Agreements, including without limitation any default or Termination Event arising under Section 6.17 of the Receivables Purchase Agreement to the extent such default or Termination Event solely relates to Section 10.8 or 10.16 of the Note Agreements; and (c) Bank of Boston (i) waives from and including March 30, 1996 through and including May 15, 1996 any default or Event of Default (each as defined in the Restated Loan Agreement) solely arising out of the Company's failure to comply with Section 10.1 or 10.9 of the Note Agreements, and (ii) waives from and including March 1, 1996 through and including May 15, 1996 any default or Event of Default solely arising out of the Company's failure to comply with Section 10.8 or 10.16 of the Note Agreements. SECTION 2. Consents. Each of the Note Purchasers, PNC, and Bank of Boston (collectively, the "Lenders") hereby (a) consents to the Company entering into the Asset Purchase Agreement and to the consummation of the transactions contemplated thereby and the performance by the Company of its obligations thereunder, notwithstanding Section 6(g) of the Restated Loan -3- 4 Agreement, Sections 10.5 and 10.6 of the Note Agreements, or any other provision of the Restated Loan Agreement, the Note Agreements or the Receivables Purchase Agreement, as the case may be, prohibiting or otherwise limiting any such sale of assets and property by the Company as is contemplated by, and on substantially the terms and conditions set forth in, the Asset Purchase Agreement, provided, that the foregoing consent shall not, and shall not be construed to, waive any Lender's right to declare a default or an event of default under the Restated Loan Agreement, the Note Agreements or the Receivables Purchase Agreement, as the case may be, arising out of the Company's payment of indemnity obligations or the occurrence of a default or other breach of obligation by the Company under the Asset Purchase Agreement; (b) waives any default or event of default under the Restated Loan Agreement, the Note Agreements or the Receivables Purchase Agreement, as the case may be, solely arising out of the sale of assets and property by the Company contemplated by, and on substantially the terms and conditions set forth in, the Asset Purchase Agreement, provided, that the foregoing waiver shall not, and shall not be construed to, waive any Lender's right to declare a default or an event of default under the Restated Loan Agreement, the Note Agreements or the Receivables Purchase Agreement, as the case may be, arising out of the Company's payment of indemnity obligations or the occurrence of a default or other breach of obligation by the Company under the Asset Purchase Agreement; and (c) consents to the payments to be made by the Company to Bank of Boston and the Note Purchasers, respectively, pursuant to Section 4(a) and Schedule 1 hereto. SECTION 3. Amendments to Restated Loan Agreement and Receivables Purchase Agreement. (a) Amendment to Restated Loan Agreement. Bank of Boston and the Company hereby agree that the definition of "Maturity Date" in the Restated Loan Agreement is amended by deleting "April 15, 1996" and inserting therefor "May 15, 1996." (b) Consent to Amendment. Each of the Note Purchasers and PNC hereby consents to the amendment to the Restated Loan Agreement set forth in Section 3(a) of this Agreement. (c) Amendment to Receivables Purchase Agreement. (i) PNC and the Company hereby agree that the term "Maximum Purchaser's Net Investment" set forth in Section 1.1 of the -4- 5 Receivables Purchase Agreement is amended and restated to read as follows: "Maximum Purchaser's Net Investment" means (i) Eleven Million Dollars ($11,000,000) for the period from and including March 15, 1996 to, but not including, July 15, 1996, and (ii) Ten Million Dollars ($10,000,000) at any time thereafter. (d) Consents to Amendment. Each of the Note Purchasers and Bank of Boston hereby consent to the amendment to the Receivables Purchase Agreement set forth in Section 3(c) of this Agreement. SECTION 4. Consideration. (a) Payments. (i) In consideration of the consents and the waivers granted by the Lenders in Sections 1 and 2 of this Agreement and the amendment to the Restated Loan Agreement set forth in Section 3 of this Agreement, on the first business day following the date of the closing of the Asset Purchase Agreement (the "Initial Payment Date") the Company will pay to Bank of Boston and the Note Purchasers the respective amounts set forth on Schedule 1 hereto in immediately available funds. Immediately following the closing of the Asset Purchase Agreement, the Company shall give irrevocable written instructions to wire the funds referred to on Schedule 1 hereto as soon as practicable and in any event no later than 9:00 a.m. on March 18, 1996, and shall furnish each of the Lenders with a copy of such instructions. (ii) If the Company fails to make the payments to Bank of Boston and the Note Purchasers, respectively, due under the terms of this Section 4(a) and Schedule 1 hereto, the consents, waivers and amendments granted and agreed to in this Agreement shall immediately be revoked, and this Agreement shall immediately terminate without further notice to the Company and shall have no further force or effect. (b) Release of Liens. Bank of Boston acknowledges and agrees that, upon its receipt of $3,500,000 of the amount to be paid to it as described in Section 4(a) of and Schedule 1 to this Agreement, the Additional Obligations (as such term is defined in the Restated Loan Agreement) shall be paid and satisfied in full, and Bank of Boston shall be deemed to have released its liens on the Collateral (as such term is defined in the Restated Loan Agreement); provided, that, notwithstanding the foregoing, Bank of Boston shall retain its right under the Restated Loan Agreement to recover any hereafter arising reasonable costs, fees and expenses, including, but not limited to, attorneys' fees and other professional fees, costs of enforcement, liabilities, and obligations of the Company owing to Bank of Boston in connection with the Obligations (as such term is defined in the Restated Loan Agreement). Upon its receipt of such $3,500,000, Bank of Boston will deliver executed UCC-3 termination statements, in -5- 6 form and substance satisfactory to the Company, and such other instruments and agreements that the Company deems reasonably necessary and appropriate to release and discharge the liens of Bank of Boston in the Collateral. SECTION 5. Representations, Warranties and Covenants. (a) Corporate Power and Authority. Each party hereto represents that it has all requisite corporate power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of each such party. (b) Compliance with Other Instruments, etc. The Company represents that the consummation of the transactions contemplated by this Agreement and, except as to such contracts and agreements set forth in Schedule 7.4 to the Asset Purchase Agreement, the Asset Purchase Agreement will not result in any breach of, or constitute a default under, or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance in respect of any property of the Company under, any indenture, mortgage, deed of trust, bank loan or credit agreement, corporate charter, by-law, or other agreement or instrument to which the Company is a party or by which the Company or any of its properties may be bound or affected, or violate any existing law, governmental rule or regulations, or any order of any court, arbitrator or governmental body, applicable to the Company or any of its properties. (c) Governmental Consent. The Company represents that no consent, approval or authorization of, or registration, filing or declaration with, any governmental authority is required for the validity of the execution and delivery by the Company of this Agreement or the Asset Purchase Agreement or the consummation of the transactions contemplated hereby or thereby. (d) Principal Payments. The Company covenants, and each of the Note Purchasers and Bank of Boston hereby agree, that until May 15, 1996, the Company shall not (unless each of the Note Purchasers and Bank of Boston jointly give notice to the Company to the contrary) make any further payments on the outstanding principal amounts of the obligations under the Note Agreements and the Restated Loan Agreement (whether by regularly scheduled payment or mandatory or optional prepayment). SECTION 6. Expenses. Without limiting the generality of any provision of the Receivables Purchase Agreement, the Note Agreements (each as amended by the Amendment Agreement), the Letter Agreement, or the Restated Loan Agreement, the Company agrees that it will pay on the date of this Agreement any invoices or statements submitted on or prior to the date of this Agreement for the reasonable fees, expenses and client charges of counsel for the Lenders, for any services rendered in connection -6- 7 with the transactions contemplated hereby and with respect to this Agreement and any other document delivered pursuant to this Agreement (including for any amounts due and unpaid as of the date hereof under the respective agreements, including the Restated Loan Agreement, the January Consent, and the Amendment Agreement), and the Company further agrees that it will hereafter promptly pay any additional reasonable fees, expenses and client charges of counsel for the Lenders, for any services rendered in connection with the transactions contemplated hereby and with respect to this Agreement and any other document delivered pursuant to this Agreement. SECTION 7. Effectiveness. This Agreement shall become effective upon the delivery to the Company of a copy of this Agreement executed by each of the Lenders. SECTION 8. Counterparts; Separate Agreements. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles. SECTION 10. Headings. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of this Agreement. SECTION 11. No Other Changes. (a) Except as expressly stated herein, the Receivables Purchase Agreement, the Note Agreements (each as amended by the Amendment Agreement), the Restated Loan Agreement and the January Consent are unaffected hereby and shall remain in full force and effect in accordance with the respective terms thereof. (b) Except as expressly set forth herein, the Lenders do not waive (i) any breaches or defaults under the Note Agreements (each as amended by the Amendment Agreement), the Receivables Purchase Agreement, the Restated Loan Agreement or the January Consent, as the case may be, or any other agreements executed concurrently therewith or pursuant thereto, whether known or unknown, previously or hereafter arising, or of any nature or character whatsoever, or (ii) any of their respective rights or remedies thereunder or under applicable law, including (but not limited to) any Make-Whole Premium (as such term is defined in the Note Agreements) to which the Note Purchasers may be entitled pursuant to the terms of Section 9 of the Note Agreements on account of the payments due under the terms of Section 4(a) and Schedule 1 hereto. -7- 8 SECTION 12. Reaffirmation. The Company hereby represents and warrants to the applicable Lender that each of the representations and warranties contained in the Restated Loan Agreement, the Note Agreements or the Receivables Purchase Agreement, as the case may be, were true and correct in all material respects when made and, except to the extent (a) that a particular representation or warranty by its terms expressly applies only to an earlier date, or (b) the Company has previously advised such Lender in writing as contemplated under the respective agreement, are true and correct in all material respects as of the date of this Agreement. SECTION 13. Conflict of Terms. In the event of any inconsistency between the provisions of this Agreement and any provision of the Note Agreements (each as amended by the Amendment Agreement), the Receivables Purchase Agreement, or the Letter Agreement or Restated Loan Agreement, as the case may be, the terms and provisions of this Agreement shall govern and control. [The rest of this page is intentionally left blank] -8- 9 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: /s/ Geoffrey A. Whynot ------------------------------------- PNC BANK, NATIONAL ASSOCIATION By: ------------------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- MASSMUTUAL/CARLSON CBO, N.V. LIFE By: ------------------------------------- 10 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ------------------------------------- PNC BANK, NATIONAL ASSOCIATION By: /s/ ANTHONY TRUNZO ------------------------------------- Anthony L. Trunzo Vice President & Manager JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- MASSMUTUAL/CARLSON CBO, N.V. LIFE By: ------------------------------------- 11 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ------------------------------------- PNC BANK, NATIONAL ASSOCIATION By: ------------------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ STEPHEN J. BLEWITT ------------------------------------- Investment Officer NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- MASSMUTUAL/CARLSON CBO, N.V. LIFE By: ------------------------------------- 12 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ------------------------------------- PNC BANK, NATIONAL ASSOCIATION By: ------------------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- NEW YORK LIFE INSURANCE COMPANY By: /s/ LYDIA S. SANGREE ------------------------------------- Lydia S. Sangree Assistant Vice President MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- MASSMUTUAL/CARLSON CBO, N.V. LIFE By: ------------------------------------- 13 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ------------------------------------- PNC BANK, NATIONAL ASSOCIATION By: ------------------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: /s/ RICHARD C. MORRISON ------------------------------------- Vice President MASSMUTUAL/CARLSON CBO, N.V. LIFE By: ------------------------------------- Kerr Group Inc. Consent, Waiver and Amendment Agreement 14 IN WITNESS WHEREOF, the parties hereto have signed, or caused their duly elected officer to sign on the date first written above. KERR GROUP, INC. By: ------------------------------------- PNC BANK, NATIONAL ASSOCIATION By: ------------------------------------- JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- NEW YORK LIFE INSURANCE COMPANY By: ------------------------------------- MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: ------------------------------------- MASSMUTUAL/CARLSON CBO, N.V. LIFE By: MESSPIERSON TRUST (CURACAO) N.V. ------------------------------------- Managing Director 15 BARNETT & CO. By: /s/ RICHARD McCORMICK ------------------------------------- THE FIRST NATIONAL BANK OF BOSTON By: ------------------------------------- 16 BARNETT & CO. By: ------------------------------------- THE FIRST NATIONAL BANK OF BOSTON By: /s/ Dougles Vannah, V.P. ------------------------------------- 17 SCHEDULE 1 SCHEDULE OF PAYMENTS 1. BANK OF BOSTON The Company will make a payment to Bank of Boston in repayment of a portion of the outstanding principal amount of the obligations under the Restated Loan Agreement (consisting of the entire $3,500,000 principal amount of the Additional Obligations and $460,177 of the principal amount of the Original Obligations) on or prior to the Initial Payment Date in the amount of $3,960,177. 2. NOTE PURCHASERS The Company will make a payment to the Note Purchasers in repayment of a portion of the aggregate outstanding principal amount of the obligations under the Note Agreements on or prior to the Initial Payment Date in the aggregate amount of $3,539,823 (such aggregate amount to be distributed pro rata to the Note Purchasers in accordance with their respective shares of the total aggregate outstanding principal amount of the obligations under the Note Agreements). EX-11.1 12 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 KERR GROUP, INC. Statement Re: Computation of Per Share Earnings (Loss)
Years Ended December 31, ------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands, except per share data) ------------------------------------- Primary Net Earnings (Loss) Per Common Share Net earnings (loss) ($5,307) $3,404 ($1,633) ($2,697) ($2,579) Less Preferred Stock dividends (829) (829) (829) (829) (829) ------- ------ ------- ------- ------- Net earnings (loss) applicable to primary earnings (loss) per common share ($6,136) $2,575 ($2,462) ($3,526) ($3,408) ======= ====== ======= ======= ======= Weighted average number of common shares outstanding 3,842 3,674 3,669 3,675 3,675 ======= ====== ======= ======= ======= Primary net earnings (loss) per common share ($ 1.60) $ 0.70 ($ 0.67) ($ 0.96) ($ 0.93) ======= ====== ======= ======= ======= Fully Diluted Net Earnings (Loss) Per Common Share Net earnings (loss) applicable to primary earnings (loss) per common share ($6,136) $2,575 ($2,462) ($3,526) ($3,408) Add Preferred Stock dividends 829 829 829 829 829 ------- ------ ------- ------- ------- Net earnings (loss) applicable to fully diluted earnings (loss) per common share ($5,307) $3,404 ($1,633) ($2,697) ($2,579) ======= ====== ======= ======= ======= Weighted average number of common shares outstanding 3,842 3,674 3,669 3,675 3,675 Common shares issuable from assumed conversion of Preferred Stock 709 709 709 709 709 Incremental common shares issuable upon assumed exercise of outstanding stock options 31 22 6 3 -- ------- ------ ------- ------- ------- Adjusted weighted average number of common shares outstanding 4,582 4,405 4,384 4,387 4,384 ======= ====== ======= ======= ======= Fully diluted net earnings (loss) common share: As computed ($ 1.16) $ 0.77 ($ 0.37) ($ 0.61) ($ 0.59) ======= ====== ======= ======= ======= As reported (a) ($ 1.60) $ 0.70 ($ 0.67) ($ 0.96) ($ 0.93) ======= ====== ======= ======= =======
(a) The calculation of fully diluted net earnings (loss) per common share for all years was not dilutive. EX-21.1 13 SUBSIDIARIES LIST 1 EXHIBIT 21.1 Subsidiaries Name State of Incorporation - ---- ---------------------- Santa Fe Plastic Corporation California EX-23.1 14 CONSENT OF INDEPENDENT ACOUNTANTS 1 EXHIBIT 23.1 Consent of Independent Certified Public Accountants To the Board of Directors of Kerr Group, Inc.: We consent to the incorporation by reference in the Registration Statement No. 2-92721 on Form S-3, Registration Statement No. 33-3517 on Form S-3, Registration Statement No. 33-18463 on Form S-8 and Registration Statement No. 33-31347 on Forms S-3 and S-8 of Kerr Group, Inc. (Kerr) of our report dated March 15, 1996 relating to the consolidated balance sheets of Kerr and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of earnings (loss), common stockholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 1995, which report appears in the December 31, 1995 annual report on Form 10-K of Kerr. KPMG Peat Marwick LLP Los Angeles, California March 29, 1996 EX-27 15 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 3,904 0 7,851 421 31,041 45,483 113,452 61,957 120,221 75,821 0 0 9,748 2,113 12,046 120,221 138,995 139,223 108,964 108,964 33,037 0 6,047 (8,825) (3,518) (5,307) 0 0 0 (5,307) (1.60) (1.60)
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