1
EXHIBIT 10(o)
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
REVOLVING CREDIT AGREEMENT APPROVED BY COMERICA BANK
Borrowers:
Detrex Corporation, The Elco Corporation, Xxxxxx Plastics, Inc., and
Xxxxxxx-Oxidermo, Inc. as joint and several obligors.
Facility:
$12,000,000 Revolving Credit with a $1,250,000 sublimit for standby letters of
credit. Total Revolving Credit debt and outstanding letters of credit are not
to exceed the lesser of the Revolving Credit amount or the Borrowing Formula.
Purpose
To pick up the outstanding loan balance on the existing revolving credit
agreement dated 3/11/94 and amended by the first amendment dated 12/31/94.
Maturity Date:
April 1, 1997.
LENDER:
Comerica Bank.
Borrowing Formula:
- 80% of eligible Accounts Receivable
- Up to $2,000,000 of inventory advances based on 25% of eligible Raw
Material and Finished Goods at Xxxxxx Plastics, Inc., Xxxxxxx-Oxidermo,
Inc. and The Elco Corporation.
-and-
- a $2,400,000 over advance without regard to formula. Over advance to
reduce by all of the proceeds of any tax refund and/or the sale of
commercial property.
Collateral:
- First security interest in Borrowers' ASSETS, INCLUDING
accounts receivable, GENERAL INTANGIBLES, inventory, machinery, and
equipment.
- A first mortgage on commercial properties located at: 000 Xxxxxx Xxx.,
Xxxxxxx Xxxxx, XX; 000 Xxxxxx Xxx., Xxxxxxx Xxxxx, KY; and 00000 Xxxxxxx
Xxx., Xxxxxxx, XX; and 000 Xxxxxxx Xx., Xxxxxx, XX. Surveys and title
commitments to be ordered by Comerica Bank.
2
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
Support
- Pledge and first perfected security interest in the stock of Xxxxxx
Plastics, Inc., Xxxxxxx-Oxidermo, Inc., and The Elco Corp.
Interest Rate:
Prime + 1.0.
Commitment Fee:
75 basis points on the unused portion, MONTHLY IN ARREARS.
Other Fees:
- Letter of credit fees of 2.50% per annum, PAYABLE ANNUALLY IN ADVANCE.
- A $50,000 loan closing fee.
- A monthly fee of 10 basis points to be assessed on the gross over advance
amount available to the Borrowers the previous month end.
- All costs, including but not limited to legal, audit, title commitment and
appraisal fees, shall be for the account of Borrowers.
Negative Covenants:
- Consolidated Cash Flow Coverage
Borrowers shall maintain a Consolidated Cash Flow Coverage ratio of not less
than:
Calculation Date Measuring Period Ratio
---------------- ---------------- -----
3/31/96 1/1/96 - 3/31/96 0.55
6/30/96 1/1/96 - 6/30/96 0.55
9/30/96 1/1/96 - 9/30/96 0.55
12/31/96 1/1/96 - 12/31/96 0.60
3/31/97 4/1/96 - 3/31/97 0.85
Where "Consolidated Cash Flow Coverage" is equal to Adjusted Net Income +
Depreciation + Amortization DIVIDED by Capital Expenditures + Current
Maturities of LTD (excluding balloon payments) + Payment on Capital Leases
during the specified period + Dividends + the amount of cash expenditures
which are deductions from environmental reserves.
"Adjusted Net Income" is defined as GAAP Net Income from continuing
operations after taxes less the amount of any recoveries in environmental
reserves (net of taxes) and plus the amount of any deductions related to
increases in environmental reserves (net of taxes).
-2-
3
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
- Consolidated Current Ratio
Borrowers shall maintain a Consolidated Current Ratio of at least:
Period Ratio
------------------------ -----------
12/31/95 - 6/29/96 1.150 to 1.0
6/30/96 - 12/30/96 1.175 to 1.0
12/31/96 - and thereafter 1.250 to 1.0
Where "Consolidated Current Ratio" is equal to Current Assets other than
Deferred Income Taxes divided by Current Liabilities. All other Current
Assets and Current Liabilities are defined according to GAAP. Revolving
credit debt shall be classified as current for compliance purposes.
- Consolidated Tangible Net Worth
Borrowers shall maintain a minimum Consolidated tangible Net Worth of
$15,200,000 to increase by 100% of quarterly net income after taxes with no
reductions for losses beginning 3/31/96.
"Consolidated Tangible Net Worth" is defined as the excess of the net book
value of all assets (other than Patents, Patent Rights, Trademarks, Trade
Names, Franchises, Copy Rights, Licenses, Goodwill, and similar intangible
assets) after all appropriate deductions in accordance with GAAP (including,
without limitation, reserves for doubtful receivables, obsolescence,
depreciation, and amortization), over all Debt and Minority Interests.
- Consolidated Leverage Ratio
Borrowers shall maintain a "Consolidated Leverage Ratio" of Total
Liabilities divided by Tangible Net Worth of not more than:
Period Ratio
----------------------- -----------
12/31/95 - 12/30/96 3.25 to 1.0
12/31/96 and thereafter 3.00 to 1.0
Where "Total Liabilities" are defined according to GAAP.
-3-
4
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
Ongoing Reporting Requirements:
- Weekly Report of Accounts Receivable the following Thursday of each week.
- Monthly Detailed Accounts Receivable Aging within 20 days of month end.
- Monthly Detailed Report of Eligible Inventory within 20 days of month end.
- Monthly Detailed Accounts Payable Report within 20 days of month end.
- Monthly Consolidated Financial Statements for Detrex Corporation within 30
days of month end including a Statement of Income and Earnings and Balance
Sheets.
- Monthly Financial Statements for The Elco Corporation, Xxxxxx Plastics, Inc.,
and Xxxxxxx-Oxidermo, Inc. including a Statement of Income and Earnings and
Balance Sheets within 30 days of month end.
- Monthly internal results by business unit within 30 days of month end.
- Monthly Covenant Compliance Certificates within 30 days of month end.
- Annual Audited Consolidated Financial Statements within 90 days of year end.
- ANNUAL FINANCIAL STATEMENTS FOR XXXXXX PLASTICS, INC. WITHIN 90 DAYS OF YEAR
END PREPARED BY DETREX CORPORATIONS'S AUDITOR.
- Annual Projections within 30 days of year end, Quarterly updates for the
current fiscal year within 45 days of quarter end.
- Other information provided to shareholders and the SEC within five days of
delivery.
- Asset Based Bank Audits as scheduled.
- Lockbox with Dominion of Funds for all Borrowers.
Conditions of Closing
- Appraisals satisfactory to the Bank which are not less than 30 days old
to be received no latter than 4/30/96 for machinery and equipment located at:
- Detrex Chemicals Division - Ashtabula, OH
- Xxxxxxx-Oxidermo, Inc. - Detroit and Romulus, MI
- The Elco Corp. - Cleveland, OH
- Xxxxxx Plastics, Inc. - Easton, PA and Bakersfield, CA
- See the attached list of qualified machinery and equipment appraisers
acceptable to the Bank.
- Appraisal and environmental reports satisfactory to the Bank which are not
less than 30 days old to be received no later than 4/30/96 for the following
real estate locations:
- 000 Xxxxxx Xxx., Xxxxxxx Xxxxx, XX
- 000 Xxxxxxx Xx., Xxxxxx, XX
- See attached list of qualified environmental consultants acceptable to the
Bank. Real estate appraisals are to be ordered by the Bank as required per
current banking regulations.
- The Borrowers are to provide the following information with respect to 000
Xxxxxx Xxx., Xxxxxxx Xxxxx, XX: signed purchase agreement, existing
environmental audits, approved remedial work plan, itemization of year-to-date
expenditures on the remedial work plan, and revised estimate of the cost to
complete the remedial work plan. IF THIS PROPERTY IS NOT SOLD WITHIN 90 DAYS
OF CLOSING THIS CREDIT ARRANGEMENT, AN APPRAISAL IS REQUIRED ON THIS PROPERTY
WITHIN 120 DAYS OF CLOSING THIS CREDIT ARRANGEMENT.
-4-
5
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
Conditions of Closing Continued
- The Elco Corporation shall obtain the consent of the minority shareholders of
Xxxxxx Plastics, Inc. to the terms and conditions outlined in this letter,
including the pledge of the stock of Xxxxxx Plastics, Inc., and shall modify
or amend the by-laws of Xxxxxx Plastics, Inc. to permit the pledge of such
stock to Comerica, and Comerica's subsequent exercise of its power of sale as
secured party, free and clear of the restrictions contained in its by-laws.
- The Borrowers agree that all of the security granted to Comerica shall also
secure all amounts due from the Borrowers to Comerica Leasing Corporation.
Other Provisions
- The occurrence of a Materially Adverse Event shall be an Event of Default.
- Limits on the following:
- outside debt including capital leases
- acquisition of businesses
- asset sales and/or sale/leasebacks
- judgments or decrees
- Bank will continue to monitor the progress against the 1996 projections and
the related impact on Borrowers' ability to meet the financial covenants in
the Agreement. The effectiveness of the Agreement will also be evaluated on
this criteria.
- The Borrowers shall acknowledge and agree to the terms of this proposal to the
undersigned by no latter than 6:00 p.m. on March 22, 1996.
- This loan arrangement must be closed no latter than April 30, 1996. As a
condition of closing this credit facility, Comerica must be provided with all
documents required by Comerica in form and substance satisfactory to
Comerica. A further condition of funding this credit facility is Comerica's
continued satisfaction with Borrowers' consolidated financial condition,
operations, and economic environment which may be reviewed by Comerica at any
time.
- THE LOANS SHALL BE EVIDENCED AND SECURED BY LOAN DOCUMENTS CONSISTENT WITH
THIS COMMITMENT AND OTHERWISE IN FORM SATISFACTORY TO THE BANK AND ITS
COUNSEL. THE LOAN DOCUMENTS SHALL INCLUDE WARRANTIES, REPRESENTATIONS AND
AGREEMENTS TO INDEMNIFY BANK FROM ANY COST ASSOCIATED WITH ANY VIOLATIONS OF
ENVIRONMENTAL LAWS AND REGULATIONS.
- THIS COMMITMENT SHALL BE TERMINATED AT THE BANK'S OPTION, AND IN ANY MANNER AS
THE BANK MAY DETERMINE IF:
(i) ANY BORROWER SHALL FAIL TO COMPLY WITH ANY OF THE TERMS AND
CONDITIONS HEREOF; OR
-5-
6
[COMERICA BANK LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
(II) IN THE EVENT OF THE FILING BY OR AGAINST ANY BORROWER OF A PETITION IN
BANKRUPTCY OR INSOLVENCY OR FOR REORGANIZATION, OR FOR THE APPOINTMENT
OF A RECEIVER OF TRUSTEE OR THE MAKING BY ANY BORROWER AN ASSIGNMENT
FOR THE BENEFIT OF CREDITORS OR THE FILING OF A PETITION FOR
ARRANGEMENT BY ANY BORROWER WHICH MAY EXIST AT THE TIME NOW OR
HEREAFTER ESTABLISHED FOR THE CLOSING OF THE LOAN FACILITIES
CONTEMPLATED HEREUNDER; OR
(III) ANY MATERIAL ADVERSE CHANGES IN THE FINANCIAL CONDITION, PROPERTIES,
OR BUSINESS PROSPECTS OF ANY BORROWER SHALL OCCUR.
- THE COMMITMENTS SET FORTH HEREIN SHALL NOT BE ASSIGNABLE BY THE BORROWERS BY
OPERATION OF LAW, OR OTHERWISE, ARE NOT INTENDED TO CREATE ANY RIGHTS IN
FAVOR OF AND MAY NOT BE RELIED UPON BY ANY THIRD PARTY.
- THIS COMMITMENT LETTER CONTAINS THE ENTIRE AGREEMENT OF THE BORROWERS AND
THE BANK AS OF THE DATE HEREOF AND IS NOT SUBJECT TO OR SUPPLEMENTED BY ANY
PREVIOUS CORRESPONDENCE OR DISCUSSIONS BETWEEN THE BORROWERS AND THE BANK OR
ANY OTHER DOCUMENT NOT EXPRESSLY REFERENCED HEREIN. NO CHANGE IN THIS
COMMITMENT LETTER SHALL BE BINDING UPON THE BANK UNLESS EXPRESSED IN WRITING
AND SIGNED BY THE BANK.
Please contact me if you have any questions.
Very truly yours,
Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
Assistant Vice President
ACKNOWLEDGED AND AGREED:
DETREX CORPORATION
By: X.X. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: V.P. - FINANCE
-------------------------
-6-
7
[COMERICA LETTERHEAD]
March 22, 1996
DETREX CORPORATION
(Continued)
THE ELCO CORPORATION
By: X.X. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: TREASURER
-------------------------
XXXXXX PLASTICS, INC.
By: X.X. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: DIRECTOR
-------------------------
XXXXXXX-OXIDERMO, INC.
By: X.X. ISRAEL Date: March 22 , 1996
-------------------------- ---------------------
Its: TREASURER
-------------------------
-7-
