SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-475
A.O. SMITH CORPORATION
Delaware 39-0619790
(State of Incorporation) (IRS Employer ID Number)
P. O. Box 23972, Milwaukee, Wisconsin 53223-0972
Telephone: (414) 359-4000
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 and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Class A Common Stock Outstanding as of July 31, 1995: 5,902,704
Common Stock Outstanding as of July 31, 1995: 15,010,717
Exhibit Index Page 17
Index
A. O. Smith Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Earnings and Retained Earnings
- Six months ended June 30, 1995 and 1994 3
Condensed Consolidated Balance Sheet
- June 30, 1995 and December 31, 1994 4-5
Condensed Consolidated Statements of Cash Flows
- Six months ended June 30, 1995 and 1994 6
Notes to Condensed Consolidated Financial Statements
- June 30, 1995 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12-14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Index to Exhibits 17
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
AND RETAINED EARNINGS
Three and Six months ended June 30, 1995 and 1994
(000 omitted except for per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
EARNINGS 1995 1994 1995 1994
Electrical Products Company $ 84,560 $ 74,858 $169,816 $145,299
Automotive Products Company 220,272 185,611 441,941 368,226
Water Products Company 66,870 62,764 130,950 130,766
Smith Fiberglass Products Inc. 15,600 15,857 29,317 28,557
Agricultural Products 12,541 11,102 20,807 17,147
-------- ------- ------- -------
NET REVENUES 399,843 350,192 792,831 689,995
Cost of products sold 335,535 291,653 664,380 578,073
-------- ------- -------- --------
Gross profit 64,308 58,539 128,451 111,922
Selling, general and
administrative expenses 29,315 26,013 58,277 51,553
Interest expense 3,349 3,083 6,565 6,055
Other expense - net 1,147 922 3,131 1,138
--------- -------- -------- --------
30,497 28,521 60,478 53,176
Provision for income taxes 11,744 10,810 23,150 20,113
--------- -------- -------- --------
Earnings before equity in
earnings of affiliated
companies 18,753 17,711 37,328 33,063
Equity in earnings of
affiliated companies 1,272 247 1,058 601
-------- -------- -------- ---------
NET EARNINGS 20,025 17,958 38,386 33,664
======== ========= ======= =========
RETAINED EARNINGS
Balance at beginning of
period 240,110 190,973 224,467 177,543
Cash dividends on common
shares (3,137) (2,712) (5,855) (4,988)
------- ------- ------- -------
BALANCE AT END OF PERIOD $256,998 $206,219 $256,998 $206,219
======= ======= ======= =======
DIVIDENDS PER COMMON SHARE $ .15 $ .13 $ .28 $ .24
NET EARNINGS PER COMMON SHARE $ .96 $ .86 $1.84 $1.62
See accompanying notes to unaudited condensed consolidated financial
statements.
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1995 and December 31, 1994
(000 omitted)
(unaudited)
(unaudited) December 31,
June 30, 1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,177 $ 8,485
Trade receivables 155,850 132,630
Finance subsidiary receivables and
leases 15,328 16,361
Customer tooling 17,858 24,489
Inventories (note 2) 109,961 110,863
Deferred income taxes 22,277 28,100
Other current assets 13,765 8,592
------- --------
TOTAL CURRENT ASSETS 340,216 329,520
Investment in and advances to
affiliated companies 19,276 17,326
Deferred model change 23,513 18,638
Finance subsidiary receivables and
leases 33,624 37,842
Other assets 40,979 42,751
Property, plant and equipment 912,103 881,717
Less accumulated depreciation 503,473 479,937
------- --------
Net property, plant and equipment 408,630 401,780
-------- --------
TOTAL ASSETS $866,238 $847,857
======== ========
LIABILITIES AND STOCKHOLDERS'EQUITY
CURRENT LIABILITIES
Trade payables $ 95,031 $ 101,153
Accrued payroll and pension 37,133 36,641
Postretirement benefit obligation 9,873 9,573
Other current liabilities 59,982 61,301
Long-term debt due within one year 3,925 3,775
Finance subsidiary long-term debt
due within one year 3,502 3,480
------ -------
TOTAL CURRENT LIABILITIES 209,446 215,923
Long-term debt (note 3) 137,954 136,769
Finance subsidiary long-term debt 25,118 29,357
Postretirement benefit obligation 71,948 72,388
Other liabilities 22,280 26,230
Deferred income taxes 53,328 54,445
STOCKHOLDERS' EQUITY:
Class A common stock, $5 par
value: authorized 7,000,000
shares; issued 5,962,828 and
6,035,641 29,814 30,178
Common stock, $1 par value:
authorized 24,000,000 shares;
issued 15,736,822 and
15,664,109 15,737 15,664
Capital in excess of par value 68,552 68,209
Retained earnings (note 3) 256,998 224,467
Pension liability adjustment (9,653) (9,653)
Cumulative foreign currency
translation adjustments (7,224) (8,035)
Treasury stock at cost (8,060) (8,085)
--------- --------
TOTAL STOCKHOLDERS' EQUITY 346,164 312,745
------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $866,238 $847,857
======= ========
See accompanying notes to unaudited condensed consolidated financial
statements.
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
A. O.SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended June 30, 1995 and 1994
(000 omitted) - (unaudited)
CASH FLOWS 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 38,386 $ 33,664
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 26,522 24,546
Deferred income taxes 4,706 5,497
Equity in earnings of affiliates,
net of dividends (1,058) (601)
Deferred model change and software
amortization 3,807 4,549
Other - net (1,157) 870
Change in current assets and liabilities:
Trade receivables and customer tooling (15,811) (40,278)
Current income tax accounts-net 2,468 (150)
Inventories 902 (7,632)
Prepaid expenses and other (6,311) (7,355)
Trade Payables (6,122) 15,222
Accrued liabilities, payroll and pension (1,857) 7,202
Net change in noncurrent assets and
liabilities 1,837 3,752
------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 46,312 39,286
------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (32,592) (30,696)
Other - net (8,368) (733)
-------- --------
CASH USED BY INVESTING ACTIVITIES (40,960) (31,429)
-------- --------
CASH FLOW BEFORE FINANCING ACTIVITIES 5,352 7,857
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Long-term debt incurred 15,000 828
Long-term debt retired (13,665) (4,219)
Finance subsidiary net long-term debt
retired (4,217) (7,912)
Proceeds from common stock options
exercised 90 1,850
Other stock transactions (13) 1,971
Dividends paid (5,855) (4,988)
------- --------
CASH USED BY FINANCING ACTIVITIES (8,660) (12,470)
Net increase (decrease) in cash and
cash equivalents (3,308) (4,613)
Cash and cash equivalents-beginning
of period 8,485 11,902
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,177 $ 7,289
======= ========
See accompanying notes to unaudited condensed consolidated financial
statements.
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
A. O. SMITH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(unaudited)
1. Basis of Presentation
The financial statements presented herein are based on interim
figures and are subject to audit. In the opinion of management, all
adjustments consisting of normal accruals considered necessary for
fair presentation of the results of operations and of financial
position have been made. The results of operations for the six-month
period ended June 30, 1995 are not necessarily indicative of the
results expected for the full year. The consolidated balance sheet
as of December 31, 1994 is derived from the audited financial
statements but does not include all disclosures required by generally
accepted accounting principles.
2. Inventories
(000 omitted) June 30, 1995 December 31, 1994
Finished products $ 53,005 $ 55,331
Work in process 49,465 48,886
Raw materials 44,393 41,709
Supplies 8,278 7,457
-------- --------
155,141 153,383
Allowance to state
inventories at LIFO cost 45,180 42,520
-------- --------
$109,961 $110,863
======== ========
3. Long-Term Debt
On June 30, 1995, the Corporation's $140 million Revolver Agreement with a
group of ten banks was amended to $160 million and the final maturity was
extended from April 3, 1998 to June 30, 2000. The amended agreement also
carries lower fees and lower borrowing rates.
The Corporation's long-term credit agreements contain certain conditions
and provisions which restrict the Corporation's payment of dividends.
Under the most restrictive of these provisions, retained earnings of $96.9
million were unrestricted as of June 30, 1995 for cash dividends and
treasury stock purchases.
PART 1--FINANCIAL INFORMATION
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - First six months of 1995 compared to 1994
The slowdown in the domestic economy has not had a significant effect upon
the corporation's businesses as evidenced by revenues and earnings for the
first six months and second quarter of 1995 that surpassed those of any
previous comparable period. The corporation's ability to achieve this
record performance despite indications of downturns in the automotive and
electric motors markets is due largely to a concerted effort to gain
market share and secure new customers.
Revenues for the first half of 1995 were $792.8 million or almost 15
percent better than the $690 million of revenues in the same period of
1994. Revenues of $399.8 million in the second quarter of 1995 surpassed
last year's second quarter by $49.6 million or 14.2 percent.
The corporation earned $38.4 million for the first half of 1995 compared
to $33.7 million in the first half of 1994. Second quarter earnings were
$20 million in 1995, an increase of $2 million or more than 11 percent
over the $18 million earned in the same quarter of 1994.
The gross profit margin through the first half of the year was 16.2
percent, identical to the margin for the same period last year. The
favorable impact of increased volume was offset by higher costs in most of
the corporation's product operations and an unfavorable product mix. In
addition margins continued to be affected by costs associated with new
product programs at the Automotive Products Company. The second quarter
gross margin of 16.1 percent declined from 16.7 percent from the second
quarter of 1994 as the impact of higher material costs and lower margins
on export shipments was evident.
The Automotive Products Company sales in the first half of 1995 increased
by 20 percent over the same period of 1994. The second quarter of 1995
exhibited a similar percentage increase over the same quarter of 1994.
These increases were in direct contrast to the three percent sales decline
experienced by the domestic automotive industry during the first six
months of the year. Automotive's improved sales performance was
influenced by a strong presence in the light truck segment, added volume
resulting from new product programs completed in 1994 and early 1995, and
continued strength in the heavy truck market.
Automotive's 1995 earnings for the second quarter and first half were
higher than comparable periods of 1994 despite absorbing the costs
associated with new product programs introduced this year.
The corporation's 40 percent owned Mexican affiliate experienced a good
second quarter, and operations improved substantially over the prior year
due to increased export shipments and a lower cost structure. Due to the
strengthening of the peso during the quarter, the corporation recognized a
minimal translation gain, whereas in the first quarter of 1995, a
translation loss was incurred. The affiliate's results for the second
quarter and first half of 1994 were impacted by start up costs for new
products and costs incurred to realign manufacturing operations, the
benefits of which are now being realized.
Automotive will launch two significant product programs in the near
future. Engine cradles for the 1996 Ford Taurus/Mercury Sable will be
shipped from the Granite City, Illinois plant while the Milwaukee,
Wisconsin plant will start production of full frame assemblies for the
extended cab version of the Dodge Ram pickup. Also, during the second
quarter Automotive announced it would be building two new plants. A plant
near Roanoke, Virginia will supply customized frame rails for Class 8
heavy trucks beginning in the third quarter of 1996, and a plant in
Plymouth, Michigan will supply frames for the 1997 model year Dodge Dakota
pick-up truck commencing in the summer of 1996.
The labor contracts of the various unions at Automotive's Milwaukee plant
expired on July 31, 1995. A ninety day no-strike extension has been agreed
to by all the bargaining units represented and contract negotiations are
currently underway.
The Electrical Products Company followed its excellent first quarter of
1995 with continued good performance in the second quarter. Sales in the
second quarter increased 13 percent over a very strong second quarter of
1994. Strength in the commercial hermetic market and increased export
sales had a significant influence on second quarter volumes. Year-to-date
sales reflect almost a 17 percent increase over the first half of 1994 due
to sustained high demand in all of the major markets the company serves.
Electrical Products second quarter earnings were slightly less than last
year's second quarter due primarily to increased cost of raw materials.
First half profits in 1995 were substantially higher than the same period
in 1994 as a result of higher volume.
The Water Products Company overcame its slow 1995 start with second
quarter sales up 6.5 percent over last year's second quarter. Increased
commercial water heater volume contributed significantly to the improved
second quarter performance as Water Products continues to gain share in
this segment of the market. The residential water heater market
demonstrated a moderate recovery in the second quarter, however, the
entire industry continues to trail last year's volumes. Year-to-date
sales were about equal to the first six months of 1994.
Second quarter earnings for Water Products were 11.5 percent higher than
the 1994 second quarter, reflecting increased volume and favorable product
mix. Profits for the first half of the year were equal to those for the
first six months of 1994.
Second quarter sales for Smith Fiberglass Products Inc. were lower than
the second quarter of 1994 as this subsidiary continues to be affected by
the industry wide slowdown in demand for service station pipe. Sales for
the first half of the year reflect a slight improvement over the same
period last year as strong export sales helped offset lower petroleum
marketing sales.
Earnings for both the second quarter and first half of 1995 for Smith
Fiberglass were lower than the comparable periods in 1994 as a result of
lower margins associated with export sales, increased product development
costs, and expenses related to global expansion activities.
The corporation's agricultural operations reflected profits for both the
second quarter and first half of the year in contrast to losses incurred
in the same periods in 1994. Through the first half of the year, revenues
for A. O. Smith Harvestore Products, Inc. have increased nearly 21 percent
over the first half of 1994 as the result of strong demand for a new
unloader product and an improving market for municipal/industrial and
water and waste storage products. The significant increase in sales
resulted in a substantial improvement in earnings for both the second
quarter and first half of 1995. The losses incurred by AgriStor Credit
Corporation were lower in 1995 than 1994 due to lower operating expenses
and lower debt service costs as this finance subsidiary continues to be
liquidated.
Selling, general and administrative expenses for the second quarter and
first half increased $3.3 million and $6.7 million respectively, over the
comparable periods in 1994, but remained relatively constant as a
percentage of sales. The absolute increase was associated with higher
employee incentives due to increased earnings in certain units and general
increases to support the higher sales volumes. Despite reduced debt
levels, interest expense for the first half of the year was 8.4 percent
higher than the first half of 1994 due to higher interest rates.
Other expenses were relatively consistent for the second quarters of 1995
and 1994, however the first half of 1995 reflects a $2.0 million increase
over the same period in 1994. This increase is explained by translation
losses, environmental costs and certain non-recurring costs incurred in
1995. The effective tax rates for the second quarter and first half of
1995 were slightly less than the same periods in 1994 due to the
recognition of additional research and development tax credits in 1995.
During the first six months of 1995, the corporation was a party to
futures contracts for purposes of hedging a portion of certain raw
material purchases. The corporation was also a party to forward foreign
exchange contracts to hedge foreign currency transactions consistent with
its committed exposures. Had these contracts not been in place, the net
earnings of the corporation would not have been materially affected in the
second quarter or first half of 1995.
On the strength of a solid financial performance for the first half of
1995, and assuming no major economic downturn, the corporation remains
optimistic about its ability to provide a third consecutive year of record
profits for its shareholders.
Liquidity and Capital Resources
The Corporation's working capital was $130.8 million at June 30, 1995
compared to $113.6 million at December 31, 1995. Sales related increases
in trade receivables were partially offset by a decrease in customer
tooling.
Cash flow provided by operations was $7.0 million greater than the same
period last year due primarily to higher earnings. The Corporation's
long-term debt increased $1.2 million in the first six months to $138.0
million due to slightly higher capital expenditures. The long-term debt of
the finance subsidiary declined $4.2 million to $25.1 million reflecting
the continuing liquidation of that business.
In June, the Corporation amended its revolving credit agreement. The
facility was increased from $140 million to $160 million, and the term of
the agreement was extended two years to June 30, 2000. The amended
agreement also carries lower fees and lower borrowing rates.
Due primarily to the recently announced automotive unit manufacturing
plants in Roanoke, Virginia, and Plymouth, Michigan, the corporation
expects its 1995 capital expenditures to exceed $100 million versus the
corporation's original forecast of $80 million. The corporation
anticipates that internally generated funds will cover capital expenditure
requirements for the remainder of the year and that year-end debt levels
will not vary significantly from current levels.
At its June 6, 1995 meeting, A. O. Smith's Board of Directors declared a
regular quarterly dividend of $.15 per share on its common stock (Classes
A and Common). The dividend is payable on August 15, 1995 to shareholders
of record as of July 31, 1995.
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
At June 30, 1995, the Corporation or A. O. Smith Harvestore Products, Inc.
("AOSHPI"), a wholly-owned subsidiary of the Corporation, were defendants
in approximately nine (9) lawsuits (two of which are class action
lawsuits) filed by various plaintiffs who were alleging property damage
claimed to have arisen out of alleged defects in AOSHPI's animal feed
storage equipment. In the second quarter of 1995, no new cases were filed
against the Corporation and AOSHPI and six cases were favorably resolved.
The United States District Court for the Southern District of Ohio has set
a trial date in the conditionally certified class action brought on behalf
of purchasers and lessees of Harvestore structures manufactured by the
Corporation and AOSHPI. Discovery in the case is ongoing and a trial of
the liability issues only is scheduled to begin on October 16, 1995.
Damages would be tried at a later date and only after a liability finding.
Information on these lawsuits was previously reported in Part I, Item 3 of
the Corporation's annual report on Form 10-K for the fiscal year ended
December 31, 1994 and in Part II, Item 1 of the Corporation's Form 10-Q
report for the quarterly period ended March 31, 1995, which are
incorporated herein by reference.
There have been no material changes in the environmental matters
previously reported in Item 3 in the Corporation's annual report on Form
10-K for the fiscal year ended December 31, 1994, which is incorporated
herein by reference.
ITEM 2--CHANGES IN SECURITIES
On June 30, 1995, the Corporation's $140,000,000 Revolver Agreement with a
group of ten banks was amended to $160,000,000 and the final maturity was
extended from April 3, 1998 to June 30, 2000. The covenants and
restrictions on the payment of dividends remain essentially the same.
Refer to Note 3 on page 7 of this report for more detailed information
regarding the Corporation's debt covenants, dividend payment restrictions
and retained earnings.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 1, 1995, the Corporation mailed a proxy statement to its
stockholders relating to the annual meeting of stockholders on April 5,
1995. The annual meeting included the election of directors and the
consideration and action upon proposals to amend the Restated Certificate
of Incorporation to increase the number of authorized shares of Class A
Common Stock from 7,000,000 to 14,000,000 shares and the number of
authorized shares of Common Stock from 24,000,000 to 60,000,000 shares, to
approve the ratification of Ernst and Young LLP as the independent
auditors of the Corporation for 1995 and to act upon a stockholder
proposal relating to the rotation of the annual meeting of stockholders.
Directors are elected by a plurality of the votes cast, by proxy or in
person, with the holders voting as separate classes. A plurality of votes
means that the nominees who receive the greatest number of votes cast are
elected as directors. Consequently, any shares which are not voted,
whether by abstention, broker nonvotes or otherwise, will have no effect
on the election of directors.
With respect to the Company's proposal to amend the Restated Certificate
of Incorporation, the affirmative vote of the holders of a majority of the
outstanding shares of the Class A Common Stock and the Common Stock
entitled to vote at the meeting, each voting as a separate class, is
needed for adoption of the proposed amendment. In addition, the proposal
must be adopted by the vote of the Class A Common Stock and the Common
Stock voting together as a single class in the manner described in the
paragraph below.
For all other matters considered at the meeting, both classes of stock
vote together as a single class, with the Class A Common Stock entitled to
one vote per share and the Common Stock entitled to 1/10th vote per share.
All such other matters are decided by a majority of the votes cast. On
such other matters, an abstention will have the same effect as a "no" vote
but, because shares held by brokers will not be considered to vote on
matters as to which the brokers withhold authority, a broker nonvote will
have no effect on the vote.
1. Election of Directors
Votes Broker
Votes For Withheld Non-Votes
Class A Common Stock Directors
Tom H. Barrett 5,826,971 45,297 0
Glen R. Bomberger 5,826,971 45,297 0
Thomas I. Dolan 5,826,937 45,331 0
Robert J. O'Toole 5,827,071 45,197 0
Donald J. Schuenke 5,827,071 45,197 0
Arthur O. Smith 5,826,971 45,297 0
Bruce M. Smith 5,826,837 45,431 0
Common Stock Directors
Russell G. Cleary 10,281,615 102,139 0
Leander W. Jennings 10,280,843 102,911 0
Dr. Agnar Pytte 10,280,961 102,793 0
2. Amendment of Restated Certificate of Incorporation to Increase the
Authorized Shares
Votes Broker
Votes For Against Abstentions Non Votes
Class A Common Stock 5,673,571 196,530 2,567 0
Common Stock 8,429,799 1,883,115 70,940 0
COMBINED CLASS VOTE: 6,516,550 384,841 9,661 0
(Class A Common Stock
and Common Stock 1/10th vote)
3. Ratification of Ernst & Young LLP as Independent Auditors
Votes Broker
Votes For Against Abstentions Non Votes
COMBINED CLASS VOTE:
Class A Common
Stock and Common
Stock (1/10th vote) 6,834,753 72,906 3,393 0
4. Stockholder Proposal on Rotation of the Location of the Annual
Stockholders Meeting
Votes Broker
Votes For Against Abstentions Non Votes
COMBINED CLASS VOTE:
Class A Common Stock
and Common Stock
(1/10th vote) 178,576 6,427,993 49,194 255,288
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(4) Amendment dated as of June 30, 1995 to the Revolver
Agreement dated February 26, 1993.
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Corporation in the
second quarter of 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. O. SMITH CORPORATION
August 11, 1995 /s/ John J. Kita
John J. Kita
Treasurer and Controller
August 11, 1995 /s/ G. R. Bomberger
G. R. Bomberger
Executive Vice President
and Chief Financial Officer
INDEX TO EXHIBITS
Exhibit
Number Description
4 Amendment dated as of June 30, 1995 to the Revolver Agreement
dated February 26, 1993.
27 Financial Data Schedule
EXECUTION COPY
EXTENSION AND THIRD AMENDMENT
EXTENSION AND THIRD AMENDMENT, dated as of June 30, 1995, to the
Amended and Restated Credit Agreement, dated as of February 26, 1993 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among A.O. SMITH CORPORATION, a Delaware corporation (the
"Borrower"), the banks parties thereto (the "Banks"), and Chemical Bank,
as agent (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks, and the Agent are parties to
the Credit Agreement;
WHEREAS, the Borrower has requested that the Agent and the Banks
amend certain provisions of the Credit Agreement in order to increase the
aggregate Commitments (as defined in the Credit Agreement) to
$160,000,000; and
WHEREAS, the Borrower has requested that the Agent and the
Banks provide a competitive advance facility ("CAF") on an uncommitted
competitive advance basis through an auction mechanism; and
WHEREAS, the Agent and the Banks are willing to agree to such
amendments only upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms which are defined in the Credit Agreement are used herein as therein
defined.
2. Amendments of Article I of the Credit Agreement.
(a) Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of "Interest Rate Leverage Percentage" and by inserting the
following definition:
"Interest Rate Leverage Percentage" means, as to any CD Loan or
Euro-Dollar Loan, the percentage set forth in the table below under
the appropriate column opposite the Leverage Ratio range which
includes the Leverage Ratio of the Borrower:
Interest Rate Leverage Percentage
Leverage Ratio Euro-Dollar Loan CD Loan
Less than or equal
to 30.0% .2500% .3750%
Greater than 30%
and less than or
equal to 40.0% .3000% .4250%
Greater than 40%
and less than or
equal to 50.0% .3125% .4375%
Greater than 50.0% .5000% .6250%
For purposes of this definition, the Leverage Ratio shall be
determined for any day on the basis of each notice furnished to the
Banks from time to time pursuant to Section 5.10(a) or (b) and shall
be effective from the date of receipt by the Agent of such notice for
the period from such date until the date of receipt of the next such
notice.
(b) Section 1.1 is hereby amended by adding thereto the following
definitions in their appropriate alphabetical order:
"Borrowing Date" means any Domestic Business Day or Euro-Dollar
Business Day, as the case may be, specified in a notice pursuant to
Section 2.2 or Section 2.14(a) as a date on which the Borrower
requests the Banks to make Loans or CAF Advances, as the case may be,
hereunder.
"CAF Advance" means each CAF Advance made pursuant to Section
2.13.
"CAF Advance Availability Period" means the period from and
including the Third Amendment Effective Date until the date which is
7 days prior to the Termination Date.
"CAF Advance Confirmation" means each confirmation by the
Borrower of its acceptance of CAF Advance Offers, which confirmation
shall be substantially in the form of Exhibit F and shall be
delivered to the Agent by telecopy.
"CAF Advance Interest Payment Date" means as to each CAF
Advance, each interest payment date specified by the Borrower for
such CAF Advance in the related CAF Advance Request.
"CAF Advance Maturity Date" means as to any CAF Advance, the
date specified by the Borrower pursuant to Section 2.14(d)(ii) in its
acceptance of the related CAF Advance Offer.
"CAF Advance Note" has the meaning specified in Section 2.16
(collectively, the "CAF Advance Notes").
"CAF Advance Offer" means each offer by a Bank to make CAF
Advances pursuant to a CAF Advance Request, which offer shall contain
the information specified in Exhibit E and shall be delivered to the
Agent by telephone, immediately confirmed by telecopy.
"CAF Advance Request" means each request by the Borrower for
Banks to submit bids to make CAF Advances, which request shall
contain the information in respect of such requested CAF Advances
specified in Exhibit D and shall be delivered to the Agent in
writing, by telecopy, or by telephone, immediately confirmed by
telecopy.
"Fixed Rate CAF Advance" means any CAF Advance made pursuant to
a Fixed Rate CAF Advance Request.
"Fixed Rate CAF Advance Request" means any CAF Advance Request
requesting the Banks to offer to make CAF Advances at a fixed rate
(as opposed to a rate composed of the London Interbank Offered Rate
plus (or minus) a margin).
"London Interbank Offered Rate CAF Advance" means any CAF
Advance made pursuant to a London Interbank Offered Rate CAF Advance
Request.
"London Interbank Offered Rate CAF Advance Request" means any
CAF Advance Request requesting the Banks to offer to make CAF
Advances at an interest rate equal to the London Interbank Offered
Rate plus (or minus) a margin.
"Termination Date" means June 30, 2000.
"Third Amendment Effective Date" means the date on which all the
conditions set forth in Section 8 of the Extension and Third
Amendment are satisfied or waived.
3. Amendments to Article II of the Credit Agreement. (a)
Sections 2.1 and 2.8 of the Credit Agreement are hereby amended by
deleting the date "April 3, 1998" wherever it appears in such Sections and
inserting in lieu thereof the date "June 30, 2000".
(b) Section 2.6(a) of the Credit Agreement is hereby amended by
deleting such subsection in its entirety and inserting in lieu thereof the
following subsection (a):
"(a) Facility Fees. The Borrower shall pay to the Agent for the
account of each Bank a facility fee on the average daily amount of
such Bank's Commitment at the per annum rate set forth in the table
below opposite the Leverage Ratio range which includes the Leverage
Ratio of the Borrower:
Leverage Ratio Per Annum Rate
Less than or equal 0.1250%
to 30.0%
Greater than 30% 0.1500%
and less than or
equal to 40.0%
Greater than 40% 0.1875%
and less than or
equal to 50.0%
Greater than 50.0% 0.2500%
For purposes of this Section 2.6(a), the Leverage Ratio shall be
determined for any day on the basis of each notice furnished to the
Banks from time to time pursuant to Section 5.10 (a) and (b) and
shall be effective from the date of receipt by the Agent of such
notice for the period from such date until the date of receipt of the
next such notice. Such facility fees shall accrue from and including
the date hereof to and including June 30, 2000 and shall be payable
quarterly on each June 30, September 30, December 31 and March 31."
(c) Section 2.6(b) of the Credit Agreement is hereby amended
effective as of the Third Amendment Effective Date by deleting such
subsection in its entirety and inserting in lieu thereof the following:
"[INTENTIONALLY OMITTED]".
(d) Article II of the Credit Agreement is hereby amended
effective as of the Third Amendment Effective Date by adding thereto new
Section 2.13 through 2.17 as set forth below:
Section 2.13 CAF Advances. Subject to the terms and
conditions of this Agreement, the Borrower may borrow CAF
Advances from time to time on any Euro-Dollar Business Day in
the case of London Interbank Offered Rate CAF Advances or any
Domestic Business Day in the case of any Fixed Rate CAF Advances
during the CAF Advance Availability Period. CAF Advances shall
be borrowed in amounts such that the aggregate amount of Loans
outstanding at any time shall not exceed the aggregate amount of
the Commitments at such time. Within the limits and on the
conditions hereinafter set forth with respect to CAF Advances,
the Borrower from time to time may borrow, repay and reborrow
CAF Advances.
Section 2.14 Procedure for CAF Advance Borrowing.
(a) The Borrower shall request CAF Advances by delivering a CAF
Advance Request to the Agent, not later than 12:00 Noon (New
York City time) four Euro-Dollar Business Days prior to the
proposed Borrowing Date (in the case of a London Interbank
Offered Rate CAF Advance Request), and not later than 10:00 A.M.
(New York City time) one Domestic Business Day prior to the
proposed Borrowing Date (in the case of a Fixed Rate CAF Advance
Request). Each CAF Advance Request may solicit bids for CAF
Advances in an aggregate principal amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and having not
more than three alternative CAF Advance Maturity Dates. The CAF
Advance Maturity Date for each CAF Advance shall be the date set
forth therefor in the relevant CAF Advance Request, which date
shall be (i) not less than 7 days nor more than 180 days after
the Borrowing Date therefor, in the case of a Fixed Rate CAF
Advance, (ii) one, two, three or six months after the Borrowing
Date therefor, in the case of a London Interbank Offered Rate
CAF Advance and (iii) not later than the Termination Date, in
the case of any CAF Advance. The Agent shall notify each Bank
promptly by telecopy of the contents of each CAF Advance Request
received by the Agent.
(b) In the case of a London Interbank Offered Rate CAF
Advance Request, upon receipt of notice from the Agent of the
contents of such CAF Advance Request, each Bank may elect, in
its sole discretion, to offer irrevocably to make one or more
CAF Advances at the applicable London Interbank Offered Rate
plus (or minus) a margin determined by such Bank in its sole
discretion for each such CAF Advance. Any such irrevocable
offer shall be made by delivering a CAF Advance Offer to the
Agent, before 10:30 A.M. (New York City time) on the day that is
three Euro-Dollar Business Days before the proposed Borrowing
Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF
Advance Maturity Date (which amount shall be at least
$5,000,000) and the aggregate maximum amount of CAF Advances for
all CAF Advance Maturity Dates which such Bank would be willing
to make (which amounts may, subject to Section 2.13, exceed such
Bank's Commitment); and
(ii) the margin above or below the applicable London
Interbank Offered Rate at which such Bank is willing to make
each such CAF Advance.
The Agent shall advise the Borrower before 11:00 A.M. (New York City
time) on the date which is three Euro-Dollar Business Days before the
proposed Borrowing Date of the contents of each such CAF Advance
Offer received by it. If the Agent, in its capacity as a Bank, shall
elect, in its sole discretion, to make any such CAF Advance Offer, it
shall advise the Borrower of the contents of its CAF Advance Offer
before 10:15 A.M. (New York City time) on the date which is three
Euro-Dollar Business Days before the proposed Borrowing Date.
(c) In the case of a Fixed Rate CAF Advance Request, upon
receipt of notice from the Agent of the contents of such CAF
Advance Request, each Bank may elect, in its sole discretion, to
offer irrevocably to make one or more CAF Advances at a rate of
interest determined by such Bank in its sole discretion for each
such CAF Advance. Any such irrevocable offer shall be made by
delivering a CAF Advance Offer to the Agent before 9:30 A.M.
(New York City time) on the proposed Borrowing Date, setting
forth:
(i) the maximum amount of CAF Advances for each CAF
Advance Maturity Date (which amount shall be at least
$5,000,000) and the aggregate maximum amount for all CAF Advance
Maturity Dates, which such Bank would be willing to make (which
amounts may, subject to Section 2.13, exceed such Bank's
Commitment); and
(ii) the rate of interest at which such Bank is willing to
make each such CAF Advance.
The Agent shall advise the Borrower before 10:00 A.M. (New York City
time) on the proposed Borrowing Date of the contents of each such CAF
Advance Offer received by it. If the Agent, in its capacity as a
Bank, shall elect, in its sole discretion, to make any such CAF
Advance Offer, it shall advise the Borrower of the contents of its
CAF Advance Offer before 9:15 A.M. (New York City time) on the
proposed Borrowing Date.
(d) Before 11:30 A.M. (New York City time) three Euro-
Dollar Business Days before the proposed Borrowing Date (in the
case of CAF Advances requested by a London Interbank Offered
Rate CAF Advance Request) and before 10:30 A.M. (New York City
time) on the proposed Borrowing Date (in the case of CAF
Advances requested by a Fixed Rate CAF Advance Request), the
Borrower, in its absolute discretion, shall:
(i) cancel such CAF Advance Request by giving the Agent
telephone notice followed by confirmation by telecopy to that
effect, or
(ii) by giving telephone notice to the Agent (immediately
confirmed by delivery to the Agent of a CAF Advance Confirmation
by telecopy) (A) subject to the provisions of Section 2.14(e),
accept one or more of the offers made by any Bank or Banks
pursuant to Section 2.14(b) or Section 2.14(c), as the case may
be, and (B) reject any remaining offers made by Banks pursuant
to Section 2.14(b) or Section 2.14(c), as the case may be.
(e) The Borrower's acceptance of CAF Advances in response
to any CAF Advance Request shall be subject to the following
limitations:
(i) the amount of CAF Advances accepted for each CAF
Advance Maturity Date specified by any Bank in its CAF Advance
Offer shall not exceed the maximum amount for such CAF Advance
Maturity Date specified in such CAF Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for all
CAF Advance Maturity Dates specified by any Bank in its CAF
Advance Offer shall not exceed the aggregate maximum amount
specified in such CAF Advance Offer for all such CAF Advance
Maturity Dates;
(iii) the Borrower may not accept offers for CAF Advances
for any CAF Advance Maturity Date in an aggregate principal
amount in excess of the maximum principal amount requested in
the related CAF Advance Request; and
(iv) if the Borrower accepts any of such offers, it must
accept offers based solely upon pricing for each relevant CAF
Advance Maturity Date and upon no other criteria whatsoever and
if two or more Banks submit offers for any CAF Advance Maturity
Date at identical pricing and the Borrower accepts any of such
offers but does not wish to (or by reason of the limitations set
forth in Section 2.13, cannot) borrow the total amount offered
by such Banks with such identical pricing, the Borrower shall
accept offers from all of such Banks in amounts allocated among
them pro rata according to the amounts offered by such Banks;
provided that if the number of Banks that submit offers for any
CAF Advance Maturity Date at identical pricing is such that,
after the Borrower accepts such offers pro rata in accordance
with the foregoing, the CAF Advance to be made by such Banks
would be less than $5,000,000 principal amount, the number of
such Banks shall be reduced by the Agent by lot until the CAF
Advances to be made by such remaining Banks would be in a
principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof).
(f) If the Borrower notifies the Agent that a CAF Advance
Request is cancelled pursuant to Section 2.14(d)(i), the Agent
shall give prompt telephone notice thereof to the Banks.
(g) If the Borrower accepts pursuant to Section
2.14(d)(ii) one or more of the offers made by any Bank or Banks,
the Agent promptly shall notify each Bank which has made such an
offer of (i) the aggregate amount of such CAF Advances to be
made on such Borrowing Date for each CAF Advance Maturity Date
and (ii) the acceptance or rejection of any offers to make such
CAF Advances made by such Bank. Before 12:00 Noon (New York
City time) on the Borrowing Date specified in the applicable CAF
Advance Request, each Bank whose CAF Advance Offer has been
accepted shall make available to the Agent at its office set
forth in Section 9.1 the amount of CAF Advances to be made by
such Bank, in immediately available funds. The Agent will make
such funds available to the Borrower as soon as practicable on
such date at such office of the Agent. As soon as practicable
after each Borrowing Date, the Agent shall notify each Bank of
the aggregate amount of CAF Advances advanced on such Borrowing
Date and the respective CAF Advance Maturity Dates thereof.
Section 2.15 CAF Advance Payments. (a) The Borrower
shall pay to the Agent for the account of each Bank which has
made a CAF Advance on the applicable CAF Advance Maturity Date
the then unpaid principal amount of such CAF Advance. The
Borrower shall not have the right to prepay any principal amount
of any CAF Advance without the consent of the Bank to which such
CAF Advance is owed.
(b) The Borrower shall pay interest on the unpaid
principal amount of each CAF Advance from the Borrowing Date to
the applicable CAF Advance Maturity Date at the rate of interest
specified in the CAF Advance Offer accepted by the Borrower in
connection with such CAF Advance (calculated on the basis of a
360-day year for actual days elapsed), payable on each
applicable CAF Advance Interest Payment Date.
(c) If all or a portion of the principal amount of any CAF
Advance shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue principal
amount shall, without limiting any rights of any Bank under this
Agreement, bear interest from the date on which such payment was
due at a rate per annum which is 1% above the rate which would
otherwise be applicable pursuant to the CAF Advance Note
evidencing such CAF Advance until the stated CAF Advance
Maturity Date of such CAF Advance, and for each day thereafter
at a rate per annum which is 1% above the Alternate Base Rate,
in each case until paid in full (as well after as before
judgment). Interest accruing pursuant to this paragraph (c)
shall be payable from time to time on demand.
Section 2.16 CAF Advance Notes. The CAF Advances made by
each Bank shall be evidenced by a promissory note of the
Borrower, substantially in the form of Exhibit B with
appropriate insertions (a "CAF Advance Note"), payable to the
order of such Bank and representing the obligation of the
Borrower to pay the unpaid principal amount of all CAF Advances
made by such Bank, with interest on the unpaid principal amount
from time to time outstanding of each CAF Advance evidenced
thereby as prescribed in subsection 2.15(b). Each Bank is
hereby authorized to record the date and amount of each CAF
Advance made by such Bank, the CAF Advance Maturity Date
thereof, the date and amount of each payment of principal
thereof and the interest rate with respect thereto on the
schedule attached to and constituting part of its CAF Advance
Note, and any such recordation shall constitute prima facie
evidence of the accuracy of the information so recorded;
provided, however, that the failure to make any such recordation
shall not affect the obligations of the Borrower hereunder or
under any CAF Advance Note. Each CAF Advance Note shall be
dated the Third Amendment Effective Date and each CAF Advance
evidenced thereby shall bear interest for the period from and
including the Borrowing Date of such CAF Advance on the unpaid
principal amount thereof from time to time outstanding at the
applicable rate per annum determined as provided in, and such
interest shall be payable as specified in, Section 2.15(b).
Section 2.17 Certain Restrictions. A CAF Advance Request
may request offers for CAF Advances to be made on not more than
one Borrowing Date and to mature on not more than three CAF
Advance Maturity Dates. No CAF Advance Request may be submitted
earlier than five Domestic Business Days after submission of any
other CAF Advance Request.
4. Amendment of Article III of the Credit Agreement. Section
3.1(d) of the Credit Agreement is hereby amended by deleting said Section
in its entirety and substituting in lieu thereof the following:
"(d) the fact that since December 31, 1994 there shall not have
been any change in the business or financial position of the Borrower
or any of its Consolidated Subsidiaries, which in the opinion of
Banks holding at least 50% of the aggregate amount of the
Commitments, is materially adverse to the business or financial
position of the Borrower and its Consolidated Subsidiaries considered
as a whole."
5. Amendment of Article IV of the Credit Agreement. Sections
4.4(a) and 4.4(b) of the Credit Agreement are hereby amended by deleting
said Sections in their entirety and substituting in lieu thereof the
following:
"(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1994 and the
related consolidated statements of operations and retained
earnings and changes in financial position for the fiscal year
then ended, reported on by Ernst & Young and set forth in the
Borrower's 1994 Form 10-K, a copy of which has been delivered to
each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of
such date and their consolidated results of operations and
changes in financial position for such fiscal year.
(b) Since December 31, 1994 there have been no material adverse
change in the business, financial position or results of operations
of the Borrower and its Consolidated Subsidiaries, considered as a
whole."
6. Amendment of Schedule I of the Credit Agreement. The Credit
Agreement is hereby further amended by deleting Schedule I in its entirety
and inserting in lieu thereof Schedule I attached hereto.
7. Representations and Warranties of Borrower. The Borrower
hereby represents and warrants that each of the representations and
warranties of the Borrower contained in the Credit Agreement, as amended
by this Amendment, is true and correct on the date hereof as if made on
and as of the date hereof except that representations and warranties that
apply to a specific date were true and correct as of such date.
8. Effectiveness. This Third Amendment shall become effective
as of the first date (the "Third Amendment Effective Date") prior to June
30, 1995 or the first day thereafter when the following conditions shall
have been met:
(i) the Agent shall have received counterparts
hereof, duly executed by the Borrower and all the Banks;
(ii) the Agent shall have received an opinion of W.
David Romoser, General Counsel of the Borrower to be
attached as Exhibit A.
(iii) the Agent shall have received a copy of the resolutions, in
form and substance satisfactory to the Agent, of the Board
of Directors of the Borrower authorizing the execution and
delivery of this Amendment, certified by the Secretary or
an Assistant Secretary of the Borrower, as the case may be,
as of the Third Amendment Effective Date, which certificate
shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded since the date
of adoption thereof.
9. Continuing Effect of Credit Agreement. This Amendment shall
not constitute a waiver or amendment of any other provision of the Credit
Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of the
Borrower that would require a waiver or consent of the Required Banks or
the Agent. Except as expressly amended hereby, the provisions of the
Credit Agreement are and shall remain in full force and effect.
10. Counterparts. This Amendment may be executed by the
parties hereto in any number of counterparts, and all of such counterparts
taken together shall be deemed to constitute one and the same instrument.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above
written.
A.O. SMITH CORPORATION
By: /s/ John J. Kita
Title: Treasurer and Controller
CHEMICAL BANK, as Agent and
as a Bank
By: /s/
Title:
BANK OF AMERICA ILLINOIS, as successor to
CONTINENTAL BANK N.A.
By: /s/
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/
Title:
M & I MARSHALL & ILSLEY BANK
By: /s/
Title:
CITIBANK, N.A.
By: /s/
Title:
FIRST BANK MILWAUKEE
By: /s/
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/
Title:
BANK ONE, MILWAUKEE, N.A.
By: /s/
Title:
NATIONAL BANK OF DETROIT
By: /s/
Title:
NORWEST BANK WISCONSIN, N.A.
By: /s/
Title:
Schedule I
COMMITMENT AMOUNTS
Commitment
Chemical Bank $ 29,000,000
Bank of America Illinois, 29,000,000
as successor to Continental
Bank N.A.
Morgan Guaranty Trust Company 29,000,000
of New York
M & I Marshall & Ilsley Bank 14,000,000
Citibank, N.A. 14,000,000
Firstar Bank Milwaukee, N.A. 12,000,000
First Bank Milwaukee 12,000,000
Bank One, Milwaukee, N.A. 7,000,000
National Bank of Detroit 7,000,000
Norwest Bank Wisconsin, N.A. 7,000,000
------------
$160,000,000
EXHIBIT A
OPINION OF
COUNSEL FOR THE BORROWER
June 30, 1995
To the Banks and the Agent
Referred to Below
c/o Chemical Bank,
as Agent
270 Park Avenue
New York, New York 10017
Dear Sirs:
I have acted as counsel for A.O. Smith Corporation (the
"Borrower") in connection with the Extension and Third Amendment, dated as
of June 30, 1995 (the "Third Amendment"), to the Amended and Restated
Credit Agreement (the "Credit Agreement") dated as of February 26, 1993
among the Borrower, the banks listed on the signature pages thereof and
Chemical Bank, as Agent. Terms defined in the Credit Agreement are used
herein as therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted
such other investigations of fact and law as I have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of
the Third Amendment are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official
and does not contravene, or constitute a default under, any certificate of
incorporation or by-laws of the Borrower or, to the best of my knowledge,
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any
Lien on any asset of the Borrower or any of its Subsidiaries.
3. The execution, delivery and performance by the Borrower the
Notes are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and
does not contravene, or constitute a default under, any certificate of
incorporation or by-laws of the Borrower or, to the best of my knowledge,
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any
Lien on any asset of the Borrower or any of its Subsidiaries.
4. The Third Amendment and the New Notes constitute the valid
and the binding obligations of the Borrower enforceable in accordance with
their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
5. Except as set forth in the Ilhardt, et al. v. A.O. Smith
Corp., et al. lawsuit, there is no action, suit or proceeding pending
against, or to the best of my knowledge threatened against or affecting,
the Borrower or any of its Subsidiaries before any court or arbitrator or
any governmental body, agency or official, in which there is a reasonable
possibility of an adverse decision which could materially adversely affect
the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries, considered
as a whole or which in any manner draws into question the validity of the
Third Amendment.
6. Each of the Borrower's Subsidiaries is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
Very truly yours,
Exhibit B
FORM OF
CAF ADVANCE NOTE
New York, New York
[Date]
FOR VALUE RECEIVED, the undersigned, A.O. Smith Corporation, a
Delaware corporation (the "Borrower"), hereby unconditionally promises to
pay to the order of (the "Bank") at the
office of Chemical Bank located at 270 Park Avenue, New York, New York
10017, in lawful money of the United States of America and in immediately
available funds, the aggregate unpaid principal amount of each CAF Advance
which is made by the Bank to the Borrower pursuant to subsection 2.13 of
the Credit Agreement, as hereinafter defined. The principal amount of
each CAF Advance evidenced hereby shall be payable on the CAF Advance
Maturity Date therefor set forth on the schedule attached hereto and made
a part hereof or on a continuation of such schedule which shall be
attached hereto and made a part hereof (the "Grid"). The Borrower further
agrees to pay interest in like money at such office on the unpaid
principal amount of each CAF Advance evidenced hereby, at the rate per
annum set forth in respect of such CAF Advance on the Grid, calculated on
the basis of a year of 360 days and actual days elapsed from the Borrowing
Date of such CAF Advance until the due date thereof (whether at the stated
maturity, by acceleration or otherwise) and thereafter at the rates
determined in accordance with subsection 2.15(c) of the Credit Agreement.
Interest on each CAF Advance evidenced hereby shall be payable on the date
or dates set forth in respect of such CAF Advance on the Grid. CAF
Advances evidenced by this Note may not be prepaid without the consent of
the Bank.
The holder of this Note is authorized to endorse on the Grid the
Borrowing Date, amount, Interest rate, Interest Payment Dates and CAF
Advance Maturity Date in respect of each CAF Advance made pursuant to
subsection 2.13 of the Credit Agreement and each payment of principal with
respect thereto. Each such endorsement shall constitute prima facie
evidence of the accuracy of the information endorsed. The failure to make
any such endorsement shall not affect the obligations of the Borrower in
respect of such CAF Advance.
This Note is one of the CAF Advance Notes referred to in the Amended
and Restated Credit Agreement dated as of February 26, 1993 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Bank, the other banks and financial
institutions from time to time parties thereto and Chemical Bank, as Agent
and is subject to the provisions of the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable, all as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
A.O. SMITH CORPORATION
By
Title:
Exhibit C
SCHEDULE OF CAF ADVANCES
_________________, Bank
A.O. Smith Corporation, Borrower
Amended and Restated Credit Agreement dated February 26, 1993
CAF
Borrowing Advance CAF
Date of Amount of Interest Advance
CAF CAF Interest Payment Maturity Payment Authoriza-
Advance Advance Rate Dates Date Date tion
EXHIBIT D
FORM OF
CAF ADVANCE REQUEST
__________, 199__
Chemical Bank, as Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Amended and Restated Credit Agreement,
dated as of February 26, 1993, among the undersigned, the Banks named
therein, Chemical Bank, as Agent (as the same may be amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
This is a [Fixed Rate] [London Interbank Offered Rate] CAF
Advance Request* pursuant to subsection 2.14 of the Credit Agreement
requesting quotes for the following CAF Advances:
Loan 1 Loan 2 Loan 3
Aggregate Principal
Amount $__________ $__________ $_________
Borrowing Date
CAF Advance Maturity
Date
Interest Payment Dates
Very truly yours,
* Pursuant to the Credit Agreement, a CAF Advance Request may be
transmitted in writing, by telecopy, or by telephone, immediately
confirmed by telecopy. In any case, a CAF Advance Request shall
contain the information specified in the second paragraph of this
form.
A.O. SMITH CORPORATION
By
Name:
Title:
EXHIBIT E
FORM OF
CAF ADVANCE OFFER
, 199
Chemical Bank, as Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Amended and Restated Credit Agreement,
dated as of February 26, 1993, among the undersigned, the Banks named
therein, and Chemical Bank, as Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement and used herein shall
have the meanings given to them in the Credit Agreement.
In accordance with subsection 2.14 of the Credit Agreement, the
undersigned Bank offers to make CAF Advances thereunder in the following
amounts with the following maturity dates:
Borrowing Date: __________, Aggregate Maximum Amount:
199__ $_________
Maturity Date 1: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
Maturity Date 2: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
Maturity Date 3: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
* Insert the interest rate offered for the specified CAF Advance. In
the case of London Interbank Offered Rate CAF Advances, insert a
margin bid. In the case of Fixed Rate CAF Advances, insert a fixed
rate bid.
Very truly yours,
[NAME OF BANK]
By
Name:
Title:
Telephone No.:
Telecopy No.:
EXHIBIT F
FORM OF
CAF ADVANCE CONFIRMATION
_________ __, 19__
Chemical Bank, as Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Amended and Restated Credit Agreement,
dated as of February 26, 1995, among the undersigned, the Banks named
therein, and Chemical Bank, as Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement and used herein shall
have the meanings given to them in the Credit Agreement.
In accordance with subsection 2.14(d)(ii) of the Credit
Agreement, the undersigned accepts and confirms the offers by the Bank(s)
to make CAF Advances to the undersigned on , 19 under
subsection 2.14(d) in the (respective) amount(s) set forth on the attached
list of CAF Advances offered.
Very truly yours,
A.O. SMITH CORPORATION
By
Name:
Title:
[The Borrower must attach CAF Advance offer list prepared by the Agent
with accepted amount entered by the Borrower to right of each CAF Advance
offer].
5
1,000
6-MOS
DEC-31-1995
JAN-01-1995
JUN-30-1995
5,177
0
171,178
0
109,961
340,216
912,103
(503,473)
866,238
209,446
163,072
106,043
0
0
240,121
866,238
792,831
792,831
664,380
664,380
61,408
0
6,565
60,478
23,150
38,386
0
0
0
38,386
1.84
1.84
