<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For The Quarter Ended February 28, 1997
Commission File Number 001 - 12673
RIVIERA TOOL COMPANY
A Michigan Corporation
I.R.S. Employer Identification No. 38- 2828870
5460 Executive Parkway S.E., Grand Rapids, Michigan 49512
Telephone: (616) 698 - 2100
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 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 _____
The number of Common Shares outstanding at April 16, 1997 was 2,470,000.
1.
<PAGE> 2
PART I
FINANCIAL INFORMATION
INDEX
Page No.
Item 1. Financial Statements
- Balance Sheets as of February 28, 1997 and August 31,
1996....................................................... 3
- Statements of Operations for the Three and Six Months
Ended February 28, 1997 and 1996........................... 4
- Statements of Cash Flows for the Six Months Ended
February 28, 1997 and 1996................................. 5
- Notes to Financial Statements.............................. 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........... 9
PART II
OTHER INFORMATION
INDEX
Item 1. Legal Proceedings - Incorporated by reference to Prospectus -
"Business-Legal Proceedings" contained in Registrant's Registration
Statement number 333-14187, effective March 3, 1997.
Item 2. Changes in Securities - None
Item 3. Default Upon Senior Securities - Incorporated by reference to
Prospectus - "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources"
contained in Registrant's Registration Statement number 333-14187,
effective March 3, 1997.
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8 - K
6(a) Exhibits
- 3(i-ii), 4(a-b), 10(a-h) - Incorporated by reference to the
corresponding numbered exhibit contained in Registrant's Registration
Statement number 333-14187, effective March 3, 1997.
- 10i - LaSalle National Bank Loan Agreement, Revolving Loan Note, Term
Note and Security Agreement dated March 7, 1997.
- 10j - Assignment of Life Insurance Policy to NBD Bank dated March 3,
1997.
- 10k - Assignment of Claim to NBD Bank dated March 3, 1997.
6(b) Reports on Form 8-K - None
2.
<PAGE> 3
RIVIERA TOOL COMPANY
FINANCIAL STATEMENTS
BALANCE SHEET
<TABLE>
<CAPTION>
February 28, 1997 August 31,
ASSETS (unaudited) 1996
------ ------------------------------- --------------
CURRENT ASSETS Note Actual Pro-forma Audited
---- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Cash........................................................ $ 1,650 $ 1,650 $ -
Accounts Receivable:
Trade..................................................... 3,378,907 3,378,907 4,924,305
Related Party............................................. 356,684 356,684 344,892
Costs and estimated gross profit in excess
of billings on contracts in process....................... 2 6,397,201 6,397,201 5,549,823
Inventories................................................. 445,473 445,473 445,473
Prepaid expenses and other current assets................... 305,164 305,164 250,210
------------ ------------ ------------
Total current assets................................ 10,885,079 10,885,079 11,514,703
PROPERTY, PLANT AND EQUIPMENT, NET.......................... 3 9,389,359 9,389,359 9,785,639
PERISHABLE TOOLING.......................................... 672,923 672,923 759,258
OTHER ASSETS................................................ 1,215,207 499,718 868,832
------------ ------------ ------------
Total assets........................................ $ 22,162,568 $ 21,447,079 $ 22,928,432
============ ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES
Notes payable............................................. 4 $ 9,826,068 $ -- $ 10,241,503
Current portion of long-term debt......................... 4 712,182 955,220 926,861
Current portion of capitalized lease obligations.......... 4 361,640 -- 409,225
Accounts payable.......................................... 2,621,584 2,635,037 2,913,878
Accrued liabilities....................................... 1,075,682 962,621 692,271
------------ ------------ ------------
Total Current liabilities........................... 14,597,156 4,552,878 15,183,738
CAPITALIZED LEASE OBLIGATIONS............................... - 118,805
LONG-TERM DEBT.............................................. 4 588,989 4,639,643 882,989
DEFERRED GAINS.............................................. 30,766 30,766 61,540
ACCRUED LEASE OBLIGATIONS................................... 582,299 582,299 558,935
DEFERRED TAX LIABILITY...................................... 567,700 567,700 395,700
PREFERRED STOCK - no par value,
$100 mandatory redemption value:
Authorized -- 5,000 shares
Issued and outstanding - 475 shares at February
28, 1997 and 1,425 shares at August 31, 1996............ 50,552 50,552 139,072
Preferred Stock - no par value,
Authorized - 200,000 shares
Issued and outstanding - none........................... - - -
COMMON STOCKHOLDERS' EQUITY
Common stock - No par value:
Authorized - 9,785,575 shares
Issued and outstanding - 1,460,000 shares,
2,470,000 shares on a Pro-Forma basis................... 4,392,752 9,670,887 4,392,752
Retained earnings........................................... 1,352,354 1,352,354 1,194,901
------------ ------------ ------------
Total common stockholders' equity................... 5,745,106 11,023,241 5,587,653
------------ ------------ ------------
Total liabilities and stockholders' equity............ $ 22,162,568 $ 21,447,079 $ 22,928,432
============ ============ ============
</TABLE>
See notes to financial statements
3.
<PAGE> 4
RIVIERA TOOL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months Ended For The Six Months Ended
February 28, February 28
----------------------------- ---------------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
SALES................................... $ 5,405,086 $ 4,629,274 $ 10,885,299 $ 9,563,694
COST OF SALES........................... 4,300,066 3,682,382 8,695,329 7,732,550
----------- ----------- ------------ -----------
GROSS PROFIT...................... 1,105,020 946,892 2,189,970 1,831,144
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 438,909 400,681 869,440 822,366
----------- ----------- ------------ -----------
INCOME FROM OPERATIONS 666,111 546,211 1,320,530 1,008,778
OTHER INCOME (EXPENSE)
Interest expense...................... (442,700) (402,268) (845,371) (769,488)
Gain on asset sales................... 15,387 48,298 30,774 85,700
----------- ----------- ------------ -----------
TOTAL OTHER EXPENSE - NET 427,313 353,770 814,597 683,788
INCOME BEFORE TAXES ON INCOME........... 238,798 192,441 505,933 324,990
INCOME TAXES............................ 81,191 65,430 172,000 110,497
----------- ----------- ------------ -----------
NET INCOME 157,607 127,011 333,933 214,493
DIVIDENDS AND ACCRETION ON
PREFERRED STOCK....................... 1,868 7,134 6,480 14,268
----------- ----------- ------------ -----------
NET INCOME AVAILABLE FOR COMMON
SHARES................................ $ 155,739 $ 119,877 $ 327,453 $ 200,225
=========== =========== ============ ===========
NET INCOME PER COMMON SHARE............. $ .11 $ .08 $ .22 $ .14
=========== =========== ============ ===========
COMMON SHARES OUTSTANDING............... 1,460,000 1,460,000 1,460,000 1,460,000
=========== =========== ============ ===========
PRE-OFFERING PREFERENTIAL DIVIDEND
DECLARED.............................. $ 170,000 $ 170,000
=========== ============
</TABLE>
See notes to financial statements
4.
<PAGE> 5
RIVIERA TOOL COMPANY
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
February 28,
----------------------------------
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................... $ 333,933 $ 214,493
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization............................. 643,045 582,254
Amortization of deferred gain............................. (30,774) (74,402)
Deferred taxes............................................ 172,000 110,497
Bad debt expense.......................................... (137,378) --
(Increase) decrease in assets:
Accounts receivable.................................... 1,670,984 1,004,613
Costs and estimated gross profit in excess of
billings on contracts in process..................... (847,378) (3,598,117)
Perishable tooling..................................... 86,335 --
Prepaid expenses and other current assets.............. (54,954) (16,520)
Increase (decrease) in liabilities:
Accounts payable....................................... (342,294) (307,341)
Accrued lease expense.................................. 23,364 28,032
Accrued liabilities.................................... 213,411 170,510
----------- ------------
Net cash provided by (used in)
operating activities............................... 1,730,294 (1,885,981)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in other assets...................................... (10,753) --
Additions to property, plant and equipment.................... (181,223) 30,716
----------- ------------
Net cash provided by (used in) investing
activity........................................... (191,976) 30,716
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayments of) short-
term debt................................................... (415,435) 2,800,563
Principal payments under capital lease obligations............ (166,390) (168,951)
Principal payments on long-term debt.......................... (508,679) (775,628)
Redemption of preferred stock................................. (95,000) --
Capitalized refinancing costs................................. (351,164) --
----------- ------------
Net cash provided by (used in) financing
activities......................................... (1,536,668) 1,855,984
----------- ------------
NET INCREASE IN CASH............................................ $ 1,650 $ 719
CASH - Beginning of Period...................................... 0 3,188
----------- ------------
CASH - End of Period............................................ $ 1,650 $ 3,907
=========== ============
</TABLE>
See notes to financial statements
5.
<PAGE> 6
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements (the "Financial
Statements") of Riviera Tool Company (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, the Financial Statements do not include all the
information and footnotes normally included in the annual financial statements
prepared in accordance with generally accepted accounting principles.
In the opinion of management, the Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles.
These Financial Statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Prospectus dated
March 4, 1997, for the fiscal year ended August 31, 1996.
The results of operations for the three and six month periods ended February
28, 1997 are not indicative of the results to be expected for the full year.
PRO-FORMA FINANCIAL STATEMENTS
The accompanying Pro-Forma balance sheet as of February 28, 1997 reflects the
effect of the completion of the initial public offering of the Company's
1,010,000 shares of common stock as described in the Company's Prospectus dated
March 4, 1997 and events as disclosed in Note 8 - Subsequent Events included
herein.
NOTE 2 - COSTS AND BILLINGS ON CONTRACTS IN PROCESS
Costs and billings on contracts in process are as follows:
<TABLE>
<CAPTION>
February 28, August 31,
1997 1996
----------- -----------
<S> <C> <C>
Costs incurred on contracts in process under the
percentage-of-completion method........................... $ 15,900,811 $ 10,844,647
Estimated gross profit...................................... 500,125 900,375
------------ ------------
Total................................................... 16,400,936 11,745,022
Less progress payments received and progress billings
to date................................................... 10,010,793 6,353,779
Plus costs incurred on contracts in process under the
completed contract method................................. 7,058 158,580
------------ ------------
Costs and estimated gross profit in excess of
billings on contracts in process.................. $ 6,397,201 $ 5,549,823
============ ============
</TABLE>
Included in estimated gross profit for August 31, 1996 and February 28, 1997
are jobs with losses accrued of $264,890 and $610,448, respectively.
6.
<PAGE> 7
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
February 28, August 31,
1997 1996
------------ ------------
<S> <C> <C>
Lease and leasehold improvements.................... $ 1,553,206 $ 1,553,206
Office furniture and fixtures....................... 186,909 186,909
Machinery and equipment............................. 14,885,619 14,704,396
Transportation equipment............................ 99,935 99,935
------------ ------------
Total cost........................................ 16,725,669 16,544,446
Accumulated depreciation and amortization........... 7,336,310 6,758,807
------------ ------------
Net carrying amount............................... $ 9,389,359 $ 9,785,639
============ ============
Depreciation expense for the period................. 524,757 1,081,680
Amortization expense for the period................. 52,746 93,548
------------ ------------
Depreciation and amortization expense for the period $ 577,503 $ 1,175,228
============ ============
</TABLE>
NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT
<TABLE>
<CAPTION>
August 31,
NOTES PAYABLE February 28, 1997 1996
- ------------- --------------------------- ----------
Actual Pro-forma
---------- -------------
<S> <C> <C> <C>
Revolving bank credit line. collaterlized by
substantially all assets of the Company. The
agreement provides for borrowing, subject
to certain collateral requirements of up to
$10,500,000, and bears interest at 4% above
the bank's prime rate at February 28, 1997... $ 9,826,068 $ --- $ 10,241,503
=========== ============ ============
LONG-TERM DEBT
- --------------
Note payable to bank, payable in monthly
installments of $40,000 plus interest of 4%
above the bank's prime rate .................. 136,962 --- 376,962
Note payable to financial institution, payable
in monthly installments of $39,945, including
interest at 9.9%.............................. 899,025 899,025 1,088,532
Note payable to financial institution,
payable in monthly installments of $15,000,
including interest at 7%...................... 265,184 265,184 344,356
Note payable to bank, payable in monthly
installments of $31,667 plus interest of 1%
above the bank's prime rate (an effective rate
of 9.25%),.................................... --- 1,900,000 ---
</TABLE>
7.
<PAGE> 8
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997
NOTE 4 - NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
February 28, August 31,
LONG-TERM DEBT - CONTINUED 1997 1996
---------------------------- ------------
Actual Pro-forma
----------- -----------
<S> <C> <C> <C>
Revolving bank credit line,
collaterlized by substantially
all assets of the Company. The
agreement provides for
borrowing, subject to certain
collateral requirements of up
to $8,000,000, and bears
interest at 1% above the
bank's prime rate (an
effective rate of 9.25%), due
December 1, 1998. The
agreement is subject to
certain loan covenants and
requires a quarterly
commitment fee of .05% per
annum on the average daily
unused portion of the
revolving credit line....... --- 2,530,644 ---
----------- ----------- ------------
Total long-term debt........ 1,301,171 5,594,863 1,809,850
Total current portion....... 712,182 955,220 926,861
----------- ----------- ------------
Long-term debt - Net........ $ 588,989 $ 4,639,643 $ 882,989
=========== =========== ============
</TABLE>
In connection with the line of credit and notes payable to certain banks as of
August 31, 1996 and February 28, 1997, the Company has agreed to certain
covenants. As of August 31, 1996 and February 28, 1997, the Company was in
violation of such covenants and therefore, has reclassified those debt
obligations as current liabilities. Subsequent to February 28, 1997 the Company
refinanced such debt with LaSalle National Bank and was in compliance with all
covenants under such refinancing.
NOTE 5- SUBSEQUENT EVENT
On March 4, 1997, the Company completed an offering of 1,010,000 shares of
Common Stock at an offering price of $7.00 per share (the "Offering"). The
Company has granted the Underwriters (National Securities Corporation) a 45-day
option to purchase up to an additional 151,500 additional shares of Common Stock
to cover over-allotments at the same price per share as the initial shares
purchased from the Company. The net proceeds of $5,723,500 (after underwriting
discounts and commissions of $707,000 or $.70 per share and expenses of the
Offering ($639,500) were utilized to reduce financial institution indebtedness
previously incurred.
On March 4, 1997, the Company refinanced its' revolving line of credit and term
debt facilities with LaSalle National Bank. Under the terms of the financing
the Company has a $8.0 million revolving line of credit and a $1.9 million five
year term debt, both at an annual interest rate of prime plus 1%.
NOTE 6 - DIVIDENDS
Pursuant to a Shareholder Agreement dated October 31, 1996 between Motor Wheel
Corporation and Riviera Holding Company, the Company had declared a
preferential dividend of approximately $170,000 on the shares of Common Stock
owned by Riviera Holding Company to pay the income tax payable by Riviera
Holding Company as a result of the lapse of options by Motor Wheel Corporation
to purchase common stock owned by Riviera Holding Company and as a result of
the dividend itself. This dividend has been declared, but unpaid as of February
28, 1997.
8.
<PAGE> 9
RIVIERA TOOL COMPANY
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of the
Company's Statement of Operations as a percentage of sales.
<TABLE>
<CAPTION>
For The Three Months For The Six Months
Ended February 28, Ended February 28
-------------------- ------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
SALES....................................... 100.0% 100.0% 100.0% 100.0%
COST OF SALES............................... 79.6% 79.5% 79.9% 80.9%
------ ------ ------ ------
GROSS PROFIT........................ 20.4% 20.5% 20.1% 19.1%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 8.1% 8.7% 8.0% 8.6%
------ ------ ------ ------
INCOME FROM OPERATIONS.............. 12.3% 11.8% 12.1% 10.5%
OTHER INCOME (EXPENSE)
INTEREST EXPENSE........................... 8.2% 8.7% 7.7% 8.0%
GAIN ON ASSET SALES........................ .3% 1.0% .3% .9%
------ ------ ------ ------
TOTAL OTHER EXPENSE - NET............... 7.9% 7.7% 7.4% 7.1%
INCOME BEFORE TAXES ON INCOME....... 4.4% 4.1% 4.7% 3.4%
INCOME TAXES................................ 1.5% 1.4% 1.6% 1.2%
------ ------ ------ ------
NET INCOME.......................... 2.9% 2.7% 3.1% 2.2%
====== ====== ====== ======
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 28, 1997 TO THE THREE MONTHS
ENDED FEBRUARY 28, 1996
REVENUES -- Revenues for the three months ended February 28, 1997 totaled $5.4
million as compared to $4.6 million for the three months ended February 28,
1996, an increase of $.8 million or 17%. This revenue increase was due to the
Company's increased backlog.
COST OF SALES -- Cost of sales increased from $3.7 million for the three months
ended February 28, 1996 to $4.3 million for the three months ended February 28,
1997. As a percent of revenue, cost of sales for the three months ended
February 28, 1997 was 79.6% compared to 79.5% for the three months ended
February 28, 1996. The increase in cost of sales was largely due to an increase
in the Company's revenue during this period.
S,G & A EXPENSES -- Selling, general and administrative expenses increased from
approximately $401,000 for the three months ended February 28, 1996 to
approximately $439,000 for the three months ended February 28, 1997. This
increase was largely due to an increase in legal and professional expenses
($57,000) and a decrease in selling expenses ($24,000). As a percentage of
revenue, selling, general and administrative expenses were 8.1% for the three
months ended February 28, 1997 compared to 8.7% for the three months ended
February 28,1996.
9.
<PAGE> 10
INTEREST EXPENSE -- Interest expense for the three months ended February 28,
1997 was approximately $443,000 compared to approximately $402,000 for the
three months ended February 28, 1996. This increase was largely due to bank
fees of $93,750 the Company paid to its primary lender in extending its
revolving line of credit and term debt during the three months ended February
28, 1997. As a percentage of revenue, interest expense decreased from 8.7%
for the three months ended February 28, 1996 as compared to 8.2% for the three
months ended February 28, 1997.
COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 28, 1997 TO THE SIX MONTHS ENDED
FEBRUARY 28, 1996
REVENUES -- Revenues for the six months ended February 28, 1997 totaled $10.9
million as compared to $9.6 million for the six months ended February 28, 1996,
an increase of $1.3 million or 14%. This revenue increase was due to the
Company's increased backlog.
COST OF SALES -- Cost of sales increased from $7.7 million for the six months
ended February 28, 1996 to $8.7 million for the six months ended February 28,
1997. As a percent of revenue, cost of sales for the six months ended February
28, 1997 was 79.9% compared to 80.9% for the six months ended February 28,
1996. The increase in cost of sales was largely due to an increase in the
Company's revenue during this period.
S,G & A EXPENSES -- Selling, general and administrative expenses increased from
approximately $822,000 for the six months ended February 28, 1996 to
approximately $869,000 for the six months ended February 28, 1997. This
increase was largely due to an increase in legal and professional expenses
($70,000) and a decrease in selling expenses ($23,000). As a percentage of
revenue, selling, general and administrative expenses were 8.0% for the six
months ended February 28, 1997 compared to 8.6% for the six months ended
February 28,1996.
INTEREST EXPENSE -- Interest expense for the six months ended February 28, 1997
was approximately $845,000 compared to approximately $769,000 for the six
months ended February 28, 1996. This increase was largely due to the Company
paying bank fees of $125,000 to its primary lender in extending its revolving
line of credit and term debt during the six months ended February 28, 1997. As
a percentage of revenue, interest expense decreased from 8.0% for the six
months ended February 28, 1996 as compared to 7.7% for the six months ended
February 28, 1997.
FEDERAL INCOME TAXES
The effective federal income tax rate was 34% for the three and six months
ended February 28, 1997 and 1996. As of August 31, 1996, the Company had
approximately $4.2 million of net operating loss carryforwards that expire 2006
through 2009, investment tax credit carryforwards of approximately $246,700
that expire 1998 through 2003 and alternative minimum tax credits of
approximately $40,000, the use of which do not expire.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended February 28, 1997, the Company's cash provided from
operating activities was $1,730,294. The capital provided from operating
activities was primarily due to the change in the Company's Accounts
Receivable.
From Investing Activities, the Company increased it's other assets by $10,753
and acquired additional machinery and equipment fof $181,223 for a total of
$191,976 during the six months ended February 28, 1997.
From Financing Activities, the Company used in financing activities a total of
$1,536,668 during the six months ended February 28, 1997. During the six months
ended February 28, 1997, the Company reduced financial institution debt
($924,114), capital lease obligations ($166,390), redeemed 950 shares of the
Company's Redeemable Preferred Stock ($95,000) and incurred an additional
$351,164 of capitalized costs in connection with the Company's initial public
offering.
10.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: April 15, 1997
RIVIERA TOOL COMPANY
/s/ Kenneth K. Rieth
-------------------------------
Kenneth K. Rieth
President and Chief Executive
Officer
/s/ Peter C. Canepa
-------------------------------
Peter C. Canepa
Principal Financial
and Accounting Officer
11.
<PAGE> 1
EXHIBIT 10(i)
LOAN AGREEMENT
THIS AGREEMENT is made as of March 4, 1997 between RIVIERA TOOL
COMPANY, a Michigan corporation, of 5460 Executive Parkway, S.E., Grand Rapids,
Michigan 49512 ("Borrower"), and LASALLE NATIONAL BANK, a national banking
association, of 135 S. LaSalle Street, Chicago, Illinois 60603 (the "Bank"), on
the following terms:
Section 1. Acknowledged Facts. Borrower has requested Bank to
provide the following loans (the "Loans"): (a) a revolving line of credit in
the amount of $8,000,000 to provide accounts receivable and contracts in process
financing (the "Revolving Loan"); and (b) a term loan in the amount of
$1,900,000 to refinance the outstanding balance of its term loan indebtedness to
First Chicago NBD (the "Term Loan"). The Bank has issued its commitment letter
dated February 7, 1997, which generally outlines the terms and conditions of the
Loans (the "Commitment Letter"). The Commitment Letter is expressly subject to
documentation satisfactory in form and content to the Bank and its legal
counsel. Therefore, this Agreement is entered into as required by the
Commitment Letter and as modified above to completely set forth the terms and
conditions of the Loans to the satisfaction of the Bank.
Section 2. Definitions. The following terms used in this
Agreement shall have the following meanings:
(a) "Bank Prime Rate" shall mean the fully floating daily
variable rate of interest determined and announced by the Bank from time to
time as its prime lending rate (without reference to the prime or base rate
of any other financial institution). This rate is not necessarily the
lowest rate of interest charged by the Bank to any of its customers. This
rate is an index and the actual rate charged to any borrower for a specific
loan may be above or below that index.
(b) "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which the Bank is not open for the transaction of
substantially all of its banking functions.
(c) "Closing" shall mean that date on which all conditions to the
Loans are satisfied and the Term Loan is disbursed, which shall occur on or
before March 7, 1997 unless the Bank, in its sole discretion, agrees to a
later date.
(d) "Collateral" shall mean all property and instruments pledged
as security for the Loans, including the personal property described on
Exhibit A, and the Guaranty.
(e) "Current Assets" shall mean the sum of cash; marketable
securities, inventory at lower of cost or market; and estimated gross
profit in excess of billings on Eligible Contracts excluding selling,
general administrative and interest expenses and costs; and ordinary trade
accounts receivable excluding any amount due
<PAGE> 2
from any officer, employee, director, shareholder or Related Person. In the
event of a dispute relative to the carrying value of said inventory or accounts
receivable, the determination thereof by an independent Certified Public
Accountant chosen by Borrower and acceptable to the Bank shall be controlling.
(f) "Current Liabilities" shall include all indebtedness normally
held as due within one (1) year (exclusive of Subordinated Debt, if any),
and any unsubordinated debt due to any officer, employee, director,
shareholder or Related Person.
(g) "Current Ratio" shall mean Current Assets divided by Current
Liabilities.
(h) "Debt" means all liabilities including but not limited to
accruals, deferrals, and capitalized leases, less subordinated debt, if
any, and less accrued lease expense with respect to the real property
located at 5460 Executive Parkway, SE, Grand Rapids, Michigan.
(i) "Default Rate" shall mean two percent (2%) above the interest
rate applicable to each of the Loans.
(j) "EBIT" shall mean earnings before interest and taxes as
determined in accordance with GAAP.
(k) "EBITDA" shall mean earnings before interest, taxes,
depreciation and amortization as determined in accordance with GAAP.
(l) "Eligible Receivables" shall mean all accounts receivable
that (i) remain unpaid 90 days or less from the date of the original
invoice, (ii) are not due from a Related Person, and (iii) which have less
than 25% of the total amount due from any single customer over 90 days; and
such other receivables as expressly approved by the Bank.
(m) "Eligible Contracts" shall include inventory and estimated
gross profit in excess of billings on all contracts in process excluding
amounts attributable to selling, general, administrative and interest
expenses and costs.
(n) "Environmental Certificates" shall mean the Environmental
Certificate executed by Borrower as of the date of this Agreement, and any
other document relating to environmental matters delivered by Borrower to
Bank in connection with the Loans.
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<PAGE> 3
(o) "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or any
successor authority) that are applicable as of the date of determination,
consistently applied.
(p) "Guarantor" shall mean Kenneth K. Rieth.
(q) "Intangible Assets" shall include at book value, without
limitation, leasehold improvements, goodwill, including any costs
associated with expenses capitalized arising from the attempted or complete
public offering of Borrower, patents, copyrights, secret processes,
deferred expenses relating to sales, general administrative, research and
development expense, and all amounts due from any officer, employee,
director, shareholder or Related Person.
(r) "LIBOR Business Day" shall mean a day which is both a
Business Day and a day on which dealings in Dollar deposits are carried out
in the London interbank market.
(s) "LIBOR Interest Period" shall mean any one-month, two-month
or three-month period commencing on the date of any disbursement of the
Revolving Loan during the term of the Revolving Loan provided, however,
that (i) each LIBOR Interest Period which would otherwise begin or end on a
day which is not a LIBOR Business Day shall commence or end, as the case
may be, on the next succeeding LIBOR Business Day, (ii) the initial LIBOR
Interest Period shall commence on the date of closing, (or if such date is
not a LIBOR Business Day, on the next succeeding LIBOR Business Day), and
end on the first day of the month following the Closing, and (iii) the
final LIBOR Interest Period shall end on the date the Revolving Loan
matures, or if such date is not a LIBOR Business Day, on the next
succeeding LIBOR Business Day. The LIBOR Interest Period for purposes of
the Bank's Base Lending Rate shall be equal to thirty (30) days.
(t) "LIBOR Rate" shall mean the per annum rate of interest
determined by dividing (i) the per annum rate of interest at which deposits
in Dollars for such LIBOR Interest Period in an aggregate amount comparable
to the amount of the Revolving Loan is offered to the Bank by other banks
in the London interbank market, selected in the Bank's discretion, at
approximately 11:00 a.m. London time on the second LIBOR Business Day prior
to the first day of the LIBOR Interest Period; by (ii) a percentage equal
to 100% minus that percentage (expressed as a decimal) that is specified
on the first day of such LIBOR Interest Period by the Board of Governors of
the Federal Reserve System (or any successor agency thereto) for
determining the maximum reserve requirement (including, without limitation,
any marginal, emergency or special reserves) with respect to eurocurrency
funding
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<PAGE> 4
(currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of such system, all as conclusively
determined by Bank (absent manifest error), such sum to be rounded up, if
necessary, to the nearest whole multiple of 1/100 of 1%, and such LIBOR
Rate to be adjusted on the first day of each LIBOR Interest Period after
the date of Closing.
(u) "Loan Documents" shall mean this Agreement, the Term Loan
Note, the Revolving Loan Note, the Security Agreement, the Guaranty, the
Environmental Certificates, and all other documents, certificates and
instruments delivered in connection with the application for or closing of
the Loans.
(v) "Permitted Liens" shall mean any liens or encumbrances held
by the Bank; any lien or encumbrance shown on the attached Exhibit B; new
purchase money security interests, each of which shall not exceed $75,000
unless otherwise agreed to by the Bank in writing; liens for taxes,
assessments or other governmental charges which are not yet past due or
which are past due but being contested by Borrower in good faith, and any
other liens or encumbrances consented to in writing by the Bank.
(w) "Person" shall mean and include an individual, partnership,
corporation, trust, unincorporated organization, government or any
department or agency thereof.
(x) "Property" shall mean all personal property described on
attached Exhibit A.
(y) "Related Person" shall include, but shall not be confined to,
any Person related to Borrower by common control or ownership.
(z) "Subordinated Debt" shall mean indebtedness of the Borrower
owed to any officer, employee, director, shareholder or Related Person
which is subordinated to all indebtedness owed by the Borrower to the Bank
under terms and conditions approved in writing by the Bank.
(aa) "Tangible Net Worth" shall include the amount of total
assets excluding the amount of Intangible Assets minus the amount of total
liabilities. For purposes of this definition, total liabilities shall not
include accrued lease expense with respect to the real property located at
5460 Executive Parkway, S.E., Grand Rapids, Michigan.
(bb) "Total Debt Service" shall mean all principal and interest
payments due and owing by Borrower to Bank and any other third party as
measured for any 12-month period.
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<PAGE> 5
Section 3. The Revolving Loan. The Revolving Loan shall be evidenced
by a promissory note in form and substance satisfactory to Bank which shall be
executed and delivered by the Borrower at Closing (the "Revolving Loan Note").
The Revolving Loan shall bear interest and shall be due and payable as provided
below.
(a) Disbursement of the Revolving Loan. Upon request by Borrower
received no later than 10:00 a.m. on the Business Day of the proposed
disbursement, subject to the prior satisfaction of all conditions precedent
set forth in this Agreement, and provided that no event of default as
defined in this Agreement has occurred, or any event that with the giving
of notice or lapse of time, or both, would constitute an event of default,
the Bank shall disburse to the Borrower funds such that the outstanding
balance of funds advanced does not at any time exceed 80% of Eligible
Receivables plus 40% of Eligible Contracts; provided, however, that the
amount advanced against Eligible Contracts shall at no time exceed
$2,000,000. To the extent that Buyer selects a LIBOR Rate under
Subparagraph (b) below, disbursement of the Revolving Loan shall not be
permitted in amounts less than $1,000,000 and Borrower's request for
disbursement must be received by the Bank at least two (2) Business Days in
advance of the requested disbursement date. Principal amounts repaid by
the Borrower prior to Maturity shall be available for reborrowing in
accordance with the advance formula contained in this Subparagraph.
(b) Interest Rate. From the date of closing through February 28,
1998, interest shall accrue on the outstanding principal balance of the
Revolving Loan at a rate equal to the Bank Prime Rate plus one percent (1%)
or the LIBOR Rate plus three percent (3%), as determined by the Borrower
and Bank two (2) Business Days prior to the date of Closing. Beginning
March 1, 1998, and continuing until maturity (whether at the Stated
Maturity Date, by acceleration or otherwise), interest shall accrue on the
outstanding principal balance of the Revolving Loan at a rate selected by
Borrower and Bank two (2) Business Days prior to March 1, 1998 from among
the following optional rates, which are available depending upon the
Borrower's total EBIT as of two (2) Business Days prior to March 1, 1998:
<TABLE>
<CAPTION>
EBIT Bank Prime Rates LIBOR Rates
---- ---------------- -----------
<S> <C> <C>
Less than or equal to Bank Prime Rate LIBOR plus 3%
$500,000 plus 1%
Greater than $500,000 but Bank Prime Rate LIBOR plus 2.5%
less than $1,500,000 plus .375%
Greater than or equal to Bank Prime Rate LIBOR plus 2%
$1,500,000 less .25% less .25%
</TABLE>
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<PAGE> 6
If Borrower and Bank fail to select from among the available interest rate
options as described above, then the interest rate shall default to the
applicable rate based upon the Bank Prime Rate. If the rate applicable to
the Revolving Loan is based upon the Bank Prime Rate, such rate shall
change simultaneously with changes in the Bank Prime Rate. After maturity
(whether at the Stated Maturity Date, by acceleration or otherwise) or
during any period that an Event of Default under the Revolving Loan Note
remains uncured, interest shall accrue on the outstanding principal balance
of the Revolving Loan at two percent (2%) above the interest rate described
above until the Revolving Loan is paid in full. Interest shall be computed
for the actual number of days elapsed on the basis of a 360-day year. If
at any time the interest rate payable under the Revolving Loan Note exceeds
the maximum legal rate applicable, the interest rate payable shall be
reduced to that maximum legal rate.
(c) Term. The Revolving Loan will mature on December 1, 1998, at
which time all outstanding principal and accrued interest shall be paid in
full to the Bank.
(d) Repayment of the Revolving Loan. On the first day of each
month during the term of the Revolving Loan Note (or, if a rate of interest
based upon the LIBOR Rate is selected by Borrower, then upon the last day
of the applicable LIBOR Interest Period), Borrower shall pay accrued
interest to the Bank as described in the Revolving Loan Note. Furthermore,
Borrower hereby authorizes Bank to apply all monies received by it on
behalf of Borrower pursuant to a Wholesale Lockbox Mail Service Agreement
to be applied against all outstanding principal under the Revolving Loan
when such monies are received.
(e) Late Payment Penalty. In the event that any monthly payment
is not paid within ten (10) days after it is due, Borrower shall pay to the
Bank a late penalty of five percent (5%) of the amount of the late payment
to compensate Bank for loss of interest and reasonable administrative
expenses.
(f) Procedure for Payment. All payments of principal and
interest shall be made in lawful money of the United States of America
which shall be legal tender for the payment of all debts, public and
private, at the time of payment. Bank shall be entitled to directly debit
any account maintained by Borrower with the Bank for payments due under the
Revolving Loan.
(g) Revolving Loan fee. Beginning with the quarter ending May
31, 1997 a fee equal to 1/2% per annum on the undisbursed portion of the
Revolving Loan shall be paid by Borrower to Bank quarterly in arrears.
(h) Funding of the Revolving Loan. Notwithstanding any provision
of this Agreement to the contrary, Bank shall be entitled to fund and
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<PAGE> 7
maintain its funding of all or any part of the Revolving Loan in any manner
it sees fit, it being understood, however, that for purposes of this
Agreement, all determinations hereunder shall be made as if Bank had
actually funded and maintained the Revolving Loan through the purchase of
deposits in the relevant interbank market having a maturity corresponding
to such related interest payment period and bearing an interest rate equal
to the LIBOR Rate for such interest period.
(i) Yield Protection and Contingencies.
(i) In the event that any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect,
or any interruption or administration thereof by any governmental
authority charged with the interpretation or administration thereof,
or compliance by Bank with any request or directive of such authority
(whether or not having the force of law), including without limitation
exchange controls, shall make it unlawful or impossible for Bank to
maintain the Revolving Loan under this Agreement, Borrower shall upon
receipt of notice thereof from Bank repay in full to Bank the then
outstanding principal amount of the Revolving Loan so affected
together with all accrued interest thereon to the date of payment and
all other amounts due to Bank under this Agreement, (a) on the last
day of the then current interest period applicable to the affected
principal amount of the Revolving Loan if Bank may lawfully continue
to maintain the Loan to such day, or (b) immediately if Bank may not
continue to maintain the Revolving Loan to such day.
(ii) Notwithstanding subparagraph (j) below, if the Bank
allows Borrower to make any payment of principal on any other date
than the last day of LIBOR Interest Period applicable thereto, or if
Borrower fails to make any payment of principal or interest when due,
in lieu of any late charge or Default Rate payable hereunder, Bank may
elect that Borrower shall reimburse Bank on demand for any resulting
loss or expenses incurred by Bank, including without limitation any
loss incurred in obtaining, liquidating or employing deposits from
third parties. A detailed statement as to the amount of such loss or
expense, prepared in good faith and submitted by Bank to Borrower,
shall be conclusive and binding for all purposes, absent manifest
error in computation.
(j) Prepayment. Borrowings subject to a LIBOR Rate may not
be prepaid. All other borrowings under the Revolving Loan may be
prepaid without premium or penalty.
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<PAGE> 8
Section 4. The Term Loan. The Term Loan shall be evidenced by a
promissory note in form and substance satisfactory to Bank which shall be
executed and delivered by Borrower at Closing (the "Term Loan Note"). The Term
Loan shall bear interest and shall be due and payable as provided below.
(a) Disbursement of the Loan. Subject to the prior satisfaction
of all conditions precedent set forth in this Agreement, and provided that
no event of default as defined in this Agreement has occurred, or any event
that with the giving of notice or lapse of time, or both, would constitute
an event of default, the Bank shall disburse at Closing to Borrower's
existing Secured Creditors, on Borrower's behalf, that portion of the Term
Loan not exceeding 80% of the forced liquidation value of the Borrower's
machinery and equipment pledged as collateral for the Loans.
(b) Interest Rate. Prior to maturity, interest shall accrue on
the outstanding principal balance of the Term Loan from the Closing until
paid in full at a rate equal to the Bank Prime Rate plus one percent (1%)
or the yield on U. S. Treasury Notes maturing 5 years from the date of
Closing plus two and one-half percent (2.5%), as selected by Borrower two
(2) days prior to the date of Closing. If Borrower fails to select an
interest rate for the Term Loan as provided above, then the interest rate
shall default to the Bank's Prime Rate plus 1%. If the rate of interest
applicable to the Term Loan is based upon the Bank Prime Rate, such rate
shall change simultaneously with changes in the Bank Prime Rate. After
maturity (whether at the Stated Maturity Date, by acceleration or
otherwise) or during any period that an Event of Default under the Term
Loan Note remains uncured, interest shall accrue on the outstanding
principal balance of the Term Loan at two percent (2%) above the interest
rate described above until the Term Loan is paid in full. Interest shall
be computed for the actual number of days elapsed on the basis of a 360 day
year. If at any time the interest rate payable under the Note exceeds the
maximum legal rate applicable, the interest rate payable shall be reduced
to that maximum legal rate.
(c) Repayment of the Loan.
(i) Monthly Payments. On April 7, 1997, and continuing on
the same day of each month for sixty (60) months thereafter, Borrower
shall pay a monthly payment consisting of principal in the amount of
Thirty-one Thousand Six Hundred Sixty-six Thousand and 67/100 Dollars
($31,666.67), plus interest accrued on the outstanding principal
balance of the Term Loan. The monthly interest payment shall be
adjusted automatically to reflect any change in the Bank Prime Rate.
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<PAGE> 9
(ii) Maturity. Notwithstanding anything contained herein to
the contrary, the entire outstanding principal balance and accrued
interest of this Term Loan shall be paid in full on or before March 7,
2002 ("Stated Maturity Date").
(d) Late Payment Penalty. In the event that any monthly payment
is not paid within ten (10) days after it is due, Borrower shall pay to the
Bank a late penalty of five percent (5%) of the amount of the late payment
to compensate Bank for loss of interest and reasonable administrative
expenses.
(e) Procedure for Payment. All payments of interest and
principal shall be made in lawful money of the United States of America
which shall be legal tender for the payment of all debts, public and
private, at the time of payment. Bank shall be entitled to directly debit
any account maintained by Borrower with the Bank for payments due under the
Term Loan.
(f) Prepayment. The Term Loan may be prepaid by Borrower at any
time, in whole or in part, without premium or penalty.
(g) Loan Facility Fee. A loan facility fee shall be paid by
Borrower to Bank at closing in the amount of $32,500.00. Borrower shall be
credited with any payments made toward this fee prior to closing.
Section 5. Security for the Loans. The Borrower shall execute and
deliver, or cause to be executed and delivered, to the Bank, the following
documents as collateral security for its payment obligations described in this
Agreement:
(a) Guaranty. An unconditional guaranty of payment, in form and
substance satisfactory to the Bank, limited as provided therein, executed
and delivered by Kenneth K. Rieth.
(b) Security Agreement. A security agreement (the "Security
Agreement") in form and substance satisfactory to the Bank, covering the
personal property described on attached Exhibit A, subject only to
Permitted Liens.
Borrower and each Guarantor shall execute and deliver to Bank all such
documents, agreements and instruments, and take all such further action, as Bank
may reasonably request in connection with the perfection and priority of the
security interests provided for above.
Section 6. Conditions Precedent to Disbursement. The Bank shall be
obligated to disburse the Loans only upon Bank's satisfaction that all of the
following conditions have been met:
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<PAGE> 10
(a) Execution of Loan Documents. Borrower shall have executed
and delivered, or caused to be executed and delivered to the Bank all Loan
Documents.
(b) No Default. No event of default as defined in this
Agreement, or any event that with the giving of notice or lapse of time, or
both, would constitute an event of default, shall have occurred.
(c) Accuracy of Representations and Warranties. As of the date
of Closing, all of Borrower's representations and warranties contained in
this Agreement and the Environmental Certificates shall be true and correct
in all material respects.
(d) Satisfaction of Environmental Conditions. Borrower shall
have satisfied all environmental conditions contained in this Agreement.
(e) Insurance. Borrower shall have furnished to the Bank, in
form and amounts, and with companies satisfactory to the Bank, evidence of
hazard insurance policies with loss payable clauses in favor of the Bank
covering all assets and properties pledged by Borrower as Collateral for
the Loans; and evidence satisfactory to Bank of adequate liability and
workman's compensation insurance.
(f) Authority of Borrower. The Bank shall have received the
following:
(i) A Certificate of Good Standing and certified Articles of
Incorporation of the Borrower, certified by the Michigan Department of
Commerce as of a date reasonably close to the date of closing.
(ii) A certified copy of the Bylaws and Resolutions of the
Borrower, authorizing the execution and delivery of the Loan Documents
by the officers of Borrower.
(iii) A certificate of the secretary or the assistant
secretary of the Borrower, dated as of the date of closing, as to the
incumbency and signatures of the officers of the Borrower signing the
Loan Documents.
(g) Bank's Satisfaction. Bank shall be satisfied that no default
has occurred, that all warranties and representations contained in this
Agreement are true and correct as of the date of Closing, and that no
material adverse change has
10
<PAGE> 11
occurred in the financial condition and affairs of the Borrower or any
Guarantor, since the date of Borrower's application for the Loans.
(h) Other Information. There shall have been delivered to the
Bank such other information, documents, instruments, approvals or opinions
as the Bank or its counsel may reasonably request.
(i) Title to Collateral. Bank shall be satisfied that Borrower
has or will acquire all right, title and interest in and to the Collateral.
(j) Initial Public Offering. Borrower shall have completed an
Initial Public Offering such that Borrower shall have received minimum net
proceeds of $6,363,000.
(k) NBD Bank. Borrower shall have caused NBD Bank to:
(i) Enter into a blocked account agreement, in form and
substance acceptable to bank, which acknowledges that any collections
of accounts receivable or other funds received by First Chicago NBD on
behalf of Borrower are collateral of Bank and provides that such
collections and funds shall be remitted directly to Bank for
application against any outstanding interest or principal under the
Revolving Loan;
(ii) Entered into a Settlement and Forbearance Agreement
with Kenneth K. Rieth, in form and substance acceptable to the Bank
(the "Forbearance Agreement"), which provides for the release of NBD
Bank's pledge of Kenneth K. Rieth's stock in the Borrower, as well as
certain liabilities of Kenneth K. Rieth as guarantor or otherwise to
NBD Bank; and
(iii) Execute and deliver at closing a payoff letter
certifying the total indebtedness owed by Borrower to NBD Bank as of
the date of closing and agreeing to execute and deliver UCC
termination statements with respect to all UCC financing statements
currently on file with respect to the Collateral as soon as
practicable after the payoff amount is received by NBD Bank.
(iv) Release its existing pledge covering Kenneth K. Rieth's
stock in the Borrower in accordance with the Forbearance Agreement.
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<PAGE> 12
(l) Borrower's Counsel Opinion. Borrower's legal counsel shall
have delivered its opinion to Bank in form and substance satisfactory to
Bank and Bank's legal counsel.
(m) Lockbox. Borrower's deposit accounts, including a lockbox
into which all collections of receivables shall be deposited and applied to
the outstanding principal balance of the Revolving Loan pursuant to an
agreement with the Bank, shall be established and maintained by Borrower
and the Bank.
(n) Appraisal. Bank shall have received a current appraisal of
Borrower's machinery and equipment in form and substance satisfactory to
the Bank, which establishes the forced liquidation value of Borrower's
assets.
Section 7. Representations and Warranties of Borrower. Except as
otherwise disclosed by Borrower to Bank on the attached Exhibit C, the Borrower
represents and warrants that:
(a) Loan Documents. The Borrower makes each of the
representations and warranties contained in the Loan Documents to which the
Borrower is a party, to, and for the benefit of, the Bank as if the same
were set forth at length herein.
(b) Organization. The Borrower has under the laws of the State
of Michigan all requisite power and authority to own and operate its
properties and to carry on its activities as now conducted and as presently
proposed to be conducted.
(c) Conflicting Agreements and Other Matters. The Borrower is
not a party to any contract or agreement or subject to any restriction
which materially and adversely affects its business, property, assets or
financial condition. Except as previously disclosed to the Bank by the
Borrower in writing, the execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower is a party,
will not result in the violation of or be in conflict with or constitute a
default under any term or provision of any mortgage, lease, agreement or
other instrument, or any judgment, decree, governmental order, statute,
rule or regulation by which the Borrower is bound or to which any of its
assets is subject. No approval by, authorization of, or filing with any
Federal, State or other governmental commission, agency or authority is
necessary in connection with the execution and delivery by the Borrower of
this Agreement or the other Loan Documents to which the Borrower is a party
which has not previously been obtained in writing and delivered to Bank.
The Borrower is not a party to, or otherwise subject to any provision
contained in any instrument evidencing indebtedness of the Borrower, any
agreement relating thereto or any other contract or agreement which
restricts or otherwise limits the incurring of the indebtedness to be
represented by the Term Loan Note, the Revolving Loan Note, or this
Agreement.
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<PAGE> 13
(d) Powers and Authorization. The execution, delivery and
performance of this Agreement and each of the other Loan Documents to which
the Borrower is a party are within the Borrower's powers, have been duly
authorized by all necessary action and do not require any consents or
approvals which have not been obtained.
(e) Binding Agreement. Upon execution and delivery, this
Agreement and the other Loan Documents to which the Borrower is a party
will be the legal, valid and binding obligations of the Borrower
enforceable in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by general equitable
principles.
(f) Litigation. There is no action, suit or proceeding at law or
in equity or by or before any governmental instrumentality or other agency
now pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any property or rights of the Borrower which
might result in any material adverse change in the business, condition or
operations of the Borrower or which might materially or adversely affecting
the ability of the Borrower to comply with this Agreement or any of the
other Loan Documents to which the Borrower is a party. The Borrower is
not, to the knowledge of the Borrower, in default in any material respect
with respect to any judgment, order, writ, injunction, decree, rule or
regulation of any governmental instrumentality or other agency.
(g) Taxes. The Borrower has filed all Federal, State and local
tax returns which, to the best knowledge of the Borrower, are required to
be filed, and has paid all taxes as shown on said returns and on all
assessments received by it to the extent that such taxes have become due
and are not otherwise being contested in good faith by Borrower pursuant to
appropriate proceedings.
(h) Disclosure. There is no fact known to the Borrower which has
a material adverse affect, or may have a material adverse affect on the
business, property, assets, or financial condition of the Borrower which
has not been disclosed in this Agreement or in the other documents,
certificates and statements furnished to the Bank by or on behalf of the
Borrower prior to the date hereof in connection with the transactions
contemplated hereby.
(i) Liens and Encumbrances. Except for Permitted Liens, none of
Borrower's assets or properties pledged as Collateral, are subject to any
mortgage, pledge, lien, security interest, or other encumbrance of any kind
or character.
Section 8. Affirmative Covenants. The Borrower agrees that until all
amounts payable hereunder are paid in full, Borrower shall:
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<PAGE> 14
(a) Performance of Operative Documents. Observe and perform all
covenants and agreements contained in the Loan Documents.
(b) Compliance With Laws. Comply with all applicable federal,
state and local laws, ordinances, rules and regulations, including but not
limited to, all environmental laws, ordinances, rules and regulations and
shall keep all of its real and personal property or any interest therein
free and clear of any liens (other than Permitted Liens) imposed pursuant
to such laws, ordinances, rules and regulations and deliver to Bank reports
and information in form satisfactory to Bank as Bank may request from time
to time to establish compliance with this covenant.
(c) Maintain Existence. Carry on and conduct its business in
substantially the same manner and in substantially the same areas as such
business is now and has previously been carried on, and maintain its legal
existence, and comply with all valid and applicable statutes, rules and
regulations.
(d) Financial Information. Maintain a standard, modern system of
accounting and deliver to Bank financial reports in form satisfactory to
Bank in accordance with GAAP as Bank may request from time to time,
including but not limited to: (i) annual audited financial statements of
Borrower prepared by an independent certified public accounting firm
acceptable to the Bank within ninety (90) days after the end of each fiscal
year of the Borrower; (ii) monthly internally prepared financial
statements, including but not limited to a balance sheet and income and
expense statement within thirty (30) days after the end of each month,
(iii) annual personal financial statements of the Guarantor accompanied by
the annual IRS tax returns of Guarantor; and (iv) monthly compliance
certificates executed and delivered by Borrower in form and substance
satisfactory to Bank which verify Borrower's compliance with the covenants,
terms and conditions contained in the Loan Documents and which contain such
other information as the Bank may request. Furthermore, Borrower shall
cause Guarantor to submit, as soon as possible to the Bank, copies of all
personal financial statements delivered by Guarantor to NBD Bank, N.A.
pursuant to the Forbearance Agreement.
(e) Inspection Rights. Permit the Bank to inspect its books,
records, and properties at all reasonable times, wherever the same may be
located.
(f) Maintain Collateral. Maintain, preserve, and keep its
properties and every part thereof in good repair, working order, and
condition and from time to time make all necessary and proper repairs,
renewals, replacements, additions, betterments, and improvements thereof,
so that at all times, their efficiency shall be fully preserved and
maintained.
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<PAGE> 15
(g) Notice of Default. Provide the Bank with prompt notice of
any event of default or default under this Agreement.
(h) Maintain Books and Records. Keep accurate books and records
in accordance with GAAP.
(i) Expenses of Bank. Pay all costs and expenses incurred by
the Bank in connection with the Loans including but not limited to attorney
fees at Closing.
(j) Maintain Security Interest. Take all actions, including but
not limited to the execution and delivery of certificates and other
documents, reasonably requested by the Bank in order to assure the Bank
that its security interest in the Collateral is not impaired, and that the
priority of that security interest in the Collateral is maintained.
(k) Insure Collateral. Maintain insurance against fire, theft,
and other casualty on its insurable real and personal property at full
replacement cost from companies acceptable to the Bank and maintain
insurance against liability on account of damage to persons or property as
required under all workers' compensation laws. Also, Borrower shall
maintain any other insurance as may from time to time be reasonably
requested by the Bank and shall deliver certified copies of all such
insurance policies to the Bank. Borrower shall deliver to Bank
certificates evidencing all such insurance policies, in form and substance
satisfactory to the Bank, naming the Bank as loss payee.
(l) Avoid Liens on Collateral. Maintain the Collateral free from
all liens and encumbrances except for Permitted Liens.
(m) Comply with Employment Laws. Comply with all applicable
federal, state and local laws, ordinances, rules and regulations concerning
wage payments, minimum wages, overtime laws, and payment of withholding
taxes, and deliver to Bank such reports and information in form
satisfactory to Bank as Bank may request from time to time to establish
compliance with such laws.
(n) Environmental Covenants. Comply with those Environmental
Covenants described in this Agreement and in the Environmental
Certificates.
(o) Discharge Taxes and Assessments. Duly pay and discharge or
cause to be paid and discharged all taxes, assessments, and other
governmental charges imposed upon it and its properties or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies, which if unpaid could become a lien or
charge upon its property, except such items as are
15
<PAGE> 16
being in good faith appropriately contested and for which the Borrower has
provided adequate reserves.
(p) Borrowing Base Certificate. At the end of each week, and in
conjunction with any request for disbursement under the Revolving Loan,
Borrower shall provide Bank with a Borrowing Base Certificate which
provides, at a minimum, an aging of accounts receivable, a listing of any
accounts receivable which have less than 25% of the total amount due from
any single customer over 90 days, a listing of current inventory, contracts
in process, borrowings outstanding, and such other information as Bank
shall request.
(q) Past Due Obligations. Within ten (10) days after Closing,
Borrower shall provide evidence, the form and substance of which shall be
satisfactory to Bank, that (i) all delinquent and currently due taxes and
special assessments have been paid, (ii) that all past due rents have been
paid, and (iii) all payables are current within stated terms applicable to
such payables.
(r) Financial Covenants. Prior to maturity (whether at the
Stated Maturity Date, upon acceleration or otherwise), Borrower shall
maintain at all times compliance with each of the following financial
restrictions:
(i) Maintain a Current Ratio of not less than 2.5 to 1.0.
(ii) Maintain Tangible Net Worth of not less than (A)
$10,700,000 from the date of closing to August 31, 1997; (B)
increasing to $11,500,000 by August 31, 1998; and (C) increasing to
$12,750,000 by August 31, 1999.
(iii) Maintain an EBITDA to Total Debt Service ratio of not
less than 2.0 to 1.
(iv) Maintain a ratio of maximum total unsubordinated debt
to Tangible Net Worth not less than (A) 1.5 to 1.0 from the date of
Closing to August 31, 1997; (B) reducing to a maximum of 1.45 to 1.0
for the fiscal year ending August 31, 1998, and (C) reducing to a
maximum of 1.40 to 1.0 for the fiscal year ending August 31, 1999 and
thereafter.
(v) Maintain working capital not less than the $6,500,000.
16
<PAGE> 17
(vi) Maintain a ratio of EBITDA to interest of not less than
2.0 to 1.0.
(vii) Limit capital expenditures and liabilities under
leases to not more than $1,000,000 during any fiscal year.
Section 9. Environmental Conditions and Covenants. This Agreement is
subject to the following environmental terms and conditions:
(a) Definitions: For purposes of this paragraph, the following
terms shall have the following meanings:
(i) "Environmental Laws" shall mean all applicable federal,
state or local statutes, laws, ordinances, codes, rules, regulations,
and guidelines (including consent decrees and administrative orders)
relating to public health and safety, and the protection of the
environment.
(ii) "Hazardous Material" shall mean any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Liability and Compensation Act of 1980, as amended ("CERCLA"), any
"hazardous waste" as defined by the Resource Conservation and Recovery
Act, as amended, ("RCRA"), any petroleum product, asbestos, urea foam
insulation, polycholorinated biphenyl, paint containing lead,
solvents, aromatic or chlorinated organic compounds, toxic chemicals,
or any other solid, liquid or gas governed, or regulated by the
Environmental Laws.
(iii) "Environmental Audit" shall mean a written report,
prepared by a qualified, independent environmental consulting company
acceptable to Bank which is prepared for the purpose of determining
whether Borrower is in compliance with the Environmental Laws, and
whether, and to what extent there exists any condition or circumstance
on, in or under the Collateral which requires or may impose some
notification, investigative, clean-up, removal or other obligations
upon Borrower in connection with the Environmental Laws.
(b) Environmental Conditions Precedent to Closing of Loan. The
Bank shall not be obligated to close the Loan:
17
<PAGE> 18
(i) Unless Borrower completes, executes and returns the
Environmental Certificates to the Bank. The Environmental
Certificates are incorporated herein by reference.
(ii) If, in the opinion of the Bank, there exists an
uncorrected violation of any Environmental Law or any environmental
condition which may impair the creditworthiness of the Borrower, or
which may impair the value of the Collateral, or which requires or may
require notification of appropriate regulatory authorities, a cleanup,
removal, or other remedial action by Borrower under any applicable
Environmental Law.
(c) Environmental Covenants. Borrower agrees that so long as
this Agreement is in effect, and until all amounts payable hereunder are
paid in full:
(i) Borrower shall comply with all Environmental Laws
applicable to it or its properties, and shall keep the Collateral free
and clear of any liens imposed by such Environmental Laws, and shall
deliver to Bank such reports and information in form satisfactory to
Bank as Bank may request from time to time to establish compliance
with this covenant.
(ii) Borrower shall indemnify Bank for any damage,
liability, cost or expense (including attorneys' fees and the cost of
any Environmental Audit or other investigation of the Collateral)
incurred by Bank as a result of any actual or alleged release of
Hazardous Materials, in on or under any real property owned or
operated by the Borrower, any other degradation of the environment
occurring at such property, or Borrower's violation of any
Environmental Law. This indemnity shall survive the disbursement of
the Loans and closing of this Agreement.
(iii) Borrower shall immediately forward to Bank, upon
receipt, copies of all written claims, complaints, notices or inquires
relating to the environmental condition of any real property owned or
operated by the Borrower, and Borrower's compliance with all
applicable Environmental Laws. Borrower shall promptly cure and cause
the dismissal with prejudice to Bank's satisfaction of any actions or
proceedings brought against Borrower relating to compliance with
Environmental Laws.
18
<PAGE> 19
(iv) At its sole cause and expense, Borrower shall pay,
immediately when due, the cost of compliance with all Environmental
Laws applicable to it or its properties.
Section 10. Events of Default. Upon the occurrence of any of the
following events (herein referred to as an "Event of Default"), unless waived by
the Bank:
(a) The occurrence of an event of default under any Loan
Document; or
(b) Failure to pay amounts when due under the Term Loan Note; or
(c) Failure to pay amounts when due under the Revolving Loan
Note; or
(d) Failure to perform or observe any term contained in this
Agreement; or
(e) The occurrence of facts which would indicate that any
representation or warranty made by the Borrower in any Loan Document is
false or misleading in any material respect; or
(f) The Borrower or Guarantor files for bankruptcy, or becomes
insolvent, or fails to pay its debts generally as they become due, or if a
receivership or involuntary bankruptcy proceeding is commenced against the
Borrower or Guarantor, or any of the properties of Borrower or Guarantor,
and such receivership or involuntary bankruptcy proceeding is not dismissed
within thirty (30) days; or
(g) Guarantor defaults in the payment of any money on the
performance of any obligation required by the Forbearance Agreement;
then, and in any such event, the Bank may, in its sole discretion do any or all
of the following: (1) by notice to Borrower, declare all unpaid principal and
accrued interest thereon, as well as all other amounts required to be paid by
Borrower under this Agreement, the Term Loan Note and the Revolving Loan Note
to be immediately due and payable; and (2) exercise any or all of its rights
and remedies under any of the Loan Documents.
No remedy herein conferred or reserved is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or any other Loan Documents now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing under any default, omission or failure of performance hereunder shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right or power may be exercised from time to time and as often as may
be deemed expedient. In order to exercise any remedy reserved to the Bank in
this Agreement, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required. In the event any provision
contained in this
19
<PAGE> 20
Agreement should be breached by any party and thereafter duly waived by the
other party so empowered to act, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach hereunder.
No waiver, amendment, release or modification of this Agreement shall be
established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by the parties thereunto duly authorized by
this Agreement.
Section 11. Miscellaneous.
(a) Amendments. This Agreement sets forth the entire agreement
between Bank and Borrower with regard to its subject matter and cannot be
modified in any way, except by a future amendment in writing signed by the
Bank and Borrower. This Agreement supersedes any preliminary discussions,
negotiations, previous written agreements or understandings between Bank
and Borrower with respect to its subject matter.
(b) Survival of Covenants, Agreements, Representations and
Warranties. All covenants, agreements, representations and warranties
contained herein or made in writing by the Borrower in connection herewith
shall survive the execution and delivery of this Agreement and the Loan
Documents, regardless of any investigation made by the Bank or on its
behalf.
(c) Expenses. The Borrower shall promptly pay to Bank all costs
and expenses incurred by the Bank in connection with (i) the closing of the
Loans (including the Bank's attorney's fees), (ii) the curing of any event
of default resulting from the acts or omissions of the Borrower under any
Loan Documents, (iii) enforcing its remedies against the Borrower, the
Guarantor or the Collateral after an Event of Default.
(d) Notices. Except where telephonic or telegraphic instructions
are authorized to be given, all notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
shall be in writing and shall be personally delivered or sent by
first-class mail, postage prepaid, and shall be deemed to be given for
purposes of this Agreement on the day that the writing is personally
delivered or two (2) business days after it is mailed in accordance with
this section. Unless otherwise specified in a notice sent or delivered in
accordance with this section, notices, demands, instructions, and other
communications in writing shall be given to or made upon the respective
parties at their respective addresses indicated below:
IF TO BANK:
LaSalle National Bank
125 Ottawa Ave., N.W., Suite 370
Grand Rapids, MI 49503
Attn: David W. Edwards, Vice President
20
<PAGE> 21
IF TO BORROWER:
Riviera Tool Company
5460 Executive Parkway, S.E.
Grand Rapids, MI 49512
Attn: Mr. Kenneth K. Rieth, President
IF TO THE GUARANTOR:
Mr. Kenneth K. Rieth
5460 Executive Parkway, S.E.
Grand Rapids, MI 49512
(e) Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Bank, the determination of
such satisfaction shall be made by the Bank in its sole and exclusive
judgment exercised in good faith.
(f) Binding Effect; Assignment. This Agreement is a continuing
obligation and shall (i) be binding upon the Borrower, its successors and
assigns and (ii) inure to the benefit of and be enforceable by the Bank and
its successors, transferees and assigns; provided, however, that the
Borrower may not assign all or any part of this Agreement without the prior
written consent of the Bank. The Bank may assign, negotiate, pledge or
otherwise hypothecate all or any portion of this Agreement, or grant
participation herein, in the Loan Agreement or in any of its rights or
security hereunder or thereunder, including, without limitations, the
instruments securing the Borrower's obligations hereunder, provided,
however, that the Bank promptly will inform the Borrower of any such
assignment, negotiation, pledge or other hypothecation and of the parties
involved therewith and, provided further, that no such assignment,
negotiation, pledge or other hypothecation by the Bank will relieve the
Bank of its obligation under this Agreement. In connection with any
assignment or participation, the Bank may disclose to the proposed assignee
or participant any information that the Borrower is required to deliver to
the Bank pursuant to this Agreement. Notwithstanding the foregoing, the
Bank shall not assign all or any portion of its right or interest under the
Loan Documents to NBD Bank or any person who is a successor in interest to
NBD Bank.
(g) Relationship with Borrower. Nothing contained in this
Agreement or any exhibit attached hereto or any agreement given pursuant
hereto shall be deemed or construed as creating any relationship other than
that of borrower and lender. There is no partnership or joint venture
between the Bank and Borrower, or between the Bank and any other person and
the Bank is not responsible in any way for the debts or obligations of the
Borrower or any other person. Nothing in this letter or any attachments
makes the Bank a fiduciary for the Borrower or any other person.
21
<PAGE> 22
(h) Third Parties. This Agreement is personal to the parties
hereto and is for their sole benefit and is not made for the express or
implied benefit of any other person or entity. Borrower consents to direct
communications between the Bank, and the Guarantors with respect to the
Loans, and shall, upon Guarantors' request, supply Guarantors with copies
of any document in the Bank's possession concerning the Loans.
(i) Appraisal. Any appraisals of the Borrower's property or
evaluation of the potential profitability of the enterprise to be engaged
in by the Borrower in connection with the extension of credit or proposed
extension of credit from the Bank to the Borrower, are for the sole benefit
of the Bank and do not constitute a representation of the likelihood of
financial viability of such enterprise by the Bank to the Borrower.
(j) Indemnification. Except as otherwise provided in this
Agreement, and except with respect to the willful misconduct or bad faith
of the Bank, or gross negligence on the part of the Bank, the Borrower
shall agree to indemnify the Bank, from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorney's fees) which the Bank may incur, directly
or indirectly as a consequence of the disbursement of the Loans, or breach
by any party of any term, condition, representation, warranty, or covenant
contained in any Loan Document.
(k) Waiver. To the extent permitted by law, Borrower waives the
benefit of all laws now existing or that hereafter may be enacted (i)
providing for a jury trial on any issues pertaining to the Loan Documents
or any liability of Borrower, or (ii) in any way extending the time for the
enforcement of the collection of Borrower's obligations under the Loan
Documents or creating or extending any period of redemption from any sale
made in connection with collecting on such obligations.
(l) Character of Obligations Hereunder. The obligations of the
Borrower under this Agreement are primary, absolute, independent,
irrevocable and unconditional. The Borrower understands and agrees that no
payment by it under any other agreement (whether voluntary or involuntary
or pursuant to court order or otherwise) shall constitute a defense to the
obligations under this Agreement.
22
<PAGE> 23
(m) Governing Law. This Agreement, and each of the Loan
Documents, shall be construed and interpreted in accordance with the laws
of the State of Michigan.
LASALLE NATIONAL BANK
Dated: 4 March, 1997 By /s/ David W. Edwards
-----------------------------------
David W. Edwards, Vice President
BANK
RIVIERA TOOL COMPANY
Dated: March 4, 1997 By /s/ Kenneth K. Rieth
------------------------------------
Kenneth K. Rieth, President
BORROWER
23
<PAGE> 24
EXHIBIT A
PERSONAL PROPERTY
The following property of the Debtor, whether now or
hereafter existing or acquired and wherever now or
hereafter located: All accounts, accounts receivable,
notes, contract rights, chattel paper, instruments,
documents, conditional sales contracts, goods,
including, without limitation, inventory and
equipment, furniture, general intangibles, jigs,
tools, dies, molds, acceptances, and all proceeds of
the foregoing.
<PAGE> 25
EXHIBIT B
PERMITTED LIENS
1. All purchase money security interests or lessor interests listed in
that UCC Form 11 Lien Search certified by the Michigan Secretary of State with
respect to the Borrower and its affiliates as of January 23, 1997, with the
exception of any security interests granted to NBD Bank or its predecessors in
interest.
2. All purchase money security interests or lessor interests listed in
that UCC search of the records of Kent County, Michigan with respect to the
Borrower or its affiliates performed by LEXIS Document Services as of January
30, 1997 with the exception of any security interests held by NBD Bank or its
predecessors in interest.
3. All liens for delinquent and currently due taxes and special
assessments, provided that Borrower provides evidence to the Bank within ten
(10) days after the date of closing, which is satisfactory in form and
substance to the Bank, that such obligations have been paid or otherwise
brought current, and that all liens levied in connection with those obligations
have been released or terminated.
4. Liens of NBD Bank in all claims against Durametallic Corporation, Fred
Borsini and Herb Keeler including as set out in Kent County Circuit Court Case
No. 94-2809-CZ, and all right, title and interest in and to Transamerica
Occidental Life Insurance Company Policy No. 92004017 dated June 3, 1985 in the
face amount of $1,000,000 on the life of Kenneth K. Rieth, as described in the
Forbearance Agreement.
<PAGE> 26
EXHIBIT C
The following Michigan Single Business Taxes are outstanding, as of
the date of this agreement:
<TABLE>
<CAPTION>
Tax year Fiscal Year Taxes Due Penalties & Interest
- -------- ----------- --------- --------------------
<S> <C> <C> <C>
1995 8/31/96 $173,700
1994 8/31/95 $139,557 $25,717
1993 8/31/94
</TABLE>
26
<PAGE> 27
EXHIBIT 10(i)
TERM LOAN NOTE
$1,900,000 Chicago, Illinois
March 7, 1997
FOR VALUE RECEIVED, the undersigned, RIVIERA TOOL COMPANY, a Michigan
corporation, ("Borrower") promises to pay to the order of LASALLE NATIONAL BANK,
a national banking association, ("Bank") at its 135 S. LaSalle Street, Chicago,
Illinois office, or at such other place as the holder hereof may designate in
writing, the sum of One Million Nine Hundred Thousand Dollars ($1,900,000), or
such amount as may be advanced from time to time, together with interest
calculated from today's date on the unpaid balance at an annual rate equal to
the Interest Rate. The "Interest Rate" shall be the Bank Prime Rate plus one
percent (1%) or the yield on U.S. Treasury Notes maturing five (5) years from
and after the date of this Note, as selected by the Borrower as of the date of
this Note. If Borrower fails to select the applicable rate to date of this
Note, the Interest Rate shall automatically default to the Bank Prime Rate plus
one percent (1%). If the Interest Rate is bound upon the Bank Prime Rate, the
Interest Rate shall change simultaneously with any change in the Bank Prime
Rate. After maturity (whether at the Stated Maturity Date defined below, by
acceleration or otherwise) or during any period that an Event of Default
(defined in Section 3 (B) below) remains uncured, interest shall accrue on the
outstanding principal balance of this Note at two percent (2%) above the
interest rate described above until this Note is paid in full. Interest shall be
computed for the actual number of days elapsed on the basis of a 360 day year.
If at any time the interest rate payable under this Note exceeds the maximum
legal rate applicable, the interest rate payable shall be reduced to that
maximum legal rate. Capitalized terms not otherwise defined herein shall be
defined as provided in that Loan Agreement of even date herewith between
Borrower and Bank ("Loan Agreement").
1. Payment of Principal and Interest.
A. Monthly Payments. On April 7, 1997, and continuing on the
same day of each month thereafter, Borrower shall pay a monthly payment
consisting of principal in the amount of Thirty-one Thousand Six Hundred
Sixty-six and 67/100 Dollars ($31,666.67), plus interest accrued on the
outstanding principal balance of this Note. The monthly principal and
interest payment shall be adjusted simultaneously with any change in the
Interest Rate.
B. Maturity. Notwithstanding anything contained herein to the
contrary, the entire balance of principal and interest owed under this Note
shall be paid in full on March 7, 2002 (the "Stated Maturity Date").
C. Prepayment. The indebtedness evidenced by this Note may be
prepaid by Borrower at any time, in whole or in part, without premium or
penalty.
D. Late Payment Penalty. If Borrower fails to make any payment
required under this Note within ten (10) days of the time the payment has
become due, Borrower shall pay a late payment penalty equal to five percent
(5%) of the payment due.
<PAGE> 28
2. Security. Repayment of this Note is secured by a Security
Agreement of even date from Borrower to Bank.
3. Default.
A. Event of Default. For purposes of this Note, an "Event of
Default" will be deemed to have occurred if Borrower has failed to make any
payment required under this Note within ten (10) days of when due; or has
failed to make any payment of any other indebtedness owed to the Bank by
Borrower within ten (10) days of when and as the same has become due; or
upon the occurrence of an Event of Default (as defined in the Loan
Agreement); or any default under any collateral security document executed
and delivered in connection with this Note or the Loan Agreement.
B. Consequences of Event of Default. Upon occurrence of an Event
of Default, the entire unpaid balance of this Note and all amounts owed
pursuant to the Loan Agreement and any other agreements between the
parties, together with all accrued but unpaid interest, shall at the option
of the holder of this Note immediately become due and payable, and the
holder will be entitled to all other remedies available under applicable
law, including the Uniform Commercial Code.
4. Cancellation. After all principal and interest owed on this Note
has been paid in full, this Note will be canceled and surrendered.
5. Applicable Law. The terms of this Note shall be governed by
Michigan law.
6. Severability. If any term in this Note is invalid or
unenforceable in any respect, that term shall nevertheless be enforced to the
maximum extent permitted by law. The invalidity or unenforceability shall not
affect the validity or enforceability of any remaining term in this Note.
7. Effect of Delay. No delay or omission on the part of the holder
of this Note in exercising any right under this Note shall operate as a waiver
of that right or of any other right or remedy under this Note. A waiver at any
time shall not be construed as a bar to or waiver of any right or remedy at any
future time.
8. Waiver of Presentment, Protest and Notice. Borrower waives
presentment for payment, protest and notice of non-payment.
9. Costs of Collection. Borrower shall pay all expenses and costs
of collection, including, but not limited to, reasonable attorney fees.
2
<PAGE> 29
10. Successors. This Note shall be binding on the Borrower and its
successors, and shall inure to the benefit of the Bank, its successors and
assigns. Any reference to Bank herein shall include any holder of this Note.
RIVIERA TOOL COMPANY
Dated: March 7, 1997 By_________________________________
Kenneth K. Rieth, President
3
<PAGE> 30
EXHIBIT 10(i)
REVOLVING LOAN NOTE
Chicago, Illinois
$8,000,000 ______________, 1997
On December 1, 1998, RIVIERA TOOL COMPANY (herein termed "Borrower"),
for value received, promises to pay to the order of LASALLE NATIONAL BANK
(herein termed "Bank") at its offices at 135 S. LaSalle Street, Chicago,
Illinois, the principal sum of EIGHT MILLION DOLLARS ($8,000,000), or such other
amount as is reflected upon the books and records of the Bank, with interest
thereon until paid, plus all of the Bank's expenses (including reasonable
attorney's fees and court costs) incurred in the enforcement and collection of
this Note. Capitalized terms not otherwise defined in this Note shall be
defined as provided in that Loan Agreement of even date herewith between
Borrower and Bank ("Loan Agreement").
From the date of this Note through February 28, 1998, Borrower agrees
to pay interest on the outstanding principal balance of this Note at a rate
equal to Bank Prime Rate plus one percent (1%) or the LIBOR Rate plus three
percent (3%) as determined by Borrower as of the date of this Note. Beginning
March 1, 1998 and continuing until maturity (whether as the State Maturity Date,
upon acceleration or otherwise), interest shall accrue on the outstanding
principal balance of this Note at a rate selected by Borrower and Bank on March
1, 1998 from the following optional rates, which are available depending upon
the total EBIT as measured for the 6 month period ending on that date.
<TABLE>
<CAPTION>
EBIT Bank Prime Rate Option LIBOR Rate Option
- ---- ----------------------- ------------------
<S> <C> <C>
Less than or equal to $500,000 Bank Prime Rate plus 1% LIBOR Rate plus 3%
Greater than $500,000 but less
than $1,500,000 Bank Prime Rate plus .375% LIBOR Rate plus 2.5%
Greater than or equal to
$1,500,000 Bank Prime Rate minus .25% LIBOR Rate plus 2%
</TABLE>
If Borrower fails to exercise its right to select from among the
available interest rate options as of the date of this Note or on March 1, 1998,
then the interest rate shall default to the applicable rate based upon the Bank
Prime Rate. If the rate of interest applicable to this Note is based upon the
Bank Prime Rate, such rate shall change simultaneously with changes in the Bank
Prime Rate.
Interest shall be payable on the 1st day of each month during the term
of this Note unless the interest rate applicable to this Note is based upon the
LIBOR Rate, in which case, interest shall be due and payable on the last day of
the LIBOR Interest Period. Interest shall be computed for the actual number of
days elapsed on the basis of a year consisting of 360 days. Interest hereunder
shall begin to accrue on the date of the first advance made by the Bank.
Interest on all advances shall be computed from the respective dates thereof
until the same are paid in full. The principal payable hereunder at any given
date shall be equivalent to all advances made by the Bank to or at the request
of the Borrower as of that date less principal payments previously received by
the Bank. Advances hereunder shall at all times be made at the sole discretion
of the Bank, and Bank shall not have any obligation whatsoever to make any such
advances.
<PAGE> 31
At the Bank's option, upon occurrence of a default under this Note or
any other agreement with the Bank, the Borrower shall pay interest on the unpaid
principal balance of this Note at the then applicable rate of interest plus two
percent (2%) per annum effective from and after the date of occurrence of the
default which is not cured or waived within the appropriate grace period, if
any.
Notwithstanding any provision of this Note to the contrary, all
accrued interest and outstanding principal shall become due and owing on
December 1, 1998.
Borrower does hereby pledge to the Bank all deposits and other
property of Borrower now or hereafter in the possession, custody or control of
Bank for any purpose, and does hereby grant to Bank as security for the Note the
following:
A. The Collateral described in the Security Agreement of even
date from the Borrower to the Bank; and
B. Limited unconditional personal guaranty of Kenneth K. Rieth
as described in the Loan Agreement, of even date.
as well as any other security agreement, mortgage, document or loan agreement
executed at any time by the Borrower and delivered to the Bank (herein
collectively termed "Collateral") as security for the payment of this Note and
for the payment of all other liabilities, whether direct or indirect, absolute
or contingent, now or hereafter existing, due to become due, several or
otherwise, of the Borrower to the Bank (herein termed "Indebtedness").
Collateral securing other obligations of Borrower to Bank may also secure this
Note. The surrender of this Note upon payment or otherwise shall not affect
the right of Bank to retain the Collateral as security for any Indebtedness.
Upon default in payment of this Note, or default in payment of any
Indebtedness of the Borrower to Bank, or if there is a default under any
security agreement, mortgage, loan agreement or document given in connection
with the Collateral, or if the security afforded by the Collateral at any time
in the sole opinion of the Bank becomes insufficient, or if any material
representation made by the Borrower to Bank for the purpose of obtaining credit
appears to the Bank to be untrue, or the commencement of a case under any
federal or state bankruptcy or insolvency law by or against the Borrower or any
guarantor of the Note, or Borrower or any guarantor of the Note fails generally
to pay its debts as such debts become due, or if proceedings are taken to
attach, garnishee or levy on any deposits, credits, funds or other property of
the Borrower or any guarantor of the Note, or the Borrower or any guarantor of
the Note fails to notify the Bank of any material adverse change in its
financial status, this Note and all Indebtedness shall, at the option of the
Bank, become immediately due and payable in full without notice, presentation or
demand for payment, all such being hereby waived by the Borrower and in such
event, it is agreed that the Bank may exercise all rights and remedies available
to it under any security agreement, mortgage, loan agreement or document
relating to or otherwise securing any of the Indebtedness, or which may be
available to Bank under the Uniform Commercial Code as in effect in the State of
Michigan or other applicable law. Delay or forbearance by the Bank in the
exercise of any right granted hereunder shall not operate as a waiver thereof.
2
<PAGE> 32
All loan advances to the Borrower shall be evidenced by this Note. A
separate note will not be required of the Borrower upon each advance; rather the
Bank shall establish a "Loan Account" for the Borrower upon the records of Bank
on which will be recorded as debits loan advances to the Borrower and as credits
all payments made by the Borrower on this Note. Records prepared by the Bank in
the ordinary course of business shall be evidence of the dates and amounts of
disbursements, payments, interest rates and applicable effective dates thereof.
Loan advances to the Borrower may be made by the Bank upon the written
request of those officers or agent of the Borrower duly authorized by
appropriate resolution or partnership agreement of the Borrower on file with the
Bank. Loan advances shall be made in the Bank's discretion pursuant to the
advance formula and subject to the restrictions contained in Section 3 of the
Loan Agreement. The Bank is also authorized and directed to accept telephonic
instructions to make further advances for credit to the Borrower's checking
account.
It is agreed that the Bank shall have the right at all times to hold
or apply its own indebtedness or liability to the Borrower as security for, or
in payment of, this Note either before or after its maturity, or in payment of
the Indebtedness. This Note shall be governed by the laws of the State of
Michigan.
If more than one party shall execute this Note the term "Borrower" as
used herein shall mean all parties signing this Note whether as maker or
endorser and each of them, and all such parties shall be jointly and severally
obligated hereunder. The Borrower hereby waives presentment, demand, protest
and notice of dishonor and agrees that each Borrower, if more than one, shall
not be released or discharged by reason of any extension, indulgence or release
given to any person, or by the Bank's release, sale or non-action with respect
to the Collateral or any guaranty or other undertaking securing this Note. If
this Note is not dated when executed by the Borrower, Bank is hereby authorized,
without notice to the Borrower to date this Note as of the date when the
principal balance hereunder has been advanced to the Borrower in whole or in
part. Borrower acknowledges receipt of a fully completed copy of this Note.
ADDRESS: BORROWER:
5460 Executive Parkway, SE RIVIERA TOOL COMPANY
Grand Rapids, Michigan 49512
By_____________________________
Kenneth K. Rieth, President
3
<PAGE> 33
EXHIBIT 10(i)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made this 4th day of March, 1997, between
RIVIERA TOOL COMPANY, a Michigan corporation, of 5460 Executive Parkway, S.E.,
Grand Rapids, Michigan 49512, as Debtor (the "Debtor") and LASALLE NATIONAL
BANK, a national banking association of 135 S. LaSalle Street, Chicago, Illinois
60603, as Secured Party (the "Secured Party").
Preliminary Statement
The Debtor and the Secured Party have entered into a Loan Agreement
dated March 4, 1997 (the "Loan Agreement"). Pursuant to the Loan Agreement, the
Debtor has agreed to borrow, and the Secured Party has agreed to loan, up to
$8,000,000 in the form of a line of credit, and up to $1,900,000 in the form of
a term loan (the "Indebtedness"). To secure the Indebtedness, the Debtor has
agreed to create a security interest in the personal property described in this
Agreement. Accordingly, this Agreement is being entered into in order to
effectuate the creation of the security interest to the Secured Party as agreed
upon in the Loan Agreement.
SECTION 1. CREATION OF SECURITY INTEREST.
1.1. Collateral. Pursuant to the facts set forth in the Preliminary
Statement and in consideration of the mutual promises of the parties, the Debtor
creates a security interest in favor of the Secured Party, its successors and
assigns, in the following described properties,
<PAGE> 34
whether now owned or subsequently acquired and wherever now or hereafter
located (subsequently referred to collectively as the "Collateral"):
All accounts, accounts receivable, notes, contract rights, chattel
paper, instruments, documents, conditional sales contracts, goods,
including, without limitation, inventory and equipment, furniture,
general intangibles, jigs, tools, dies, molds, acceptances, and all
proceeds of any of the foregoing.
1.2. Indebtedness Secured. This Agreement secures the Indebtedness
due and owing by the Debtor to the Secured Party pursuant to the Loan Agreement.
This Agreement further secures all other amounts due and owing by the Debtor to
the Secured Party pursuant to this Agreement, including without limitation, any
amounts advanced by the Secured Party on behalf of the Debtor pursuant to this
Agreement.
SECTION 2. COVENANTS AND AGREEMENTS OF DEBTOR.
2.1. Corporate Existence and Authority. The Debtor is duly qualified
and in good standing in the State of Michigan and in every other state in which
it is doing business. It is duly authorized to execute and deliver this
Agreement. None of the provisions of this Agreement violate or are in conflict
with any provisions of the Articles of Incorporation, Bylaws or any existing
agreement, court order or consent decree to which the Debtor is a party or may
be bound. The Debtor has taken all necessary action to authorize the granting
of the security interest pursuant to this Agreement and the delivery of any
instruments as may be required under this Agreement.
2
<PAGE> 35
2.2. Payment of Indebtedness. The Debtor will pay the Indebtedness
secured by this Agreement as and when it becomes due and payable in accordance
with the terms of the Loan Agreement and this Agreement.
2.3. Place of Business. Except as permitted with the prior written
consent of the Secured Party, the Collateral will be kept at 5460 Executive
Parkway, S.E., Grand Rapids, Michigan (the "Premises"). The Debtor will not
remove the Collateral from the Premises without the prior written consent of the
Secured Party, except in the ordinary course of Debtor's business. The chief
executive office and the principal place of business of the Debtor are at the
address listed above. The Debtor will immediately give written notice to the
Secured Party of any change in its chief executive office or principal place of
business.
2.4. No Liens or Financing Statements. The Debtor has, or will
acquire, full and clear right, title and interest to the Collateral and will at
all times keep the Collateral free from any adverse lien, security interest or
encumbrance other than Permitted Encumbrances. No financing statements covering
all or any portion of the Collateral is on file in any public office, except
with respect to Permitted Encumbrances. For purposes of this Agreement,
"Permitted Encumbrances" shall be defined as provided in the Loan Agreement.
2.5. Filing; Further Assurances. The Debtor authorizes the Secured
Party at the expense of the Debtor to execute and file a financing statement or
statements on its behalf in those public offices deemed necessary or proper by
the Secured Party to protect its security interest granted by this Agreement.
In addition, the Debtor will deliver or cause to be delivered such other
documents as the Secured Party may reasonably request to secure the
indebtedness,
3
<PAGE> 36
obligations and liabilities referred to in this Agreement including, without
limitation, any continuation statements.
2.6. No Transfer of Collateral. The Debtor will not sell or offer to
sell or otherwise transfer all or any part of the Collateral, except in the
ordinary course of Debtor's business, without the prior written consent of the
Secured Party.
2.7. Insurance. The Debtor will keep the Collateral insured against
such risks in such form and in such amounts as may be required by the Secured
Party and will pay when due all premiums on that insurance.
2.8. Books and Records; Inspection Rights. The Debtor will at all
times maintain accurate and complete books and records with respect to the
Collateral. The Secured Party may inspect, audit and make copies of those books
and records and any other data relating to the Collateral, at such times and
places as the Secured Party shall determine. In addition, the Secured Party may
inspect the Collateral at such times and places as the Secured Party shall
determine, and for that purpose may enter upon or into the Premises.
SECTION 3. POSSESSION, USE AND RELEASE OF COLLATERAL.
3.1. Possession and Use. So long as the Debtor is not in default
under this Agreement, it may use, possess, and deal with the Collateral in the
ordinary course of Debtor's business. The Debtor's use and possession is,
however, subject to the observance and performance of the terms and conditions
of this Agreement.
3.2. Release of Security Interest. When all of the indebtedness
secured by this Agreement has been fully paid and all other obligations of the
Debtor under this Agreement have
4
<PAGE> 37
been fully performed, then this Agreement shall terminate. At the request of
the Debtor, the Secured Party will execute and deliver to the Debtor such
instruments as shall be necessary or proper to release and discharge the
security interest of this Agreement.
SECTION 4. EVENTS OF DEFAULT AND REMEDIES.
4.1. Events of Default. Any of the following events shall, for
purposes of this Agreement, constitute an "event of default":
(a) Failure by the Debtor to fully pay any installment of
the principal of or interest on the indebtedness secured by this Agreement
when due (whether upon maturity, acceleration or otherwise).
(b) Failure by the Debtor to perform or observe any
covenant, agreement or condition to be observed or performed by the Debtor
under this Agreement or the Loan Agreement.
(c) Insolvency of the Debtor or the admission in writing of
its inability to pay its debts as they mature, or any assignment for the
benefit of its creditors.
(d) Institution of bankruptcy, reorganization, arrangement,
insolvency or other similar proceedings by or against the Debtor; or the
occurrence of an involuntary transfer of the Debtor's interest in the
Collateral or of all or substantially all of the Debtor's property by
bankruptcy or by the appointment of a receiver or trustee or by execution
or otherwise.
4.2. Remedies Upon Default. Upon the occurrence of any event of
default, the Secured Party shall have the rights, options, duties and remedies
of a secured party, and the
5
<PAGE> 38
Debtor shall have the rights and duties of a debtor, under the Michigan Uniform
Commercial Code. In addition, upon the occurrence of an event of default, the
Secured Party may exercise any one or more of the following remedies:
(a) Declare the entire indebtedness secured by this
Agreement and then remaining unpaid, immediately due and payable. Demand
for possession, or seizure of any part, of the Collateral covered by this
Agreement shall be considered sufficient notice of intention to declare
that indebtedness due.
(b) Enter upon the premises of the Debtor, or any place or
places where any of the Collateral covered by this Agreement is situated,
and take possession of it, if this can be done without breach of the peace,
and hold it at the place of business of the Secured Party. Alternatively,
the Secured Party may remove the Collateral to such other place or places
within the State of Michigan, as it may deem desirable, and keep the
Collateral at that place for such time as the Secured Party shall
determine, at the risk and expense of the Debtor. The Secured Party may
then sell the Collateral either at private or public sale, in bulk or in
parcels, giving such notices as may be required by the Uniform Commercial
Code in force in the State of Michigan. Any sale of the Collateral must be
in a commercially reasonable manner. Out of the monies arising from that
sale, the Secured Party shall pay the expenses of seizure, holding and
removal, and sale, including, actual attorney fees. If the proceeds from
that sale are not sufficient to defray such expenses and to satisfy the
entire indebtedness secured by this Agreement, the Debtor shall pay, and
the Secured Party may recover, the deficiency, with interest. The Secured
Party agrees to pay all surplus proceeds from that sale, over and above the
6
<PAGE> 39
unpaid indebtedness and the expenses described above, to Debtor or to such
other party as may be legally entitled to receive it.
(c) Require the Debtor to assemble the Collateral and make
it available at a place the Secured Party designates which is mutually
convenient, to allow the Secured Party to take possession or dispose of the
Collateral.
4.3. Remedies Generally. All remedies provided for in Section 4.2
shall be available to the extent not prohibited by law. No remedy conferred
upon the Secured Party by this Agreement is an exclusive remedy. Each remedy
shall be cumulative and additional to any other remedy of the Secured Party at
law, in equity or by statute. No delay or omission to exercise any right or
power accruing upon any default or event of default shall impair any such right
or power or shall be construed to be a waiver of, or acquiescence in, any such
default or event of default.
The Secured Party may waive any event of default and may rescind any
declaration of maturity of payments on the indebtedness secured by this
Agreement. In case of such waiver or rescission the Debtor and the Secured
Party shall be restored to their respective former positions and rights under
this Agreement. Any waiver by the Secured Party of any default or event of
default shall be limited to the particular default waived in a written
instrument signed by the Secured Party and shall not be deemed to waive any
other default.
SECTION 5. MISCELLANEOUS.
5.1. Governing Law. This Agreement shall be governed in all respects
by Michigan law.
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<PAGE> 40
5.2. Binding Effect. This Agreement shall be binding on, and inure
to the benefit of, the parties to this Agreement and their respective successors
and assigns.
5.3. Advances by Secured Party. If the Debtor shall fail to pay any
taxes, assessments or other governmental charges assessed against the Collateral
or any premiums for insurance policies required by this Agreement, the Secured
Party may advance its own funds on behalf of the Debtor to pay those amounts.
However, the Secured Party shall not be obligated to pay those amounts.
Any amounts advanced by the Secured Party shall bear interest at a
rate of twelve percent (l2%) per annum. Any amounts advanced by the Secured
Party, together with accrued interest, shall be added to the indebtedness
secured by this Agreement.
5.4. Notices. All notices shall be in writing and shall be deemed
given when personally delivered or when deposited in the United States mail or
other comparable mail service, postage prepaid, addressed to the party at its
address set forth above.
5.5. Severability. The unenforceability of any term of this
Agreement shall not affect the enforceability of any of the remaining terms of
this Agreement.
5.6. Entire Agreement and Amendment. This Agreement and any
agreement to which it refers contain all the terms of the agreement between the
parties with respect to their subject matter and may be amended only by a
writing signed by the Debtor and the Secured Party.
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<PAGE> 41
5.7 Assignment. Secured Party may assign its rights in the Loan
Agreement and this Agreement without Debtor's consent and without affecting
Secured Party's rights under this Agreement as provided in the Loan Agreement.
IN WITNESS OF WHICH, Debtor and Secured Party have executed this
Agreement.
LaSalle National Bank Riviera Tool Company
By /s/ David W. Edwards By /s/ Kenneth K. Rieth
-------------------------- ---------------------------
David W. Edwards Kenneth K. Rieth
Its Vice President Its President
SECURED PARTY DEBTOR
9
<PAGE> 1
EXHIBIT 10(j)
[NBD LOGO] ASSIGNMENT OF POLICY AS COLLATERAL SECURITY
FOR VALUE RECEIVED, the undersigned ("Assignor") assigns and transfers all its
rights, title and interest in and to Policy Number 92004017 issued by
Transamerica Occidental Life Insurance Company ("Insurance Company"), on the
life of Kenneth K. Rieth to NBD BANK, of 611 Woodward Avenue, Detroit, Michigan
48226, its successors and assigns ("Bank"), together with all rights to all
unearned pre-paid premiums, subject however to all the terms and conditions of
the policy and to all liens, if any, which the Insurance Company may have
against the policy.
It is expressly agreed that without detracting from the generality of the
foregoing, the following rights and privileges are included in this assignment:
(1) The sole right to collect from the Insurance Company the net proceeds of
the policy when it becomes a claim by death or maturity, and to collect
any Disability Income, unless this right is waived by the Bank in writing.
(2) The sole right to surrender the policy and to receive its surrender value
at any time that the surrender value is available, without notice to or
assent by the insured, the beneficiary or the owner.
(3) The sole right, without notice to or assent by the insured, the
beneficiary or the owner, to secure a loan or loans on the policy for any
purpose whatsoever and to pledge the policy as security for that loan.
(4) The sole right to collect and to receive all distributions, shares of
surplus, dividend deposits or additions to the policy now or hereafter
made or apportioned to it, if any, and to determine whether the cash value
of any distributions, shares of surplus, dividend deposits, or additions
that may be used in accordance with the terms of the policy in the payment
of premiums shall be so used or shall be taken by the assignee in cash;
provided, that unless and until the Bank shall notify the Insurance Company
in writing to the contrary, the distributions, shares of surplus, dividend
deposits, or additions shall continue on the plan in force at the time of
this assignment.
(5) The sole right to exercise all nonforfeiture options permitted by the
terms of the policy and to receive all benefits and advantages derived from
those options. Then Bank shall not have the right to elect installment
options or to change the beneficiary even though that right to change has
been reserved in the policy. The right, if any, to change the beneficiary
from time to time, subject always to this assignment, being reserved to the
person or persons having such right under the terms of the policy.
This assignment is made and the policy is to be held as collateral security
for all present and future direct or indirect liabilities of the undersigned and
Kenneth K. Rieth or any of them to the Bank, and any balance that may remain
with the Bank after payment of those liabilities shall be paid to the persons
entitled to it under the terms of the policy.
The sole receipt of the Bank for any amount payable under the policy and
received by it shall be a full discharge and release of the Insurance Company,
and the Insurance Company shall not be bound in any way to see to the
application of the proceeds of the policy by the Bank.
If it should appear that this assignment is made upon any trust, the
Insurance Company shall not be liable to see to the application of any payment
and may rely upon the sole signature of the Bank to any receipt, release, or
waiver, or to any transfer or other instrument, purporting to affect this
assignment or any rights under this assignment.
The undersigned agree that without notice to either or any of them and
without affecting the liability of either or any of them under this assignment,
the Bank may apply the proceeds of the assigned policy to the liabilities for
which this assignment is given as security without first resorting to other
collateral; may take or release other security and may grant extensions,
renewals and indulgences with respect to those liabilities; and may release any
party primarily or secondarily liable for any liability secured by this
assignment.
No proceedings in bankruptcy are pending against the undersigned or any of
them.
WAIVER OF JURY TRIAL. The Bank and the undersigned, after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this agreement or any related
instruments or agreement, or any of the transactions contemplated by this
agreement or any related instrument or agreement, or any course of conduct,
dealing, statements (whether oral or written), or actions of either of them.
Neither the Bank nor the undersigned shall seek to consolidate, by counterclaim
or otherwise, any action in which a jury trial cannot be or has not been waived.
These provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the undersigned except by written instrument
executed by both of them.
Executed on March 3, 1997.
[SIG] Kenneth K. Rieth, President
- ----------------------------- ---------------------------------
Witness Owner: Riviera Tool Company*
[SIG] Kenneth K. Rieth, President
- ----------------------------- ---------------------------------
Witness Beneficiary: Riviera Tool Company*
[SIG] Kenneth K. Rieth,
- ----------------------------- ---------------------------------
Witness Insured: Kenneth K. Rieth
*Successor by merger to the
interests of Riviera Die & Tool
Company, formerly known as
R.D.T. Inc.,
<PAGE> 2
INDIVIDUAL ACKNOWLEDGMENTS
State of Michigan
County of Wayne
The assignment on the reverse was acknowledged before me on March 3, 1997 by
Kenneth K. Rieth (and) ____________________________.
My Commission expires July 18, 2001 Ruby M. Edison
---------------------------
Notary Public, Wayne County, MI
CORPORATE ACKNOWLEDGMENT
State of Michigan
County of Wayne
The assignment on the reverse was acknowledged before me on March 3, 1997,
by Kenneth K. Rieth, (and) ___________________________,
the President (and) ___________________________ (respectively) of
Riviera Tool Company, a Michigan corporation, on behalf of the corporation.
My commission expires July 18, 2001 Ruben M. Edison
-------------------------------
Notary Public, Wayne County, MI
ACKNOWLEDGMENT BY INSURANCE COMPANY
Received and duplicate filed at the home office of the Insurance Company in
______________________________________,on ___________________________, 19___.
________________________________
Name of Insurance Company
By _____________________________
Authorized Official
DISCHARGE OF ASSIGNMENT
In consideration of full payment, receipt of which is acknowledged, and of
other valuable consideration, the undersigned release all right, title and
interest in and under the assignment on the reverse of this sheet and in and
to the policy assigned, and the assignment is fully discharged.
Executed at Detroit, Michigan on _____________________________________, 19____.
NBD BANK
By ___________________________
Vice President
State of Michigan
County of ________
The foregoing Discharge of Assignment was acknowledged before
me on ________________________________, 19__,
by ________________________________________, the Vice President of NBD Bank.
My Commission expires ___________, 19___ ____________________________________
Notary Public, __________ County, MI
<PAGE> 1
EXHIBIT 10(k)
ASSIGNMENT OF CLAIM
THIS ASSIGNMENT ("ASSIGNMENT") is made effective as of March 3, 1997,
by Kenneth K. Rieth ("Rieth"), Arlene Rieth Morris ("Morris"), Riviera Holding
Company, a Michigan corporation ("Holding") and Riviera Tool Company, a Michigan
corporation, successor by merger to the interests of Riviera Die & Tool, Inc.
("Riviera", and together with Rieth, Morris and Holding, collectively
"Assignors"), in favor of NBD Bank whose address is 701 Woodward Avenue,
Detroit, Michigan 48226 ("Assignee").
RECITALS
A. New Leap Corporation, Leap Technologies, Inc. and Riviera Plastic
Company ("Debtors") are currently indebted to Assignee in the amount of
$1,964,642.54 plus interest accruing from and after February 26, 1997 together
with all costs and expenses (including attorney fees), and all other present
and future obligations of Debtors to Assignee, direct or indirect, of every
kind or nature (the "New Leap Obligations").
B. To secure the New Leap Obligations, Rieth pledged 100% of the stock
of Holdings and Holdings pledged 50% of the stock of Riviera (the "Pledges").
C. Riviera has advised NBD that it intends to make an Initial Public
Offering of approximately 1,100,000 shares of the stock of Riviera (the "IPO")
to substantially improve the capital structure of Riviera. In addition,
Riviera has received a commitment from LaSalle National Bank ("LaSalle") to
provide certain financing to replace the current financing provided by
Assignee to Riviera which, together with the proceeds of the IPO, will be used
to pay all of Riviera's obligations to Assignee in full.
D. Rieth, Morris, Holding and Riviera have represented to Assignee
that the IPO and refinancing by LaSalle are in the best interest of Assignors
and that Assignee must release the Pledges for the IPO to proceed and the
replacement financing from LaSalle to close.
E. In consideration for Assignee's release of the Pledges, Assignors
have, among other things, proposed to assign all of their right, title and
interest in and to all proceeds of the Claim (as hereinafter defined) against
Durametallic Corporation, Fred H. Borsini and Herbert Keeler.
F. Assignors represent and warrant to Assignee that they will receive
direct and substantial economic benefit from the IPO, the refinancing by
LaSalle, the release of the Pledges and the execution of a certain Settlement
and Forbearance Agreement dated February 26, 1997 among Rieth, Holding and
Assignee (the "Forbearance Agreement").
G. As a result of this Assignment, the Claim will secure the
obligations of Rieth under the Forbearance Agreement, the Rieth Note and the
Rieth Guaranty (as defined in the Forbearance Agreement) and related documents
executed in connection with the Forbearance Agreement.
<PAGE> 2
Based on the foregoing recitals (which are incorporated in this Agreement
and shall constitute representations, warranties and covenants of the
Assignors), and for other good and valuable considerations, the parties hereto
agree as follows:
AGREEMENT
1. Assignment. Assignors, jointly and severally, hereby assign and grant
Assignee a continuing security interest in all of each Assignors right, title
and interest in and to all proceeds (including, but not limited to, a money
judgment or other monetary award and other tangible property) of any and all
claims, whether now existing or hereafter arising, that any of them may have
against Durametallic Corporation, Fred H. Borsini and Herbert Keeler including,
but not limited to, any proceeds pursuant to settlement, judgement or otherwise
resulting from Kent County Circuit Court Case No. 94-2809-CZ, Kenneth K. Rieth,
Arlene Morris, Riviera Holding Company and Riviera Die & Tool, Inc. (now know
as Riviera Tool Company), Durametallic Corporation, Fred H. Borsini and Herbert
Keeler (the "Claim"), to secure payment of the Rieth Guaranty and the Rieth
Note (as defined in the Forbearance Agreement).
2. Consultation and Consent of Assignee. Assignors have agreed to advise
Assignee regarding all offers of settlement or compromise of the Claim.
Assignors further agree not to settle and/or compromise the Claim without the
prior written consent of Assignee. Assignors will at all times take any and
all steps necessary to pursue the Claim to its conclusion, to pay all costs
associated with realizing upon the Claim, to provide any and all support,
documents information, consultation and testimony necessary to fully and
completely pursue the Claim to its conclusion including any post-judgment
collection and appellate efforts and to at all times preserve their rights in
and to the same and all of the benefits, privileges and distributions related
thereto.
3. Additional Documentation. Assignors shall execute and deliver all such
documents and agreements and to undertake all acts required by Assignee to
achieve the intents and purposes of this Assignment.
4. Additional Representations. Assignors or any one or more of them has not
assigned all or any portion of the Claim to any other person or entity and
their respective rights in and to the Claim are free and clear of any lien,
encumbrance or security interest of any kind or nature. Further, Assignors or
any one or more of them shall not assign or pledge or grant any lien,
encumbrance or security interest in the Claim to any other person or entity.
5. Reports. Assignors shall provide, or cause to be provided by counsel to
Assignors, Assignee with a detailed written report of the status of the Claim
on the first day of each month commencing March 1, 1997. Additionally,
Assignors shall promptly report any and all pending dates in any litigation
related to the Claim and of any material events or occurrences related
thereto. Assignee shall be permitted to discuss with and seek written
information from Assignors' counsel at any time and Assignors' counsel is
hereby authorized to provide any information so requested by Assignee.
2
<PAGE> 3
6. Payment of Proceeds. Until the Rieth Guaranty is paid, satisfied
and/or performed in full, all amounts due or payable to Assignors on the Claim
shall be paid to Assignee, net only of the fees to be paid to their counsel
Dickinson, Wright, Moon, Van Dusen & Freeman in accordance with the terms of a
letter agreement dated June 4, 1994 (the "Dickinson Fees") but not net of the
tax consequences of the outcome of such litigation (the "Net Proceeds"). Prior
to payment of the Dickinson Fees, Assignors shall provide Assignee with a
detailed written breakdown of any proposed payment of the Dickinson Fees for
approval. Further, Assignors may not change the Dickinson Fees without the
prior written consent of Assignee. Assignee shall have the right to receive
any and all Net Proceeds. Additionally, the defendants are authorized,
permitted and directed to make any payment of Net Proceeds directly to Assignee.
7. Cumulative Rights. The rights and remedies of Assignee under this
Assignment are cumulative and are not in lieu of, but in addition to, any other
rights and remedies Assignee shall have under this agreement, the Forbearance
Agreement or applicable law. No change, amendment, modification, cancellation
or discharge hereof, or any party hereto, shall be valid unless consented to in
writing by Assignors and Assignee.
8. Continuing Obligations of Assignors. Nothing contained herein shall be
construed to bind or obligate Assignee to undertake any direct efforts, incur
any costs or take responsibility for enforcement of the Claim or pursuit of the
litigation. Assignors agree to remain responsible for and shall take any and
all steps necessary to pursue the Claim to its conclusion.
9. Applicable Law. This assignment shall be governed by the laws of
Michigan. If any provision of this assignment shall be unenforceable, this
assignment shall be enforceable as if such provision was not contained
herein. This assignment shall inure to the benefit of and shall be binding
upon the respected successors and assigns of the parties hereto.
10. WAIVER OF JURY TRIAL AND BOND; SUBMISSION TO JURISDICTION; AND
ACKNOWLEDGEMENT.
A. ANY JUDICIAL PROCEEDINGS ARISING FROM OR RELATING TO THIS
ASSIGNMENT, THE FORBEARANCE AGREEMENT OR ANY OTHER FUTURE AGREEMENT BETWEEN ANY
ONE OR MORE OF THE ASSIGNORS AND ASSIGNEE MAY BE BROUGHT BY ASSIGNEE IN A COURT
OF COMPETENT JURISDICTION OF THE STATE OF MICHIGAN OR THE UNITED STATES OF
AMERICA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH ASSIGNOR AND
ASSIGNEE ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR RESPECTIVE
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION, OF
THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS ASSIGNMENT, THE FORBEARANCE AGREEMENT
OR ANY OTHER PRESENT OR FUTURE AGREEMENT BETWEEN ANY ONE OR MORE OF THE
ASSIGNORS AND ASSIGNEE. EACH ASSIGNOR WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON THEM, AND
3
<PAGE> 4
CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY MAIL OR MESSENGER
DIRECTED TO THEM AT THEIR ADDRESS SET FORTH IN THIS ASSIGNMENT. EACH OF THE
ASSIGNORS WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND OR SURETY WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ASSIGNEE. NOTHING CONTAINED IN THIS
SECTION AFFECTS ASSIGNEE'S RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECTS ASSIGNEE'S RIGHT TO BRING ANY ACTION OR PROCEEDING
AGAINST ANY ONE OR MORE OF THE ASSIGNORS IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY ASSIGNOR AGAINST ASSIGNEE
INVOLVING, DIRECTLY OR INDIRECTLY, ANY CLAIM OR MATTER IN ANY WAY ARISING OUT
OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY PRESENT OR FUTURE
AGREEMENT BETWEEN ANY ONE OR MORE OF THE ASSIGNORS AND ASSIGNEE, MUST BE
BROUGHT ONLY IN A COURT LOCATED IN THE STATE OF MICHIGAN. EACH ASSIGNOR WAIVES
ANY OBJECTION TO JURISDICTION OR VENUE OF ANY ACTION INSTITUTED HEREUNDER OR IN
CONNECTION HEREWITH AND MAY NOT ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE OR BASED UPON FORUM NONCONVENIENS.
B. EACH ASSIGNOR ACKNOWLEDGES THAT (1) IT HAS FULLY READ ALL OF
THE AGREEMENT AND HAS BEEN GIVEN THE OPPORTUNITY TO CONSULT WITH COUNSEL AND
OTHER ADVISORS OF THEIR CHOICE, AND AFTER CONSULTING WITH SUCH COUNSEL OR
ADVISORS, KNOWINGLY, VOLUNTARILY AND WITHOUT DURESS, UNLAWFUL RESTRAINT,
INTIMIDATION OR COMPULSION, ENTERS INTO THIS AGREEMENT, BASED UPON SUCH ADVICE
AND COUNSEL AND IN THE EXERCISE OF ITS BUSINESS JUDGMENT, (2) THIS AGREEMENT HAS
BEEN ENTERED INTO IN EXCHANGE FOR GOOD AND VALUABLE CONSIDERATION,
RECEIPT OF WHICH THE PARTIES HERETO ACKNOWLEDGE, AND (3) THEY HAVE CAREFULLY
AND COMPLETELY READ ALL THE TERMS AND PROVISIONS OF THIS AGREEMENT AND ARE NOT
RELYING ON THE OPINIONS OR ADVICE OF ASSIGNEE OR ITS AGENTS OR REPRESENTATIVES
IN ENTERING INTO THIS AGREEMENT.
C. THE ASSIGNORS HERETO ACKNOWLEDGE THAT THEIR RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THIS RIGHT MAY BE WAIVED. EACH
ASSIGNOR AND ASSIGNEE HEREBY KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION, WAIVE
ALL RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES ARISING OUT OF OR IN RELATION TO
THIS AGREEMENT, THE FORBEARANCE AGREEMENT OR ANY OTHER AGREEMENTS BETWEEN ANY
OF THE ASSIGNORS AND ASSIGNEE. NO PARTY TO THIS AGREEMENT WILL BE DEEMED TO
HAVE RELINQUISHED THE BENEFIT OF THIS WAIVER OF JURY TRIAL UNLESS SUCH
RELIQUISHMENT IS IN A WRITTEN INSTRUMENT SIGNED BY THE PARTY TO WHICH SUCH
RELINQUISHMENT WILL BE CHARGED. EACH ASSIGNOR AND ASSIGNEE
4
<PAGE> 5
AGREE THAT ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THEIR CONSENT TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY AND THE OTHER AGREEMENTS SET FORTH IN THIS
AGREEMENT.
IN WITNESS WHEREOF, ASSIGNORS HAVE CAUSED THIS ASSIGNMENT TO BE DULY EXECUTED
ON THE DAY AND YEAR FIRST ABOVE WRITTEN.
WITNESS RIVIERA HOLDING COMPANY
[SIG] BY: Kenneth K. Rieth
- ---------------------- -----------------------
Name: Kenneth K. Rieth
[SIG] -----------------
- ---------------------- Title: President
------------
WITNESS RIVIERA TOOL COMPANY,
SUCCESSOR BY MERGER TO THE
INTERESTS OF RIVIERA DIE AND
TOOL, INC.
Kenneth K. Rieth
- ---------------------- By: [SIG]
[SIG] -----------------------
- ---------------------- Name: Peter C. Canepa
------------------
Title: CFO
------------
WITNESS
[SIG] Kenneth K. Rieth
- ---------------------- -------------------------
[SIG] Kenneth K. Rieth
- ----------------------
[Signatures continue on next page]
5
<PAGE> 6
[Signatures continue from previous page]
WITNESS
Kenneth K. Rieth Arlene Rieth Morris
- ------------------------ -----------------------------
ARLENE RIETH MORRIS
- ------------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PART I
FINANCIAL INFORMATION, ITEM 1, FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH SEL FORM 10Q FOR THE SECOND QUARTER ENDED
FEBRUARY 28,1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,772
<ALLOWANCES> 37
<INVENTORY> 6,843
<CURRENT-ASSETS> 10,885
<PP&E> 16,726
<DEPRECIATION> 7,336
<TOTAL-ASSETS> 22,163
<CURRENT-LIABILITIES> 14,597
<BONDS> 589
51
0
<COMMON> 4,393
<OTHER-SE> 1,352
<TOTAL-LIABILITY-AND-EQUITY> 22,163
<SALES> 10,885
<TOTAL-REVENUES> 10,885
<CGS> 8,695
<TOTAL-COSTS> 869
<OTHER-EXPENSES> (31)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 845
<INCOME-PRETAX> 506
<INCOME-TAX> 172
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 327
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
